<PAGE>

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.  20549

                                     FORM 10-K/A 
                                  (AMENDMENT NO. 2)
             [ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

                     For the fiscal year ended December 31, 1997

                                          OR

             [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                             Commission File No. 1-14166

                           MERIDIAN INDUSTRIAL TRUST, INC.
-------------------------------------------------------------------------------
                (Exact name of registrant as specified in its charter)

            MARYLAND                                     94-3224765

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

     455 MARKET STREET
     17TH FLOOR
     SAN FRANCISCO, CALIFORNIA                                    94105

(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code:           (415) 281-3900 
Securities registered pursuant to Section 12(b) of the Act:   

TITLE OF EACH CLASS                NAME OF EACH EXCHANGE ON WHICH REGISTERED
-----------------------------      -----------------------------------------
COMMON STOCK, PAR VALUE $.001                NEW YORK STOCK EXCHANGE
PER SHARE

RIGHTS TO PURCHASE SERIES C                  NEW YORK STOCK EXCHANGE
JUNIOR PARTICIPATING PREFERRED 
STOCK, PAR VALUE $.001 PER SHARE

WARRANTS TO PURCHASE COMMON STOCK            AMERICAN STOCK EXCHANGE

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

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

     Yes      X          No          
            -----             -----

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

     The aggregate market value of the voting stock held by non-affiliates of
the registrant on March 3, 1998 was $270,832,109, computed by reference to the
closing sales price of the Common Stock reported on the New York Stock Exchange
and by excluding Common Stock and Series B Preferred Stock owned by directors,
executive officers and principal stockholders (i.e., holders of 10% or more of
the registrant's voting stock).

     The registrant had 30,186,468 shares of Common Stock outstanding on 
March 3, 1998.

<PAGE>

                           MERIDIAN INDUSTRIAL TRUST, INC.

                             ANNUAL REPORT ON FORM 10-K
                        FOR THE YEAR ENDED DECEMBER 31, 1997


                                 TABLE OF CONTENTS

     FORM 10-K
     ITEM NO.  NAME OF ITEM                                               PAGE

<TABLE>
<CAPTION>
PART I
<S>                                                                        <C>

     Item 1.   Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
     Item 2.   Properties. . . . . . . . . . . . . . . . . . . . . . . . . .15
     Item 3.   Legal Proceedings . . . . . . . . . . . . . . . . . . . . . .23
     Item 4.   Submission of Matters to a Vote of Security Holders . . . . .23

PART II

     Item 5.   Market for Registrant's Common Equity and Related
                 Stockholder Matters . . . . . . . . . . . . . . . . . . . .24
     Item 6.   Selected Financial Data . . . . . . . . . . . . . . . . . . .26
     Item 7.   Management's Discussion and Analysis of Financial
                 Condition and Results of Operations . . . . . . . . . . . .29
     Item 8.   Financial Statements and Supplementary Data . . . . . . . . .37
     Item 9.   Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure . . . . . . . . . . . .37

PART III

     Item 10.  Directors and Executive Officers of the Registrant. . . . . .38
     Item 11.  Executive Compensation. . . . . . . . . . . . . . . . . . . .38
     Item 12.  Security Ownership of Certain Beneficial Owners
                 and Management. . . . . . . . . . . . . . . . . . . . . . .38
     Item 13.  Certain Relationships and Related Transactions. . . . . . . .38

PART IV

     Item 14.  Exhibits, Financial Statement Schedules, and Reports
                 on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . .39

               Financial Statements and Financial Statement
                 Schedules . . . . . . . . . . . . . . . . . . . . .F-1 - F-24
</TABLE>


                                       - i -
<PAGE>

     Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, the 
Registrant hereby amends and restates its Annual Report on Form 10-K for the 
fiscal year ended December 31, 1997 in its entirety as follows:

ITEM 1.  BUSINESS

THE COMPANY

     Meridian Industrial Trust, Inc. (the "Company") is a real estate 
investment trust engaged primarily in the business of owning, acquiring, 
developing, managing and leasing income-producing warehouse/distribution and 
light industrial properties.  At December 31, 1997, the Company owned and 
operated 193 warehouse/distribution and light industrial properties 
encompassing approximately 23.7 million square feet of leasable space that 
were 97% leased to a total of 462 tenants. See Item 2. of this report.  The 
NAREIT Index lists approximately 30 publicly-traded REITs whose portfolios 
include industrial and office properties.  Of these, Meridian is the 
sixteenth largest based on its market capitalization.  Based on the total 
square feet of leasable space owned by the Company and management's knowledge 
of the industrial real estate market, the Company believes it is one of the 
largest public owners and managers of modern industrial space for lease in 
the United States.  The Company had 3.2 million square feet of 
warehouse/distribution properties under development at December 31, 1997.  
The Company also owned two retail properties encompassing 384,875 square feet 
at December 31, 1997.  (The properties owned by the Company are collectively 
referred to as the "Properties".)

     On February 23, 1996, (i) Meridian Point Realty Trust IV Co. ("Trust IV"),
Meridian Point Realty Trust VI Co. ("Trust VI"), and Meridian Point Realty Trust
VII Co. ("Trust VII") (collectively the "Merged Trusts") merged with and into
the Company, with the Company as the surviving entity (the "Merger"); and (ii)
in a separate transaction (the "Asset Purchase"), the Company acquired certain
properties and assumed mortgage notes and certain other liabilities from
Meridian Point Realty Trust '83 ("Trust 83").  (Trusts 83, IV, VI, and VII are
collectively referred to herein as the "Trusts.")

     The Properties are located in significant industrial centers and
distribution hubs throughout the United States (Atlanta, Chicago, Columbus,
Dallas, Detroit, Houston, Los Angeles Basin, Memphis, New Jersey/Pennsylvania I-
95 Corridor, Phoenix, San Francisco Bay Area and Seattle).  The Company intends
to increase its presence in these markets and in other regional markets and to
continue its strategy of being a demand-driven, competitively priced, nationwide
provider of industrial space.

     The Company's senior executives have an average of approximately 18 years
experience in the commercial real estate business and an average tenure of nine
and a half years with the Company and its predecessors.  These senior
executives' comprehensive in-house expertise includes management of public and
private companies, operating public real estate investment trusts, acquisitions,
dispositions, development, property management, leasing, marketing, finance,
accounting and law. The executive officers include Allen J. Anderson, Chairman
and Chief Executive Officer, Milton K. Reeder, President and Chief Financial
Officer, and Dennis Higgs, Executive Vice President.  The Company also has
attracted institutional investors that, as of December 31, 1997, owned a
substantial portion of the Company's outstanding stock, including Hunt Realty
Corporation ("Hunt"), USAA Real Estate Company ("USAA"), Ameritech Pension Trust
("Ameritech"), Cohen & Steers Capital Management, Inc.,  The State Teachers
Retirement Board of Ohio ("OTR"), and The Prudential Insurance Company of
America and certain related entities ("Prudential").

     The Company was incorporated in the state of Maryland in May 1995.  The
Company has elected to be taxed as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its
initial taxable year ended December 31, 1995.  The Company's executive offices
are located at 455 Market Street, 17th Floor, San Francisco, California 94105,
and its telephone number is (415) 281-3900. At December 31, 1997, the Company
had 36 employees.

BUSINESS OBJECTIVE

     The Company's fundamental business objective is to maximize total return to
its stockholders by increasing cash flow per share and increasing the long-term
value of the Properties. The Company intends to achieve this objective by
continuing to implement the operating strategies summarized below.


                                       1
<PAGE>

     The Company's business strategy is responsive to the accelerated pace of
change in the location and use of distribution space.  Management believes this
change is the result of global competition and technological advances which
drive companies to increase efficiencies and reduce costs.  Logistics, the
science of procuring, storing and distributing goods, has redefined many of the
criteria for designing distribution space and has led to the development of the
modern warehouse.  The Company defines the modern warehouse building as one that
typically has greater clear heights to stack goods (24 feet or greater), deeper
truck turning radii (in excess of 130 feet), high capacity sprinkler systems and
cross docking capabilities as well as other important features that are designed
to increase the velocity of goods distribution.  In addition, the rapid decline
in the cost of computer driven technology has provided many companies with
improved methods for tracking, storing and retrieving goods.  As a result, there
is a growing trend among distribution space users to consolidate inventory into
large, modern warehouses located in major markets along the "path of goods
movement" (I.E., major cities at the intersection of highways, airports, rail
lines and shipping ports).  Major cities along the path of goods movement are
the markets that the Company has targeted for acquisition and development
opportunities.

     The Company believes that demand for modern warehouses will increase as a
result of such factors as population growth, increased industrial production,
increased capital spending and increased consumer demand.  The resulting
increase in demand for this type of distribution space has not been met by a
corresponding increase in supply.  Therefore, distribution space users often
seek build-to-suit transactions in which building design can be matched with
specific logistical requirements and modern distribution technologies.

GROWTH

     The Company's growth strategy is to acquire and develop industrial
properties while maximizing cash flow from the Properties.  The Company seeks to
make acquisitions and develop new properties to meet the needs of customers. 
The Company seeks to maximize cash flow from the Properties by retaining
existing tenants, releasing space at higher rates and increasing occupancy
levels.  As part of this strategy, the Company will seek to build market share,
to achieve name recognition and to continue to improve its operating efficiency.
Specifically, the Company will evaluate and engage in the following activities:

     ACQUISITIONS.  The Company continually investigates opportunities to
acquire individual and portfolios of properties.  During the year ended December
31, 1997, the Company acquired 13 individual Properties which aggregate to 2.6
million square feet of space.  As of December 31, 1997, costs incurred to date
for these individual Properties total approximately $92.5 million.

     In addition, the Company intends to pursue acquisitions of multi-building
portfolios currently owned by regional developers seeking increased liquidity,
including acquisitions through tax-advantaged structures sometimes referred to
as "down REITs."  Many U.S. companies are, for various financial and logistical
reasons, seeking to sell their distribution facilities.  Also, many
institutional investors own industrial portfolios which they may seek to
liquidate.  During the year ended December 31, 1997, the Company successfully
completed five portfolio acquisitions comprising 12.1 million square feet of
space.  As of December 31, 1997, costs incurred to date for these five portfolio
acquisitions totaled approximately $418.5 million.


                                         2
<PAGE>

     The following table summarizes the Property and portfolio acquisitions
completed during the year ended December 31, 1997.

<TABLE>
<CAPTION>
                                                           RENTABLE
                                                            SQUARE         INVESTMENT
 PROPERTY NAME                        LOCATION               FEET           COST(1)
 -------------                        --------               ----           -------
<S>                              <C>                       <C>          <C>
Meyer Circle                     Los Angeles Basin         201,380      $  8,358,207
South Arlington                  Indianapolis              219,104         7,554,351
80th Avenue                      Chicago                   302,500         9,304,514
Eucalyptus Avenue                Los Angeles Basin         169,719         5,173,146
Yates Avenue                     Los Angeles Basin         373,361        16,497,870
2501 N. Great Southwest Pkwy.    Dallas                    117,025         3,433,556
425 South Rockefeller            Los Angeles Basin         110,000         3,938,912
100 Friars Lane                  New Jersey/I-95           181,370        10,032,407
2200 Cedars Road                 Atlanta                   201,600         6,054,227
3050-3080 Enterprise Street      Los Angeles Basin          64,640         3,578,282
2190 Hanson Way                  San Francisco Bay Area    200,000         7,077,041
4647 Pine Timbers                Houston                   143,550         3,665,641
4660 Pine Timbers                Houston                   306,785         7,783,007
Prudential Portfolio (2)         Various                 5,231,406       180,807,031
Prudential Real Estate
  Investors I                    Various                   825,568        32,885,005
Prudential Real Estate
  Investors II                   Columbus                  953,691        32,037,746
Ameritech Portfolio Group A      Various                 2,144,848        83,038,967
Ameritech Portfolio Group B      Various                 1,960,334        62,921,444
Estate of James Campbell
  Portfolio                      Dallas                    607,275        15,844,135
UBS Portfolio                    New Jersey/I95            397,897        10,987,739
                                                        ----------      ------------
                                                        14,712,053      $510,973,228
                                                        ----------      ------------
                                                        ----------      ------------
</TABLE>
----------------
(1)  Investment Cost includes all costs incurred to date for the property
     acquisitions.
(2)  Includes the acquisition of thirteen industrial properties, which were
     conveyed in a simultaneous purchase and sale by the Company to a single
     buyer, for a total sale price of $49.7 million.

     DEVELOPMENT.  The Company also seeks to develop new warehouse/distribution
properties on a selective basis.  During the year ended December 31, 1997, the
Company completed construction on five build-to-suit transactions totaling $35.6
million and aggregating 786,960 square feet. 

     The following table summarizes the development projects completed during
the year ended December 31, 1997:

<TABLE>
<CAPTION>
                                                                             RENTABLE
                                                        DATE OF               SQUARE      INVESTMENT
 PROPERTY NAME                   LOCATION             COMPLETION               FEET         COST(1)
 -------------                   --------             ----------               ----         -------
<S>                           <C>                     <C>                    <C>          <C>
Boulder Avenue                Minneapolis             March 1997             100,000      $ 4,157,332
</TABLE>


                                               3
<PAGE>

<TABLE>
<S>                           <C>                     <C>                    <C>          <C>
Highlands Parkway             Atlanta                 July 1997              150,000        7,818,932
Enterprise Park A             Dallas                September 1997           129,800        4,251,123
2200 Consulate Drive          Orlando               September 1997           242,160        9,853,326
Skylab Road                   Los Angeles Basin     December 1997            165,000        9,538,194
                                                                             -------      -----------
                                                                             786,960      $35,618,907
                                                                             -------      -----------
                                                                             -------      -----------
</TABLE>
---------------
(1)  Investment Cost includes all costs incurred to date for completed 
     development projects.

     As of December 31, 1997, the Company had development projects in progress
with an aggregate square footage of 3,181,614 and estimated aggregate
development cost of approximately $107.4 million.  The development projects in
progress have anticipated stabilization dates through September 1998.  The
Company expects that future development projects will be undertaken to (i) meet
expansion needs of existing tenants, (ii) meet requirements of new tenants on a
build-to-suit basis, and (iii) selectively provide inventory for lease in
certain markets.

     When evaluating acquisition and development opportunities, the Company will
consider such factors as:  (i) geographic area and type of property; (ii)
location, construction quality, condition and design of the property; (iii)
potential for capital appreciation of the property; (iv) ability of the Company
to improve the property's performance through renovations; (v) terms of tenant
leases, including the potential for rent increases; (vi) potential for economic
growth and the tax and regulatory environment of the area in which the property
is located; (vii) potential for expansion of the property; (viii) occupancy and
demand by tenants for properties of a similar type in the vicinity; (ix)
competition from existing properties and the potential for the construction of
new properties in the area; and (x) the creditworthiness of tenants.

     INTERNAL GROWTH.  The Company seeks to capitalize on opportunities to
maximize growth in cash flow from the Properties by (i) retaining existing
tenants, (ii) increasing occupancy, and (iii) releasing space at higher rates. 
The occupancy rate of the portfolio at December 31, 1997 was 97%.  The Company's
ability to retain existing tenants and its commitment to increasing occupancy
levels may improve property revenues by minimizing vacancy periods attributable
to leasing downtime and reducing leasing costs such as tenant improvements and
leasing commissions.  Further, the Company seeks to achieve internal growth
through controlling operating expenses and renovating properties to a higher and
better use where appropriate.

PORTFOLIO MANAGEMENT

     The Company's portfolio management strategy is to actively manage the
portfolio by utilizing market research to help determine which markets and
submarkets are most favorable for new acquisitions.  This research is designed
to facilitate the understanding of market cycles for demand and supply.  Market
cycles vary from region to region, making individual markets more or less
attractive for new acquisitions at any given time on a comparative basis.  The
Company intends to emphasize new acquisitions in those markets which are, at the
time, believed to offer better risk adjusted investment returns.  Based on the
same research and understanding of comparative market cycles, the Company will
sell assets that no longer meet its business objectives or when a market is
believed to be overvalued.

     REDEPLOYMENT OF ASSETS.  As part of its portfolio management strategy, the
Company seeks to reposition its existing portfolio by selling Properties which
no longer meet its investment criteria.  The Company plans to focus on the
development and management of warehouse/distribution and light industrial
Properties and, accordingly, the Company intends to market and sell the balance
of its retail Properties as market conditions warrant.  During the year ended
December 31, 1997, the Company sold five Properties and a parcel of land for $12
million. In addition, thirteen industrial Properties were directly conveyed in a
simultaneous purchase and sale by the Company to a single buyer for a total sale
price of $49.7 million in conjunction with a property for stock transaction.
Subsequent to December 31, 1997, the Company sold a warehouse/distribution
property located in Memphis, Tennessee for $1.9 million.


                                           4
<PAGE>

MARKETING AND LEASING

     The Company's marketing and leasing strategy is to anticipate customer
needs in a manner that promotes tenant retention and maximizes the opportunity
to increase net rental revenues.  The Company plans to increase its market share
in the markets in which it currently owns Properties. Management believes that
by obtaining and expanding critical mass in these markets, the Company can
achieve above-average rents and occupancy levels.  This opportunity arises out
of an ability to anticipate the changing needs of existing tenants who seek
either to expand or relocate their operations to other buildings owned by the
Company.  The Company believes that this flexibility generally leads to greater
tenant satisfaction, higher average rents and lower cost of operations. In
addition, significant local market presence may create increased access to
potential new tenants.

     The Company pursues an active leasing strategy by aggressively marketing
available space, renewing existing leases at higher rents per square foot and
seeking leases that provide for the pass-through of property-related expenses to
the tenant.  One component of the Company's leasing strategy is to increase the
percentage of "triple-net" leases (based on leased area) which provide that the
tenant reimburses the Company for property taxes, insurance and maintenance
costs.

     The Company will continue to expand existing local marketing programs that
focus on the business and brokerage communities.  Also, the Company will market
its industrial space directly to "Fortune 1000" users in multiple markets to
meet their warehouse and distribution space needs.

FINANCING

     The Company's financing strategy is to minimize its cost of capital by
maintaining conservative debt levels, achieving an investment grade credit
rating and maintaining ready access to public and private debt and equity
capital.  The Company believes that the size of its portfolio and the geographic
diversity of its buildings and tenants will allow it access to the debt and
equity markets that are not generally available to smaller, less diversified
property owners.  In addition, management believes that growing and further
diversifying its portfolio may enhance the Company's ability to achieve an
investment grade credit rating.  Where intermediate or long-term debt financing
is employed, the Company will generally seek to obtain fixed interest rates or
enter into agreements intended to cap the effective interest rate on floating
rate debt.

     The Company intends to operate with a ratio of debt-to-total market
capitalization that generally will not exceed 50%.  Total market capitalization
is defined as the total indebtedness divided by total market capitalization
which equals the sum of total indebtedness and the market value of the Company's
Common Stock, after giving effect to the conversion of the Company's 2,272,727
outstanding shares of Series B Preferred Stock.  At December 31, 1997, the
Company's debt-to-total market capitalization rate was 23.7%.

     During the year ended December 31, 1997, the Company was successful in
amending and restating the Unsecured Credit Facility ("Unsecured Credit
Facility") on two separate transactions which ultimately resulted in: (i) an
increase in the borrowing limit from $75 million to $250 million, (ii) a
decrease in the interest spread over LIBOR from 1.7% to 1.3%, and (iii) an
extension of the maturity date from February 26, 1998 to April 3, 2000.

     In addition, on November 20, 1997, the Company completed a private offering
of $160 million in principal of unsecured senior notes to institutional
investors.  The unsecured senior notes were issued in two tranches, $135 million
maturing on November 20, 2007, bearing an interest rate of 7.25% per annum and
$25 million maturing on November 20, 2009, bearing an interest rate of 7.30% per
annum.

ORGANIZATION

     The Company's organizational strategy is to maintain professional staff
which focuses on important value-added decisions. The Company implements its
growth, portfolio management, marketing and leasing, financing and
organizational strategies, together with other critical operating functions,
from its headquarters in San Francisco and its four regional offices located in
Boston, Chicago, Dallas and Los Angeles.  The Boston office opened in February
1998.  The Company is staffed by experienced real estate professionals and
executives who also have substantial private 


                                    5
<PAGE>

and public capital markets expertise. The Company's management and real 
estate professionals perform the following functions: asset management, 
investment analysis, acquisition due diligence, asset acquisition and 
disposition, marketing, capital markets, legal and accounting. The Company 
maintains operational, financial and reporting control in all aspects of its 
business.  However, the Company relies on outsourcing of certain functions 
where it is most cost-effective to do so and when management believes that it 
can effectively oversee and monitor the quality of services performed by 
outside vendors.  In pursuing build-to-suit opportunities that meet its 
investment objectives, the Company relies on qualified third parties to 
provide design and construction services.

     The Company currently employs a system of independent agents or "regional
operators" to provide tenants with certain routine services on a day-to-day
basis. These services include maintenance, rent collections, oversight of
physical improvements and certain other services that may be performed by third
party providers in a reliable and cost-effective manner.

     The Company's officers and asset management staff are directly responsible
for all leasing activities, including (i) initiating renewal/expansion
negotiations with existing tenants, (ii) soliciting the brokerage community for
new lease proposals, and (iii) negotiating and signing all leases. In addition,
the Company's asset managers maintain regular contact with tenants to assure
customer service and monitor the effectiveness of individual regional operators
on day-to-day property-specific duties. The Company believes this system has
helped to maintain high tenant retention in the Properties while increasing
rental rates on lease renewals.

THE INDUSTRIAL REAL ESTATE SECTOR

     The Company believes that the industrial real estate sector provides an
opportunity for attractive returns on investment and that demand for industrial
space will increase as a result of such factors as population growth, increased
industrial production, increased capital spending and increased consumer demand.
In the Company's opinion, these economic factors, should lead to continued
strong demand for industrial space. Although the amount of construction of
industrial space in 1996 and 1997 increased significantly from the depressed
levels of the early 1990s, management believes that the overall decrease in the
supply of industrial space during the previous six years, coupled with increased
demand for modern space and the downward trend of vacancy rates, will result in
increases in rental rates and appreciation in the value of properties in the
industrial real estate sector.

TARGET MARKETS

     GENERAL.  The Company believes that as retailing and manufacturing 
businesses continue to focus on higher inventory turnover rates and 
just-in-time delivery of goods, transportation of products will continue to 
be the most important link in the distribution chain.  Faster movement of 
inventory is increasing the importance of storing finished goods near the 
final consumer for quick response to meet consumer demand. Further, greater 
reliance on just-in-time inventory control by manufacturers requires that 
goods used in the manufacturing process be stored relatively close to 
manufacturing centers to ensure continuous replenishment of those goods when 
needed.

     As the distribution chain continues to become shorter and regional
economies expand or contract, the demand for storage space will fluctuate (i.e.
the demand in specific source and destination markets will increase or
decrease). However, space located along the path of goods movement will remain
in demand even as source and destination points change over time. The Company
owns warehouse/distribution and light industrial properties in target markets
that are located strategically along the path of goods movement across the
United States.

     The Company's current target markets are Atlanta, Chicago, Columbus,
Dallas, Detroit, Houston, Indianapolis, Los Angeles Basin, Memphis, New
Jersey/Pennsylvania I-95 Corridor, Orlando, Phoenix, San Francisco Bay Area and
Seattle.

     The Company expects that it will make further investments in target markets
in which it currently owns Properties and may identify other target markets as
attractive investment opportunities become available. The Company believes that
opportunities exist in target markets to acquire or develop additional
industrial properties at attractive returns.


                                     6
<PAGE>

     The Company's target markets have been selected on the basis of their
ability to play a continuing and expanding role in the country's nationwide
distribution process. The Properties are generally located near major
transportation facilities, including highway and freeway interchanges, airports,
shipping ports and railyards. Management believes that the portfolio of
Properties is geographically well-located within competitive submarkets and is
well-received by prospective tenants and the brokerage communities in the target
markets. The current portfolio is characterized by a tenant base that is a mix
of local, regional and national companies. These companies are involved in a
variety of industries, including retailing and wholesaling, telecommunications,
aerospace, publishing, entertainment, advertising, pharmaceuticals and financial
services. Within these industries, the Company's tenants are involved in all
stages of the manufacturing, assembly and distribution processes of a diverse
set of commercial and retail products and services. The Company intends to
continue to improve this tenant base in each target market by increasing the
general credit quality of tenants and placing an emphasis on tenants that have
increasing distribution and storage space requirements.

     As part of its business plan, the Company intends to evaluate additional
markets in which it may acquire and develop properties and may eliminate certain
existing target markets as conditions warrant.

     NATIONAL FOCUS.  The Company believes that its national focus on ownership
and management of industrial properties in selected markets has many strategic
advantages over owning and managing properties exclusively in one region of the
country.  These advantages include the following:

     -    Enabling the Company to maintain and improve geographic
diversification.

     -    Permitting the Company to lease space to a tenant in more than one
market.

     -    Exposing the Company to direct build-to-suit transactions with major
national tenants in multiple markets.

     -    Providing the Company with the ability to respond to acquisition
opportunities in multiple markets throughout the country.

     -    Providing the Company with the opportunity to enhance or create
critical mass in the largest and most diverse industrial markets.

     -    Affording the Company growth opportunities in markets of institutional
investment quality, thus protecting property values and providing for a reduced
cost of capital.

     -    Allowing the Company to establish a Meridian Industrial Trust trade
name recognized by industrial space users throughout the country.

COMPETITION

     All Properties owned by the Company are located in developed areas.  Within
the market areas of each Property, there are numerous other industrial
properties and real estate companies which compete with the Company for tenants
and development and acquisition opportunities.  The number of competitive
industrial properties and real estate companies in such areas could have a
material effect on (i) the Company's ability to rent space at the Properties and
the amount of rents currently charged, and (ii) development and acquisition
opportunities.  The Company competes for tenants and acquisitions with other
companies who have greater resources than the Company.

INSURANCE

     In addition to other types of insurance maintained by the Company, the
Company carries commercial general liability and excess liability coverage on
its Property portfolio in the annual aggregate amount of $150 million to insure
against liability claims and provide for the costs of defense of lawsuits
arising out of the Company's operation.  Similarly, the Company is insured
against the risk of direct physical damage in an amount necessary to reimburse
the 


                                      7
<PAGE>

Company on a replacement cost basis for costs incurred to repair or rebuild
each property; this coverage includes reimbursement for any loss of rental
income during the reconstruction period in the aggregate amount as to be
sufficient to repair, or replace properties damaged by insured perils.  There
are, however, certain types of losses (such as losses arising from acts of war
or relating to pollution) that are not generally insured because they are either
uninsurable or not economically insurable.

REGULATION AND SUPERVISION

     Environmental Matters.  Under various federal, state and local laws and
regulations, a current or previous owner, operator, manager or developer of real
estate may be liable for the cost of response to a hazardous substance release
to the environment that is detected on a property or in the ground or surface
water associated with a property.  These laws often impose liability without
regard to whether the owner or operator was responsible for causing the
hazardous substance release. The cost of response may be substantial, and the
presence of the release, or the failure to respond to the release, may adversely
affect the owner's or operator's ability to sell the real estate or borrow
against the real estate.

     Persons who arrange for the disposal or treatment of hazardous substances
at an off-site facility may also be liable for the cost of any necessary
response to a release at the treatment of disposal facility.  Certain laws
govern the management of asbestos containing building materials.  If asbestos
containing building materials are not properly handled during demolition or
remodeling of structures, the person responsible may be held liable in
government enforcement proceedings and for personal injuries that may have
resulted from exposures to asbestos fibers.  In addition, the presence of
hazardous substances at a site adjacent to or in the vicinity of a property
could have an adverse effect on the value of the property and cause the owner to
incur costs to demonstrate that the owner's property has not contributed to the
hazardous substance release.

     Although certain tenants at several of the Properties use hazardous
substances in the ordinary course of their operations, the Company believes that
those Properties are in material compliance with all federal, state and local
regulations regarding hazardous substances and the Company is not aware of any
material liability or claim relating to hazardous substances at any of the
Properties.

     All of the Properties have been subject to at least a Phase I environmental
assessment. These assessments were intended to evaluate the environmental
condition of, and potential environmental liabilities associated with, the
Properties, and generally include (i) a visual observation of the Properties
during a site visit; (ii) a review of certain records concerning the Properties
including publicly-available information concerning known conditions at other
properties in the vicinity of the Properties; (iii) consideration of the likely
presence of asbestos-containing materials in the buildings on the Properties;
(iv) consideration of the likely presence of elevated levels of lead in the
drinking water; (v) an inquiry into the likely presence of polychlorinated
biphenyl's in electrical transformers; (vi) consideration of the presence of
underground or above-ground storage tanks and (vii) the preparation of a written
report. A Phase I assessment does not include sampling or analysis of soil,
ground water or other environmental media or subsurface investigations.

     A property acquired in the Merger has experienced groundwater
contamination. An environmental consultant has reported that the sources of the
contamination appear to be adjoining parcels. A responsible party has
acknowledged orally that they must fund remediation costs. Management has
reviewed the financial condition of the responsible party (a municipality
located in the San Francisco Bay Area) and believes that party has the ability
to fund the costs of remediation. Accordingly, the Company has not accrued any
liability related to this property.

     Environmental assessments do not necessarily identify all environmental
compliance issues or the extent of required remediation for those issues they do
identify.

     REGULATION.  A number of federal, state and local laws (such as the
Americans with Disabilities Act) may require modification to existing buildings
to improve access to such buildings by disabled persons. Additional legislation
may impose further requirements on owners with respect to access by disabled
persons. The cost of compliance with such laws may be substantial and may reduce
overall returns on properties.


                                        8
<PAGE>

                                     RISK FACTORS

     An investment in the Company's securities involves various risks.  The
following factors should be carefully considered in addition to the other
information set forth in this report.

RISK OF INABILITY TO SUSTAIN DISTRIBUTION LEVEL

     The Company's current intended distribution level is based on a number of
assumptions, including assumptions relating to the future operations of the
Company. These assumptions concern, among other matters, continued property
occupancy and profitability of tenants, capital expenditures and other costs
relating to the Company's properties, the level of leasing activity, the
strength of real estate markets, competition, the cost of environmental
compliance and compliance with other laws, the amount of uninsured losses, and
decisions by the Company to reinvest rather than distribute cash available for
distribution. The Company currently expects to maintain its current distribution
level.  However, some of the assumptions described above are beyond the control
of the Company, and a significant change in any such assumptions could cause a
reduction in the Company's cash flow and its cash available for distributions,
which could affect the Company's ability to sustain its distribution level. 

INFLUENCE OF SIGNIFICANT STOCKHOLDERS

     As of December 31, 1997, five stockholders of the Company owned a 
majority of the outstanding Common Stock (assuming conversion of the Series B 
Preferred Stock).  Until such time as the holders of the Series B Preferred 
Stock cease to hold shares of Series B Preferred Stock representing in the 
aggregate at least the Minimum Ownership Level (as defined in the Company's 
Charter), the holders of Series B Preferred Stock (Ameritech and OTR) are 
entitled to require that the Board of Directors be expanded by one additional 
director and to fill the vacancy created by that expansion.  At the next 
annual meeting following the election of a director by the holders of the 
Series B Preferred Stock, if necessary, the number of directors would be 
reduced to nine, including the director elected by the holders of the Series B
Preferred Stock. In addition, Prudential is entitled to require the Company 
to expand the size of the Board of Directors by one director and to designate 
the individual who will fill the vacancy created by such expansion.  
Accordingly, for so long as these stockholders own a significant percentage 
of the Company's stock, they will retain substantial influence over the 
affairs of the Company, a situation that may result in decisions that do not 
fully represent the interests of all stockholders of the Company.

REAL ESTATE INVESTMENT RISKS

     EXPIRING LEASES.  The Company's inability to renew or release space upon
expiration of its expiring leases could adversely affect the Company's cash flow
and its cash available for distributions. In addition, the Company usually will
incur additional costs in the form of leasing commissions and tenant
improvements if it is unable to renew an expiring lease with an existing tenant.
In that regard, during 1998 and 1999, leases covering approximately 17.25% and
13.68%, respectively of the Company's industrial leased space are scheduled to
expire.

     GENERAL RISKS.  The Company's investments are subject to the risks incident
to ownership and operation of commercial real estate generally. The yields
available from equity investments in real estate depend upon the amount of
income generated and expenses incurred. If the Company's properties do not
generate revenue sufficient to cover operating expenses, including debt service
and capital expenditures, the Company's cash flow and its ability to make
distributions to its stockholders will be adversely affected.

     A commercial property's revenues and value may be adversely affected by a
number of factors, including: the national, state and local economic climate and
real estate conditions (such as oversupply of or reduced demand for space and
changes in market rental rates); the perceptions of prospective tenants of the
safety, convenience and attractiveness of the properties; the ability of the
owner to provide adequate management, maintenance and insurance; the ability to
collect on a timely basis all rents from tenants; the expense of periodically
renovating, repairing and reletting space; and increasing operating costs
(including real estate taxes and utilities) which may not be passed through the
tenants. Certain significant expenditures associated with investments in real
estate (such as debt service payments, real estate taxes, insurance and
maintenance costs) are generally not reduced when circumstances cause a
reduction in rental revenues 


                                       9
<PAGE>

from a property. If a property is mortgaged to secure the payment of 
indebtedness and if the Company is unable to meet its mortgage payments, a 
loss could be sustained as a result of foreclosure on the property or the 
exercise of other remedies by the lender. In addition, real estate values and 
income from properties are affected by such factors as compliance with laws 
and governmental regulations, including tax laws, interest rate levels and 
the availability of financing. Also, rentable square feet of commercial 
property is often affected by market conditions and may therefore fluctuate 
over time.

     TENANT DEFAULTS.  Substantially all the Company's income is derived from
rental income from real property and, consequently, the Company's cash flow and
ability to make expected distributions to stockholders would be adversely
affected if a significant number of tenants of the Properties failed to meet
their lease obligations. In the event of a default by a lessee, the Company may
experience delays in enforcing its rights as lessor and may incur substantial
costs in protecting its investment. At any time, a tenant of the Properties may
also seek protection under the bankruptcy laws, which could result in rejection
and termination of such tenant's lease and thereby cause a reduction in the cash
available for distribution by the Company. If a tenant rejects its lease, the
Company's claim for breach of the lease would be treated (absent collateral
securing the claim) as a general unsecured claim. No assurance can be given that
the Company will not experience significant tenant defaults in the future.

     MARKET ILLIQUIDITY.  Equity real estate investments are relatively
illiquid. Such illiquidity will tend to limit the ability of the Company to vary
its portfolio promptly in response to changes in economic or other conditions.
In addition, provisions of the Code limit a REIT's ability to sell properties
held for fewer than four years, which may affect the Company's ability to sell
properties at a time when it is otherwise economically advantageous to do so,
thereby adversely affecting returns to holders of Common Stock.

     OPERATING RISKS.  The Properties are subject to operating risks common to
commercial real estate in general, any and all of which may adversely affect
occupancy or rental rates. The Properties are subject to increases in operating
expenses such as: cleaning, electricity, heating, ventilation and air
conditioning; insurance and administrative costs; and other general costs
associated with security, landscaping, repairs and maintenance. While the
Company's tenants are currently obligated to pay all or a portion of these
escalating costs, there can be no assurance that tenants will agree to pay such
costs upon renewal or that new tenants will agree to pay such costs. If
operating expenses increase, the local rental market may limit the extent to
which rents may be increased to meet increased expenses without decreasing
occupancy rates. While the Company generally implements cost saving incentive
measures at its Properties, if any of the circumstances discussed in this
paragraph occurs, the Company's cash flow and its ability to make distributions
to stockholders could be adversely affected.

     COMPETITION.  There are numerous commercial properties that compete with
the Company in attracting tenants and numerous companies that compete in the
selection of land for development and properties for acquisition.  These
competitors include publicly traded REITs, privately held REITs, investment
banking firms and private institutional investment firms.  This competition for
acquisition and development opportunities has increased prices for
warehouse/distribution and light industrial properties and may continue to
increase such prices in the future and also may lower the Company's return
on such investments.

     UNINSURED LOSSES.  The Company carries or requires its tenants to carry
comprehensive liability, fire, extended coverage and rental loss insurance with
respect to all of the Properties, with policy specifications, insured limits and
deductibles customarily carried for similar properties. There are, however,
certain types of losses (such as losses arising from acts of war or relating to
pollution) that are not generally insured because they are either uninsurable or
not economically insurable. Should an uninsured loss or a loss in excess of
insured limits occur, the Company could lose its capital invested in a Property,
as well as the anticipated future revenue from such Property, and would continue
to be obligated on any mortgage indebtedness or other obligations related to the
property. Any such loss would adversely affect the business of the Company and
its financial condition and results of operations.

POTENTIAL ENVIRONMENTAL LIABILITY RELATED TO THE PROPERTIES

     Under various federal, state and local laws, ordinances and regulations, an
owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. These laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or 


                                      10
<PAGE>

toxic substances. The cost of any required remediation and the owner's 
liability therefore as to any property is generally not limited under such 
enactments and could exceed the value of the property and/or the aggregate 
assets of the owner. The presence of such substances, or the failure to 
properly remediate such substances, may adversely affect the owner's ability 
to sell or rent such property or to borrow using such property as collateral. 
Persons who arrange for the disposal or treatment of hazardous or toxic 
substances may also be liable for the costs of removal or remediation of such 
substances at a disposal or treatment facility, whether or not such facility 
is owned or operated by such person. Certain environmental laws govern the 
removal, encapsulation or disturbance of asbestos-containing materials 
("ACMs") when such materials are in poor condition or the Property in 
question is renovated or demolished.  Such laws impose liability for release 
of ACMs into the air, and third parties may seek recovery from owners or 
operators of real properties for personal injury associated with ACMs. In 
connection with the ownership (direct or indirect), operation, management and 
development of real properties, the Company may be considered an owner or 
operator of such properties or as having arranged for the disposal or 
treatment of hazardous or toxic substances.  The Company may therefore be 
potentially liable for removal or remediation of costs, as well as certain 
other related costs, including governmental fines and injuries to persons and 
property.

     All the Properties have been subject to a Phase I or similar environmental
audit undertaken by independent environmental consultants after December 1992
(which involved general inspections without soil sampling, ground water analysis
or radon testing and, for the Properties constructed in 1978 or earlier, survey
inspections to ascertain the existence of ACMs).  These environmental audits
have not revealed, and the Company is not aware of, any environmental liability
that would have a material adverse effect on the Company's business.

RISKS OF ACQUISITION, DEVELOPMENT AND CONSTRUCTION ACTIVITIES

     The Company intends to acquire existing warehouse/distribution and light
industrial properties to the extent they can be acquired on advantageous terms
and meet the Company's investment criteria. Acquisitions of such properties
entail general investment risk associated with any real estate investment,
including the risk that investments will fail to perform as expected or that
estimates of cost of planned improvements may prove inaccurate.

     The Company also intends to grow the selective development and construction
of build-to-suit warehouse/distribution and light industrial properties as
opportunities arise in the future.  Risks associated with the Company's
development and construction activities include the risk that: the Company may
abandon development activities after expending resources to determine
feasibility; construction costs of a project may exceed original estimates;
occupancy rates and rents at a newly completed property may not be sufficient to
make the property profitable; financing may not be available on favorable terms
for development of a property; and the construction and lease-up may not be
completed on schedule, resulting in lower cash flow to satisfy debt obligations
and increased expense and construction costs. Development activities are also 
subject to risk relating to inability to obtain, or delays in obtaining, all 
necessary zoning, land-use, building, occupancy and other required governmental 
permits and authorizations. If any of the circumstances described in this 
paragraph occur, the Company's cash flow and its ability to make expected 
distributions to stockholders could be adversely affected. In addition, new 
development activities, regardless of whether they are ultimately successful, 
typically require a substantial portion of management's time and attention.

RISKS OF ADVERSE EFFECT ON THE COMPANY FROM DEBT FINANCING, INCREASES IN
INTEREST RATES, FINANCIAL COVENANTS AND ABSENCE OF LIMITATIONS ON DEBT

     DEBT FINANCING.  The Company is subject to risks normally associated with
debt financing, including the risk that the Company's cash flow will be
insufficient to meet required payments of principal and interest and the risk
that existing indebtedness on the Properties will not be able to be refinanced
or that the terms of such refinancings will be as favorable as the terms of the
existing indebtedness.  There can be no assurance that the Company will be able
to refinance any indebtedness or otherwise obtain funds by selling assets or
raising equity to make required payments on maturing indebtedness.

     REQUIREMENTS OF CREDIT FACILITIES; FORECLOSURES.  The Company has entered
into secured and unsecured credit facilities as well as certain other promissory
notes. The terms of certain of this indebtedness require the Company to comply
with a number of customary financial and other covenants (such as maintaining
certain debt coverage and loan-


                                      11
<PAGE>

to-value ratios, maintaining insurance coverage, etc.).  These covenants may 
limit the Company's flexibility in its operations, and breaches of these 
covenants could result in defaults under the instruments governing the 
applicable indebtedness even if the Company has satisfied its payment 
obligations.  The Company may not have funds on hand sufficient to repay such 
indebtedness at maturity. It may therefore be necessary for the Company to 
refinance debt through additional debt financing or equity offerings. If the 
Company is unable to refinance its indebtedness on acceptable terms, the 
Company may be forced to dispose of properties upon disadvantageous terms, 
which could result in losses to the Company and adversely affect the amount 
of cash available for distribution to stockholders.  In addition, if the 
Company is unable to meet its payment obligation under its secured 
indebtedness, certain Properties could be foreclosed upon by or otherwise 
transferred to the lender with a consequent loss of income and asset value to 
the Company.

     RISK OF RISING INTEREST RATES.  Outstanding advances under the Unsecured
Credit Facility bear interest rates at a variable rate. In addition, the Company
may incur indebtedness in the future that also bears interest at a variable rate
or may be required to refinance its debt at higher rates. Increases in interest
rates could increase the Company's interest expense, which could adversely
affect the Company's ability to pay expected distributions to stockholders.

     NO LIMITATION ON DEBT.  The Company currently has a policy of incurring
debt only if, upon such incurrence, the Company's debt-to-total market
capitalization would be 50% or less. However, the Organizational Documents of
the Company do not contain any limitation on the amount of indebtedness the
Company may incur. Accordingly, the Board could alter or eliminate this policy
and would do so if, for example, it were necessary in order for the Company to
continue to qualify as an REIT. If this policy were changed, the Company could
become more highly leveraged, resulting in an increase in debt service that
could adversely affect the cash available for distribution to stockholders and
could increase the risk of default on the Company's indebtedness.

CONFLICTS OF INTEREST

     The Company has adopted certain policies designed to eliminate or minimize
conflicts of interest. These policies include a requirement that all
transactions in which officers, directors and substantial stockholders and their
affiliates have a conflicting interest must be approved by a majority of the
disinterested directors of the Company who are not officers or full time
employees of the Company or members of the immediate family of any such officer
or employee (the "Independent Directors"). However, there can be no assurance
that these policies will be successful in minimizing or eliminating such
conflicts and, if they are not successful, decisions could be made that might
fail fully to reflect the interests of all stockholders.

COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND SIMILAR LAWS

     AMERICANS WITH DISABILITIES ACT.  Under the Americans with Disabilities Act
of 1990 (the "ADA"), places of public accommodation and commercial facilities
are required to meet certain federal requirements related to access and use by
disabled persons. These requirements became effective in 1992. Although
management of the Company believes that the Properties are substantially in
compliance with present requirements of the ADA, the Company may incur
additional costs of compliance in the future. A number of additional federal,
state and local laws exist which impose further burdens or restrictions on
owners with respect to access by disabled persons and may require modifications
to the Properties, or restrict certain further renovations thereof, with respect
to access by disabled persons. The ultimate amount of the cost of compliance
with the ADA or other such laws is not currently ascertainable. While such costs
are not expected to have a material effect on the Company, they could be
substantial. If required changes involve greater expense than the Company
currently anticipates, the Company's cash flow and its ability to make expected
distributions could be adversely affected.

     OTHER LAWS.  The Properties are also subject to various federal, state and
local regulatory requirements, such as state and local fire and life safety
requirements. Failure to comply with these requirements could result in the
imposition of fines by governmental authorities or awards of damages to private
litigants. The Company believes that the Properties are currently in compliance
with all such regulatory requirements. However, there can be no assurance that
these requirements will not be changed or that new requirements will not be
imposed, a result that could require significant unanticipated expenditures by
the Company and could have an adverse effect on the Company's cash flow.


                                      12
<PAGE>

RISKS OF FAILURE TO QUALIFY AS A REIT AND OTHER TAX LIABILITIES

     CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT.  The Company has elected to
be taxed as a REIT under the Code, commencing with its initial taxable year
ended December 31, 1995.  To maintain REIT status, the Company must meet a
number of highly technical requirements on a continuing basis. Those
requirements seek to ensure, among other things, that the gross income and
investments of a REIT are largely real estate related, that a REIT distributes
substantially all its ordinary taxable income to stockholders on a current basis
and that the REIT's ownership is not overly concentrated. Due to the complex
nature of these rules, the limited available guidance concerning interpretation
of the rules, the importance of ongoing factual determinations and the
possibility of adverse changes in the law, administrative interpretations of the
law and developments at the Company, no assurance can be given that the Company
will qualify as a REIT for any particular year.

     If the Company fails to qualify as a REIT, it will be taxed as a regular
corporation, and distributions to stockholders will not be deductible in
computing the Company's taxable income.  The resulting corporate tax liabilities
could materially reduce the funds available for distribution to the Company's
stockholders or for reinvestment. In the absence of REIT status, distributions
to stockholders would no longer be required. Moreover, the Company might not be
able to elect to be treated as a REIT for the four taxable years after the year
during which the Company ceased to qualify as a REIT.  In addition, if the
Company later requalified as a REIT, it might be required to pay a full
corporate-level tax on any unrealized gain in its assets as of the date of
requalification and to make distributions equal to any earnings accumulated
during the period of non-REIT status.

     EFFECT OF REIT DISTRIBUTION REQUIREMENTS.  To maintain its qualification as
a REIT, the Company must annually distribute to the Company's stockholders at
least 95% of its net ordinary taxable income (not capital gains). This
requirement limits the Company's ability to accumulate capital. Under certain
circumstances, the Company may not have sufficient cash or other liquid assets
to meet the distribution requirement. Difficulties in meeting the distribution
requirements might arise due to competing demands for the Company's funds or to
timing differences between tax reporting and cash receipts and disbursements
(because income may have to be reported before cash is received, or because
expenses may have to be paid before a deduction is allowed or deductions may be
disallowed or limited). In those situations, the Company might be required to
borrow funds or sell properties on adverse terms in order to meet the
distribution requirements. Although the Company does not anticipate difficulties
in meeting the distribution requirements, no assurance can be given that the
necessary funds will be available. If the Company fails to make a required
distribution, it would cease to be a REIT.

LIMITS ON OWNERSHIP AND CHANGES IN CONTROL MAY DETER CHANGES IN MANAGEMENT AND
THIRD PARTY ACQUISITION PROPOSALS

     In order to maintain its qualification as a REIT, not more than 50% in
value of the outstanding shares of the Company may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year (other than 1995). To
help the Company meet these requirements and otherwise maintain its REIT status,
the Company's Charter prohibits (a) actual or constructive ownership by any
person (other than persons designated by the Board as "Excepted Holders") of
more than 8.5% of the lesser of the number or value of the outstanding shares of
any class or series of the Company's Common Stock or preferred stock ("Equity
Stock"), (b) ownership of stock that would cause the Company to be "closely
held" or otherwise fail to qualify as a REIT and (c) transfers that would result
in outstanding shares being owned by less than 100 persons.  The Company's
Charter provides that, upon any attempted transfer of shares (including warrants
or options to acquire shares) that would cause any person to be treated as
owning stock in violation of the ownership restrictions (other than the
prohibition against transfers that would result in less than 100 owners), the
number of shares that would cause the violation are automatically transferred to
a Trustee for the benefit of a charitable beneficiary as "Shares-In-Trust." The
person who otherwise would have been considered the owner will have no rights or
economic interest in those shares. For these purposes, potentially violative
"ownership" is evaluated by taking into account the broad constructive ownership
rules of Sections 544 and 318 of the Code, with certain modifications. In
addition, a "transfer" that is subject to these restrictions includes any
issuance, sale, transfer, gift, assignment, devise or other disposition, as well
as any other event 


                                      13
<PAGE>

that causes any person to have or acquire ownership (applying the 
constructive ownership rules) of stock of the Company.

     The provisions and certain other provisions of the Company's Charter and
bylaws and the Maryland General Corporation Law and the Company's recently
adopted Stockholder Rights Plan may have the effect of delaying, deferring or
preventing a third party from making an acquisition proposal for the Company and
may thereby inhibit a change in control of the Company. For example, such
provisions may (a) deter tender offers for Common Stock that may be attractive
to stockholders or (b) deter purchases of large blocks of Common Stock, thereby
limiting the opportunity for stockholders to receive a premium for their Common
Stock over then-prevailing market prices. 

     FUTURE ISSUANCES OF COMMON STOCK.  The Charter authorizes the Board to
issue additional shares of Common Stock without stockholder approval. Any such
issuance could have the effect of diluting existing stockholders' interest in
the Company.

     PREFERRED STOCK.  The Charter authorizes the Board to (a) issue up to 25
million shares of preferred stock, (b) reclassify unissued shares of stock, (c)
establish the preferences, conversion and other rights, voting powers,
restrictions, limitations and restrictions on ownership and limitations as to
dividends or other distributions with respect to preferred stock and (d)
establish terms and conditions of redemption for each class or series of any
preferred stock issued.

DEPENDENCE ON KEY PERSONNEL

     The Company is dependent on the efforts of its executive officers. The loss
of their services could have an adverse effect on the operations of the Company.

RISKS ASSOCIATED WITH RELIANCE ON FORWARD LOOKING STATEMENTS

     This report contains statements which constitute forward looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").  Those statements appear in a number of places in
this report and include statements regarding the intent, belief or current
expectations of the Company and its management with respect to, among other
things (i) potential acquisitions or property developments by the Company; (ii)
the Company's financing plans; (iii) trends affecting the Company's financial
condition or results of operations; (iv) the Company's growth strategy,
operating strategy and financing strategy; (v) the declaration and payment of
dividends; and (vi) regulatory matters affecting the Company.  Readers are
cautioned that any such forward looking statements are not guarantees of future
performance and involve risks and uncertainties and that actual results may
differ materially from those projected in the forward looking statements as a
result of various factors.  Risks and uncertainties associated with the
Company's acquisition activities include risks that acquisition opportunities
explored by the Company may be abandoned, investments will fail to perform in
accordance with expectations and analysis with respect to the cost of
improvements to bring an acquired project up to standards will prove inaccurate,
as well as general investment risks associated with any new real estate
investment.  


                                      14
<PAGE>

     ITEM 2.  PROPERTIES.

     The Company owned and operated 193 warehouse/distribution and light
industrial Properties (collectively, the "Industrial Properties") encompassing
23,701,264 million square feet of leasable space that was 97% leased as of
December 31, 1997.  The Company also owned and operated two retail Properties
encompassing 384,875 square feet of leasable space that was 92% leased as of
December 31, 1997.

     The following table summarizes the Industrial Properties as of December 31,
1997.

<TABLE>
<CAPTION>
                                                                 RENTABLE       % OF TOTAL
                                  NO. OF         PERCENT           SQUARE          SQUARE          INVESTMENT
MARKET                          PROPERTIES       OCCUPIED           FEET            FEET            COST (1)
------------------------      -------------    -----------     ------------     -----------   -------------------
<S>                           <C>              <C>             <C>              <C>           <C>
Atlanta                              5             100%            679,716          2.87%       $   25,805,254
Chicago                             22              95%          2,655,142         11.20%           82,434,650
Columbus                             6             100%          1,968,283          8.31%           62,968,996
Dallas                              41              94%          4,636,593         19.56%          129,122,951
Detroit                             13              91%            654,321          2.76%           27,146,105
Houston                             10              94%          1,134,445          4.79%           27,986,846
Indianapolis                         1             100%            219,104          0.92%            7,554,351
Los Angeles Basin (2)               48              97%          5,584,211         23.56%          212,253,836
Little Rock                          2             100%            235,250          0.99%            4,445,767
Memphis                             10             100%          1,943,287          8.20%           38,955,462
Miami                                3              99%            219,379          0.93%           11,621,845
Minneapolis                          1             100%            100,000          0.42%            4,157,332
Nashville                            3             100%            437,552          1.85%            6,524,166
New Jersey/I-95                     10             100%            579,267          2.44%           21,020,147
Orlando                              1             100%            242,160          1.02%            9,853,326
Phoenix                              5             100%            587,105          2.48%           20,352,631
Richmond                             2              92%            145,799          0.62%           13,233,910
San Diego                            2             100%            191,451          0.81%           10,058,483
San Francisco Bay Area               6              98%          1,124,276          4.74%           53,012,471
Seattle                              1              75%            237,281          1.00%           12,278,624
St. Louis                            1             100%            126,642          0.53%            2,970,682

------------------------      -------------    -----------     ------------     -----------   -------------------
Total Portfolio Summary            193              97%         23,701,264        100.00%       $  783,757,835
------------------------      -------------    -----------     ------------     -----------   -------------------
------------------------      -------------    -----------     ------------     -----------   -------------------
</TABLE>

------------------------
(1)  Investment Cost includes all costs incurred to date for the Property.
(2)  Includes seven warehouse/distribution buildings comprising 623,678 square
     feet which serve as collateral for a participating mortgage note receivable
     in the principal amount of $21.5 million.  The buildings are 100% occupied
     as of December 31, 1997.


                                      15
<PAGE>

     The following tables lists each of the Company's Industrial Properties and
Properties Under Development as of December 31, 1997.

<TABLE>
<CAPTION>
                                               INDUSTRIAL PROPERTIES

                                                                RENTABLE                                            NUMBER
                                                                 SQUARE          PERCENT          INVESTMENT          OF
    PROPERTY NAME                      LOCATION                   FEET           OCCUPIED            COST(1)        TENANTS
---------------------          -----------------------       -------------     ------------     --------------    ------------
<S>                              <C>                         <C>               <C>              <C>               <C>
ATLANTA
2200 Cedars Road                 Lawrenceville, GA               201,600          100.00%        $  6,054,227           1
Highlands Parkway                Smyrna, GA                      150,000          100.00%           7,818,932           1
1901 Riverside                   Austell, GA                      66,300          100.00%           4,034,698           1
1601 Riverside                   Austell, GA                     119,031          100.00%           3,600,244           3
1701 Riverside                   Austell, GA                     142,785          100.00%           4,297,153           1

CHICAGO
1000 Lunt (5)                    Elk Grove Village, IL           121,465          100.00%           2,590,677           6
1090 Pratt (5)                   Elk Grove Village, IL            24,975          100.00%             634,054           1
1100 Pratt (5)                   Elk Grove Village, IL            39,500          100.00%           1,095,535           1
1180 Pratt (5)                   Elk Grove Village, IL            24,350          100.00%             537,790           1
1201 Busse (5)                   Elk Grove, IL                    24,000          100.00%             401,182           1
17025 Wallace (5)                South Holland, IL                95,515          100.00%           1,966,191           3
17129 Wallace (5)                South Holland, IL                84,000          100.00%           1,677,852           1
1815 Landmeier (5)               Elk Grove, IL                    77,150          100.00%           1,703,593           1
2375 Touhy Ave (5)               Elk Grove, IL                    53,550          100.00%           1,198,768           1
3 Timber Court                   Bolingbrook, IL                 320,722          100.00%          12,559,233           4
3400 West Lake (5)               Glenview, IL                    121,225          100.00%           2,619,596           2
Crossroads Parkway               Bolingbrook, IL                 249,130           68.24%           9,371,251           2
5101 W. 122nd Street (5)         Alsip, IL                       123,986          100.00%           3,138,285           3
700 Pratt (5)                    Elk Grove Village, IL            81,480          100.00%           1,812,810           3
80 Internationale Boulevard      Glendale Heights, IL            135,526          100.00%           6,344,201           2
801 Lunt (5)                     Elk Grove Village, IL            41,600            0.00%             941,836          --
80th Avenue                      Pleasant Prairie, WI            302,500          100.00%           9,304,514           1
900 Pratt (5)                    Elk Grove Village, IL            30,000          100.00%             781,525           1
Bedford Park                     Bedford Park, IL                200,808          100.00%           3,247,722           1
101 Regency Drive                Glendale Heights, IL            150,000          100.00%           7,409,865           1
500 Regency Drive                Glendale Heights, IL            160,660          100.00%           7,006,431           1
Lombard I (5)                    Lombard, IL                     193,000          100.00%           6,091,739           1

COLUMBUS
2303 John Glenn                  Columbus, OH                    289,491          100.00%          10,236,105           2
Crosswind Drive (5)              Columbus, OH                  1,014,592          100.00%          30,931,250           1
200 Constitution Drive           Fairfield, OH                   235,000          100.00%           8,050,588           1
2141 Southwest                   Grove City, OH                  126,200          100.00%           4,330,994           2
6959-6967 Alum Creek             Columbus, OH                    145,000          100.00%           4,508,807           3
6969 Alum Creek                  Columbus, OH                    158,000          100.00%           4,911,252           1

DALLAS
10425 Plano Road                 Dallas, TX                      159,600          100.00%           4,969,456           3
1049 Avenue H East               Arlington, TX                   104,948          100.00%           2,615,768           1
13700 Benchmark Drive            Farmers Branch, TX              180,841          100.00%           6,008,795           1
1441 Patton Place                Carrollton, TX                  106,048          100.00%           3,326,764           5
1505 Valwood Parkway             Carrollton, TX                   83,200          100.00%           3,229,692           2
</TABLE>


                                      16
<PAGE>

<TABLE>
<CAPTION>
                                                                RENTABLE                                            NUMBER
                                                                 SQUARE          PERCENT          INVESTMENT          OF
    PROPERTY NAME                      LOCATION                   FEET           OCCUPIED            COST(1)        TENANTS
---------------------          -----------------------       -------------     ------------     --------------    ------------
<S>                            <C>                           <C>               <C>              <C>               <C>
1701 Timberlake Drive           Arlington, TX                   227,120          100.00%           3,749,361           1
2022 McKenzie Drive             Carrollton, TX                  155,496          100.00%           5,116,318           1
2501 N. Great S.W. Parkway      Grand Prairie, TX               117,025            0.00%           3,433,556          --
2800 E. Plano Parkway           Plano, TX                       144,000          100.00%           5,014,644           4
399 Great S. W. Parkway         Arlington, TX                    42,350          100.00%           1,061,514           1
415-417 113th Street            Grand Prairie, TX                68,962          100.00%           1,724,604           1
500-508 113th Street            Grand Prairie, TX                68,962          100.00%           1,722,274           1
514-516 Great S.W. Parkway      Arlington, TX                   110,327          100.00%           2,749,325           1
714-720 107th Street            Arlington, TX                    76,035          100.00%           1,897,883           2
918-920 Avenue N                Grand Prairie, TX                29,643          100.00%             746,004           2
Beltline                        Carrollton, TX                   96,000          100.00%           1,736,011           6
Centreport 17 (5)               Fort Worth, TX                   51,923          100.00%           1,849,552           1
Centreport VII                  Fort Worth, TX                  122,259          100.00%           5,183,179           3
Enterprise Building Park A      Allen, TX                       129,800          100.00%           4,251,123           1
Exchange Service Center 1       Arlington, TX                   147,840          100.00%           2,480,024           1
Exchange Service Center 2       Arlington, TX                   141,616           60.90%           2,585,898           2
Great Southwest 110 (5)         Arlington, TX                   163,043          100.00%           2,915,543           1
Great Southwest 4               Arlington, TX                    90,880           36.44%           1,579,348           1
Highland Place                  Dallas, TX                      279,840          100.00%           7,970,659           1
Las Colinas 1                   Irving, TX                       35,050          100.00%             805,204           1
Northgate 4                     Dallas, TX                       56,633          100.00%           1,096,542           2
Northgate International (5)     Garland,  TX                    260,000          100.00%           7,302,095           1
Palisades I                     Plano, TX                        56,000           80.00%           1,261,413           5
Palisades II                    Plano, TX                        56,000           80.00%           1,200,682           5
201 Regal Row (5)               Dallas, TX                       59,970          100.00%           1,189,425           1
Sarah Jane Parkway              Grand Prairie, TX               361,690          100.00%          15,843,667           1
Valley Branch II                Farmers Branch, TX               74,160          100.00%           1,376,646           2
Valwood 20 (5)                  Farmers Branch, TX               99,600          100.00%           3,090,013           1
Valwood IV                      Farmers Branch, TX               64,533          100.00%           1,393,333           2
Water's Ridge                   Lewisville, TX                  367,744          100.00%          10,201,581           1
Las Colinas 4                   Irving, TX                       22,159           22.56%             525,496           2
Las Colinas 5                   Irving, TX                       77,304           83.33%           1,813,423           2
Northgate 28                    Dallas, TX                       36,736          100.00%             947,787           1
Northgate 5                     Dallas, TX                       31,747          100.00%             748,406           3
Regal Empress                   Dallas, TX                       46,509           92.02%           1,787,483           5
Valley Branch I                 Farmers Branch, TX               33,000           81.52%             622,460           6

DETROIT
HCC - Lot 26-11                 New Boston, MI                   77,060          100.00%           2,877,056           1
HCC - Lot 27-8                  New Boston, MI                   47,556          100.00%           2,139,420           1
HCC - Lot 6-16                  New Boston, MI                  111,204          100.00%           3,430,184           1
Pontiac                         Pontiac, MI                      74,400          100.00%           2,675,095           1
H & J Industrial 1              Farmington Hills, MI             28,241           66.78%           1,036,183           5
H & J Industrial 2              Farmington Hills, MI             14,565           83.19%             607,458           8
H & J Industrial 3              Farmington Hills, MI             15,910          100.00%             971,214           4
H & J Industrial 4              Farmington Hills, MI              6,200          100.00%             247,255           1
Southfield Commerce Ctr. 1      South Field, MI                  38,485           90.26%           1,428,870           6
Southfield Commerce Ctr. 2      South Field, MI                  58,545          100.00%           2,278,615          11
Troy Tech II                    Troy, MI                        122,829           76.19%           6,688,675           2
</TABLE>


                                      17
<PAGE>

<TABLE>
<CAPTION>
                                                                RENTABLE                                            NUMBER
                                                                 SQUARE          PERCENT          INVESTMENT          OF
    PROPERTY NAME                      LOCATION                   FEET           OCCUPIED            COST(1)        TENANTS
---------------------          -----------------------       -------------     ------------     --------------    ------------
<S>                            <C>                           <C>               <C>              <C>               <C>

Westhills Commerce Ctr. 1       Farmington Hills, MI             26,687          100.00%           1,446,211           9
Westhills Commerce Ctr. 2       Farmington Hills, MI             32,639           64.54%           1,319,869           7

HOUSTON
4647 Pine Timbers               Houston, TX                     143,550          100.00%           3,665,641           6
4660 Pine Timbers               Houston, TX                     306,785           95.02%           7,783,007          13
Brittmore Distribution - 1      Houston, TX                     168,758          100.00%           3,951,845           3
Brittmore Distribution - 2      Houston, TX                     145,520          100.00%           3,378,429           7
Perimeter Distribution - 1      Houston, TX                      97,246           87.23%           2,189,406           3
Perimeter Distribution - 2      Houston, TX                      43,680          100.00%             971,817           4
Pine North Distribution - 1     Houston, TX                      48,600           43.95%           1,221,790           2
Pine North Distribution - 2     Houston, TX                      81,000          100.00%           2,058,297           1
Pinemont Distribution - 1       Houston, TX                      31,186           72.31%             866,926           1
Pinemont Distribution - 2       Houston, TX                      68,120          100.00%           1,899,688           4

INDIANAPOLIS
South Arlington                 Indianapolis, IN                219,104          100.00%           7,554,351           1

LOS ANGELES BASIN
1051 South Rockefeller Ave.     Ontario, CA                     133,775          100.00%           4,291,550           1
11195 Eucalyptus Street         Rancho Cucamonga, CA            125,952          100.00%           3,389,679           1
11440 Pacific Avenue            Fontana, CA                     136,260          100.00%           5,514,851           2
14821 East Northam Street       La Mirada, CA                    70,756          100.00%           3,168,338           1
19545 East San Jose Avenue      City of Industry, CA            126,720          100.00%           4,158,098           1
3050-3080 Enterprise Avenue     Brea, CA                         64,640          100.00%           3,578,282           3
3200 Enterprise Street          Brea, CA                        132,000          100.00%           4,380,518           1
425 South Rockefeller           Ontario, CA                     110,000          100.00%           3,938,912           1
500 South Dupont Street         Ontario, CA                     275,169          100.00%          10,216,864           1
8865 Utica Avenue               Rancho Cucamonga, CA            177,744          100.00%           5,842,487           1
Arenth Avenue (5)               City of Industry, CA            332,790          100.00%           9,819,830           1
Cedarpointe 14                  Ontario, CA                      40,159          100.00%           1,722,325           1
Cedarpointe 15                  Ontario, CA                      49,611          100.00%           2,125,345           1
Cedarpointe 16                  Ontario, CA                      66,894          100.00%           2,862,270           1
Cedarpointe 17                  Ontario, CA                      50,383          100.00%           2,158,262           1
Cedarpointe 18                  Ontario, CA                      62,126          100.00%           2,658,969           1
Cedarpointe Industrial Park-2   Ontario, CA                     124,220          100.00%           4,445,890           2
Dominguez North - Bldg 1        Compton, CA                      85,345          100.00%           4,753,342           1
Dominguez North - Bldg 10       Compton, CA                      73,555          100.00%           2,822,842           5
Dominguez North - Bldg 11       Compton, CA                      50,296          100.00%           1,857,572           1
Dominguez North - Bldg 2        Compton, CA                      60,175          100.00%           2,737,581           1
Dominguez North - Bldg 3        Compton, CA                      50,003          100.00%           1,681,419           1
Dominguez North - Bldg 4        Compton, CA                      54,359          100.00%           2,239,209           1
Dominguez North - Bldg 5        Compton, CA                     206,483          100.00%           9,524,211           1
Dominguez North - Bldg 6        Compton, CA                     108,387          100.00%           4,800,227           1
Dominguez North - Bldg 7        Compton, CA                     100,000          100.00%           2,143,258           1
Dominguez North - Bldg 8        Compton, CA                      98,013          100.00%           2,603,884           1
Dominguez North - Bldg 9        Compton, CA                     183,000          100.00%           7,279,874           1
4451 Eucalyptus Avenue          Chino, CA                       169,719            0.00%           5,173,146          --
Meyer Circle                    Corona, CA                      201,380          100.00%           8,358,207           1
Mission Oaks                    Camarillo, CA                   310,736          100.00%           9,088,544           1
</TABLE>


                                      18
<PAGE>

<TABLE>
<CAPTION>
                                                                RENTABLE                                            NUMBER
                                                                 SQUARE          PERCENT          INVESTMENT          OF
    PROPERTY NAME                      LOCATION                   FEET           OCCUPIED            COST(1)        TENANTS
---------------------          -----------------------       -------------     ------------     --------------    ------------
<S>                            <C>                           <C>               <C>              <C>               <C>
Rustin Avenue                   Riverside, CA                   113,721          100.00%           4,166,080           2
Skylab Road                     Huntington, Beach CA            165,000          100.00%           9,538,194           1
Valencia Industrial Bldg. (5)   Valencia, CA                    107,520          100.00%           5,023,385           1
Wanamaker                       Ontario, CA                     136,249          100.00%           4,550,482           2
Yates Avenue                    Montebello, CA                  373,361          100.00%          16,497,870           2
Chatsworth                      Chatsworth, CA                   40,000          100.00%           2,548,768           1
Cypress A (5)                    Cypress, CA                      32,256          100.00%           1,571,466           1
Cypress B                       Cypress, CA                      68,760          100.00%           2,974,563           3
Cypress C (5)                    Cypress, CA                      36,216          100.00%           1,612,295           1
North Irvine                    Santa Ana, CA                    56,800          100.00%           2,934,947          12

LITTLE ROCK
Baxter                          Little Rock, AR                  50,000          100.00%           1,324,384           1
Port Distribution               Little Rock, AR                 185,250          100.00%           3,121,383           2

MEMPHIS
4000 Air Park Cove              Memphis, TN                     120,640          100.00%           1,602,326           1
4013 Premier (2)                Memphis, TN                     181,064          100.00%           1,765,476           1
Airport Bldg #14                Memphis, TN                     175,275          100.00%           2,772,277           2
Airport Bldg #16A               Memphis, TN                      62,290          100.00%           1,516,355          11
Airport Bldg #16B               Memphis, TN                      21,000          100.00%             470,152           1
Airport Bldg #17                Memphis, TN                     142,618          100.00%           2,246,404           2
Airport Bldg #3                 Memphis, TN                      75,000          100.00%           1,068,094           2
Delp Distribution (5)           Memphis, TN                     300,000          100.00%           6,885,674           1
Olive Branch (5)                Olive Branch, MS                800,000          100.00%          16,507,400           1
Willow Lake Business Park (5)   Memphis, TN                      65,400          100.00%           4,121,304           1

MIAMI
Centerport Building A           Pompano Beach, FL                80,040           98.08%           3,670,950           3
Centerport Building B           Pompano Beach, FL                95,940          100.00%           3,426,086           4
Centerport Building E           Pompano Beach, FL                43,399          100.00%           4,524,809           2

MINNEAPOLIS
Boulder Avenue                  Rosemount, MN                   100,000          100.00%           4,157,332           1

NASHVILLE
1550 Heil Quaker                La Vergne, TN                   238,900          100.00%           3,612,449           1
1600 Corporate Place            La Vergne, TN                   102,652          100.00%           1,451,344           1
Hennessey Warehouse             La Vergne, TN                    96,000          100.00%           1,460,373           2

NEW JERSEY/I-95
100 Friars Lane                 Thorofare, NJ                   181,370          100.00%          10,032,408           1
103-105 Gaither Drive           Mt. Laurel, NJ                   89,140          100.00%           2,448,152           2
110 Gaither Drive               Mt. Laurel, NJ                   51,646          100.00%           1,422,986           3
112 Gaither Drive               Mt. Laurel, NJ                   48,000          100.00%           1,323,235           1
130 Benigno Blvd.               Bellmawr, NH\J                   53,020          100.00%           1,460,579           2
361 Bellevue Road               Newark, DE                       39,200          100.00%           1,094,127           3
9020 Pennsauken Highway         Pennsauken, NJ                   25,316          100.00%             702,622           1
9040 Pennsauken Highway         Pennsauken, NJ                   28,000          100.00%             776,687           1
9160 Pennsauken Highway         Pennsauken, NJ                   22,175          100.00%             616,686           1
</TABLE>


                                      19
<PAGE>

<TABLE>
<CAPTION>
                                                                RENTABLE                                            NUMBER
                                                                 SQUARE          PERCENT          INVESTMENT          OF
    PROPERTY NAME                      LOCATION                   FEET           OCCUPIED            COST(1)        TENANTS
---------------------          -----------------------       -------------     ------------     --------------    ------------
<S>                            <C>                           <C>               <C>              <C>               <C>
9255 Commerce Highway           Pennsauken, NJ                   41,400          100.00%           1,142,665           2

ORLANDO
2200 Consulate Drive            Orlando, FL                     242,160          100.00%           9,853,326           1

PHOENIX
4440 East Elwood Street         Phoenix, AZ                     157,626          100.00%           7,070,730           2
470 West Vaughn Street          Tempe, AZ                        60,633          100.00%           2,410,797           1
7000 West Latham Street         Phoenix, AZ                     273,586          100.00%           8,313,418           1
Phoenix N. 27th                 Phoenix, AZ                      32,480          100.00%             855,146           1
Phoenix Plaza Three             Phoenix, AZ                      62,780          100.00%           1,702,540           1

RICHMOND
North Run III                   Richmond, VA                     53,941           96.44%           5,059,075          10
North Run IV                    Richmond, VA                     91,858           89.77%           8,174,835           6

SAN DIEGO
6355 Nancy Ridge Drive          San Diego, CA                     5,294          100.00%             279,171           1
Scripps Ranch                   San Diego, CA                   186,157          100.00%           9,779,312           5

SAN FRANCISCO BAY AREA
2190 Hanson Way                 Woodland, CA                    200,000          100.00%           7,077,042           1
Gold River Lane                 Stockton, CA                    351,788          100.00%          13,574,126           1
Overlake Place                  Newark, CA                      160,000          100.00%           8,535,314           1
San Carlos Industrial (3)       San Carlos, CA                  134,352           99.97%           8,085,289           6
2711 North First Street         San Jose, CA                     74,621          100.00%           6,497,284           3
Barrington Business Park        Hayward, CA                     203,515           91.04%           9,243,416          27

SEATTLE
Park At Woodinville (5)         Woodinville, WA                 237,281           75.38%          12,278,624          12

ST. LOUIS
5463 Phantom Drive              St. Louis, MO                   126,642          100.00%           2,970,682           1

                                                            -----------          -------       -------------        ----
TOTAL INDUSTRIAL PROPERTIES                                  23,077,586           96.65%       $ 762,257,835         443
                                                            -----------          -------       -------------        ----
                                                            -----------          -------       -------------        ----

INVESTMENT IN UNCONSOLIDATED
  JOINT VENTURE(4)
Rancho Downey A-G               Los Angeles, CA                 623,678          100.00%       $  21,500,000          19
                                                            -----------          -------       -------------        ----
                                                            -----------          -------       -------------        ----
</TABLE>
------------------------
(1)  Investment cost includes all costs incurred to date for the Property.
(2)  On February 28, 1998, the Company sold the 4013 Premier Property.  See Item
     7 of this report.
(3)  In 1998, Company has entered into a contract to sell the San Carlos
     Property.
(4)  In 1997, the Company acquired a $21.5 million participating mortgage loan
     secured by seven warehouse/distribution buildings.  The participating
     mortgage loan is classified as Investment in Unconsolidated Joint Venture
     in the financial statements.
(5)  These properties serve as collateral for the Mortgage Loan facility.  In 
     addition, a retail property located in Marietta, Georgia also serves as 
     collateral for this facility.  As of December 31, 1997, the outstanding 
     indebtedness under this facility totaled $66,094.  As of December 31, 
     1997, these properties have a net book value of $138,863.  Also, see 
     schedule III of Part IV, Item 14 of this report.


                                      20
<PAGE>
                             PROPERTIES UNDER DEVELOPMENT

<TABLE>
<CAPTION>
                                                        ESTIMATED         RENTABLE         ESTIMATED
                                                         DATE OF           SQUARE         DEVELOPMENT
 PROPERTY NAME                   LOCATION               COMPLETION          FEET            COST(1)
-----------------------       -----------------------   ------------      ---------      -------------
<S>                           <C>                       <C>               <C>            <C>
 2225 Cedars Road             Atlanta                     March 1998       249,600       $   6,871,508
 Carrowinds Boulevard         Charlotte                    July 1998       558,900          21,600,000
 Enterprise Building B        Dallas                      April 1998       124,798           4,134,000
 Enterprise Building C        Dallas                        May 1998       178,013           7,052,092
 Frankford Trade Center       Dallas                       June 1998       709,920          20,560,209
 Meridian Distribution
   Cntr.                      Los Angeles Basin           April 1998       606,753          19,626,000
 Lebanon Pike Circle          Nashville                   April 1998       178,630           7,281,528
 2100 Consulate Drive         Orlando                   January 1998        75,000           3,915,580
 Gateway One                  San Francisco Bay Area      April 1998       500,000          16,400,294
                                                                         ---------        ------------
                                                                         3,181,614        $107,441,211
                                                                         ---------        ------------
                                                                         ---------        ------------
</TABLE>

------------------
(1)  Estimated development cost includes all estimated costs to complete
construction.

     LEASES EXPIRATIONS OF INDUSTRIAL PROPERTIES.  At December 31, 1997, 460 
leases, representing 95% of the annual base rent ("Base Rent") from the 
leased space at the Industrial Properties are leased on a triple-net basis 
with tenants responsible for most day-to-day operating expenses such as real 
estate taxes, insurance, utilities, maintenance of common areas and 
non-structural repairs. The Company's tenant retention rate on a square 
footage basis for the Industrial Properties during the year ended December 
31, 1997 was 69%.  Average base rents for lease renewals and released space 
increased by 4.53% during the year ended December 31, 1997.  The Company 
expects to obtain additional rental increases from existing leases in 1998 
which have scheduled rental adjustments (both fixed and inflation indexed).  
These leases comprise approximately 25% of the annual base rent of the 
Company's industrial leases.

     The following table summarizes scheduled lease expirations for the 
Industrial Properties for all leases in effect as of December 31, 1997.  The 
table assumes that none of the tenants exercises a renewal option or 
termination right.

<TABLE>
<CAPTION>
                              RENTABLE     PERCENTAGE OF    CUMULATIVE %         ANNUAL
                            SQUARE FEET    TOTAL LEASED    OF TOTAL LEASED      BASE RENT
               NUMBER OF     SUBJECT TO     SQUARE FEET      SQUARE FEET          UNDER
                 LEASES       EXPIRING      OF EXPIRING      OF EXPIRING        EXPIRING
YEAR            EXPIRING       LEASES         LEASES           LEASES           LEASES(1)
----           ---------    -----------    ------------    ---------------   ---------------
<S>            <C>          <C>            <C>             <C>                 <C>
1998(2)           115        3,952,200        17.25%           17.25%            $15,452,971
1999              107        3,134,235        13.68%           30.93%             13,160,047
2000               90        3,136,308        13.69%           44.62%             11,804,482
2001               64        2,800,194        12.22%           56.84%             11,293,304
2002               47        2,088,003         9.11%           65.95%              8,079,372
2003               15          705,670         3.08%           69.03%              3,003,324
2004                9          428,178         1.88%           70.91%              1,449,683
2005               18        1,982,393         8.65%           79.56%              6,223,757
2006               10        2,167,077         9.46%           89.02%              7,866,543
2007                6        1,005,764         4.39%           93.41%              3,644,840
Thereafter          6        1,508,859         6.59%          100.00%              5,352,491
               -------      -----------      ------                          ---------------
                  487       22,908,881       100.00%                             $87,330,814
               -------      -----------      ------                          ---------------
               -------      -----------      ------                          ---------------
</TABLE>


                                      21
<PAGE>

----------------
(1)  Represents annualized monthly Base Rent of the leases in effect at
     December 31, 1997.  For purposes of this report, "Base Rent" means
     contractual gross rent and, therefore, excludes payments by tenants
     on account of real estate taxes and operating expense reimbursements.
(2)  Month-to-month tenants are included as 1998 expirations.

LAND HELD FOR DEVELOPMENT

     On December 10, 1997, the Company acquired a 27.4 acre site located in 
the Los Angeles Basin for a purchase price of approximately $3 million.  On 
January 16, 1998, the Company acquired a 19.2 acre site located in the Los 
Angeles Basin scheduled for development comprising approximately 372,000 
square feet upon completion.  The purchase price was $3.4 million.  On March 
23, 1998, the Company acquired 19 acres of land on three unimproved sites 
located in California scheduled for development of five buildings which will 
total approximately 377,000 square feet upon completion.  The purchase price 
was $6,314.  In addition, the Company has two land options comprising 88.3 
acres for which purchase and sale agreements have been executed.

RETAIL PROPERTIES

     At December 31, 1997, the Company owned two retail Properties ("Retail 
Properties") consisting of one neighborhood and one community shopping center 
with a total of 384,875 square feet of retail space.  That space was 92% 
leased to 40 tenants with an annualized monthly Base Rent of $2,843,805 from 
leases in effect as of December 31, 1997.  The Retail Properties account for 
1.60% of the total rentable square feet of the Company's entire portfolio.  
The Company expects to sell the remaining Retail Properties in its portfolio 
as market conditions warrant and purchase with the net proceeds from such 
sales, Industrial Properties that meet the Company's investment objectives.  
The Company's investments in Retail Properties are subject to risks incident 
to (i) the oversupply of retail space in certain areas of the United States, 
(ii) competition from new retailers and the nationwide expansion of existing 
retailers, and (iii) general economic conditions.

     In addition, some of the retail leases include guaranteed minimum rents 
plus potential percentage rents equal to a specified percentage of the 
tenant's sales over specified amounts. During the year ended December 31, 
1997, few retail tenants' sales reached the amounts specified in the 
percentage rent clauses of their leases.

     LEASES EXPIRING OF RETAIL PROPERTIES. The following table summarizes
scheduled lease expirations for the Retail Properties for all leases in effect
as of December 31, 1997.  The table assumes that none of the tenants exercises a
renewal option or termination right.

<TABLE>
<CAPTION>
                                                 PERCENTAGE OF       CUMULATIVE %         ANNUAL
                                 SQUARE FEET      TOTAL LEASED     OF TOTAL LEASED      BASE RENT
                 NUMBER OF       SUBJECT TO       SQUARE FEET        SQUARE FEET          UNDER
                  LEASES          EXPIRING        OF EXPIRING        OF EXPIRING         EXPIRING
YEAR              EXPIRING          LEASES          LEASES            LEASES            LEASES(1)
------          ----------       -----------     -------------    ----------------     -----------
<S>             <C>              <C>             <C>              <C>                  <C>
1998(2)             1               36,903            10.46%            10.46%         $  491,294
1999                1               30,541             8.66%            19.12%            298,555
2000                1               25,784             7.31%            26.43%            301,206
2001                1                3,000             0.85%            27.28%             40,500
2002                1                5,817             1.65%            28.93%             63,966
2003               --                   --             0.00%            28.93%                 --
2004                1               12,840             3.64%            32.57%            149,280
2005               --                   --             0.00%            32.57%                 --
2006               --                   --             0.00%            32.57%                 --
2007               --                   --             0.00%            32.57%                 --
Thereafter          2              237,806            67.43%           100.00%          1,499,004
                ------       --------------    -------------                          -----------
                    8              352,691           100.00%                           $2,843,805
                ------       --------------    -------------                          -----------
                ------       --------------    -------------                          -----------
</TABLE>


                                      22
<PAGE>

---------------

(1)  Represents annualized monthly Base Rent of the leases in effect at 
December 31, 1997. For purposes of this report, "Base Rent" means 
contractual gross rent and, therefore, excludes payments by tenants on 
account of real estate taxes and operating expense reimbursements.
(2)  Month-to-month tenants are included as 1998 expirations.

PRINCIPAL TENANTS

     The Company's 15 largest tenants accounted for approximately 25% (or 
approximately $22.4 million) of the total annual Base Rent at December 31, 
1997. The weighted average remaining lease term for the 15 largest tenants 
was 6.4 years at December 31, 1997. Although the loss of several significant 
tenants could have a materially adverse effect on the financial condition of 
the Company, the Company believes that the total number and geographical 
diversity of tenants at the Industrial Properties contributes to the 
stability of the portfolio, eases releasing of space subject to expiring 
leases and mitigates the potential impact on cash flows due to periodic 
vacancies.

     The following table summarizes the 15 largest tenants occupying the 
Properties, as measured by annualized Base Rent as of December 31, 1997.

<TABLE>
<CAPTION>
                                           NUMBER            SQUARE        ANNUAL             PERCENTAGE
                                            OF                FEET          BASE               OF TOTAL
                                           LEASES            LEASED        RENT(1)            PORTFOLIO
                                          -------          ---------      ---------           ---------
 <S>                                      <C>              <C>          <C>                   <C>
 Sears Roebuck and Co.                          3          1,814,592    $ 4,966,448             5.5%
 Continental General Tire, Inc.                 2            632,790      2,120,916             2.4
 Carnation Company(2)                           1            260,000      1,771,448             2.0
 S.C. Johnson & Son, Inc.                       2            502,500      1,665,385             1.9
 Kirk Paper Corporation                         1            315,705      1,412,712             1.6
 Allegiance Healthcare Corporation(3)           1            361,690      1,294,127             1.4
 Kraft Foods, Inc.                              1            351,788      1,278,262             1.4
 Technicolor Videocassette, Inc.                1            310,736      1,132,585             1.3
 Cumberland Swan, Inc.                          2            341,552      1,127,122             1.3
 L.D. Brinkman and Company                      1            367,744      1,055,676             1.2
 Moog Automotive, Inc.                          1            209,682        966,215             1.1
 International Business Machine                 1            150,000        937,500             1.0
 AmeriSource Health Corporation                 1            181,370        936,747             1.0
 Mattel Toys                                    1            275,169        924,576             1.0
 Core-Mark Distributors, Inc.                   1            201,380        852,000             0.9
                                          -------          ---------    -----------           ---------
 Total                                         20          6,276,698    $22,441,719           25.0%
                                          -------          ---------    -----------           ---------
                                          -------          ---------    -----------           ---------
</TABLE>

----------
(1)  Represents annualized monthly Base Rent of the leases in effect at December
     31, 1997.  For purposes of this report, "Base Rent" means   contractual
     gross rent and, therefore, excludes payments by tenants on account of real
     estate taxes and operating expense reimbursements.
(2)  This tenant has sub-leased this space to Blockbuster Music Corp.
(3)  This lease is guaranteed by Baxter Healthcare Corporation.

     ITEM 3.   LEGAL PROCEEDINGS.

     The Company currently is not involved in any litigation and does not 
know of any litigation currently threatened, except for routine litigation 
arising in the ordinary course of business.

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

     No matters were submitted to a vote of the Company's security holders 
during the last quarter of its fiscal year ended December 31, 1997.


                                      23
<PAGE>

-------------------------------------------------------------------------------
                                      PART II
-------------------------------------------------------------------------------

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

     The Company's Common Stock has been listed on the New York Stock Exchange
("NYSE") since February 26, 1996, under the symbol "MDN."  On March 3, 1998, the
last reported sales price per share of Common Stock on the NYSE was $24.813.
There were approximately 16,630 holders of record of the Company's Common Stock
at March 3, 1998.  The following table summarizes the high and low last reported
closing sales prices per share of the Common Stock on the NYSE during each
calendar quarter the Common Stock has been listed.

<TABLE>
<CAPTION>
     PERIOD                                       HIGH             LOW
     -------------------------------------------------------------------
     <S>                                          <C>            <C>
     1997
     First Quarter                                $24.125        $20.875
     Second Quarter                               $23.625        $20.500
     Third Quarter                                $25.625        $22.188
     Fourth Quarter                               $26.188        $21.875

     1996
     February 26, 1996 through March 31, 1996     $16.625        $15.125
     Second Quarter                               $18.375        $15.875
     Third Quarter                                $18.125        $17.125
     Fourth Quarter                               $21.750        $17.125
</TABLE>

     There are two holders of record of the Series B Preferred Stock owning
2,272,727 shares. The Series B Preferred Stock is convertible into Common Shares
at any time.

     As a condition of maintaining its status as a REIT, the Company is 
required to make distributions to stockholders that aggregate annually to at 
least 95% of its taxable income.  For the period beginning February 23, 1996 
(the date the Merger and Asset Purchase were completed) through March 31, 
1996, the Company declared and paid a distribution of approximately $0.12 per 
share to holders of record of Common Stock (equivalent to a quarterly 
distribution of $0.29 per share).  Thereafter, the Company has declared and 
paid regular quarterly distributions of $0.29 per share to holders of its 
Common Stock, which on an annualized basis is equivalent to an annual 
distribution of $1.16 per share. For the period beginning February 23, 1996 
(the date of completion of the Preferred Stock Private Placement) through 
March 31, 1996, the Company declared and paid a distribution per share to the 
holders of record of the Series B Preferred Stock of $0.13 (equivalent to a 
quarterly distribution of approximately $0.31 per share).  Thereafter, the 
Company has declared and paid regular quarterly distributions of $0.31 per 
share to holders of Series B Preferred Stock.  Beginning January 1, 1998, 
each share of Series B Preferred Stock is entitled to receive quarterly 
dividends, an amount equal to the greater of (i) the quarterly preferred 
dividend amount declared by the Board of Directors ("the Board"), for the 
quarter ended December 31, 1997, or (ii) the dividend paid per share of 
Common Stock for the current quarter.  Future distributions by the Company 
will be at the discretion of the Company's Board and will depend on the 
actual funds from operations of the Company, its financial condition, its 
capital requirements, the annual distribution requirements under the REIT 
provisions of the Code and such other factors as the Board deems relevant.  
In addition, the rights of holders of Common Stock to receive distributions 
are junior to the rights of the holders of the Series B Preferred Stock; the 
terms of the Series B Preferred Stock provide that no dividends may be paid 
on shares of Common Stock if dividends to which the holders of Series B 
Preferred Stock are entitled are in arrears.  There can be no assurance that 
any such distributions will be made by the Company.

     In the Merger, holders of Trust VI common stock and Trust VII common 
stock received a total of 553,000 warrants to purchase Common Stock ("Merger 
Warrants").  The Merger Warrants were issued in certificated form under a 
Warrant Agreement between the Company and First Chicago Trust Company of New


                                      24
<PAGE>

York, as warrant agent.  The Merger Warrants were issued on April 8, 1996.  Each
Merger Warrant entitles the holder to receive one share of Common Stock upon its
exercise.  The Merger Warrants are listed for trading on the American Stock
Exchange.  The Merger Warrants are exercisable during the period May 23, 1997
through February 23, 1999.  The exercise price of the Merger Warrants is $16.23
(the average of the closing prices of the Common Stock for the first 20 trading
days after the Merger).

     The exercise price of the Merger Warrants and the number of shares of 
Common Stock issuable upon exercise of the Merger Warrants are subject to 
adjustment in the event of stock dividends, stock splits, subdivisions, 
reclassifications, reorganizations, consolidations and mergers.  During the 
period that the Merger Warrants are exercisable, the Merger Warrants may be 
exercised by delivering the certificates representing the Merger Warrants, 
and paying the exercise price by cash or certified or bank check, to the 
warrant agent.  The Merger Warrants may not be exercised unless a 
registration statement under the Securities Act, covering the underlying 
shares of Common Stock, is current and effective and those shares of Common 
Stock have been qualified, or there is an exemption from applicable 
qualification requirements, under the securities laws of the state of 
residence of the holder of the Merger Warrants. The issuance of the shares of 
Common Stock underlying the Merger Warrants have been registered on a 
registration statement filed by the Company that was declared effective 
January 6, 1996.  However, the Company may suspend the exercisability of the 
Merger Warrants from time to time during the exercise period if, for any 
reason, no registration statement is effective with respect to the shares of 
Common Stock underlying the Merger Warrants (for example, because a stop 
order relating to the registration statement issued by the SEC is then in 
effect) or the Company determines that the Prospectus does not provide 
current information as required by the Securities Act or otherwise needs to 
be amended in order to comply with the Securities Act. The Company would 
extend the exercise period of the Merger Warrants in the case of certain such 
suspensions.

     If a holder of Merger Warrants fails to exercise his or her Merger 
Warrants on or before February 23, 1999, those warrants will expire and the 
holder will have no further rights with respect to Merger Warrants. A holder 
of Merger Warrants will not have any rights, privileges or liabilities of a 
stockholder of the Company prior to exercise of the Merger Warrants, 
including the rights to vote and to receive distributions.

     In addition, the Company issued a warrant to purchase 184,900 shares of 
the Company's Common Stock at an exercise price of $14.60 per share.  The 
warrant is exercisable in whole or in part at any time from May 23, 1997 to 
February 23, 1999.  No shares of Common Stock have been issued pursuant to 
this warrant as of December 31, 1997.

DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

     The Company has adopted a dividend reinvestment and stock purchase plan 
designed to provide holders of Common Stock with a convenient and economical 
means to reinvest all or a portion of their cash dividends in shares of 
Common Stock and to acquire additional shares of Common Stock through 
voluntary purchases. First Chicago Trust Company of New York, which serves as 
the Company's transfer agent, administers the dividend reinvestment and stock 
purchase plan.

STOCKHOLDER RIGHTS PLAN

     The Company's Board recently authorized the adoption of a stockholder 
rights plan designed to enhance the ability of all of the Company's 
stockholders to realize the long-term value of their investment.  The rights 
plan is designed, among other things, to prevent a person or group from 
gaining control of the Company without offering a fair price to all of the 
Company's stockholders.

     On February 27, 1998, the Board declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of Common Stock.  The
dividend was paid to the stockholders of record on March 16, 1998.  Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series C Junior Participating Preferred Stock, par value $.001 per
share, of the Company, at a price of $100 per one one-thousandth of a share,
subject to adjustment.  The description and terms of the Rights are set forth in
a Rights Agreement dated as of March 12, 1998, between the Company and First
Chicago Trust Company of New York, as Rights Agent.


                                      25
<PAGE>


     ITEM 6.   SELECTED FINANCIAL DATA.

     The following table summarizes certain selected financial data for the
Company as of and for the years ended December 31, 1997 and December 31, 1996.
The Company was incorporated on May 18, 1995.  Except for interest earned on its
investments and general and administrative expenses which were incurred and
accrued, the Company had no other activities prior to February 23, 1996, the
date of the Merger.  This table should be read in conjunction with the more
detailed financial statements included elsewhere herein.

     In addition, the table summarizes certain selected financial data of the 
Merged Trusts as of and for the three years ended December 31, 1995 and for 
the period January 1, 1996 to February 23, 1996.


                                      26
<PAGE>

                         SELECTED FINANCIAL AND OTHER DATA
                        AS OF AND FOR THE PERIODS INDICATED
                       (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                  COMPANY                                          MERGED TRUSTS
                                   ----------------------------------      -----------------------------------------------------
                                     YEAR           YEAR     MAY 18,       JANUARY 1,
                                     ENDED         ENDED     1995 TO       1996 TO            FOR THE YEAR ENDED DECEMBER 31,
                                    DECEMBER      DECEMBER   DECEMBER      FEBRUARY 23,       -------------------------------
                                    31, 1997      31, 1996   31, 1995       1996 (2)          1995          1994         1993
                                   ---------    ----------   ---------     -----------    ---------     -----------   ---------
 <S>                               <C>          <C>         <C>            <C>            <C>           <C>           <C>
OPERATING DATA:
  Total Revenues.................  $  66,150    $   35,041  $       33      $    5,158    $  34,597     $   34,822    $  35,024
  Income (Loss) Before
    Gain (Loss) on Divestiture of
  Properties and
    Extraordinary Items.........      23,958        11,161      (1,293)           (542)         852        (11,135)      (9,993)
  Gain (Loss) on Divestiture of
     Properties, Net............        (462)        3,313          --              --           --             --           --
  Extraordinary Items...........        (808)         (411)         --              --       (1,865)            --          796
  Net Income (Loss).............      22,688        14,063      (1,293)           (542)      (1,013)       (11,135)      (9,197)
  Net Income (Loss)
    Allocable to Common               19,870        11,651      (1,322)             --           --             --           --
  Net Income  (Loss) Per
    Basic Common Share:
    Before Extraordinary
    Item........................  $     1.17    $     1.42  $(1,468.89)   $         --    $      --     $       --    $      --
    Net Income (Loss)...........        1.12          1.37   (1,468.89)             --           --             --           --
  Net Income  (Loss) Per
    Diluted Common Share:
    Before Extraordinary
     Item.......................  $     1.13     $    1.37  $   (32.05)   $         --    $      --     $       --    $      --
    Net Income (Loss)...........        1.09          1.33      (32.05)             --           --             --           --
 Distributions Per
    Share:
    Common Stock................        1.16          0.99          --              --           --             --           --
    Preferred Dividends.........        1.24          1.06        0.03              --           --             --           --

BALANCE SHEET DATA:
  Investment in Real
    Estate Assets, Net..........  $  830,007    $  321,984   $       --     $       --    $ 217,216     $  226,219    $ 249,492
  Total Assets..................     863,512       333,063        3,724             --      247,159        250,986      275,951
  Unsecured Notes, Net..........     160,109            --           --             --           --            --            --
  Mortgage Loans................      66,094        66,094           --             --      109,728        137,143      151,130
  Unsecured Credit
    Facility....................      20,500        11,500           --             --           --            --            --
  Stockholders' Equity
    (Deficit)...................     570,139       243,513         (714)            --      106,375        107,388      118,523

OTHER DATA:
 Funds From
    Operations (1)..............  $   35,067    $   16,076   $       --     $       --    $      --     $       --   $       --
  Cash Flows Provided By
    (Used In):
   Operating Activities.........      37,286        20,615         (459)          (549)       7,229          6,755        8,226
   Investing Activities             (177,402)      (86,302)        (576)          (185)      (5,039)         5,949         (466)
   Financing Activities.........     145,029        68,154        1,510           (442)      (6,069)       (14,200)      (4,696)
  Weighted Average:
    Basic Common Shares
     Outstanding................  17,791,304     8,476,461          900             --           --             --           --
    Diluted Common Shares 
     Outstanding................  18,264,459    10,545,878       41,251             --           --             --           --
    Preferred Shares
     Outstanding................   2,272,727     2,272,727    1,000,000             --           --             --           --
</TABLE>


                                      27
<PAGE>

------------
 (1) In addition to cash flows and net income, management and industry analysts
     generally consider Funds From Operations to be one additional measure of
     the performance of an equity REIT because, together with net income and
     cash flows, Funds From Operations provides investors with an additional
     basis to evaluate the ability of an entity to incur and service debt and to
     fund acquisitions and other capital expenditures. However, Funds From
     Operations does not measure whether cash flow is sufficient to fund all of
     an entity's cash needs including principal amortization, capital
     improvements, and distributions to stockholders. Funds From Operations also
     does not represent cash generated from operating, investing or financing
     activities as determined in accordance with generally accepted accounting
     principles. Funds From Operations should not be considered as an
     alternative to net income as an indicator of an entity's operating
     performance or as an alternative to cash flow as a measure of liquidity.
     Funds From Operations is defined by NAREIT as net income or loss, excluding
     gains or losses from debt restructurings and sales of properties, plus
     depreciation and amortization of real estate assets, and after adjustments
     for unconsolidated partnerships and joint ventures. The Company calculates
     Funds From Operations as defined by NAREIT and as interpreted in the White
     Paper (i.e., the Company does not add back amortization of deferred
     financing costs and depreciation of non-rental real estate assets to net
     income). In addition, other real estate companies may calculate Funds From
     Operations differently than the Company.  A reconciliation of Funds From
     Operations to net income for the years ended December 31, 1997 and 1996 is
     summarized below:

<TABLE>
<CAPTION>
                                                             FOR THE YEARS
                                                                 ENDED
                                                               DECEMBER 31,
                                                           1997           1996
                                                         -------        -------
  <S>                                                    <C>            <C>
  Net Income                                             $22,688        $14,063
  Reconciling Items:
    Depreciation and Amortization of
       Real Estate Assets                                 11,109          4,915
    (Gain) Loss on Divestiture of
       Properties, Net                                       462         (3,313)
    Extraordinary Item                                       808            411
                                                         -------        -------
  Funds From Operations                                  $35,067        $16,076
                                                         -------        -------
                                                         -------        -------
</TABLE>


                                      28
<PAGE>

     ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS.
               (DOLLARS IN THOUSANDS, UNLESS INDICATED OTHERWISE)

INTRODUCTION

     The Company is a real estate investment trust engaged primarily in the 
business of owning, acquiring, developing, managing, and leasing 
income-producing warehouse/distribution and light industrial properties.  
(See Item 1 of this report.)  The Company's principal asset is its portfolio 
of 193 Industrial Properties and two Retail Properties. (See Item 2 of this 
report.)

     This section should be read in conjunction with the financial statements
and supplementary data listed in Item 8 and Item 14 of this report.  Unless
otherwise defined in this report, or unless the context otherwise requires, the
capitalized words or phrases used in this section either (i) describe accounting
terms that are used as line items in those financial statements, or (ii) have
the meanings ascribed to them in such financial statements and the notes
thereto.

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

     The Company intends to finance property acquisitions, development,
expansions and renovations using a combination of cash flow from operations and
bank and institutional debt financing, supplemented with private or public debt
or equity placements. Where intermediate or long-term debt financing is
employed, the Company generally seeks to obtain fixed interest rates or enter
into agreements intended to cap the effective interest rate on floating rate
debt.  The Company intends to operate with a ratio of debt-to-total market
capitalization that generally will not exceed 50%.  Total market capitalization
is defined as the total indebtedness divided by total market capitalization
which equals the sum of total indebtedness, the market value of the Company's
Common Stock and the liquidation preference value of the Series B Preferred
Stock.

SOURCES OF LIQUIDITY

     The Company's main sources of liquidity are:  (i) cash flows from operating
activities, (ii) cash reserves, (iii) borrowings under the Unsecured Credit
Facility, (iv) proceeds from private or public equity or debt placements, and
(iv) proceeds from the sale of properties.  A summary of the Company's
historical cash flows for the year ended December 31, 1997, are as follows:

<TABLE>
<CAPTION>
      <S>                                                                  <C>
      Cash flows provided by (used in):
      Operating activities                                                 $  37,286
      Investing activities                                                  (177,402)
      Financing activities                                                   145,029
</TABLE>

     As of December 31, 1997, the Company had approximately $7,855 in
unrestricted cash and cash equivalents.

     As of December 31, 1995, the Merged Trusts and Trust 83 had 
approximately $126,100 in total debt, $33,500 of which was paid off 
concurrent with the Merger using a portion of the net proceeds from the sale 
in a private placement of 2,272,727 shares of Series B Preferred Stock, 
resulting in an outstanding debt balance after the Merger of approximately 
$92,600.  Subsequent to the Merger, the Company drew on the Unsecured Credit 
Facility and used the proceeds to retire all other debt assumed upon the 
Merger and Asset Purchase, except for the $66,094 outstanding on the fixed 
rate debt facility (the "Mortgage Loan").  The Mortgage Loan bears interest 
at an annual rate of 8.63% and requires interest only payments until its 
maturity in 2005.

     The Unsecured Credit Facility originally bore interest at LIBOR plus 
1.7%, was scheduled to mature in February 1998, and provided for a maximum 
borrowing amount of $75,000. On April 21, 1997, the Unsecured


                                      29
<PAGE>

Credit Facility was amended and restated.  This amendment and restatement of
the Unsecured Credit Facility provided for (i) an increase in the borrowing
limit from $75,000 to $150,000, (ii) a decrease in the interest rate spread
over LIBOR from 1.7% to 1.4%, and (iii) an extension of the maturity date to
April 3, 2000, from February 26, 1998.  On September 23, 1997, the Unsecured
Credit Facility was further amended and restated to provide for (i) an
increase of the borrowing limit from $150,000 to $250,000 and (ii) a decrease
in the interest rate spread over LIBOR from 1.4% to 1.3%.  At December 31,
1997, the interest rate on Unsecured Credit Facility was 7.02%.  During the
year ended December 31, 1997, the Company borrowed $182,500 under its
Unsecured Credit Facility to fund property acquisitions and developments.

     On November 20, 1997, the Company completed a private offering of $160,000
in principal of unsecured senior notes to institutional investors.  The
unsecured senior notes were issued in two tranches, $135,000 maturing on
November 20, 2007, bearing an interest rate of 7.25% per annum, and $25,000
maturing on November 20, 2009, bearing an interest rate of 7.30% per annum.
Interest on these notes is payable semiannually. The proceeds were used to repay
borrowings on the Unsecured Credit Facility.  In connection with this
transaction, the Company entered into two forward exchange rate contracts which
resulted in a premium totaling $109.

     On May 13, 1997, the Company purchased a property located in Montebello,
California, subject to a mortgage note payable bearing an interest rate
different from the prevailing market rate at the date of acquisition.  This
interest rate differential was recorded as a premium.  The new loan amounting to
$10,429 has a maturity date of July 15, 1998 and provides for monthly principal
and interest payments of $96 based on an interest rate of 9.89% per annum and a
30-year amortization schedule.

     Future minimum principal payments for the Company's mortgage loans and
long-term debt as of December 31, 1997, are as follows:

<TABLE>
<CAPTION>
               Years Ending
               December 31,                               Amount
               ------------                           ----------
               <S>                                    <C>
                   1998                               $   10,350
                   1999                                       --
                   2000                                   20,500
                   2001                                       --
                   2002                                       --
                Thereafter                               226,094
                                                      ----------
                                                      $  256,944
                                                      ----------
                                                      ----------
</TABLE>

     The $20,500 of long-term debt maturing in the year 2000 represents the
borrowings outstanding on the Unsecured Credit Facility.  This amount will
change to the extent borrowings and/or payments are made on the Unsecured Credit
Facility in 1998 and 1999.

     The Company currently has a policy of incurring debt only if, upon such
incurrence, the Company's debt-to-total market capitalization would be 50% or
less.  However, the Company's organizational documents do not contain any
limitation on the amount of indebtedness the Company may incur.  Accordingly,
the Board could alter or eliminate this policy and would do so if, for example,
it were necessary in order for the Company to continue to qualify as an REIT.
If this policy were changed, the Company could become more highly leveraged,
resulting in an increase in debt service that could adversely affect the cash
available for distribution to stockholders and could increase the risk of
default on the Company's indebtedness.

     In addition to the variable interest rate contracts on the Unsecured Credit
Facility, the Company may incur indebtedness in the future that bears interest
at a variable rate, or it may be required to refinance its debt at higher rates.
As a result, increases in interest rates could increase the Company's interest
expense, which could adversely affect the Company's ability to pay distributions
to stockholders.


                                      30
<PAGE>

     On December 23, 1997, the Company completed a public offering of 414,508
shares of the Company's Common Stock at an offering price of $24.125 per share,
resulting in gross proceeds of $10,000.  The Company used the net proceeds to
fund two property acquisitions.

     In connection with the Merger, the Company issued approximately 553,000
warrants to purchase an equal number of shares of the Company's Common Stock
(the "Merger Warrants").   May 23, 1997, was the first day of the exercise
period for the Merger Warrants.  Each Merger Warrant entitles the holder to
purchase one share of the Company's Common Stock at the exercise price of
$16.23.  The exercise period ends February 23, 1999.  As of December 31, 1997,
the Company had issued 23,315 shares pursuant to exercise of the Merger
Warrants.

     In addition, the Company issued a warrant to purchase 184,900 shares of the
Company's Common Stock at an exercise price of $14.60 per share.  The warrant is
exercisable in whole or in part at any time from May 23, 1997 to February 23,
1999.  No shares of Common Stock have been issued pursuant to this warrant as of
December 31, 1997.

     During the year ended December 31, 1997, the Company sold five 
Properties and a parcel of land for an aggregate sales price of $11,983.  The 
Properties and land parcel were located in Alabama, Texas, California, 
Arizona and Georgia. After closing costs and pro-rated items totaling $654 
from these transactions, the Company received net proceeds aggregating to 
$11,329.

     On February 28, 1998, the Company sold a property located in Tennessee for
a sales price of $1,880.  After closing costs and pro-rated items totaling $110,
the Company received net proceeds of $1,770.  The Company has entered into an
agreement to sell the San Carlos property located in California.  The net
proceeds from Property dispositions will be used to repay borrowings on the
Unsecured Credit Facility.

USES OF LIQUIDITY

     The Company's principal applications of its cash resources are:  (i)
funding of property acquisitions and developments; (ii) payments of capital
improvements and leasing costs; (iii) payment of distributions; (iv) payment of
property operating costs including property expenses, property taxes, general
and administrative expenses, and interest expense; and (v) principal payments on
debt.

     The Company anticipates that it will have sufficient cash flows to fund:
(i) its operating needs, (ii) capital improvements on its properties, and (iii)
the proposed distributions to its common and preferred stockholders.  Planned
capital improvements on the Company's properties consist of tenant improvements
and other expenditures necessary to lease and maintain the properties.

     The Company has been declaring and paying dividends on a quarterly basis.
During the years ended December 31, 1997 and 1996, dividends declared to Common
Stockholders aggregated to $24,425 and $10,544, respectively, or $1.16 and $.99
per share of Common Stock, respectively.  During the years ended December 31,
1997 and 1996, dividends declared to Series B Preferred Stockholders aggregated
to $2,818 and $2,412, respectively, or $1.24 and $1.06 per share of Preferred
Stock, respectively.  Beginning January 1, 1998, each share of Series B
Preferred Stock is entitled to receive quarterly dividends in an amount equal to
the greater of (i) the quarterly preferred dividend amount declared by the Board
of Directors for the quarter ended December 31, 1997, or (ii) the dividend paid
per share of Common Stock for the current quarter.  See Item 5 of this report.

     On March 4, 1998, the Board declared a dividend of $0.33 per share of 
Common Stock payable on April 17, 1998 to stockholders of record on April 3, 
1998. This represents a 14% increase in the annualized dividend to $1.32 from 
$1.16 per share. The Board also declared a dividend of $0.33 per share of 
Series B Preferred Stock payable on April 15, 1998, to stockholders of record 
on April 3, 1998. This represents a 6% increase in the annualized dividend to 
$1.32 from $1.24 per share.

     During the year ended December 31, 1997, the Company repaid borrowings on
its Unsecured Credit Facility totaling $173,500 using the net proceeds received
from (i) a private offering of $160,000 in principal of unsecured senior notes
to institutional investors, (ii) property dispositions during 1997, and (iii)
existing cash reserves.

DEVELOPMENT PROJECTS


                                      31
<PAGE>

     During the year ended December 31, 1997, the Company, either directly or
through consolidated partnerships, completed development of and placed in
service five warehouse/distribution Properties comprising 786,960 square feet
with an aggregate cost of $35,619.

     At December 31, 1997, the Company had, either directly or through
consolidated partnerships, nine warehouse/distribution Properties under
development or scheduled for development comprising 3,181,614 square feet
upon completion.  The aggregate cost for the design and construction of these
development projects is estimated to be approximately $107,441.  As of
December 31, 1997, the Company incurred total project costs of approximately
$35,336 on these development projects.  The Company anticipates funding the
balance of such development costs from cash reserves and borrowings under the
Unsecured Credit Facility.

     In connection with the development activities relating to the
consolidated partnerships, the Company's minority partners contributed land
and other consideration valued at $5,102.

PROPERTY AND PORTFOLIO ACQUISITIONS

     During the year ended December 31, 1997, the Company purchased thirteen
Properties located in California, Georgia, Indiana, New Jersey, Texas and
Wisconsin, with an aggregate square footage of 2,591,034.  The aggregate
purchase price for these Properties totaled $90,401.  The Company funded a
portion of these acquisitions from cash reserves and funded the majority of
the remaining costs with borrowings under the Unsecured Credit Facility.  In
addition, the Company assumed mortgage notes totaling $16,153.  The Company
recorded a corresponding premium totaling $324 in connection with these
mortgage notes.

     On September 30, 1997, the Company acquired from Ameritech Pension Trust
("Ameritech") in a property-for-stock transaction (i) eleven
warehouse/distribution properties comprising 1,521,170 square feet, and (ii)
a participating mortgage loan secured by a seven building, 623,678 square
foot project.  The purchase price totaled $81,589, including the
participating loan which was purchased for $21,500.  The property-for-stock
transaction involved the issuance of 4,160,745 shares of the Company's Common
Stock to Ameritech.

     On October 22, 1997, the Company acquired eleven additional
warehouse/distribution Properties comprising 1,960,334 square feet in
consideration of the issuance of 3,104,477 shares of the Company's Common
Stock to Ameritech.  The purchase price for this transaction totaled $61,571.

     On September 24, 1997, the Company acquired from The Prudential
Insurance Company of America and related entities (collectively "Prudential")
a portfolio of 44 industrial buildings containing an aggregate of
approximately 3,538,000 square feet of rentable space (the "Portfolio
Properties").  The aggregate contract price for the Portfolio Properties was
$127,079 (the "Prudential Property Transaction").  The Company also
contracted with Prudential to purchase five unimproved parcels of land
located in California, Illinois and Michigan. The contract price for these
parcels of $13,721 was deposited into an escrow account.  In the event that
the contingencies regarding these properties are not cleared to the Company's
satisfaction, then the funds in the escrow account will be returned to the
Company.  On December 10, 1997, the Company purchased the unimproved land
located in California for a purchase price of $3,055, funded from the escrow
account.

     The Company funded the cost of the Prudential transactions from a
combination of (i) net proceeds from the sale of 7,096,513 shares of the
Company's Common Stock to Prudential and three separate accounts managed by
Prudential totaling $141,901, and (ii) proceeds from borrowings under its
Unsecured Credit Facility.

     Concurrent with the closing of the Prudential Property Transaction, 
eight industrial properties located in the metropolitan areas of New Orleans, 
Louisiana and five industrial properties located in the metropolitan area of 
Jacksonville, Florida (collectively the "EastGroup Properties") were directly 
conveyed in a simultaneous sale by the Company to EastGroup Properties, L.P. 
("EastGroup") for a total sales price of $49,710.  In addition, EastGroup 
paid $207 of cash for closing costs and pro-rated items.  The total 
consideration paid by EastGroup for the EastGroup Properties was cash of 
$4,917 and $45,000 in fully secured promissory notes.  EastGroup repaid


                                      32
<PAGE>

the notes on December 30, 1997.  The notes required monthly payments of
interest only computed on the basis of an annual rate of 9.25%.  The
EastGroup Properties were conveyed at the Company's cost of such properties
thus resulting in no gain or loss on the transaction.

     The Company also entered into agreements to acquire 12 industrial
Properties from two separate accounts managed by Prudential Real Estate
Investors.  On August 29, 1997, the Company acquired seven of these
properties comprising 825,568 square feet.  The purchase price consisted of
the payment of $16,047 in cash and the issuance of 808,888 shares of Common
Stock.  On September 24, 1997, the Company acquired the remaining five
industrial properties comprising 953,691 square feet.  The purchase price
consisted of the payment of $9,361 in cash and the issuance of 1,106,931
shares of Common Stock. The total $25,408 cash portion of the purchases for
these portfolios was funded from borrowings on the Company's Unsecured Credit
Facility.

     On December 31, 1997, the Company acquired an eight Property portfolio
located in Texas, comprising 607,275 square feet for a total purchase price
of $15,700.  The Company funded the acquisition from a portion of the
proceeds received from the repayment of the promissory notes by the EastGroup.

     On December 31, 1997, the Company also acquired a nine Property
portfolio located in New Jersey and Delaware comprising 397,897 square feet
for a total purchase price of $10,790.  The Company funded the acquisition
from a portion of the proceeds received from the repayment of the promissory
notes by the EastGroup.

ACQUISITIONS SUBSEQUENT TO DECEMBER 31, 1997

     During the period from January 1, 1998 to March 23, 1998, the Company, 
either directly, or through its consolidated and unconsolidated subsidiaries, 
acquired 12 properties and businesses with an aggregate purchase price of 
approximately $90,585 located in California, Texas and Nevada.  These 
acquisitions were funded through the use of $6,739 in cash reserves, $60,154 
in drawings on the Unsecured Credit Facility, and the assumption of $17,468 
in mortgage indebtedness.  The properties acquired have square footage 
totaling approximately 773,000, including three properties acquired by an 
unconsolidated subsidiary.  In the same transactions, approximately 56 acres 
of land scheduled for future development was also acquired.  The costs to 
develop these parcels is expected to aggregate to approximately $33,000, to 
be funded from drawings on the Unsecured Credit Facility and from cash 
reserves.  These properties, when complete, will total approximately 749,000 
square feet.  In addition, the Company has entered into a commitment in the 
amount of $19,369 to acquire additional property from the seller of certain 
of the acquired properties.

OTHER RISKS

YEAR 2000 COMPLIANCE

     The Company utilizes a number of computer software programs and
operating systems across its entire organization, including applications used
in financial business systems and various administrative functions.  To the
extent that the Company's software applications contain source code that is
unable to appropriately interpret the upcoming calendar year "2000" and
beyond, some level of modification, or replacement of such application will
be necessary.  The Company has completed its identification of applications
that are not yet "Year 2000" compliant and has commenced modification of
replacement of such applications, as necessary.  Given information known at
this time about the Company's systems that are non-compliant, coupled with
the Company's ongoing, normal course-of-business efforts to upgrade or
replace critical systems, as necessary, management does not expect Year 2000
compliance costs to have any material adverse impact on the Company's
liquidity or ongoing results of operations.  No assurance can be given,
however, that all of the Company's systems will be Year 2000 compliant or
that compliance costs or the impact of the Company's failure to achieve
substantial Year 2000 compliance will not have a material adverse impact on
the Company's future liquidity or results of operations.

MATERIAL CHANGES IN RESULTS OF OPERATIONS


                                      33
<PAGE>

COMPARISON OF HISTORICAL RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER
31, 1997 TO HISTORICAL RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1996

     The Company's historical results of operations for the year ended
December 31, 1996 include the operating activities subsequent to the Merger
and Asset Purchase.  In comparison to the operating activities of the Company
for 1997, which reflect one full year of operations from January 1, 1997 to
December 31, 1997, the historical results of operations for the year ended
December 31, 1996 reflect the operating activities of the Company from
February 23, 1996 to December 31, 1996 (the difference between these two time
periods are referred to as "Short Period Differences").

     Rentals from Real Estate Investments for the years ended December 31,
1997 and 1996 totaled $63,491 and $34,465, respectively.  The increase of
$29,026 was due to (i) the Short Period Differences of $6,784, (ii)
Properties acquired during 1996 and 1997 ("Property Acquisitions") which
increased rental revenues by $22,759, and (iii) the rental revenues generated
by the build-to-suit properties placed in service during 1996 and 1997
("Completed Build-to-Suits") totaling $4,669.  These increases were offset by
Properties disposed of during 1996 and 1997 ("Property Dispositions") which
reduced rental revenues by $5,186.

     Interest and Other Income totaled $2,014 and $576 for the years ended
December 31, 1997 and 1996, respectively.  The increase of $1,438 was
primarily due to interest income from the $45,000 in fully secured promissory
notes which was part of the consideration for the EastGroup Properties.
These notes were repaid on December 30, 1997.

     Income from Unconsolidated Joint Venture totaled $645 for the year ended
December 31, 1997 resulting from interest income on the $21,500 participating
mortgage loan purchased by the Company in connection with the
property-for-stock transaction with Ameritech.

     Compared to 1996, Interest Expense increased by $4,957 to $11,022 during
the year ended December 31, 1997.  The increase was primarily due to
increased levels of borrowings under the Unsecured Credit Facility during
1997 as compared to 1996.

     Compared to 1996, Property Taxes increased by $3,425 to $8,194 during
the year ended December 31, 1997.  The increase was due to (i) the Short
Period Differences of $923, (ii) the Property Taxes attributable to the
Property Acquisitions totaling $2,716, and (iii) the Property Taxes for the
Completed Build-to-Suits amounting to $468.  These increases were offset by
Property Dispositions which reduced Property Taxes by $682.

     Compared to 1996, Property Operating Expenses increased by $1,719 to
$5,540 during the year ended December 31, 1997.  The increase was due to (i)
the Short Period Differences of $844, (ii) the Property Operating Expenses
attributable to the Property Acquisitions totaling $1,397, and (iii) the
Property Operating Expenses for the Completed Build-to-Suits amounting to
$417. These increases were offset by Property Dispositions, which reduced
Property Operating Expenses by $939.

     General and Administrative Expenses totaled $6,212 and $4,273 for the
years ended December 31, 1997 and 1996, respectively.  The increase of $1,939
was due to the Short Period Differences of $423 and an increase in personnel
costs of $1,516 arising from the growth of the Company.

     Compared to 1996, Depreciation and Amortization Expense increased by
$6,242 to $11,194 during the year ended December 31, 1997.  The increase was
due to (i) the Short Period Differences of $1,336, (ii) the Depreciation
Expense attributable to the Property Acquisitions totaling $4,466, and (iii)
the Depreciation Expense for the Completed Build-to-Suits amounting to
$1,045. These increases were offset by Property Dispositions, which reduced
Depreciation and Amortization Expenses by $605.

     The Loss on Divestiture of Properties totaling $462 for the year ended 
December 31, 1997 was attributable to the disposition of the Wildwood and 
Golden Cove properties, which resulted in a total loss of $1,218.  The losses


                                      34
<PAGE>

were partially offset by gains on the disposition of the Birmingham I, 
Birmingham II and Phoenix North 23rd properties and the Marietta land parcel 
totaling $756.

     The Gain on Divestiture of Properties totaling $3,313 for the year ended 
December 31, 1996 was attributable to (i) the disposition of the Moorpark R & 
D Building located in California resulting in a gain of $165, (ii) the 
disposition of Progress Center I, Progress Center II and 8215 Highway 
Building located in Alabama, resulting in a gain of $230, (iii) the 
disposition of the Seatac and Meridian Village Shopping Centers located in 
Washington, resulting in a net gain of $1,420, and (iv) the disposition of 
eight properties located in Arizona, resulting in a net gain of $1,498.

     The Extraordinary Item totaling $808 for the year ended December 31 1997 
was attributable to the restructuring of the Company's Unsecured Credit 
Facility.  The Company wrote off loan costs in connection with this 
restructuring.  The Extraordinary Item totaling $411 for the year ended 
December 31, 1996 was incurred in connection with the retirement of debt 
assumed in connection with the Merger and Asset Purchase.

COMPARISON OF HISTORICAL RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 
31, 1996 TO HISTORICAL RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 
1995

     The Company was incorporated on May 18, 1995.  The Merger and Asset 
Purchase were consummated on February 23, 1996.  Except for Interest earned 
on its investments and General and Administrative Expenses which were 
incurred and accrued, the Company had no operating activities as of December 
31, 1995.  As a result, the Company's historical results of operations for 
the year ended December 31, 1996 are not comparable to the prior year's 
historical results of operations.  The Company's historical results of 
operations for the year ended December 31, 1996 include the operating 
activities subsequent to the Merger and Asset Purchase.


                                      35
<PAGE>

COMPARISON OF HISTORICAL AS ADJUSTED RESULTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1996 TO HISTORICAL AS ADJUSTED RESULTS OF OPERATIONS FOR THE
YEAR ENDED DECEMBER 31, 1995.

     The unaudited historical as adjusted operating data of the Company for
the years ended December 31, 1996 and 1995 has been prepared to reflect (i)
the respective historical results of the Merged Trusts and the Properties
acquired from Trust 83 ("Trust 83 Properties"); (ii) the May 31, 1995 closing
of the transactions under the stock purchase agreements between Hunt and each
of the Merged Trusts and the stock purchase agreements between USAA, and each
of the Merged Trusts, and the concurrent restructuring or retirement of the
Merged Trusts' indebtedness ("Recapitalization"); (iii) the incremental
effects of the Merger, the retirement of certain indebtedness using the net
proceeds of the Series B Preferred Stock Private Placement and availability
of funds on the Unsecured Credit Facility ("Refinancing"); and the effect of
purchase accounting on the historical results of the Merged Trusts and the
Trust 83 Properties; and (iv) the historical results of the Company to
reflect the post-Merger operations of the Company as if such transactions and
adjustments had occurred on January 1, 1995.  The historical as adjusted
information excludes the impact of the April and November offerings.  The
Merger, Asset Purchase and Refinancing closed concurrently on February 23,
1996.

     In the opinion of management, the unaudited historical as adjusted
consolidated financial information provides for all adjustments necessary to
reflect the effects of the Merger, the Asset Purchase, the Refinancing and
the Recapitalization.

     This financial information is unaudited and is not necessarily 
indicative of the historical as adjusted consolidated results that would have 
occurred if the transaction and adjustments reflected therein had been 
consummated in the period presented or on any particular date in the future, 
nor does it purport to represent the financial position, results of 
operations or changes in cash flows for future periods.

<TABLE>
<CAPTION>
                                                     FOR THE YEARS ENDED
                                                         DECEMBER 31,
                                                     -------------------
                                                       1996      1995
                                                     --------  --------
<S>                                                  <C>       <C>
TOTAL REVENUE                                        $ 40,199  $ 38,861

EXPENSES:
Interest                                                7,571     7,409
Property Taxes                                          5,581     5,485
Property Operating                                      4,733     5,099
General and Administrative                              5,435     4,800
Depreciation and Amortization                           6,260     5,148
                                                     --------  --------
TOTAL EXPENSES                                         29,580    27,941
                                                     --------  --------
NET INCOME BEFORE GAIN (LOSS) ON SALE OF
  PROPERTIES AND EXTRAORDINARY ITEMS                 $ 10,619  $ 10,920
                                                     --------  --------
                                                     --------  --------
</TABLE>

     The Company's historical as adjusted Net Income of $10,619 was $301
lower for the year ended December 31, 1996 than in 1995. The decrease is
mainly attributable to increases in Interest, General and Administrative, and
Depreciation and Amortization Expenses totaling $162, $635 and $1,112,
respectively.  These expenses increased primarily due to the property
acquisitions made in 1996 which necessitated borrowings on the Unsecured
Credit Facility and resulted in increased General and Administrative
Expenses.  These were partially offset by an increase in the Net Operating
Income generated by the asset portfolio.  Compared to 1995, total Revenue
increased by $1,338 of which $2,727 is attributable to properties acquired in
1996, partially offset by decreases in total revenues attributable to
properties disposed in 1995 and 1996 totaling $1,431.  Compared to 1995,
Property


                                      36
<PAGE>

Operating Expenses decreased by $366 in 1996.  The Property Operating 
Expenses decreased primarily due to the fact that a portion of the costs 
classified as Property Operating Expenses in 1995 were classified as General 
and Administrative Expenses in 1996.

     ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The financial statements and supplementary data listed in Item 14(a)(1)
and (a)(2) below are incorporated herein by reference and filed as part of
this report.

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

     The Company has not changed its independent certified public accountants
and has not had any disagreement with its independent certified public
accountants on accounting or financial disclosures required to be made under
rules of the Securities and Exchange Commission.


                                      37
<PAGE>

--------------------------------------------------------------------------------
                                 PART III
--------------------------------------------------------------------------------

     ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information required by Item 10 is incorporated by reference from
the Company's definitive proxy statement to be filed for its annual
stockholders' meeting to be held on May 15, 1998.

     ITEM 11.  EXECUTIVE COMPENSATION.

     The information required by Item 11 is incorporated by reference from
the Company's definitive proxy statement to be filed for its annual
stockholders' meeting to be held on May 15, 1998.

     ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT.

     The information required by Item 12 is incorporated by reference from
the Company's definitive proxy statement to be filed for its annual
stockholders' meeting to be held on May 15, 1998.

     ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by Item 13 is incorporated by reference from
the Company's definitive proxy statement to be filed for its annual
stockholders' meeting to be held on May 15, 1998.


                                      38
<PAGE>

-------------------------------------------------------------------------------
                                      PART IV
-------------------------------------------------------------------------------

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

(a) (1)    FINANCIAL STATEMENTS.  The following Company financial statements are
filed as part of this report:

<TABLE>
<CAPTION>
                                                                       PAGE
                                                                       ----
           <S>                                                         <C>
           Report of Independent Public Accountants................... F-1
           Consolidated Balance Sheets................................ F-2
           Consolidated Statements of Operations...................... F-3
           Consolidated Statements of Stockholders' Equity (Deficit).. F-4
           Consolidated Statements of Cash Flows...................... F-5
           Notes to Consolidated Financial Statements................. F-6
</TABLE>

(a) (2)    FINANCIAL STATEMENT SCHEDULES.  The following financial statement
schedules are filed as part of this report:

<TABLE>
<CAPTION>
                                                                       PAGE
                                                                       ----
           <S>                                                         <C>
           Valuation and Qualifying Accounts.......................... F-23
           Real Estate and Accumulated Depreciation................... F-24
</TABLE>

(a) (3)    EXHIBITS.

<TABLE>
<CAPTION>
NO.                                  DESCRIPTION
--                                   -----------
<S>        <C>
2.1   (1)  Amended and Restated Agreement and Plan of Merger among the Trusts
           and the Company dated as of November 10, 1995.

3.1   (2)  The Company's Third Amended and Restated Articles of Incorporation.

3.2   (2)  The Company's Second Amended and Restated Bylaws.

3.3   (3)  Amendment to Second Amended and Restated Bylaws adopted January 26,
           1996.

3.4   (3)  Second Amendment to Second Amended and Restated Bylaws adopted
           September 17, 1997.

3.5   (4)  Amendment to Second Amended and Restated Bylaws adopted January 20,
           1997.

4.1   (2)  Specimen share certificate. (See also restrictions contained in
           Exhibits 3.1 and 3.2)

4.2   (5)  Rights Agreement, dated as of March 12, 1998, between the Company
           and First Chicago Trust Company of New York, which includes the form
           of Certificate of Designation of Series C Junior Participating 
           Preferred Stock as Exhibit A, the form of Rights Certificate as
           Exhibit B and the form of the Summary of Rights as Exhibit C.

10.1  (2)  Amended and Restated Employee and Director Incentive Stock Plan of
           the Company.

10.2  (6)  First Amendment to Amended and Restated Employee and Director
           Incentive Stock Plan of the Company.

10.3  (4)  Amendment to Amended and Restated Employee and Director Incentive
           Stock Plan adopted by the Company's shareholders on May 16, 1997.


                                      39
<PAGE>

10.4  (4)  Amendment to Amended and Restated Employee and Director Incentive
           Stock Plan adopted by the Company's Board of Directors on
           January 20, 1998. 

10.5  (2)  Amended and Restated Investor Rights Agreement among the Company,
           Hunt, USAA, Trust 83, Ameritech and OTR dated as of February
           23, 1996.

10.6  (7)  Registration Rights Agreement dated September 24, 1997, among the
           Company, The Prudential Insurance Company of America, The
           Prudential Insurance Company of America on behalf of a single
           client insurance company separate account contained in Group
           Annuity Contract No. GA-9032, Strategic Performance Fund - II,
           Inc., and The Prudential Variable Contract Real Property Partnership.

10.7  (7)  Amended and Restated Registration Rights Agreement dated September
           24, 1997, among the Company, The Prudential Insurance Company of
           America acting for the benefit of the Chevron Separate Account, and
           The Prudential Insurance Company of America acting for the benefit of
           the Strategic Performance Fund I Separate Account.

10.8  (8)  Registration Rights Agreement dated September 30, 1997 between the
           Company and Ameritech Pension Trust.

10.9  (2)  Amended and Restated Excepted Holder Agreement between the Company
           and Hunt dated as of February 23, 1996.

10.10 (2)  Amended and Restated Excepted Holder Agreement between the Company
           and USAA dated as of February 23, 1996.

10.11 (2)  Excepted Holder Agreement between the Company and Ameritech dated as
           of February 23, 1996.

10.12 (2)  Excepted Holder Agreement between the Company and OTR dated as of
           February 23, 1996.

10.13 (3)  MIT-Investor Excepted Holder Agreement dated September 24, 1997
           between the Company and The Prudential Insurance Company of
           America.

10.14 (4)  First Amendment to Excepted Holder Agreement dated January 20, 1998
           between the Company and The Prudential Insurance Company of America.

10.15 (8)  MIT-Ameritech Amended and Restated Excepted Holder Agreement dated
           September 30, 1997, between the Company and Ameritech Pension Trust.

10.16 (1)  Amended and Restated Stockholders' Agreement among the Company, the
           Trusts, USAA, Allen J. Anderson, C.E. Cornutt, Peter O. Hanson,
           Robert E. Morgan, John S. Moody, James M. Pollak, Kenneth N.
           Stensby and Lee W. Wilson dated as of November 10, 1995.

10.17 (2)  Warrant Agreement between the Company and the First Chicago Trust
           Company of New York dated as of February 23, 1996.

10.18 (1)  Form of Indemnification Agreement signed by the Company and certain
           directors, officers, employees and agents of the Company.

10.19 (1)  Stock Purchase Agreement among the Company, Ameritech and OTR dated
           as of December 20, 1995.


                                      40
<PAGE>

10.20 (3)  Third Amended and Restated Revolving Credit Agreement dated
           September 23, 1997, among (i) the Company, (ii) BankBoston, N.A.,
           Texas Commerce Bank National Association, NationsBank of Texas, N.A.,
           Wells Fargo Bank, N.A., Dresdner Bank AG, First American Bank Texas,
           S.S.B., (collectively, the "Banks"), (iii) BankBoston, N.A. as Agent
           for the Banks, (iv) Texas Commerce Bank National Association as
           Documentation Agent for the Banks, and (v) NationsBank of Texas, N.A.
           as Syndication Agent for the Banks.

10.21 (3)  Second Amended and Restated Guaranty of Payment and Performance dated
           September 23, 1997 executed by MIT Unsecured L.P.

10.22 (4)  Form of First Amendment to Third Amended and Restated Revolving Credit
           Agreement dated February 19, 1998 among (i) the Company, (ii) MIT
           Unsecured L.P. and Meridian Refrigerated, Inc. (iv) BankBoston, N.A.,
           Chase Bank of Texas, National Association, NationsBank of Texas, N.A.,
           Wells Fargo Bank, N.A., Dresdner Bank AG, New York Branch and Grand
           Cayman Branch, and First American Bank Texas, S.S.B., (collectively,
           the "Banks"), (iii) BankBoston, N.A. as Agent for the Banks, (iv) Chase
           Bank of Texas, National Association as Documentation Agent for the
           Banks, and (v) NationsBank of Texas, N.A. as Syndication Agent for the
           Banks. 

10.23 (4)  Form of Guaranty of Payment and Performance dated February 19, 1998 and
           signed by Meridian Refrigerated, Inc.
 
10.24 (6)  Amended and Restated Loan Administration Agreement between The
           Prudential Insurance Company of America and the Company, IndTennco
           Limited Partnership, Metro-Sierra Limited Partnership, and Progress
           Center/Alabama Limited Partnership dated as of February 23, 1996.

10.25 (2)  Agreement of Limited Partnership of DFW Nine dated April 15, 1987.

10.26 (2)  Amendment No. 1 to Agreement of Limited Partnership of DFW Nine dated
           June 1, 1987.

10.27 (2)  Assignment of General Partnership Interests and Agreement regarding
           DFW Nine dated February, 1996.

10.28 (6)  Assignment of Limited Partnership Interest in MIT Unsecured L.P.
           (formerly known as DFW Nine) dated December 31, 1996.

10.29 (2)  Agreement of Limited Partnership of Progress Center/Alabama Limited
           Partnership dated December 3, 1987.

10.30 (2)  First Amendment to Agreement of Limited Partnership of Progress
           Center/Alabama Limited Partnership dated June 29, 1990.

10.31 (6)  Assignment of Limited Partnership Interest in MIT Secured L.P.
           (formerly known as Progress Center/Alabama Limited Partnership)
           dated December 31, 1996.

10.32 (9)  Amended and Restated Stock Purchase Agreement dated June 12, 1997 by
           and between the Company as Seller and The Prudential Insurance Company
           of America, as Purchaser together with a summary of the economic terms
           of three additional Stock Purchase Agreements into which the Company as
           Seller has entered with Strategic Performance Fund-II, Inc. as
           Purchaser, The Prudential Variable Contract Real Property Partnership
           as Purchaser, and The Prudential Insurance Company of America on behalf
           of a single client insurance company account contained in Group Annuity
           Contract No. GA-9032 as Purchaser.


                                      41
<PAGE>

10.33 (9)  Purchase and Sale Agreement (Texas properties) between The Prudential
           Insurance Company of America and the Company dated May 29, 1997,
           together with the First Amendment thereto dated July 7, 1997, the
           Second Amendment thereto dated July 22, and the Third Amendment thereto
           dated August 5, 1997. 

10.34 (10) Fourth Amendment to Purchase and Sale Agreement (Texas properties)
           between The Prudential Insurance Company of America and the  Company 
           dated August 20, 1997, Fifth Amendment to Purchase and Sale Agreement
           (Texas properties) between The Prudential Insurance Company of America
           and the Company dated September 5, 1997, and Sixth Amendment to 
           Purchase and Sale Agreement (Texas properties) between The Prudential
           Insurance Company of America and the Company dated September 8, 1997.

10.35 (9)  Summary of the Purchase and Sale Agreement (Cedarpointe, CA)
           between The Prudential Insurance Company of America and the Company 
           dated May 29, 1997, together with the First Amendment thereto dated
           July 7, 1997, the Second Amendment thereto dated July 22, and the Third
           Amendment thereto dated August 5, 1997. 

10.36 (10) Fourth Amendment to Purchase and Sale Agreement (Cedarpointe, CA) 
           between The Prudential Insurance Company of America and the Company 
           dated August 20, 1997, Fifth Amendment to Purchase and Sale 
           Agreement (Cedarpointe, CA) between The Prudential Insurance Company 
           of America and the Company dated September 5, 1997, and Sixth 
           Amendment to Purchase and Sale Agreement (Cedarpointe, CA) between 
           The Prudential Insurance Company of America and the Company dated 
           September 8, 1997.

10.37 (9)  Summary of the Purchase and Sale Agreement (460 Ellis 
           Road-Jacksonville & Centerport) between The Prudential Insurance 
           Company of America and the Company dated May 29, 1997, together with 
           the First Amendment thereto dated July 7, 1997, the Second Amendment 
           thereto dated July 22, and the Third Amendment thereto dated August 
           5, 1997.  

10.38 (10) Fourth Amendment to Purchase and Sale Agreement (460 Ellis 
           Road-Jacksonville & Centerport) between The Prudential Insurance 
           Company of America and the Company dated August 20, 1997, Fifth 
           Amendment to Purchase and Sale Agreement (460 Ellis 
           Road-Jacksonville & Centerport) between The Prudential Insurance 
           Company of America and the Company dated September 5, 1997, and 
           Sixth Amendment to Purchase and Sale Agreement (460 Ellis 
           Road-Jacksonville & Centerport) between The Prudential Insurance 
           Company of America and the Company dated September 8, 1997.
 
10.39 (9)  Summary of the Purchase and Sale Agreement (Michigan, Louisiana, and 
           Virginia) between The Prudential Insurance Company of America and 
           the Company dated May 29, 1997, together with the First Amendment 
           thereto dated July 7, 1997, the Second Amendment thereto dated July 
           22, and the Third Amendment thereto dated August 5, 1997.

10.40 (10) Fourth Amendment to Purchase and Sale Agreement (Michigan, 
           Louisiana, and Virginia) between The Prudential Insurance Company of 
           America and the Company dated August 20, 1997, Fifth Amendment to 
           Purchase and Sale Agreement (Michigan, Louisiana, and Virginia) 
           between The Prudential Insurance Company of America and the Company 
           dated September 5, 1997, and Sixth Amendment to Purchase and Sale 
           Agreement (Michigan, Louisiana, and Virginia) between The Prudential 
           Insurance Company of America and the Company dated September 8, 1997.

10.41 (9)  Summary of the Purchase and Sale Agreement (Illinois, Michigan & 
           California land) between The Prudential Insurance Company of America 
           and the Company dated May 29, 1997, together with the First 
           Amendment thereto dated July 7, 1997, the Second Amendment thereto 
           dated July 22, and the Third Amendment thereto dated August 5, 1997. 


                                      42
<PAGE>

10.42 (10) Fourth Amendment to Purchase and Sale Agreement (Illinois, Michigan 
           & California land) between The Prudential Insurance Company of 
           America and the Company dated August 20, 1997, Fifth Amendment to 
           Purchase and Sale Agreement (Illinois, Michigan & California) 
           between The Prudential Insurance Company of America and the Company 
           dated September 5, 1997, and Sixth Amendment to Purchase and Sale 
           Agreement (Illinois, Michigan & California) between The Prudential 
           Insurance Company of America and the Company dated September 22, 
           1997.

10.43 (10) Summary of Purchase and Sale Agreement between Pru-Oma Joint Venture 
           and the Company dated May 29, 1997 together with the First Amendment 
           thereto dated July 7, 1997, the Second Amendment thereto dated July 
           22, the Third Amendment thereto dated August 5, 1997, the Fourth 
           Amendment thereto dated August 20, 1997, the Fifth Amendment thereto 
           dated September 5, 1997, and the Sixth Amendment thereto dated 
           September 8, 1997.
                                    
10.44 (10) Summary of Purchase and Sale Agreement between The Prudential 
           Insurance Company of America and One Federal Street  Joint Venture 
           as sellers and the Company as buyer dated May 29, 1997 together with 
           the First Amendment thereto dated July 7, 1997, the Second Amendment 
           thereto dated July 22, the Third Amendment thereto dated August 5, 
           1997, the Fourth Amendment thereto dated August 20, 1997, the Fifth 
           Amendment thereto dated September 5, 1997, and the Sixth Amendment 
           thereto dated September 8, 1997.

10.45 (10) Agreement regarding Real Property between EastGroup Properties, L.P. 
           and the Company dated September 22, 1997.

10.46 (10) Promissory Note in the amount of $18,300,000 dated September 23, 
           1997 executed in favor of the Company by EastGroup Properties, L.P.

10.47 (10) Form of Mortgage and Security Agreement executed by EastGroup 
           Properties, L.P. with respect to the $18,300,000 loan from the 
           Company to EastGroup Properties, L.P.

10.48 (10) Promissory Note in the amount of $26,700,000 dated September 23, 
           1997 executed in favor of the Company by EastGroup Properties, L.P.

10.49 (10) Form of Mortgage and Security Agreement executed by EastGroup
           Properties, L.P. with respect to the $26,700,000 loan from the
           Company to EastGroup Properties, L.P.

10.50 (11) Agreement of Purchase and Sale and Joint Escrow Instructions dated 
           May 29, 1997 between the Company and State Street Bank and Trust 
           Company, as Trustee for Ameritech Pension Trust.

10.51 (1)  Form of employment letters signed by the Company and, respectively, 
           Allen J. Anderson, Milton K. Reeder, Dennis D. Higgs, Jaime Suarez 
           and Robert A. Dobbin, each dated November 14, 1995, together with 
           summary of economic terms for each such employment letter.

10.52 (2)  Employment letter signed by Celeste Woo dated November 14, 1996.

10.53 (2)  Employment letter signed by Peter B. Harmon dated January 30, 1996.

10.54 (12) Employment letter signed by Gregory D. Skirving dated January 9, 1997.

10.55 (4)  Form of Severance Agreement entered into between the Company and Allen
           J. Anderson, Dennis D. Higgs, and Milton K. Reeder.


                                      43
<PAGE>

10.56 (4)  Form of Severance Agreement entered into between the Company and 
           Gregory D. Skirving, Peter B. Harmon, Timothy B. Keith, Brian R. 
           Barringer, Jaime Suarez, and Robert A. Dobbin.

10.57 (4)  The Company's Severance Plan adopted February 5, 1998.

10.58 (2)  Form of Incentive Stock Option Agreement to be signed by the 
           Company and certain officers and employees participating in the 
           Company's Stock Plan.

10.59 (2)  Form of Nonstatutory Stock Option Agreements to be signed by the 
           Company and certain directors, officers, employees and agents 
           participating in the Company's Stock Plan.

10.60 (2)  Form of Promissory Note used in connection with the purchase the 
           Company's Common Stock signed by Messrs. Anderson ($200,000), 
           Reeder ($40,000), Higgs ($90,000), Keith ($30,000) and Suarez 
           ($20,000).

10.61 (2)  Note Purchase Agreement between the Company and The First National 
           Bank of Boston dated as of February 13, 1996.

10.62 (2)  Security Agreement and Assignment of Account to The First National
           Bank of Boston from the Company dated February 13, 1996.

10.63 (1)  Option Agreement between the Company and USAA dated as of November 
           21, 1995, including the form of USAA Warrant attached.

10.64 (2)  Warrant issued to USAA to purchase Common Stock of the Company 
           dated February 23, 1996.

10.65 (2)  The Company's Dividend Reinvestment Plan.

10.66 (4)  Note Purchase Agreement among the Company and The Travelers 
           Insurance Company (I/N/O TRAL & CO.), United Services Automobile 
           Association (I/N/O SALKELD & CO.), The Variable Annuity Life 
           Insurance Company, The United States Life Insurance Company in 
           the City of New York, All American Life Insurance Company, The 
           Old Line Life Insurance Company of America, The Lincoln National 
           Life Insurance Company, Lincoln Life & Annuity Company of New 
           York, First Penn-Pacific Life Insurance Company (I/N/O CUDD & 
           CO), Lincoln National Health & Casualty Insurance Company, Allied 
           Life Insurance Company "B" (I/N/O GERLACH & CO), Sons of Norway 
           (I/N/O VAR & CO), Aid Association for Lutherans (I/N/O NIMER & 
           CO), Metropolitan Life Insurance Company, National Life Insurance 
           Company, Life Insurance Company of the Southwest, Keyport Life 
           Insurance Company (I/N/O BOST & CO), Union Central Life Insurance 
           Company (I/N/O HARE & CO), Pan-American Life Insurance Company 
           dated November 15, 1997.

12.1  (4)  Statements re computation of ratios.

21.1  (4)  Subsidiaries of the Company.

23.1 (13)  Consent of Independent Public Accountants.

27.1  (4)  Financial Data Schedule.
</TABLE>

----------------------------------------
(1)  Filed with the Company's Registration Statement No. 333-00018 on January 3,
     1996, and incorporated herein by reference.
(2)  Filed with the Company's Amendment No. 1 to Registration Statement No.
     333-02322 on March 25, 1996, and incorporated herein by reference.
(3)  Filed on November 14, 1997 with the Company's Form 10-Q for the quarter
     ended September 30, 1997 and incorporated herein by reference.
(4)  Previously filed.
(5)  Filed on March 16, 1998 with the Company's Registration Statement on
     Form 8A dated March 16, 1998 and incorporated herein by reference.
(6)  Filed on March 20, 1997 with the Company's Form 10-K for 1996 and
     incorporated herein by reference.
(7)  Filed with the Schedule 13D filed on October 3, 1997 by The Prudential 
     Insurance Company of America, Strategic Performance Fund - II, Inc.,
     and The Prudential Variable Contract Real Property Partnership and
     incorporated herein by reference.
(8)  Filed with the Amendment No. 1 to Schedule 13D filed on October 10, 1997
     by Ameritech Pension Trust and incorporated herein by reference.
(9)  Filed on August 13, 1997 with the Company's Form 10-Q for the quarter
     ended June 30, 1997 and incorporated herein by reference.
(10) Filed November 12, 1997 with the Company's Form 8-KA dated September
     24, 1997.
(11) Filed November 12, 1997 with the Company's Form 8-KA dated September
     30, 1997 and incorporated herein by reference.
(12) Filed on May 14, 1997 with the Company's Form 10-Q for the quarter ended
     March 31, 1997 and incorporated herein by reference.
(13) Filed with this report.

(b)    REPORTS ON FORM 8-K.
       Current Report on Form 8-K dated September 24, 1997 (this Form 8-K
       was filed on October 9, 1997).

       Current Report on Form 8-K dated September 30, 1997 (this Form 8-K
       was filed on October 15, 1997).

       Current Report on Form 8-K dated October 22, 1997 (this Form 8-K was
       filed on November 6, 1997).

       Form 8-KA Amendment No. 1 to the Company's Current Report on Form 8-K
       dated September 24, 1997 (this Form 8-KA was filed on November 12, 1997)

       Form 8-KA Amendment No. 1 to the Company's Current Report on Form 8-K
       dated September 30, 1997 (this Form 8-KA was filed on November 12, 1997).

       Form 8-KA Amendment No. 1 to the Company's Current Report on Form 8-K 
       dated October 22, 1997 (this Form 8-KA was filed on November 12, 1997.

(c)    The exhibits listed in Item 14(a)(3) above are submitted as part of
       this report.

(d)    The financial statement schedules listed in Item 14(a)(2) above are
       submitted as part of this report.


                                      44
<PAGE>

                                     SIGNATURES

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

Dated: February 24, 1999  MERIDIAN INDUSTRIAL TRUST, INC.


                          By:  /s/ Robert A. Dobbin
                          ------------------------------------
                          Robert A. Dobbin
                          Secretary



                                      45
<PAGE>

                      REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders of Meridian Industrial Trust, Inc.:


     We have audited the accompanying consolidated balance sheets of Meridian
Industrial Trust, Inc. (a Maryland corporation) as of December 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the years ended December 31, 1997 and 1996
and for the period from May 18, 1995 (inception) to December 31, 1995.  These
consolidated financial statements and the schedules referred to below are the
responsibility of the management of the Company.  Our responsibility is to
express an opinion on these consolidated financial statements and schedules
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 Meridian
Industrial Trust, Inc. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997 and 1996 and
for the period from May 18, 1995 (inception) to December 31, 1995, in conformity
with generally accepted accounting principles.

     Our audits were made for the purpose of forming an opinion on the basic 
consolidated financial statements taken as a whole.  The financial statement 
schedules listed in Item 14(a)(2) are presented for purposes of complying 
with the Securities and Exchange Commission's rules and are not part of the 
basic consolidated financial statements. These schedules have been subjected 
to the auditing procedures applied in our audits of the basic consolidated 
financial statements and, in our opinion, fairly state in all material 
respects the financial data required to be set forth in relation to the basic 
consolidated financial statements taken as a whole.

                                                  /s/ ARTHUR ANDERSEN LLP

San Francisco, California
  March 23, 1998


                                      F-1
<PAGE>

                          MERIDIAN INDUSTRIAL TRUST, INC.

                            CONSOLIDATED BALANCE SHEETS
                          AS OF DECEMBER 31, 1997 AND 1996
                         (IN THOUSANDS, EXCEPT SHARE DATA)
                                          
                                       ASSETS
                                          
<TABLE>
<CAPTION>
                                                                                           1997             1996
                                                                                         --------         --------
 <S>                                                                                     <C>              <C>
 INVESTMENT IN REAL ESTATE ASSETS:
 Rental Properties Held for Investment                                                   $813,389         $318,671
 Less: Accumulated Depreciation                                                           (14,374)          (4,217)
                                                                                         --------         --------
                                                                                          799,015          314,454
 Rental Properties Held for Divestiture                                                     9,492            7,530
                                                                                         --------         --------
                                                                                          808,507          321,984
 Investment in Unconsolidated Joint Venture                                                21,500               --
                                                                                         --------         --------
 Total Investment in Real Estate Assets                                                   830,007          321,984

 OTHER ASSETS:
 Cash and Cash Equivalents                                                                  7,855            2,942
 Cash Held in Consolidated Limited Partnerships                                               992               --
 Restricted Cash and Cash Held in Escrow                                                   11,267            2,314
 Accounts Receivable, Net of Reserves of $228 and $571 at
   December 31, 1997 and 1996, respectively                                                 3,460            1,659
 Capitalized Loan Fees, Lease Commissions and Other Assets, Net                             9,931            4,164
                                                                                         --------         --------

 TOTAL ASSETS                                                                            $863,512         $333,063
                                                                                         --------         --------
                                                                                         --------         --------

                      LIABILITIES AND STOCKHOLDERS' EQUITY

 LIABILITIES:
 Unsecured Notes, Including Unamortized Debt Premium of $109
   at December 31, 1997                                                                  $160,109         $     --
 Mortgage Loan                                                                             66,094           66,094
 Unsecured Credit Facility                                                                 20,500           11,500
 Mortgage Note Payable, Including Unamortized Debt Premium of $153
   at December 31, 1997                                                                    10,503               --
 Accrued Dividends Payable                                                                  9,473            4,648
 Accounts Payable, Prepaid Rent, Tenant Deposits and Other Liabilities                     21,562            7,308
                                                                                         --------         --------
 TOTAL LIABILITIES                                                                        288,241           89,550
                                                                                         --------         --------

 Minority Interest in Consolidated Limited Partnerships                                     5,132               --
                                                                                         --------         --------

 Commitments and Contingencies                                                                 --               --

 STOCKHOLDERS' EQUITY:
 Authorized Shares - 175,000,000 shares of Common Stock and
   25,000,000 shares of Preferred Stock authorized, each with par value of 
   $0.001; 30,165,662 and 13,595,563 shares of Common Stock issued and
   outstanding at December 31, 1997 and 1996, respectively; and 2,272,727 shares
   of Series B Preferred Stock with a liquidation preference of $35,000 issued and       
   outstanding at December 31, 1997 and 1996                                                   32               16
 Additional Paid-in Capital                                                               574,848          243,683
 Distributions in Excess of Income                                                         (4,741)            (186)
                                                                                         --------         --------
 TOTAL STOCKHOLDERS' EQUITY                                                               570,139          243,513
                                                                                         --------         --------

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                              $863,512         $333,063
                                                                                         --------         --------
                                                                                         --------         --------
</TABLE>

          The accompanying notes are an integral part of these statements.


                                      F-2
<PAGE>
                          MERIDIAN INDUSTRIAL TRUST, INC.

                       CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
         FOR THE PERIOD FROM MAY 18, 1995 (INCEPTION) TO DECEMBER 31, 1995
                         (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                 1997              1996            1995
                                                             -----------       -----------      -----------
 <S>                                                         <C>               <C>              <C>
 REVENUES:
 Rentals from Real Estate Investments                        $    63,491       $    34,465      $        --
 Interest and Other Income                                         2,014               576               33
 Income from Unconsolidated Joint Venture                            645                --               --
                                                             -----------       -----------      -----------
 TOTAL REVENUES                                                   66,150            35,041               33
                                                             -----------       -----------      -----------

 EXPENSES:
 Interest                                                         11,022             6,065                5
 Property Taxes                                                    8,194             4,769               --
 Property Operating                                                5,540             3,821               --
 General and Administrative                                        6,212             4,273            1,321
 Depreciation and Amortization                                    11,194             4,952               --
                                                             -----------       -----------      -----------
 TOTAL EXPENSES                                                   42,162            23,880            1,326
                                                             -----------       -----------      -----------
 Income (Loss) Before Minority Interest                           23,988            11,161           (1,293)
 Minority Interest in Net (Income)                                   (30)               --               --
                                                             -----------       -----------      -----------
 Income (Loss) Before Gain (Loss) on Divestiture of 
   Properties and Extraordinary Item                              23,958            11,161           (1,293)
 Gain (Loss) on Divestiture of Properties, Net                      (462)            3,313               --
                                                             -----------       -----------      -----------
 Income (Loss) Before Extraordinary Item                          23,496            14,474           (1,293)
 Extraordinary Item -- Expenses Incurred in
   Connection with Debt Restructuring and Retirements               (808)             (411)              --
                                                             -----------       -----------      -----------
 NET INCOME (LOSS)                                           $    22,688       $    14,063      $    (1,293)
                                                             -----------       -----------      -----------
                                                             -----------       -----------      -----------

 Net Income (Loss)                                           $    22,688       $    14,063      $    (1,293) 
 Less: Preferred Dividends Declared                               (2,818)           (2,412)             (29)
                                                             -----------       -----------      -----------
 NET INCOME (LOSS) ALLOCABLE TO COMMON                       $    19,870       $    11,651      $    (1,322)
                                                             -----------       -----------      -----------
                                                             -----------       -----------      -----------

 BASIC PER SHARE DATA:
 Income (Loss) Before Extraordinary Item                     $      1.17       $      1.42      $ (1,468.89)
 Extraordinary Item                                                (0.05)            (0.05)              --
                                                             -----------       -----------      -----------
 NET INCOME (LOSS) ALLOCABLE TO COMMON PER BASIC
   WEIGHTED AVERAGE COMMON SHARE OUTSTANDING                 $      1.12       $      1.37      $ (1,468.89)
                                                             -----------       -----------      -----------
                                                             -----------       -----------      -----------

 DILUTED PER SHARE DATA:
 Income (Loss) Before Extraordinary Item                     $      1.13       $      1.37      $    (32.05)
 Extraordinary Item                                                (0.04)            (0.04)              --
                                                             -----------       -----------      -----------
 NET INCOME (LOSS) ALLOCABLE TO COMMON PER DILUTED
   WEIGHTED AVERAGE COMMON SHARE OUTSTANDING                 $      1.09       $      1.33      $    (32.05)
                                                             -----------       -----------      -----------
                                                             -----------       -----------      -----------

 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 Basic                                                        17,791,304         8,476,461              900
                                                             -----------       -----------      -----------
                                                             -----------       -----------      -----------
 Diluted                                                      18,264,459        10,545,878           41,251
                                                             -----------       -----------      -----------
                                                             -----------       -----------      -----------
</TABLE>

          The accompanying notes are an integral part of these statements.


                                      F-3
<PAGE>
                                          
                          MERIDIAN INDUSTRIAL TRUST, INC.
                                          
             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
         FOR THE PERIOD FROM MAY 18, 1995 (INCEPTION) TO DECEMBER 31, 1995
                         (IN THOUSANDS, EXCEPT SHARE DATA)
                                          

<TABLE>
<CAPTION>
                                                                                
                                         COMMON STOCK       SERIES B PREFERRED STOCK ADDITIONAL  DISTRIBUTIONS
                                         ------------       ------------------------   PAID-IN      IN EXCESS
                                       SHARES     PAR VALUE    SHARES    PAR VALUE     CAPITAL      OF INCOME
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
<S>                                  <C>           <C>        <C>        <C>         <C>         <C>
 BALANCE AT                                                                                                            
   MAY 18, 1995 (INCEPTION)                 --     $    --           --     $    --   $      --     $     --
 Issuance of Common Shares                 900           1           --          --          13           --
 Stock Option Compensation                  --          --           --          --         594           --
 Accrued Dividends for                                                                               
   Series A Preferred Stock                 --          --           --          --          --          (29)
 Net Loss                                   --          --           --          --          --       (1,293)
---------------------------------------------------------------------------------------------------------------
 BALANCE AT                                                                                                            
   DECEMBER 31, 1995                       900           1           --          --         607       (1,322)
 Issuance of Shares at Date                                                                                           
   of Merger                         7,989,756           8           --          --     116,209           --
 Stock Options Exercised               191,900          --           --          --       2,300           --
 Retainer Fee Paid as Shares                                                                                          
   to Directors                          3,007          --           --          --          52           --
 Issuance of Common Shares           5,410,000           5           --          --      95,915           --
 Issuance of Preferred Shares               --          --    2,272,727           2      34,998           --
 Offering Costs                             --          --           --          --      (6,398)          --
 Cancellation of Dividends                                                                                        
   for Series A Preferred Stock             --          --           --          --          --           29
 Distributions Declared:                                                                                               
   Common                                   --          --           --          --          --      (10,544)
   Preferred                                --          --           --          --          --       (2,412)
 Net Income                                 --          --           --          --          --       14,063
---------------------------------------------------------------------------------------------------------------
 BALANCE AT                                                                        
   DECEMBER 31, 1996                13,595,563          14    2,272,727           2     243,683         (186)
 Issuance of Common Shares          16,692,062          16           --          --     335,019           --
 Offering Costs                             --          --           --          --        (700)          --
 Warrants Exercised                     23,315          --           --          --         389           --
 Stock Options Exercised                 5,000          --           --          --          81           --
 Retainer Fee Paid as Shares                                                                            
   to Directors                          3,322          --           --          --          75           --
 Cancellation of Common                                                                                              
   Shares                             (153,600)         --           --          --      (3,699)          --
 Distributions Declared:                                                                                               
   Common                                   --          --           --          --          --      (24,425)
   Preferred                                --          --           --          --          --       (2,818)
 Net Income                                 --          --           --          --          --       22,688
---------------------------------------------------------------------------------------------------------------
 BALANCE AT                                                                        
   DECEMBER 31, 1997                30,165,662     $    30    2,272,727     $     2   $ 574,848     $ (4,741)
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</TABLE>

          The accompanying notes are an integral part of these statements.


                                      F-4
<PAGE>

                          MERIDIAN INDUSTRIAL TRUST, INC.
                                          
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
         FOR THE PERIOD FROM MAY 18, 1995 (INCEPTION) TO DECEMBER 31, 1995
                                   (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                1997            1996            1995
                                                                            ----------      ----------       --------
<S>                                                                         <C>             <C>              <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
 Net Income (Loss)                                                          $   22,688      $   14,063       $ (1,293)
   Adjustments to Reconcile Net Income (Loss) to Cash Provided by
     Operating Activities:
      Depreciation and Amortization                                             11,194           4,952             --
      Amortization of Debt Premium                                                (172)             --             --
      Amortization of Financing Costs                                              301             419             --
      Straight Line Rent                                                        (2,067)           (732)            --
      Income Allocated to Minority Partner                                          30              --             --
      Loss (Gain) on Divestiture of Properties, Net                                462          (3,313)            --
      Extraordinary Item -- Expenses Incurred in Connection with
        Debt Restructuring and Retirements                                         808             411             --
      Stock Option Compensation                                                     --              --            594
      (Increase) Decrease in Accounts Receivable and Other Assets               (1,573)          1,206            (68)
      Increase (Decrease) in Accounts Payable, Prepaid Rent,
        Tenant Deposits and Other Liabilities                                    5,615          (1,874)           308
                                                                            ----------      ----------       --------
 Net Cash Provided by (Used in) Operating Activities                            37,286          15,132           (459)
                                                                            ----------      ----------       --------

 CASH FLOWS FROM INVESTING ACTIVITIES:
   Cash Contributed by Merged Trusts                                                --          11,892             --
   Net Proceeds from Property Sales                                             16,245          31,447             --
   Decrease in Restricted Cash and Cash Held In Escrow                           4,937           5,483             --
   Increase in Cash Held In Consolidated Partnerships                             (992)             --             --
   Net Cash Paid in Connection with Asset Purchase                                  --          (3,257)            --
   Redemption of Series A Preferred Stock and Accrued Dividends Payable             --             (83)            --
   Investments in Real Estate                                                 (238,432)       (122,637)          (300)
   Recurring Building Improvements                                              (2,123)         (1,407)            --
   Recurring Tenant Improvements                                                  (941)           (859)            --
   Recurring Leasing Commissions                                                (1,304)         (1,396)            --
   Maturity of Marketable Security, Net of Related Debt                             --             256           (256)
   Receipt of Mortgage Note Receivable                                          45,000              --             --
   Receipt of Note Receivable                                                      503              --             --
   Purchase of Other Assets                                                       (295)           (258)           (20)
                                                                            ----------      ----------       --------
 Net Cash Used in Investing Activities                                        (177,402)        (80,819)          (576)
                                                                            ----------      ----------       --------

 CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments for Capitalized Loan Fees                                           (1,946)           (551)          (254)
   Principal Payments on Mortgage Notes                                         (5,786)             --             --
   Retirement of Debt and Advances from Affiliates                                  --         (59,438)           750
   Borrowings on Unsecured Credit Facility                                     182,500         118,400             --
   Repayment of Borrowings on Unsecured Credit Facility                       (173,500)       (106,900)            --
   Proceeds from Debt Placement                                                160,109              --             --
   Distributions Paid to Stockholders                                          (22,418)         (8,308)            --
   Proceeds from the Issuance of Common and Preferred Stock, Net                 6,070         124,951          1,014
                                                                            ----------      ----------       --------
 Net Cash Provided by Financing Activities                                     145,029          68,154          1,510
                                                                            ----------      ----------       --------

 NET INCREASE IN CASH AND CASH EQUIVALENTS                                       4,913           2,467            475
 Cash and Cash Equivalents at Beginning of Period                                2,942             475             --
                                                                            ----------      ----------       --------
 CASH AND CASH EQUIVALENTS AT END OF PERIOD                                 $    7,855      $    2,942       $    475
                                                                            ----------      ----------       --------
                                                                            ----------      ----------       --------

 CASH PAID FOR INTEREST                                                     $   11,418      $    6,276       $     --
                                                                            ----------      ----------       --------
                                                                            ----------      ----------       --------
</TABLE>

           The accompanying notes are an integral part of these statements.


                                      F-5
<PAGE>

                        MERIDIAN INDUSTRIAL TRUST, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF DECEMBER 31,1997 AND 1996
                       (IN THOUSANDS, EXCEPT SHARE DATA)

1.   ORGANIZATION

     Meridian Industrial Trust, Inc. (the "Company") was incorporated in the 
state of Maryland on May 18, 1995. The Company is a real estate investment 
trust ("REIT") engaged primarily in the business of owning, acquiring, 
developing, managing and leasing income-producing warehouse/distribution and 
light industrial properties.  At December 31, 1997, the Company's principal 
asset is its portfolio of 193 warehouse/distribution and light industrial 
properties and two retail properties.  In addition, at December 31, 1997, the 
Company had nine build-to-suit properties under construction.

     On February 23, 1996, the Company merged with Meridian Point Realty 
Trust IV Co., Meridian Point Realty Trust VI Co. and Meridian Point Realty 
Trust VII Co. ("Trust IV," "Trust VI" and "Trust VII," respectively; 
collectively referred to as the "Merged Trusts"), with the Company as the 
surviving entity (that transaction is referred to below as the "Merger"). In 
addition, concurrent with the Merger, the Company acquired certain 
properties, and assumed certain mortgage notes and other liabilities, from 
Meridian Point Realty Trust '83 ("Trust 83") (that transaction is referred to 
below as the "Asset Purchase").

     Prior to February 23, 1996, the Company had no operations other than 
interest on its investments and general and administrative expenses.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  BASIS OF PRESENTATION  The accompanying consolidated financial 
statements include the results of the Company, its wholly-owned subsidiaries 
and its majority-owned and controlled partnerships.  All intercompany 
transactions have been eliminated.
      
     (b)  USE OF ESTIMATES  The preparation of 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 the disclosure of contingent assets and liabilities at 
the date of the financial statements and the reported amounts of revenues and 
expenses during the reporting period. Actual results could differ from those 
estimates.  
                    
     (c)  RENTAL PROPERTIES HELD FOR INVESTMENT  Investments in rental
properties are stated at cost unless circumstances indicate that cost cannot be
recovered, in which case, the carrying value of the property is reduced to
estimated fair value.  Estimated fair value: (i) is based upon the Company's
plans for the continued operation of each property; (ii) is computed using
estimated sales price, as determined by prevailing market values for comparable
properties and/or the use of capitalization rates multiplied by annualized
rental income based upon the age, construction, and use of the building, and
(iii) does not purport, for a specific property, to represent the current sales
price that the Company could obtain from third parties for such property.  The
fulfillment of the Company's plans related to each of its properties is
dependent upon, among other things, the presence of economic conditions which
will enable the Company to continue to hold and operate the properties to yield
an acceptable return on the Company's investment.  Due to uncertainties inherent
in the valuation process and in the economy, management can provide no
assurances that the actual results of operating and disposing of the Company's
properties will not be materially different than current expectations.


                                     F-6
<PAGE>

     Rental Properties Held for Investment are depreciated over 35 years 
using the straight-line method.  Expenditures for maintenance, repairs, and 
improvements which do not materially prolong the normal useful life of an 
asset are charged to operations as incurred.  Tenant improvements are 
capitalized and amortized under the straight-line method over the term of the 
related lease.

     Rental Properties Held for Divestiture are stated at the lower of cost 
or estimated fair value.  Estimated fair value is based upon prevailing 
market values for comparable properties or the use of capitalization rates 
multiplied by annualized rental income based upon the age, construction and 
use of building, but does not  purport to represent the current sales price 
that the Company could obtain from third parties for such property.  No 
depreciation is recorded on Rental Properties Held for Divestiture.
      
     (d)  CONSTRUCTION IN PROGRESS  Costs clearly associated with the 
development and construction of a real estate project are capitalized as 
construction in progress.  In addition, interest, real estate taxes, 
insurance and other holding costs are capitalized until the property is 
placed in service. For the years ended December 31, 1997 and 1996, interest 
expense totaling $1,820 and $561, respectively, were capitalized for 
properties under construction.

     (e)  CASH AND CASH EQUIVALENTS  For the purposes of reporting cash 
flows, cash and cash equivalents include cash on hand and short-term 
investments with an original maturity of three months or less when purchased.
      
     (f)  CAPITALIZED LOAN FEES AND LEASE COMMISSIONS  Capitalized loan fees 
are amortized as interest expense over the term of the related debt. Lease 
commissions are amortized into depreciation and amortization expense on a 
straight-line basis over the term of the related lease.
      
     (g)  FAIR VALUE OF FINANCIAL INVESTMENTS  Statement of Financial 
Accounting Standards No. 107, "Accounting for Fair Value of Financial 
Instruments," requires disclosure of fair value for all financial 
instruments.  Based on the borrowing rates currently available to the 
Company, the carrying amount of its debt approximates fair value.  The 
carrying amount of cash and cash equivalents also approximates fair value.
      
     (h)  OFFERING COSTS  Underwriting commissions, offering costs and other
expenses incurred in connection with stock offerings of the Company's Common and
Preferred Stock have been reflected as a reduction of Stockholders' Equity.
      
     (i)  RENTALS FROM REAL ESTATE INVESTMENTS  All leases are classified as 
operating leases.  The Company recognizes rental income on a straight-line 
basis over the term of the lease.  Deferred rent receivable, included in 
other assets, represents the excess of rental revenue on a straight-line 
basis over the cash received under the applicable lease provision.
      
     Certain of the Company's leases relating to its properties require 
lessees to pay all or a portion of real estate taxes, insurance and operating 
expenses ("Expense Recaptures").  Expense Recaptures are recognized as 
revenues in the same period the related expenses are incurred by the Company. 
For the years ended December 31, 1997 and 1996, Expense Recaptures of $8,535 
and $4,331 have been included in rentals from real estate investments.
      
     (j)  INCOME TAXES  The Company has previously elected to be taxed as a 
REIT for federal and, where the federal rules are allowed, state income tax 
purposes. To continue to qualify for REIT status, the Company must meet a 
number of ongoing organizational and operational requirements. If the Company 
satisfies those REIT requirements and the Company currently distributes all 
of its net taxable income (including net capital gains) to its stockholders, 
the Company should generally owe no federal or state income tax.  The REIT 
provisions of the Internal Revenue Service Code of 1986, as amended, 
generally allow a REIT to deduct dividends paid to stockholders.  If the 
Company fails to qualify as a REIT in any taxable year, it will be subject to 
certain state and federal taxes imposed on its income and properties.


                                     F-7
<PAGE>

     As a result of deductions allowed for the dividends paid to shareholders 
and the utilization of net operating loss carryovers of the Merged Trusts, 
the Company has no federal or state taxable income.  Accordingly, no 
provisions for federal or state income taxes have been made in the 
accompanying consolidated statements of operations for the years ended 
December 31, 1997, 1996 and 1995.
      
     (k)  EARNINGS PER SHARE  During the first quarter of 1997, the Financial 
Accounting Standards Board issued Statement of Financial Accounting Standards 
(SFAS) No. 128, "Earnings Per Share."  SFAS 128 requires the disclosure of 
basic earnings per share and modifies existing guidance for computing diluted 
earnings per share.  Under the new standard, basic earnings per share is 
computed as net income or loss divided by the weighted average number of 
shares of Common Stock outstanding, excluding the dilutive effects of stock 
options and other potentially dilutive securities.  SFAS No. 128 is effective 
for periods ending after December 15, 1997.  Earnings per share for all 
periods presented have been restated to conform to the new standards as 
follows:

<TABLE>
<CAPTION>
                                               Years Ended December 31,
                                      ---------------------------------------
                                          1997          1996         1995
                                      -----------   -----------  ------------
<S>                                   <C>           <C>          <C>
 Net Income (Loss) - Basic            $    19,870   $    11,651  $     (1,322)

 Net Income (Loss) - Diluted          $    19,870   $    14,063  $     (1,322)

 Weighted Average Shares
 Outstanding:
   Basic                               17,791,304     8,476,461           900
   Stock options                          314,019        98,921        40,351
   Warrants                               159,136        26,880            --
   Series B Preferred Stock                    --     1,943,616            --
   Diluted
                                      -----------   -----------   -----------
                                       18,264,459    10,545,878        41,251
                                      -----------   -----------   -----------
                                      -----------   -----------   -----------

 Net Income (Loss) Per Share:
   Basic                              $      1.12   $      1.37   $ (1,468.89)
   Diluted                                   1.09          1.33        (32.05)
</TABLE>

     (l)  NEW ACCOUNTING PRONOUNCEMENT  In June, 1997, the Financial 
Accounting Standards Board issued Statement of Financial Accounting Standards 
(SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related 
Information." SFAS 131 is effective for fiscal years beginning after December 
15, 1997. Management has not yet determined the level of additional 
disclosure, if any, that may be required by SFAS No. 131.  Additional 
disclosure that may be required will be provided beginning with the financial 
statements of the Company for the year ending December 31, 1998.
      
     (m)  RECLASSIFICATIONS  Certain 1996 and 1995 items have been 
reclassified to conform to the 1997 presentation.
      
      
3.   TRANSACTIONS WITH AFFILIATES

     For the years ended December 31, 1997 and 1996 and for the period from 
May 18, 1995 to December 31, 1995, the Company incurred fees and expenses 
relating to services provided by its directors of approximately $242, $283 
and $194, respectively.  The directors are entitled to elect to receive all 
or any portion of their annual retainer in shares of the Company's Common 
Stock.

     On September 17, 1997, the Company entered into a partnership agreement, 
in which a director of the Company is a minority partner.  The partnership 
was formed to develop a property in Carrollton, Texas.  In connection with 
this development, the Company's minority joint venture partner contributed 
land and other consideration valued at $2,738.


                                     F-8
<PAGE>

     From June 1, 1995 through February 23, 1996, Hunt Realty Corporation 
("Hunt") provided the services of Allen J. Anderson (Chairman and Chief 
Executive Officer of the Company) and two other persons to the Company in 
exchange for reimbursement of Hunt's costs associated with making those 
persons available to the Company.  During 1995, the Company incurred $245 for 
such services.

     On November 21, 1995, the Company entered into an Option Agreement under 
which USAA Real Estate Company, a Delaware corporation ("USAA"), granted the 
Company an option (the "USAA Option") to purchase a 292,000 square-foot 
industrial property located in Lakeland, Florida (the "USAA Option 
Property"). The USAA Option also included a right of first refusal in favor 
of the Company with respect to five bulk warehouse facilities comprising 
approximately 1.1 million square feet located in West Chicago, Illinois (the 
"USAA Chicago Property").  In exchange for the option, the Company issued a 
warrant to USAA to purchase shares of the Company's Common Stock at an 
exercise price that provided USAA with a value of $300 based upon the value 
of the Company's Common Stock during the first 20-trading-day period after 
the Merger.  The Company did not acquire either the USAA Option Property or 
Chicago Property under the USAA Option which expired in February 1997.

     During 1995, the Company received $750 in advances from the Merged 
Trusts to cover certain operating expenditures.  These advances bore interest 
at a rate of 7% per annum.  In connection with the Merger and Asset Purchase, 
the Company canceled these Notes Payable to Affiliates. 

4.   INVESTMENT IN MARKETABLE SECURITIES

     In December 1995, the Company purchased a U.S. Treasury Note.  The 
Company financed this purchase with a cash deposit equal to 10% of the total 
purchase price of the government security and a short-term loan in the amount 
of $2,346 bearing interest at a rate of 8.625% per annum.  In January 1996, 
the government security matured and the related proceeds were used to repay 
the short-term loan payable.

5.   RENTAL PROPERTIES HELD FOR INVESTMENT

     In accordance with generally accepted accounting principles, the Company 
has accounted for the Merger and Asset Purchase using the purchase method.  
As a result, the assets and liabilities acquired in connection with the 
Merger and Asset Purchase are recorded at their "acquisition cost," 
representing the fair value of the consideration surrendered and liabilities 
assumed. The acquisition cost was then allocated to all identifiable assets 
based upon their individual estimated fair values. The following is a summary 
of the acquisition cost recorded in connection with the Merger and Asset 
Purchase on February 23, 1996:


                                     F-9
<PAGE>

<TABLE>
<S>                                                                                     <C>
Fair value of the Company's Common Stock valued at $16.375 per share, based upon        
   the average of the closing price of the Company's Common Stock for the first five
   post-Merger trading days, issued to the Merged Trusts' shareholders other than
   Hunt and USAA                                                                        $ 72,677
 Fair value of the Company's Common Stock totaling 390,360 shares, valued
   at $16.375 per share, issued to Trust 83                                                6,392
 Common Stock issued to Hunt and USAA valued at the consideration they paid
   for their interests in the Merged Trusts                                               37,173
 Cash consideration paid to Trust 83 in connection with the Asset Purchase
   before pro-rated items                                                                  3,600
 Liabilities of the Merged Trusts and Trust 83 assumed by the Company upon
   consummation of the Merger and Asset Purchase                                         133,453
 Closing and other accrued costs incurred in connection with the Merger and
   Asset Purchase                                                                            204
                                                                                        --------
 Acquisition cost basis                                                                  253,499
 Acquisition cost basis allocated to assets other than Investment in Real
   Estate                                                                                (23,668)
                                                                                        --------
 Acquisition cost basis allocated to Investment in Real Estate as a result
   of the Merger and Asset Purchase                                                     $229,831
                                                                                        --------
                                                                                        --------
</TABLE>

     Rental Properties Held for Investment as of December 31, 1997 and 1996
consisted of the following:

<TABLE>
<CAPTION>
                                                   1997               1996
                                                ---------          ---------
           <S>                                  <C>                <C>
           Land                                 $ 165,172          $  72,594
           Buildings                              619,833            241,254
           Capital Improvements                     3,651              1,702
           Construction-in-Progress                24,733              3,121
                                                ---------          ---------
           Total                                $ 813,389          $ 318,671
                                                ---------          ---------
                                                ---------          ---------
</TABLE>

     Future minimum rental revenues under non-cancelable operating lease
agreements in effect as of December 31, 1997, are as follows:

<TABLE>
<CAPTION>
                        Years Ending
                         December 31,     Amount
                        -------------   ---------
                        <S>             <C>
                            1998        $  80,845
                            1999           67,593
                            2000           56,099
                            2001           44,763
                            2002           35,864
                         Thereafter       120,672
                        ------------    ---------
                                        $ 405,836
                                        ---------
                                        ---------
</TABLE>

      Based on the projected 1998 base rent of existing leases, there is 
currently one major tenant comprising approximately 5% of the total annual 
revenue of the Company.  This tenant has three leases which are scheduled to 
expire in 2005 and 2006.  As of December 31, 1997, the Company's properties 
were 97% occupied.  During 1998, leases covering 18% of the leased space are 
scheduled to expire.
      
     At December 31, 1997, the Company had two properties with a carrying 
value of $9,492, which it plans to dispose of in the first quarter of 1998. 
Management has determined that these properties do not fit the Company's 
investment strategy.


                                     F-10
<PAGE>

6.   LONG-TERM DEBT

     The Company acquired a fixed rate facility (the "Mortgage Loan") in
connection with the Merger.   The Mortgage Loan has a principal balance of
$66,094, bears interest at an annual rate of 8.63%, requires interest only
payments until its maturity in 2005 and is secured by a pool of the Company's
properties with a net book value of $138,863 as of December 31, 1997.

     Concurrent with the Merger, the Company entered into an unsecured credit 
facility (the "Unsecured Credit Facility").  The Unsecured Credit Facility 
originally bore interest at LIBOR plus 1.7%, was scheduled to mature in 
February 1998, and provided for a maximum borrowing amount of $75,000. On 
April 21, 1997, the Unsecured Credit Facility was amended and restated.  This 
amendment and restatement of the Unsecured Credit Facility provided for (i) 
an increase in the borrowing limit from $75,000 to $150,000, (ii) a decrease 
in the interest rate spread over LIBOR from 1.7% to 1.4%, and (iii) an 
extension of the maturity date to April 3, 2000, from February 26, 1998.  The 
Company recorded an extraordinary expense of $808 in loan costs in connection 
with this restructuring.

     On September 23, 1997, the Unsecured Credit Facility was further amended 
and restated to provide for (i) an increase of the borrowing limit from 
$150,000 to $250,000 and (ii) a decrease in the interest rate spread over 
LIBOR from 1.4% to 1.3%.  At December 31, 1997, the interest rate on the 
Unsecured Credit Facility was 7.02%.  The Company paid a fee totaling $250 in 
connection with this amendment.

     On November 20, 1997, the Company completed a private offering of 
$160,000 in principal of unsecured senior notes to institutional investors.  
The unsecured senior notes were issued in two tranches, $135,000 maturing on 
November 20, 2007, bearing an interest rate of 7.25% per annum, and $25,000 
maturing on November 20, 2009, bearing an interest rate of 7.30% per annum. 
Interest on these notes is payable semiannually. The proceeds were used to 
repay borrowings on the Unsecured Credit Facility.  In connection with this 
transaction, the Company entered into two forward exchange rate contracts 
which resulted in a premium totaling $109.

     In the opinion of the Company's management, the Company was in 
compliance with all loan covenants related to the debt instruments discussed 
above at December 31, 1997.
      
     Future minimum principal payments for the Company's long-term debt as of 
December 31, 1997, are as follows:

<TABLE>
<CAPTION>
                        Years Ending
                         December 31,     Amount
                        -------------   ---------
                        <S>             <C>
                            1998        $      --
                            1999               --
                            2000           20,500
                            2001               --
                            2002               --
                         Thereafter       226,094
                        ------------    ---------
                                        $ 246,594
                                        ---------
                                        ---------
</TABLE>


                                     F-11
<PAGE>

7.   MORTGAGE NOTES PAYABLE

     The Company assumed a mortgage note payable with a principal balance of 
$5,724 in connection with the acquisition of a property located in Corona, 
California on April 29, 1997.  The loan had a maturity date of  February 1, 
1998 and called for monthly principal and interest payments of $55 based on 
an interest rate of 10% per annum and a ten-year amortization schedule.  On 
September 15, 1997, the Company repaid the outstanding balance on this 
mortgage note payable amounting to $5,688.

     On May 13, 1997, the Company purchased a property located in Montebello, 
California, subject to a mortgage note payable bearing an interest rate 
different from the prevailing market rate at the date of acquisition.  This 
interest rate differential was recorded as a premium.  The new loan amounting 
to $10,429 has a maturity date of July 15, 1998 and provides for monthly 
principal and interest payments of $96 based on an interest rate of 9.89% per 
annum and a 30-year amortization schedule.  The premium totaling $324 is 
amortized over the term of the note payable using the effective interest 
method.  As of December 31, 1997, this mortgage note payable and debt premium 
had outstanding balances of $10,350 and $153, respectively. 

8.   COMMON AND PREFERRED STOCK

     The initial capitalization of the Company consisted of 900 shares of 
Common Stock, issued for a total consideration of $14.  In addition, Trust 
83, and the Merged Trusts purchased 79,500 and 920,500 shares of Series A 
Preferred Stock, respectively, for $1.00 per share. In connection with the 
Merger and Asset Purchase transactions, the Company issued 7,599,396 and 
390,360 shares of Common Stock, respectively. The Company also canceled the 
Series A Preferred Stock owned by the Merged Trusts and redeemed the Series A 
Preferred Stock owned by Trust 83.

     Concurrent with the Merger and Asset Purchase, the Company completed a 
private placement of 2,272,277 shares of Series B Preferred Stock with a 
liquidation preference of $35,000. The shares of Series B Preferred Stock are 
convertible into shares of Common Stock on a one-for-one basis. The net 
proceeds were used to retire debt acquired in connection with the Merger and 
Asset Purchase in the principal amount of $33,500.

     In connection with the Merger, the Company issued approximately 553,000 
warrants to purchase an equal number of shares of the Company's Common Stock 
(the "Merger Warrants").   May 23, 1997, was the first day of the exercise 
period for the Merger Warrants.  Each Merger Warrant entitles the holder to 
purchase one share of the Company's Common Stock at the exercise price of 
$16.23.  The exercise period ends February 23, 1999.  As of December 31, 
1997, the Company had issued 23,315 shares pursuant to exercise of the Merger 
Warrants.

     In addition, the Company issued a warrant to purchase 184,900 shares of 
the Company's Common Stock at an exercise price of $14.60 per share.  The 
warrant is exercisable in whole or in part at any time from May 23, 1997 to 
February 23, 1999.  No shares of Common Stock have been issued pursuant to 
this warrant as of December 31, 1997.

     On April 3, 1996, the Company completed a public offering of 1,500,000 
shares of the Company's Common Stock at an offering price of $16.375 per 
share, resulting in gross proceeds of $24,563 (the "April Offering"). The 
Company used the net proceeds of the April Offering and existing cash 
reserves to make a $24,000 payment on its Unsecured Credit Facility.


                                     F-12
<PAGE>

    On November 25, 1996, the Company completed a public offering of 
3,400,000 shares of the Company's Common Stock at an offering price of $18.25 
per share, resulting in gross proceeds of $62,050 (the "November Offering").  
The Company used the net proceeds of the November Offering and existing cash 
reserves to make a $58,650 payment on its Unsecured Credit Facility.  In 
accordance with the underwriting agreement entered into by the Company and 
its underwriters for the November Offering, on December 23, 1996, the Company 
sold an additional 510,000 shares of the Company's Common Stock to the 
underwriters to satisfy over allotments at an offering price of $18.25 per 
share, resulting in gross proceeds of $9,308.  The Company used the net 
proceeds therefrom to fund a property acquisition.
      
     On December 23, 1997, the Company completed a public offering of 414,508 
shares of the Company's Common Stock at an offering price of $24.125 per 
share, resulting in gross proceeds of $10,000.  The Company used the net 
proceeds to fund two property acquisitions.
      
     The Company has been declaring and paying dividends on a quarterly 
basis. During the years ended December 31, 1997 and 1996, dividends declared 
to Common Stockholders aggregated to $24,425 and $10,544, respectively, or 
$1.16 and $.99 per share of Common Stock, respectively.  During the years 
ended December 31, 1997 and 1996, dividends declared to Series B Preferred 
Stockholders aggregated to $2,818 and $2,412, respectively, or $1.24 and 
$1.06 per share of Preferred Stock, respectively.  The analysis below 
presents the amount of distributions paid to stockholders and the percentage 
of the distributions which the Company estimates is taxable and nontaxable 
for the year ended December 31, 1997 and 1996.  Nontaxable distributions are 
treated as return of capital to stockholders.

<TABLE>
<CAPTION>
                                       1997                 1996
                               --------------------------------------
                               PREFERRED  COMMON    PREFERRED  COMMON
                               ---------  ------    ---------  ------
<S>                            <C>        <C>       <C>        <C>
Distributions Paid Per Share    $ 1.24    $ 1.16     $ 0.75    $ 0.70
                               ---------  ------    ---------  ------
                               ---------  ------    ---------  ------

Nontaxable Dividends                --      3.40%        --     96.37%
Taxable Dividends               100.00%    96.60%    100.00%     3.63%
                               ---------  ------    ---------  ------
Total                           100.00%   100.00%    100.00%   100.00%
                               ---------  ------    ---------  ------
                               ---------  ------    ---------  ------
</TABLE>

     The holders of Series B Preferred Stock generally have a cumulative 
preferential right to such quarterly dividends as are declared each year by 
the Board of Directors.  From the date of the Merger through the fourth 
quarter of 1997, the dividend amount per share of Series B Preferred Stock 
was required to equal the greater of (i) $0.31 per full calendar quarter 
(pro-rated for periods less than a full quarter), or (ii) 103% of the 
quarterly dividend payable per share of Common Stock during the corresponding 
dividend period.  Thereafter, each share of series B preferred stock is 
entitled to receive quarterly dividends in an amount equal to the greater of 
(i) the quarterly preferred dividend amount declared by the Board of 
Directors for the quarter ended December 31, 1997, or (ii) the dividend paid 
per share of Common Stock for the current quarter.

9.   STOCK PLAN

     The Board of Directors of the Company adopted an incentive stock plan 
(the "Stock Plan") to enable the Company to attract, retain and motivate key 
employees, directors and, on occasion, consultants and advisors, by providing 
them with equity participation in the Company. The Stock Plan provides for 
the grant of incentive stock options, non-qualified stock options, 
unrestricted stock, restricted stock and stock appreciation rights. The Stock 
Plan is administered by the Board of Directors or a committee appointed by 
the Board (the "Committee").  The Committee, which must consist of not less 
than two members of the Company's Board of Directors, selects the employees 
(and any consultants or advisors) to whom awards will be granted, the number 
of shares subject to such award, and the other terms and conditions of the 
award, consistent with the Stock Plan.


                                     F-13
<PAGE>

     In November 1995, the Board of Directors authorized the award of two sets
of stock options to certain employees relating to services performed by the
employees in 1995 to effect the Merger.  The first set of awards provided for
the issuance of 653,000 stock options to be issued under the Stock Plan
concurrent with the Merger, exercisable at the stock trading price at the Merger
of $15.125 per share.  These option awards provided that 461,000 of the stock
options vest over five years.  The remaining stock options granted under the
first set of awards, totaling 192,000, include certain performance criteria that
would allow for vesting after three years if certain performance criteria are
achieved, or vesting at the end of five years if the performance criteria are
not met.  These options will become fully-vested in the event of a termination
of employment without "cause" by the Company or for "good reason" by the
employee (in each case as defined in the stock option agreement), or in the
event of the death or disability of the employee.

     The second set of stock options granted in 1995 consisted of 
non-qualified stock options to purchase 191,400 shares of the Company's 
Common Stock at any time between January 26, 1996 and February 28, 1996 for 
$12 per share.  In connection with the grant of these options, the Company 
guaranteed certain promissory notes executed by the employees from a third 
party lender in the event that the employees defaulted under such notes.  The 
Company had $1,900 in proceeds from the exercise of these stock grants held 
as collateral in restricted cash for these guarantees.  The cash collateral 
was released in November, 1997.  The accompanying statement of operations for 
the period from May 18, 1995 (Inception) to December 31, 1996 reflects a 
charge to earnings for the stock option compensation attributable to the 
excess of the market price of the Company's Common Stock over the exercise 
price of the non-qualified stock options.  These non-qualified stock options 
were not granted under the Stock Plan.

     After the Merger, the Company granted each non-employee director of the
Company, an option to purchase 5,000 shares of the Company's Common Stock.  In
addition, beginning June 30, 1996, on the last day of each calendar quarter, the
Company automatically grants each non-employee director a non-qualified option
to purchase 1,167 shares of the Company's Common Stock.  The exercise price of
these options is the fair value of the shares of the Company's Common Stock
covered by the options on the date of grant.  Each of these director options are
fully exercisable beginning six months after the date of grant and generally
terminate (unless terminated sooner under the terms of the Stock Plan) ten years
after the date of grant.

     Additionally, under the Stock Plan, each non-employee director may elect to
receive his or her retainer in cash, shares of the Company's Common Stock, or a
combination of both cash and the Company's Common Stock.

     The aggregate number of shares of Common Stock that the Company may have
subject to outstanding awards at one time under the Stock Plan is an amount
equal to (a) seven percent of the aggregate of (i) the total number of shares of
Common Stock outstanding from time to time, PLUS (ii) the total number of
securities convertible into or exchangeable or exercisable for shares of Common
Stock outstanding from time to time (in each case other than any such securities
issued under the Stock Plan and any other stock-based plan for employees or
directors of the Company) MINUS (b) the total number of shares of Common Stock
subject to outstanding awards on the date of calculation under the Stock Plan
and any other stock-based plan for employees or directors of the Company.

     In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock Based
Compensation," which establishes financial accounting and reporting standards
for stock-based employee compensation plans.  SFAS No. 123 became effective for
the Company in the year ended December 31, 1996.  This statement encourages a
"fair value based method" of accounting for an employee stock option or similar
equity instrument.  Such a method measures compensation cost at the grant date
using an option pricing model to value the award.  Compensation expense is
recognized over the service period, which is usually the vesting period. As
permitted by the provisions of SFAS No. 123, the Company records compensation
for its stock plans using 

                                     F-14

<PAGE>

the "intrinsic value based method" of accounting, which measures as expense the
difference between the exercise price and the fair value of the stock on the
date of grant.  Disclosure is provided of the pro forma impact on net income and
earnings per share of the "fair value based method" of accounting.  This impact
is as follows:

<TABLE>
<CAPTION>
                                           Years Ended December 31,
                                         -----------------------------
                                              1997              1996
                                         -----------       ------------
         <S>                             <C>               <C>
         NET INCOME:                     
         As reported                     $    19,870       $    11,651
         SFAS 123 adjustment                    (534)             (217)
                                         -----------       -----------
         Pro forma                            19,336            11,434
                                         -----------       -----------
                                         -----------       -----------

         BASIC INCOME PER SHARE:         
         As reported                            1.12              1.37
         SFAS 123 adjustment                   (0.03)            (0.03)
                                         -----------       -----------
         Pro forma                              1.09              1.34
                                         -----------       -----------
                                         -----------       -----------

         DILUTED INCOME PER SHARE:
         As reported                            1.09              1.33 
         SFAS 123 adjustment                   (0.03)            (0.02)
         Pro forma                       -----------       ----------- 
                                                1.06              1.31 
                                         -----------       ----------- 
                                         -----------       ----------- 
</TABLE>

    The following table summarizes the stock option activity for the years 
ended December 31, 1997 and 1996.

<TABLE>
<CAPTION>
                                               Number             Weighted
                                              of Shares            Average
                                             Outstanding       Exercise Price\
                                             -----------       --------------
         <S>                                 <C>               <C>
         Balance at December 31, 1995               --           $      --
         Granted                               728,507               15.37
         Exercised                                  --                  --
         Expired                                    --                  --
         Forfeited                                  --                  --
                                             ---------         -----------
         Balance at December 31, 1996          728,507               15.37
                                             ---------         -----------
         Granted                               319,459               22.41
         Exercised                              (5,000)              16.38
         Expired                                    --                  --
         Forfeited                                  --                  --
                                             ---------         -----------
         Balance at December 31, 1997        1,042,966           $   17.52
                                             ---------         -----------
                                             ---------         -----------
</TABLE>

    Of the options outstanding as of December 31, 1997 and 1996, there were a 
total of 297,540 and 46,669 exercisable, respectively.  Exercisable options 
as of December 31, 1997, have exercise prices between $15.13 and $23.50 with 
a weighted average exercise price of $17.44.  The weighted average remaining 
contractual life of outstanding options as of December 31, 1997 was 8.45 
years.

     The fair value of each option grant is estimated on the date of grant 
using the Black-Scholes option pricing model with the following weighted 
average assumptions used for grants in 1997 and 1996: a weighted average 
risk-free interest rate of 6.51% and 6.01%, expected dividend yield of 5.02% 
and 6.66%, expected life of 10 years, and expected volatility of 27.33% and 
14.48%, respectively.  

     The weighted average fair value of the options granted in 1997 and 1996 
were $5.22 and $1.24, respectively.


                                     F-15
<PAGE>

10.  PROPERTY ACQUISITIONS AND DEVELOPMENTS

          In addition to the Portfolio Acquisitions described in Note 11, during
the year ended December 31, 1997, the Company purchased thirteen properties
located in California, Georgia, Indiana, New Jersey, Texas and Wisconsin, with
an aggregate square footage of 2,591,034.  The aggregate purchase price for
these properties totaled $90,401.  The Company funded a portion of these
acquisitions from cash reserves and funded the majority of the remaining costs
with borrowings under the Unsecured Credit Facility.  In addition, the Company
assumed mortgage notes totaling $16,153.  The Company recorded a corresponding
premium totaling $324 in connection with these mortgage notes.
      
     In addition, during the year ended December 31, 1997, the Company, either
directly or through consolidated partnerships, completed development of and
placed in service five warehouse/distribution properties comprising 786,960
square feet with an aggregate cost of $35,619.  
      
     At December 31, 1997, the Company had, either directly or through
consolidated partnerships, nine warehouse/distribution properties under
development or scheduled for development comprising 3,181,614 square feet upon
completion.  The aggregate cost for the design and construction of these
development projects is estimated to be approximately $107,441.  As of December
31, 1997, the Company incurred total project costs of approximately $35,336 on
these development projects.  The Company anticipates funding the balance of such
development costs from cash reserves and borrowings under the Unsecured Credit
Facility.
      
     In connection with the development activities relating to the consolidated
partnerships, the Company's minority partners contributed land and other
consideration valued at $5,102.
      
     During the year ended December 31, 1996, the Company purchased eight
properties located in California, Illinois and Ohio with an aggregate square
footage of 2,669,506.  The purchase prices totaled $89,703 and were financed by
applying a $300 deposit paid in 1995, with the balance funded by draws on its
Unsecured Credit Facility and net proceeds received from the Company's public
offerings of shares of Common Stock.  

     Also during the year ended December 31, 1996, the Company completed
development of and placed in service two warehouse/distribution properties
located in Texas comprising 729,434 square feet with an aggregate cost of
$25,852.


11.  PORTFOLIO ACQUISITIONS

     On September 30, 1997, the Company acquired from Ameritech Pension Trust
("Ameritech") in a property-for-stock transaction (i) eleven
warehouse/distribution properties comprising 1,521,170 square feet, and (ii) a
participating mortgage loan secured by a seven building, 623,678 square foot
project.  The purchase price totaled $81,589, including the participating loan
which was purchased for $21,500.  The property-for-stock transaction involved
the issuance of 4,160,745 shares of the Company's Common Stock to Ameritech.  
      
     On October 22, 1997, the Company acquired eleven additional
warehouse/distribution properties comprising 1,960,334 square feet in
consideration of the issuance of 3,104,477 shares of the Company's Common Stock
to Ameritech.  The purchase price for this transaction totaled $61,571.


                                     F-16
<PAGE>

      On September 24, 1997, the Company acquired from The Prudential Insurance
Company of America and related entities (collectively "Prudential") a portfolio
of 44 industrial buildings containing an aggregate of approximately 3,538,000
square feet of rentable space (the "Portfolio Properties").  The aggregate
contract price for the Portfolio Properties was $127,079 (the "Prudential
Property Transaction").  The Company also contracted with Prudential to purchase
five unimproved parcels of land located in California, Illinois and Michigan. 
The contract price for these parcels of $13,721 was deposited into an escrow
account.  In the event that the contingencies regarding these properties are not
cleared to the Company's satisfaction, then the funds in the escrow account will
be returned to the Company.  On December 10, 1997, the Company purchased the
unimproved land located in California for a purchase price of $3,055, funded
from the escrow account.
      
     The Company funded the cost of the Prudential transactions from a
combination of (i) net proceeds from the sale of 7,096,513 shares of the
Company's Common Stock to Prudential and three separate accounts managed by
Prudential totaling $141,901, and (ii) proceeds from borrowings under its
Unsecured Credit Facility.
      
     Concurrent with the closing of the Prudential Property Transaction, 
eight industrial properties located in the metropolitan areas of New Orleans, 
Louisiana and five industrial properties located in the metropolitan area of 
Jacksonville, Florida (collectively the "EastGroup Properties") were directly 
conveyed in a simultaneous sale by the Company to EastGroup Properties, L.P. 
("EastGroup") for a total sales price of $49,710.  In addition, EastGroup 
paid $207 of cash for closing costs and pro-rated items.  The total 
consideration paid by EastGroup for the EastGroup Properties was cash of 
$4,917 and $45,000 in fully secured promissory notes.  EastGroup repaid the 
notes on December 30, 1997.  The notes required monthly payments of interest 
only computed on the basis of an annual rate of 9.25%.  The EastGroup 
Properties were conveyed at the Company's cost of such properties thus 
resulting in no gain or loss on the transaction.
      
     The Company also entered into agreements to acquire 12 industrial
properties from two separate accounts managed by Prudential Real Estate
Investors.  On August 29, 1997, the Company acquired seven of these properties
comprising 825,568 square feet.  The purchase price consisted of the payment of
$16,047 in cash and the issuance of 808,888 shares of Common Stock.  On
September 24, 1997, the Company acquired the remaining five industrial
properties comprising 953,691 square feet.  The purchase price consisted of the
payment of $9,361 in cash and the issuance of 1,106,931 shares of Common Stock. 
The total $25,408 cash portion of the purchases for these portfolios was funded
from borrowings on the Company's Unsecured Credit Facility.
      
     On December 31, 1997, the Company acquired an eight property portfolio
located in Texas, comprising 607,275 square feet for a total purchase price of
$15,700.  The Company funded the acquisition from a portion of the proceeds
received from the repayment of the promissory notes by the EastGroup.

     On December 31, 1997, the Company also acquired a nine property portfolio
located in New Jersey and Delaware comprising 397,897 square feet for a total
purchase price of $10,790.  The Company funded the acquisition from a portion of
the proceeds received from the repayment of the promissory notes by the
EastGroup.


12.  PROPERTY DISPOSITIONS
      
     During the year ended December 31, 1997, the Company sold five properties
for an aggregate sales price of $11,833.  The properties were located in
Alabama, Texas, California and Arizona.  After closing costs and pro-rated items
which totaled $638, the Company received net proceeds from the property sales
aggregating to $11,195.  The net proceeds were used to repay borrowings on the
Unsecured Credit Facility.


                                     F-17
<PAGE>

     On December 15, 1997, the Company also sold a parcel of land located in
Georgia for a sales price of $150.  After closing costs and pro-rated items
which totaled $16, the Company received net proceeds of $134.  The net proceeds
were used to repay borrowings on the Unsecured Credit Facility.

          During the year ended December 31, 1996, the Company sold 14
properties located in Alabama, California, Arizona and Washington for an
aggregate sales price of $33,398.  After closing costs, escrow holdback, early
release of funds and pro-rated items which totaled $1,975, the Company received
net proceeds from the property sales aggregating $31,423.  The net proceeds were
used to repay borrowings on the Unsecured Credit Facility.


13.  SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS

     The following table summarizes non-cash investing and financing
transactions for the years ended December 31, 1997 and 1996.

<TABLE>
<CAPTION>
                                                                               1997             1996
                                                                           ----------       ----------
            <S>                                                            <C>              <C>
            Merger Transaction:
             Acquisition Cost Allocated to Investment in Real Estate       $      --          $203,489
             Restricted Cash                                                      --             5,551
             Receivables, Net                                                     --             2,889
             Note Receivable from Affiliate                                       --               720
             Capitalized Loan Fees                                                --               992
             Cancellation of Redeemable Series A Preferred Stock                  --               960
             Mortgage Loan Assumed                                                --           (66,094)
             Other Long-Term Debts Assumed                                        --           (43,191)
             Accounts Payable Assumed                                             --            (2,869)
             Shares of Common Stock Issued, at Par Value                          --                (8)
             Paid-in Capital                                                      --         ( 109,842)
             Other Net Liabilities Assumed                                        --            (4,489)
          
           Asset Purchase Transaction:
             Acquisition Cost Allocated to Investment in Real Estate              --            26,342
             Restricted Cash Applied to Debt Payment                              --               117
             Mortgage Notes Payable Assumed                                       --           (16,334)
             Paid-in Capital of Common Shares Issued                              --            (6,392)
             Accrued Closing Costs and Pro-rated Items                            --              (476)
          
           Property Acquisitions
             Acquisition Price                                                91,468            89,856
             Land for Built-to-Suit Facilities                                14,994             6,670
             Minority Limited Partners' Capital Contributions                 (4,733)               --
             Mortgage Notes Payable Assumed                                  (16,136)               --
             Accrued Closing Costs and Pro-rated Items                          (914)           (1,048)
             Note Receivable                                                  45,000              --
          
           Portfolio Acquisitions:
             Acquisition Price                                               396,971                --
             Shares of Common Stock Issued                                  (321,584)               --
             Restricted Cash                                                  13,890                --
             Investment in Unconsolidated Joint Venture                       21,500                --
             Accrued Closing Costs and Pro-rated Items                        (5,350)               --
          
           Property Dispositions:
             Net Basis                                                       (61,793)          (28,916)
             Other Assets Net of Other Liabilities                               288               782
</TABLE>


                                     F-18
<PAGE>

14.  COMMITMENT AND CONTINGENCIES

     (a)  LITIGATION  The Company is involved from time to time in legal actions
relating to the ownership and operations of its properties.  In management's
opinion, the liabilities, if any, that may ultimately result from such legal
actions are not expected to have a materially adverse effect on the consolidated
financial position, results of operations or cash flows of the Company.

     (b)  ENVIRONMENTAL MATTERS  The Company follows a policy of monitoring its
properties for the presence of hazardous or toxic substances.  The Company is
not aware of any environmental liability with respect to the properties that
would have a material adverse effect on the Company's business, assets or
results of operations.  There can be no assurance that such a material
environmental liability does not exist.  The existence of any such material
environmental liability could have an adverse effect on the Company's results of
operations and cash flow.

     A property acquired in the Merger has experienced groundwater 
contamination.  An environmental consultant has reported that the sources of 
the contamination appear to be adjoining parcels.  A responsible party has 
acknowledged orally that they must fund remediation costs.  Management has 
reviewed the financial condition of the responsible party (a municipality 
located in the San Francisco Bay Area) and believes that party has the 
ability to fund the costs of remediation.  Accordingly, the Company has not 
accrued any liability related to this property, as management believes that 
such liability, if any, is neither estimable nor material to the Company."

     (c)  GENERAL UNINSURED LOSSES  The Company carries comprehensive liability,
fire, flood, extended coverage and rental loss insurance with policy
specifications, limits and deductibles customarily carried for similar
properties.  There are, however, certain types of extraordinary losses which may
be either uninsurable, or not economically insurable.  Further, certain of the
properties are located in areas that are subject to earthquake activity.  Should
a property sustain damage as a result of an earthquake, the Company may incur
loses due to insurance deductibles, co-payments or insured losses or uninsured
losses.  Should an uninsured loss occur, the Company could lose is investment
in, and anticipated profits and cash flows from, a property.

     (d)  401(k) RETIREMENT PLAN  The Company has a 401(k) defined contribution
retirement plan for all full time employees with at least six months of
continuous service and who have reached the age of twenty one years.  The plan
is qualified under section 401(a) of the Internal Revenue Code so that
contributions to the plan by the Company are not taxable until distributed to
employees.  The Company is currently matching fifty percent of each
participating employee's contribution up to a total match of $2 per employee,
and such employer contributions are vested immediately.  Employer contributions
to the plan for the years ended December 31, 1997 and 1996 totaled $42 and $2,
respectively.

     (e)  OPERATING LEASES  As of December 31, 1997, the Company has entered
into operating leases for office spaces in Chicago, Dallas, Los Angeles and San
Francisco.  The operating leases contain renewal options which if exercised
would extend the expiration dates from 2001 to 2006.  The operating lease term
for the Los Angeles office is on a month-to-month basis.

     Future minimum lease payments under non-cancelable lease agreements in
effect as of December 31, 1997, are as follows:

<TABLE>
<CAPTION>
               Years Ending
               December 31,                               Amount
               ------------                              --------
               <S>                                       <C>
                   1998                                   $   292
                   1999                                       305
                   2000                                       307
                   2001                                       286
                   2002                                        34
                Thereafter                                     --
                                                          -------
                                                           $1,224
                                                          -------
                                                          -------
</TABLE>


                                     F-19
<PAGE>

     Rent expense recognized during the years ended December 31, 1997 and 1996
was $261 and $167, respectively.

15.  SUBSEQUENT EVENTS

     ACQUISITIONS

     During the period from January 1, 1998 to March 23, 1998, the Company,
either directly, or through its consolidated and unconsolidated subsidiaries,
acquired 12 properties and businesses with an aggregate purchase price of
approximately $90,585 located in California, Texas and Nevada.  These
acquisitions were funded through the use of $6,739 in cash reserves, $60,154 in
drawings on the Unsecured Credit Facility, and the assumption of $17,468 in
mortgage indebtedness.  The properties acquired have square footage totaling
approximately 773,000, including three properties acquired by an unconsolidated
subsidiary.  In the same transactions, approximately 56 acres of land scheduled
for future development was also acquired.  The costs to develop these parcels is
expected to aggregate to approximately $33,000, to be funded from drawings on
the Unsecured Credit Facility and from cash reserves.  These properties, when
complete, will total approximately 749,000 square feet.  In addition, the
Company has entered into a commitment in the amount of $19,369 to acquire
additional property from the seller of certain of the acquired properties.

     DISPOSITIONS
     
     On February 28, 1998, the Company sold a property located in Tennessee for
a sales price of $1,880.  After closing costs and pro-rated items which totaled
$110, the Company received net proceeds of $1,770.  The net proceeds were used
to repay borrowings on the Unsecured Credit Facility.

     OTHER

     The Company's Board recently authorized the adoption of a stockholder
rights plan designed to enhance the ability of all of the Company's stockholders
to realize the long-term value of their investment.  The rights plan is
designed, among other things, to prevent a person or group from gaining control
of the Company without offering a fair price to all of the Company's
stockholders.

     On February 27, 1998, the Board declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of Common Stock.  The
dividend was paid to the stockholders of record on March 16, 1998.  Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series C Junior Participating Preferred Stock, par value $.001 per
share, of the Company, at a price of $100 per one one-thousandth of a share,
subject to adjustment.  The description and terms of the Rights are set forth in
a Rights Agreement dated as of March 12, 1998, between the Company and First
Chicago Trust Company of New York, as Rights Agent.

     On March 4, 1998, the Board declared a dividend of $0.33 per share of 
Common Stock payable on April 17, 1998 to stockholders of record on April 3, 
1998. This represents a 14% increase in the annualized dividend to $1.32 from 
$1.16 per share. The Board also declared a dividend of $0.33 per share of 
Series B Preferred Stock payable on April 15, 1998, to stockholders of record 
on April 3, 1998. This represents a 6% increase in the annualized dividend to 
$1.32 from $1.24 per share.

16.  QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following tables summarize selected quarterly financial data for the
years ended December 31, 1997 and 1996.

<TABLE>
<CAPTION>
                                                                            QUARTER                           YEAR ENDED
                                                     ----------------------------------------------------     DECEMBER 31,
                                                        1              2              3              4            1997
                                                     -------        -------        -------        -------     ------------
<S>                                                  <C>            <C>            <C>            <C>         <C>
Total Revenues                                       $11,852        $13,017        $15,033        $26,248        $66,150
Total Expenses                                         7,495          8,441         10,133         16,093         42,162


                                     F-20
<PAGE>

Income Before Minority Interest,
 Gain (Loss) on Divestiture of Properties and
 Extraordinary Item                                    4,357          4,576          4,900         10,155         23,988
Minority Interest in Net (Income)                         --             --             --            (30)           (30)
Gain (Loss) on Divestiture of Properties, Net            428           (877)           (17)             4           (462)
Extraordinary Item                                        --           (808)            --             --           (808)
Net Income                                             4,785          2,891          4,883         10,129         22,688
Net Income Allocable to Common                         4,080          2,186          4,178          9,426         19,870
Net Income Per Basic Weighted Average
 Common Share:
   Net Income Before Extraordinary Item              $  0.30        $  0.22        $  0.29        $  0.32        $  1.17
   Net Income                                           0.30           0.16           0.29           0.32           1.12
Net Income Per Diluted Weighted 
Average Common Share:
   Net Income Before Extraordinary Item              $  0.29           0.22           0.28           0.32           1.13
   Net Income                                           0.29           0.16           0.28           0.32           1.09

<CAPTION>
                                                                            QUARTER                           YEAR ENDED
                                                     ----------------------------------------------------     DECEMBER 31,
                                                        1              2              3              4            1996
                                                     -------        -------        -------        -------     ------------
<S>                                                  <C>            <C>            <C>            <C>         <C>
Total Revenues                                       $ 3,624        $10,132        $10,177        $11,108        $35,041
Total Expenses                                         2,688          6,690          6,777          7,725         23,880
Income Before Minority Interest, Gain on 
 Divestiture of Properties and Extraordinary Item        936          3,442          3,400          3,383         11,161
Gain on Divestiture of Properties                         --              7            170          3,136          3,313
Extraordinary Item                                      (375)           (36)            --             --           (411)
Net Income                                               561          3,413          3,570          6,519         14,063
Net Income Allocable to Common                           265          2,708          2,864          5,814         11,651
Net Income Per Basic Weighted Average
 Common Share:
   Net Income Before Extraordinary Item              $  0.19        $  0.28        $  0.30        $  0.52        $  1.42
   Net Income                                           0.08           0.28           0.30           0.52           1.37
Net Income Per Diluted Weighted
Average Common Share:
   Net Income Before Extraordinary Item              $  0.19        $  0.28        $  0.29        $  0.48        $  1.37
   Net Income                                           0.08           0.28           0.29           0.48           1.33
</TABLE>


                                     F-21
<PAGE>

17.  PRO FORMA RESULTS OF OPERATIONS  (UNAUDITED)

     The unaudited pro forma results of operations presented below for the 
years ended December 31, 1997 and 1996 have been prepared to reflect (i) the 
incremental effects of the Merger, (ii) the financing transactions discussed 
in Notes 6, 7 and 8, (iii) the acquisitions discussed in Notes 10 and 11, and 
(iv) the dispositions discussed in Note 12 on the operations of the Company 
as if such transactions and adjustments had occurred on January 1, 1996.
      
     In the opinion of management, the unaudited pro forma results of operations
provide for all adjustments necessary to reflect the effects of the transactions
completed by the Company through December 31, 1997.

     This financial information is unaudited and is not necessarily indicative
of the historical consolidated results that would have occurred if the
transaction and adjustments reflected therein had been consummated in the period
presented or on any particular date in the future, nor does it purport to
represent the financial position, results of operations or changes in cash flows
for future periods.

<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED
                                                               DECEMBER 31,
                                                   -----------------------------------
                                                      1997                     1996
                                                   ----------               ----------
<S>                                                <C>                      <C>
TOTAL REVENUE                                      $ 102,686                 $  93,170

EXPENSES:                                                                
Interest                                              19,843                    19,966
Property Taxes                                        11,898                    11,319
Property Operating                                     9,032                     8,927
General and Administrative                             6,212                     5,885
Depreciation and Amortization                         18,492                    15,133
                                                   ----------               ----------
TOTAL EXPENSES                                        65,477                    61,230
                                                   ----------               ----------

NET INCOME BEFORE GAIN (LOSS) ON DIVESTITURE
  OF PROPERTIES AND EXTRAORDINARY ITEMS            $   37,209                $  31,940
                                                   ----------               ----------
                                                   ----------               ----------

Net Income Allocable to Common                     $   33,091                $  32,024

Earnings Per Share:
     Basic                                         $     1.10                $    1.06
     Diluted                                       $     1.08                $    1.04

Weighted Average Shares Outstanding:
     Basic                                         30,165,662               30,165,662
     Diluted                                       30,638,817               30,638,817
</TABLE>


                                     F-22
<PAGE>

                                 SCHEDULE II
                      VALUATION AND QUALIFYING ACCOUNTS
                    AS OF DECEMBER 31, 1997, 1996 AND 1995
                                       
<TABLE>
<CAPTION>
                               BALANCE AT                                  BALANCE AT
                              BEGINNING OF   CHARGED TO    ADDITIONS         END OF
 DESCRIPTION                      YEAR         EXPENSE    (DEDUCTIONS)        YEAR
---------------------------------------------------------------------------------------
<S>                           <C>            <C>          <C>             <C>
 1995
 ----
 Reserve for Bad Debts          $      --            --           --       $      --

 1996
 ----
 Reserve for Bad Debts          $      --       485,468       85,772       $ 571,240

 1997
 ----
 Reserve for Bad Debts          $ 571,240      (131,452)    (212,275)      $ 227,513
</TABLE>


                                     F-23
<PAGE>

                        MERIDIAN INDUSTRIAL TRUST, INC.
                                  SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                      FOR THE YEAR ENDED DECEMBER 31, 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                   GROSS AMOUNT
                                                 INITIAL COST TO COMPANY                      CARRIED AT END OF PERIOD
                                       -------------------------------------------  ------------------------------------------
                                                                                                    BUILDING &
PROPERTY                                    LAND       BUILDING       IMPROVEMENTS       LAND      IMPROVEMENTS       TOTAL
------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>       <C>            <C>            <C>            <C>            <C>            <C>
  ATLANTA:
    2200 Cedars Road                         1,264          4,790              -          1,264          4,790          6,054
    Highlands Parkway             (2)        2,060          5,755              3          2,060          5,758          7,818
    1901 Riverside                             546          3,489              -            546          3,489          4,035
    1601 Riverside                             712          2,889              -            712          2,889          3,601
    1701 Riverside                             811          3,486              -            811          3,486          4,297
    Live Oak Parkway              (5)        1,885          1,654              -          1,885          1,654          3,539
    Marietta Trade Center    (1), (5)        7,163         11,661             52          7,163         11,713         18,876
                                       ------------   ------------   ------------   ------------   ------------   ------------
  Subtotal                                  14,441         33,724             55         14,441         33,779         48,220
                                       ------------   ------------   ------------   ------------   ------------   ------------

  CHICAGO:
    1000 Lunt                     (1)   $      567     $    1,910     $      114     $      567     $    2,024     $    2,591
    1090 Pratt                    (1)          211            415              8            211            423            634
    1100 Pratt                    (1)          231            641            223            231            864          1,095
    1180 Pratt                    (1)          128            410              -            128            410            538
    1201 Busse                    (1)          110            289              3            110            292            402
    17025 Wallace                 (1)          164          1,621            181            164          1,802          1,966
    17129 Wallace                 (1)          133          1,544              1            133          1,545          1,678
    1815 Landmeier                (1)          302          1,370             32            302          1,402          1,704
    2375 Touhy Avenue             (1)          363            836              -            363            836          1,199
    3 Timber Court                           1,220         11,339              -          1,220         11,339         12,559
    3400 West Lake                (1)          881          1,694             44            881          1,738          2,619
    Crossroads Parkway                       1,497          7,874              -          1,497          7,874          9,371
    5101 W. 122nd Street          (1)          191          2,443            505            191          2,948          3,139
    700 Pratt                     (1)          386          1,414             13            386          1,427          1,813
    80 Internationale
       Boulevarde                              529          5,815              -            529          5,815          6,344
    801 Lunt                      (1)          203            645             94            203            739            942
    80th Avenue                              1,575          7,729              -          1,575          7,729          9,304
    900 Pratt                     (1)          226            534             21            226            555            781
    Bedford Park                               359          2,712            176            359          2,888          3,247
    101 Regency Drive                        1,030          6,380              -          1,030          6,380          7,410
    500 Regency Drive                        1,027          5,979              -          1,027          5,979          7,006
    Lombard I                     (1)          883          4,558            651            883          5,209          6,092
                                       ------------   ------------   ------------   ------------   ------------   ------------
  Subtotal                                  12,216         68,152          2,066         12,216         70,218         82,434
                                       ------------   ------------   ------------   ------------   ------------   ------------

  COLUMBUS:

    2303 John Glenn                          1,404          8,832              -          1,404          8,832         10,236
    Crosswind Drive               (1)        4,993         25,939              -          4,993         25,939         30,932
    200 Constitution Drive                   1,817          6,233              -          1,817          6,233          8,050
    2141 Southwest                             690          3,641              -            690          3,641          4,331
    6959-6967 Alum Creek                       730          3,779              -            730          3,779          4,509
    6969 Alum Creek                            727          4,184              -            727          4,184          4,911
                                       ------------   ------------   ------------   ------------   ------------   ------------
  Subtotal                                  10,361         52,608              -         10,361         52,608         62,969
                                       ------------   ------------   ------------   ------------   ------------   ------------

                                       ACCUMULATED        DATE OF       DATE OF
PROPERTY                              DEPRECIATION      CONSTRUCTION  ACQUISITION
----------------------------------------------------------------------------------
<S>                                   <C>               <C>           <C>
  ATLANTA:
    2200 Cedars Road                          (52)          1997       08/14/97
    Highlands Parkway                        (100)          1997       07/01/97
    1901 Riverside                            (34)          1989       08/29/97
    1601 Riverside                            (28)          1987       08/29/97
    1701 Riverside                            (34)          1987       08/29/97
    Live Oak Parkway                          (87)          1988       02/23/96
    Marietta Trade Center                    (639)          1986       02/23/96
                                       ------------
  Subtotal                                   (974)
                                       ------------

  CHICAGO:
    1000 Lunt                           $    (126)          1964       02/23/96
    1090 Pratt                                (24)          1964       02/23/96
    1100 Pratt                                (35)          1964       02/23/96
    1180 Pratt                                (22)          1963       02/23/96
    1201 Busse                                (15)          1964       02/23/96
    17025 Wallace                            (103)          1973       02/23/96
    17129 Wallace                             (82)          1970       02/23/96
    1815 Landmeier                            (72)          1964       02/23/96
    2375 Touhy Avenue                         (44)          1963       02/23/96
    3 Timber Court                            (81)          1994       09/30/97
    3400 West Lake                            (95)          1974       02/23/96
    Crossroads Parkway                       (226)          1995       12/31/96
    5101 W. 122nd Street                     (149)          1973       02/23/96
    700 Pratt                                 (75)          1964       02/23/96
    80 Internationale
       Boulevarde                             (41)          1994       09/30/97
    801 Lunt                                  (35)          1970       02/23/96
    80th Avenue                              (148)          1996       04/30/97
    900 Pratt                                 (31)          1964       02/23/96
    Bedford Park                             (161)          1980       02/23/96
    101 Regency Drive                         (62)          1991       08/29/97
    500 Regency Drive                         (58)          1991       08/29/97
    Lombard I                                (275)          1974       02/23/96
                                       ------------
  Subtotal                                 (1,960)
                                       ------------

  COLUMBUS:

    2303 John Glenn                           (63)          1994       09/24/97
    Crosswind Drive                          (926)          1989       09/30/96
    200 Constitution Drive                    (45)          1992       09/24/97
    2141 Southwest                            (26)          1991       09/24/97
    6959-6967 Alum Creek                      (27)          1993       09/24/97
    6969 Alum Creek                           (30)          1993       09/24/97
                                       ------------
  Subtotal                                 (1,117)
                                       ------------
</TABLE>


                                      F-24
<PAGE>

<TABLE>
<CAPTION>
                                                                                                   GROSS AMOUNT
                                                 INITIAL COST TO COMPANY                      CARRIED AT END OF PERIOD
                                       -------------------------------------------  ------------------------------------------
                                                                                                    BUILDING &
PROPERTY                                    LAND       BUILDING       IMPROVEMENTS       LAND      IMPROVEMENTS       TOTAL
------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>  <C>            <C>            <C>            <C>            <C>            <C>
  DALLAS:
    10425 Plano Road                           755          4,215              -            755          4,215          4,970
    1049 Avenue H East                         446          2,170              -            446          2,170          2,616
    13700 Benchmark Drive                      833          5,176              -            833          5,176          6,009
    1441 Patton Place                          434          2,893              -            434          2,893          3,327
    1505 Valwood Parkway                       383          2,846              -            383          2,846          3,229
    1701 Timberlake Drive                      785          2,964              -            785          2,964          3,749
    2022 McKenzie Drive                        754          4,363              -            754          4,363          5,117
    2501 N. Great S.W. Parkway                 693          2,648             92            693          2,740          3,433
    2800 E. Plano Parkway                      806          4,209              -            806          4,209          5,015
    399 Great S.W. Parkway                     144            917              -            144            917          1,061
    415-417 113th Street                       234          1,490              -            234          1,490          1,724
    500-508 113th Street                       232          1,490              -            232          1,490          1,722
    514-516 Great S.W. Parkway                 370          2,379              -            370          2,379          2,749
    714 -720 107th Street                      259          1,639              -            259          1,639          1,898
    918-920 Avenue N                            59            687              -             59            687            746
    Beltline                                   494          1,153             89            494          1,242          1,736
    Centreport 17                 (1)          383          1,441             25            383          1,466          1,849
    Centerport VII                             649          4,494             40            649          4,534          5,183
    Enterprise Building Park A    (2)          807          3,444              -            807          3,444          4,251
    Exchange Service Center 1                  505          1,975              -            505          1,975          2,480
    Exchange Service Center 2                  528          2,058              -            528          2,058          2,586
    Great Southwest 110           (1)          511          2,310             94            511          2,404          2,915
    Great Southwest 4                          340          1,233              7            340          1,240          1,580
    Highland Place                           1,572          6,399              -          1,572          6,399          7,971
    Las Colinas 1                              218            587              -            218            587            805
    Northgate 4                                244            834             18            244            852          1,096
    Northgate International       (1)        1,761          5,541              -          1,761          5,541          7,302
    Palisades I                                239            954             69            239          1,023          1,262
    Palisades II                               239            954              8            239            962          1,201
    201 Regal Row                 (1)          283            906              -            283            906          1,189
    Sarah Jane Parkway                       3,064         12,762             18          3,064         12,780         15,844
    Valley Branch II                           388            983              5            388            988          1,376
    Valwood 20                    (1)          691          2,399              -            691          2,399          3,090
    Valwood IV                                 326          1,067              -            326          1,067          1,393
    Water's Ridge                            2,358          7,843              -          2,358          7,843         10,201
    Las Colinas 4                              139            298             88            139            386            525
    Las Colinas 5                              492          1,058            263            492          1,321          1,813
    Northgate 28                               152            795              -            152            795            947
    Northgate 5                                137            469            142            137            611            748
    Regal Empress                              435          1,345              7            435          1,352          1,787
    Valley Branch #1                           175            442              6            175            448            623
                                       ------------   ------------   ------------   ------------   ------------   ------------
  Subtotal                                  24,317        103,830            971         24,317        104,801        129,118
                                       ------------   ------------   ------------   ------------   ------------   ------------

<CAPTION>

                                       ACCUMULATED        DATE OF       DATE OF
PROPERTY                              DEPRECIATION      CONSTRUCTION  ACQUISITION
----------------------------------------------------------------------------------
<S>                                   <C>               <C>           <C>
  DALLAS:
    10425 Plano Road                          (24)          1995       10/21/97
    1049 Avenue H East                          -           1964       12/31/97
    13700 Benchmark Drive                     (29)          1995       10/21/97
    1441 Patton Place                           -           1986       12/31/97
    1505 Valwood Parkway                      (16)          1995       10/21/97
    1701 Timberlake Drive                     (17)          1972       10/21/97
    2022 McKenzie Drive                       (24)          1984       10/21/97
    2501 N. Great S.W. Parkway                (49)          1983       05/30/97
    2800 E. Plano Parkway                     (24)          1994       10/21/97
    399 Great S.W. Parkway                      -           1970       12/31/97
    415-417 113th Street                        -           1974       12/31/97
    500-508 113th Street                        -           1974       12/31/97
    514-516 Great S.W. Parkway                  -           1971       12/31/97
    714 -720 107th Street                       -           1972       12/31/97
    918-920 Avenue N                            -           1974       12/31/97
    Beltline                                  (78)          1980       02/23/96
    Centreport 17                             (76)          1987       02/23/96
    Centerport VII                            (45)          1984       08/29/97
    Enterprise Building Park A                (56)          1997       09/17/97
    Exchange Service Center 1                 (14)          1973       09/24/97
    Exchange Service Center 2                 (15)          1973       09/24/97
    Great Southwest 110                      (141)          1974       02/23/96
    Great Southwest 4                         (65)          1979       02/23/96
    Highland Place                            (46)          1986       09/24/97
    Las Colinas 1                             (31)          1977       02/23/96
    Northgate 4                               (45)          1979       02/23/96
    Northgate International                  (293)          1987       02/23/96
    Palisades I                               (63)          1981       02/23/96
    Palisades II                              (52)          1981       02/23/96
    201 Regal Row                             (48)          1966       02/23/96
    Sarah Jane Parkway                       (491)          1996       11/19/96
    Valley Branch II                          (52)          1980       02/23/96
    Valwood 20                               (127)          1987       02/23/96
    Valwood IV                                (10)          1985       08/29/97
    Water's Ridge                            (328)          1996       11/29/96
    Las Colinas 4                             (20)          1980       02/23/96
    Las Colinas 5                             (91)          1980       02/23/96
    Northgate 28                              (42)          1983       02/23/96
    Northgate 5                               (46)          1979       02/23/96
    Regal Empress                             (73)          1984       02/23/96
    Valley Branch #1                          (25)          1980       02/23/96
                                       ------------
  Subtotal                                 (2,556)
                                       ------------
</TABLE>


                                      F-25
<PAGE>

<TABLE>
<CAPTION>
                                                                                                   GROSS AMOUNT
                                                 INITIAL COST TO COMPANY                      CARRIED AT END OF PERIOD
                                       -------------------------------------------  ------------------------------------------
                                                                                                    BUILDING &
PROPERTY                                    LAND       BUILDING       IMPROVEMENTS       LAND      IMPROVEMENTS       TOTAL
------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>            <C>            <C>            <C>            <C>            <C>
  DETROIT:
    HCC - Lot 26-11                            275          2,602              -            275          2,602          2,877
    HCC - Lot 27-8                             406          1,733              -            406          1,733          2,139
    HCC - Lot 6-16                             399          3,032              -            399          3,032          3,431
    Pontiac                                    519          2,078             78            519          2,156          2,675
    H & J Industrial 1                         128            905              3            128            908          1,036
    H & J Industrial 2                          66            542              -             66            542            608
    H & J Industrial 3                          72            899              -             72            899            971
    H & J Industrial 4                          28            219              -             28            219            247
    Southfield Commerce Ctr. 1                 204          1,219              6            204          1,225          1,429
    Southfield Commerce Ctr. 2                 311          1,968              -            311          1,968          2,279
    Troy Tech II                             1,326          5,305             58          1,326          5,363          6,689
    Westhills Commerce Ctr. 1                  100          1,346              -            100          1,346          1,446
    Westhills Commerce Ctr. 2                  122          1,197              -            122          1,197          1,319
                                       ------------   ------------   ------------   ------------   ------------   ------------
  Subtotal                                   3,956         23,045            145          3,956         23,190         27,146
                                       ------------   ------------   ------------   ------------   ------------   ------------
  HOUSTON:
    4647 Pine Timbers                          465          3,201              -            465          3,201          3,666
    4660 Pine Timbers                          978          6,795             10            978          6,805          7,783
    Brittmore Distribution - 1                 530          3,422              -            530          3,422          3,952
    Brittmore Distribution - 2                 457          2,922              -            457          2,922          3,379
    Perimeter Distribution - 1                 372          1,818              -            372          1,818          2,190
    Perimeter Distribution - 2                 167            805              -            167            805            972
    Pine North Distribution - 1                167          1,038             17            167          1,055          1,222
    Pine North Distribution - 2                278          1,781              -            278          1,781          2,059
    Pinemont Distribution - 1                  136            731              -            136            731            867
    Pinemont Distribution - 2                  298          1,602              -            298          1,602          1,900
                                       ------------   ------------   ------------   ------------   ------------   ------------
  Subtotal                                   3,848         24,115             27          3,848         24,142         27,990
                                       ------------   ------------   ------------   ------------   ------------   ------------

<CAPTION>

                                       ACCUMULATED        DATE OF       DATE OF
PROPERTY                              DEPRECIATION      CONSTRUCTION  ACQUISITION
----------------------------------------------------------------------------------
<S>                                   <C>               <C>           <C>
  DETROIT:
    HCC - Lot 26-11                            (19)         1990       09/24/97
    HCC - Lot 27-8                             (12)         1990       09/24/97
    HCC - Lot 6-16                             (22)         1990       09/24/97
    Pontiac                                   (110)         1986       02/23/96
    H & J Industrial 1                          (6)         1981       09/24/97
    H & J Industrial 2                          (4)         1981       09/24/97
    H & J Industrial 3                          (6)         1981       09/24/97
    H & J Industrial 4                          (2)         1981       09/24/97
    Southfield Commerce Ctr. 1                  (9)         1975       09/24/97
    Southfield Commerce Ctr. 2                 (14)         1975       09/24/97
    Troy Tech II                              (280)         1986       02/23/96
    Westhills Commerce Ctr. 1                  (10)         1983       09/24/97
    Westhills Commerce Ctr. 2                   (9)         1983       09/24/97
                                       ------------
  Subtotal                                    (503)              
                                       ------------

  HOUSTON:
    4647 Pine Timbers                            -          1975       12/30/97
    4660 Pine Timbers                            -          1975       12/30/97
    Brittmore Distribution - 1                 (24)         1980       09/24/97
    Brittmore Distribution - 2                 (21)         1980       09/24/97
    Perimeter Distribution - 1                 (13)         1980       09/24/97
    Perimeter Distribution - 2                  (6)         1980       09/24/97
    Pine North Distribution - 1                 (7)         1982       09/24/97
    Pine North Distribution - 2                (13)         1982       09/24/97
    Pinemont Distribution - 1                   (5)         1981       09/24/97
    Pinemont Distribution - 2                  (11)         1981       09/24/97
                                       ------------
  Subtotal                                    (100)              
                                       ------------
</TABLE>


                                      F-26
<PAGE>

<TABLE>
<CAPTION>
                                                                                                   GROSS AMOUNT
                                                 INITIAL COST TO COMPANY                      CARRIED AT END OF PERIOD
                                       -------------------------------------------  ------------------------------------------
                                                                                                    BUILDING &
PROPERTY                                    LAND       BUILDING       IMPROVEMENTS       LAND      IMPROVEMENTS       TOTAL
------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>  <C>            <C>            <C>            <C>            <C>            <C>
  INDIANAPOLIS:
    South Arlington                            899          6,655              -             899          6,655          7,554
                                       ------------   ------------   ------------   ------------   ------------   ------------
  Subtotal                                     899          6,655              -             899          6,655          7,554
                                       ------------   ------------   ------------   ------------   ------------   ------------

  LOS ANGELES BASIN:
    1051 South Rockefeller Ave.                691          3,600              -             691          3,600          4,291
    11195 Eucalyptus Street                    945          2,444              -             945          2,444          3,389
    11440 Pacific Avenue                       785          4,730              -             785          4,730          5,515
    14821 East Northam Street                  623          2,545              -             623          2,545          3,168
    19545 East San Jose Avenue                 815          3,343              -             815          3,343          4,158
    3050-3080 Enterprise Street              1,609          1,970              -           1,609          1,970          3,579
    3200 Enterprise Street                     873          3,508              -             873          3,508          4,381
    425 South Rockefeller                    1,239          2,700              -           1,239          2,700          3,939
    500 South Dupont Street                  1,946          8,271              -           1,946          8,271         10,217
    8865 Utica Avenue                        1,247          4,595              -           1,247          4,595          5,842
    Arenth Avenue                 (1)        3,430          6,105            285           3,430          6,390          9,820
    Cedarpointe - Land                       3,102             27             99           3,102            126          3,228
    Cedarpointe 14                             357          1,365              -             357          1,365          1,722
    Cedarpointe 15                             346          1,780              -             346          1,780          2,126
    Cedarpointe 16                             430          2,432              -             430          2,432          2,862
    Cedarpointe 17                             285          1,873              -             285          1,873          2,158
    Cedarpointe 18                             433          2,226              -             433          2,226          2,659
    Cedarpointe Industrial
       Park-2                                  744          3,702              -             744          3,702          4,446
    Dominguez North - Bldg 1                   697          4,057              -             697          4,057          4,754
    Dominguez North - Bldg 10                  585          2,238              -             585          2,238          2,823
    Dominguez North - Bldg 11                  503          1,355              -             503          1,355          1,858
    Dominguez North - Bldg 2                   481          2,256              -             481          2,256          2,737
    Dominguez North - Bldg 3                   417          1,265              -             417          1,265          1,682
    Dominguez North - Bldg 4                   446          1,793              -             446          1,793          2,239
    Dominguez North - Bldg 5                 1,803          7,721              -           1,803          7,721          9,524
    Dominguez North - Bldg 6                   839          3,962              -             839          3,962          4,801
    Dominguez North - Bldg 7                   810          1,334              -             810          1,334          2,144
    Dominguez North - Bldg 8                   784          1,820              -             784          1,820          2,604
    Dominguez North - Bldg 9                 1,464          5,816              -           1,464          5,816          7,280
    4451 Eucalyptus Avenue                   1,197          3,843            133           1,197          3,976          5,173
    Meyer Circle                             1,694          6,664              -           1,694          6,664          8,358
    Mission Oaks                             2,176          6,912              -           2,176          6,912          9,088
    Rustin Avenue                              623          3,543              -             623          3,543          4,166
    Skylab Road                   (2)        3,389          6,044            105           3,389          6,149          9,538
    Valencia Industrial Bldg.     (1)        1,429          3,591              4           1,429          3,595          5,024
    Wanamaker                                  499          4,049              3             499          4,052          4,551
    Yates Avenue                             6,085         10,413              -           6,085         10,413         16,498
    Chatsworth                                 812          1,736              -             812          1,736          2,548
    Cypress A(1)                               516          1,036             20             516          1,056          1,572
    Cypress B                                1,088          1,886              1           1,088          1,887          2,975
    Cypress C(1)                               495          1,118              -             495          1,118          1,613
    North Irvine                               691          2,077            167             691          2,244          2,935
                                       ------------   ------------   ------------   ------------   ------------   ------------
  Subtotal                                  49,423        143,745            817          49,423        144,562        193,985
                                       ------------   ------------   ------------   ------------   ------------   ------------

<CAPTION>

                                       ACCUMULATED        DATE OF       DATE OF
PROPERTY                              DEPRECIATION      CONSTRUCTION  ACQUISITION
----------------------------------------------------------------------------------
<S>                                   <C>               <C>           <C>
  INDIANAPOLIS:
    South Arlington                           (128)         1992       04/28/97
  Subtotal                                    (128)              

  LOS ANGELES BASIN:
    1051 South Rockefeller Ave.                (26)         1986       09/30/97
    11195 Eucalyptus Street                    (14)         1983       10/21/97
    11440 Pacific Avenue                       (34)         1989       09/30/97
    14821 East Northam Street                  (18)         1992       09/30/97
    19545 East San Jose Avenue                 (24)         1988       09/30/97
    3050-3080 Enterprise Street                  -          1980       12/23/97
    3200 Enterprise Street                     (25)         1982       09/30/97
    425 South Rockefeller                      (39)         1986       07/01/97
    500 South Dupont Street                    (46)         1987       10/21/97
    8865 Utica Avenue                          (26)         1987       10/21/97
    Arenth Avenue                             (346)         1973       03/29/96
    Cedarpointe - Land                           -  
    Cedarpointe 14                             (10)         1990       09/24/97
    Cedarpointe 15                             (13)         1990       09/24/97
    Cedarpointe 16                             (17)         1990       09/24/97
    Cedarpointe 17                             (13)         1990       09/24/97
    Cedarpointe 18                             (16)         1990       09/24/97
    Cedarpointe Industrial Park-2              (26)         1990       09/24/97
    Dominguez North - Bldg 1                   (29)         1981       09/24/97
    Dominguez North - Bldg 10                  (16)         1981       09/24/97
    Dominguez North - Bldg 11                  (10)         1981       09/24/97
    Dominguez North - Bldg 2                   (16)         1981       09/24/97
    Dominguez North - Bldg 3                    (9)         1981       09/24/97
    Dominguez North - Bldg 4                   (13)         1981       09/24/97
    Dominguez North - Bldg 5                   (55)         1981       09/24/97
    Dominguez North - Bldg 6                   (28)         1981       09/24/97
    Dominguez North - Bldg 7                   (10)         1981       09/24/97
    Dominguez North - Bldg 8                   (13)         1981       09/24/97
    Dominguez North - Bldg 9                   (42)         1981       09/24/97
    4451 Eucalyptus Avenue                     (70)         1989       05/12/97
    Meyer Circle                              (128)         1983       04/28/97
    Mission Oaks                              (202)         1969       12/24/96
    Rustin Avenue                             (114)         1990       11/15/96
    Skylab Road                                (32)         1997       12/10/97
    Valencia Industrial Bldg.                 (190)         1985       02/23/96
    Wanamaker                                 (130)         1985       11/22/96
    Yates Avenue                              (189)         1987       05/13/97
    Chatsworth                                 (92)         1985       02/23/96
    Cypress A                                  (55)         1984       02/23/96
    Cypress B                                 (100)         1984       02/23/96
    Cypress C                                  (59)         1984       02/23/96
    North Irvine                              (153)         1975       02/23/96
                                       ------------
  Subtotal                                  (2,448)              
                                       ------------
</TABLE>


                                      F-27
<PAGE>

                        MERIDIAN INDUSTRIAL TRUST, INC.
                                  SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                      FOR THE YEAR ENDED DECEMBER 31, 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                              GROSS AMOUNT
                                            INITIAL COST TO COMPANY                    CARRIED AT END OF PERIOD
                                    ----------------------------------------    ----------------------------------------
                                                                                               BUILDING &
PROPERTY                               LAND        BUILDING     IMPROVEMENTS        LAND      IMPROVEMENTS      TOTAL
------------------------------------------------------------------------------------------------------------------------
<S>                                <C>            <C>           <C>             <C>           <C>             <C>
  LITTLE ROCK:
    Baxter                                115          1,210            -              115          1,210          1,325
    Port Distribution                     218          2,900              3            218          2,903          3,121
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                                333          4,110              3            333          4,113          4,446
                                   ----------     ----------     ----------     ----------     ----------     ----------

  MEMPHIS:
    4000 Air Park Cove                    241          1,361            -              241          1,361          1,602
    4013 Premier                          204          1,556              6            204          1,562          1,766
    Airport Bldg #14                      363          2,410            -              363          2,410          2,773
    Airport Bldg #16 A                    132          1,339             46            132          1,385          1,517
    Airport Bldg #16 B                     42            428            -               42            428            470
    Airport Bldg #17                      237          1,938             71            237          2,009          2,246
    Airport Bldg #3                       170            898            -              170            898          1,068
    Delp Distribution          (1)      1,101          5,785            -            1,101          5,785          6,886
    Olive Branch          (1), (4)        587          9,204             22            587          9,226          9,813
    Olive Branch 2             (4)        -            6,681             14            -            6,695          6,695
    Willow Lake                (1)        750          3,210            161            750          3,371          4,121
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                              3,827         34,810            320          3,827         35,130         38,957
                                   ----------     ----------     ----------     ----------     ----------     ----------

  MIAMI:
    Centerport Building A                 711          2,960            -              711          2,960          3,671
    Centerport Building B                 802          2,623              2            802          2,625          3,427
    Centerport Building E                 488          4,036            -              488          4,036          4,524
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                              2,001          9,619              2          2,001          9,621         11,622
                                   ----------     ----------     ----------     ----------     ----------     ----------

  MINNEAPOLIS:
    Boulder Avenue                          5          4,151              1              5          4,152          4,157
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                                  5          4,151              1              5          4,152          4,157
                                   ----------     ----------     ----------     ----------     ----------     ----------

  NASHVILLE:
    1550 Heil Quaker                      298          3,228             87            298          3,315          3,613
    1600 Corporate Place                  185          1,260              7            185          1,267          1,452
    Hennessy Warehouse                    201          1,226             33            201          1,259          1,460
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                                684          5,714            127            684          5,841          6,525
                                   ----------     ----------     ----------     ----------     ----------     ----------

<CAPTION>

                                   ACCUMULATED      DATE OF       DATE OF
                                  DEPRECIATION   CONSTRUCTION   ACQUISITION
---------------------------------------------------------------------------
<S>                               <C>            <C>            <C>
  LITTLE ROCK:
    Baxter                                (63)       1990        02/23/96
    Port Distribution                    (157)       1986        02/23/96
                                   ----------                 
  Subtotal                               (220)                
                                   ----------                 
                                                              
  MEMPHIS:                                                    
    4000 Air Park Cove                    (72)       1988        02/23/96
    4013 Premier                          (84)       1970        02/23/96
    Airport Bldg #14                     (127)       1977        02/23/96
    Airport Bldg #16 A                    (86)       1977        02/23/96
    Airport Bldg #16 B                    (23)       1977        02/23/96
    Airport Bldg #17                     (118)       1978        02/23/96
    Airport Bldg #3                       (47)       1971        02/23/96
    Delp Distribution                    (306)       1982        02/23/96
    Olive Branch                         (488)       1989        02/23/96
    Olive Branch 2                       (354)       1995        02/23/96
    Willow Lake                          (203)       1988        02/23/96
                                   ----------                 
  Subtotal                             (1,908)                
                                   ----------                 
                                                              
  MIAMI:                                                      
    Centerport Building A                 (21)       1991        09/24/97
    Centerport Building B                 (19)       1991        09/24/97
    Centerport Building E                 (29)       1991        09/24/97
                                   ----------                 
  Subtotal                                (69)                
                                   ----------                 
                                                              
  MINNEAPOLIS:                                                
    Boulder Avenue                       (119)       1997        03/01/97
                                   ----------                 
  Subtotal                               (119)                
                                   ----------                 
                                                              
  NASHVILLE:                                                  
    1550 Heil Quaker                     (173)       1978        02/23/96
    1600 Corporate Place                  (69)       1976        02/23/96
    Hennessy Warehouse                    (78)       1975        02/23/96
                                   ----------
  Subtotal                               (320)           
                                   ----------
</TABLE>


                                      F-28
<PAGE>

                        MERIDIAN INDUSTRIAL TRUST, INC.
                                  SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                      FOR THE YEAR ENDED DECEMBER 31, 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                              GROSS AMOUNT
                                            INITIAL COST TO COMPANY                    CARRIED AT END OF PERIOD
                                    ----------------------------------------    ----------------------------------------
                                                                                               BUILDING &
PROPERTY                               LAND        BUILDING     IMPROVEMENTS        LAND      IMPROVEMENTS      TOTAL
------------------------------------------------------------------------------------------------------------------------
<S>                                <C>            <C>           <C>             <C>            <C>            <C>
  NEW JERSEY/I95:
    100 Friars Lane                     1,348          8,685            -            1,348          8,685         10,033
    103-105 Gaither Drive                 513          1,935            -              513          1,935          2,448
    110 Gaither Drive                     285          1,138            -              285          1,138          1,423
    112 Gaither Drive                     264          1,060            -              264          1,060          1,324
    130 Benigno Blvd.                     255          1,205            -              255          1,205          1,460
    361 Bellevue Road                     200            894            -              200            894          1,094
    9020 Pennsauken Highway               100            602            -              100            602            702
    9040 Pennsauken Highway               120            656            -              120            656            776
    9160 Pennsauken Highway               122            495            -              122            495            617
    9255 Commerce Highway                 174            968            -              174            968          1,142
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                              3,381         17,638            -            3,381         17,638         21,019
                                   ----------     ----------     ----------     ----------     ----------     ----------

  ORLANDO:
    2200 Consulate Drive       (2)      1,706          8,138              9          1,706          8,147          9,853
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                              1,706          8,138              9          1,706          8,147          9,853
                                   ----------     ----------     ----------     ----------     ----------     ----------

  PHOENIX:
    4440 East Elwood Street               697          6,374            -              697          6,374          7,071
    470 West Vaughn Street                277          2,134            -              277          2,134          2,411
    7000 West Latham Street             1,601          6,712            -            1,601          6,712          8,313
    Phoenix N. 27th                       197            658            -              197            658            855
    Phoenix Plaza Three                   486          1,121             96            486          1,217          1,703
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                              3,258         16,999             96          3,258         17,095         20,353
                                   ----------     ----------     ----------     ----------     ----------     ----------

  RICHMOND:
    North Run III                       1,154          3,905            -            1,154          3,905          5,059
    North Run IV                        1,568          6,607            -            1,568          6,607          8,175
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                              2,722         10,512            -            2,722         10,512         13,234
                                   ----------     ----------     ----------     ----------     ----------     ----------

  SAN DIEGO:
    6355 Nancy Ridge Drive                 93            186            -               93            186            279
    Scripps Ranch                       3,862          5,844             74          3,862          5,918          9,780
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                              3,955          6,030             74          3,955          6,104         10,059
                                   ----------     ----------     ----------     ----------     ----------     ----------

  SEATTLE:
    Park at Woodinville        (1)      2,530          9,468            281          2,530          9,749         12,279
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                              2,530          9,468            281          2,530          9,749         12,279
                                   ----------     ----------     ----------     ----------     ----------     ----------

<CAPTION>

                                   ACCUMULATED      DATE OF       DATE OF
                                  DEPRECIATION   CONSTRUCTION   ACQUISITION
---------------------------------------------------------------------------
<S>                               <C>            <C>            <C>
  NEW JERSEY/I95:
    100 Friars Lane                      (115)       1992        07/29/97
    103-105 Gaither Drive                 -          1974        12/31/97
    110 Gaither Drive                     -          1973        12/31/97
    112 Gaither Drive                     -          1974        12/31/97
    130 Benigno Blvd.                     -          1974        12/31/97
    361 Bellevue Road                     -          1974        12/31/97
    9020 Pennsauken Highway               -          1974        12/31/97
    9040 Pennsauken Highway               -          1974        12/31/97
    9160 Pennsauken Highway               -          1976        12/31/97
    9255 Commerce Highway                 -          1974        12/31/97
                                   ----------                   
  Subtotal                               (115)                  
                                   ----------                   
  ORLANDO:                                                      
    2200 Consulate Drive                  (51)       1997        10/08/97
                                   ----------                   
  Subtotal                                (51)                  
                                   ----------                   
                                                                
  PHOENIX:                                                      
    4440 East Elwood Street               (36)       1995        10/21/97
    470 West Vaughn Street                (15)       1991        09/30/97
    7000 West Latham Street               (38)       1995        10/21/97
    Phoenix N. 27th                       (35)    1983-1984      02/23/96
    Phoenix Plaza Three                  (106)    1969-1970      02/23/96
                                   ----------     
  Subtotal                               (230)              
                                   ----------     

  RICHMOND:
    North Run III                         (28)       1988        09/24/97
    North Run IV                          (47)       1989        09/24/97
                                   ----------     
  Subtotal                                (75)              
                                   ----------     

  SAN DIEGO:
    6355 Nancy Ridge Drive                (10)       1984        02/23/96
    Scripps Ranch                        (336)    1978-1980      02/23/96
                                   ----------     
  Subtotal                               (346)              
                                   ----------     

  SEATTLE:
    Park at Woodinville                  (531)       1982        02/23/96
                                   ----------     
  Subtotal                               (531)              
                                   ----------     
</TABLE>


                                      F-29
<PAGE>

                        MERIDIAN INDUSTRIAL TRUST, INC.
                                  SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                      FOR THE YEAR ENDED DECEMBER 31, 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                              GROSS AMOUNT
                                            INITIAL COST TO COMPANY                    CARRIED AT END OF PERIOD
                                    ----------------------------------------    ----------------------------------------
                                                                                               BUILDING &
PROPERTY                               LAND        BUILDING     IMPROVEMENTS        LAND      IMPROVEMENTS      TOTAL
------------------------------------------------------------------------------------------------------------------------
<S>                                <C>            <C>           <C>             <C>           <C>             <C>
  SAN FRANCISCO BAY AREA
    2190 Hanson Way                     1,124          5,954            -            1,124          5,954          7,078
    Gold River Lane                     2,153         11,421            -            2,153         11,421         13,574
    Overlake Place                      2,900          5,635            -            2,900          5,635          8,535
    San Carlos Industrial               3,042          4,829            214          3,042          5,043          8,085
    2711 North First Street             1,304          5,193            -            1,304          5,193          6,497
    Barrington Business Park            1,865          7,379            -            1,865          7,379          9,244
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                             12,388         40,411            214         12,388         40,625         53,013
                                   ----------     ----------     ----------     ----------     ----------     ----------

  ST. LOUIS:
    5463 Phantom Drive                    248          2,722            -              248          2,722          2,970
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                                248          2,722            -              248          2,722          2,970
                                   ----------     ----------     ----------     ----------     ----------     ----------

  DEVELOPMENT PROJECTS:
    Atlanta, GA                (3)        928             10            637            928            647          1,575
    Charlotte, NC              (3)        -              -              -              -              -              -  
    Dallas, TX                 (3)        755              4          2,281            755          2,285          3,040
    Dallas, TX                 (3)        905            -            2,469            905          2,469          3,374
    Dallas, TX                 (3)      2,738              3          2,162          2,738          2,165          4,903
    Los Angeles, CA            (3)      4,977              5          3,664          4,977          3,669          8,646
    Nashville, TN              (3)      1,013            -            2,371          1,013          2,371          3,384
    Orlando, FL                (3)        602            -            1,900            602          1,900          2,502
    San Francisco Bay Area, CA (3)        -              -            7,912            -            7,912          7,912
                                   ----------     ----------     ----------     ----------     ----------     ----------
  Subtotal                             11,918             22         23,396         11,918         23,418         35,336
                                   ----------     ----------     ----------     ----------     ----------     ----------
------------------------------------------------------------------------------------------------------------------------
TOTAL                              $  168,417     $  626,218        $28,604     $  168,417     $  654,822     $  823,239
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------

<CAPTION>

                                   ACCUMULATED      DATE OF       DATE OF
                                  DEPRECIATION   CONSTRUCTION   ACQUISITION
---------------------------------------------------------------------------
<S>                               <C>            <C>            <C>
  SAN FRANCISCO BAY AREA
    2190 Hanson Way                       -          1997        12/23/97
    Gold River Lane                      (328)       1996        12/30/96
    Overlake Place                       (251)       1996        06/10/96
    San Carlos Industrial                (274)       1969        02/23/96
    2711 North First Street               (37)       1980        09/30/97
    Barrington Business Park              (53)       1990        09/30/97
                                   ----------
  Subtotal                               (943)               
                                   ----------

  ST. LOUIS:                                                 
    5463 Phantom Drive                    (19)       1975        09/30/97
                                   ----------
  Subtotal                                (19)           
                                   ----------

  DEVELOPMENT PROJECTS:
    Atlanta, GA                           -  
    Charlotte, NC                         -  
    Dallas, TX                            -  
    Dallas, TX                            -  
    Dallas, TX                            -  
    Los Angeles, CA                       -  
    Nashville, TN                         -  
    Orlando, FL                           -  
    San Francisco Bay Area, CA            -  
                                   ----------
  Subtotal                                -              
                                   ----------

---------------------------------------------------------------------------
TOTAL                              $  (14,732)           
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>


                                      F-30
<PAGE>

                        MERIDIAN INDUSTRIAL TRUST, INC.
                                  SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                      FOR THE YEAR ENDED DECEMBER 31, 1997
                                 (IN THOUSANDS)

Reconciliation of cost and accumulated depreciation for the years ended 
December 31, 1997 and 1996, are as follows:

<TABLE>
<CAPTION>
                                                               December 31, 1997                       December 31, 1996
                                                       --------------------------------        --------------------------------
                                                                           Accumulated                             Accumulated 
                                                             Cost          Depreciation             Cost           Depreciation
                                                       --------------------------------        --------------------------------
<S>                                                    <C>                 <C>                 <C>                 <C>
Balance at beginning of year                           $    326,349        $     (4,365)       $        300        $          -
                                                       
 Additions during period:                              
     Merged Trusts                                                -                   -             229,831                   -
     Acquisition of rental properties                       493,768                   -              89,320                   -
     Land acquistion and property development costs          62,429                   -              33,235                   -
     Recurring building and  tenant improvements              3,064                   -               2,265                   -
     Adjustments to property basis                             (235)                  6                 446                   -
     Depreciation                                                 -             (10,716)                  -              (4,792)

 Property dispositions                                      (62,136)                343             (29,048)                427
                                                       --------------------------------        --------------------------------
 Balance at End of Year                                $    823,239        $    (14,732)       $    326,349        $     (4,365)
                                                       --------------------------------        --------------------------------
                                                       --------------------------------        --------------------------------
</TABLE>

(1) These properties serve as collateral for the Mortgage Loan facility.  As
    of December 31, 1997, the outstanding indebtedness under this facility 
    totaled $66,094.  As of December 31, 1997, these properties have a net 
    book value of $138,863.

(2) These properties were completed in 1997.

(3) As of December 31, 1997 these properties were still under construction. 
    The properties are located in various markets and will be completed in 1998.

(4) Olive Branch and Olive Branch 2 are considered one property.

(5) These two properties are retail shopping centers with an aggregate net
    book value of $21,689 at December 31, 1997.  All other operating properties
    owned by the Company are industrial.

(6) Aggregate cost for federal income tax purposes is $889,610.


                                      F-31
<PAGE>

MOST RECENT REVISION: 3/12/98

<TABLE>
<CAPTION>
NO.                                  DESCRIPTION
--                                   -----------
<S>        <C>
2.1   (1)  Amended and Restated Agreement and Plan of Merger among the Trusts
           and the Company dated as of November 10, 1995.

3.1   (2)  The Company's Third Amended and Restated Articles of Incorporation.

3.2   (2)  The Company's Second Amended and Restated Bylaws.

3.3   (3)  Amendment to Second Amended and Restated Bylaws adopted January 26,
           1996.

3.4   (3)  Second Amendment to Second Amended and Restated Bylaws adopted
           September 17, 1997.

3.5   (4)  Amendment to Second Amended and Restated Bylaws adopted January 20,
           1997.

4.1   (2)  Specimen share certificate. (See also restrictions contained in
           Exhibits 3.1 and 3.2)

4.2   (5)  Rights Agreement, dated as of March 12, 1998, between the Company
           and First Chicago Trust Company of New York, which includes the form
           of Certificate of Designation of Series C Junior Participating 
           Preferred Stock as Exhibit A, the form of Rights Certificate as
           Exhibit B and the form of the Summary of Rights as Exhibit C.

10.1  (2)  Amended and Restated Employee and Director Incentive Stock Plan of
           the Company.

10.2  (6)  First Amendment to Amended and Restated Employee and Director
           Incentive Stock Plan of the Company.

10.3  (4)  Amendment to Amended and Restated Employee and Director Incentive
           Stock Plan adopted by the Company's shareholders on May 16, 1997.

<PAGE>

10.4  (4)  Amendment to Amended and Restated Employee and Director Incentive
           Stock Plan adopted by the Company's Board of Directors on
           January 20, 1998. 

10.5  (2)  Amended and Restated Investor Rights Agreement among the Company,
           Hunt, USAA, Trust 83, Ameritech and OTR dated as of February
           23, 1996.

10.6  (7)  Registration Rights Agreement dated September 24, 1997, among the
           Company, The Prudential Insurance Company of America, The
           Prudential Insurance Company of America on behalf of a single
           client insurance company separate account contained in Group
           Annuity Contract No. GA-9032, Strategic Performance Fund - II,
           Inc., and The Prudential Variable Contract Real Property Partnership.

10.7  (7)  Amended and Restated Registration Rights Agreement dated September
           24, 1997, among the Company, The Prudential Insurance Company of
           America acting for the benefit of the Chevron Separate Account, and
           The Prudential Insurance Company of America acting for the benefit of
           the Strategic Performance Fund I Separate Account.

10.8  (8)  Registration Rights Agreement dated September 30, 1997 between the
           Company and Ameritech Pension Trust.

10.9  (2)  Amended and Restated Excepted Holder Agreement between the Company
           and Hunt dated as of February 23, 1996.

10.10 (2)  Amended and Restated Excepted Holder Agreement between the Company
           and USAA dated as of February 23, 1996.

10.11 (2)  Excepted Holder Agreement between the Company and Ameritech dated as
           of February 23, 1996.

10.12 (2)  Excepted Holder Agreement between the Company and OTR dated as of
           February 23, 1996.

10.13 (3)  MIT-Investor Excepted Holder Agreement dated September 24, 1997
           between the Company and The Prudential Insurance Company of
           America.

10.14 (4)  First Amendment to Excepted Holder Agreement dated January 20, 1998
           between the Company and The Prudential Insurance Company of America.

10.15 (8)  MIT-Ameritech Amended and Restated Excepted Holder Agreement dated
           September 30, 1997, between the Company and Ameritech Pension Trust.

10.16 (1)  Amended and Restated Stockholders' Agreement among the Company, the
           Trusts, USAA, Allen J. Anderson, C.E. Cornutt, Peter O. Hanson,
           Robert E. Morgan, John S. Moody, James M. Pollak, Kenneth N.
           Stensby and Lee W. Wilson dated as of November 10, 1995.

10.17 (2)  Warrant Agreement between the Company and the First Chicago Trust
           Company of New York dated as of February 23, 1996.

10.18 (1)  Form of Indemnification Agreement signed by the Company and certain
           directors, officers, employees and agents of the Company.

10.19 (1)  Stock Purchase Agreement among the Company, Ameritech and OTR dated
           as of December 20, 1995.

<PAGE>

10.20 (3)  Third Amended and Restated Revolving Credit Agreement dated
           September 23, 1997, among (i) the Company, (ii) BankBoston, N.A.,
           Texas Commerce Bank National Association, NationsBank of Texas, N.A.,
           Wells Fargo Bank, N.A., Dresdner Bank AG, First American Bank Texas,
           S.S.B., (collectively, the "Banks"), (iii) BankBoston, N.A. as Agent
           for the Banks, (iv) Texas Commerce Bank National Association as
           Documentation Agent for the Banks, and (v) NationsBank of Texas, N.A.
           as Syndication Agent for the Banks.

10.21 (3)  Second Amended and Restated Guaranty of Payment and Performance dated
           September 23, 1997 executed by MIT Unsecured L.P.

10.22 (4)  Form of First Amendment to Third Amended and Restated Revolving Credit
           Agreement dated February 19, 1998 among (i) the Company, (ii) MIT
           Unsecured L.P. and Meridian Refrigerated, Inc. (iv) BankBoston, N.A.,
           Chase Bank of Texas, National Association, NationsBank of Texas, N.A.,
           Wells Fargo Bank, N.A., Dresdner Bank AG, New York Branch and Grand
           Cayman Branch, and First American Bank Texas, S.S.B., (collectively,
           the "Banks"), (iii) BankBoston, N.A. as Agent for the Banks, (iv) Chase
           Bank of Texas, National Association as Documentation Agent for the
           Banks, and (v) NationsBank of Texas, N.A. as Syndication Agent for the
           Banks. 

10.23 (4)  Form of Guaranty of Payment and Performance dated February 19, 1998 and
           signed by Meridian Refrigerated, Inc.
 
10.24 (6)  Amended and Restated Loan Administration Agreement between The
           Prudential Insurance Company of America and the Company, IndTennco
           Limited Partnership, Metro-Sierra Limited Partnership, and Progress
           Center/Alabama Limited Partnership dated as of February 23, 1996.

10.25 (2)  Agreement of Limited Partnership of DFW Nine dated April 15, 1987.

10.26 (2)  Amendment No. 1 to Agreement of Limited Partnership of DFW Nine dated
           June 1, 1987.

10.27 (2)  Assignment of General Partnership Interests and Agreement regarding
           DFW Nine dated February, 1996.

10.28 (6)  Assignment of Limited Partnership Interest in MIT Unsecured L.P.
           (formerly known as DFW Nine) dated December 31, 1996.

10.29 (2)  Agreement of Limited Partnership of Progress Center/Alabama Limited
           Partnership dated December 3, 1987.

10.30 (2)  First Amendment to Agreement of Limited Partnership of Progress
           Center/Alabama Limited Partnership dated June 29, 1990.

10.31 (6)  Assignment of Limited Partnership Interest in MIT Secured L.P.
           (formerly known as Progress Center/Alabama Limited Partnership)
           dated December 31, 1996.

10.32 (9)  Amended and Restated Stock Purchase Agreement dated June 12, 1997 by
           and between the Company as Seller and The Prudential Insurance Company
           of America, as Purchaser together with a summary of the economic terms
           of three additional Stock Purchase Agreements into which the Company as
           Seller has entered with Strategic Performance Fund-II, Inc. as
           Purchaser, The Prudential Variable Contract Real Property Partnership
           as Purchaser, and The Prudential Insurance Company of America on behalf
           of a single client insurance company account contained in Group Annuity
           Contract No. GA-9032 as Purchaser.

<PAGE>

10.33 (9)  Purchase and Sale Agreement (Texas properties) between The Prudential
           Insurance Company of America and the Company dated May 29, 1997,
           together with the First Amendment thereto dated July 7, 1997, the
           Second Amendment thereto dated July 22, and the Third Amendment thereto
           dated August 5, 1997. 

10.34 (10) Fourth Amendment to Purchase and Sale Agreement (Texas properties)
           between The Prudential Insurance Company of America and the  Company 
           dated August 20, 1997, Fifth Amendment to Purchase and Sale Agreement
           (Texas properties) between The Prudential Insurance Company of America
           and the Company dated September 5, 1997, and Sixth Amendment to 
           Purchase and Sale Agreement (Texas properties) between The Prudential
           Insurance Company of America and the Company dated September 8, 1997.

10.35 (9)  Summary of the Purchase and Sale Agreement (Cedarpointe, CA)
           between The Prudential Insurance Company of America and the Company 
           dated May 29, 1997, together with the First Amendment thereto dated
           July 7, 1997, the Second Amendment thereto dated July 22, and the Third
           Amendment thereto dated August 5, 1997. 

10.36 (10) Fourth Amendment to Purchase and Sale Agreement (Cedarpointe, CA) 
           between The Prudential Insurance Company of America and the Company 
           dated August 20, 1997, Fifth Amendment to Purchase and Sale 
           Agreement (Cedarpointe, CA) between The Prudential Insurance Company 
           of America and the Company dated September 5, 1997, and Sixth 
           Amendment to Purchase and Sale Agreement (Cedarpointe, CA) between 
           The Prudential Insurance Company of America and the Company dated 
           September 8, 1997.

10.37 (9)  Summary of the Purchase and Sale Agreement (460 Ellis 
           Road-Jacksonville & Centerport) between The Prudential Insurance 
           Company of America and the Company dated May 29, 1997, together with 
           the First Amendment thereto dated July 7, 1997, the Second Amendment 
           thereto dated July 22, and the Third Amendment thereto dated August 
           5, 1997.  

10.38 (10) Fourth Amendment to Purchase and Sale Agreement (460 Ellis 
           Road-Jacksonville & Centerport) between The Prudential Insurance 
           Company of America and the Company dated August 20, 1997, Fifth 
           Amendment to Purchase and Sale Agreement (460 Ellis 
           Road-Jacksonville & Centerport) between The Prudential Insurance 
           Company of America and the Company dated September 5, 1997, and 
           Sixth Amendment to Purchase and Sale Agreement (460 Ellis 
           Road-Jacksonville & Centerport) between The Prudential Insurance 
           Company of America and the Company dated September 8, 1997.
 
10.39 (9)  Summary of the Purchase and Sale Agreement (Michigan, Louisiana, and 
           Virginia) between The Prudential Insurance Company of America and 
           the Company dated May 29, 1997, together with the First Amendment 
           thereto dated July 7, 1997, the Second Amendment thereto dated July 
           22, and the Third Amendment thereto dated August 5, 1997.

10.40 (10) Fourth Amendment to Purchase and Sale Agreement (Michigan, 
           Louisiana, and Virginia) between The Prudential Insurance Company of 
           America and the Company dated August 20, 1997, Fifth Amendment to 
           Purchase and Sale Agreement (Michigan, Louisiana, and Virginia) 
           between The Prudential Insurance Company of America and the Company 
           dated September 5, 1997, and Sixth Amendment to Purchase and Sale 
           Agreement (Michigan, Louisiana, and Virginia) between The Prudential 
           Insurance Company of America and the Company dated September 8, 1997.

10.41 (9)  Summary of the Purchase and Sale Agreement (Illinois, Michigan & 
           California land) between The Prudential Insurance Company of America 
           and the Company dated May 29, 1997, together with the First 
           Amendment thereto dated July 7, 1997, the Second Amendment thereto 
           dated July 22, and the Third Amendment thereto dated August 5, 1997. 

<PAGE>

10.42 (10) Fourth Amendment to Purchase and Sale Agreement (Illinois, Michigan 
           & California land) between The Prudential Insurance Company of 
           America and the Company dated August 20, 1997, Fifth Amendment to 
           Purchase and Sale Agreement (Illinois, Michigan & California) 
           between The Prudential Insurance Company of America and the Company 
           dated September 5, 1997, and Sixth Amendment to Purchase and Sale 
           Agreement (Illinois, Michigan & California) between The Prudential 
           Insurance Company of America and the Company dated September 22, 
           1997.

10.43 (10) Summary of Purchase and Sale Agreement between Pru-Oma Joint Venture 
           and the Company dated May 29, 1997 together with the First Amendment 
           thereto dated July 7, 1997, the Second Amendment thereto dated July 
           22, the Third Amendment thereto dated August 5, 1997, the Fourth 
           Amendment thereto dated August 20, 1997, the Fifth Amendment thereto 
           dated September 5, 1997, and the Sixth Amendment thereto dated 
           September 8, 1997.
                                    
10.44 (10) Summary of Purchase and Sale Agreement between The Prudential 
           Insurance Company of America and One Federal Street  Joint Venture 
           as sellers and the Company as buyer dated May 29, 1997 together with 
           the First Amendment thereto dated July 7, 1997, the Second Amendment 
           thereto dated July 22, the Third Amendment thereto dated August 5, 
           1997, the Fourth Amendment thereto dated August 20, 1997, the Fifth 
           Amendment thereto dated September 5, 1997, and the Sixth Amendment 
           thereto dated September 8, 1997.

10.45 (10) Agreement regarding Real Property between EastGroup Properties, L.P. 
           and the Company dated September 22, 1997.

10.46 (10) Promissory Note in the amount of $18,300,000 dated September 23, 
           1997 executed in favor of the Company by EastGroup Properties, L.P.

10.47 (10) Form of Mortgage and Security Agreement executed by EastGroup 
           Properties, L.P. with respect to the $18,300,000 loan from the 
           Company to EastGroup Properties, L.P.

10.48 (10) Promissory Note in the amount of $26,700,000 dated September 23, 
           1997 executed in favor of the Company by EastGroup Properties, L.P.

10.49 (10) Form of Mortgage and Security Agreement executed by EastGroup
           Properties, L.P. with respect to the $26,700,000 loan from the
           Company to EastGroup Properties, L.P.

10.50 (11) Agreement of Purchase and Sale and Joint Escrow Instructions dated 
           May 29, 1997 between the Company and State Street Bank and Trust 
           Company, as Trustee for Ameritech Pension Trust.

10.51 (1)  Form of employment letters signed by the Company and, respectively, 
           Allen J. Anderson, Milton K. Reeder, Dennis D. Higgs, Jaime Suarez 
           and Robert A. Dobbin, each dated November 14, 1995, together with 
           summary of economic terms for each such employment letter.

10.52 (2)  Employment letter signed by Celeste Woo dated November 14, 1996.

10.53 (2)  Employment letter signed by Peter B. Harmon dated January 30, 1996.

10.54 (12) Employment letter signed by Gregory D. Skirving dated January 9, 1997.

10.55 (4)  Form of Severance Agreement entered into between the Company and Allen
           J. Anderson, Dennis D. Higgs, and Milton K. Reeder.

<PAGE>

10.56 (4)  Form of Severance Agreement entered into between the Company and 
           Gregory D. Skirving, Peter B. Harmon, Timothy B. Keith, Brian R. 
           Barringer, Jaime Suarez, and Robert A. Dobbin.

10.57 (4)  The Company's Severance Plan adopted February 5, 1998.

10.58 (2)  Form of Incentive Stock Option Agreement to be signed by the 
           Company and certain officers and employees participating in the 
           Company's Stock Plan.

10.59 (2)  Form of Nonstatutory Stock Option Agreements to be signed by the 
           Company and certain directors, officers, employees and agents 
           participating in the Company's Stock Plan.

10.60 (2)  Form of Promissory Note used in connection with the purchase the 
           Company's Common Stock signed by Messrs. Anderson ($200,000), 
           Reeder ($40,000), Higgs ($90,000), Keith ($30,000) and Suarez 
           ($20,000).

10.61 (2)  Note Purchase Agreement between the Company and The First National 
           Bank of Boston dated as of February 13, 1996.

10.62 (2)  Security Agreement and Assignment of Account to The First National
           Bank of Boston from the Company dated February 13, 1996.

10.63 (1)  Option Agreement between the Company and USAA dated as of November 
           21, 1995, including the form of USAA Warrant attached.

10.64 (2)  Warrant issued to USAA to purchase Common Stock of the Company 
           dated February 23, 1996.

10.65 (2)  The Company's Dividend Reinvestment Plan.

10.66 (4)  Note Purchase Agreement among the Company and The Travelers 
           Insurance Company (I/N/O TRAL & CO.), United Services Automobile 
           Association (I/N/O SALKELD & CO.), The Variable Annuity Life 
           Insurance Company, The United States Life Insurance Company in 
           the City of New York, All American Life Insurance Company, The 
           Old Line Life Insurance Company of America, The Lincoln National 
           Life Insurance Company, Lincoln Life & Annuity Company of New 
           York, First Penn-Pacific Life Insurance Company (I/N/O CUDD & 
           CO), Lincoln National Health & Casualty Insurance Company, Allied 
           Life Insurance Company "B" (I/N/O GERLACH & CO), Sons of Norway 
           (I/N/O VAR & CO), Aid Association for Lutherans (I/N/O NIMER & 
           CO), Metropolitan Life Insurance Company, National Life Insurance 
           Company, Life Insurance Company of the Southwest, Keyport Life 
           Insurance Company (I/N/O BOST & CO), Union Central Life Insurance 
           Company (I/N/O HARE & CO), Pan-American Life Insurance Company 
           dated November 15, 1997.

12.1  (4)  Statements re computation of ratios.

21.1  (4)  Subsidiaries of the Company.

23.1 (13)  Consent of Independent Public Accountants.

27.1  (4)  Financial Data Schedule.
</TABLE>

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(1)  Filed with the Company's Registration Statement No. 333-00018 on January 3,
     1996, and incorporated herein by reference.
(2)  Filed with the Company's Amendment No. 1 to Registration Statement No.
     333-02322 on March 25, 1996, and incorporated herein by reference.
(3)  Filed on November 14, 1997 with the Company's Form 10-Q for the quarter
     ended September 30, 1997 and incorporated herein by reference.
(4)  Previously filed.
(5)  Filed on March 16, 1998 with the Company's Registration Statement on
     Form 8A dated March 16, 1998 and incorporated herein by reference.
(6)  Filed on March 20, 1997 with the Company's Form 10-K for 1996 and
     incorporated herein by reference.
(7)  Filed with the Schedule 13D filed on October 3, 1997 by The Prudential 
     Insurance Company of America, Strategic Performance Fund - II, Inc.,
     and The Prudential Variable Contract Real Property Partnership and
     incorporated herein by reference.
(8)  Filed with the Amendment No. 1 to Schedule 13D filed on October 10, 1997
     by Ameritech Pension Trust and incorporated herein by reference.
(9)  Filed on August 13, 1997 with the Company's Form 10-Q for the quarter
     ended June 30, 1997 and incorporated herein by reference.
(10) Filed November 12, 1997 with the Company's Form 8-KA dated September
     24, 1997.
(11) Filed November 12, 1997 with the Company's Form 8-KA dated September
     30, 1997 and incorporated herein by reference.
(12) Filed on May 14, 1997 with the Company's Form 10-Q for the quarter ended
     March 31, 1997 and incorporated herein by reference.
(13) Filed with this report.