================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

              (Mark one)

                  |X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR
                        15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

                                       OR

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

                         Commission File Number 0-21670

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


                         CARDINAL REALTY SERVICES, INC.
             (Exact name of registrant as specified in its charter)

                 OHIO                                           31-4427382
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                             6954 AMERICANA PARKWAY
                            REYNOLDSBURG, OHIO 43068
           (Address of principal executive offices including zip code)

                                 (614) 759-1566
              (Registrant's telephone number, including area code)

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


SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:    NONE

SECURITIES  REGISTERED  PURSUANT TO SECTION  12(G) OF THE ACT:  SHARES OF COMMON
STOCK,  NO PAR VALUE

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 8-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]

As of March  28,  1997  the  aggregate  market  value of  voting  stock  held by
non-affiliates  (based on total  shares  outstanding  reduced  by the  number of
shares held by directors,  officers, and other affiliates) of the Registrant was
$91,050,152  based on the closing price reported on the National  Association of
Securities Dealers Automated Quotation National Market System.

Indicate  by check mark  whether  the  Registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. YES X NO

As of March 28, 1997 there were 4,445,531 shares of Common Stock outstanding.

The following document is incorporated herein by reference: None

================================================================================
<PAGE>
                                        2


                         CARDINAL REALTY SERVICES, INC.

                             FORM 10-K ANNUAL REPORT

                       FISCAL YEAR ENDED DECEMBER 31, 1996


PART I:                                                                    PAGE:

ITEM 1  BUSINESS...............................................................3
ITEM 2  PROPERTIES............................................................16
ITEM 3  LEGAL PROCEEDINGS.................................................... 17
ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................. 17


PART II:

ITEM 5  MARKET FOR REGISTRANT'S COMMON EQUITY
          AND RELATED STOCKHOLDER MATTERS.................................... 18
ITEM 6  SELECTED FINANCIAL DATA.............................................  19
ITEM 7  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS.......................................... 21
ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................... 32
ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE........................................... 32


PART III:

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................... 32
ITEM 11 EXECUTIVE COMPENSATION............................................... 37
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....... 54
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................... 57


PART IV:

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...... 57

CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES..............................F-1


                                        2


<PAGE>
                                        3


                                     PART I

     This  report  contains  forward-looking  statements.  The  forward  looking
statements include,  without limitation,  the stability of controlled Management
Services Fee revenues (page 6);  potential  increases in Ancillary  Services Fee
revenues from apartment residents (page 8); future appreciation in real property
market value from investments and improvements (page 15); competitive advantages
based upon  experience  and quality of service  (page 15);  business  strategies
(page 16); and  increases in  distributable  cash flow  available to the Company
(page 27). All of the  forwarding  looking  statements  contained in this report
represent  management's  good faith  projections of future results and are based
upon existing  market,  financial and economic  conditions  known to management.
Future  changes or  developments  in national,  regional and local  economic and
market  conditions,  especially  increased  competition  at any of these  levels
within the multi-family residential property industry;  changing demographics in
the specific  locations in which apartment  communities  owned or managed by the
Company are  located;  the  discontinuance  of the  identifiable  trend  towards
consolidation within the multi-family residential property industry,  generally;
increases in interest  rates or  increasing  inflation all may operate to render
the forward looking statements contained in this report inaccurate. There can be
no  assurance  that  any of the  forward  looking  statements  will  prove to be
correct. Actual results may differ and such differences may be material.

ITEM 1.  BUSINESS
         --------

                                  THE COMPANY

     Cardinal  Realty  Services,  Inc.  (the  "Company"),  an Ohio  corporation,
invests in, and holds direct and indirect ownership  interests in,  multi-family
real estate. Its wholly owned subsidiary,  Lexford Properties, Inc. ("Lexford"),
a Texas corporation, provides property management and related services to owners
of  multi-family  real estate.  According to 1997 rankings by the National Multi
Housing Council,  the Company is the nation's 19th largest owner of multi-family
properties and Lexford is the 9th largest manager of multi-family properties.

     As of December  31,  1996,  the Company  had an  ownership  interest in 522
apartment communities  (consisting of an aggregate of 34,363 apartment units) in
14 states.  As of the same  date,  Lexford  managed  609  apartment  communities
(consisting of an aggregate of 55,397 apartment  units) in 22 states.  Lexford's
management portfolio included 519 apartment  communities (34,209 units) in which
the Company has an ownership  interest (the  "Properties" or "Portfolio") and 90
apartment communities (21,188 units) managed for third party owners.

     The  majority  of the  Portfolio  was  constructed  during the 1980s and is
comprised entirely of buildings of modular  construction.  On December 31, 1996,
the average  economic  occupancy of the Portfolio was 92.5% and the average rent
collected  per unit was $396.  The  Portfolio  is mostly  located  in  suburban,
secondary and tertiary markets in the eastern United States.

     The Company's  headquarters is located in suburban  Columbus,  Ohio at 6954
Americana Parkway,  Reynoldsburg,  Ohio 43068. The Company's telephone number is
(614) 759 - 1566.  Lexford's  headquarters is in suburban Dallas,  Texas at 8615
Freeport  Parkway,  Suite 200,  Irving,  Texas  75063.  Lexford  also  maintains
regional  operations  offices in: Columbus,  Ohio;  Orlando,  Florida;  Seattle,
Washington;  and Houston and San  Antonio,  Texas.  On December  31,  1996,  the
Company employed 167 employees at its corporate headquarters and in the regional
office,  an additional 61 employees who work at Lexford  headquarters and in its
regional offices, and 1,665 employees at the Properties.

     The Company's common stock,  without par value ("Common Stock"),  is traded
on  the   Nasdaq  National  Market  tier of the Nasdaq  Stock  Market  under the
symbol "CRSI." (SEE ITEM 5 - "MARKET FOR REGISTRANT'S  COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS").


                                        3

<PAGE>
                                        4


     The Company is successor by name only to Cardinal Industries,  Inc. ("CII")
(SEE THE COMPANY'S FORM 10 REGISTRATION  STATEMENT).  The Company registered its
Common Stock with the Securities and Exchange  Commission in June 1993. Prior to
March 1995,  the  Company's  Common Stock was traded on the OTC  Bulletin  Board
(trading symbol "CNRV").

1996 DEVELOPMENTS

     In January  1996,  the Company  implemented  a corporate  restructuring  to
segregate its services and ownership businesses,  creating a Management Services
division and an Investment  Management  division,  respectively.  The Investment
Management division was formerly referred to as Advisory Services. The corporate
restructuring  allowed  the  Management  Services  division to pursue its growth
strategy  of  improving  the  performance  of the  apartment  communities  under
management and entering the third-party fee based property management  business,
and allowed the Investment  Management  division to focus on its growth strategy
of improving return on the Company's investments in real estate.  Related to the
corporate  restructuring,  the Company made a number of changes in  senior-level
management.

     Effective August 1, 1996, the Company significantly enhanced its Management
Services business when it acquired Lexford by merger (the "Lexford Merger") of a
wholly owned subsidiary of the Company with and into Lexford. Under the terms of
the Lexford Merger, the Company succeeded to the ownership of all the issued and
outstanding  stock of Lexford and the  shareholders of Lexford  received 700,000
shares of  restricted,  newly issued Common  Stock.  For purposes of the Lexford
Merger,  the  Common  Stock was  valued  at $20 per  share.  Approximately  $9.0
million,  or 450,000  shares,  of the purchase price is subject to forfeiture in
whole or in part in the event  Lexford  does not achieve  certain  profitability
criteria  within the three full fiscal  years  ending  December  31,  1999.  The
Lexford   shareholders   received   250,000  shares  of  Common  Stock  free  of
contingencies in the Lexford Merger.

     Lexford has been engaged in the practice of third-party property management
since commencing business in June 1988. The executives of Lexford have extensive
experience in managing apartment communities for third- party owners - a busines
which the Company had  identified  as an important  part of its growth  strategy
prior to the Lexford Merger. At the time of the Lexford Merger,  Lexford managed
approximately  22,000  apartment  units and enjoyed a reputation  for  extensive
training programs and the accuracy of its reporting systems. Through the Lexford
Merger,  the Company was also able to expand its geographic scope to establish a
national  presence,  and to add  class  A and B  residential  properties  to its
management portfolio. The unaffiliated properties managed by Lexford are located
primarily  in the  western  U.S.  and  include a range of  property  types (from
affordable to luxury) while the Company's  Portfolio is located primarily in the
eastern U.S. and consists entirely of affordable apartment communities of single
story modular construction. Since completing the Lexford Merger, the Company has
consolidated its Management Services division property and financial  operations
with those of Lexford, and combined other functions, including payroll, training
and human resources.  The Company's property management operations are conducted
under the  Lexford  name and the Lexford  executives  (who were among the former
owners  of  Lexford)  direct  day-to-day  operations  of the  former  Management
Services division.

                             THE COMPANY'S BUSINESS

     The  Company is  engaged  in two core  business  activities:  1)  providing
management  and other  services to owners of  multi-family  real estate;  and 2)
investing  in  real  estate.  The  Company's  real  estate  investments  include
investments  in  limited  partnerships  or other  entities  that  own  apartment
communities  in which the  Company  or one of its  subsidiaries  owns all of the
equity  interest (the "Wholly Owned  Properties"),  and  investments  in limited
partnerships  that own apartment  communities in which the Company or one of its
subsidiaries  serves as general  partner of, and in most  cases,  also owns some
limited partner interests (the "Syndicated Partnerships").


                                        4

<PAGE>
                                        5


     The unaudited net  contribution to profit  (revenues less direct  expenses)
and Adjusted  EBITDA  (defined as Recurring  Earnings  Before  Interest,  Income
Taxes,  Depreciation and Amortization excluding interest on mortgages secured by
the Wholly Owned Properties) by the two core business  activities of the Company
for the years  ended  December  31,  1996 and 1995,  are as  follows.  Financial
information   presented   includes  revenue  generated  from  the  Wholly  Owned
Properties which is eliminated in the  Consolidated  Financial  Statements,  and
does not include  allocation of general corporate  overhead.  The 1995 financial
information  is based on a Pro  Forma  Income  Statement  since the  results  of
operations of the Wholly Owned  Properties  were excluded from the  consolidated
income  statement during the period the assets were Held for Sale (SEE ITEM 7 --
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS").

Lexford - Management Services - Net Contribution to Profit

                                           1996              1995
                                      ---------------  ---------------
Revenues
     Controlled Contracts.............  $11,916,175      $11,592,409
     Third Party Contracts............    2,135,429                0
     Ancillary........................      617,098        1,036,482
     Other............................      460,639          637,744
                                      ---------------  ---------------
                                         15,129,341       13,266,635
                                      ---------------  ---------------
Direct Expenses.......................    9,386,591        6,707,291
                                      ---------------  ---------------
Net Contribution to Profit............   $5,742,750       $6,559,344
                                      ===============  ===============
Adjusted EBITDA.......................   $5,742,750       $6,559,344
                                      ===============  ===============

     The decline in Management Services' Net Contribution to Profit is primarily
due to two  factors:  1) a decline in  Ancillary  Revenues  associated  with the
Company's   restructuring   of  its  parts  supply   operation  (see  "Ancillary
Services"),  and 2) a decline in Other  Income due to the  one-time  recovery in
1995 of accounts  receivable which had previously been written off. The increase
in direct expenses primarily is due to the Lexford Merger.

Investment Management - Net Contribution to Profit

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

Revenues

   Interest Income..........................    $9,298,650       $4,361,497
   Fee Based Services
         Administrative Fees................     1,532,447        1,573,694
         Loan Fees..........................       751,994          966,398
   Income from Disposal of Non-Core Assets..       962,761        3,408,379
   Other....................................        52,631           99,827
                                            ----------------  -----------------
                                                12,598,483       10,409,795
                                            ----------------  -----------------

Direct Expenses.............................     1,958,136        1,960,068
                                            ----------------  -----------------
Net Equity in Wholly Owned Properties.......      (455,234)      (2,745,738)
                                            ----------------  -----------------
Net Contribution to Profit..................   $10,185,113       $5,703,989
                                            ================  =================

Adjusted EBITDA.............................   $11,278,914       $6,052,544
                                            ================  =================


                                        5

<PAGE>
                                        6



     The  increase  in  the  Investment  Management   contribution  was  derived
principally from the improved financial operating performances of the Syndicated
Partnerships (reflected in Interest Income) and the Wholly Owned Properties.

                                                     CONSOLIDATED SUMMARY
                                                  ---------------------------
                                                        1996          1995
                                                  ------------- -------------

Net Contribution to Profit:

    Lexford - Management Services.................  $5,742,750    $6,559,344
    Investment Management.........................  10,185,113     5,703,989
                                                  ------------- -------------

                                                    15,927,863    12,263,333
                                                  ------------- -------------
Other Expenses:

    Administration................................   5,030,967     4,399,349
    Restructure Costs.............................     242,899     1,537,073
    Interest - Corporate..........................   1,098,333     1,522,087
    Depreciation and Amortization.................     769,434       537,849
                                                  ------------- -------------
                                                     7,141,633     7,996,358
                                                  ------------- -------------
Income before Income Taxes & Extraordinary Items..  $8,786,230    $4,266,975
                                                  ============= =============




                                                       Adjusted EBITDA by
                                                        Business Activity
                                                  ----------------------------
                                                        1996          1995
                                                  -------------- -------------

Adjusted EBITDA - Net Contribution:

         Lexford - Management Services............   $5,742,750   $6,559,344
         Investment Management ...................   11,278,914    6,052,544
         Corporate Administration.................   (5,030,967)  (4,399,349)
                                                  -------------- -------------
         Adjusted EBITDA..........................  $11,990,697   $8,212,539
                                                  ============== =============

Lexford - Management Services

     The Company's management services business,  conducted by Lexford, provides
traditional  property management services to owners of multi-family real estate.
Lexford  earns  fees for these  services,  which  services  include:  day-to-day
management and  maintenance of apartment  communities;  attracting and retaining
qualified  residents;  collecting  rents and other  receivables  from residents;
providing  cash  management  services for rental  revenues,  security  deposits,
taxes,  insurance and deferred  maintenance escrows; and compiling and reporting
information to property  owners.  Lexford's  client base includes 519 of the 522
apartment  communities  (34,209  units) in which the  Company  has an  ownership
interest.  Management  contracts for the Properties are almost all long-term and
include incentive fees for rent collection. The revenue stream from managing the
Properties  is  considered  to be stable and  recurring.  Lexford  clients  also
include  unrelated  third-party  owners.  The terms of management  contracts for
third-party owners vary considerably  according to the objectives of the owners,
and  are  typically  subject  to  termination  on  30-days'  notice.  Due to the
combination  of controlled and  third-party  management  contracts,  the Company
expects that the number of units  managed  will  fluctuate  somewhat  over time.
Lexford intends to aggressively seek to expand its third-party  business,  which
it may do without  jeopardizing its base of long-term  management  contracts for
the Properties.

                                        6

<PAGE>
                                        7


     Lexford's  management   philosophy  centers  on  maximizing  the  financial
performance  of the  properties  it manages for owners.  Lexford  believes  that
managers  must  have  detailed   knowledge  of  their   properties  to  maximize
performance.   Consequently,   Lexford's  property  management   operations  are
decentralized,  with on-site  managers  responsible  for day-to-day  leasing and
maintenance   issues,  and  multi-property   managers  frequently  visiting  the
properties  to  manage  personnel  and  review  the  property's  appearance  and
financial performance.  To maintain control and realize efficiencies,  financial
operations,  including payroll and cash management, are centralized in Columbus,
Ohio and  Dallas,  Texas.  To help  ensure  compliance  with legal and  customer
service standards, Lexford has developed a system of policies and procedures for
on-site  employees,  who receive  continuous  training from  Lexford's  Training
Department.  Lexford  encourages  its employees to pursue  continuing  education
opportunities, and a number of managers have earned the designation of Certified
Property  Manager.  Lexford  holds  the  designation  of  Accredited  Management
Organization from the Institute of Real Estate Management.

Location of Properties

     The table below indicates the geographic locations of apartment communities
managed by Lexford as of December 31, 1996.

                                 No. of               No. of
               State            Properties            Units
         ----------------    ---------------     ----------------
              Alabama                  2                  159
             Arkansas                  1                  232
              Arizona                  3                1,015
            California                 9                2,764
             Colorado                  5                2,255
              Florida                142                9,915
              Georgia                 74                5,059
             Illinois                  4                  289
              Indiana                 71                4,817
             Kentucky                 35                2,132
             Maryland                  6                  465
             Michigan                 25                1,739
               Ohio                  140                8,524
             Oklahoma                  1                  138
              Oregon                   2                  800
           Pennsylvania                9                  582
          South Carolina               3                  269
             Tennessee                 7                  465
               Texas                  46               10,309
             Virginia                  2                  732
            Washington                15                2,259
          West Virginia                7                  478
                            ---------------     ----------------
                                     609               55,397
                            ===============     ================

                                        7

<PAGE>
                                        8


Operating Performance

     In the aggregate,  Net Operating Income ("NOI") of the Portfolio  increased
approximately  7.4% over 1995,  (7.9% on a same unit basis) due  primarily to an
approximate  4.5%  increase  in  rental  revenue  (5.0% on a same  unit  basis).
Management also believes that the results were favorably influenced by increased
emphasis on  accountability  at the  property  management  level,  an  incentive
compensation plan for on-site managers and leadership from the Lexford staff.

Ancillary Services

     Lexford also provides ancillary  services to real estate owners,  including
replacement parts,  laundry services and maintenance  supplies.  In prior years,
the Company  maintained a warehouse  with an  inventory  of parts and  supplies,
which were shipped to the apartment  communities upon the receipt of orders.  In
November 1996, the Company disposed of such inventory and Lexford  established a
"Preferred Vendor" program that features discounts with major vendors (including
General Electric,  Whirlpool,  Glidden, Sherman Williams,  Sears, Roebuck & Co.,
and  Maintenance  Warehouse/Home  Depot).  The program allows Lexford clients to
benefit from volume  purchasing  by paying  discounted  prices for  high-quality
goods. By outsourcing the replacement parts and supplies, Lexford eliminated its
inventory and reduced overhead significantly. As of December 31, 1996, more than
95% of the Portfolio were  participating  in the Preferred  Vendor program.  The
program was made available to third- party clients  effective  December 1, 1996.
Lexford  receives a rebate for every purchase made through the Preferred  Vendor
program,  as well as a rebate from residents' use of laundry equipment.  Lexford
expects that it can improve third party client  participation  in the "Preferred
Vendor" program in 1997.

     Lexford also provides  services to apartment  residents,  including renters
insurance  and leased  apartment  furnishings.  As of December 31, 1995,  20% of
residents  at  apartment  communities  in which  the  Company  has an  ownership
interest   selected  renters  insurance  offered  through  an  insurance  agency
affiliated  with Lexford.  As of December 31, 1996, the percentage  increased to
27%. Lexford plans to make the renters  insurance program available to residents
of  third-party  clients  in  the  second  quarter  of  1997.  Lexford  receives
compensation for services rendered and a reimbursement of expenses. Lexford also
offers leased apartment  furnishings  through agreements with national companies
such as Aaron Rents, Inc. and Globe Furniture Rentals,  and receives a rebate on
furniture packages leased by residents.  Although there can be no assurance, the
Company  believes  that Lexford can continue to increase the number of residents
who select renters  insurance and leased apartment  furnishings  offered through
Lexford or its affiliates.

     On a very  limited  basis,  Lexford  offers  telecommunications  and  cable
television  services to residents.  The Company expects that Lexford will expand
those services in 1997.

Investment Management

     The Company's equity investments in real estate are comprised of the Wholly
Owned  Properties,  the Syndicated  Partnerships  and a small number of non-core
assets.  The Portfolio  Managers and Assets  Managers  employed in the Company's
Investment  Management  division  are charged with  maximizing  the value of the
Company's  real estate  assets  (the  Wholly  Owned  Properties  and  Syndicated
Partnerships are collectively  referred to herein as the  "Properties")  and its
return  on  real  estate  investments.  The  Company  maintains  at  least  a 1%
partnership interest in each of the Syndicated Partnerships,  and typically a 9%
to 10% managing general partner interest.  In addition to its equity investments
(i.e., partnership interests) in the Syndicated Partnerships,  the Company holds
interest earning receivables from a majority of the Syndicated Partnerships.  In
most  instances,  the Company's  interest  earning  receivable from a Syndicated
Partnership is the Company's more meaningful,  income producing asset.  Positive
cash flow generated from the operations of Syndicated  Partnerships is generally
available to pay accrued interest on receivables owing to the Company.  Interest
income on receivables from Syndicated  Partnerships is a major source of Company
revenue. (SEE NOTE 1 TO NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS).

     The Company's  Investment  Management  division  administers  the Company's
duties and functions as general partner of the Syndicated Partnerships by

                                       8

<PAGE>
                                       9


providing asset management services to the Syndicated Partnerships. In addition,
the  Investment  Management  division  performs the  following  services for the
accounts of the co-owners  (limited  partners) of the  Syndicated  Partnerships:
informational and financial reporting services, including tax return preparation
and provision of tax return  information;  and capital and  financial  planning,
including  determination  of  reserves,  funding  of  capital  requirements  and
administration of capital  distributions to partners.  The Investment Management
division earns fees for providing these services,  as well as for its efforts in
successful mortgage loan refinancing transactions.

Wholly Owned Properties

     As of December 31, 1996, the Company's  portfolio included 113 Wholly Owned
Properties  (8,504 units).  The Wholly Owned Properties are owned by (i) limited
partnerships in which the Company or one of its wholly owned  subsidiaries  owns
both the general  partner  interest and limited  partner  interests (ii) limited
liability companies in which the Company or one of its wholly owned subsidiaries
own all the member interests, or (iii) wholly owned subsidiaries of the Company.
Revenues  from the  Wholly  Owned  Properties,  primarily  generated  from  rent
payments collected from residents,  increased approximately $1.9 million or 4.8%
in 1996.

     The  following  table  summarizes  the unaudited  operating  results of the
Wholly Owned  Properties by quarter in 1996 and for the years ended December 31,
1996 and 1995:


                                        9


<PAGE>
                                       10


Wholly Owned Properties (cont'd)
<TABLE>
<CAPTION>

                                                                             Quarter Ending                Year          Year
                                           ------------------------------------------------------------   Ending        Ending
                                              March 31,      June 30,      Sept. 30,          Dec. 31,   Dec. 31,      Dec. 31,
                                                1996          1996           1996               1996       1996          1995
                                           ------------- ------------- ---------------- --------------- ------------  --------------

Statistical information
-----------------------

<S>                                        <C>           <C>           <C>              <C>             <C>          <C>
Properties at end of period                         114           114              114             113          113           116
Average Units                                     8,777         8,587            8,574           8,568        8,626         8,777
Ave Economic Occupancy                            89.7%         92.5%            91.0%           91.1%        91.1%         91.8%
Ave Rent Collected/Unit/Month                      $378          $385             $389            $396         $387          $366
Property - Operating Expenses/Unit/Month           $433          $435             $446            $462       $1,776        $1,700
Capital & Maintenance/Unit/Month                    $82          $118              $94            $107         $401          $451
Real Estate Taxes/Unit/Month                        $96           $95              $97             $92         $380          $358
Property - Operating Expense Ratio                37.3%         36.4%            37.1%           37.6%        37.1%         37.9%

Financial Information (000's) omitted
-------------------------------------

Revenues

  Rental Income                            $      9,954  $      9,926  $        10,004  $       10,172  $    40,055   $    38,514
  Other Property Income                             236           328              307             350        1,221           862
                                           ------------- ------------- ---------------- --------------- ------------ --------------
Total Revenues                                   10,190        10,254           10,311          10,522       41,276        39,376
                                           ------------- ------------- ---------------- --------------- ------------ --------------

Expenses

  Property Operating                              3,802         3,736            3,824           3,956       15,319        14,921
  Real Estate Taxes                                 842           814              833             789        3,277         3,145
                                           ------------- ------------- ---------------- --------------- ------------ --------------
      Operating Expenses                          4,644         4,550            4,657           4,745       18,596        18,066
                                           ------------- ------------- ---------------- --------------- ------------ --------------
      Net Operating Income                        5,546         5,704            5,654           5,777       22,680        21,310
                                           ------------- ------------- ---------------- --------------- ------------ --------------

  Interest - Mortgage                             3,564         3,637            3,500           3,431       14,132        13,549
  Interest - Corporate Advances                     100           100              100             101          401           262
  Major Maintenance (1)                             654           842              668             608        2,772         3,960
  Non Operating                                     311           130              417             227        1,085         1,561
  Depreciation                                    1,200         1,183            1,242           1,119        4,745         4,723
                                           ------------- ------------- ---------------- --------------- ------------ --------------
          Non Operating                           5,829         5,892            5,927           5,486       23,135        24,055
                                           ------------- ------------- ---------------- --------------- ------------ --------------
 Inc./(Loss) bef. extraordinary items              (283)         (188)            (273)            291         (455)       (2,745)
                                           ------------- ------------- ---------------- --------------- ------------ --------------
 Extraordinary gain/(Loss) (2)                        0             0                0          (1,614)      (1,614)          804
                                           ------------- ------------- ---------------- --------------- ------------ --------------
 Net Income/(Loss)                         $       (283) $       (188) $          (273) $       (1,323) $    (2,069) $     (1,941)
                                           ============= ============= ================ =============== ============ ==============
 Capital Expenditures (1)                  $         62  $        174  $           135  $          330  $       701  $          0
                                           ============= ============= ================ =============== ============ ==============

<FN>
Note: See Exhibit 99 for  Individual  Property  Financial  Information by Wholly
Owned Property for each Wholly Owned Property as of December 31, 1996.

(1)  The Company initiated a limited capitalization program effective January 1,
     1996 which requires capitalization of major exterior building improvements.
     In prior years all items were expensed.

(2)  See Note 6 to Notes to the Consolidated Financial Statements
</FN>
</TABLE>


                                       10

<PAGE>
                                       11


Same Units Comparison

     The  Company  uses  a  "same  unit"  comparison  as  an  indicator  of  the
performance of the 108 Wholly Owned Properties owned for the entire year in 1996
and 1995. Total Revenues increased 5.7%, while expenses increased 3.6% resulting
in a same unit net operating income increase of 7.5%. The average rent collected
was $391 in 1996 versus $373 for 1995 with  economic  occupancy at 92.5% in 1996
versus 91.8% in 1995.

Deconsolidated Balance Sheet

     Effective  January 1, 1996,  the  Company's  Wholly Owned  Properties  were
reclassified  from "Real Estate Assets Held For Sale" to operating assets on the
Company's  Consolidated  Balance  Sheet and their  results  of  operations  were
reflected in the Company's  Consolidated  Income and Cash Flow  Statements  (SEE
NOTE 2 OF NOTES TO CONSOLIDATED FINANCIAL  STATEMENTS).  The following unaudited
table is a pro forma presentation of the Company's Consolidated Balance Sheet as
of December 31, 1996 without the  consolidation of the Wholly Owned  Properties,
which highlights the impact of consolidating  the Wholly Owned Properties on the
Company's Balance Sheet.

<TABLE>
<CAPTION>

                                    Pro Forma
                          Deconsolidated Balance Sheet
                                December 31, 1996

                                 (000s omitted)

              Assets                                          Liabilities and Equity
-------------------------------------------------- ------------------------------------------
<S>                                     <C>         <C>                          <C>
Cash................................    $     271   Term Debt and Other........  $   15,263

Accounts Receivable.................        5,348   Accounts Payable...........         400

Interests in and Receivables from                   Accrued Expenses and Taxes.       8,256
Syndicated Partnerships.............       54,610

Equity in Wholly Owned Properties...       17,073   Other Liabilities..........       5,369

Furniture, Fixtures - Net...........        1,168

Funds Held in Escrow................        7,031

Prepaids and Other..................        6,296   Shareholders' Equity.......      62,509
                                      -------------                            --------------
                                        $  91,797                                $   91,797
                                      =============                            ==============
</TABLE>

Funds From Operations

         Funds From Operations ("FFO") is a financial  statistic  primarily used
by real estate investment  trusts ("REITs") to report  performance of owned real
estate. FFO represents net income excluding depreciation, extraordinary gains or
losses and funding from escrows for deferred  maintenance.  The following  table
sets forth unaudited condensed,  combined FFO of the Wholly Owned Properties for
the years ended December 31, 1996, 1995, and 1994.

<TABLE>
<CAPTION>
                                                                1996           1995              1994
                                                           -------------- ---------------    -------------
<S>                                                          <C>           <C>                 <C>
Income, excluding Depreciation and Extraordinary Items       $      4,290  $        1,978      $     2,676
Maintenance funded from Deferred Escrows..................            523           1,714              334
                                                           -------------- ---------------    -------------
Funds from Operations.....................................   $      4,813  $        3,692      $     3,010
                                                           ============== ===============    =============
<FN>
Note:   1995 and 1994 FFO has been restated for interest  expense  capitalized
        during the period the Wholly Owned  Properties were classified as Held
        for Sale.
</FN>

</TABLE>
                                       11


<PAGE>
                                       12


Syndicated Partnerships

     The Company holds receivables from  substantially all of the 409 Syndicated
Partnerships,  in which the Company had an  ownership  interest on December  31,
1996,  primarily in the form of second mortgages and general partner advances to
the Syndicated  Partnerships.  Interest payments on these receivables generate a
majority of the interest income recognized by the Company. On December 31, 1996,
the contractual value of the Company's  interest in second  mortgages,  advances
and other  receivables,  including related accrued interest,  was $238.9 million
(SEE NOTE 3 TO NOTES TO CONSOLIDATED FINANCIAL  STATEMENTS).  Over the past four
years,  cash flow from the Syndicated  Partnerships  has improved,  largely as a
result of refinanced  first mortgage debt,  investment in property  improvements
and increased NOI. The improved cash flow allows for increased  interest and, in
certain instances, principal reduction payments from the Syndicated Partnerships
to the Company.

     The following table summarizes the overall  unaudited  operating results of
the Syndicated  Partnerships by quarter in 1996 and for the years ended December
31, 1996 and 1995.  The  financial  information  presented is based upon accrual
accounting at the partnership level.  Certain  transactions  between the Company
and the Syndicated Partnerships are recorded at amounts at the partnership level
that will not necessarily correspond to amounts recorded at the Company level as
Interest  Income  due to  "Fresh  Start"  accounting  (SEE  NOTE 1 TO  NOTES  TO
CONSOLIDATED FINANCIAL STATEMENTS).


<TABLE>
<CAPTION>


                                                                 Quarter Ending                       Year          Year
                                           --------------------------------------------------------   Ending        Ending
                                              March 31,      June 30,     Sept. 30,       Dec. 31,   Dec. 31,      Dec. 31,
                                                1996          1996          1996            1996       1996          1995
                                           ------------- ------------- -------------- ------------- ------------  ----------

<S>                                               <C>         <C>          <C>            <C>           <C>          <C>
Statistical information
-----------------------

Properties at end of period.................         414         414          414            409           409          415
Average Units...............................      26,197      26,197       26,197         26,084        26,162       26,374
Ave Economic Occupancy......................       91.2%       92.4%        92.7%          92.9%         92.4%        91.9%
Average Rent Collected/Unit/Month ..........        $377        $385         $390           $395          $387         $369
Property - Operating Expenses/Unit/Month....        $453        $439         $455           $464        $1,811       $1,767
Capital & Maintenance/Unit/Month............        $103        $104         $126           $187          $519         $586
Real Estate Taxes/Unit/Month................         $91         $89          $88            $90          $358         $351
Property - Operating Expense Ratio..........       39.1%       36.9%        37.7%          37.9%         37.9%        39.1%

</TABLE>

                                       12

<PAGE>
                                       13


Syndicated Partnerships (cont'd)

<TABLE>
<CAPTION>
                                                                             Quarter Ending                Year          Year
                                           ------------------------------------------------------------   Ending        Ending
                                              March 31,      June 30,      Sept. 30,          Dec. 31,   Dec. 31,      Dec. 31,
                                                1996          1996           1996               1996       1996          1995
                                           ------------- ------------- ---------------- --------------- ------------  -------------
<S>                                          <C>            <C>          <C>            <C>             <C>            <C>
Revenues

  Rental Income............................. $    29,641    $  30,256    $    30,693    $    31,001     $   121,591    $ 116,193
  Other Property Income.....................         688          946            988            953           3,574        3,151
                                            ---------------------------------------------------------------------------------------
  Total Revenues............................      30,329       31,202         31,681         31,954         125,165      119,344
                                            ---------------------------------------------------------------------------------------

Expenses

  Property Operating........................      11,857       11,502         11,930         12,103          47,391       46,601
  Real Estate Taxes.........................       2,378        2,321          2,317          2,348           9,364        9,247
                                            ---------------------------------------------------------------------------------------
      Operating Expenses....................      14,235       13,823         14,247         14,451          56,755       55,848
                                            ---------------------------------------------------------------------------------------
      Net Operating Income..................      16,094       17,379         17,434         17,503          68,410       63,496
                                            ---------------------------------------------------------------------------------------

  Interest - Mortgage.......................       9,920       10,007          9,940          9,855          39,723       40,452
  Interest - General Partner................       3,035        3,090          3,078          3,337          12,539       12,203
  Major Maintenance (1).....................       2,484        2,129          2,618          3,120          10,350       15,462
  Non Operating.............................         533        1,120            161            231           2,045        2,880
  Depreciation..............................       4,532        4,543          4,588          4,810          18,474       18,497
                                            ---------------------------------------------------------------------------------------

      Non Operating.........................      20,504       20,889         20,385         21,353          83,131       89,494
                                            ---------------------------------------------------------------------------------------
Inc./(Loss) bef. extraordinary items........      (4,410)      (3,510)        (2,951)        (3,850)        (14,721)     (25,998)
                                            ---------------------------------------------------------------------------------------

Extraordinary gain/(Loss)...................           0            0          1,247           (588)            659       33,429
                                            ---------------------------------------------------------------------------------------
Net Income/(Loss)........................... $    (4,410)   $  (3,510)   $    (1,704)   $    (4,438)    $   (14,062)   $   7,431
                                            =======================================================================================

Capital Expenditures (1).................... $       215    $     588    $       674    $     1,757     $     3,234    $       0
                                            =======================================================================================

<FN>
     (1)  The Syndicated Partnerships initiated a limited capitalization program
          effective  January  1, 1996  which  requires  capitalization  of major
          exterior  building  improvements.   In  prior  years  all  items  were
          expensed.
</FN>
</TABLE>

Note: See Exhibit 99 for Syndicated  Partnership  performance,  by property, for
all Properties in which the Company had an ownership interest as of December 31,
1996.

The  Company's  interest  income  is  principally  derived  from the  Syndicated
Partnerships.  The  following  unaudited  table  reflects  interest  income from
Syndicated Partnerships recognized over the prior three years:


                                      000s omitted
                 ----------------------------------------------------
Interest Income        1996               1995             1994
                 -----------------  ---------------  ----------------
  Recurring          $     6,960      $     4,099      $      2,633
  Refinancing              1,937                0                 0
                 -----------------  ---------------  ----------------
Total                $     8,897      $     4,099      $      2,633
                 =================  ===============  ================


                                       13

<PAGE>
                                       14


         The $2.9 million increase in recurring interest income was generated by
the  aggregate   $4.9  million   increase  in  net  operating   income  and  the
approximately   $700,000   decrease  in  interest   expense  at  the  Syndicated
Partnerships.  This  $5.6  million  increase  in  cash  flow  at the  Syndicated
Partnership level was partially offset by (i) an approximately $852,000 increase
in distributions to outside limited partners in 1996 as compared to 1995 (ii) an
approximately  $683,000  increase in principal  payments on cash flow  secondary
mortgages ("B Notes").  The $1.1 million  balance of the  partnership  cash flow
increase  did not flow to the  Company as interest  income for several  reasons,
including:  (1) many partnerships  which experienced cash flow increases in 1996
were in negative cash flow situations in 1995, and the 1996 increases  therefore
do not equate to  distributable  positive cash flow in whole or in part; and (2)
in connection with refinancings and major maintenance,  partnerships may require
temporary advances (or holdbacks of cash distributions)  which may not be repaid
as of the end of a fiscal year, thereby  diminishing or delaying interest income
to the Company. (SEE "CAPITALIZATION OF PROPERTIES").


Capitalization of Properties

     The Company  believes that  obtaining and  maintaining  the best  available
financing for the Properties is vital to maximizing their operating  performance
and  managing  refinancing  risk.  Over the past four  years,  the  Company  has
successfully negotiated long-term,  non-recourse,  fixed interest rate financing
for  approximately  92% of the  Properties.  The Company has also negotiated and
established escrows for property improvements, real property tax liabilities and
working capital as provisions of refinancing.

     The Company  applies a two-fold first mortgage loan  refinancing  strategy.
First, securing serviceable long-term,  fixed rate financing for the Properties'
first  mortgage debt  improves the chances of  relatively  stable cash flow with
sufficient  coverage to properly  maintain the  Properties  and thereby  enhance
long-term Property performance. Second, to the extent NOIs increase, the Company
benefits from increased cash flow from operation of the Wholly Owned  Properties
and, generally, from increased interest income from the Syndicated Partnerships.
The Company earns mortgage restructuring fees for successful refinancing efforts
on behalf of the Syndicated Partnerships.

     In 1996,  the Company  refinanced (i) 98 Property  mortgages  (with a total
principal  amount  of  $115.4  million)  through  an  affiliate  of  PaineWebber
Incorporated (ii) 21 Property  mortgages (with a total principal amount of $26.1
million)  through First Union  Capital  Markets  Group,  and (iii) five Property
mortgages (with a total  principal  amount of $5.4 million)  through  Donaldson,
Lufkin & Jenrette  Securities  Corporation.  These  refinancings  reduced annual
Property debt service requirements, including B Note cash flow payments, by $1.3
million and funded escrows in the aggregate amount of $4.2 million.

     The  refinancing  transactions  mentioned  above  eliminated  B Notes  with
principal  balances amounting to $1.2 million on six Wholly Owned Properties and
$3.9 million on 21 Syndicated Partnerships. During 1996, excess cash flow at the
Property  level applied to these  eliminated B Notes  amounted to  approximately
$98,000  and  $338,000  on  the  Wholly  Owned  Properties  and  the  Syndicated
Partnerships,  respectively.  Approximately  $255,000 of principal payments were
made on B Notes  of  Wholly  Owned  Properties  which  remained  outstanding  at
December 31, 1996. Approximately $1.1 million of principal payments were made on
B Notes of Syndicated  Partnerships  which remained  outstanding at December 31,
1996.

     As of  December  31,  1996,  more  than  83% of the  mortgage  loans on the
Properties had scheduled  maturities  beyond  December 31, 1999. This represents
approximately  82% of the  mortgage  loans to the  Syndicated  Partnerships  and
approximately 89% of the mortgage loans to the Wholly Owned Properties.

                                       14

<PAGE>
                                       15


Non-Core Assets

     The Company also owns or holds an  ownership  interest in a small number of
properties and parcels of land (the "Non-Core  Assets").  The Company intends to
dispose of these  assets on the best terms it can obtain.  In 1996,  the Company
recognized  approximately $963,000 from the sale of Non-Core Assets. The Company
does not  expect  the sale of  Non-Core  Assets  to be a  continuing  source  of
revenue, as a minimal number of Non-Core Assets remain to be sold.

                                   COMPETITION

         Lexford competes nationally for management  contracts,  and locally for
apartment community residents. The Company believes that the property management
business continues to follow the consolidation trend of the real estate industry
in general.

Competition for Apartment Residents

         Competition  for residents at apartment  communities  is subject to the
condition and pricing of individual units, local market conditions, the location
of the apartment community,  the apartment community owner's  capitalization and
other factors.  Lexford's portfolio of managed properties is spread over a large
geographic  area and,  therefore,  not subject to any one set of local  economic
circumstances.  Additionally,  the Company  believes that Lexford  benefits from
managing a diverse portfolio that includes luxury apartments in major markets as
well as affordable apartments in secondary and tertiary markets.

         To remain competitive and provide opportunities for increases in rental
rates,  the Company  continues to invest in improvements to the Properties.  The
following table displays  Property  improvement  expenditures for the years 1994
through 1996 for both Wholly Owned Properties and Syndicated  Partnerships.  The
improvements  were funded  primarily by escrows  established  under the terms of
agreements for refinanced mortgage loans entered into since January 1, 1994. The
Company  expects that these  investments in the  Properties  will increase their
value.  The Company will continue to address  capital  improvements  and routine
maintenance requirements in future years.

                                   Major Maintenance by Year (000s omitted)
                         -------------------------------------------------------

                               1996                1995                1994
                         ----------------   ----------------   -----------------

Major Maintenance......       $13,122            $19,422             $13,514

Capital Improvements...         3,935                N/A                 N/A
                         ----------------   ----------------   -----------------

                              $17,057            $19,422             $13,514
                         ================   ================   =================

     Major  Maintenance   expenditures  are  typically   concentrated  in  years
immediately  following  mortgage  refinancings  due to  requirements of mortgage
lenders.  The 1996  activity  declined due to a "trailing  off" of  expenditures
related  to  properties   refinanced  in  1994  and  1995.  Reserves  for  major
maintenance  established  in the  1996  refinancing  program  will  be  expended
primarily in 1997. These expenditures, combined with termite repairs funded from
the proceeds of the termite  litigation,  are expected to reverse,  at least for
1997, the downward expenditure trend experienced in 1996.

Competition for Management Contracts

     Lexford  competes  with  numerous  other fee based  property  managers  for
third-party management contracts.  Competition in this arena is keen, as well as
highly fragmented, according to geographic region and property type. The Company
is Lexford's largest client, by virtue of the number of apartment communities

                                       15
<PAGE>
                                       16


controlled  by the  Company.  These  contracts  provide a base that will  remain
stable  as  Lexford  seeks  to  acquire  additional  management  contracts  from
third-party owners.

     Although  there can be no assurance,  the Company  believes that  Lexford's
experience and track record with respect to financial controls, quality service,
lower  operating  costs  and  emphasis  on  employee  training  are  competitive
advantages.  The Company also believes that its ability to co-invest with owners
or developers of multi-family  real estate may provide  opportunities to control
additional apartment communities.

                               CORPORATE STRATEGY

     The Company's overall business objective is to maximize the total return to
shareholders  and  investors  through  increases  in the value of the  Company's
Properties, cash flows and earnings. The Company believes that this objective is
best  accomplished by providing  high-quality  services to owners of real estate
and to residents of apartment communities. The Company currently offers property
management,  ancillary and investment management services; it intends to improve
margins  from,  and  participation  in,  these  services  as well as to  explore
opportunities to offer additional services.

     Lexford  will  strive to  expand  its  business  by  soliciting  additional
fee-based contracts for providing  management and other services to multi-family
communities.  To that  end,  Lexford  plans  to  implement  an  advertising  and
promotional  campaign  to  increase  its  visibility,  and to devote  additional
resources to improve and expand its marketing efforts. Lexford's growth strategy
will  be  primarily  targeted  at  regions  in  which  it has  properties  under
management,  so that  economies of scale may be  realized.  Lexford will seek to
expand into regions where large  congregations  of apartments  are located,  and
where it believes there are opportunities for future growth.

     With  respect  to  apartment  communities  in  which  it has  an  ownership
interest, the Company intends to continue its conservative financial strategies,
including  funding  reserves  of at least  $300 per unit  annually  for  capital
improvements,  and seeking opportunities for refinancing when improved terms can
be achieved. The Company also intends to carefully evaluate return on investment
from  the  Properties  with  the  goal  of  disposing  of   under-performing  or
non-performing  Properties,  and  replacing  them with  assets from which it can
achieve higher investment returns.

     The Company also plans to invest in technology to enhance the  capabilities
of both Lexford and the  Investment  Management  division.  In 1996, the Company
invested in new hardware and software at its corporate  headquarters  to improve
processing  and  reporting  capabilities.  The Company  plans to  continue  this
investment by migrating computer technology to the Properties through the second
quarter of 1998 (SEE ITEM 7: "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" -- LIQUIDITY AND CAPITAL RESOURCES).

ITEM 2.  PROPERTIES
         ----------

     The Company  maintains  ownership  interests in the Wholly Owned Properties
and  the  Syndicated   Partnerships   (SEE  ITEM  1.   "BUSINESS"  -  INVESTMENT
MANAGEMENT).

     The Company's  corporate  headquarters are located in a 52,168 square-foot,
single-story  office building at 6954 Americana  Parkway,  in suburban Columbus,
Ohio.  The  Company  entered  into a  lease  for  the  building  with  Americana
Investment Company (an entity affiliated with an outside director of the Company
- SEE PART II ITEM 13: "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS") in late
1992.  Management  believes that the lease terms are competitive with commercial
lease rates in the suburban Columbus market.

     Lexford's corporate  headquarters are located in a 15,185 square-foot suite
of offices located in an office park at 8615 Freeport Parkway in suburban


                                       16

<PAGE>
                                       17


Dallas,  Texas.  Lexford  entered into a lease for the office suite in 1993.  In
addition to the  corporate  headquarters,  Lexford  leases  regional  operations
offices  in  Orlando,  Florida;  Seattle,  Washington;  and in  Houston  and San
Antonio, Texas.

ITEM 3.  LEGAL PROCEEDINGS
         -----------------

     The Company  reached a settlement in THE ESTATE OF HAROLD MURPHY,  ET AL V.
CARDINAL  REALTY  SERVICES,  INC. ET AL.,  pending in the United States District
Court for the  Southern  District of  Indiana.  The  settlement  resulted in the
judgment  entered  against the Company  being  vacated,  the  withdrawal  of the
pending action and a release of all claims against the Company in  consideration
of the Company's payment of $370,000 to the Plaintiffs. Pursuant to the terms of
the proposed settlement, there was no admission of liability by the Company. The
$370,000 settlement amount was paid in the second quarter of 1996.

     The Company reached a settlement in CARDINAL  INDUSTRIES,  INC. V. NATIONAL
UNION FIRE  INSURANCE  COMPANY OF PITTSBURGH,  PA ET AL.,  pending in the United
States District Court for the Southern District of Ohio,  Eastern Division.  The
settlement provided for a gross payment of $7.5 million to the Company,  for the
benefit of the affected Properties,  and certain other parties to be paid in two
installments.  The first  installment  of $4.0  million was  received in October
1996,  with the  balance  received  in  November  1996.  A large  portion of the
settlement payments was paid to the Company's attorneys in the case (who handled
the case on a contingency fee basis). The settlement provides for the release of
all claims  between the  Company  and  National  Union Fire  Insurance  Company.
Pursuant to the terms of the settlement,  there was no admission of liability by
either party.  The settlement  funds are being held by the Company,  pending the
finalization of an allocation of proceeds to the affected Properties.

     On March 7, 1996,  the Company filed suit against  Hartford Fire  Insurance
Company ("Hartford") in the United States District Court for the Middle District
of Florida, in a case captioned CARDINAL REALTY SERVICES,  INC. V. HARTFORD FIRE
INSURANCE  CO., Case No.  96-458-CIV  T-24A.  In that case, the Company seeks to
recover from Hartford, pursuant to an excess property insurance policy issued to
the  Company  by  Hartford,  for  termite-related  losses at  approximately  150
Properties in which the Company holds an interest.  The termite  related  losses
are the same as those  which  formed the  object  matter of the  NATIONAL  UNION
litigation. Hartford's insurance policy provides coverage for such losses to the
extent  they  exceed $25  million.  The  parties  are  presently  engaged in the
discovery process, and a trial has been scheduled for September 1997.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
           ---------------------------------------------------
     None


                                       17

<PAGE>
                                       18


                                     PART II

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

     Effective March 9, 1995, the Company  commenced trading of its Common Stock
on the Nasdaq  National  Market tier of the Nasdaq Stock Market under the symbol
"CRSI".  Prior to this  date,  the  Company's  Common  Stock  traded  on the OTC
Bulletin Board as "CNRV". On December 31, 1996, there were  approximately  1,431
registered holders of the Company's Common Stock. The following table sets forth
the high and low bid prices of the Common Stock for the periods indicated. These
over-the-counter  market quotations reflect inter-dealer prices,  without retail
mark-up,  mark-down  or  commission  and may not  necessarily  represent  actual
transactions.

                                    1996                    1995
                           ----------------------- ---------------------
                               High        Low         High       Low
                           ---------- ------------ ----------- ---------

First Quarter...........     $18.75      $17.50       $13.75    $10.50

Second Quarter..........      21.75       17.50        18.00     12.75

Third Quarter...........      20.75       18.50        18.50     16.88

Fourth Quarter..........      21.25       19.38        19.75     16.00


                        The Company's transfer agent is:

                          The Huntington National Bank
                                Trust Department
                              The Huntington Center
                               Attention: HC 1112
                              Columbus, Ohio 43287

     The  Company  has  paid no  dividends  since it  became a public  reporting
company.  Until August 1995, the Company's  ability to pay dividends was subject
to a prohibition  contained in its financing  arrangements  with The  Huntington
National Bank. The terms of the Company's  current credit  facility  provided by
The Provident Bank no longer  restrict  dividends.  (SEE ITEM 7 -  "MANAGEMENT'S
DISCUSSION    AND   ANALYSIS   OF   FINANCIAL    CONDITION    AND   RESULTS   OF
OPERATIONS"--"Liquidity and Capital Resources").

     In  connection  with its  acquisition  of Lexford  on August 1,  1996,  the
Company issued 700,000 shares of its Common Stock to the former  shareholders of
Lexford Properties, Inc. as merger consideration for the cancellation of all the
issued and  outstanding  shares of capital  stock of  Lexford  Properties,  Inc.
450,000  shares of Common  Stock  issued to the former  shareholders  of Lexford
Properties,  Inc. are subject to  forfeiture,  in whole or in part, in the event
that Lexford fails to produce net income from property management  operations in
sufficient amounts in the 1997, 1998 or 1999 fiscal years.

     During 1996,  the Company  issued 30,000 shares of restricted  Common Stock
and  8,750  shares of  Common  Stock  underlying  matching  stock  grants to The
Provident Bank, as trustee (the "Trustee") of the Cardinal Realty Services, Inc.
Executive Deferred Compensation Rabbi Trust for the benefit of certain executive
officers of the Company.  (SEE PART III, ITEM 11 "EXECUTIVE  COMPENSATION  - (F)
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT").

                                       18

<PAGE>
                                       19


     All of the  shares of Common  Stock  issued to the former  shareholders  of
Lexford  Properties,  Inc.,  as  well as to the  trustee,  were  issued  without
registration under the Securities Act of 1933, as amended (the "Act") based upon
the  Company's  claim (on  account  of the  private  and  limited  nature of the
issuances) to the exemption from registration provided under Section 4(2) of the
Act.

ITEM 6:  SELECTED FINANCIAL DATA
         -----------------------

     The information  below should be read in conjunction  with the CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO AND ITEM 7 - "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS".

     The net  income  previously  reported  in the 1994  and  1993  Consolidated
Statements  of Income has been  adjusted  in order to comply with  Statement  of
Position  90-7   "Reorganization   Under  the  Bankruptcy  Code"  pertaining  to
accounting  for deferred  income  taxes.  The  restatement  involved a change in
accounting  for  benefits   realized  from  the  Company's  net  operating  loss
carryforwards  generated  prior to its  emergence  from  bankruptcy  proceedings
("Pre-Reorganization  NOLs").  The financial  statements  for the years 1994 and
1993  have been  adjusted  to  reflect  the  benefits  from net  operating  loss
carryforwards as a credit to Additional Paid-in Capital,  rather than reflecting
such  benefits  as a  reduction  in income tax expense  reported  for  financial
statement  purposes.  In the future, such benefits will be applied to Additional
Paid-in  Capital until the  Pre-Reorganization  NOLs and other tax benefits have
been fully utilized.  The adjustment does not affect the Company's cash flows or
total  shareholders'  equity  (SEE  NOTES 1 AND 10 TO NOTES TO THE  CONSOLIDATED
FINANCIAL STATEMENTS).

     The  unaudited  tables set forth  below  provide a variety  of  statistical
information  about the  Company.  The  Company  believes  that  earnings  before
interest,  income taxes,  depreciation,  amortization  and  extraordinary  items
("EBITDA"),  EBITDA  adjusted for non recurring items  ("Recurring  EBITDA") and
Recurring  EBITDA less  interest on mortgage  loans  secured by the Wholly Owned
Properties ("Adjusted EBITDA") are significant indicators of the strength of its
results.  EBITDA is a measure of a company's ability to generate cash to service
its obligations,  including debt service obligations, and to finance capital and
other  expenditures,  including  expenditures for acquisitions.  EBITDA does not
represent cash flow as defined by generally accepted  accounting  principles and
does not necessarily  represent  amounts of cash available to fund the Company's
cash requirements.

                                       19

<PAGE>
                                       20


<TABLE>
<CAPTION>

                                         Year Ended          Year Ended          Year Ended          Year Ended
                                        December 31,        December 31,        December 31,        December 31,
                                           1996(1)              1995                1994                1993
                                      ----------------    ----------------   ------------------   ----------------
<S>                                   <C>                 <C>                <C>                  <C>
Operating Revenue.....................$     65,300,990    $     23,676,429   $       22,600,025   $     16,064,076
                                      ================    ================   ==================   ================
Income before Extraordinary Item......$      5,370,230    $      4,292,713   $        3,943,943   $        229,049

Extraordinary Item....................$     (1,614,356)   $        804,022   $        3,155,901   $      1,050,086
                                      ----------------    ----------------   ------------------   ----------------
Net Income ...........................$      3,755,874    $      5,096,735   $        7,099,844   $      1,279,135
                                      ================    ================   ==================   ================
EBITDA(2).............................$     29,530,914    $     24,599,501   $       24,752,196   $     19,887,705
                                      ================    ================   ==================   ================
Adjusted EBITDA(2)....................$     11,990,697    $      8,212,539   $        6,850,341   $      4,189,385
                                      ================    ================   ==================   ================

Income Per Common Share:

  Income before Extraordinary Item....           $1.37               $1.11                $1.02              $0.06
  Extraordinary Item..................           (0.41)               0.21                 0.82               0.27
                                      ----------------    ----------------   ------------------   ----------------
  Net Income..........................           $0.96               $1.32                $1.84              $0.33
                                      ================    ================   ==================   ================

Balance Sheet Data:  (At period end)

Total Assets..........................$    245,367,779    $    239,398,900   $      236,729,107   $    243,969,706
Long-Term Debt........................     163,319,285         170,111,869          168,159,368        179,816,494
Shareholders' Equity..................      62,509,178          51,246,094           43,248,143         31,684,299
<FN>

     (1)  The Company,  during 1995 and prior years, classified the Wholly Owned
          Properties as Held for Sale.  While the Wholly Owned  Properties  were
          Held for  Sale,  the  results  of  operations  from the  Wholly  Owned
          Properties  were credited to the carrying value of the real estate and
          no  revenues,   expenses  or   depreciation   were   included  in  the
          consolidated  statements of income.  Commencing  in 1996,  the Company
          changed the  classification  of the Wholly Owned  Properties and fully
          consolidated  the  operations  of the Wholly Owned  Properties  in the
          Company's  Statement  of  Income  (SEE  NOTES 1 AND 2 TO  NOTES TO THE
          CONSOLIDATED FINANCIAL STATEMENTS).

     (2)  Adjusted  EBITDA for the years ended December 31, 1995,  1994 and 1993
          includes  the funds from  operations  of the Wholly  Owned  Properties
          during the period  Held for Sale (SEE ITEM 1 -  "BUSINESS - FUNDS FROM
          OPERATIONS").
</FN>
</TABLE>


                                       20

<PAGE>
                                       21


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

                                  INTRODUCTION

     The following  discussion  should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto (SEE ITEM 1 - "BUSINESS" AND
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS).

     The financial  statements for the years ended December 31, 1995 and 1994 do
not include the results of operations (revenues or expenses) attributable to the
Wholly Owned  Properties  previously  classified as "Real Estate Assets Held for
Sale".  Commencing  January  1,  1996  the  Results  of  Operations,   including
depreciation  of  the  Wholly  Owned  Properties,  have  been  included  in  the
Consolidated  Statements of Income.  Therefore,  the  Consolidated  Statement of
Income  for  the  year  ended  December  31,  1996  is  not  comparable  to  the
Consolidated  Statements  of Income for the years  ended  December  31, 1995 and
1994.

     In order to facilitate the comparison of operations in 1996 to prior years,
the following "pro forma" Income Statements (the "Pro Forma Income  Statements")
has been  prepared  for the year ended  December 31, 1995 as if the Wholly Owned
Properties were previously consolidated. All intercompany transactions have been
eliminated.  Depreciation  expense  for the  Wholly  Owned  Properties  has been
estimated  for 1995 (SEE  NOTES 1 AND 2 TO NOTES TO THE  CONSOLIDATED  FINANCIAL
STATEMENTS).

     The  following  discussion  of  Results  of  Operations  for the year ended
December  31,  1996 as  compared  to 1995 is  based  upon the Pro  Forma  Income
Statement.
<TABLE>
<CAPTION>
                                                                           Unaudited
                                                                          Pro Forma
                                                            1996             1995
                                                         -------------- -------------
Revenues:
<S>                                                       <C>            <C>
 Rental and Other Operating Real Estate Revenues......... $41,276,684    $39,375,333
 Fee Based...............................................  13,651,042     11,803,329
 Interest, Principally from Syndicated Partnerships......   8,897,233      4,099,329
 Income from Disposal of Non-Core Assets-Net.............     962,761      3,408,379
 Other...................................................     513,270        737,571
                                                         -------------  -------------
                                                           65,300,990     59,423,941
                                                         -------------  -------------
Expenses:
 Rental Operating........................................  21,129,433     21,977,790
 Fee Based...............................................   9,366,777      6,910,228
 Administration..........................................   5,030,967      4,399,349
 Restructure Costs/Tender Offer Costs ...................     242,899      1,537,073
 Interest - Wholly Owned Property Debt...................  14,131,780     13,549,258
 Interest - Corporate Debt...............................   1,098,333      1,522,087
 Depreciation and Amortization...........................   5,514,571      5,261,181
                                                         -------------  -------------
                                                           56,514,760     55,156,966
                                                         -------------  -------------
Income Before Income Taxes and Extraordinary Item........   8,786,230      4,266,975
Provision for Income Taxes ..............................   3,416,000      1,664,000
                                                         -------------  -------------
Income before Extraordinary Item.........................   5,370,230      2,602,975

Extraordinary Item, net of Income Taxes .................  (1,614,356)       804,022
                                                         -------------  -------------
Net Income...............................................  $3,755,874     $3,406,997
                                                         =============  =============
</TABLE>

                                       21

<PAGE>
                                       22


<TABLE>
<CAPTION>

                                                                           Unaudited
                                                                          Pro Forma
                                                            1996             1995
                                                         -------------- -------------


<S>                                                        <C>           <C>
  EBITDA (Unaudited).....................................  $29,530,914   $24,599,501
                                                         ============== ==============
  Adjusted EBITDA (Recurring EBITDA reduced by
     interest on Wholly Owned Property Debt) (Unaudited).  $11,990,697    $8,212,539
                                                         ============== ==============
Net Income per Common Share:
  Income Before Extraordinary Item.......................        $1.37         $0.67
  Extraordinary Item.....................................        (0.41)         0.21
                                                         -------------- --------------
  Net Income.............................................        $0.96         $0.88
                                                         ============== ==============
</TABLE>

                              RESULTS OF OPERATIONS

Comparison  of Results of Operations  for the Years ended  December 31, 1996 and
Pro forma 1995

     Rental and Other Operating Real Estate Revenues are derived from the Wholly
Owned  Properties  which are apartment  communities  that comprise the Company's
Operating Real Estate Assets.  Revenues increased $1.9 million, or 4.8%, in 1996
as compared to 1995.  The increase was  primarily due to the increase in average
rent collected from $366 in 1995 to $387 in 1996. The average economic occupancy
of the 108 Wholly  Owned  Properties  in  operation at all times during 1996 and
1995 was 92.5% in 1996 compared to 91.8% in 1995.  Economic occupancy is defined
as the amount of revenue collected from residents as a percentage of the revenue
a property could generate if full rents for all units were collected.

     Fee Based  Revenues  are  comprised  of Lexford and  Investment  Management
revenues  generated  from services  provided to Properties  and residents at the
Properties. Property Management Services revenues principally relate to property
management  and  accounting  services  provided  to  the  Properties.  Ancillary
Services  revenues  consist  principally  of revenue  generated from the sale of
replacement and maintenance material to the Properties.  In addition,  Ancillary
Services  revenues include revenue  generated from furniture leasing and renters
insurance services provided to residents. Investment Management revenues consist
of partnership administration fees as well as loan refinancing and restructuring
fees.

     The following are the major  components of Lexford  Revenues and Investment
Management Revenues (unaudited) for 1996 as compared to pro forma 1995:

                                       22
<PAGE>
                                       23


<TABLE>
<CAPTION>

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

<S>                                                                          <C>              <C>
Lexford:

  Property Management Services:
    Property Management and Accounting Services -- Controlled ............   $ 7,782,722      $7,414,992
    Property Management and Accounting Services -- Third Party ...........     2,135,429               0
    Other Management Service Fee Revenues. ...............................     1,399,742       1,497,530

  Ancillary Services:
    Furniture Leasing and Renters Insurance ..............................       403,704         290,937
    Replacement and Maintenance Material Revenues-net ....................        45,676         532,315
                                                                          ---------------  ---------------
Total Management Services Revenue.........................................    11,767,273       9,735,774
                                                                          ---------------  ---------------

Investment Management:

    Partnership Administration & Other fees ..............................     1,131,775       1,181,540
    Loan Refinancing and Restructuring Fees ..............................       751,994         886,015
                                                                          ---------------  ---------------
Total Investment Management Revenues .....................................     1,883,769       2,067,555
                                                                          ---------------  ---------------
Total Fee Based Revenues..................................................   $13,651,042     $11,803,329
                                                                          ===============  ===============
</TABLE>

     Fee Based Revenues increased  approximately $1.8 million, or 15.6%, in 1996
as compared to 1995.  The  increase  was  primarily  due to the  acquisition  of
Lexford Properties,  a third party property management company,  which generated
$2.1 million in Fee Revenue since its  acquisition on August 1, 1996 (SEE NOTE 1
TO NOTES TO  CONSOLIDATED  FINANCIAL  STATEMENTS - "LEXFORD  ACQUISITION").  The
increase in property management revenues was offset by an approximately $487,000
decrease  in   replacement   and   maintenance   material  sales  to  Syndicated
Partnerships. The decline in replacement and maintenance material sales occurred
as the Company  transitioned from a warehouse  operation to a coordinated buying
group for replacement and  maintenance  material.  Revenue in the future will be
derived  from a  portion  of the  volume  discounts  generated  by the  property
purchases.

     Fee Based  Revenues  are  dependent  to a certain  extent on the  financial
condition of the  Properties  owned and managed by the Company and the Company's
ability to retain its ownership  interests.  Loss of these interests,  due to an
increase in interest  rates or an inability to refinance  matured  loans,  could
have a material adverse impact on Fee Based Revenues and the financial condition
of  the  Company.  Although  there  can be no  assurance,  management  does  not
currently foresee any material loss of ownership  interests in the Properties in
1997 that would adversely affect the Company's Fee Based Revenues.  In addition,
Lexford  derives  its  third  party  property  management  revenues  from 30 day
cancelable  contracts.  Therefore,  the amount of revenue  generated  from third
party management contracts may be subject to significant fluctuation from period
to  period.  Lexford,  for  example,  in  early  1997  lost  the  management  of
approximately  3,000 units in a portfolio  involved  in  bankruptcy  proceedings
which resulted in a change of control of the ownership of these units.

     Fee Based Revenues are also directly  related to the occupancy and level of
rents collected at the properties managed by the Company. For the past two years
the Company has maintained  occupancy,  on average,  above 90% at the properties
managed by the Company.  The Company's  ability to obtain  rental  increases and
maintain  occupancy are highly  dependent upon market  conditions,  the physical
condition of the  properties  and the  competitive  environments  affecting such
properties.

     Interest  Income  increased  $4.8 million or 117% in 1996 compared to 1995.
Interest Income is primarily  derived from the interest  collected or accrued on
the  recorded  value  of  interests  in,  and   receivables   from,   Syndicated
Partnerships.  (SEE NOTE 3 TO NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS).
Approximately  $1.9  million  of the  increase  was  generated  from the  excess
proceeds derived from refinancing of Syndicated Partnerships (SEE  LIQUIDITY AND


                                       23

<PAGE>
                                       24


CAPITAL  RESOURCES -- FINANCING AND  DEBT  RESTRUCTURING  OF  THE   PROPERTIES).
Although the interest  income  generated from excess  refinance  proceeds is not
recurring,  Interest Income may be favorably impacted in the future by the lower
debt service as a result of the refinancing  transactions completed in 1996. The
balance of the  increase  was a result of  improved  cash flow due to  increased
operating performance of the Syndicated  Partnerships (a same unit 7.9% increase
in net  operating  income in 1996 as  compared  to 1995) and lower debt  service
requirements on mortgage debt  refinanced in prior years.  Although there can be
no assurance,  Interest Income should  continue to be favorably  impacted in the
future from the improved cash flow on the Syndicated Partnerships generated from
lower debt service requirements and increases in operating income.

     Income from  Disposal of Non-Core  Assets -- Net,  decreased  approximately
$2.4  million in 1996 as  compared  to 1995.  This  income is  derived  from the
proceeds of the sale of  Non-Core  Assets and the  recovery  of  investor  notes
receivables in excess of the aggregate  recorded  value of these assets.  During
1994 the Company  recovered the entire  recorded value of these assets and, as a
result, began recognizing the proceeds,  net of collection and closing costs, as
income. Additional income from the disposal of Non-Core Assets may be recognized
in the future  although it is not a significant  long term source of revenue for
the Company.

     Other Income decreased  approximately $224,000 in 1996 as compared to 1995.
The  decrease was  principally  due to income in 1995 from the recovery of trade
accounts receivable which had previously been written off.

     Rental Operating Expenses  decreased  approximately  $848,000,  or 3.8%, in
1996 as compared to 1995.  The decrease was primarily due to the  implementation
in 1996 of a  capitalization  program which  resulted in the  capitalization  of
major building  exterior  improvements.  Previously all items were expensed.  In
1996  approximately  $700,000 of improvements  were  capitalized that would have
been expensed in prior years. In addition,  major maintenance  expense decreased
approximately  $487,000  in 1996 as  compared  to  1995.  The  decrease  in 1996
primarily related to major maintenance on Wholly Owned Properties  refinanced in
1995  and  1994.  Reserves  for  major  maintenance   established  in  the  1996
refinancing   program  will  be  expended  in  1997  and  reverse  the  decrease
experienced in 1996.

     Fee Based Expenses increased approximately $2.5 million in 1996 as compared
to  1995.  Approximately  $2.0  million  of  the  increase  was  related  to the
third-party management operation of Lexford, which was acquired effective August
1, 1996.

     Administration  Expenses increased  approximately $632,000 in 1996 compared
to 1995. The increase was primarily due to bonuses payable to employees pursuant
to the Company's 1996 Incentive Compensation Plan. The incentive compensation is
based upon certain increases in Company  profitability.  The percentage increase
used as a measurement for the majority of the incentive compensation is computed
net of the cost of such plan.  The  increase in incentive  compensation  in 1996
compared to 1995 is reflective  of the  significant  increases in  profitability
achieved in 1996 compared to 1995.

     Restructuring  Costs in 1996 of  $242,899  related to  realignments  to the
Company's   organization   to  eliminate   overlapping   responsibilities.   The
restructuring  in 1996 was a follow up to the  restructuring  costs  incurred in
1995 of $1.5  million.  The  restructuring  costs  are  primarily  comprised  of
severance and separation costs.  Management  anticipates that the restructurings
completed  in 1995 and 1996  should  result in annual  savings in excess of $1.0
million,  primarily  related to reductions in payroll and related fringe benefit
costs.

     Interest  Expense on  mortgages on the Wholly  Owned  Properties  increased
approximately  $582,000 in 1996 as compared  to 1995.  The  increase in interest
expense  was due to the  refinancing  transactions  completed  in 1996 and 1995.
Although the overall  contractual  interest rates  decreased,  interest  expense
increased,  due to the impact of "Fresh Start" reporting with effective interest
rates applied to the Carrying  Value of the mortgages.  Interest  expense on the
Company's  corporate lines of credit  decreased  approximately  $424,000 in 1996
compared  to 1995.  The  decrease  is due to lower  outstanding  balances on the
lines,  and the  refinancing of the Company's  corporate  credit lines in August
1995 at a more favorable interest rates (SEE "LIQUIDITY AND CAPITAL RESOURCES").

                                       24
<PAGE>
                                       25


     Depreciation and Amortization Expense increased  approximately  $253,000 in
1996 as compared to 1995. The increase is primarily due to amortization  expense
related to loan origination costs capitalized in connection with the refinancing
of corporate  debt and mortgages on the Wholly Owned  Properties,  combined with
amortization  of management  contracts and goodwill  associated with the Lexford
acquisition.

     Income before  Extraordinary  Item  increased  from $2.6 million in 1995 to
$5.4 million in 1996. The Extraordinary charge of $1.6 million, net of taxes was
a result of mortgage debt  refinancing on certain Wholly Owned  Properties  (SEE
NOTE 6 TO NOTES TO THE  CONSOLIDATED  FINANCIAL  STATEMENTS  AND "LIQUIDITY  AND
CAPITAL RESOURCES"--FINANCING AND DEBT  RESTRUCTURING  OF THE  PROPERTIES).  The
extraordinary  gain of $804,000  recognized in 1995 was due to debt  forgiveness
generated  from the debt  restructuring  and  refinancing of mortgages on Wholly
Owned Properties. Net income increased from $3.4 million in 1995 to $3.8 million
in 1996.

     The financial  position of the Company may be impacted by the  availability
to the Company of certain tax benefits, such as net operating loss carryforwards
and other tax  attributes.  To the extent all or a portion of the  Company's tax
attributes  are  unavailable  to  offset  taxable  income,  the cash flow of the
Company could be materially  impacted (SEE NOTE 10 TO NOTES TO THE  CONSOLIDATED
FINANCIAL STATEMENTS).

Comparison  of Results of Operations  for the Years ended  December 31, 1995 and
1994

     Fee Based  Revenues are  comprised of  Management  Services and  Investment
Management revenues generated from services provided to Properties and residents
of the  apartment  communities.  The  following  are  the  major  components  of
Management Services Revenues and Investment Management Revenues for 1995 as
compared to 1994:

<TABLE>
<CAPTION>
                                                                        1995                1994
                                                                 --------------------  ------------------

<S>                                                                  <C>                 <C>
Management Services:
  Property Management Services:
     Property Management and Accounting Services -- Controlled...    $    9,844,330      $    9,564,710
     Other Management Service fee revenues.......................         1,748,079           1,679,888
  Ancillary Services:
     Furniture Leasing and Renters Insurance.....................           296,203             255,942
     Replacement and Maintenance Material revenues--net..........           740,279             577,074
                                                                 --------------------  ------------------
Total Management Services Revenues...............................        12,628,891          12,077,614
                                                                 --------------------  ------------------

Investment Management:

  Partnership Administration & Other fees........................         1,573,693           1,686,877
  Loan Refinancing and Restructuring Fees........................           966,398           1,514,027
                                                                 --------------------  ------------------
Total Investment Management Revenues.............................         2,540,091           3,200,904
                                                                 --------------------  ------------------
Total Fee Based Revenues.........................................    $   15,168,982      $   15,278,518
                                                                 ====================  ==================
</TABLE>

     Fee Based Revenues decreased  approximately $110,000 in 1995 as compared to
1994,  due to a decrease in  Investment  Management  revenues  of  approximately
$661,000,  which  was  partially  offset by  increases  in  Property  Management
Services and Ancillary Services Revenues of approximately $348,000 and $203,000,
respectively. The decrease in Investment Management revenues was principally due
to a decrease of approximately  $548,000 in loan  refinancing and  restructuring
fees in 1995 as compared to 1994. Loan  refinancing and  restructuring  fees are
subject to significant  fluctuation  from period to period based upon the volume
of loans maturing in a given year, and a property owner's ability to refinance

                                       25

<PAGE>
                                       26


based on the current interest rate  environment.  The balance of the decrease in
Investment  Management  revenues  was due to fees  earned  in  1994  related  to
bankruptcy services provided to properties in Chapter 11 bankruptcy proceedings.
The increase in Property  Management Services revenues was due to an increase in
management and accounting services fees of approximately  $280,000. The increase
was  primarily  due to an increase  in the number of  Properties  managed  after
management of six properties was returned to the Company due to the cancellation
of a third party management contract in the third quarter of 1995. The aggregate
increase  in  Ancillary   Services   revenues  of  approximately   $203,000  was
principally due to an increase in replacement and maintenance  material sales to
properties.  The increased sales were  attributable to the deferred  maintenance
escrow funds established with the refinancing and restructuring of mortgage debt
on a significant number of the Properties in 1994 and 1995.

     Interest  Income  increased  $1.7  million  in 1995 as  compared  to  1994.
Interest Income is primarily  derived from the interest  collected or accrued on
the  recorded  value  of  interests  in,  and   receivables   from,   Syndicated
Partnerships.  (SEE NOTE 3 TO NOTES TO THE CONSOLIDATED  FINANCIAL  STATEMENTS).
The  increase  in  Interest  Income  was due to  increased  cash  flow  from the
Syndicated Partnerships primarily as a result of lower debt service requirements
on refinanced or restructured mortgage debt.

     Income  from  Disposal of Non-Core  Assets -- Net  increased  approximately
$219,000 in 1995 as compared to 1994.  This income is derived  from the proceeds
of the sale of Non-Core Assets and the recovery of investor notes  receivable in
excess of the aggregate recorded value of these assets.  During 1994 the Company
recovered  the entire  recorded  value of these  assets and, as a result,  began
recognizing the proceeds, net of collection and closing costs, as income.

     Other Income decreased  approximately $692,000 in 1995 as compared to 1994.
The decrease was  principally  due to the settlement of a pending claim in 1994.
The settlement  resulted in a release of an accrued  liability of  approximately
$726,000 in exchange for the Company's dismissal of a preference action.

     Fee Based Expenses decreased  approximately $336,000 in 1995 as compared to
1994.  The  decrease in Fee Based  Expenses  reflects the staff  reductions  and
realignments implemented by the Company in 1993 and 1994.

     Administration   Expenses  increased  approximately  $406,000  in  1995  as
compared  to  1994.  The  increase  was  primarily  due  to the  recording  of a
litigation  reserve in the fourth quarter of 1995. The reserves were established
for ongoing and  potential  legal and  litigation  costs  involving the Company.
Administration  Expenses  also  increased  in 1995 due to  additional  corporate
governance costs and expenses  associated with the registration of the Company's
Common Stock on the Nasdaq National Market tier of the Nasdaq Stock Market.

     Restructuring  Costs  of $1.5  million  were  incurred  in 1995 as a charge
related  to the  corporate  restructuring  implemented  at the end of 1995 which
aligned the Company's  organization  structure with current and future  business
goals.  The  $1.5  million  charge  is  primarily  comprised  of  severance  and
separation costs.

     Interest Expense  decreased  approximately  $121,000 in 1995 as compared to
1994.  The decrease was due to a reduction  in the average debt  outstanding  of
approximately $2.0 million in 1995 versus 1994. In addition, in August 1995, the
Company  obtained  more  favorable  financing  terms  on its  corporate  debt by
negotiating a variable interest rate with a new lender,  The Provident Bank (the
"Bank"),  at the Bank's  prime rate of  interest  minus  1.0% as  compared  to a
previous variable interest rate at the Huntington  National Bank's prime rate of
interest plus 0.5%. These favorable factors were partially offset by an increase
in the prime  interest rate charged by most lenders in 1995.  The prime interest
rate  charged  by the  Company's  lender  ranged  from  6.0%  to 8.5% in 1994 as
compared  to a  range  of  8.5% to 9.0%  in  1995  (SEE  LIQUIDITY  AND  CAPITAL
RESOURCES).

     Depreciation Expense increased approximately $90,000 due to depreciation on
capital improvements undertaken at the end of 1994 and throughout 1995.

                                       26

<PAGE>
                                       27


     Income before  Extraordinary  Item. As a result of the  approximately  $1.1
million aggregate increase in revenues less an increase in expenses and taxes of
approximately  $728,000,  Income  before  Extraordinary  Item improved from $3.9
million in 1994 to $4.3 million in 1995.  The  extraordinary  gain,  due to debt
forgiveness  generated  from the debt  restructuring  and  refinancing on Wholly
Owned  Properties,  was $804,000 in 1995 versus $3.2 million in 1994. Net Income
amounted to $5.1 million in 1995 as compared to $7.1 million in 1994.

Earnings before Interest, Taxes, Depreciation and Amortization

     The  Company  believes  that  earnings  before   interest,   income  taxes,
depreciation,  amortization and extraordinary items ("EBITDA"), Recurring EBITDA
and Adjusted EBITDA are  significant  indicators of the strength of its results.
EBITDA is a measure of a  Company's  ability  to  generate  cash to service  its
obligations, including debt service obligation, and to finance capital and other
expenditures, including expenditures for acquisitions. EBITDA does not represent
cash flow as defined by Generally Accepted  Accounting  Principles  ("GAAP") and
does not necessarily  represent  amounts of cash available to fund the Company's
cash  requirements.  Unaudited EBITDA and the computation of Adjusted EBITDA for
the years ended December 31, 1996, 1995 and 1994 is as follows: (000s omitted)

<TABLE>
<CAPTION>
                                                                                   Pro Forma
                                                                     -------------------------------
                                                         1996           1995            1994
                                                     --------------  ---------------  --------------
<S>                                                       <C>              <C>             <C>
EBITDA ..............................................     $29,531          $24,600         $24,752
------                                               --------------  ---------------  --------------

    Interest Income derived from refinance proceeds .      (1,936)               0               0
    Income from Disposal of Non Core Assets..........        (963)          (3,408)         (3,189)
    Other Income.....................................           0                0            (726)
    Loan Fees........................................        (752)            (966)         (1,514)
    Restructure/Tender Offer Costs...................         243            1,537             977
                                                     --------------  ---------------  --------------
Recurring EBITDA.....................................      26,123           21,763          20,300
----------------                                     --------------  ---------------  --------------
    Interest on Wholly Owned Properties..............     (14,132)         (13,549)        (13,450)
                                                     --------------  ---------------  --------------
Adjusted EBITDA......................................     $11,991        $   8,214      $    6,850
---------------                                      ==============  ===============  ==============
</TABLE>

     EBITDA increased $4.9 million, or 20.0%, and Adjusted EBITDA increased $3.8
million,  or 46.0%, in 1996 as compared to 1995. EBITDA decreased  $152,000,  or
1%;  however,  Adjusted  EBITDA  increased  $1.4 million,  or 19.9%,  in 1995 as
compared to 1994.

                         LIQUIDITY AND CAPITAL RESOURCES

     The following  discussion  regarding liquidity and capital resources should
be read in  conjunction  with the Company's  Consolidated  Balance  Sheets as of
December 31, 1996 and 1995 and the Consolidated Statements of Cash Flows for the
years ended December 31, 1996, 1995 and 1994.

     The  principal  sources of liquidity for the Company are cash flow from its
operations and borrowing  available  under the Company's  credit  facility.  The
Company's Net Cash Provided by Operating Activities has increased  significantly
over  the past  three  years,  from  approximately  $1.0  million  in  1994;  to
approximately $5.6 million in 1995; to approximately $12.7 million in 1996.

                                       27

<PAGE>
                                       28


Increases in Cash Received from  Interests in and  Receivables  from  Syndicated
Partnerships  has been a major  factor  in such  increase.  Cash  Received  from
Interests in and Receivables  from Syndicated  Partnerships,  which is primarily
comprised of payments of accrued interest,  increased 82.7%, or $4.1 million, in
1996 as  compared  to 1995 and 98.5%,  or $2.4  million,  in 1995 as compared to
1994. In 1996, 294 Syndicated  Partnerships  provided operating cash flow to the
Company, as compared to 220 in 1995 and 160 in 1994.

     The increase in Net Cash Provided by Operating  Activities  was also due to
$4.5  million of  operating  cash flow from the Wholly  Owned  Properties.  This
operating cash flow was formerly  treated as cash flow from  investing  activity
while the Wholly Owned  Properties  were  classified as "Real Estate Assets Held
for Sale" (SEE NOTES 1 AND 2 OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS).

     The other factors  impacting the Company's cash flow in 1996, 1995 and 1994
are discussed in "Results from Operations" and "Financing and Debt Restructuring
of the Properties".

     The Company  anticipates  that cash flow from its operations and borrowings
available  under the  Company's  credit  facility  will be  adequate to meet the
reasonably  foreseeable  capital  and  liquidity  needs of the  Company.  If the
Company is successful  in its future  growth plans,  it may be necessary to seek
additional  capital  sources  through other debt or equity  sources (SEE ITEM 1-
"BUSINESS").

     In August 1995, The Provident Bank (the "Bank") and the Company closed on a
new  credit  facility  that  retired  the  Company's  credit  facility  with The
Huntington  National  Bank  ("HNB")  as well as  provided  additional  borrowing
capacity with more flexible  terms.  The new credit  facility has lower interest
rates than the previous facility with HNB and also reduced or eliminated certain
restrictive covenants.

     The new  credit  facility  provides  credit  up to  $32.0  million,  and is
comprised  of: a $3.0  million  revolving  line of credit  for  operating  needs
subject to annual  review and  extension  by the Bank;  a $7.0  million  line of
credit for acquisitions and Property debt restructuring (the "Acquisition Line")
due in six years with interest only,  payable in the first year; a $22.0 million
reducing  balance  line of credit  (the  "Reducing  Line") due in six years with
interest,  only, payable during the first year (collectively,  the "Loans"). The
Reducing  Line was used to retire  HNB  credit  facility.  The  credit  facility
provided  that the interest  rate on the Loans would be the Bank's prime rate of
interest  minus 1%;  however,  in February  1996,  the Company  entered  into an
agreement  with the Bank to fix the  interest  rate on the  Acquisition  Line at
7.25% with  principal  amortization  beginning in March 1996 in 60 equal monthly
installments of principal and interest.  Excess corporate cash is applied to pay
down the  Reducing  Line and  reborrowed  as needed  (SEE NOTE 4 TO NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS).

     In July 1996, the Company received a commitment letter from the Bank for an
additional $10.0 million line of credit.  The new line will bear interest at the
Bank's prime rate of interest minus 1% with interest only during the first year,
and will be due in six years.  The Company did not draw on this line in 1996. On
December 31,  1996,  including  the $10.0  million  commitment,  the Company had
unrestricted credit availability of approximately $25.4 million.

     In addition,  all of the Company and the majority of Property bank accounts
are maintained at the Bank. The banking  relationship has increased cash flow at
the  Properties as a result of reduced  service  charges and increased  interest
income on the  Property  bank account  balances.  The Company may benefit from a
portion of the improved cash flow at the Properties.

     Presently, the Company plans to finance its working capital needs from cash
flow and through borrowing under its credit facility. Although it is anticipated
that the Company will have access to sufficient funds to meet its  requirements,
if   opportunities   develop  on  favorable   terms  for   additional   mortgage
restructuring, or acquisitions, the Company may seek alternative outside debt or
equity sources to fund such activities. In addition, any significant decrease or
increase in interest  rates will affect the  Company's  earnings  and cash flows
favorably or unfavorably, respectively.

                                       28

<PAGE>
                                       29


     In November 1995, the  shareholders of the Company  approved an increase in
the number of authorized shares of Common Stock from 4,500,000 to 13,500,000 and
also authorized  1,500,000  shares of "Blank Check" Preferred Stock. The Company
has no current commitments or arrangements which would require the issuance of a
material  number of  additional  shares.  The  Company  sought the  increase  in
authorized shares to provide an additional source of capital and provide greater
flexibility  in  structuring  potential   transactions,   such  as  the  Lexford
acquisition.

     The  Company's  capital  expenditures  for 1996  amounted to  approximately
$423,000 funded from cash flow and the Company's  credit  facility.  The Company
anticipates  that its capital  needs in the future can be satisfied  out of cash
flow or the Company's credit facility.  The Company currently  forecasts capital
expenditures  of  approximately  $400,000  in  1997,  principally  for  enhanced
computer system hardware and software. The Company is currently implementing new
software systems in order to obtain optimal efficiencies from technology.


     Improvement  and  Replacement  Expense for the Wholly Owned  Properties was
$2.8 million and capital expenditures amounted to approximately  $682,000 during
1996.  Improvement and Replacement Expense was funded from Wholly Owned Property
cash flow and maintenance escrow funds. The 1997 combined budget for improvement
and replacement expense and capital expenditures for the Wholly Owned Properties
is anticipated to be $4.5 million.

Lexford Acquisition

     Effective August 1, 1996, the Company acquired  Lexford,  a privately held,
third-party  multi-family management company headquartered in Dallas, Texas (SEE
NOTE 1 - BUSINESS  -  MANAGEMENT  SERVICES  OF NOTES TO  CONSOLIDATED  FINANCIAL
STATEMENTS).  The acquisition added approximately  22,000 apartment units to the
Company's  management  portfolio which totals 55,397 units at December 31, 1996.
Based on 1997 rankings by the National Multi Housing Council, Lexford has become
the nation's  ninth largest  manager of  multi-family  real estate.  The Company
intends to maintain  Lexford's  Dallas office as  headquarters  for its combined
property management business, which will be conducted under the Lexford name.

     To acquire  Lexford,  the Company  issued  700,000  shares of Common  Stock
valued,  for  acquisition  purposes,  at $20 per  share  representing  a maximum
purchase  price of $14 million.  Approximately  $9 million of the purchase price
(450,000  shares) is subject to forfeiture  in the event the Company's  combined
property management  operations do not achieve certain  profitability  criteria.
Lexford shareholders  received 250,000 shares of the Company's Common Stock free
of  contingencies.  The  remaining  450,000  contingent  shares will cease to be
subject  to  risk  of  forfeiture  if  and  when  specified   increases  in  the
profitability  of the  Company's  property  management  operations  are achieved
during the three full fiscal years  following  the merger (i.e. on or before the
end of the Company's 1999 fiscal year). If, during the specified period,  profit
from property  management  operations  increases  $1.8 million or more from 1995
levels,  the former  Lexford  shareholders  would own 150,000 of the  contingent
shares free of  contingencies,  and if the increase is $4.0 million or more from
1995 levels, the former Lexford shareholders would own the entire 700,000 shares
free  of  contingencies,   or  approximately   15.4%  of  the  Company's  shares
outstanding as of December 31, 1996.

                                       29

<PAGE>
                                       30


     Selected pro forma,  unaudited  financial  information  relating to Lexford
third party  management  operations  for the years ended  December  31, 1996 and
1995, is as follows:

                                           Lexford Pro Forma
                                        Year Ended December 31,
                           --------------------------------------------------

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

Fee Based Revenues.........         $5,588,563                  $4,685,735
                           ----------------------    ------------------------

Fee Based Expenses.........          4,781,933                   4,027,520
Interest Expense...........             61,507                      73,879
                           ----------------------    ------------------------
                                     4,843,440                   4,101,399
                           ----------------------    ------------------------
Income Before Taxes........            745,123                     584,336
                           ----------------------    ------------------------

EBITDA.....................           $806,630                    $658,215
                           =======================    ========================

     The acquisition of Lexford was accounted for as a purchase,  with a portion
of the  purchase  price,  ($1.6  million),  assigned to the value of the Lexford
management  contracts,  and the balance ($3.9 million)  assigned to the value of
the "Lexford"  name and goodwill (to the extent that the purchase  price exceeds
the fair market value of  Lexford's  net  tangible  assets).  The portion of the
purchase  subject to  forfeiture  (450,000  shares or $9.0  million) will not be
recorded until the shares become free of contingencies.

Financing and Debt Restructuring of the Properties

     In 1996 the Company refinanced first mortgages on 125 Properties  comprised
of 35 Wholly Owned  Properties  (SEE NOTE 6 OF NOTES TO  CONSOLIDATED  FINANCIAL
STATEMENTS) and 90 Syndicated  Partnerships.  The new mortgages on 98 Properties
were financed through PaineWebber Incorporated ("PaineWebber"); the mortgages on
21 Properties  were financed  through First Union Capital  Markets Group ("First
Union");  the  mortgages on five  Properties  were financed  through  Donaldson,
Lufkin & Jenrette Securities  Corporation;  and the mortgage on one Property was
financed with the Department of Housing and Urban Development  ("HUD").  The new
PaineWebber  mortgages on the 26 Wholly  Owned  Properties  have fixed  interest
rates of 8.8% with a 30 year principal  amortization and a 10 year maturity, and
the 72 Syndicated Partnerships have fixed interest rates from 8.8% to 9.0 % with
a 25 year principal  amortization schedule beginning in year four, and a 10 year
maturity.  The new First Union  mortgages have fixed interest rates ranging from
8.0% to 9.1% with a 25 year principal  amortization and a 10 year maturity.  The
other  mortgages  refinanced  in 1996 have  terms  similar  to the  First  Union
mortgages.   While  the  PaineWebber  mortgages  secured  by  the  Wholly  Owned
Properties are cross  collateralized  and cross  defaulted,  all of the mortgage
loans are without recourse to the Company.

     Aggregate  mortgage  debt,  and  related  interest  on the 35 Wholly  Owned
Properties  with a contractual  balance of $46.8 million and a carrying value of
$45.6  million  was  refinanced   with  mortgage  debt  having  a  carrying  and
contractual  balance of $47.8 million.  A fourth quarter  extraordinary non cash
charge of $1.6 million was triggered by the mortgage debt refinancing on certain
Wholly Owned  Properties.  The charge occurred  related to Properties that had a
carrying value (recorded in 1992 under the "Fresh Start"  accounting method upon
confirmation  of  the  bankruptcy  plan  of   reorganization  of  the  Company's
predecessor)  less than the unpaid  contractual  balance of the mortgage loan at
such time.  Generally  Accepted  Accounting  Principles  required the Company to
record the charge upon refinancing the prior mortgage as the previous lender was
repaid at the contractual balance. Additional extraordinary charges may occur in
the future on Wholly Owned Properties with  contractual  mortgage debt in excess
of the "Fresh Start"  carrying  value.  The required  annual debt service on the
Wholly Owned Properties  refinanced in 1996 decreased by approximately  $300,000

                                       30

<PAGE>
                                       31


with the Company investing $1.1 million, net of excess proceeds from refinancing
certain  Wholly  Owned  Properties.  In  addition,  $1.2  million  of cash  flow
secondary  mortgages ("B Notes") on six Wholly Owned  Properties were refinanced
in 1996.  The B Notes  previously  required  100% of the excess  cash flow to be
applied to the principal.  In 1996 the excess cash flow applied to these B Notes
amounted to approximately $98,000.

     Aggregate  mortgage  debt,  and  related  interest,  on the  90  Syndicated
Partnerships  with a balance of $95.2 million was refinanced  with mortgage debt
totaling $101.7 million. The Company advanced $5.6 million to certain Syndicated
Partnerships  to  facilitate  the  refinancing  (debited  to  Interests  in  and
Receivables from Syndicated Partnerships),  but received excess proceeds of $5.0
million from the  refinancing  of other  Syndicated  Partnerships.  The required
annual debt service on the Syndicated  Partnerships will decrease  approximately
$600,000  per year for the first three  years.  In  addition,  $3.9 million of B
Notes on 21 Syndicated  Partnerships  were  refinanced in 1996. In 1996,  excess
cash flow applied to these B Notes amounted to approximately $338,000.  Although
there can be no assurance, management anticipates that cash distributions to the
Company will increase from these  Syndicated  Partnerships due to the lower debt
service requirements and the elimination of the B Notes.  Increased cash flow at
the Syndicated Partnerships,  if it occurs, may enhance recovery of Interests in
and Receivables from Syndicated Partnerships,  including Interest Income, to the
Company in the future.

     During  1996  the  Company  granted  deeds  in lieu of  foreclosure  to the
mortgagees of three Wholly Owned  Properties.  No  significant  gain or loss was
recognized  on  these  transactions  because  the  assets  and the non  recourse
mortgages on each of these Wholly Owned  Properties  had been  recorded in equal
amounts.

     In June 1995, the Company purchased  mortgages amounting to $8.8 million in
the  aggregate,  related to one  Syndicated  Partnership  and four Wholly  Owned
Properties,  financed with a $7.8 million note payable. As of June 30, 1996, the
Company had obtained permanent  non-recourse mortgages on these five Properties.
The proceeds of the refinancing were applied to the Company's note payable.


                                       31

<PAGE>
                                       32


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
        -------------------------------------------
        Not applicable.

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

        None.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
         --------------------------------------------------

     (a) DIRECTORS

         The  Board of  Directors  ("Board")  of the  Company  consists  of nine
         members.  The Company's  Regulations  classify the directors into three
         classes,  with the directors in each class serving for three year terms
         and until their  successors  are  elected.  The terms of the  directors
         listed below will expire at the 1997,  1998 and 1999 annual meetings of
         the Company's shareholders, respectively, as indicated below.

            CLASS II DIRECTORS SERVING UNTIL THE 1997 ANNUAL MEETING

                        Has Served as            Principal Occupation
  Name          Age     Director Since         and Business Experience
------------  -------- ---------------- ---------------------------------------

Joseph E.        64         1992        A corporate  financial  consultant,  Mr.
Madigan                                 Madigan  also is a  Director  of  Cooker
                                        Restaurant Corp.,  Skyline Chili,  Inc.,
                                        VOCA  Corporation  and The  Frank  Gates
                                        Service Company.  Mr. Madigan  currently
                                        serves  as  Chairman  of  the  Company's
                                        Board of Directors  and served as Acting
                                        Chief  Executive  Officer of the Company
                                        from June 13,  1995 to December 1, 1995.
                                        Mr.    Madigan   was   Executive    Vice
                                        President,  Chief Financial  Officer and
                                        Director of Wendy's International,  Inc.
                                        from 1980 through 1987. He was Treasurer
                                        and  Vice  President  of  Borden,   Inc.
                                        between  1968 and 1980.  Mr.  Madigan is
                                        also  a  former   Trustee  of  Excelsior
                                        Income Shares, Inc., a closed-end income
                                        fund, and NCC Funds,  a  Cleveland-based
                                        closed-end investment fund.

George J.        61         1992        President     of  Allstate   Development
Neilan                                  Company,  and has been  involved in land
                                        acquisition   and   development  in  the
                                        Charleston,  West  Virginia  area  since
                                        1982. He also maintains an  intellectual
                                        property   legal   practice   in   South
                                        Charleston, West Virginia.


                                       32

<PAGE>
                                       33



                        Has Served as            Principal Occupation
  Name          Age     Director Since         and Business Experience
------------  -------- ---------------- ---------------------------------------

Glenn C.          39        1992        Senior Vice President of Brown, Gibbons,
Pollack                                 Lang  &  Company,  L.P.,  an  investment
                                        banking firm located in Cleveland, Ohio,
                                        since  January  6,  1997.   Mr.  Pollack
                                        served as  President  of Zeus  Advisors,
                                        Inc.,  a  consulting   firm  located  in
                                        Cleveland,  Ohio,  from November 1994 to
                                        December  1996.  From  September 1989 to
                                        October  1994,  Mr.  Pollack  was  Chief
                                        Executive Officer of A & W Foods,  Inc.,
                                        a regional food distributor. Mr. Pollack
                                        was a senior  manager  in the  Corporate
                                        Strategies Group at the Cleveland Office
                                        of Price  Waterhouse  in 1988 and  1989,
                                        and  served in a similar  capacity  from
                                        1984 to 1988 with Siedmann & Associates,
                                        a Cleveland-based consulting firm.

            CLASS III DIRECTORS SERVING UNTIL THE 1998 ANNUAL MEETING


                        Has Served as            Principal Occupation
  Name          Age     Director Since         and Business Experience
------------  -------- ---------------- ---------------------------------------

John B.         39          1995        President and Chief Executive Officer of
Bartling, Jr.                           the Company since December 1, 1995. From
                                        April  1993  until  December  1995,  Mr.
                                        Bartling  was a  Director  in  the  Real
                                        Estate   Products   Group  of  CS  First
                                        Boston,  an investment  banking firm. He
                                        was an executive officer of NHP, Inc., a
                                        company specializing in the development,
                                        ownership and  management of real estate
                                        assets, from June 1987 to April 1993. In
                                        addition,   Mr.   Bartling   served   as
                                        Executive  Vice  President  of NHP  Real
                                        Estate Corp.,  NHP Capital Corp. and NHP
                                        Servicing     Inc.,     wholly     owned
                                        subsidiaries  of NHP, Inc., from 1991 to
                                        April 1993.

George R.        69         1992        Chairman of the Board and past President
Oberer, Sr.                             and CEO of  Oberer  Development  Company
                                        since the early 1970s.  He was President
                                        of the predecessor  corporation,  Oberer
                                        Construction  Company,  since 1953.  Mr.
                                        Oberer is President  and CEO of Gold Key
                                        Realty   Company.   Oberer   Development
                                        Company and Gold Key Realty  Company are
                                        engaged in real estate  development  and
                                        management, respectively.


                                       33

<PAGE>
                                       34



                        Has Served as            Principal Occupation
  Name          Age     Director Since         and Business Experience
------------  -------- ---------------- ---------------------------------------

Robert J.        61         1992        A central  Ohio real  estate  developer,
Weiler                                  Mr.  Weiler  joined  The  Robert  Weiler
                                        Company in 1957 and has been Chairman of
                                        the  Board  since  1987.  A real  estate
                                        consultant  since 1970,  Mr. Weiler also
                                        is a licensed real estate  appraiser and
                                        a  member  of the  Appraisal  Institute,
                                        having  served as  President of the Ohio
                                        Chapter.   He  was  a  Director  of  the
                                        National   and   Ohio   Association   of
                                        Realtors and is a past  President of the
                                        Columbus Board of Realtors. Formerly, he
                                        was a Director of Main Federal,  Freedom
                                        Federal  and Buckeye  Federal  Savings &
                                        Loan.


             CLASS I DIRECTORS SERVING UNTIL THE 1999 ANNUAL MEETING

                        Has Served as            Principal Occupation
  Name          Age     Director Since         and Business Experience
------------  -------- ---------------- ---------------------------------------

Robert V.        49         1992        President    of   RVG    Management    &
Gothier, Sr.                            Development   Company,   a  manager  and
                                        developer of residential  and commercial
                                        properties,   since  1976  and   general
                                        partner  of  Rostan  Associates,  a real
                                        estate holding  company  associated with
                                        RVG Management and Development  Company,
                                        since 1986. Mr. Gothier also is a member
                                        of the Harrisburg  Board of Realtors and
                                        the    legislative    board    of    the
                                        Pennsylvania      Manufactured      Home
                                        Association.

H. Jeffrey       42         1992        Partner  in the  law  firm  of  Benesch,
Schwartz                                Friedlander,   Coplan  &   Aronoff   LLP
                                        ("BFCA")  since 1988 and Chairman of the
                                        firm's    Bankruptcy    and   Commercial
                                        Department.  Prior to joining BFCA,  Mr.
                                        Schwartz   was  a  law   clerk   to  the
                                        Honorable  William  J.  O'Neill,  United
                                        States Bankruptcy Court for the Northern
                                        District of Ohio,  from 1982 to 1983 and
                                        to the  Honorable  Joseph T.  Molitoris,
                                        United States  Bankruptcy  Court for the
                                        Northern  District  of Ohio from 1980 to
                                        1982.  Mr.  Schwartz is a faculty member
                                        of the Bankruptcy  Litigation Institute,
                                        has   written   numerous   articles   on
                                        bankruptcy   law   and  is  the   former
                                        Chairman  of the  Section of  Bankruptcy
                                        and  Commercial Law of the Cleveland Bar
                                        Association.


                                       34
<PAGE>
                                       35



                        Has Served as            Principal Occupation
  Name          Age     Director Since         and Business Experience
------------  -------- ---------------- ---------------------------------------

Gerald K.        60         1992        President   of  Craig   Capital  Co.,  a
Wedren                                  Washington,    D.C.-based   merger   and
                                        acquisition firm, since 1973. Mr. Wedren
                                        has been Managing Partner of Tavern Real
                                        Estate  Limited  Partnership  and Wedren
                                        Associates,    which   own   and   lease
                                        properties   in   the   Washington   and
                                        Baltimore  area,  since 1988. Mr. Wedren
                                        was President of G.E.W.,  Inc., an owner
                                        of fast food  restaurants,  from 1981 to
                                        1988;  was of counsel  with the Columbus
                                        law firm of Brownfield,  Bowen,  Bally &
                                        Sturtz from 1973 to 1981; and was Acting
                                        Director of the  Department  of Commerce
                                        and  Commissioner  of Securities for the
                                        State of Ohio in 1971 and 1972.  He is a
                                        Director  of  Marwed   Corporation   and
                                        Tavern Realty Co.

    (b) EXECUTIVE OFFICERS

     In addition to John B. Bartling, Jr., Chief Executive Officer and President
and a director of the Company,  listed below are the  executive  officers of the
Company as of March 28, 1997. Each executive officer will serve until his or her
successor  is selected by the Board or until his or her earlier  resignation  or
removal. There are no family relationships among these officers.

                                        Principal Occupation During the
   Name                    Age            Past Five or More Years
-----------------------  ----------   ------------------------------------------

Mark D. Thompson            39          Chief  Financial  Officer and  Executive
                                        Vice  President  of  the  Company  since
                                        October  31,  1996.  Prior to that time,
                                        Mr.    Thompson   was   Executive   Vice
                                        President of Corporate  Acquisitions  of
                                        the  Company  since  April 1, 1996.  Mr.
                                        Thompson  was a partner  in the law firm
                                        of McDonald, Hopkins, Burke & Haber from
                                        January 1995 to such time. Prior to that
                                        time, Mr.  Thompson was an associate and
                                        partner  in the  law  firm  of  Benesch,
                                        Friedlander,  Coplan & Aronoff LLP from
                                        January 1985 and October 1992,
                                        respectively.


Patrick M. Holder            49         Executive  Vice President of the Company
                                        since December 20, 1996 and President of
                                        Lexford Properties, Inc., a wholly owned
                                        subsidiary of the Company,  since August
                                        1, 1996.  Mr.  Holder was  President  of
                                        Lexford Partners,  a property management
                                        firm,  from 1988 to July 31,  1996.  Mr.
                                        Holder previously served as President of
                                        Brentwood Properties from 1987 to 1988.


Paul R. Selid                34         Senior  Vice  President  of the  Company
                                        since  April  15,  1996.  Prior  to that
                                        time,  Mr.  Selid was Vice  President of
                                        Acquisitions of NHP, Inc. since December
                                        1994.  Mr.  Selid  also  served  as Vice
                                        President   of   Asset    Management   &
                                        Underwriting of NHP, Inc. from September
                                        1992  to  December   1994.   Mr.   Selid
                                        previously  served as Vice  President of
                                        Finance of Hall  Financial  Group,  Inc.
                                        from January 1990 to September 1992.


                                       35

<PAGE>
                                       36


                                        Principal Occupation During the
   Name                    Age            Past Five or More Years
-----------------------  ----------   ------------------------------------------

Michele R. Souder             35        Vice  President  of  the  Company  since
                                        January  16,  1996 and  Chief  Financial
                                        Officer of Lexford  Properties,  Inc., a
                                        wholly owned  subsidiary of the Company,
                                        since  November  1, 1996.  Prior to that
                                        time,  Ms.  Souder was Director of Audit
                                        of the Company  since August 1993.  From
                                        October 1992 to August 1993,  she served
                                        as an  Associate in the  Turnaround  and
                                        Crisis Management division of Jay Alix &
                                        Associates,   a  management   consulting
                                        firm. She  previously  served in various
                                        positions as Portfolio Analyst,  Product
                                        Manager and Manager of Asset  Management
                                        of  the  Company,   from  July  1987  to
                                        October 1992.

Ronald P. Koegler             44        Vice  President  and  Controller  of the
                                        Company  since  December 20,  1996.  Mr.
                                        Koegler  served  as Vice  President  and
                                        Treasurer  of the Company  from  January
                                        16, 1996 to December 20, 1996.  Prior to
                                        that time, Mr. Koegler was Controller of
                                        the Company  since April 1992. He served
                                        as Assistant  Controller  of the Company
                                        from  October  1989 to April  1992.  Mr.
                                        Koegler  holds  a  B.S.B.A.   degree  in
                                        accounting    from   The   Ohio    State
                                        University, where he graduated Summa Cum
                                        Laude.

Michael F. Sosh               35        Vice  President  and  Treasurer  of  the
                                        Company since January 9, 1997.  Prior to
                                        that time, Mr. Sosh served as Divisional
                                        Vice  President and Assistant  Treasurer
                                        of The Bon-Ton Stores,  Inc. since March
                                        1995. He previously served as Manager of
                                        Financial Planning and Financial Analyst
                                        of The Bon- Ton Stores,  Inc.  from 1987
                                        to 1995. Mr. Sosh was a banking  officer
                                        with Meridian Bancorp, Inc. from 1983 to
                                        1987.


                COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     Section  16(a) of the  Exchange Act  requires  the  Company's  officers and
directors,  and persons who own more than 10% of the Company's  Common Stock, to
file initial  statements of  beneficial  ownership  (Form 3), and  statements of
changes in  beneficial  ownership  (Forms 4 or 5) of Common Stock of the Company
with the Securities and Exchange Commission (the "SEC"). Officers, directors and
greater  than 10%  shareholders  are required by SEC  regulation  to furnish the
Company with copies of all such forms they file.

     To the Company's knowledge, based on its review of the copies of such forms
received by it, or written  representations  from certain reporting persons that
no additional  forms were required for those persons,  the Company believes that
during the  previous  fiscal year,  all filing  requirements  applicable  to its
officers, directors, and greater than 10% beneficial owners were complied with.

     (c) CERTAIN SIGNIFICANT EMPLOYEES

     In addition to the executive officers named above, listed below are certain
officers of the Company and its wholly  owned  subsidiary,  Lexford  Properties,
Inc.,  as of March 28, 1997.  Each officer will serve until his or her successor
is  selected by the Board or until his or her  earlier  resignation  or removal.
There are no family relationships among these officers.

                                       36

<PAGE>
                                       37


                                        Principal Occupation During the
   Name                    Age            Past Five or More Years
-----------------------  ----------   ------------------------------------------

Annette Hoover              68          Vice  President  of Lexford  Properties,
                                        Inc., a wholly owned  subsidiary  of the
                                        Company, since August 1, 1996. From 1988
                                        to  August  1996,  Ms.  Hoover  was Vice
                                        President   of   Lexford   Partners,   a
                                        property management firm.

Bruce P.  Woodward          45          Vice  President  of Lexford  Properties,
                                        Inc., a wholly owned  subsidiary  of the
                                        Company, since August 1, 1996. From 1988
                                        to  August  1996,  Mr. Woodward was Vice
                                        President   of   Lexford   Partners,   a
                                        property management firm.

James D.  Alexander         47          Vice  President  of Lexford  Properties,
                                        Inc., a wholly owned  subsidiary  of the
                                        Company,  since  August  1,  1996.  From
                                        February   1992  to  August  1996,   Mr.
                                        Alexander was Vice  President of Lexford
                                        Partners,  a property  management  firm.
                                        From  May  1988  to  February  1992, Mr.
                                        Alexander   served  as  Executive   Vice
                                        President   and  Director  of  Portfolio
                                        Management  at Southwest  Savings  Bank,
                                        where he handled  asset  management  and
                                        marketing  services  for the  bank's  $3
                                        billion real estate portfolio.

Peggy C. Smith              45          Vice  President  of  the  Company  since
                                        December 20, 1996 and Vice  President of
                                        Lexford Properties, Inc., a wholly owned
                                        subsidiary of the Company,  since August
                                        1, 1996.  From 1988 to August 1996,  Ms.
                                        Smith  was  Vice  President  of  Lexford
                                        Partners, a  property  management firm.

Thomas Trubiana             45          Vice  President  of Lexford  Properties,
                                        Inc., a wholly owned  subsidiary  of the
                                        Company,   since  August  1,  1996.  Mr.
                                        Trubiana served as Vice President of the
                                        Company  from  1988 to  1996.  Prior  to
                                        joining the  Company,  Mr.  Trubiana was
                                        Regional   Manager   and   Director   of
                                        Development with Allen & O'Hara, Inc., a
                                        real estate  development  and management
                                        firm, from 1982 to 1987.

Dain C.  Akin               44          Vice   President   and  Acting   General
                                        Counsel of the  Company  since March 18,
                                        1996. From February 1992 to March  1996,
                                        Mr. Akin served as  Director  of Tax of
                                        the  Company.

Jeffrey D.  Meyer           31          Secretary and Associate  General Counsel
                                        of the Company since  February 26, 1996.
                                        Mr.  Meyer was an  associate  in the law
                                        firm of Benesch, Friedlander, Coplan and
                                        Aronoff  LLP  from  May 1992 to February
                                        1996.


ITEM 11. EXECUTIVE COMPENSATION
         ----------------------

     (a) SUMMARY COMPENSATION TABLE

     The  following  table sets forth the  compensation  earned by the Company's
Chief Executive  Officer during 1996 and the other four most highly  compensated
executive  officers (and two additional  individuals for whom  disclosure  would
have  been  provided  but for the fact  such  individuals  were not  serving  as
executive  officers at the end of the last  completed  fiscal year) for services
rendered in all  capacities to the Company during 1996 as well as 1995 and 1994,
where applicable.


                                       37

<PAGE>
                                       38
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
|                              |       |                                          | Long-Term Compensation |           |
|                              |       |            Annual Compensation           |        Awards          |           |
|                              |       | ------------------------------------------------------------------|           |
|                              |       |              |             |   Other     |            | Securities|           |
|                              |       |              |             |   Annual    | Restricted |   Under-  |           |
|                              |       |              |             |   Compen-   |   Stock    |    Lying  |    LTIP   |  All Other
|Name and                      |       |    Salary    |  Bonus(es)  |   sation    |  Award(s)  |   Options |   Payouts |Compensation
|Principal Position            |  Year |     ($)      |    ($)      |    ($)      |   ($)      |    (#)    |     ($)   |     ($)
-----------------------------------------------------------------------------------------------------------------------------------

<S>                               <C>    <C>           <C>            <C>          <C>          <C>           <C>       <C>
John B. Bartling, Jr.             1996   $285,000      $171,000(1)    $503,800(2)  $402,188(3)   20,000(4)     --         $7,371(5)
Chief Executive Officer and       1995    $23,750(6)        --         $13,250(7)       --          --         --          --
President                         1994        --            --            --            --          --         --          --

Mark D. Thompson                  1996   $127,885(8)   $157,491(9)    $216,635(10) $136,875(11)  12,500(12)    --           $934(13)
Chief Financial Officer and       1995        --            --            --            --          --         --          --
Executive Vice President          1994        --            --            --            --          --         --          --

Paul R. Selid                     1996    $86,538(14)  $112,500(15)   $137,163(16)      --       12,500(17)    --         $3,576(18)
Senior Vice President             1995        --            --            --            --          --         --          --
                                  1994        --            --            --            --          --         --          --

Michele R.  Souder                1996   $100,245       $45,110(19)       --            --        2,500(20)    --         $2,600(21)
Vice President and Chief          1995    $77,476       $15,037(22)       --            --          --         --         $2,140(21)
Financial Officer of Lexford      1994    $77,025        $7,500(23)       --       $ 39,500(24)     --         --         $1,949(21)
Properties, Inc.

Ronald P.  Koegler                1996    $84,492       $38,250(19)       --            --        2,500(25)    --         $6,218(26)
Vice President                    1995    $75,194       $15,450(22)       --            --          --         --         $5,603(26)
and Controller                    1994    $71,655       $10,100(23)       --        $23,250(27)     --         --         $3,860(26)

David P.  Blackmore               1996   $130,668(28)   $84,012(29)       --            --          --         --        $20,543(30)
Former Chief Financial Officer    1995   $116,730      $117,096(22)       --            --          --         --         $3,197(31)
and Executive Vice President      1994   $107,214       $76,000(23)       --        $29,868(32)     --         --         $3,022(31)

Michael F.  Carbone               1996   $205,905(33)  $102,953(34)       --            --          --         --       $578,138(35)
Former Chief Financial Officer    1995   $201,643              (36)     $6,000(37)      --          --         --         $7,314(38)
and Vice President                1994   $191,322      $155,500(23)     $6,000(37)   $6,288(39)     --         --         $4,112(38)

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

<FN>
(1)  This  amount  includes  a cash bonus for 1996 paid in 1997 in the amount of
     $27,862. This amount also includes an award of 6,940 shares of Common Stock
     as a stock bonus for 1996 granted in 1997. The value of the stock bonus was
     determined by multiplying the number of shares subject to this grant by the
     closing price of the Common Stock at fiscal year-end, which was $20.625.

(2)  This amount  includes an award of 10,000 shares of restricted  Common Stock
     in 1997 pursuant to the terms of Mr. Bartling's  Employment  Agreement with
     the  Company,  which  states that Mr.  Bartling  will  receive one share of
     Common  Stock for each  share of Common  Stock  purchased  by him,  up to a
     maximum of 10,000  shares.  The value of 5,000 shares subject to this award
     was  determined  by  multiplying  such shares by the  closing  price of the
     Common Stock on June 10, 1996, the date of his matching purchase, which was
     $19.875. In addition, pursuant to an amendment to Mr. Bartling's Employment
     Agreement,  Mr. Bartling  elected to receive shares of Common Stock in lieu
     of cash  bonus  compensation  otherwise  payable  to him on  account of the
     Company's 1996 fiscal year. The shares of Common Stock were issued based on
     a  valuation  of $20.625 per share,  being the closing  price of the Common
     Stock on December 31, 1996. The shares issued to Mr.  Bartling  pursuant to
     this election qualified as shares purchased for the grant of matching stock
     and  accordingly  the value of these  5,000  shares of  matching  stock was
     determined  by  multiplying  such shares by the closing price of the Common
     Stock on December 31, 1996, the date applicable to such qualified  matching
     purchase,  which was $20.625. Mr. Bartling elected to contribute the shares
     subject to each of the foregoing  grants to the Cardinal  Realty  Services,
     Inc. Executive Deferred Compensation Rabbi Trust. This amount also includes
     (a) payments of $12,500 per month from January 1, 1996 to November 30, 1996
     for Mr. Bartling's  relocation and temporary living expenses,  as well as a
     payment of $154,800 to compensate  Mr.  Bartling for any taxes  relating to
     such monthly payments, and (b) a car allowance of $750 per month.

(3)  Mr. Bartling  received an award of 22,500 shares of restricted Common Stock
     on April 5, 1996,  one-third  of which vest on the third,  fourth and fifth
     anniversaries  of such  date.  The value of this  award was  determined  by
     multiplying the number of shares subject to this grant by the closing price
     of the Common Stock on April 5, 1996,  $17.875.  The value of this award at
     the end of the 1996 fiscal year was $464,063  based on the fiscal  year-end

                                       38
<PAGE>
                                       39

     price of $20.625 per share. Mr. Bartling is entitled to receive  dividends,
     if paid, on this restricted Common Stock as and when such stock vests.

(4)  Mr.  Bartling  received an option to purchase 20,000 shares of Common Stock
     at  $17.875  per share on April 5,  1996,  one-fourth  of which vest on the
     second, third, fourth and fifth anniversaries of the date of grant.

(5)  Includes the  Company's  payment of a premium in the amount of $1,190 for a
     term life  insurance  policy  with a death  benefit of  $2,000,000  and the
     Company's  portion  of the  cost  of  group  term  life  insurance,  health
     insurance and disability  insurance  paid on behalf of Mr.  Bartling in the
     aggregate amount of $6,181.

(6)  Salary for the period from December 1, 1995,  when Mr.  Bartling  commenced
     his employment with the Company, to December 31, 1995.

(7)  Includes a payment of $12,500,  which sum was  required to be paid  monthly
     from  December 1, 1995 to November 30, 1996 for Mr.  Bartling's  relocation
     and  temporary  living  expenses,  and (b) a car  allowance of $750 for the
     month of December, 1995.

(8)  Salary for the period from April 1, 1996, when Mr.  Thompson  commenced his
     employment with the Company, to December 31, 1996.

(9)  This  amount  includes  a cash bonus for 1996 paid in 1997 in the amount of
     $27,203. This amount also includes an award of 6,317 shares of Common Stock
     as a stock bonus for 1996 granted in 1997. The value of the stock bonus was
     determined by multiplying the number of shares subject to this grant by the
     closing price of the Common Stock at fiscal year-end, which was $20.625.

(10) Includes an award of 5,000 shares of Common  Stock in 1997  pursuant to the
     terms of Mr. Thompson's Employment Agreement with the Company, which states
     that Mr.  Thompson will receive one share of Common Stock for each share of
     Common Stock  purchased by him, up to a maximum of 5,000 shares.  The value
     of 2,500 shares subject to this award was  determined by  multiplying  such
     shares by the closing price of the Common Stock on June 10, 1996,  the date
     of his matching purchase,  which was $19.875.  In addition,  pursuant to an
     amendment to Mr. Thompson's Employment  Agreement,  Mr. Thompson elected to
     receive shares of Common Stock in lieu of cash bonus compensation otherwise
     payable to him on account of the Company's  1996 fiscal year. The shares of
     Common Stock were issued  based on a valuation of $20.625 per share,  being
     the closing  price of the Common  Stock on December  31,  1996.  The shares
     issued  to Mr.  Thompson  pursuant  to this  election  qualified  as shares
     purchased  for the grant of  matching  stock and  accordingly  the value of
     these 2,500 shares of matching  stock was  determined by  multiplying  such
     shares by the closing  price of the Common Stock on December 31, 1996,  the
     date applicable to such qualified matching purchase, which was $20.625. Mr.
     Thompson  elected to contribute the shares subject to each of the foregoing
     grants  to  the  Cardinal  Realty   Services,   Inc.   Executive   Deferred
     Compensation  Rabbi Trust.  This amount also includes a relocation bonus of
     $60,000 paid in 1997 for moving his principal residence to Columbus,  Ohio,
     as well as  payment of $55,385 to  compensate  Mr.  Thompson  for any taxes
     relating to such relocation bonus.

(11) Mr. Thompson  received an award of 7,500 shares of restricted  Common Stock
     on April 15, 1996,  one-third of which vests on the third, fourth and fifth
     anniversaries  of such  date.  The value of this  award was  determined  by
     multiplying the number of shares subject to this grant by the closing price
     of the Common Stock on April 15, 1996,  $18.25.  The value of this award at
     the end of the 1996 fiscal year was $154,688  based on the fiscal  year-end
     price of $20.625 per share. Mr. Thompson is entitled to receive  dividends,
     if paid, on the Common Stock as and when such stock vests.

(12) Mr.  Thompson  received an option to purchase 12,500 shares of Common Stock
     at  $17.625  per share on April 1,  1996,  one-fifth  of which  vest on the
     first, second, third, fourth and fifth anniversaries of the date of grant.

(13) Includes the Company's portion of the cost of group term life insurance and
     disability insurance paid on behalf of Mr. Thompson in the aggregate amount
     of $934.

(14) Salary for the period from April 15,  1996,  when Mr. Selid  commenced  his
     employment with the Company, to December 31, 1996.

(15) This  amount  includes  a cash bonus for 1996 paid in 1997 in the amount of
     $27,484. This amount also includes an award of 4,122 shares of Common Stock
     as a stock bonus for 1996 granted in 1997. The value of the stock bonus was
     determined by multiplying the number of shares subject to this grant by the
     closing price of the  Common Stock at  fiscal  year-end, which was $20.625.

                                       39

<PAGE>
                                       40

(16) This  amount  includes  an award of 2,500  shares of  Common  Stock in 1997
     pursuant to the terms of Mr. Selid's Employment Agreement with the Company,
     which states that Mr. Selid will receive one share of Common Stock for each
     share of Common Stock  purchased  by him, up to a maximum of 2,500  shares.
     The  value  of  1,250  shares  subject  to this  award  was  determined  by
     multiplying  such shares by the closing  price of the Common  Stock on June
     10,  1996,  the  date of his  matching  purchase,  which  was  $19.875.  In
     addition, pursuant to an amendment to Mr. Selid's Employment Agreement, Mr.
     Selid  elected  to  receive  shares of Common  Stock in lieu of cash  bonus
     compensation  otherwise  payable to him on account  of the  Company's  1996
     fiscal year. The shares of Common Stock were issued based on a valuation of
     $20.625 per share,  being the closing price of the Common Stock on December
     31,  1996.  The  shares  issued  to Mr.  Selid  pursuant  to this  election
     qualified  as  shares  purchased  for  the  grant  of  matching  stock  and
     accordingly  the  value  of  these  1,250  shares  of  matching  stock  was
     determined  by  multiplying  such shares by the closing price of the Common
     Stock on December 31, 1996, the date applicable to such qualified  matching
     purchase,  which was $20.625.  Mr. Selid elected to  contribute  the shares
     subject to each of the foregoing  grants to the Cardinal  Realty  Services,
     Inc. Executive Deferred Compensation Rabbi Trust. This amount also includes
     payments   aggregating  $45,000  pursuant  to  the  terms  of  Mr.  Selid's
     Employment Agreement,  all of which sums were paid to Mr. Selid during 1996
     for Mr. Selid's  relocation  and temporary  living  expenses,  as well as a
     payment of $41,538 to  compensate  Mr. Selid for income  taxes  relating to
     such payments.

(17) Mr. Selid  received an option to purchase  12,500 shares of Common Stock at
     $18.25 per share on April 15,  1996,  one-fifth of which vest on the first,
     second, third, fourth and fifth anniversaries of the date of grant.

(18) Includes the  Company's  portion of the cost of group term life  insurance,
     health  insurance and  disability  insurance paid on behalf of Mr. Selid in
     the aggregate amount of $3,576.

(19) Cash bonus for 1996 paid in 1997.

(20) Ms. Souder  received an option to purchase  2,500 shares of Common Stock at
     $19.25 per share on June 27,  1996,  one-third  of which vest on the first,
     second and third anniversaries of the date of grant.

(21) Includes the  Company's  portion of the cost of group term life  insurance,
     health insurance and disability insurance paid on behalf of Ms. Souder.

(22) Cash bonus for 1995 paid in 1996.

(23) Cash bonus for 1994 paid in 1995.

(24) Ms. Souder received an award of 3,000 shares of restricted  Common Stock on
     February 24, 1994, one-third of which vested on the first, second and third
     anniversaries  of such  date.  The value of this  award was  determined  by
     multiplying  the number of shares  subject to this grant by $8.00 being the
     bid price of the Common  Stock in the Over The  Counter  market on February
     24, 1994.  Ms.  Souder also received an award of 1,000 shares of restricted
     Common Stock on October 11,  1994,  one-third of which vested on the first,
     second and third  anniversaries  of such date.  The value of this award was
     determined  by  multiplying  the number of shares  subject to this grant by
     $15.50  being the bid  price of the  Common  Stock in the Over The  Counter
     market on October 11, 1994.

(25) Mr. Koegler  received an option to purchase 2,500 shares of Common Stock at
     $19.25 per share on June 27,  1996,  one-third  of which vest on the first,
     second and third anniversaries of the date of grant.

(26) Includes the  Company's  portion of the cost of group term life  insurance,
     health insurance and disability insurance paid on behalf of Mr. Koegler.

(27) Mr. Koegler received an award of 1,500 shares of restricted Common Stock on
     October 11, 1994,  one-third of which vested on the first, second and third
     anniversaries  of such  date.  The value of this  award was  determined  by
     multiplying  the number of shares subject to this grant by $15.50 being the
     bid price of the Common Stock in the Over The Counter market on October 11,
     1994.

(28) Salary  for the  period  from  January 1, 1995 to  October  31,  1996,  the
     effective date of Mr. Blackmore's resignation.

(29) This  amount  includes  a cash bonus for 1996 paid in 1997 in the amount of
     $37,338. This amount also includes an award of 2,263 shares of Common Stock
     as a stock bonus for 1996 granted in 1997. The value of the stock bonus was

                                       40

<PAGE>
                                       41


     determined by multiplying the number of shares subject to this grant by the
     closing price of the Common Stock at fiscal year-end, which was $20.625.

(30) Includes the  Company's  portion of the cost of group term life  insurance,
     health  insurance and disability  insurance paid on behalf of Mr. Blackmore
     and the  Company's  matching  contribution,  in the  form of the  Company's
     Common  Stock,  made  pursuant  to  Mr.  Blackmore's  contribution  in  the
     Company's  401(k)  Savings  Plan in the  aggregate  amount of $3,238.  This
     amount also includes  $17,305 paid to Mr. Blackmore in 1996 pursuant to the
     terms  of Mr.  Blackmore's  Severance  Agreement  and  Mutual  Release  and
     Consulting  Agreement with the Company (See  "Termination  of Employment of
     Certain Executive Officers").

(31) Includes the  Company's  portion of the cost of group term life  insurance,
     health  insurance and disability  insurance paid on behalf of Mr. Blackmore
     and the  Company's  matching  contribution,  in the  form of the  Company's
     Common  Stock,  made  pursuant  to  Mr.  Blackmore's  contribution  in  the
     Company's 401(k) Savings Plan.

(32) Mr. Blackmore  received an award of deferred Common Stock equal to 0.19% of
     the Company's Total Committed Equity.  The value of the award was estimated
     based on (a) a  projection  as to the number of shares of Common Stock that
     management  believed would be issued pursuant to the Plan of Reorganization
     and (b) a per share  valuation of the Common  Stock based on the  estimated
     value of the Common Stock of $3.93 per share, the value upon which issuance
     of the Deferred  Stock was contingent at the date of grant.  Mr.  Blackmore
     received  approximately  7,600 shares of Deferred Stock.  Mr.  Blackmore is
     fully  vested in the  Deferred  Stock.  In the event  the  Company  were to
     declare a dividend on its Common Stock,  the dividend  would be paid on the
     Deferred Stock awarded to Mr. Blackmore.


(33) See "Termination of Employment of Certain Executive Officers".

(34) Cash bonus for 1996 paid in 1997. See "Termination of Employment of Certain
     Executive  Officers".


(35) Includes the  Company's  portion of the cost of group term life  insurance,
     health  insurance and disability  insurance paid on behalf of Mr.  Carbone.
     This amount also  includes  severance  payments of $427,953 and  consulting
     fees of $150,000  (See  "Termination  of  Employment  of Certain  Executive
     Officers").

(36) See "Termination of Employment of Certain Executive Officers".

(37) Includes car allowance of $500 per month.

(38) Includes the  Company's  portion of the cost of group term life  insurance,
     health  insurance  and  disability  insurance.  Also includes the Company's
     matching  contribution,  in the form of the Company's  Common  Stock,  made
     pursuant to Mr.  Carbone's  participation  in the Company's  401(k) Savings
     Plan.

(39) Mr.  Carbone  received an award of deferred  Common Stock equal to 0.04% of
     the Company's Total Committed Equity.  The value of the award was estimated
     based on (a) a  projection  as to the number of shares of Common Stock that
     management  believed would be issued pursuant to the Plan of Reorganization
     and (b) a per share  valuation of the Common  Stock based on the  estimated
     value of the Common Stock of $3.93 per share, the value upon which issuance
     of the Deferred  Stock was  contingent  at the date of grant.  Mr.  Carbone
     received approximately 1,600 shares of Deferred Stock. Mr. Carbone is fully
     vested in the  Deferred  Stock.  In the event the Company were to declare a
     dividend on its Common  Stock,  the dividend  would be paid on the Deferred
     Stock awarded to Mr. Carbone.
</FN>
</TABLE>

                                       41

<PAGE>
                                       42


           (b) STOCK OPTIONS GRANTS TABLE

             The following table sets forth the information noted for all grants
of  stock  options  to each  of the  executive  officers  named  in the  Summary
Compensation Table during 1996:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
|                          |                                                             | Potential Realizable        |
|                          |                                                             | Value at Assumed Annual     |
|                          |                                                             | Rates of Stock Price        |
|                          |           Individual Grants                                 | Appreciation For Option Term|
|----------------------------------------------------------------------------------------------------------------------|
|                          |  Number of     |                  |              |          |            |                |
|                          | Securities     |Percent of Total  |              |          |            |                |
|                          | underlying     | Options Granted  | Exercise of  |          |            |                |
|                          |   Options      | to Employees in  | Base Price   |Expiration|            |                |
|         Name             | Granted (#)    |   Fiscal Year    |   ($/Sh)     |   Date   |   5% ($)   |      10% ($)   |
|----------------------------------------------------------------------------------------------------------------------|
 <S>                              <C>               <C>            <C>          <C>         <C>           <C>
 John B. Bartling, Jr.,
 Chief Executive Officer          20,000(1)         33%            $17.875      4/5/06      $224,830      $569,763
 and President............

 Mark D. Thompson, Chief
 Financial Officer and            12,500(2)         21%            $17.625      4/1/06      $138,553      $351,121
 Executive Vice President.

 Paul R. Selid,                   12,500(3)         21%            $18.25       4/15/06     $143,467      $363,572
 Senior Vice President....

 Michele R.  Souder,               2,500(4)          4%            $19.25       6/27/06      $30,266       $76,699
 Vice President...........

 Ronald P.  Koegler,
 Vice President and                2,500(5)          4%            $19.25       6/27/06      $30,266       $76,699
 Controller...............

 David P.  Blackmore,
 Former Chief Financial
 Officer and Executive           --                 --               --           --            --           --
 Vice President...........

 Michael F.  Carbone,
 Former Chief Financial
 Officer and Vice                --                 --               --           --            --           --
 President................

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

<FN>
(1)  Mr.  Bartling  received an option to purchase 20,000 shares of Common Stock
     with an exercise price of $17.875 per share on April 5, 1996, one-fourth of
     which vest on the second, third, fourth and fifth anniversaries of the date
     of grant.

(2)  Mr.  Thompson  received an option to purchase 12,500 shares of Common Stock
     with an exercise price of $17.625 per share on April 1, 1996,  one-fifth of
     which vest on the first,  second,  third, fourth and fifth anniversaries of
     the date of grant.

(3)  Mr. Selid received an option to purchase 12,500 shares of Common Stock with
     an exercise price of $18.25 per share on April 15, 1996, one-fifth of which
     vest on the first,  second,  third,  fourth and fifth  anniversaries of the
     date of grant.

(4)  Ms. Souder received an option to purchase 2,500 shares of Common Stock with
     an exercise price of $19.25 per share on June 27, 1996,  one-third of which
     vest on the first, second and third anniversaries of the date of grant.

                                       42

<PAGE>
                                       43

(5)  Mr.  Koegler  received an option to purchase  2,500  shares of Common Stock
     with an exercise  price of $19.25 per share on June 27, 1996,  one-third of
     which vest on the  first,  second  and third  anniversaries  of the date of
     grant.
</FN>
</TABLE>

     (c) STOCK OPTIONS VALUE TABLE

     The following  table sets forth the fiscal  year-end  value of  unexercised
stock  options  for  each  of  the  executive  officers  named  in  the  Summary
Compensation Table for the 1996 fiscal year.

<TABLE>
<CAPTION>
                                                                                                                    VALUE OF
                                                                                NUMBER OF SECURITIES              UNEXERCISED
                                                                               UNDERLYING UNEXERCISED             IN-THE-MONEY
                                                                                      OPTIONS                       OPTIONS
                                                                                 AT FISCAL YEAR-END            AT FISCAL YEAR-END
                                            SHARES             VALUE                    (#)                           ($)
                                         ACQUIRED ON          REALIZED              EXERCISABLE/                  EXERCISABLE/
                 NAME                    EXERCISE (#)           ($)                UNEXERCISABLE               UNEXERCISABLE (1)
-------------------------------------- ----------------  ----------------  ----------------------------  ---------------------------

<S>                                        <C>              <C>               <C>                           <C>
John B. Bartling, Jr., Chief                                                       0 Exercisable/               N/A Exercisable/
Executive  Officer and President......        0                  0            20,000 Unexercisable(1)       $55,000 Unexercisable(2)

Mark D. Thompson, Chief  Financial                                                 0 Exercisable/               N/A Exercisable/
Officer and Executive Vice President..        0                  0            12,500 Unexercisable(3)       $37,500 Unexercisable(4)

Paul R. Selid,                                                                     0 Exercisable/               N/A Exercisable/
Senior Vice President.................        0                  0            12,500 Unexercisable(5)       $29,688 Unexercisable(6)

Michele R.  Souder                                                                 0 Exercisable/               N/A Exercisable/
Vice President........................        0                  0             2,500 Unexercisable(7)       $3,438 Unexercisable(8)

Ronald P.  Koegler                                                                 0 Exercisable/               N/A Exercisable/
Vice President and Controller.........        0                  0             2,500 Unexercisable(9)       $3,438 Unexercisable(10)

David P.  Blackmore, Former Chief
Financial Officer and Executive Vice
President.............................      4,378           $78,804(11)                 N/A                           N/A

Michael F.  Carbone, Former Chief
Financial Officer.....................        0                  0                      N/A                           N/A

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

<FN>
(1)  Mr.  Bartling  received an option to purchase 20,000 shares of Common Stock
     with an exercise price of $17.875 per share on April 5, 1996, one-fourth of
     which vest on the second, third, fourth and fifth anniversaries of the date
     of grant.

(2)  The value of the stock option was calculated by  multiplying  the number of
     underlying securities by the difference between (a) $20.625 per share being
     the  closing  price of the Common  Stock at fiscal  year-end  on the Nasdaq
     National Market tier of the Nasdaq Stock Market, and (b) the exercise price
     of the option, $17.875 per share.

(3)  Mr.  Thompson  received an option to purchase 12,500 shares of Common Stock
     with an exercise price of $17.625 per share on April 1, 1996,  one-fifth of
     which vest on the first,  second,  third, fourth and fifth anniversaries of
     the date of grant.

(4)  The value of the stock option was calculated by  multiplying  the number of
     underlying securities by the difference between (a) $20.625 per share being
     the  closing  price of the Common  Stock at fiscal  year-end  on the Nasdaq
     National Market tier of the Nasdaq Stock Market, and (b) the exercise price
     of the options, $17.625 per share.

(5)  Mr. Selid received an option to purchase 12,500 shares of Common Stock with
     an exercise price of $18.25 per share on April 15, 1996, one-fifth of which
     vest on the first,  second,  third,  fourth and fifth  anniversaries of the
     date of grant.

(6)  The value of the stock option was calculated by  multiplying  the number of
     underlying securities by the difference between (a) $20.625 per share being
     the  closing  price of the Common  Stock at fiscal  year-end  on the Nasdaq

                                       43

<PAGE>
                                       44

     National Market tier of the Nasdaq Stock Market, and (b) the exercise price
     of the options, $18.25 per share.

(7)  Ms. Souder received an option to purchase 2,500 shares of Common Stock with
     an exercise price of $19.25 per share on June 27, 1996,  one-third of which
     vest on the first, second and third anniversaries of the date of grant.

(8)  The value of the stock option was calculated by  multiplying  the number of
     underlying securities by the difference between (a) $20.625 per share being
     the  closing  price of the Common  Stock at fiscal  year-end  on the Nasdaq
     National Market tier of the Nasdaq Stock Market, and (b) the exercise price
     of the option, $19.25 per share.

(9)  Mr.  Koegler  received an option to purchase  2,500  shares of Common Stock
     with an exercise  price of $19.25 per share on June 27, 1996,  one-third of
     which vest on the  first,  second  and third  anniversaries  of the date of
     grant.

(10) The value of the stock option was calculated by  multiplying  the number of
     underlying securities by the difference between (a) $20.625 per share being
     the  closing  price of the Common  Stock at fiscal  year-end  on the Nasdaq
     National Market tier of the Nasdaq Stock Market, and (b) the exercise price
     of the option, $19.25 per share.

(11) On September 11, 1992, Mr. Blackmore was granted a stock option to purchase
     4,378 shares of Common Stock with an exercise price of $1.42 per share.  On
     October 23,  1996,  Mr.  Blackmore  exercised  his option to purchase  such
     shares. The value of this exercise was determined by multiplying the number
     of shares  subject to this stock option by $19.88,  being the closing price
     of the Common Stock on October 23, 1996.
</FN>
</TABLE>

     (d) LONG-TERM INCENTIVE PLANS TABLE

     The  following  table sets forth the  information  noted for all  long-term
incentive  plans awards  granted to each of the executive  officers named in the
Summary Compensation Table during 1996:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                  |              |      Perform-    |
                                  |              |   ance or Other  |  Estimated Future Payouts Under Non-Stock Price-Based Plans
                                  |   Number of  |    Period Until  |--------------------------------------------------------------
                                  |    Shares    |    Maturation    |    Threshold     |       Target        |      Maximum
    Name                          |     (#)      |     Payout       |      ($ or #)    |       ($ or #)      |      ($ or #)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                  <C>            <C>              <C>                   <C>
John B. Bartling, Jr., Chief         20,000(1)            (1)            0 shares (1)     20,000 shares (1)     20,000 shares (1)
Executive Officer and President.

Mark D. Thompson, Chief
Financial Officer and Executive       9,000(2)            (2)            0 shares (2)      9,000 shares (2)     9,000 shares (2)
Vice President..................

Paul R. Selid,                        9,000(2)            (2)            0 shares (2)      9,000 shares (2)     9,000 shares (2)
Senior Vice President...........

Michele R.  Souder                       --               N/A                N/A                 N/A                   N/A
Vice President..................

Ronald P. Koegler                        --               N/A                N/A                 N/A                   N/A
Vice President and Controller...

David P.  Blackmore
Former Chief Financial Officer           --               N/A                N/A                 N/A                   N/A
and Executive Vice President ...

Michael F.  Carbone
Former Chief Financial Officer           --               N/A                N/A                 N/A                   N/A
and Vice President ............

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

<FN>

(1)  Mr.  Bartling  received  an award of the right to receive  20,000  deferred
     shares  of Common  Stock on April 5,  1996,  providing  that so long as Mr.
     Bartling  remains in the employ of the  Company,  one-third  of such shares
     will be earned  and will be issued  when the  average  number of issued and

                                       44

<PAGE>
                                       45

     outstanding  shares of  Common  Stock  over ten  consecutive  trading  days
     multiplied  by the average  closing price of the Common Stock on the Nasdaq
     National Market tier of the Nasdaq Stock Market over such period (or if the
     Common  Stock is not listed or  admitted to trading on such  exchange,  the
     principal  securities  exchange  on which  the  Common  Stock is  listed or
     admitted  to  trading)  plus  the  liquidation  value  of  all  issued  and
     outstanding  preferred  stock  of the  Company  ("Market  Capitalization"),
     exceeds  $90  million,  one-third  of which  shall  vest  when  the  Market
     Capitalization exceeds $120 million, and the final one-third of which shall
     vest when the Market Capitalization  exceeds $150 million. The terms of the
     deferred  shares provide for  acceleration  upon a change of control of the
     Company or the  termination  of Mr.  Bartling's  employment  other than for
     cause.  The shares,  if earned,  will be contributed to the Cardinal Realty
     Services, Inc. Executive Deferred Compensation Rabbi Trust.

(2)  Mr.  Thompson and Mr. Selid each  received an award of the right to receive
     9,000 deferred shares of Common Stock on April 15, 1996,  providing that so
     long as Mr.  Thompson  and Mr.  Selid  remain in the employ of the  Company
     one-third of such shares will be earned and will be issued when the average
     number of issued and outstanding shares of Common Stock over 90 consecutive
     trading days multiplied by the average closing price of the Common Stock on
     the Nasdaq  National  Market  tier  of the Nasdaq  Stock  Market  over such
     period (or if the Common Stock is not listed or admitted to trading on such
     exchange,  the principal  securities  exchange on which the Common Stock is
     listed or admitted to trading) plus the liquidation value of all issued and
     outstanding  preferred  stock  of the  Company  ("Market  Capitalization"),
     exceeds  $90  million,  one-third  of which  shall  vest  when  the  Market
     Capitalization  exceeds  $120  million,  and the final  one- third of which
     shall vest when the Market  Capitalization  exceeds $150 million. The terms
     of the deferred shares provide for acceleration upon a change of control of
     the Company or the termination of Mr. Thompson's and Mr. Selid's employment
     other than for cause.  The shares,  if earned,  will be  contributed to the
     Cardinal Realty Services, Inc. Executive Deferred Compensation Rabbi Trust
</FN>
</TABLE>

     (e) DIRECTOR COMPENSATION

     Each  director of the Company who is not an employee of the Company is paid
an  annual  retainer  fee of  $15,000,  plus  (a)  meeting  fees of  $1,000  for
attendance at each meeting of the Board and (b) $750 for each committee  meeting
that  occurs  on a date  when the full  Board  does not  meet.  Pursuant  to the
Company's 1992 Incentive Equity Plan, as amended (the "Incentive  Equity Plan"),
each member of the Board who was not employed by the Company was granted, at the
commencement  of the director's  term, a stock option to purchase  shares of the
Company's  Common Stock  representing  0.1875% of the Company's "Total Committed
Equity",  subject  to  certain  vesting  requirements  (all of which  have  been
satisfied),  which was subsequently calculated to be an option to purchase 7,500
shares of the Company's  Common Stock for each  director.  The  foregoing  stock
options expire on September 19, 2002. "Total Committed Equity" is defined in the
Incentive  Equity  Plan as the total  number of shares of the  Company's  Common
Stock (a) issued upon the  allowance of claims (as defined in Section  101(5) of
the Bankruptcy Code) pursuant to the Third Amended Plan of Reorganization of the
Company  and  its   substantively   consolidated   subsidiaries  (the  "Plan  of
Reorganization")  that was confirmed by the United States  Bankruptcy  Court for
the Southern  District of Ohio,  Eastern  Division (the  "Bankruptcy  Court") on
August 26, 1992 and became  effective  on  September  11,  1992 (the  "Effective
Date") and (b) issued or reserved for issuance  under the Incentive  Equity Plan
as of September 11, 1992. In addition, each director was granted on November 30,
1995 and May 23,  1996,  and  will be  granted  annually  on the day  after  the
Company's  Annual Meeting of  Shareholders,  so long as each director  remains a
director of the Company,  an option to purchase  2,000  shares of the  Company's
Common  Stock with an exercise  price equal to the fair market value on the date
of the grant a ten year  term  from  date of grant  and a vesting  period of the
lesser of one year or the period  from the date of the grant to the next  annual
meeting of shareholders.

     At the  Company's  annual  shareholders  meeting held on May 22, 1996,  the
shareholders approved the Company's  Non-Employee Director Restricted Stock Plan
(the  "Directors  Restricted  Stock  Plan").  Under the  terms of the  Directors
Restricted  Stock Plan, each  non-employee  director of the Company may elect to
receive  shares of the  Company's  Common Stock in lieu of cash  directors  fees
otherwise  payable to him. The Company has reserved  50,000  shares for issuance
under the  Directors  Restricted  Stock Plan and is also  authorized to purchase
shares  of  the  Company's  Common  Stock  on  the  open  market  or in  private
transactions  in order to provide for the  payment of shares of Common  Stock to
non-employee   directors  under  the  Directors   Restricted  Stock  Plan.  Each
non-employee  director who  participates in the Directors  Restricted Stock Plan
receives shares of restricted Common Stock in lieu of cash compensation with the
shares paid to such  director  being  valued at a 20%  discount  from their fair

                                       45
<PAGE>
                                       46

market value on the date of payment. Shares of restricted Common Stock issued or
paid to directors under the Directors  Restricted  Stock Plan have a restriction
period of 3 years.  The  director  may not  sell,  exchange,  transfer,  pledge,
hypothecate,  assign or otherwise  dispose of the shares during the  restriction
period,  except by bequest pursuant to a will or by intestacy.  All restrictions
will lapse and the holder of the  restricted  Common  Stock will be  entitled to
receipt of the shares following the earliest of (a) 3 years from the date of the
issuance or payment of the restricted  Common Stock to the holder;  (b) the date
of the  holder's  death or  disability;  (c) the date the  holder,  after  being
nominated by the Board,  is not elected by the  shareholders  in an election for
the Board;  or (d) the date on which the Board  determines  that the holder will
not be nominated  for  election to the Board.  Shares of the  restricted  Common
Stock will be forfeited to the Company in the event that, during the restriction
period,  the holder  (a)  resigns  (other  than by reason of  disability)  or is
dismissed  for cause from the Board during his elected  term as a director;  (b)
declines to stand for an election to the Board after  having been  nominated  by
the Board; or (c) sells, exchanges, transfers, pledges, hypothecates, assigns or
otherwise  attempts to dispose of shares of  restricted  Common  Stock except by
bequest  pursuant to a will or intestacy.  As of the end of the  Company's  1996
fiscal  year,  each non-  employee  director had elected to  participate  in the
Directors  Restricted  Stock Plan by  electing to receive  shares of  restricted
Common Stock in lieu of a  percentage  of directors  fees  otherwise  payable in
cash, such elective percentages ranging from 25% to 100% of directors fees.

     (f) EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT

     John B. Bartling, Jr. Employment Agreement
     ------------------------------------------

     The Company and Mr. Bartling entered into an employment agreement, dated as
of December 1, 1995 (the "Bartling  Employment  Agreement") for an original term
through  December  31, 1998 and an annual  base salary of $285,000  ("Bartling's
Base  Salary"),  plus an annual cash bonus of 2% of  Bartling's  Base Salary for
each 1% increase in the Company's recurring earnings before interest (other than
interest  paid  on  mortgage  loans  secured  by  the  Company's   Wholly  Owned
Properties),  taxes, depreciation and amortization determined in accordance with
generally accepted  accounting  principles without regard to extraordinary gains
or losses  ("Adjusted  EBITDA") from the previous fiscal year's Adjusted EBITDA,
limited to 60% of Bartling's Base Salary.

     Under the terms of the Bartling Employment  Agreement,  the Company granted
Mr.  Bartling  (i) 22,500  shares of  Restricted  Stock  (see  footnote 3 of the
Summary  Compensation  Table),  (ii) the right to receive up to 20,000  deferred
shares of  Restricted  Stock (see footnote 1 of the  Long-Term  Incentive  Plans
Table),  (iii) one share of the Company's Common Stock, at no additional cost to
him, for each share of the Company's  Common Stock  purchased by Mr. Bartling in
1996 up to a maximum of 10,000 shares (the "Bartling Matching Shares"), and (iv)
options to purchase 20,000 shares of the Company's  Common Stock (see footnote 1
of the Stock Options Grants Table).

     The Bartling Employment  Agreement was amended effective as of December 20,
1996 to provide that Mr. Bartling could elect to receive shares of the Company's
Common  Stock in lieu of his cash bonus  earned in 1996.  Shares of Common Stock
made subject to such  election  would be valued at the December 31, 1996 closing
price for the Company's Common Stock.  Such amendment  further provided that any
such shares which Mr.  Bartling might elect to receive in lieu of his cash bonus
earned  for 1996  would  qualify  for the grant of the 5,000  Bartling  Matching
Shares not yet awarded to Mr.  Bartling  as of such date.  In March,  1997,  Mr.
Bartling  elected to receive  6,940 shares in lieu of a portion of his 1996 cash
bonus (see footnote 1 of the Summary Compensation Table). Accordingly,  pursuant
to Mr. Bartling's election,  Mr. Bartling was entitled to receive the balance of
the 5,000 Bartling Matching Shares not yet awarded to him as of such date.

     Upon termination of Mr. Bartling's  employment  without cause, Mr. Bartling
would be entitled to receive:  (i) any of Bartling's Base Salary,  and any other
benefits  due him under  the  Bartling  Employment  Agreement,  payable  for the
remaining  period of the original term or any extension  thereof;  (ii) the cash
bonus, if any,  applicable to the fiscal year in which such termination  without
cause  occurs;  and (iii) all of the shares of Restricted  Stock,  all shares of
deferred Common Stock (whether or not any of the Market  Capitalization  targets
are then  met) and  stock  options,  fully  vested,  and  otherwise  free of any
forfeiture   provisions  or  other  restrictions  imposed  under  the  documents
evidencing such awards,  except for any  restrictions or limitations  imposed by
applicable state and federal securities laws and regulations.

     Furthermore,  in the event the Company's Market Capitalization exceeds $150
million  or there is a  change in control  of the  Company,  the  vesting of all
Restricted Stock and stock options awarded to Mr. Bartling will be accelerated.

     The Bartling Employment Agreement and related Award Agreements were amended
to permit Mr.  Bartling  to defer the  receipt  of all  shares of the  Company's
Common  Stock  which  would  otherwise  be payable to him under the terms of the

                                       46
<PAGE>
                                       47

Bartling  Employment  Agreement  and the related Award  Agreements.  Pursuant to
these  amendments  made in conjunction  with the adoption of the Cardinal Realty
Services,  Inc. Executive Deferred  Compensation Plan, all such shares of Common
Stock  have  been or will be  issued  for the  benefit  of Mr.  Bartling  to The
Provident Bank as Trustee (the "Trustee") of the Cardinal Realty Services,  Inc.
Executive Deferred Compensation Rabbi Trust.

     The Bartling Employment  Agreement has been further amended effective as of
January 1, 1997 to increase Mr. Bartling's base salary to $340,000;  $298,750 of
which is payable in cash and the balance is payable in the form of 2,000  shares
of the Company's  Common Stock  (valued at $20.625 per share,  being the closing
price of the  Company's  Common  Stock on  December  31,  1996)  issuable to the
Trustee for Mr. Bartling's benefit.

     Mark D. Thompson Employment Agreement
     -------------------------------------

     The Company and Mr. Thompson entered into an employment agreement, dated as
of April 1, 1996 (the  "Thompson  Employment  Agreement")  for an original  term
through April 14, 1997 and an annual base salary of $175,000  ("Thompson's  Base
Salary"),  plus bonuses under the Company's Incentive  Compensation Plan for its
1996 fiscal year,  under which Mr.  Thompson  will receive a cash bonus of up to
60% of Thompson's  Base Salary based on  incremental  increases in the Company's
Adjusted EBITDA from the previous fiscal year's Adjusted EBITDA.

     Under the terms of the  Thompson  Employment  Agreement  and the  Incentive
Equity Plan, the Company granted Mr.  Thompson 7,500 shares of Restricted  Stock
(see footnote 11 of the Summary  Compensation  Table), (ii) the right to receive
up to 9,000 deferred shares of Restricted Stock (see footnote 2 of the Long-Term
Incentive  Plans Table),  (iii) one share of the Company's  Common Stock,  at no
additional  cost to him, for each share of the Company's  Common Stock purchased
by Mr. Thompson in 1996 up to a maximum of 5,000 shares (the "Thompson  Matching
Shares"),  and (iv) options to purchase  12,500 shares of the  Company's  Common
Stock (see footnote 2 of the Stock Options Grants Table).

     The Thompson Employment  Agreement was amended effective as of December 20,
1996 to provide that Mr. Thompson could elect to receive shares of the Company's
Common  Stock in lieu of his cash bonus  earned in 1996.  Shares of Common Stock
made subject to such  election  would be valued at the December 31, 1996 closing
price for the Company's Common Stock.  Such amendment  further provided that any
such shares which Mr.  Thompson might elect to receive in lieu of his cash bonus
earned  for 1996  would  qualify  for the grant of the 2,500  Thompson  Matching
Shares not yet awarded to Mr.  Thompson  as of such date.  In March,  1997,  Mr.
Thompson  elected to receive  3,772 shares in lieu of a portion of his 1996 cash
bonus (see footnote 8 of the Summary Compensation Table). Accordingly,  pursuant
to Mr. Thompson's election,  Mr. Thompson was entitled to receive the balance of
the 2,500 Thompson Matching Shares not yet awarded to him as of such date.

     Upon termination of Mr. Thompson's  employment  without cause, Mr. Thompson
would be entitled to receive:  (i) any of Thompson's Base Salary,  and any other
benefits  due him under  the  Thompson  Employment  Agreement,  payable  for the
remaining  period of the original term, if any, plus the immediately  succeeding
nine months;  (ii) a prorated  portion of the cash bonus, if any,  applicable to
the fiscal year in which such termination without cause occurs; and (iii) all of
the shares of  Restricted  Stock  (other than those shares of  Restricted  Stock
based on Market  Capitalization  which have not  theretofore  vested)  and stock
options,  fully vested, and otherwise free of any forfeiture provisions or other
restrictions imposed under the documents evidencing such awards,  except for any
restrictions or limitations  imposed by applicable state and federal  securities
laws and regulations.

     Furthermore,  in the event the Company's Market Capitalization exceeds $150
million or there is a  change in control of the  Company,   the   vesting of all
Restricted Stock and stock options awarded to Mr. Thompson will be accelerated.

     The Thompson Employment Agreement and related Award Agreements were amended
to permit Mr.  Thompson  to defer the  receipt  of all  shares of the  Company's
Common  Stock  which  would  otherwise  be payable to him under the terms of the
Thompson  Employment  Agreement  and the related Award  Agreements.  Pursuant to
these  amendments  made in conjunction  with the adoption of the Cardinal Realty
Services,  Inc. Executive Deferred  Compensation Plan, all such shares of Common
Stock  have  been or will be  issued  for the  benefit  of Mr.  Thompson  to The
Provident Bank as Trustee (the "Trustee") of the Cardinal Realty Services,  Inc.
Executive Deferred Compensation Rabbi Trust.

                                       47

<PAGE>
                                       48


     The Thompson Employment  Agreement has been further amended effective as of
January 1, 1997 to increase Mr.  Thompson's  base salary to  $230,000,  of which
$200,000  is  payable  in cash and the  balance  is payable in the form of 1,455
shares of the  Company's  Common Stock  (valued at $20.625 per share,  being the
closing  price of the Company's  Common Stock on December 31, 1996)  issuable to
the Trustee for Mr. Thompson's benefit.

     Paul R. Selid Employment Agreement
     ----------------------------------

     The Company and Mr. Selid entered into an employment agreement, dated as of
April 15, 1996 (the "Selid  Employment  Agreement") for an original term through
April 14, 1997 and an annual base salary of $125,000  ("Selid's  Base  Salary"),
plus bonuses under the Company's Incentive Compensation Plan for its 1996 fiscal
year,  under which Mr.  Selid will  receive a cash bonus of up to 60% of Selid's
Base Salary based on incremental increases in the Company's return on investment
percentage ("ROI") from the previous fiscal year's ROI.

     Under the terms of the Selid Employment  Agreement and the Incentive Equity
Plan,  the  Company  granted  Mr.  Selid  (i) the right to  receive  up to 9,000
deferred shares of Restricted  Stock (see footnote 2 of the Long-Term  Incentive
Plans  Table),  (ii) one share of the Company's  Common Stock,  at no additional
cost to him, for each share of the Company's Common Stock purchased by Mr. Selid
in 1996 up to a maximum of 2,500 shares (the "Selid Matching Shares"), and (iii)
options to purchase 12,500 shares of the Company's  Common Stock (see footnote 3
of the Stock Options Grants Table).

     The Selid  Employment  Agreement  was amended  effective as of December 20,
1996 to provide  that Mr. Selid could elect to receive  shares of the  Company's
Common  Stock in lieu of his cash bonus  earned in 1996.  Shares of Common Stock
made subject to such  election  would be valued at the December 31, 1996 closing
price for the Company's Common Stock.  Such amendment  further provided that any
such  shares  which Mr.  Selid  might elect to receive in lieu of his cash bonus
earned for 1996 would qualify for the grant of the 1,250 Selid  Matching  Shares
not yet awarded to Mr. Selid as of such date. In March,  1997, Mr. Selid elected
to  receive  2,304  shares in lieu of a  portion  of his 1996  cash  bonus  (see
footnote 15 of the Summary  Compensation  Table).  Accordingly,  pursuant to Mr.
Selid's  election,  Mr.  Selid was  entitled to receive the balance of the 1,250
Selid Matching Shares not yet awarded to him as of such date.

     Upon termination of Mr. Selid's  employment  without cause, Mr. Selid would
be entitled to receive:  (i) any of Selid's Base Salary,  and any other benefits
due him under the Selid Employment  Agreement,  payable for the remaining period
of the original term, if any, plus the immediately  succeeding nine months; (ii)
a prorated  portion of the cash bonus, if any,  applicable to the fiscal year in
which such termination without cause occurs; and (iii) all of the stock options,
fully  vested,  and  otherwise  free  of  any  forfeiture  provisions  or  other
restrictions imposed under the documents evidencing such awards,  except for any
restrictions or limitations  imposed by applicable state and federal  securities
laws and regulations.

     Furthermore,  in the event the Company's Market Capitalization exceeds $150
million or there is  a  change in control of the  Company,  the  vesting of  all
Restricted Stock and stock options awarded to Mr. Selid will be accelerated.

     The Selid Employment Agreement and related Award Agreements were amended to
permit Mr.  Selid to defer the  receipt of all  shares of the  Company's  Common
Stock  which  would  otherwise  be  payable  to him under the terms of the Selid
Employment  Agreement  and the  related  Award  Agreements.  Pursuant  to  these
amendments  made  in  conjunction  with  the  adoption  of the  Cardinal  Realty
Services,  Inc. Executive Deferred  Compensation Plan, all such shares of Common
Stock have been or will be issued for the benefit of Mr. Selid to The  Provident
Bank as  Trustee  of the  Cardinal  Realty  Services,  Inc.  Executive  Deferred
Compensation Rabbi Trust.

     Termination of Employment of Certain Executive Officers
     -------------------------------------------------------

     Michael F. Carbone  resigned as Vice President and Chief Financial  Officer
of the Company  effective  as of January  16, 1996 and entered  into a Severance
Agreement  and  Mutual  Release  (the  "Carbone  Severance   Agreement")  and  a
consulting  agreement  (the  "Carbone  Consulting  Agreement")  each dated as of
January 16, 1996.  The Carbone  Severance  Agreement  provided that Mr.  Carbone
would receive (i) regular payments of base annual compensation  through December

                                       48

<PAGE>
                                       49


31, 1996; (ii) a cash bonus equal to 50% of his annual base salary (being a cash
payment of  $102,952.50);  and (iii) an  additional  cash bonus in the amount of
$325,000 in compromise of any and all disputes  regarding cash bonuses earned or
to be earned for fiscal years 1995 and 1996. In addition,  in  consideration  of
Mr. Carbone's release of any and all claims against the Company, his irrevocable
proxy and covenants of confidentiality  and cooperation,  Mr. Carbone received a
cash payment of $102,952.50  and a tax loan to cover his income tax  obligations
incurred  as a  result  of  the  exercise  of his  stock  options.  The  Carbone
Consulting  Agreement  provides  that Mr.  Carbone  will provide  financial  and
business  consulting services as requested by the Company for up to 12 hours per
month  during the one year period  beginning  June 1, 1996 and in  consideration
therefor,  Mr. Carbone received a payment in the amount of $150,000. The Carbone
Consulting  Agreement  also  provides  that Mr.  Carbone  will be entitled to an
incentive  fee (at market  rates to be agreed  upon  between the Company and Mr.
Carbone) in  consideration  for any  financings  obtained  by the  Company  from
financing  sources  solicited by Mr. Carbone on the Company's  behalf;  provided
that the  financings  are completed  within one year following the completion of
the term of consulting services.  In consideration of the Carbone Consulting and
Carbone  Severance  Agreements,  Mr. Carbone  granted the Company's  nominees an
irrevocable  proxy for the voting of all shares of the  Company's  Common  Stock
held by him over a specified  period of time ending not later than July 1, 1999,
or if  later,  the  date of  final  adjournment  of the  Company's  1999  annual
shareholders meeting.

     David P. Blackmore  resigned as Chief Financial  Officer and Executive Vice
President of the Company effective October 31, 1996 and entered into a Severance
Agreement  and  Mutual  Release  (the  "Blackmore  Severance  Agreement")  and a
Consulting  Agreement (the "Blackmore  Consulting  Agreement")  with the Company
each dated as of September 4, 1996. The Blackmore  Severance  Agreement provided
that Mr. Blackmore would receive (i) a payment in the amount of $112,500 payable
over nine months  representing a bonus for Mr.  Blackmore's prior services as an
executive officer of the Company, (ii) 83 1/3% of the cash bonus and stock bonus
he would otherwise have been entitled to receive  pursuant to the Company's 1996
Incentive  Compensation  Plan (which,  based upon the Company's fiscal year 1996
results  amounted to $37,338 in cash and 2,263  shares of Common Stock valued at
$20.625 per share), (iii) an award of an additional 2,000 shares of Common Stock
issued in  conjunction  with the  payment of the cash bonus and stock  bonus and
(iv) executive  outplacement services and certain other benefits.  The Blackmore
Consulting  Agreement  provided  that Mr.  Blackmore  would  receive  the sum of
$50,000 either in a lump sum or payable over nine months,  which amount is being
paid over nine months. In consideration of the Blackmore Severance and Blackmore
Consulting   Agreements,   Mr.  Blackmore  granted  the  Company's  nominees  an
irrevocable  proxy for the voting of all shares of the  Company's  Common  Stock
held by him over a specified  period of time ending not later than July 1, 1999,
or if  later,  the  date of  final  adjournment  of the  Company's  1999  annual
shareholders  meeting.  The Company also agreed to provide Mr.  Blackmore with a
tax loan to cover his tax  obligations  incurred as a result of the  exercise of
his stock options.

     The  Company  currently  maintains  a policy  of  providing  its  executive
officers with nine months of their base salary in the event of a termination  of
their employment without cause.

     (g) COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     The following  Report of the  Compensation  Committee  and the  Performance
Graph  included  in this Form 10-K  shall  not be deemed to be  incorporated  by
reference by any general  statement  incorporating  by reference  this Form 10-K
into any filing under the Securities Act of 1933, as amended,  or the Securities
Exchange Act of 1934, as amended,  except to the extent the Company specifically
incorporates  this Report or the  Performance  Graph by reference  therein,  and
shall not be deemed  soliciting  material or otherwise deemed filed under either
of such Acts.

     The Compensation  Committee  administers the Company's various compensation
plans and reviews and recommends to the Board of Directors  compensation  levels
for  executive  officers,   evaluates  executive  management's  performance  and
considers executive management  succession and related matters. The Compensation
Committee is composed exclusively of independent, non-employee directors.


                                       49

<PAGE>
                                       50


     Philosophy of Compensation Committee

     The  Compensation  Committee  believes that executive  compensation  should
reflect the value created for the Company's  shareholders  while  supporting the
Company's  long-term  strategic  goals.  It is the  belief  of the  Compensation
Committee that executive compensation should serve to:

     o    reward  individuals  for  significant  contribution  to the  Company's
          success;
     o    align  the  interests  of  executives  with  those  of  the  Company's
          long-term investors;
     o    retain, motivate and attract qualified executives; and
     o    provide incentives to executives to achieve strategic  objectives in a
          manner consistent with the Company's values.

Executive Officer Compensation

     Individual  executive  officer  compensation  consists of three components:
base  salary,  annual  cash and stock  incentive  bonuses and  long-term  equity
incentives. Each component will be discussed below.

     In 1996, the Company through the efforts of its Chief Executive Officer and
the  Compensation  Committee,  retained  an  entirely  new  group  of  executive
officers,  some of whom  were  newly  hired by the  Company  and  others of whom
received promotions based upon their prior superior performance in non-executive
officer  positions  with the Company.  In 1996,  the Company  also  accepted the
resignations of, and negotiated  severance agreements with, all former executive
officers  (other  than its Chief  Executive  Officer  whose  term of  employment
commenced only on December 1, 1995). In addition,  in 1996 the Company  acquired
Lexford Properties which now, as the Company's wholly owned subsidiary, performs
all of the Company's fee based property management services. An integral part of
the  negotiation  of the Company's  acquisition  of Lexford  Properties  was the
structuring negotiation and documentation of terms of employment between Lexford
Properties,  Inc. and the former equity owners of Lexford  Properties engaged in
the active management of that entity, including, without limitation,  Patrick M.
Holder who is now an executive officer of the Company. In determining the annual
salaries of each new  executive  officer and  significant  employee  retained or
promoted  during  1996,  the  Compensation   Committee   retained  a  nationally
recognized executive compensation and benefits consultant in order to obtain and
benefit  from  its  advice  and  assistance  concerning  appropriate  levels  of
executive  compensation and information regarding compensation trends and levels
of compensation paid by comparable  companies  participating in the multi-family
residential  real estate  industry  generally.  The  Compensation  Committee met
several  times in 1996 and  thoroughly  deliberated  the  complete  compensation
packages payable to each such newly retained or promoted  executive  officer and
significant employee.

     Salaries for executive officers are reviewed by the Compensation  Committee
on an annual basis and may be increased based on (a) individual  performance and
contribution and (b) increases in competitive pay levels.

     The Compensation  Committee believes that the compensation  packages agreed
to with  its  executive  officers  and  other  significant  employees  genuinely
preserves its philosophical  objectives by placing  significant  emphasis on the
latter  two  components  of the  Compensation  Committee's  stated  compensation
components,  namely,  annual cash and stock incentive bonus and long term equity
incentives. In this regard, the Company's compensation arrangements are weighted
heavily towards incentive bonuses based upon the Company's financial performance
measured in terms of its earnings  before  interest,  taxes,  depreciation,  and
amortization without regard to extraordinary gains or losses ("Adjusted EBITDA")
and  awards of  restricted  stock  which will vest on the basis of growth in the
Company's  market  capitalization.  It  should  be noted  that the  Compensation
Committee,  in consultation  with the full Board,  the Company's Chief Executive
and  Financial  Officers  and  industry  analysts,  continued to refine the best
measure of the  Company's  growth in  financial  results  from  period to period
during 1996.  The Company  announced the results of these  deliberations  in its
Form 10-Q for the nine months ended  September 30, 1996 by stating that Adjusted
EBITDA  represented,  in the  Company's  view,  the best  measure  of  recurring
financial  performance  from period to period.  These  analyses  and  definitive
results represented in the opinion of the Compensation Committee, the full Board
and Company's management, a definitive departure from emphasizing  non-recurring
gains and  income  from the sale of  non-core  assets  thereby  re-defining  the
Company as a growth company with the goal of expanding its business, operations,
revenues,  assets and profits. In addition, in 1996, the Compensation  Committee
continued its expanding emphasis on stressing  compensation of management in the

                                       50

<PAGE>
                                       51


form of  management's  equity  ownership  in the  Company  as the best  means of
aligning the long-term  goals of  management  with the  long-terms  goals of the
Company's shareholders. A significant portion of management's compensation takes
the form of equity  ownership  in the  Company.  In this way,  the  Compensation
Committee  believes that Mr.  Bartling's  Chief Executive  Officer  compensation
package and the compensation  packages of the Company's other executive officers
implements  its goal of  aligning  his  interests  with  those of the  Company's
long-term investors.

     The  Compensation  Committee has  confirmed  that all base salaries for the
Company's  executive officers,  including Mr. Bartling's base compensation,  are
reasonable and competitive,  based upon the surveys  compiled by management,  as
well as the advice and  consultation  of the  representatives  of the consulting
firm.

Management Incentive Plan

     Annual bonuses for the executive  officers on account of the Company's 1996
fiscal year were governed by the Company's 1996 Incentive Compensation Plan (the
"Incentive   Compensation  Plan"),  which  was  specifically  designed  to  link
executive  compensation to the Company's  achieving  certain operating goals and
exceeding certain projected  increases in specific financial measures applicable
to the specific role in which each executive officer (and each other employee of
the Company  participating in the Incentive  Compensation Plan) is engaged.  The
financial  measures  include  Adjusted  EBIDTA for the Company's Chief Executive
Officer  and senior  financial  and legal  officers,  net income  from  property
management for the Company's property management employees, and return on equity
for  the  Company's  Investment   Management  division  employees  (i.e.,  those
employees  committed to maximizing  the Company's  return on its  investments in
real property assets).  Under the terms of the Incentive Compensation Plan, upon
achieving  increases  in  the  designated  financial  performance  measure  when
compared  to the  Company's  1995  results,  the  executive  officers  and other
participating employees are entitled to certain cash and stock awards.

     As discussed above and disclosed elsewhere in this Form 10-K, a significant
part of Mr. Bartling's  compensation package includes the award of the aggregate
of 42,500  shares of  restricted  stock  which  will vest in part based upon Mr.
Bartling's  continued  employment  and in part upon  increases in the  Company's
market  capitalization as well as the award of stock options and matching stock.
These awards were provided for in Mr.  Bartling's  Employment  Agreement,  which
became  effective on December 1, 1995,  while the shares of restricted  stock as
well as the stock  option  award were issued on April 5, 1996.  Similar  awards,
albeit in lesser  amounts,  were granted to the  Company's  new  Executive  Vice
President  and Chief  Financial  Officer  and Senior  Vice  President  when such
executive officers were retained in April 1996.

Deductibility

     The  Company  intends,   to  the  extent   practicable,   to  preserve  the
deductibility  under  the  Internal  Revenue  Code of  compensation  paid to its
executive officers,  while maintaining  compensation  programs that will attract
and retain its executives in a competitive environment; provided, that, in light
of the Company's  ability to offset current income taxes through the utilization
of net operating loss carry forwards and passive  activity loss carry  forwards,
the Compensation  Committee will consider  facilitating  executives'  ability to
defer taxable incentive compensation (thereby also deferring,  but not reducing,
the Company's  deductibility of such items).  In keeping with this philosophy to
provide for maximizing  compensation payable in the form of the Company's Common
Stock,  as well as to provide its  executives  with the ability to defer taxable
incentive compensation,  the Company adopted its Executive Deferred Compensation
Plan and Executive Deferred  Compensation  Rabbi Trust in 1996.  Pursuant to the
Executive Deferred Compensation Plan, the Company's highly compensated executive
officers  can elect to direct the  Company to issue any shares of the  Company's
Common Stock to The Provident  Bank,  as Trustee  under the  Executive  Deferred
Compensation  Rabbi  Trust,  rather  than  directly  to the  employee  otherwise
entitled  to  receive  the  shares  of  Common  Stock,   thereby  deferring  the
recognition  of taxable  income for  federal  income tax  purposes.  The Company
believes  that,  for the  foreseeable  future,  this practice will not otherwise
result in increased  income tax liability to the Company due to the availability
of net operating and passive activity loss carry forwards for federal income tax
purposes.

                                       51


<PAGE>
                                       52


Conclusion

     In conclusion, the Compensation Committee will enable the Company to retain
highly qualified executive  management and motivate its officers with respect to
the attainment of important goals and  objectives.  The  Compensation  Committee
believes the focus on Common Stock ownership by the executive officers and other
long-term stock programs has aligned and will continue to align the interests of
management with the interests of shareholders of the Company.  The  Compensation
Committee  further  believes  that its  continuing  efforts  to refine  the best
measures of the Company's  long-term growth and improving  financial results are
reflected in the terms of the 1996 Incentive Compensation Plan and will continue
to be reflected in future management incentive programs.

     The Compensation Committee of the Board of Directors

         Glenn C. Pollack, Chairman
         George R.  Oberer, Sr.
         Gerald E.  Wedren


                                       52

<PAGE>
                                       53


(h) PERFORMANCE GRAPH

     The graph below compares the  cumulative  total  shareholder  return on the
Company's  Common Stock, to that of the Dow Jones Real Estate  Investment  Index
and the Dow Jones Market Index.  In  calculating  cumulative  total  shareholder
return,  reinvestment of dividends is assumed.  This graph is shown for the four
full fiscal years in which the Company's  Common Stock  (Nasdaq:  CRSI) has been
registered  under the  Securities  Exchange  Act of 1934,  as amended.  [GRAPHIC
OMITTED]

                             VALUE OF $100 INVESTED AT 12/31/92
--------------------------------------------------------------------------------
                      | 12/31/92 | 12/31/93 | 12/31/94  |  12/31/95  | 12/31/96
----------------------|----------|----------|-----------|------------|----------
CRSI Market Value     |    100   |   250    |   350     |    583     |   687
----------------------|----------|----------|-----------|------------|----------
Dow Jones Real Estate |    100   |   112    |   103     |    121     |   150
----------------------|----------|----------|-----------|------------|----------
Dow Jones Equity Mkt  |    100   |   107    |   104     |    139     |   167
--------------------------------------------------------------------------------


                                       53

<PAGE>
                                       54


ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         --------------------------------------------------------------

                      SECURITY OWNERSHIP OF CERTAIN PERSONS

     On March 26, 1997, the Company had outstanding  4,445,531  shares of Common
Stock.  The  following  table sets forth the  information  as of March 26,  1997
regarding  Common  Stock  owned  beneficially  by (a) each  person  known by the
Company to own  beneficially  more than 5% of the Company's  outstanding  Common
Stock,  (b) each  director  of the Company and  executive  officer  named in the
Summary  Compensation  table above and (c) all present  executive  officers  and
directors of the Company as a group.

<TABLE>
<CAPTION>
                                                    AMOUNT AND
                                                     NATURE OF
               NAME AND ADDRESS OF                   BENEFICIAL            PERCENTAGE OF
                 BENEFICIAL OWNER                  OWNERSHIP(1)           COMMON STOCK(1)
---------------------------------------------  ------------------------  ----------------

<S>                                                 <C>      <C>            <C>
Bank of America National                            513,929                 11.56%
   Trust & Savings Association
333 South Hope Street
Los Angeles, CA  90071

Directors and Executive Officers  Named
in "Summary Compensation Table"

 John B. Bartling, Jr.                               64,940  (2)             1.46%

 Mark D. Thompson                                    33,181  (3)               *

 Paul R. Selid                                       19,372  (4)               *

 Michele R.  Souder                                   4,185  (5)               *

 Ronald P.  Koegler                                   6,399  (6)               *

 David P.  Blackmore                                 41,914  (7)               *

 Michael F.  Carbone                                 50,726  (8)             1.14%

 Robert V. Gothier, Sr.                              14,185  (9)(10)           *

 Joseph E. Madigan                                   15,079  (9)(11)           *

 George J. Neilan                                    10,962  (9)(12)           *

 George R. Oberer, Sr.                               31,579  (9)(13)           *

 Glenn C. Pollack                                    14,302  (9)(14)           *

 H. Jeffrey Schwartz                                 21,945  (9)(15)           *

 Gerald E. Wedren                                    11,291  (9)(16)           *

 Robert J. Weiler                                    47,589  (9)(17)         1.07%

 All present executive officers and directors       472,000  (18)           10.41%
 of the Company as a group (15 persons not
 including Messrs. Blackmore and Carbone)

------------------
* Less than one percent (1%)

                                       54
<PAGE>
                                       55

<FN>

(1)  The shares and percentages of Common Stock indicated in the table are based
     on  4,445,531  issued and  outstanding  shares of Common  Stock;  provided,
     however,  that in the event that the number of shares beneficially owned by
     a named  individual  or group  includes  the  shares  as to which the named
     person or group has the right to acquire beneficial  ownership on or before
     May 25, 1997, then in such event, in calculating the percentages shown, the
     number of the Company's  issued and  outstanding  shares of Common Stock is
     increased by a similar number of shares.

(2)  Mr. Bartling received awards of restricted Common Stock in the aggregate of
     54,440 shares under his Employment  Agreement and related Award  Agreements
     with the Company (see footnotes 2 and 3 to the Summary  Compensation  Table
     and footnote 1 to the Long-Term  Incentive  Plans Table).  This amount also
     includes 10,000 shares purchased by Mr. Bartling. This amount also includes
     500  shares of Common  Stock to be granted  to Mr.  Bartling  for the first
     quarter  of  the  1997   fiscal  year  in  lieu  of  an  increase  in  base
     compensation,  which is calculated based on the closing price of the Common
     Stock on December 31, 1996, which was $20.625.

(3)  Mr. Thompson received awards of restricted Common Stock in the aggregate of
     25,681  shares  under  the  his  Employment  Agreement  and  related  Award
     Agreements  with  the  Company  (see  footnotes  10 and  11 to the  Summary
     Compensation Table and footnote 2 to the Long-Term  Incentive Plans Table).
     This amount includes 5,000 shares  purchased by Mr.  Thompson.  This amount
     also includes 364 shares of Common Stock to be granted to Mr.  Thompson for
     the first  quarter of the 1997  fiscal  year in lieu of an increase in base
     compensation,  which is calculated based on the closing price of the Common
     Stock on December 31, 1996,  which was $20.625.  This amount also  includes
     2,500 currently  exercisable shares subject to an option to purchase 12,500
     shares which vests over five years.

(4)  Mr. Selid  received  awards of restricted  Common Stock in the aggregate of
     14,372  shares  under the  Incentive  Equity  Plan (see  footnote 16 to the
     Summary  Compensation Table and footnote 2 to the Long-Term Incentive Plans
     Table).  This amount  includes  2,500 shares  purchased by Mr. Selid.  This
     amount also  includes  2,500  currently  exercisable  shares  subject to an
     option to purchase 12,500 shares which vests over five years.

(5)  Ms. Souder received  awards of restricted  Common Stock in the aggregate of
     4,000  shares  under the  Incentive  Equity  Plan (see  footnote  24 to the
     Summary Compensation Table). This amount also includes 185 shares of Common
     Stock to be granted to Ms.  Souder for the first quarter of the 1997 fiscal
     year in lieu of an increase in base compensation, which is calculated based
     on the closing  price of the Common Stock on December  31, 1996,  which was
     $20.625.

(6)  Mr. Koegler  received 5,510 shares of Restricted  Stock under the Incentive
     Equity Plan, 4,500 shares of which are currently  exercisable.  Mr. Koegler
     received a currently  exercisable option to purchase 1,355 shares of Common
     Stock pursuant to the Trustee's  Second  Employee  Retention Plan which was
     approved  by  the   Bankruptcy   Court  during  the  Company's   bankruptcy
     proceedings.  Mr.  Koegler's  account is allocated with  approximately  343
     shares of Common  Stock  pursuant  to his  participation  in the  Company's
     401(k)  Plan.  This amount also  includes  121 shares of Common Stock to be
     granted to Mr.  Koegler  for the first  quarter of the 1997  fiscal year in
     lieu of an increase in base compensation,  which is calculated based on the
     closing price of the Common Stock on December 31, 1996, which was $20.625.

(7)  Mr. Blackmore  received 24,061 shares of Restricted Stock, which has vested
     under the Incentive  Equity Plan.  Mr.  Blackmore also received an award of
     deferred  Common Stock (the  "Deferred  Stock") under the Incentive  Equity
     Plan of 7,619  shares,  contingent  upon (i) the average price per share of
     the  Common  Stock  during the  six-month  period  from  March 11,  1995 to
     September 11, 1995 being at least $3.93 and (ii) Mr. Blackmore being in the
     employ of the Company on September 11, 1995. The Compensation  Committee of
     the Board of Directors  accelerated  the vesting of the Deferred  Stock and
     such shares were issued to Mr. Blackmore on January 18, 1995. Mr. Blackmore
     also received stock option grants of 4,378 shares pursuant to the Trustee's
     Second Employee  Retention Plan which was approved by the Bankruptcy  Court
     during the Company's bankruptcy  proceedings.  Mr. Blackmore exercised such
     option and retained these shares.  Mr.  Blackmore has been  attributed with
     1,758 shares of Common Stock pursuant to his participation in the Company's
     401(k) plan. Mr.  Blackmore also received 535 shares for an unsecured Claim
     under the Plan of Reorganization.  Mr. Blackmore  purchased 1,300 shares of
     Common  Stock in April 1995.  Mr.  Blackmore  sold 2,000  shares in January
     1997. Mr.  Blackmore has been  attributed  with 4,263 shares which he is to
     receive  pursuant to his Severance  Agreement  and Mutual  Release with the
     Company.

                                       55

<PAGE>
                                       56

(8)  Mr.  Carbone,  the  Company's  former  Chief  Financial  Officer  and  Vice
     President,  received an award of restricted  Common Stock (the  "Restricted
     Stock") equal to 0.75% of the Company's  Total  Committed  Equity under the
     Incentive Equity Plan,  estimated to be 30,076 shares of Restricted  Stock.
     Mr.  Carbone  received an award of  deferred  Common  Stock (the  "Deferred
     Stock") equal to 0.04% of the Company's  Total  Committed  Equity under the
     Incentive  Equity Plan,  estimated to be 1,604 shares,  contingent upon (i)
     the average price per share of the Common Stock during the six-month period
     from March 11, 1995 to September 11, 1995 being at least $3.93 and (ii) Mr.
     Carbone  being in the employ of the  Company on  September  11,  1995.  The
     Compensation Committee of the Board of Directors accelerated the vesting of
     the  Deferred  Stock and such shares were issued to Mr.  Carbone on January
     18, 1995. Mr. Carbone has been attributed with 2,288 shares of Common Stock
     pursuant to his participation in the Company's 401(k) Savings Plan in which
     the Company  matches a portion of an  employee's  contribution.  InnVestors
     Limited, of which Mr. Carbone was President and is a shareholder,  received
     14,758  shares of Common  Stock for an  unsecured  Claim  under the Plan of
     Reorganization. Mr. Carbone also purchased 2,000 shares of Common Stock.

(9)  Each  non-employee  director of the  Company was granted a stock  option to
     purchase  7,500  shares of Common  Stock equal to 0.1875% of the  Company's
     Total Committed Equity. The options are exercisable to the extent of 10% of
     the shares of Common  Stock  covered by the grant  after the  optionee  has
     served  continuously as a director of the Company for six months and to the
     extent of an  additional  10% of such  shares  after  each of the next nine
     successive six month periods of continuous service; therefore, 6,750 shares
     of Common  Stock  underlying  this stock  option are  attributable  to each
     non-employee  director (except Mr. Gothier, who has exercised his option to
     purchase  3,750  shares,   leaving  an  option  to  purchase  3,000  shares
     exercisable within 60 days), because such shares will be exercisable within
     60 days based on the  commencement of each director's term on September 11,
     1992. In addition, on December 1, 1995, each director was granted an option
     to purchase  2,000 shares of Common Stock,  with an exercise price equal to
     $17.25 and a vesting  period of the  earlier of one year or the period from
     the date of the grant to the next annual  meeting of  shareholders.  On May
     23, 1996,  each director was granted an option to purchase  2,000 shares of
     Common Stock,  with an exercise price of $21.25 and a vesting period of the
     earlier  of one year or the  period  from the date of the grant to the next
     annual meeting of  shareholders.  All such shares  underlying the foregoing
     options are attributed to each  non-employee  director  because such shares
     are exercisable or will be exercisable within 60 days.

(10) This  amount  includes  (a) 300  shares of Common  Stock  purchased  by Mr.
     Gothier  through his  Individual  Retirement  Account,  (b) 2,375 shares of
     Common Stock purchased by RVG Management and Development  Company, of which
     Mr.  Gothier is President and a  shareholder,  (c) 760 shares of restricted
     Common Stock granted to Mr. Gothier  pursuant to his  participation  in the
     Company's Non-Employee Director Restricted Stock Plan, in which he received
     such shares in lieu of  director's  fees and (d) 3,750 shares  purchased by
     Mr. Gothier through the exercise of a stock option.

(11) Mr.  Madigan  received an award of  restricted  Common Stock on December 1,
     1995 and December 1, 1996 (the "1996  Award"),  each in the amount of 2,000
     shares under the  Incentive  Equity  Plan,  each of which will vest equally
     over a three year period  from the date of grant.  Mr.  Madigan  elected to
     defer the  receipt of the  shares  subject  to the 1996  Award,  which were
     instead issued to the Cardinal  Realty  Service,  Inc.  Executive  Deferred
     Compensation   Rabbi  Trust.  This  amount  also  includes  329  shares  of
     restricted   Common  Stock   granted  to  Mr.   Madigan   pursuant  to  his
     participation in the Company's Non-Employee Director Restricted Stock Plan,
     in which he received such shares in lieu of director's fees.

(12) This amount  includes 212 shares of restricted  Common Stock granted to Mr.
     Neilan pursuant to his participation in the Company's Non-Employee Director
     Restricted  Stock  Plan,  in  which  he  received  such  shares  in lieu of
     director's fees.

(13) This amount  includes (a) 5,788  shares of Common Stock  received by Oberer
     Development  Company,  of which Mr. Oberer is President and a  shareholder,
     for an unsecured  claim under the  Company's  Plan of  Reorganization,  (b)
     14,000  shares of Common Stock held by Mr.  Oberer,  individually,  and (c)
     1,041 shares of restricted  Common Stock granted to Mr. Oberer  pursuant to
     his participation in the Company's  Non-Employee  Director Restricted Stock
     Plan, in which he received such shares in lieu of director's fees.

(14) This amount  includes (a) 2,500 shares of Common Stock held by Mr. Pollack,
     individually,  and (b) 1,052 shares of  restricted  Common Stock granted to
     Mr. Pollack  pursuant to his  participation  in the Company's  Non-Employee
     Director Restricted Stock Plan, in which he received such shares in lieu of
     director's fees.

                                       56

<PAGE>
                                       57

(15) This  amount  includes  (a)  10,000  shares  of  Common  Stock  held by Mr.
     Schwartz,  individually,  and (b) 1,195 shares of  restricted  Common Stock
     granted to Mr.  Schwartz  pursuant to his  participation  in the  Company's
     Non-Employee  Director  Restricted  Stock Plan,  in which he received  such
     shares in lieu of director's fees.

(16) This amount  includes 541 shares of restricted  Common Stock granted to Mr.
     Wedren pursuant to his participation in the Company's Non-Employee Director
     Restricted  Stock  Plan,  in  which  he  received  such  shares  in lieu of
     director's fees.

(17) This amount includes (a) 36,000 shares of Common Stock held by Mr. Weiler's
     wife and (b) 839 shares of  restricted  Common Stock  granted to Mr. Weiler
     pursuant  to his  participation  in  the  Company's  Non-Employee  Director
     Restricted  Stock  Plan,  in  which  he  received  such  shares  in lieu of
     director's fees.

(18) This  amount  includes  shares  individually  held  by  the  directors  and
     executive  officers  listed in this chart excluding  Messrs.  Blackmore and
     Carbone,  former executive officers.  This amount also includes shares held
     by or  attributed  to Patrick  M.  Holder  and  Michael F. Sosh,  executive
     officers of the Company.  Mr. Holder received  175,000 shares of Restricted
     Stock in connection with the Company's  acquisition of Lexford  Properties,
     of which  125,000  shares are subject to  forfeiture  if the  Company's net
     income  from  property  management  operations  does  not  achieve  certain
     specified  increases  during the three full  fiscal  years  ending with the
     Company's 1999 fiscal year.
</FN>
</TABLE>

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

     Joseph E. Madigan, Chairman of the Company's Board of Directors, received a
retainer in 1996 of $4,000 per month  (which  amount was  increased  in December
1996 to $5,000 per month).  Mr. Madigan also received in December 1996, and will
receive  annually  during his tenure as  chairman,  an award of 2,000  shares of
restricted  Common  Stock,  one-third of which shares vest annually over a three
year period.

     H. Jeffrey Schwartz,  director of the Company, is a partner in the law firm
of Benesch,  Friedlander,  Coplan & Aronoff LLP,  which serves as outside  legal
counsel to the Company.

     Robert J. Weiler,  a director of the  Company,  is a principal of Americana
Investment  Company,  the lessor of the building housing the Company's principal
executive  offices.  Mr. Weiler did not participate in the Company's decision to
relocate to the headquarters or in the lease  negotiations.  Management believes
that the lease terms for the Company's  executive  offices are competitive  with
commercial lease rates in the Columbus,  Ohio market.  The annual lease payments
are as follows:

    1997 (thru 10/31)          $282,580                       ($6.50/sq.ft.)

                                     PART IV

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

     (a)  Documents filed as part of this report:

          1.   Financial Statements:  The Audited Consolidated Balance Sheets of
               the Company and  Subsidiaries  as of December  31, 1996 and 1995,
               and the related Consolidated Statements of Income,  Shareholders'

               Equity and Cash Flows of the  Company  and  Subsidiaries  for the
               years ended December 31, 1996, 1995 and 1994.

          2.   Consolidated  Financial Statement  Schedules:  (See the financial
               statement  schedules  listed on Index to  Consolidated  Financial
               Statement Schedules on Page F-1 of this report).

                                       57

<PAGE>
                                       58

          3.   Exhibits:

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

           (a)  Documents filed as part of this report:

                1.   Financial Statements: The Audited
                     Consolidated Balance Sheets of the Company
                     and Subsidiaries as of December 31, 1996 and
                     1995, and the related Consolidated
                     Statements of Income, Shareholders' Equity
                     and Cash Flows of the Company and
                     Subsidiaries for the years ended December
                     31, 1996, 1995 and 1994.

                2.   Consolidated Financial Statement Schedules:
                     (See the financial statement schedules
                     listed on Index to Consolidated Financial
                     Statement Schedules on Page F-1 of this
                     report).

                3.   Exhibits:

                                  EXHIBIT INDEX

EXHIBIT                                        SEQUENTIAL
 NO.              DESCRIPTION                     PAGE

  2.1    Third Amended Disclosure        Incorporated by
         Statement Pursuant to           reference to  Exhibit
         Section 1125 of Bankruptcy      2.1 to the
         Code to Accompany               Company's
         the Plan of Reorganization      Registration Statement
         of Jay Alix, Chapter            on Form 10 (the "Form
         11 Trustee for Cardinal         10")
         Industries, Inc. and its
         Substantively Consolidated
         Subsidiaries and
         Third Amended Plan of
         Reorganization of Jay
         Alix, Chapter 11 Trustee,
         for Cardinal Industries,
         Inc. and its Substantively
         Consolidated Subsidiaries

  2.2    Findings of Fact, Conclusions   Incorporated by
         of Law and Order Confirming     reference to  Exhibit
         Third Amended Plan of           2.2 to the Form 10
         Reorganization of Jay Alix,
         Chapter 11 Trustee,
         for Cardinal Industries,
         Inc. and its Substantively
         Consolidated Subsidiaries

  3.1    Amended and Restated Articles   Incorporated  by
         of Incorporation filed          reference to  Exhibit
         September 11, 1992 with the     3.1 to the Form 10
         Ohio Secretary of State
         of State

  3.2    Certificate of Amendment to     Incorporated  by
         the Articles of                 reference  to  Exhibit
         Incorporation filed October     3.2 to the Form 10
         27, 1992 with the
         Ohio Secretary of State

 3.3     Certificate of Amendment to     Incorporated by reference to Exhibit
         the Articles of                 3.3 to the Company's Annual Report
         Incorporation filed January     on Form 10-K for the fiscal year ended
         9, 1996 with the Ohio           December 31, 1995
         Secretary of State              (the "1995 Form 10-K")

  3.4    Amended Code of Regulations     Incorporated by reference to Exhibit
                                         3.3 to the Company's Annual Report on
                                         Form  10-K for the  fiscal  year  ended
                                         December 31, 1993 (the "1993 Form
                                         10-K")

  4.1    Form of Common Stock            Incorporated by reference to Exhibit
         Certificate                     4.1 to Form 10

                                       58
<PAGE>
                                       59

EXHIBIT                                        SEQUENTIAL
 NO.              DESCRIPTION                     PAGE

 10.1    Loan and Security Agreement,    Incorporated by
         dated as of August              reference to Exhibit
         11, 1995, between The           10.1 to the 1995 Form
         Provident Bank and the          10-K
         Company and certain of its
         subsidiaries

 10.2    Cognovit Promissory  Note       Incorporated by
         dated August 11, 1995           reference to Exhibit
         in the amount of $22,000,000    10.2 to the 1995 Form
         issued by the                   10-K
         Company and certain of its
         subsidiaries in favor of
         The Provident Bank.

 10.3    Cognovit Promissory Note        Incorporated by
         dated August 11, 1995           reference to Exhibit
         in the amount of $3,000,000     10.3 to the 1995 Form
         issued by the Company           10-K
         and certain of its
         subsidiaries in favor of The
         Provident Bank.

 10.4    Cognovit Promissory Note        Incorporated by
         dated August 11, 1995           reference to Exhibit
         in the amount of $7,000,000     10.4 to the 1995 Form
         issued by the Company           10-K
         and certain of its
         subsidiaries in favor of The
         Provident Bank.

 10.5    Agreement for Modification      Incorporated by
         of Management                   reference to Exhibit
         Agreement dated as of August    10.5 to the 1995 Form
         11, 1995 among                  10-K
         Cardinal Apartment
         Management Group, Inc., the
         Company and certain of its
         subsidiaries

 10.6    Assignment of Management        Incorporated by
         Contracts dated August          reference to Exhibit
         11, 1995 between Cardinal       10.6 to the 1995 Form
         Apartment Management            10-K
         Group, Inc. and The
         Provident Bank

 10.7    Stock Pledge Agreement dated    Incorporated by
         August 11, 1995                 reference to Exhibit
         between Cardinal Realty         10.7 to the 1995 Form
         Services, Inc. and The          10-K
         Provident Bank

 10.8    Stock Pledge Agreement dated    Incorporated by
         August 11, 1995                 reference to Exhibit
         between Cardinal Industries     10.8 to the 1995 Form
         of Texas, Inc. and The          10-K
         Provident Bank

 10.9    Stock Pledge Agreement dated    Incorporated by
         August 11, 1995                 reference to Exhibit
         between Cardinal Industries     10.9 to the 1995 Form
         Development                     10-K
         Corporation and The
         Provident Bank

10.10    Stock Pledge Agreement dated    Incorporated  by
         August 11, 1995                 reference to Exhibit
         between Cardinal Realty         10.10 to the 1995
         Company and The                 Form 10-K
         Provident Bank

10.11    Limited Power of Attorney       Incorporated by
         dated August 11, 1995           reference to Exhibit
         by certain subsidiaries of      10.11 to the 1995
         the Company to the              Form 10-K
         Company

                                       59

<PAGE>
                                       60


EXHIBIT                                        SEQUENTIAL
 NO.              DESCRIPTION                     PAGE

10.12    Limited Power of Attorney       Incorporated by
         dated August 11, 1995           reference to Exhibit
         by the Company and certain      10.12 to the 1995
         of its subsidiaries to          Form 10-K
         The Provident Bank

10.13    Waiver Agreement dated          Incorporated by
         August 11, 1995 among           reference to Exhibit
         The Provident Bank and the      10.13 to the 1995
         Company and certain             Form 10-K
         of its subsidiaries

10.14    Post Closing Agreement dated    Incorporated by
         as of August 11,                reference to Exhibit
         1995 among The Provident        10.14 to the 1995
         Bank and the Company            Form 10-K
         and certain of its
         subsidiaries

10.15    Form of Management Agreement    Incorporated by
         between Cardinal                reference to Exhibit
         Apartment Management Group,     10.10 to the Form 10
         Inc. and certain
         Properties

10.16    Form of Management Agreement    Incorporated by
         between Cardinal                reference to Exhibit
         Apartment Management Group,     10.16 to the 1995
         Inc. (which was                 Form 10-K
         merged with and into the
         Company) and certain of
         the Properties (as amended
         August 11, 1995)

10.17    Form of Partnership Asset       Incorporated by
         Management Agreement            reference to Exhibit
         between Cardinal Industries     10.11 to the Form 10
         Services Corporation
         and certain Properties

10.18    Form of Extended Partnership    Incorporated by
         Administration                  reference to Exhibit
         Agreement between Cardinal      10.12 to the Form 10
         Industries, Inc. and
         certain Properties

10.19    Form of Agreement for Tax       Incorporated by
         Appeal Services                 reference to Exhibit
         between the Company and         10.13 to the Form 10
         certain Properties

10.20    Asset Purchase Agreement        Incorporated by
         dated April 24, 1991,           reference to Exhibit
         among Economy Lodging           10.14 to the Form 10
         Systems, Inc., HMS
         Property Management Group,
         Inc., Cardinal
         Industries, Inc. and
         Cardinal Industries Services
         Corporation

10.21    Lease, dated September 24,      Incorporated by
         1992, between the               reference to Exhibit
         Company and the Americana       10.15 to the Form 10
         Investment Company

10.22    Term Lease Master Agreement     Incorporated by
         and Term Lease reference to     Exhibit
         Supplement, dated October 6,    10.16 to the Form 10
         1992, between the Company and
         IBM Credit Corporation

                                       60

<PAGE>
                                       61


10.23    Bankruptcy  Court  Orders,      Incorporated  by
         entered  June  28,  1990        reference to Exhibit
         and July 27, 1990,  approving   10.17 to the Form 10
         Trustee's First Employee
         Retention Plan

10.24    Bankruptcy Court Order,         Incorporated by
         entered April 3, 1992,          reference to Exhibit
         approving Trustee's Second      10.18 to the Form 10
         Employee Retention
         Plan

10.25    Description of Cash Bonus       Incorporated by
         Plan of the Company             reference to Exhibit
                                         10.28 to the Form 10

10.26    1992  Incentive Equity  Plan    Incorporated by
         of the Company, as              reference to Exhibit
         amended (effective November     10.26 to the 1995
         30, 1995)                       Form 10-K

10.27    Tax  Obligation  Loan  Program  Incorporated by
         of the Company                  reference to Exhibit
                                         10.30 to the Form 10

10.28    Form of Deferred Shares         Incorporated by
         Agreement for Employees         reference to Exhibit
         of the Company                  10.31 to the Form 10

10.29    Form  of Restricted  Shares     Incorporated by
         Agreement for Key               reference to Exhibit
         Employees of the Company        10.32 to the Form 10

10.30    Form  of Restricted Shares      Incorporated by
         Agreement for Executive         reference to Exhibit
         Officers of the Company         10.33 to the Form 10

10.31    Form of Non-Qualified Stock     Incorporated by
         Option Agreement for            reference to Exhibit
         Participants in Trustee's       10.33 to the Form 10
         Employee Retention Plan

10.32    Form of Non-Qualified Stock     Incorporated by
         Option Agreement for            reference to Exhibit
         Non-Employee Directors          10.36 to the Form 10

10.33    Form of Indemnification         Incorporated by
         Agreement between the           reference to Exhibit
         Company and its officers and    10.37 to the Form 10
         directors

10.34    Undeliverable Distributions     Incorporated by
         Trust dated as of               reference to Exhibit
         September 11, 1992, between     10.38 to the Form 10
         The Company and
         James H. Bownas, Trustee

10.35    401(k) Plan of the Company      Incorporated by
                                         reference to Exhibit
                                         10.41 to the Form 10

10.36    Premium Finance Agreement       Incorporated by
         dated September 12,             reference to Exhibit
         1995 between the Company and    10.36 to the 1995
         Transamerica                    Form 10-K
         Insurance Finance Corporation

                                       61
<PAGE>
                                       62


10.37    Premium Finance  Agreement      Incorporated by
         dated December 4, 1995          reference to Exhibit
         between the Company and         10.37 to the 1995
         First Premium                   Form 10-K
         Services, Inc.

10.38    Employment Agreement dated      Incorporated by
         as of December 1,               reference to Exhibit
         1995 between the Company and    10.38 to the 1995
         John B. Bartling,               Form 10-K
         Jr., President and Chief
         Executive Officer of the
         Company

10.39    Severance Agreement and         Filed as an Exhibit
         Mutual Release dated as         to this Form 10-K
         of September 4, 1996 between
         the Company and
         David P. Blackmore

10.40    Severance Agreement and         Filed as an Exhibit
         Mutual Release dated as         to this Form 10-K
         of January 16, 1996 between
         the Company and
         Michael F. Carbone

10.41    Assumption of Loan and          Filed as an Exhibit
         Security  Agreement dated       to this Form 10-K
         as of February 26, 1997
         between The  Provident
         Bank and
         Lexford Properties, Inc.

 11.1    Statement re: computation of    See Index to
         per share earnings              Financial Information -
                                         Note 1 in the Notes
                                         to Consolidated
                                         Financial Statements


 21.1    Subsidiaries of The Company     Filed as an Exhibit
                                         to the 1995 Form 10-K

  27     Financial Data Schedule         Filed as an Exhibit
                                         to this Form 10-K

  99     Individual Property             Filed as an Exhibit
         Financial Information           to this Form 10-K
         Summary

                                       62

<PAGE>
                                       63


                                   SIGNATURES

Pursuant to 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, hereunto duly authorized.

                                 CARDINAL REALTY
                                 SERVICES, INC.
                                  (Registrant)

Date:  March 28,  1997       By: /s/ John B. Bartling, Jr.
                                     ----------------------
                                     John B. Bartling, Jr.,

                                     President and Chief Executive Officer

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

Signature                      Title                              Date
---------                      -----                              -----


/s/ Joseph E. Madigan          Chairman of the Board              March 28, 1997
-----------------------------
Joseph E. Madigan

/s/ John B. Bartling, Jr.      President, Chief Executive         March 28, 1997
-----------------------------  Officer and Director
John B. Bartling, Jr.

/s/ Mark D. Thompson           Executive Vice President and       March 28, 1997
-----------------------------  Chief Financial Officer
Mark D. Thompson

/s/ Ronald P. Koegler          Vice President and Controller      March 28, 1997
-----------------------------
Ronald P. Koegler

/s/ Robert V. Gothier, Sr.     Director                           March 28, 1997
-----------------------------
Robert V. Gothier, Sr.

/s/ George J. Neilan           Director                           March 28, 1997
-----------------------------
George J. Neilan

/s/ George R. Oberer, Sr.      Director                           March 28, 1997
-----------------------------
George R. Oberer, Sr.

/s/ Glenn C. Pollack           Director                           March 28, 1997
-----------------------------
Glenn C. Pollack

/s/ H. Jeffrey Schwartz        Director                           March 28, 1997
-----------------------------
H. Jeffrey Schwartz

/s/ Gerald E. Wedren           Director                           March 28, 1997
-----------------------------
Gerald E. Wedren

/s/ Robert J. Weiler           Director                           March 28, 1997
-----------------------------
Robert J. Weiler

                                       63

<PAGE>
                                       64



     SUPPLEMENTAL  INFORMATION  TO BE FURNISHED  WITH REPORTS FILED  PURSUANT TO
SECTION 15(d) OF THE ACT BY  REGISTRANTS  WHICH HAVE NOT  REGISTERED  SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.


     No annual  report  or proxy  materials  have been sent to the  Registrant's
shareholders.   An  annual  report  and  proxy  materials  are  expected  to  be
distributed on or about May 15, 1997 to  shareholders  of record on or about May
13, 1997.

                                       64
<PAGE>
                                       65


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




FINANCIAL STATEMENTS

Audited Financial Information - Cardinal Realty Services, Inc. and Subsidiaries

   Report of Independent Auditors............................................F-2

   Consolidated Balance Sheets at December 31, 1996 and 1995.................F-3

   Consolidated Statements of Income for the years ended
        December 31, 1996, 1995 and 1994 ....................................F-4

   Consolidated Statements of Shareholders' Equity for the
        years ended December 31, 1996, 1995 and 1994 ........................F-5

   Consolidated Statements of Cash Flows for the years ended
        December 31, 1996, 1995 and 1994 ..............................F-6 - F-7

   Notes to Consolidated Financial Statements.........................F-8 - F-32

   Consolidated Financial Statement Schedules:

        Schedule II - Valuation and Qualifying Accounts.....................F-33

        Schedule III - Real Estate and Accumulated Depreciation......F-34 - F-40

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


                                       F-1
<PAGE>
                                       66



                         REPORT OF INDEPENDENT AUDITORS





Shareholders and Board of Directors
Cardinal Realty Services, Inc.


We have audited the accompanying  consolidated balance sheets of Cardinal Realty
Services, Inc. and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three  years in the period  ended  December  31,  1996.  Our audits  also
included the financial  statement  schedules listed in the  accompanying  index.
These financial statements and schedules are the responsibility of the Company's
management.  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  consolidated  financial  position  of
Cardinal Realty  Services,  Inc. and subsidiaries at December 31, 1996 and 1995,
and the  consolidated  results of their operations and their cash flows for each
of the three years in the period ended  December 31, 1996,  in  conformity  with
generally  accepted  accounting  principles.  Also, in our opinion,  the related
financial  statement  schedules,  when  considered  in  relation  to  the  basic
financial  statements taken as a whole,  present fairly in all material respects
the information set forth therein.

The Consolidated Financial Statements for 1994 have been restated to reflect the
changes with respect to income taxes as described in Note 1.


/s/ ERNST & YOUNG LLP

Columbus, Ohio
March 6, 1997

                                       F-2

<PAGE>
                                       67


<TABLE>
                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1996 AND 1995

<CAPTION>
                                                                                 1996                 1995
                                                                          ------------------   ------------------
                                  ASSETS
<S>                                                                           <C>                  <C>
Wholly Owned Properties (Notes 2 and 5):
  Land....................................................................     $23,652,841          $24,082,635
  Building and Improvements...............................................     137,917,083          140,251,420
                                                                          ------------------   ------------------
                                                                               161,569,924          164,334,055
  Accumulated Depreciation................................................      (4,478,379)                   0
                                                                          ------------------   ------------------
                                                                               157,091,545          164,334,055

Interests in and Receivables from Syndicated Partnerships (Notes 3 and 14)      54,610,421           52,591,444

Cash....................................................................         3,593,121            2,751,986

Accounts Receivable, Affiliates ($4,089,328 and $3,935,466, net
  of an allowance of $2,034,290 and  $2,468,845, at December 31,
  1996 and 1995, respectively), Residents and Officers (Note 14)..........       5,044,603            5,088,478

Furniture, Fixtures and Other, Net .......................................       1,167,579            1,312,228
Funds Held in Escrow (Note 1).............................................      14,011,013            9,390,610
Prepaids and Other (Note 1)...............................................       9,849,497            3,930,099
                                                                          ------------------   ------------------
                                                                              $245,367,779         $239,398,900
                                                                          ==================   ==================

                    LIABILITIES AND SHAREHOLDERS' EQUITY

Mortgages, Term Debt and Other Notes Payable:
  Non Recourse Mortgages on Wholly Owned Properties (Note 5)..............    $148,056,017         $148,188,111
  Term Debt (Note 4)......................................................      15,118,048           20,470,205
  Other Notes Payable (Note 7) ...........................................         145,220            1,453,553
                                                                          ------------------   ------------------
                                                                               163,319,285          170,111,869

Accounts Payable..........................................................       1,560,749            1,350,641
Accrued Interest, Real Estate and Other Taxes.............................       4,023,310            4,532,148
Other Accrued Expenses....................................................       8,531,031            9,716,866
Other Liabilities (Note 8)................................................       5,424,226            2,441,282
                                                                          ------------------   ------------------
  Total Liabilities.......................................................     182,858,601          188,152,806
                                                                          ------------------   ------------------

Commitments and Contingencies (Notes  9, 10, 12)

Shareholders' Equity (Notes 1 and 9):
  Preferred Stock, 1,500,000 shares authorized, unissued..................               0                    0

  Common Stock, 13,500,000 shares authorized with no
    stated value, 3,892,600 and 3,603,160 shares issued and
    outstanding, at December 31, 1996 and 1995, respectively..............      29,122,547           29,122,547

  Additional Paid-in Capital..............................................      15,968,426            8,461,216
  Retained Earnings.......................................................      17,418,205           13,662,331
                                                                          ------------------   ------------------
                                                                                62,509,178           51,246,094
                                                                          ------------------   ------------------
                                                                              $245,367,779         $239,398,900
                                                                          ==================   ==================
<FN>
                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>

                                       F-3

<PAGE>
                                       68


<TABLE>

                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<CAPTION>

                                                                                     1996               1995             1994
                                                                              ------------------- ------------------ ---------------
Revenues, primarily from Affiliates (Note 14):
<S>                                                                                  <C>                <C>             <C>
   Rental and Other Revenues - Wholly Owned Properties (Note 2)...............       $41,276,684
   Fee Based..................................................................        13,651,042        $15,168,982     $15,278,518
   Interest, Principally from Syndicated Partnerships.........................         8,897,233          4,361,497       2,703,112
   Income from Disposal of Non-Core Assets-Net................................           962,761          3,408,379       3,189,067
   Other......................................................................           513,270            737,571       1,429,328
                                                                              ------------------- ------------------ ---------------
                                                                                      65,300,990         23,676,429      22,600,025
                                                                              ------------------- ------------------ ---------------

Expenses:
   Rental Operating ..........................................................        21,129,433
   Fee Based..................................................................         9,366,777          8,667,358       9,003,485
   Administration.............................................................         5,030,967          4,399,349       3,993,435
   Restructure Costs in 1996 and 1995, Tender Offer costs in 1994 (Note 11)...           242,899          1,537,073         977,266
   Interest - Wholly Owned Property Debt (Note 5).............................        14,131,780                  0               0
   Interest - Corporate Debt..................................................         1,098,333          1,522,087       1,643,368
   Depreciation and Amortization (Note 2).....................................         5,514,571            537,849         447,528
                                                                              ------------------- ------------------ ---------------
                                                                                      56,514,760         16,663,716      16,065,082
                                                                              ------------------- ------------------ ---------------

Income Before Income Taxes and Extraordinary Item.............................         8,786,230          7,012,713       6,534,943
Provision for Income Taxes (Notes 1 and 10):
   Credited to Additional Paid-in Capital.....................................         3,166,000          2,356,000       2,390,000
   Current....................................................................           250,000            364,000         201,000
                                                                              ------------------- ------------------ ---------------
Income Before Extraordinary Item..............................................         5,370,230          4,292,713       3,943,943

Extraordinary (Loss) / Gain, Net of Income Tax Benefit/(Provision) of
$1,015,000 in 1996 and ($510,000) and ($2,074,000), in 1995 and 1994,
respectively (Note 6).........................................................        (1,614,356)           804,022       3,155,901
                                                                              ------------------- ------------------ ---------------
Net Income....................................................................        $3,755,874         $5,096,735      $7,099,844
                                                                              =================== ================== ===============

Net Income per Common Share:
   Income before Extraordinary Item..........................................   $           1.37       $       1.11    $       1.02
   Extraordinary Item........................................................              (0.41)              0.21            0.82
                                                                              ------------------- ------------------ ---------------
   Net Income................................................................   $           0.96       $       1.32    $       1.84
                                                                              =================== ================== ===============
Weighted Average Common Shares Outstanding...................................          3,933,000          3,850,000       3,850,000
                                                                              =================== ================== ===============

<FN>
                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>
                                       F-4

<PAGE>
                                       69
<TABLE>

                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<CAPTION>

                                                               Common Stock
                                                         --------------------------
                                                                                      Additional      Retained
                                                           Shares        Amount     Paid-in Capital   Earnings         Total
                                                         ------------ ------------- --------------- -------------- ---------------
<S>                                                         <C>         <C>             <C>            <C>             <C>
Balance, January 1, 1994 ..............................     2,383,414   $29,122,547      $1,096,000     $1,465,752     $31,684,299

  Shares issued in 1994, principally in connection with
  claims resolution process (Note 1) ..................     1,161,509

  Less:  Treasury shares issued to wholly owned
         partnerships and subsidiaries, and
         unclaimed shares related to bankruptcy claims
         (Note 1) .....................................      (136,296)

  Credit from utilization of pre-confirmation tax
  benefits (Note 10) ...................................                                  4,464,000                      4,464,000

  Net Income for the year ended December 31, 1994 .....                                                  7,099,844       7,099,844
                                                       -------------- ------------- --------------- ---------------   ------------
Balance, December 31, 1994.............................     3,408,627    29,122,547       5,560,000      8,565,596      43,248,143

  Shares issued in 1995, principally in connection with
  the claims resolution process (Note 1) ..............       183,354

  Exercise of options under Non-Qualified Stock Option
  Plan (Note 9) .......................................        15,303                        35,216                         35,216

  Less:  Treasury  Shares  Issued to wholly  owned
         partnerships and subsidiaries (Note 1) .......        (4,124)

  Credit from utilization of pre-confirmation tax
  benefits (Note 10) ..................................                                   2,866,000                      2,866,000

  Net Income for the year ended December 31, 1995......                                                  5,096,735       5,096,735
                                                       -------------- ------------- --------------- -------------- ---------------
Balance, December 31, 1995.............................     3,603,160    29,122,547       8,461,216     13,662,331      51,246,094
                                                       -------------- ------------- --------------- -------------- ---------------

  Shares issued in 1996, in connection with the claims
  resolution process (Note 1) .........................         6,670

  Shares issued in connection with Lexford Acquisition
  (Note 1).............................................       700,000                    14,000,000                     14,000,000

     Contingent........................................      (450,000)                   (9,000,000)                    (9,000,000)

  Exercise of options under Non-Qualified Stock Option
  Plan (Note 9) .......................................        34,308                        61,671                         61,671

  Restricted stock compensation awards and Director
  Restricted Stock Plan ...............................                                     325,869                        325,869

  Less: Treasury Shares primarily from the redemption
  in 1996 of stock held by Syndicated Partnerships ....        (1,538)                      (31,330)                       (31,330)

  Credit from utilization of pre-confirmation tax
  benefits (Note 10) ..................................                                   2,151,000                      2,151,000

  Net Income for the year ended December 31, 1996......                                                  3,755,874       3,755,874
                                                       -------------- ------------- --------------- -------------- ----------------
Balance, December 31, 1996.............................     3,892,600   $29,122,547     $15,968,426    $17,418,205     $62,509,178
                                                       ============== ============= =============== ============== ================

<FN>
                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>

                                       F-5
<PAGE>
                                       70



<TABLE>
                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>

                                                                                     1996              1995               1994
                                                                               ----------------- ----------------- -----------------
<S>                                                                               <C>               <C>               <C>
Cash flows provided by Operating activities:
Management and Investment Management activities:

   Cash received from Fee Based activities......................................   $22,414,166       $22,173,861       $20,010,063
   Cash received from Interests in and Receivables from Syndicated Partnerships.     9,074,008         4,965,246         2,500,272
   Cash receipts -- other.......................................................     2,170,253         3,261,207         1,274,820
   Cash paid to Vendors, Suppliers and Employees................................   (21,784,246)      (21,784,640)      (18,823,050)
   Interest paid on Term Debt and Other Notes Payable...........................    (1,147,593)       (1,554,454)       (1,602,080)
   Income Taxes paid - City and State...........................................      (239,145)         (234,436)         (146,172)
   Taxes paid, other than Income Taxes..........................................       (76,575)         (553,140)         (530,793)
   Payments related to non-recurring items......................................    (2,221,248)         (705,075)       (1,652,965)
                                                                               ----------------- ----------------- -----------------
                                                                                     8,189,620         5,568,569         1,030,095
                                                                               ----------------- ----------------- -----------------
Real Estate Asset activities:
   Cash received from Rental activities.........................................    41,297,937                 0                 0
   Cash paid on Rental activities...............................................   (23,262,002)                0                 0
   Interest paid on Mortgages...................................................   (13,517,318)                0                 0
                                                                               ----------------- ----------------- -----------------
                                                                                     4,518,617                 0                 0
                                                                               ----------------- ----------------- -----------------
Net Cash provided by Operating activities.......................................    12,708,237         5,568,569         1,030,095
                                                                               ----------------- ----------------- -----------------
Cash Flow provided by/(used in) Investing activities:
   Management and Investment Management activities:
     Proceeds from sale of Non-Core Assets and Other............................     1,016,334         3,787,441         8,036,470
     Capital Expenditures.......................................................      (422,853)         (397,519)         (152,959)
     Repayment from/(Advances to) Syndicated Partnerships - net.................    (2,556,807)       (8,565,119)       (1,361,547)
     Acquisition of Real Estate Assets..........................................             0        (1,864,736)                0
   Real Estate Asset activities:
     Net cash flow provided  by/(used in) Rental activities during period Held
       for Sale (net of Interest paid of $13,692,045 in 1995 and $11,618,952
       in 1994) ................................................................             0         3,037,826          (587,020)
     Capitalized Refinancing Costs..............................................    (1,687,492)                0                 0
     Funding of Escrows.........................................................       (41,279)                0                 0
     Capital Expenditures.......................................................      (681,639)                0                 0
                                                                               ----------------- ----------------- -----------------
Net Cash provided by/(used in) Investing activities.............................    (4,373,736)       (4,002,107)        5,934,944
                                                                               ----------------- ----------------- -----------------
Cash Flows (used in)/provided by Financing activities:
   Management and Investment Management activities:
     Proceeds from the exercise of Stock Options................................        61,671            35,216                 0
     Redemption of Stock held by Syndicated Partnerships........................       (31,330)                0                 0
     Proceeds from Term Debt and Other..........................................             0        21,000,505                 0
     Principal payments on Term Debt and Other..................................    (7,052,484)      (21,859,553)       (7,620,884)
   Real Estate Asset activities:
     Proceeds from Mortgage Debt................................................    47,442,961                 0                 0
     Payments on Mortgages - principal amortization.............................    (2,139,137)       (2,150,733)       (1,279,985)
     Payments on Mortgages - lump sum...........................................   (45,775,047)         (479,554)                0
                                                                               ----------------- ----------------- -----------------
Net Cash (used in)/provided by Financing activities:............................    (7,493,366)       (3,454,119)       (8,900,869)
                                                                               ----------------- ----------------- -----------------
Increase/(Decrease) in Cash.....................................................       841,135        (1,887,657)       (1,935,830)
Cash at Beginning of Year.......................................................     2,751,986         4,639,643         6,575,473
                                                                               ----------------- ----------------- -----------------
Cash at End of Year.............................................................    $3,593,121        $2,751,986        $4,639,643
                                                                               ================= ================= =================

<FN>
                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</FN>
</TABLE>
                                       F-6

<PAGE>
                                       71


<TABLE>

                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>

                                                                               1996                 1995                 1994
                                                                       --------------------  -------------------  ------------------
<S>                                                                             <C>                  <C>                 <C>
Reconciliation of Net Income to Net Cash
   Provided By Operating Activities:
     Net Income........................................................         $3,755,874           $5,096,735          $7,099,844
     Adjustments to Reconcile Net Income to Net Cash
       Provided by Operating Activities:
         Depreciation and Amortization.................................          5,514,571              537,849             447,528
         Provision for Losses on Accounts Receivable...................           (207,308)             412,794           1,461,869
         Income from Disposal of Non-Core Assets ......................           (962,761)          (3,408,379)         (3,189,067)
         (Gain) / Loss on Debt Restructuring...........................          2,629,356           (1,314,022)         (5,229,901)
         Provision for Income Taxes credited to Paid-in Capital........          2,151,000            2,866,000           4,464,000
         Changes in Operating Assets and Liabilities:
           Interests in and Receivables from Syndicated Partnerships...            616,715              335,505            (322,143)
           Accounts Receivable and Other...............................         (4,339,533)             (17,039)         (3,375,941)
           Funds Held in Escrow........................................         (4,857,423)             595,256           1,509,127
           Accounts Payable and Other Liabilities......................          8,407,746              463,870          (1,835,221)
                                                                       --------------------  -------------------  ------------------
   Net Cash Provided by Operating Activities...........................        $12,708,237           $5,568,569          $1,030,095
                                                                       ====================  ===================  ==================
</TABLE>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

In 1995, the Company acquired four apartment  properties primarily financed with
$4,770,000 of first mortgages on the properties.

In June 1995,  the Company  purchased  from a mortgage  lender the  non-recourse
mortgages on one Syndicated  Partnership and four Wholly Owned  Properties.  The
mortgages  totaled $8.8 million and were acquired for $7.8 million.  The Company
financed  the  acquisition  with a $7.8  million  note  payable to the  mortgage
lender. The note was repaid in June 1996.

In 1996,  the Company  granted deeds in lieu of foreclosure to the mortgagee for
three Wholly Owned Properties. The properties had an aggregate carrying value of
$3.9 million.  In 1995 and 1994 the Company granted deeds in lieu of foreclosure
to the  mortgagees for certain  Wholly Owned  Properties.  The properties had an
aggregate  carrying  value of $3.5 million and $3.6  million,  respectively.  No
significant gain or loss was recognized on these transactions because the assets
and the non-recourse mortgages on each of these Wholly Owned Properties had been
recorded in equal amounts.

Effective August 1, 1996, the Company acquired Lexford Properties,  Inc. through
a merger with a wholly  owned  subsidiary  of the  Company.  The Company  issued
700,000 shares of its Common Stock (valued at $14,000,000) in  consideration  of
the acquisition; however 450,000 of the shares issued (valued at $9,000,000) are
subject to forfeiture,  in whole or in part, if the Company's  combined property
management  operations  fail to achieve  certain  profitability  criteria  on or
before the end of the Company's 1999 fiscal year.

In 1996,  all  interest  incurred  was  expensed.  In 1995 and 1994 the interest
incurred on the Wholly Owned  Properties was  capitalized as the properties were
Held for Sale, while interest on corporate term debt was expensed (Note 2).


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       F-7

<PAGE>
                                       72



                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 1: BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Business
        --------

        Cardinal  Realty  Services,  Inc. and its  subsidiaries  (the "Company")
        principal  business  is the  ownership  and  management  of  multifamily
        apartment  properties.  The Company is also involved in the  acquisition
        and redevelopment of multifamily apartment properties. The Company holds
        an ownership  interest in apartment  communities  either as (i) the sole
        owner  of  various  limited   partnerships  or  subsidiaries  which  own
        apartment  communities  (the  "Wholly  Owned  Properties"),  or (ii) the
        general  partner in various  limited  partnerships  which own  apartment
        communities (the "Syndicated Partnerships"), collectively referred to as
        the  "Properties".  With  respect to the  Syndicated  Partnerships,  the
        Company retains a general partner  interest  ranging from 1.0% to 10.0%,
        but  typically  9.0% to 10.0%.  The limited  partnership  interests  are
        substantially all owned by unrelated third party investors.  The Company
        also has receivables,  typically in the form of second  mortgages,  from
        the  Syndicated  Partnerships  that  generate a majority of the interest
        income recognized by the Company.

        The majority of the  Properties are located in the midwest and southeast
        United  States,  with the  heaviest  concentrations  in  Florida,  Ohio,
        Georgia,  Indiana,  Michigan and Kentucky. The typical Property averages
        65 rental  units which are located in multiple  single  story  buildings
        with studio, one and two bedroom apartments.  All of the Properties have
        non-recourse  first  mortgage  indebtedness  which is owed to  financial
        institutions.  The  Company is not  dependent  for its  revenues  on any
        particular  property and the loss of any property  would not be material
        to the Company's  financial  position.  Geographic  distribution  of the
        Properties  also  minimizes  the  Company's  exposure to local  economic
        conditions.

        The Company  derives  revenues  from two core  business  activities:  1)
        management of multifamily residential real property, including provision
        of  management  services to owners of property in which the Company does
        not  have  an  ownership  interest  ("Management   Services");   and  2)
        activities  related to the  ownership of  multifamily  residential  real
        property  (including  provision of asset management  services to passive
        co-owners)  ("Investment  Management").  In December  1995,  the Company
        restructured   along  these  business  lines.  The   restructuring   was
        implemented,  in part, to cause the Company and its  management to focus
        attention on these two distinct, yet complementary, business activities.


                                       F-8

<PAGE>
                                       73


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 1: BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        Management Services
        -------------------

        The Company's  Management  Services division is charged with the conduct
        of the Company's property  management  business.  The Company's property
        management  business  involves all  traditional  elements of third party
        property management including:  day-to-day management and maintenance of
        multi-family residential apartment properties,  attracting and retaining
        qualified  residents,   collecting  rents  and  other  receivables  from
        residents,  providing  cash  management  services  for rental  revenues,
        security deposits, taxes and insurance and deferred maintenance escrows,
        and compiling and furnishing information to property owners.

        Effective August 1, 1996, the Company acquired Lexford Properties,  Inc.
        ("Lexford")  by merger of a wholly owned  subsidiary of the Company with
        and into Lexford. On that date, Lexford became a wholly owned subsidiary
        of the Company.  Lexford has been engaged in the business of third party
        property  management  services to the owners of multifamily  residential
        real property since commencing  business operations in June 1988. At the
        time the Company acquired Lexford,  Lexford managed approximately 22,000
        apartment units for third party owners.  The Company  currently  intends
        that  Lexford  will  continue  to provide  and  expand  its third  party
        property  management  services as well as oversee the  operation  of the
        Company's  Management  Services  division  which  managed  approximately
        34,000  units  in  1996,   including   the  Wholly   Owned   Properties.
        Accordingly,   the  Company's  property   management  business  will  be
        conducted through its wholly owned subsidiary,  Lexford Properties, Inc.
        Management  believes  that the  acquisition  of Lexford has enhanced the
        Company's  property  management  capabilities  and will  facilitate  the
        Company's ability to acquire, as well as service, additional multifamily
        residential  properties in the future including  properties not built by
        the Company. (SEE "LEXFORD ACQUISITION").

        The  Company's  Management  Services  division  also operates an adjunct
        business  which the  Company  refers  to as  "Ancillary  Services".  The
        Company's  Ancillary Services includes the sale of parts and supplies to
        both the Wholly Owned  Properties and Syndicated  Partnerships  and also
        the leasing of furniture  and sale of renters  insurance to residents at
        the Properties.  In June 1996, the Company announced realignments in its
        organization. As part of this restructure, the Company contracted to out
        source the parts and supply inventory  previously  handled internally by
        the Company's  Ancillary  Services  function.  The Company completed the
        transition  to the out  sourcing  by the end of  1996.  Thereafter,  the
        Company's   Ancillary  Services  department  will  continue  to  provide
        assistance to the  Properties,  in the  acquisition  of needed parts and
        supplies and the  management  of a  coordinated  buying group  obtaining
        substantial  volume discounts.  In consideration of these services,  the
        Company  will  generate  income by  retaining  some portion of discounts
        earned.



                                       F-9

<PAGE>
                                       74


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 1: BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        Investment Management
        ---------------------

        The  objective  of  the  Company's Investment Management division  is to
        maximize  the value of its real estate  holdings and its returns on real
        estate  investments.  The Company  performs  these  functions  both with
        respect  to the  Wholly  Owned  Properties  as  well  as the  Syndicated
        Partnerships.  The  Company  strives  to obtain  and  maintain  the best
        available  financing for the Properties and to maximize the  Properties'
        operating performance. The Company evaluates the performance of all real
        estate holdings to identify  investment  requirements,  under-performing
        Properties or those that can be sold at an attractive  price relative to
        their performance.

        The Company's  Investment  Management  division  acting in the Company's
        capacity  as general  partner of the  Syndicated  Partnerships  provides
        asset management services to the Syndicated  Partnerships.  In addition,
        the  Company's  Investment  Management  division  performs the following
        services for the  accounts of the  co-owners  (limited  partners) of the
        Syndicated Partnerships:  informational and financial reporting services
        (including   tax  return   preparation   and  provision  of  tax  return
        information to the limited partners) and capital and financial planning,
        (including  determination of reserves,  funding of capital  requirements
        and administration of capital distributions to partners).

        Fresh Start Accounting
        ----------------------

        The Company  adopted a method of  accounting  referred to as fresh start
        ("Fresh  Start")  reporting  as of  September  11, 1992 ("The  Effective
        Date") as a result of the Company's judicial plan of reorganization (the
        "Plan of Reorganization").  The Company prepared financial statements on
        the basis  that a new  reporting  entity  was  created  with  assets and
        liabilities  recorded at their estimated fair values as of the Effective
        Date. At the  Effective  Date,  to the extent the  non-recourse  debt on
        certain  Wholly Owned assets  exceeded the  estimated  fair value of the
        Wholly Owned Property, the Company reduced the contractual amount of the
        related   non-recourse  first  mortgage  debt  by  the  amounts  of  the
        deficiency  (the  "Mortgage  Deficiencies").  The  contractual  mortgage
        balance,  net of any applicable Mortgage  Deficiency,  is referred to as
        the "Carrying Value" of the mortgage.

        Non-Core Assets
        ---------------

        The Company also has interests in motel properties,  vacant land, single
        family  homes,  investor  notes  receivable  and  certain  other  assets
        (collectively the "Non-Core Assets"). The Company valued these Non- Core
        Assets,  at the Effective  Date,  based on previous  sales  activity and
        independent  appraisals.  In 1994,  the  Company  recovered  the  entire
        carrying value of the Non-Core Assets from the collection of receivables
        and proceeds from disposal. The Company began recognizing income, net of
        collection  and closing  costs,  from the  proceeds of disposal of these
        Non-Core  Assets  once the  carrying  value was fully  recovered.  As of
        December  31,  1996,  the  Company  still has an  ownership  interest in
        certain Non-Core Assets that may have potential value.



                                      F-10

<PAGE>
                                       75


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 1: BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        Lexford Acquisition
        -------------------

        Effective August 1, 1996 the Company acquired Lexford by way of a merger
        (the "Lexford  Merger") of a wholly owned subsidiary of the Company with
        and into Lexford.  The acquisition was accounted for as a purchase.  The
        terms of the Lexford  Merger  provided that the Company would succeed to
        the ownership of all of the issued and outstanding  stock of Lexford and
        the  shareholders of Lexford would receive 700,000 shares of restricted,
        newly  issued  Common  Stock.  For purposes of the Lexford  Merger,  the
        Common Stock was valued at $20 per share. Approximately $9.0 million, or
        450,000 shares,  of the purchase price is subject to forfeiture in whole
        or in part in the event Lexford does not achieve  certain  profitability
        criteria by December 31, 1999.  These shares are held in escrow  pending
        release.  At the time the shares  subject  to  forfeiture  are  released
        without  contingency,  the Company will record the  additional  purchase
        price. The Lexford shareholders  received 250,000 shares of Common Stock
        free of contingencies.

        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 amounts reported in the financial statements
        and  accompanying   notes.   Actual  results  could  differ  from  those
        estimates.

        Long-Lived Assets -- FASB Statement No. 121
        -------------------------------------------

        In March 1995, the Financial  Accounting Standards Board ("FASB") issued
        Statement No. 121,  Accounting for the  Impairment of Long-Lived  Assets
        and for Long-Lived Assets to be Disposed Of, ("FASB 121") which requires
        impairment   losses  to  be  recorded  on  long-lived   assets  used  in
        operations,   when   indicators  of  impairment   are  present  and  the
        undiscounted  cash flows  estimated  to be generated by those assets are
        less  than  the  assets'  carrying  amount.  FASB 121  became  effective
        beginning  fiscal year 1996.  Management  is not aware of any  indicator
        that would result in any significant impairment loss.


                                      F-11

<PAGE>
                                       76


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 1: BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        Fair Value of Financial Instruments
        -----------------------------------

        The  following  disclosure  of the  estimated  fair  value of  financial
        instruments  is  made  in  accordance  with  the  requirements  of  FASB
        Statement No. 107, Disclosure About Fair Value of Financial Instruments.
        The fair  value  of Cash  and  Funds  Held in  Escrow  is equal to their
        respective  carrying  amounts.  For  Interests in and  Receivables  from
        Syndicated  Partnerships  the Company  used the Fresh  Start  accounting
        methodology used at the Effective Date to estimate the value at December
        31, 1996 and 1995,  which value  approximated  $133.4 million and $107.6
        million, respectively.  Such methodology is generally based on estimates
        of the fair  market  value  of the  apartment  communities  owned by the
        Syndicated Partnerships, less related indebtedness. The Interests in and
        Receivables from Syndicated Partnerships substantially consist of second
        mortgage  loans  receivable,  whose  ultimate  repayment is subject to a
        number  of  variables,  including  the  performance  and  value  of  the
        underlying real estate property and the ultimate timing of repayments of
        the receivables. Considerable judgment is required in the interpretation
        of market  data to develop  estimates  of fair value,  accordingly,  the
        estimates  are not  necessarily  indicative of the amounts that could be
        realized or would be paid in a current  market  exchange.  The effect of
        using different market assumptions  and/or estimation  methodologies may
        be material to the estimated fair value amounts (See Note 3).

        The carrying value of the amounts comprising the Company's term debt and
        other notes payable as described in Notes 3 and 7 approximate their fair
        value.

        As further  described  in Note 5, at  December  31,  1996 the  Company's
        mortgages on Wholly Owned Properties in the amount of $148.1 million had
        contractual  balances  totaling  $157.4  million.  Interest rates on the
        mortgages   ranged  from  7.0%  to  10.0%  with  rates  being  fixed  on
        approximately $144.2 million of the contractual  balances.  In addition,
        mortgages  with a  contractual  and  carrying  value of $4.8 million had
        matured as of December 31, 1996 (See Note 5).  Management  believes that
        using the Company's incremental borrowing rate to estimate fair value of
        the  mortgages  is not  appropriate  and,  because of  excessive  costs,
        considers estimates of fair value to otherwise be impracticable.

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

        The consolidated  financial  statements include the accounts of Cardinal
        Realty  Services,  Inc.  and its wholly  owned  subsidiaries,  including
        Wholly  Owned  Properties.  All  significant  intercompany  balances and
        transactions  (except  for  Fee  Based  Revenues  and  related  expenses
        generated  from  Wholly  Owned  Properties  in 1995 and 1994)  have been
        eliminated in consolidation. Total Revenues from Wholly Owned Properties
        (during the period such  properties were held for sale) amounted to $3.6
        million and $3.4 million for the years ended December 31, 1995 and 1994,
        respectively.  Any gross profit on such revenues has been  eliminated in
        consolidation (See Note 2).

        Reclassification
        ----------------

        Certain  reclassifications  have been made in the Consolidated Financial
        Statements  resulting  from  changes in  classification  of Wholly Owned
        Properties  in 1996  previously  Held for Sale or to provide  comparable
        information  in the  Consolidated  Statements  of Income and Cash Flows.
        These reclassifications had no effect on shareholders' equity.



                                      F-12

<PAGE>
                                       77


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


NOTE 1: BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        Restatement
        -----------

        The net income previously  reported in the 1994 Consolidated  Statements
        of  Income  has been  adjusted  in order to  comply  with  Statement  of
        Position  ("SOP")  90-7  "Reorganization   Under  the  Bankruptcy  Code"
        pertaining to accounting  for deferred  income taxes.  SOP 90-7 requires
        that  benefits  realized  from   pre-confirmation   net  operating  loss
        carryforwards be reported as an increase to Additional  Paid-in Capital.
        The  Company  reported  net income but was not  required to pay taxes on
        such  income as the result of having the benefit of  deductions  for tax
        purposes  including  net  operating  loss  carryforwards  to offset  the
        income. The financial statements as adjusted,  reflect a non-cash charge
        in the form of a tax provision in the Consolidated Statements of Income.
        The valuation  reserve  against net deferred tax assets has been reduced
        by an amount  equivalent  to the  non-cash  charge with a  corresponding
        increase being made to Additional  Paid-in Capital.  The adjustment does
        not affect the Company's cash flows or total  shareholders'  equity. The
        effect of the adjustment is as follows:

<TABLE>
<CAPTION>
                                                As                     Adjustment
                                            Previously                  for Tax                      As
                                             Reported                  Provision                  Adjusted
                                       ---------------------     ----------------------     -------------------
<S>                                      <C>                       <C>                        <C>
1994
----

Income before Extraordinary Gain         $       6,333,943         $      (2,390,000)         $     3,943,943

Extraordinary Gain                               5,229,901                (2,074,000)               3,155,901
                                       ---------------------     ----------------------     -------------------
Net Income                               $      11,563,844         $      (4,464,000)         $     7,099,844
                                       =====================     ======================     ===================


Per Share of Common Stock: 1

1994
----

Income before Extraordinary Gain                     $1.64                    ($0.62)                   $1.02

Extraordinary Gain                                    1.36                     (0.54)                    0.82
                                       ---------------------     ----------------------     -------------------
Net Income                                           $3.00                    ($1.16)                   $1.84
                                       =====================     ======================     ===================

<FN>
1   Per share amounts have been restated to reflect the completion of the claims
    resolution process for the issuance of common stock.
</FN>
</TABLE>

                                      F-13

<PAGE>
                                       78


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


NOTE 1: BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        Wholly Owned Properties (previously Held for Sale)
        --------------------------------------------------

        During 1995 and prior  years,  the Company  classified  the Wholly Owned
        Properties as Held for Sale. However,  based upon mortgage debt that has
        since been restructured with favorable amortization terms, combined with
        improved  net  operating  income and cash flow  performance,  management
        decided to retain the Wholly Owned Properties for investment. Therefore,
        commencing  January 1, 1996, the Company changed the  classification  of
        the  Wholly  Owned   Properties  and  discontinued  the  Held  for  Sale
        accounting  treatment.  The Wholly Owned Properties are depreciated over
        their  estimated  remaining  useful lives,  typically  approximately  30
        years, using the straight-line  method for financial  reporting purposes
        and tax purposes.  The Company expensed all interior  replacement  costs
        and capitalized major building exterior improvements (See Note 2).

        Interests in and Receivables from Syndicated Partnerships
        ---------------------------------------------------------

        The carrying value of the interests in and  receivables  from Syndicated
        Partnerships  represents  the  allocation of the estimated fair value of
        the assets as of the  Effective  Date and, as  described  in Note 3, the
        face amounts of the  receivables  are  significantly  more than recorded
        amounts.  These receivables generally include long-term second mortgages
        and other  receivables.  In addition,  subsequent to the Effective Date,
        the Company  has made  advances to the  Syndicated  partnerships.  These
        advances  primarily  relate  to  supplemental  funding  for  refinancing
        transactions,  and bear interest at prime plus one percent.  Interest is
        accrued on the recorded  values of the second  mortgages  and certain of
        the  other  receivables  based  upon  contractual  interest  rates,  and
        allowances are provided for estimated  uncollectible interest based upon
        the underlying  properties'  net cash flow. In certain  instances,  cash
        flow  received  in excess of accrued  second  mortgage  interest  on the
        recorded  values of the second  mortgages  is  recorded  as income.  The
        Company  is also  entitled  to  receive  incentive  management  fees and
        supplemental  second mortgage interest based upon certain levels of cash
        flow of certain of the  underlying  properties.  Also,  in the event the
        underlying  properties are sold or refinanced,  the Company is generally
        entitled to a participation  interest in the net proceeds,  as a general
        partner and/or a second mortgage  holder.  The Company  accounts for its
        general partner  interests by the cost method;  no significant  recorded
        value  has  been  ascribed  to  these  interests  arising  prior  to the
        Effective Date. The realization of the interests in and receivables from
        Syndicated Partnerships is dependent on the future operating performance
        of the Syndicated Partnerships.


                                      F-14

<PAGE>
                                       79


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 1: BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        Cash
        ----

        Operating  cash as of December  31, 1996 and 1995 is  comprised  of $3.3
        million  and  $2.7  million   respectively,   related  to  Wholly  Owned
        Properties  which  is  held  in  separate  property  bank  accounts  and
        approximately $270,000 and $52,000 in corporate funds, respectively. The
        majority of excess  corporate cash is applied to the corporate term debt
        and reborrowed as needed.

        Furniture, Fixtures and Other, Net
        ----------------------------------

        Furniture and fixtures are recorded at cost.  Furniture and fixtures are
        depreciated  over their estimated  useful lives using the  straight-line
        method for  financial  reporting  purposes  and various  accelerated  or
        straight-line methods for income tax purposes.

        Funds Held in Escrow
        --------------------

        The amounts at December 31, 1996 and 1995 include  funds of $7.0 million
        and $7.1 million, respectively,  escrowed by Wholly Owned Properties for
        improvements and deferred maintenance,  real estate taxes, insurance and
        resident  security  deposits.  In addition,  the Company is holding $3.0
        million and $2.3 million,  at December 31, 1996 and 1995,  respectively,
        as funds held  primarily  for payment of  insurance  premiums  which are
        collected  on  behalf  of the  Properties.  At  December  31,  1996  the
        Company's  funds  held in escrow  also  includes  $4.0  million of funds
        received from the settlement of termite litigation.  The funds are being
        held  pending  the  finalization  of an  allocation  of  proceeds to the
        affected  properties.  Applicable  corresponding  liabilities  have been
        recorded at December 31, 1996 and 1995.

        Prepaids and Other Assets
        -------------------------

        Prepaids  and Other Assets as of December 31, 1996 and 1995 is comprised
        of the following:
<TABLE>
<CAPTION>

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

<S>                                                                   <C>                   <C>
Corporate:
----------

  Acquired Management Contracts, net of amortization of $67,219       $    1,546,041        $          0
  Goodwill, net of amortization of $62,409                                 3,797,323                   0
  Inventory                                                                        0             455,083
  Other                                                                      952,637             987,522



Wholly Owned Properties:
------------------------

  Capitalized Refinancing Costs                                            2,721,365           1,370,638
  Prepaid Insurance, Taxes and Other                                         832,131           1,116,856
                                                                   ------------------    ----------------
                                                                      $    9,849,497       $   3,930,099
                                                                   ==================    ================
</TABLE>


                                      F-15

<PAGE>
                                       80


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 1: BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

        The  management  contracts  purchased with the Lexford  Acquisition  are
        being  amortized on the straight line basis over 10 years.  The Goodwill
        related to the Lexford  acquisition  is being  amortized on the straight
        line  basis  over  25  years.  The  capitalized  refinancing  costs  are
        associated  with the  refinancing  of the  mortgages on the Wholly Owned
        Properties.  The costs are being  amortized  over six to ten years based
        upon the maturity of the new loans.

        Net Income Per Share
        --------------------

        Net income per share is  computed  based on the total  weighted  average
        number  of shares  of the  Company's  Common  Stock,  without  par value
        ("Common  Stock"),  outstanding  during the period and those  contingent
        shares  estimated to be issued to officers,  employees  and directors in
        accordance  with the Company's  1992  Incentive  Equity Plan, as amended
        (the  "Incentive  Equity  Plan").  In August  1996,  the Company  issued
        700,000  shares of Common Stock in connection  with the Lexford  merger,
        450,000  shares of which  remain  subject to  forfeiture  in whole or in
        part.  The 450,000  shares  subject to forfeiture  are excluded from the
        weighted average shares outstanding because the shares are not dilutive.
        The weighted  average shares  outstanding,  as of December 31, 1996, was
        approximately  3,933,000,   (less  210,000  treasury  shares)  including
        approximately  244,000  estimated to be issued in the future pursuant to
        the Incentive Equity Plan. As of December 31, 1995 and 1994 the weighted
        average  shares  outstanding  was  approximately  3,850,000  shares.  In
        November 1995, the  shareholders of the Company  approved an increase in
        the number of  authorized  shares of Common  Stock of the  Company  from
        4,500,000 to 13,500,000 and also authorized  1,500,000  shares of "Blank
        Check"  Preferred  Stock.  The Company  currently has no  commitments or
        arrangements which would require the issuance of additional shares.

        Treasury  shares  include  approximately  70,000 shares issued to Wholly
        Owned  Properties  and  subsidiaries  as part of the  Company's  plan of
        reorganization.  In addition,  approximately  126,000  unclaimed shares,
        related to stock  issued for  prepetition  unsecured  claims,  have been
        converted to treasury shares.  The Plan of Reorganization  provided that
        all stock issued,  but not deliverable,  to any unsecured  creditor,  be
        held in trust for a period  of two years  from the  Effective  Date,  at
        which time such stock would  either be canceled or revert to the Company
        as treasury shares at the Company's  discretion.  The Company elected to
        treat undeliverable stock as treasury shares.

                                      F-16


<PAGE>
                                       81


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 2: WHOLLY OWNED PROPERTIES

        During 1995 and prior  years,  the Company had  attempted  to market and
        sell the  Wholly  Owned  Properties  and  classified  the  Wholly  Owned
        Properties as Held for Sale. While the Wholly Owned Properties were held
        for sale,  the results of  operations  from the Wholly Owned  Properties
        were credited to the carrying  value of the real estate and no revenues,
        operating  expenses or  depreciation  were included in the  Consolidated
        Statements of Income.  Cash flows from the Wholly Owned Properties prior
        to 1996 were  classified as Cash Flow Provided by Investing  Activities.
        Commencing  January 1, 1996, based upon management's  decision to retain
        the Wholly Owned Properties for investment, the operations,  including a
        provision for  depreciation,  of the Wholly Owned  Properties  have been
        fully consolidated in the Company's  Statements of Income.  Further, the
        cash flows of the Wholly Owned Properties have been reclassified as Cash
        Flows  Provided by Operating  Activities.  The Company will  continue to
        monitor  and  evaluate  any  changes in  circumstances  and/or  economic
        conditions affecting its investment in the Wholly Owned Properties.  The
        Company is currently analyzing alternatives for its majority interest in
        the Wholly Owned  Properties,  which may include a disposition  to third
        parties resulting in deconsolidation of the entities.

        The number of Wholly Owned Properties by year is as follows:


                             1996                1995                1994
                         --------------     ---------------     -------------

Beginning of Year              116                 116               120
  Acquisitions                   1                   4                 0
  Disposals                     (4)                 (2)               (2)
  Properties Combined            0                  (2)               (2)
                         --------------     ---------------     -------------
 End of Year                   113                 116               116
                         ==============     ===============     =============


                                      F-17


<PAGE>
                                       82


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 2: WHOLLY OWNED PROPERTIES (cont'd)

        Condensed  combined  balance  sheets,  with  intercompany  payables  and
        receivables  eliminated,  of the Company's Wholly Owned Properties as of
        December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>

                                                                 1996                    1995
                                                         ---------------------  ----------------------
<S>                                                              <C>                     <C>
                          ASSETS
Net Operating Real Estate Assets (Held for Sale in 1995)         $157,091,545            $173,064,441

Less: Cumulative Income Related to Wholly Owned Properties
      from the Effective Date to December 31, 1995                          0              (8,730,386)
                                                         ---------------------  ----------------------
                                                                  157,091,545             164,334,055

Cash                                                                3,322,494               2,699,924
Accounts Receivable                                                   324,772               1,043,069
Funds Held in Escrow                                                6,980,142               7,097,162
Prepaids and Other                                                  3,553,497               2,487,494
                                                         ---------------------  ----------------------
                                                                 $171,272,450            $177,661,704
                                                         =====================  ======================

                   LIABILITIES AND EQUITY

Non Recourse Mortgages Payable:
     Contractual                                                 $157,381,603            $163,812,985
     Mortgage Deficiency                                           (9,325,586)            (15,624,874)
                                                         ---------------------  ----------------------
                                                                  148,056,017             148,188,111

Accounts Payable                                                    1,160,426                 953,076
Accrued Interest and Real Estate Taxes                              2,961,795               3,577,547
Other Accrued Expenses                                              1,337,083               1,315,132
Other Liabilities                                                     683,202               1,094,800
                                                         ---------------------  ----------------------
                                                                  154,198,523             155,128,666
Equity                                                             17,073,927              22,533,038
                                                         ---------------------  ----------------------
                                                                 $171,272,450            $177,661,704
                                                         =====================  ======================
</TABLE>


                                      F-18


<PAGE>
                                       83


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 2: WHOLLY OWNED PROPERTIES (cont'd)

        Condensed  consolidated   statements  of  income  of  the  Wholly  Owned
        Properties while Held for Sale, including intercompany expenses, for the
        years ended December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>

                                                                           1995                1994
                                                                   -------------------   -----------------
<S>                                                                       <C>                 <C>
   Rental Revenues                                                        $40,000,678         $38,773,604
   Operating Expenses                                                     (18,691,062)        (17,651,516)
                                                                   -------------------   -----------------
     Net Operating Income                                                  21,309,616          21,122,088

   Improvements and Replacement Expense                                    (2,213,586)         (2,579,321)
   Improvements and Replacement Expense
    funded from Escrows                                                    (1,746,156)           (334,574)
   Interest Expense (contractual interest of approximately
    $14,562,000 and $15,312,000, respectively)                            (13,549,258)        (13,450,027)

   Other Expenses                                                          (1,464,630)         (1,564,481)

   Reorganization Expenses                                                    (96,227)           (517,354)
                                                                   -------------------   -----------------
     Income, less expenses, excluding depreciation                         $2,239,759          $2,676,331
                                                                   ===================   =================
</TABLE>

        Revenues from rental of apartment  units is recognized  ratably over the
        term of the related operating  leases,  which are generally for a period
        of one year or less.

NOTE 3: INTERESTS IN AND RECEIVABLES FROM SYNDICATED PARTNERSHIPS

        The Interests in and  Receivables  from Syndicated  Partnerships  net of
        reserves of $2.3 million and $1.9 million,  respectively,  are comprised
        of the following major components:
<TABLE>
<CAPTION>

                                                                 1996                    1995
                                                        ---------------------   ----------------------
<S>                                                              <C>                      <C>
  Second Mortgage Notes                                          $36,450,176              $37,402,604
  Advances, since the Effective Date                              14,271,906               10,714,680
  Other, including accrued interest                                3,888,339                4,474,160
                                                        ---------------------   ----------------------
                                                                 $54,610,421              $52,591,444
                                                        =====================   ======================
</TABLE>

        The  majority of second  mortgage  notes bear  interest at 6%.  Interest
        income  is  accrued  based  upon the  Fresh  Start  value of the  second
        mortgage  notes,  as described in Note 1.  Advances  made to  Syndicated
        Partnerships  since the Effective Date  primarily were for  supplemental
        financing for the debt  restructuring  or  refinancing  transactions  as
        described in Note 6. These  advances  currently  bear  interest at prime
        plus 1%. At December  31, 1996 and 1995,  the  contractual  value of the
        Company's interest in second mortgages,  advances and other receivables,
        including  related  interest,  amounted  to $238.9  million  and  $237.1
        million,  respectively.  There can be no assurance that the Company will
        collect any amounts above the carrying value of these receivables.

                                      F-19


<PAGE>
                                       84


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994



NOTE 4: CORPORATE TERM DEBT

        In August 1995 the Company  closed a loan  agreement  with The Provident
        Bank (the "Bank") which provided a new $32.0 million credit facility for
        the Company.  The new credit  facility  retired the  previous  corporate
        credit facility with The Huntington National Bank ("HNB").  During 1995,
        the  variable  interest  rates on the HNB debt ranged from 9.0% to 10.0%
        with  fixed  rates  of  5.54%  to  6.03%.  At the  time of  refinancing,
        approximately  $6.5  million of the HNB  facility was subject to a fixed
        interest  rate of 6.03% with an  overall  weighted  average  rate on the
        total HNB credit facility of 8.25%

        The bank credit facility is comprised of three separate lines of credit,
        two of the lines bear  interest  at the Bank's  prime  rate of  interest
        minus 1% and the third line at 7.25% fixed.  During  1996,  the variable
        interest  rate on the Bank debt was 7.25%.  The loans are secured by all
        assets of the Company.

        The credit facility was comprised of the following terms and balances at
        December 31, 1996 and 1995:

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

        <S>                                                                                   <C>                    <C>
        Acquisition  revolving line (the  "Acquisition Line I"), credit facility
        for $7.0  million,  with variable  interest  rate  converted in February
        1996, to fixed interest rate of 7.25%,  due in March 2001,  with monthly
        installments of  principal  and interest due of $139,435 with no further
        credit availability on this line                                                        $6,007,232            $7,000,000

        Working capital  revolving credit facility (the "Working Capital Line"),
        maximum credit facility of $3.0 million, due in August 1997, subject to
        annual renewal by the Bank                                                                       0                     0

        Reducing balance  revolving line (the "Reducing  Line"),  maximum credit
        facility of $22.0 million, due in August 2001, with quarterly reductions
        in available credit of $750,000 commencing in October 1996                               9,110,816            13,470,205
                                                                                         ------------------    ------------------
                                                                                               $15,118,048           $20,470,205
                                                                                         ==================    ==================
</TABLE>

        Borrowings  under the Working  Capital Line will amortize over 36 months
        if the Bank does not renew the  facility  when due in August  1997.  The
        Acquisition  Line is  subject to annual  renewal  and is  restricted  to
        provide funds for the  acquisition of, or  refinancing/restructuring  of
        mortgages on affiliated properties. The Reducing Line was used to retire
        the HNB credit facility.

        In July 1996, the Company received a commitment letter from the Bank for
        a new  $10.0  million  Acquisition  Line (the  "Acquisition  Line II) of
        credit  generally  under the same terms as the  existing  facility.  The
        Company's  capital  requirements  in 1996 did not require the Company to
        access this new facility.

        At December 31, 1996 the Company had unrestricted credit availability of
        approximately  $25.4  million,   inclusive  of  the  new  $10.0  million
        commitment from the Bank, but excluding credit  availability  restricted
        for  approximately  $767,000 of unfunded letters of credit.  At December
        31, 1995,  the Company had $10.7  million  available  for future  credit
        which excluded  $829,000 of availability  restricted for specific credit
        needs.

                                      F-20


<PAGE>
                                       85


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


NOTE 4: CORPORATE TERM DEBT (cont'd)

        The  Company's  minimum  annual  long  term  debt  maturities  following
        December 31, 1996 are:

                 1997              $         4,285,595
                 1998                        4,376,035
                 1999                        4,479,181
                 2000                        1,700,874
                 2001                          276,363
                                   -------------------
                                   $        15,118,048
                                   ===================

NOTE 5: NON RECOURSE MORTGAGES ON WHOLLY OWNED PROPERTIES

        In connection with Fresh Start reporting as further described in Note 1,
        mortgages on real estate  assets have been  restated to their  estimated
        fair value as of the Effective Date. The contractual  principal balances
        of the  mortgages on Real Estate  Assets  exceed the carrying  values by
        $9.3  million  and  $15.6   million  at  December  31,  1996  and  1995,
        respectively.  The mortgages are non-recourse and are  collateralized by
        real estate  properties  and are payable over periods  through  2006. At
        December 31, 1996  contractual  interest rates ranged from 7.0% to 10.0%
        with fixed  rates on  approximately  $144.2  million of the  outstanding
        contractual  mortgage  balances.  Interest expense is recorded using the
        effective  interest method based upon the carrying value of the mortgage
        debt. The weighted average effective  interest rate was 9.0% at December
        31, 1996.  The weighted  average  contractual  interest rate and term to
        maturity on the  mortgages  on Real  Estate  Assets,  excluding  matured
        loans, was 8.7% and 7.1 years at December 31, 1996.  Annual debt service
        requirement was $15.7  million at December  31, 1996.  In  addition,  15
        Wholly Owned  Properties  have  secondary  mortgage  debt  totaling $2.9
        million  that  requires  the  application  of all excess  cash flow from
        operations to be applied to the outstanding  principal on such debt. The
        range of  interest  rates and  related  carrying  amounts  of  mortgages
        payable at December 31, 1996 is as follows:



       Contractual                Contractual                 Carrying
          Rate                      Balance                     Value
-------------------------  -----------------------    -----------------------
       Less than 8.0%      $            15,339,067    $            13,042,258
         8.0% - 9.0%                   127,440,097                121,908,563
       More than 9.0%                   14,602,439                 13,105,196
                           -----------------------    -----------------------
                           $           157,381,603    $           148,056,017
                           =======================    =======================

        At December 31, 1996,  four Wholly Owned  Properties  had mortgage loans
        which had matured with an aggregate  contractual  and carrying  value of
        $4.8  million.  The Company will either  refinance the mortgages or deed
        the property to the lender  depending  upon the outcome of  negotiations
        with the respective lenders.

        Minimum estimated repayment  requirements of mortgages for the next five
        years based upon the contractual principal balances,  exclusive of those
        mortgages which have matured, are as follows:




                                      F-21


<PAGE>
                                       86


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 5: NON RECOURSE MORTGAGES ON WHOLLY OWNED PROPERTIES (cont'd)


                                 Contractual
                                   Amounts
                           ---------------------
              1997           $         3,055,003
              1998                     8,961,786
              1999                     6,572,553
              2000                     6,574,634
              2001                    22,371,767
           Thereafter                109,845,860
                           ---------------------
                             $       157,381,603
                           =====================

NOTE 6: REFINANCED MORTGAGE DEBT

        In 1996, the Company  refinanced the mortgage and related  interest debt
        on 35 Wholly Owned Properties. Mortgage and related interest debt with a
        contractual  balance  of $46.8  million  and a  Carrying  Value of $45.6
        million was refinanced with new carrying value and contractual  mortgage
        debt of $47.8 million.  The new mortgages carry a weighted average fixed
        interest rate of 8.8%, 25 to 30 year  amortization  and typically,  a 10
        year  maturity.  Annual debt  service  requirements  decreased from $4.9
        million to $4.6  million.  In these  transactions,  cash flow  secondary
        mortgages ("B Notes") on six properties were refinanced. These "B Notes"
        required 100% of excess cash flow from  operations of the  properties to
        be  applied to the  principal  outstanding  on the B Notes.  In 1996 the
        excess cash flow applied to the B Notes on these six properties amounted
        to  approximately  $98,000.  The Wholly Owned  Properties  incurred loan
        origination  costs of $1.7 million which have been  capitalized  and are
        being amortized over the maturity term of the new mortgages. The Company
        provided net funding of $1.1 million to complete these transactions.

        A fourth quarter 1996 extraordinary non-cash charge of $1.6 million, net
        of tax benefits,  resulted from mortgage debt  refinancing on certain of
        the  above  Wholly  Owned  Properties.  The  repayment  of the  existing
        mortgage at the contractual balance was possible due to the improvements
        in performance resulting in the increased value of certain properties to
        levels in excess of the  carrying  value  established  on the  Effective
        Date.  The charge  arose  from those  mortgages  repaid  from  refinance
        proceeds at the contractual balance which exceeded the Carrying Value of
        the mortgage. (Note 1).

        The Company  also  completed  the  refinancing  of mortgage  and related
        interest  debt of  $95.3  million  on 90  Syndicated  Partnerships.  The
        Company   provided   net   advances  to   Syndicated   Partnerships   of
        approximately  $600,000 to facilitate  these  transactions.  Annual debt
        service requirements decreased, in the aggregate, approximately $626,000
        per year. The new mortgages on 72 Syndicated  Partnerships  are interest
        only for three  years;  after the third  year the  annual  debt  service
        reduction will be offset by the commencement of principal amortization.



                                      F-22


<PAGE>
                                       87


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 6: REFINANCED MORTGAGE DEBT (cont'd)

        The  refinancing  on the  Syndicated  Partnerships  generated  loan  fee
        revenue of  approximately  $752,000 in 1996 as compared to $886,000  and
        $1.3 million in 1995 and 1994, respectively.  The fees were based upon a
        graduated percentage of the new loan amounts.

        In 1995 and 1994,  the Company  completed  modification  or  refinancing
        transactions  on Wholly Owned  Properties  and  Syndicated  Partnerships
        which resulted in an extraordinary  gain on discharge of indebtedness on
        the Wholly Owned Properties, net of closing costs reserves and taxes, of
        approximately $804,000 and $3.2 million, respectively.

NOTE 7: OTHER NOTES PAYABLE

        In June 1995, the Company purchased from a mortgage lender the mortgages
        on one Syndicated  Partnership and four Wholly Owned Properties for $7.8
        million. The Company, on an interim basis,  financed the purchase of the
        mortgages  with  a  promissory  note  payable  to the  mortgage  lender.
        Approximately $1.2 million of the $7.8 million note payable relates to a
        Syndicated  Partnership  and was classified  with other notes payable at
        December  31, 1995.  The balance of the note  payable  relates to Wholly
        Owned  Properties  and was  classified  with  mortgages  on Wholly Owned
        Properties  at December 31, 1995.  The note was repaid from the proceeds
        of permanent non recourse financing on the Properties in 1996.

        The remaining  $145,220 of Other Notes Payable  consists of  obligations
        which are payable through 1997, bear interest at approximately  9.0% and
        are secured by equipment and other collateral.

NOTE 8: OTHER LIABILITIES

        Other   Liabilities   at  December   31,  1996  and  1995   consists  of
        approximately $683,000 and $964,000, respectively, of liabilities of the
        Wholly Owned Properties and $4.7 million and $1.3 million, respectively,
        of obligations of the Company. The Other Liabilities of the Wholly Owned
        Properties  at  December  31,  1996  consists   principally  of  general
        operating  accruals and  obligations  of the  properties.  The Company's
        Other Liabilities  includes $3.4 million due to Syndicated  Partnerships
        related to a litigation  settlement  to be funded from  restricted  cash
        held in escrow (See Note 1). The remaining other liabilities principally
        relate to obligations from the Company's Plan of Reorganization.

        In 1994,  the Company  settled a pending  claim in its  bankruptcy  case
        which resulted in a reduction of a recorded  liability of  approximately
        $726,000  in  exchange  for  the  Company's  dismissal  of a  bankruptcy
        preference  action against an insurance company and an insurance broker.
        The income  recognized  due to the release of the liability is reflected
        in Other Income.



                                      F-23


<PAGE>
                                       88


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 9: INCENTIVE COMPENSATION PLAN

        The Company's  1992  Incentive  Equity Plan which benefits its officers,
        key employees and  non-employee  directors,  was  established  as of the
        Effective Date of the Company's Plan of Reorganization.  Under this plan
        approximately  481,200  shares are available for awards of stock options
        and restricted  stock.  In addition to the Incentive  Equity Plan, as of
        the Effective  Date, the bankruptcy  trustee awarded options to purchase
        approximately  36,000 shares to certain key employees  under an employee
        retention plan.  Since the shares included in the 1992 Incentive  Equity
        Plan  and the  trustee  awarded  options  were  provided  in the Plan of
        Reorganization,  the  shares  have  been  deemed  awarded  prior  to the
        Effective  Date  with  no  compensation  expense  recorded  for  periods
        subsequent  to the  Effective  Date.  In  November  1995,  the  Board of
        Directors  adopted and the  shareholders  approved an  amendment  to the
        Incentive  Equity  Plan  (the  "Plan  Amendment").  The  Plan  Amendment
        provided  for  an  additional  200,000  shares  of  Common  Stock  to be
        available  for the  granting  of  future  awards  for  officers  and key
        employees. In addition, the Plan Amendment provides for 50,000 shares of
        Common  Stock to be  available  for the  granting  of stock  options  to
        non-employee directors. Awards of shares provided in the Plan Amendment,
        depending on the nature of the award,  may be reflected as compensation.
        The shares of stock  available  for future  awards may be awarded at the
        discretion of the Company's Board of Directors.

        In 1996 the  Company  awarded to  officers  and  non-employee  directors
        49,500 shares of restricted  stock,  38,000 shares of deferred stock and
        stock options for the purchase of 76,000 shares. The restricted stock is
        comprised of up to 17,500 shares awarded as a Company match of shares if
        purchased  by certain  officers by April 1997,  and 32,000  shares which
        will vest  ratably over time.  The  deferred  stock vests based upon the
        Company achieving specified levels of total market  capitalization.  The
        grant date  weighted  fair value of  restricted  and deferred  stock was
        approximately $18.57 per share.  Included in the 76,000 of stock options
        awarded in 1996 were options to purchase  2,000 shares that were awarded
        to  each  of  the  eight   non-employee   directors   of  the   Company.
        Approximately  32,500 shares of restricted  stock awards and the options
        to purchase 30,000 shares were awarded out of the shares included in the
        original 1992 Incentive Equity Plan. Approximately 173,000 shares remain
        available for future awards.  The Company's  performance based Incentive
        Bonus Plan  implemented in 1996 includes awards of restricted  stock and
        stock options if specified Company performance criteria are achieved.

        The Company has elected to follow  Accounting  Principles  Board Opinion
        No.  25,  "Accounting  for Stock  Issued to  Employees"  ("APB  25") and
        related  interpretations  in  accounting  for its  employee and director
        stock options because,  the alternative  fair value accounting  provided
        for  under  FASB  Statement  No.  123,   "Accounting   for  Stock  Based
        Compensation," ("FASB 123") requires use of option valuation models that
        were not developed for use in valuing employee stock options.  Under APB
        25, because the exercise  price of the Company's  employee stock options
        equals the market price of the underlying stock on the date of grant, no
        compensation expense is recognized.

        Pro forma  information  regarding  net income and  earnings per share is
        required  by FASB 123,  which  also  requires  that the  information  be
        determined  as if the  Company  has  accounted  for its  employee  stock
        options  granted  subsequent  to December  31, 1994 under the fair value
        method of that Statement. The fair value for these options was estimated
        at the date of the grant using Black-Scholes option pricing model.


                                      F-24


<PAGE>
                                       89


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


NOTE 9: INCENTIVE COMPENSATION PLAN (cont'd)

        The following assumptions were utilized in the pricing model; a weighted
        average risk free interest rate of 6.5% in 1995 and 1996; dividend yield
        of one percent;  volatility  factors of the expected market price of the
        Company's common stock of 0.236; and a weighted average expected life of
        seven years in 1996 and eight years in 1995.

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

        For purposes of pro forma  disclosures,  the estimated fair value of the
        options is amortized over the options vesting period.  The Company's pro
        forma information follows:


                                              1996                 1995
                                       -------------------  -------------------
        Pro forma net income              $    3,629,797       $     5,090,716
                                       ===================  ===================
        Pro forma earnings per share      $         0.92       $         1.32
                                       ===================  ===================
        As reported Earnings per share    $         0.96       $         1.32
                                       ===================  ===================

        Pro forma net income may not be  representative  of compensation expense
        under FASB 123 when the effect of the  amortization  of multiple  awards
        would be reflected.



                                      F-25


<PAGE>
                                       90


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 9: INCENTIVE COMPENSATION PLAN (cont'd)

        The following table summarizes the Company's stock option activity,  and
        related information for the years ended December 31, 1996, 1995 and 1994
        (in thousands except for exercise prices)

<TABLE>
<CAPTION>

                                                  1996                 1995                  1994
                                          ------------------- --------------------- ---------------------
                                                    Weighted             Weighted              Weighted
                                                      Ave.                 Ave.                  Ave.
                                                    Exercise             Exercise              Exercise
                                           Options   Price     Options     Price     Options    Price
                                          ------------------- --------------------- ---------------------

<S>                                             <C>    <C>         <C>       <C>         <C>        <C>
Options outstanding at beginning of year        135     $4.10      135        $2.33      140        $2.31
                                          ------------------- --------------------- ---------------------

     Options granted                             76    $18.87       16       $17.25        1        $7.00

     Options exercised                          (34)    $1.80      (14)       $2.27       (1)       $2.62

     Options forfeited                           (1)    $2.62       (2)       $2.62       (5)       $2.62
                                          ------------------- --------------------- ---------------------

Options outstanding at end of year              176    $10.91      135        $4.10      135        $2.33
                                          =================== ===================== =====================

Options exercisable at end of year               88     $5.20       96        $2.21       86        $2.12
                                          =================== ===================== =====================

Weighted Ave. Fair Value of Options
     Granted during the Year                            $6.37                 $6.84                   N/A
                                                   ==========           ===========            ==========

</TABLE>


         Options  awarded  have an exercise  price equal to or greater  than the
         market  price of the  Common  Stock at the time of the  award,  and are
         subject to vesting  schedules as determined  by the Company's  Board of
         Directors. The options granted expire, if not exercised, ten years from
         the date on which the option was granted.  Exercise  prices for options
         outstanding  as of  December  31,  1996 ranged from $1.42 to $21.25 per
         share with a weighted average remaining term of 7.7 years.

NOTE 10: INCOME TAXES

         The Company and its subsidiaries file a consolidated Federal income tax
         return.  For financial  reporting  purposes,  the Company  follows FASB
         Statement No. 109 ("FASB 109"). In accordance with FASB 109, as well as
         SOP 90-7,  income taxes have been provided at statutory rates in effect
         during the period.  Tax benefits  associated  with net  operating  loss
         carryforwards and other temporary  differences that existed at the time
         fresh  start  reporting  was adopted  are  reflected  as an increase to
         Additional Paid-in Capital in the period in which they were realized.


                                      F-26


<PAGE>
                                       91


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 10: INCOME TAXES (cont'd)

         The provision for income taxes in the Consolidated Statements of Income
         (including amounts applicable to extraordinary items) is as follows:

                                                 Years Ended
                              --------------------------------------------------
                                    1996             1995           1994
                              ---------------- ---------------- ----------------

Current:

    Federal                     $         0     $     50,000    $           0

    State                           250,000          314,000          201,000

Amounts not payable in cash       2,151,000        2,866,000        4,464,000
                              ---------------- ---------------- ----------------
                                $ 2,401,000     $  3,230,000    $   4,665,000
                              ================ ================ ================

         The Company's  actual income tax payments for the years 1996,  1995 and
         1994 were  significantly less than the total provision for income taxes
         because of available net  operating  loss  carryforwards  and other tax
         benefits.  The amounts included in the provision for taxes for which no
         amounts were payable in cash are set forth in the table above.

         The effective income tax rates varied from the federal  statutory rates
         as follows:


                                              1996         1995         1994
                                          ------------ ------------ ------------

Federal Tax provision at statutory rates  $  2,094,000 $  2,832,000 $  4,118,000

State Income Taxes,
     Net of Federal Income Tax Benefit         288,000      386,000      537,000

Other Permanent Differences                     19,000       12,000       10,000
                                          ------------ ------------ ------------
                                          $  2,401,000  $ 3,230,000 $  4,665,000
                                          ============ ============ ============
Effective Income Tax Rate                        39.0%        38.8%        39.6%
                                          ============ ============ ============


                                      F-27


<PAGE>
                                       92


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 10: INCOME TAXES (cont'd)

         Significant  components  of  the  Company's  deferred  tax  assets  and
         liabilities are as follows at December 31, 1996 and 1995.
<TABLE>
<CAPTION>

                                                                                     (000s omitted)
                                                                           --------------------------------
                                                                                1996                1995
                                                                           --------------      ------------
<S>                                                                        <C>                 <C>
Deferred Tax Assets and Other:
   Net operating loss carryforwards and other carryforwards                $       19,000      $     17,000

   Suspended passive activity losses                                               38,000            39,000

   Tax basis of assets in excess of Fresh Start estimated values                   39,000            43,000
                                                                           --------------      ------------
                                                                                   96,000            99,000
                                                                           --------------      ------------
   Less: valuation reserve                                                        (24,000)          (30,000)
                                                                           --------------      ------------
                                                                           $       72,000      $     69,000
                                                                           ==============      ============

Deferred Tax Liabilities:

   Negative capital accounts                                               $       41,000      $     35,000

   Tax basis of liabilities in excess of related
         Fresh Start estimated fair values                                          3,000             4,000

   Tax basis of assets less than related
         Fresh Start estimated fair values                                         28,000            30,000
                                                                           --------------      ------------
                                                                           $       72,000      $     69,000
                                                                           ==============      ============
</TABLE>

         The valuation  reserve against  deferred tax assets has been reduced by
         amounts  equivalent to the portions of the tax provisions which are not
         payable in cash.  Corresponding  increases have been made to Additional
         Paid-in Capital.

         As a result of the uncertainties  relating to the ultimate  utilization
         of favorable tax attributes described below, the Company has provided a
         valuation  reserve for the  remaining  excess of the net  deferred  tax
         assets as of December 31, 1996 and 1995.


                                  F-28

<PAGE>
                                       93


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 10: INCOME TAXES (cont'd)

         In addition to regular  corporate income tax,  corporations are subject
         to an  alternative  minimum  tax  liability  to the extent  alternative
         minimum tax exceeds regular tax. The Company will record an alternative
         minimum tax liability in the year that events and  transactions  create
         an  alternative  minimum tax which is probable of being paid and can be
         reasonably  estimated  by the Company.  As of December  31,  1996,  the
         Company  has  estimated   that  it  has  net  operating   loss  ("NOL")
         carryforwards for tax purposes of approximately  $44.3 million which if
         not utilized, expires in the years 2001 through 2009. In the event that
         current or future 5% shareholders  (as defined by the Internal  Revenue
         Code)  acquire  or  dispose  of  shares,  over a defined  time  period,
         representing in the aggregate 50% or more of the Company's  outstanding
         shares,  a limitation on the use of NOL  carryforwards  will occur. The
         Company has also estimated that it has approximately  $108.7 million in
         suspended  passive  activity  losses ("PALs") which may be available to
         offset future passive and active income. The Company's determination of
         its NOLs,  PALs,  and other tax  attributes,  as well as its ability to
         utilize  them to reduce  taxable  income is subject  to  uncertainties.
         Although the Company  believes that its  determinations  concerning its
         tax attributes are supportable  under applicable tax laws, there can be
         no assurance that taxing  authorities,  upon examination will not argue
         to the contrary.

NOTE 11: RESTRUCTURING/TENDER OFFER COSTS

         In 1995,  the Company  implemented a corporate  restructuring  plan and
         initiated further  restructuring in 1996. The Company recorded a charge
         of   approximately   $243,000  and  $1.5  million  in  1996  and  1995,
         respectively,  related to the costs of the  restructuring,  principally
         severance  and  separation  costs.   Approximately  26  employees  were
         released as a result of the  restructurings  in 1995 and 1996.  In 1996
         the  Company  paid $1.7  million of costs  related to the 1995 and 1996
         restructuring.

         In  1994,  the  Company   received   proposed  tender  offers  for  the
         acquisition of at least 80% of the outstanding  shares of the Company's
         Common  Stock.  The Board of Directors of the Company  engaged  various
         outside  professionals to assist in the analysis of the proposed tender
         offers.  The  costs  associated  with the  outside  professionals  were
         deferred  pending the resolution of the proposed tender offers.  Due to
         the  termination of all proposed  tender offers,  the Company  expensed
         approximately  $977,000  of  costs  incurred  in  connection  with  the
         proposed tender offers.

                                      F-29


<PAGE>
                                       94


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 12: COMMITMENTS AND CONTINGENCIES

         Office Lease
         ------------

         The Company leases its corporate  office space under an operating lease
         which  expires in  October,  1997.  The  Company has an option for five
         additional  terms of three years each. The Company is  responsible  for
         the payment of insurance,  real estate taxes and operating  expenses of
         the leased facility.  (See Note 14). The Company's Lexford wholly owned
         subsidiary  leases  office  space in four  cities to support  its third
         party  management  operations.  The majority of leases  expire in 1999.
         Annual rental requirements are approximately $558,000 in 1997, $272,000
         in  1998  and  $133,000  in  1999.  The  Company  also  leases  various
         equipment,  typically  over five years,  and  management  offices under
         operating  leases which generally have remaining terms of less than one
         year. The equipment rental  requirements are approximately  $241,000 in
         1997, $211,000 in 1998 and $146,000 in 1999. Rent expense for the years
         ended  December 31, 1996,  1995, and 1994 was  approximately  $749,000,
         $512,000 and $391,000, respectively.

         Litigation
         ----------

         The  Company is involved in various  legal  actions  arising out of the
         normal  course of its business.  Management of the Company,  based upon
         knowledge  of facts  and the  advice  of  counsel,  believes  potential
         exposure to loss from legal actions has been adequately reserved for in
         the financial  statements  and should not result in a material  adverse
         effect on the Company's consolidated financial position.

NOTE 13: RETIREMENT PLAN

         The Company  maintains the Cardinal Realty Services,  Inc. Savings Plan
         (the  "Savings  Plan") under  section  401(k) of the  Internal  Revenue
         Service  Code (the  "Code"),  to which  participants  may  contribute a
         percentage  of  their  base  pay and  overtime  earnings  up to  limits
         established  by the Code.  The Savings  Plan was amended and  restated,
         effective  July 1, 1993,  to (i)  provide  for  discretionary  matching
         contributions by the Company, (ii) provide for immediate vesting in all
         Company contributions and (iii) allow loans to participants.  Effective
         December  31,  1995 the  Savings  Plan was  amended to  exclude  highly
         compensated  employees.  Effective  July 1, 1996,  the Savings Plan was
         amended  to  include  employees  of  the  Properties  as  participants,
         increase the Company match from 1% for every 3% of wages contributed to
         1% for every 2% of wages  contributed,  and to allow highly compensated
         employees to participate in the Plan. The Company  contribution amounts
         to 1% of wages for every 2% of wages contributed by a participant up to
         a maximum  of the  lesser of 3% of wages or $2,000  per year.  In 1996,
         1995  and  1994,   the  Company's   cash   contributions   amounted  to
         approximately $134,000, $92,000, and $88,000, respectively. The Company
         cash  contributions  are then  invested  in  Company  stock held by the
         Savings Plan Trustee.


                                      F-30


<PAGE>
                                       95


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

NOTE 14: RELATED PARTY TRANSACTIONS

         The Company is the general and limited partner in, or the owner of, all
         Wholly  Owned  Properties  and is a general  partner in the  Syndicated
         Partnerships.  The Company  also serves as the  management  company for
         substantially  all of these properties and provides  various  ancillary
         services  including  sales of parts and supplies to the  properties and
         furniture rentals and renters insurance to residents. The Company's fee
         based revenue,  interest income and ancillary  income result  primarily
         from properties affiliated with the Company. Approximately $4.1 million
         and $3.9 million of the Company's accounts  receivable are due from the
         Syndicated   Partnerships   as  of  December   31,   1996,   and  1995,
         respectively.

         The Company advanced, net of amounts repaid, to Syndicated Partnerships
         $2.6 million,  $8.6 million,  and $1.4 million in 1996,  1995 and 1994,
         respectively.  The  majority  of the  advances  relate to  supplemental
         financing  provided  for  the  refinancing  of  the  mortgages  on  the
         properties  as  described  in Note 6.  Effective  October 1,  1995,  in
         conjunction with the favorable terms the Company achieved on its credit
         facility, the interest rate on these advances was revised to prime plus
         one percent from principally prime plus six percent.  The interest rate
         on advances will be adjusted in the future based on  prevailing  market
         rates.

         During 1994, the Company loaned  approximately  $331,000 to certain key
         officers  and certain  key  employees.  The  majority of the loans bear
         interest at the rate of 1% in excess of the prime rate of the Bank, and
         are due in five years.  The loans were made to fund the personal income
         tax  obligations  arising  from the tax  effect of the  vesting  in the
         Company's Common Stock awarded to these  individuals and are secured by
         the Common Stock  awarded.  All loans were repaid in 1996.  At December
         31, 1995, the amount of loans and related interest outstanding amounted
         to approximately $109,900.

         An outside  director  of the company is a partner in the law firm which
         serves as  outside  general  counsel  to the  Company.  Legal fees paid
         related  to  services  provided  to the  Company  by this law firm were
         approximately $286,000 in 1996, $255,000 in 1995, and $432,000 in 1994.
         In  addition,  legal  fees  paid  related  to  debt  restructuring  and
         refinancing  services  provided  by this law firm to the  Wholly  Owned
         Properties and Syndicated  Partnerships were approximately  $523,000 in
         1996, $739,400 in 1995 and $935,000 in 1994, respectively.

         Another  outside  director of the Company has an ownership  interest in
         the lessor of the Company's Ohio office  facility (as discussed in Note
         12).


                                      F-31


<PAGE>
                                       96


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


NOTE 15: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>

                                                    First              Second                 Third                 Fourth
                                                   Quarter             Quarter               Quarter                Quarter
                                             ------------------- -------------------- --------------------- -----------------------

<S>                                            <C>                <C>                   <C>                   <C>                <C>
Revenues

     1996                                         $ 14,689,011       $   14,711,256        $   15,709,041        $    20,191,682
     1995                                         $  5,541,014       $    6,147,749        $    5,748,023        $     6,239,643


Income before Extraordinary Gain

     1996                                         $  1,091,350       $      757,284        $      887,034        $     2,634,562
     1995                                         $  1,108,805       $    1,494,284        $    1,302,527        $       387,097


Extraordinary Gain/(loss), net of
     Income Taxes

     1996                                         $          0       $            0        $            0        $    (1,614,356)
     1995                                         $    263,952       $      540,070        $            0        $             0


Net Income

     1996                                         $  1,091,350       $      757,284        $      887,034        $     1,020,206
     1995                                         $  1,372,757       $    2,034,354        $    1,302,527        $       387,097 (1)


Net Income per Common Share:
     Income before Extraordinary Item

     1996                                         $       0.28       $         0.19        $         0.22        $          0.64
     1995                                         $       0.28       $         0.39        $         0.34        $          0.10


     Extraordinary Gain/(Loss)

     1996                                         $       0.00       $         0.00        $         0.00        $         (0.39)
     1995                                         $       0.07       $         0.14        $         0.00        $          0.00


     Net Income

     1996                                         $       0.28       $         0.19        $         0.22        $          0.25
     1995                                         $       0.35       $         0.53        $         0.34        $          0.10

<FN>
(1)  Reduced for pre-tax one time charge of $1.5 million related to corporate
     restructuring (See Note 11).
</FN>
</TABLE>

                                      F-32


<PAGE>
                                       97


                                                                    SCHEDULE II

                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS

                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995



                                                                Allowance
                                                        for Doubtful Accounts
                                                     ---------------------------
                                                         1996           1995
--------------------------------------------------- --------------- ------------
Balance at Beginning of Period                          $2,468,845    $2,056,051

   Add:  Charged to Costs and Expenses:

   (Recovery)/Reserves associated with loan fees          (300,000)      291,164

   Other reserves                                           92,692       121,630

   Less:  Account Charge Offs                             (227,247)            0
                                                    --------------- ------------
Balance at End of Period                                $2,034,290    $2,468,845
                                                    =============== ============



                                      F-33


<PAGE>
                                       98


<TABLE>


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1996

------------------------------------------------------------------------------------------------------------------------
<CAPTION>
     COLUMN A             |          COLUMN B              |     COLUMN C             |       COLUMN D
------------------------------------------------------------------------------------------------------------------------
                          |                                |                          |
     DESCRIPTION -        |       ENCUMBRANCES             |  INITIAL COST TO THE     |            COSTS CAPITALIZED
 (ALL GARDEN APARTMENTS)  |                                |        COMPANY           |              SUBSEQUENT TO
                          |                                |                          |               ACQUISITIONS
                          |                                |                          |
------------------------------------------------------------------------------------------------------------------------
                       |  |       AT     |        AT       |           |  BUILDINGS   |
                       |  |  CONTRACTUAL | STATED CARRYING |    LAND   |     &        | IMPROVEMENTS   CARRYING
 PROPERTY NAME         |ST|     VALUE    |      VALUE      |           | IMPROVEMENTS |                   COSTS
------------------------------------------------------------------------------------------------------------------------

<S>                     <C>  <C>            <C>             <C>         <C>             <C>               <C>
ACADIA COURT II         IN      1,886,146       1,886,146      398,032     1,668,862         1,470          0
AMBERWOOD               OH        908,924         908,924      171,878     1,003,228             0          0
AMESBURY I              OH      1,257,832       1,257,832      136,179     1,133,012         3,030          0
AMESBURY II             OH      1,331,775       1,331,775      168,000     1,621,000         4,660          0
ANNHURST II             OH      1,122,316       1,202,232      123,397     1,006,847             0          0
ANNHURST III            OH        966,308         966,308       70,246     1,003,822             0          0
APPLEGATE APTS II       IN      1,265,575       1,265,575      163,470     1,815,278        10,705          0
APPLERIDGE I            OH      1,061,450       1,061,450      214,233       912,594         7,200          0
ARAGON WOODS            IN      1,150,600       1,150,600      298,431     1,248,762             0          0
ASHFORD HILLS           OH      1,606,595       1,307,867      359,522     1,260,948         2,100          0
BEL AIRE II             FL      1,198,276         436,040       81,451       287,059             0          0
BLUBERRY HILL           FL        771,041         771,041       63,610       362,610           224          0
BRADFORD PLACE          IL      1,181,417         886,338      215,924       719,156          (450)         0
BRUNSWICK APTS          IL      1,449,460       1,449,460       53,500     1,644,920             0          0
BRUNSWICK II            WV      1,341,640       1,341,640      104,000     1,696,000             0          0
CALIFORNIA GARDENS      FL      1,174,998         584,065       96,067       521,414             0          0
CAMBRIDGE COMMONS III   IN      1,888,323       1,271,224        1,087     1,306,118             0          0
CANTERBURY CROSSING     FL      1,507,576         676,592       78,303       385,838             0          0
CEDARGATE II            KY      1,032,435       1,032,435      123,475       966,198             0          0
CEDARHILL               TN      1,487,500       1,487,500      235,269     1,331,238             0          0
CEDARWOOD II            KY      1,020,000       1,020,000      173,648       913,048         3,011          0
CEDARWOOD III           KY        888,760         888,760      122,917       966,624        23,740          0
CENTRE LAKE I, II & III FL      4,952,458       4,952,458    1,210,779     3,116,732         6,239          0
CHERRY GLEN I           IN      1,396,026       1,396,026      203,862     1,465,002             0          0
CHERRY GLENN II         IN      1,143,198       1,143,198        4,343     1,731,393         1,660          0
CHERRY TREE APT         MD      2,217,868       2,217,868      623,153     2,711,201         2,988          0
CLEARWATER APTS         OH      1,061,450       1,061,450      132,478     1,045,131        13,839          0
COLONY WOODS II         GA      1,599,700       1,599,700      273,901     1,556,452             0          0
CRYSTAL COURT II        FL      1,373,608       1,373,608      268,168     1,332,505             0          0
DARTMOUTH PLACE II      OH        897,388         897,388      114,393     1,135,027         2,970          0
DOGWOOD GLEN I          IN      1,792,218       1,792,218      248,246     1,427,201        21,107          0
ELMTREE PARK I          IN      1,223,246       1,223,246      208,426     1,308,102           225          0
ELMTREE PARK II         IN      1,050,340       1,050,340       45,751     1,107,766           163          0
FOREST GLEN             FL      1,136,177       1,136,177      229,086       994,552        12,000          0
FORSYTHIA COURT II      MD      2,414,099       1,801,658      283,697     1,597,543             0          0
FOXHAVEN                OH      1,896,035       1,896,035      403,075     1,657,128        13,745          0
GARDEN COURT            MI      2,185,573       2,185,573      127,573     2,247,404         1,856          0
GARDEN TERRACE I        FL        621,464         621,464       89,123       801,137        39,180          0
GLEN ARM MANOR          GA      1,283,702       1,283,702      148,679     1,274,345        43,359          0

</TABLE>

                                      F-34

<PAGE>
                                       99


<TABLE>


                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1996

------------------------------------------------------------------------------------------------------------------------
<CAPTION>
     COLUMN A             |          COLUMN B              |     COLUMN C             |       COLUMN D
------------------------------------------------------------------------------------------------------------------------
                          |                                |                          |
     DESCRIPTION -        |       ENCUMBRANCES             |  INITIAL COST TO THE     |            COSTS CAPITALIZED
 (ALL GARDEN APARTMENTS)  |                                |        COMPANY           |              SUBSEQUENT TO
                          |                                |                          |               ACQUISITIONS
                          |                                |                          |
------------------------------------------------------------------------------------------------------------------------
                       |  |       AT     |        AT       |           |  BUILDINGS   |
                       |  |  CONTRACTUAL | STATED CARRYING |    LAND   |     &        | IMPROVEMENTS   CARRYING
 PROPERTY NAME         |ST|     VALUE    |      VALUE      |           | IMPROVEMENTS |                   COSTS
------------------------------------------------------------------------------------------------------------------------

<S>                     <C>  <C>            <C>             <C>         <C>             <C>               <C>
GLENVIEW                AL      1,734,783       1,734,783      178,221     1,784,904             0          0
GLENWOOD VILLAGE        GA      1,534,803         890,683      156,445     1,000,148             0          0
HARVEST GROVE           OH      1,124,610       1,124,610      251,000     1,201,600         1,433          0
HARVEST GROVE I         OH      1,400,534       1,400,534      225,001     1,276,072             0          0
HATCHERWAY              GA        971,926         971,926      111,336     1,102,856        18,511          0
HAYFIELD PARK           KY      1,615,000       1,615,000      341,799     1,680,717        11,524          0
HEATHMOORE I            MI      1,601,847       1,601,847      128,605     1,329,672             0          0
HERON POINTE            FL      1,649,000       1,649,000      367,599     1,440,838        20,125          0
HIDDEN ACRES            FL      1,686,279       1,686,279      388,349     1,136,083           685          0
HILLSIDE TRACE          FL      1,025,402       1,025,402      197,277       833,232             0          0
HOLLY SANDS II          FL      1,062,500       1,062,500      231,970       943,482        39,715          0
HUNTER GLEN             IL      1,051,233       1,051,233      256,720     1,461,719             0          0
INDIAN LAKE I & II      GA      4,711,452       4,711,452      898,265     5,262,660         4,481          0
JEFFERSON WAY           FL      1,053,286       1,053,286      116,366     1,062,590        16,769          0
JUPITER COVE I          FL      1,440,394       1,142,910      219,698       805,001             0          0
JUPITER COVE III        FL      1,502,508       1,502,508      285,929     1,026,413             0          0
KINGS COLONY            GA      2,107,287       1,517,566      237,393     1,723,165             0          0
LAKESHORE I             GA      1,265,576       1,265,576       45,846       995,214           (60)         0
LAUREL BAY              MI        924,211         924,211      164,159     1,160,480             0          0
LAUREL GLEN             GA      1,742,500       1,742,500      265,974     1,627,699             0          0
LINDENDALE APTS         OH      1,439,828       1,439,828      188,724     1,717,434             0          0
MARABOU MILLS II        IN      1,030,710       1,030,710       84,391     1,190,609         2,233          0
MARABOU MILLS III       IN      1,205,060       1,205,060       75,122     1,099,183             0          0
MARIBOU MILLS           IN      1,468,322       1,468,322      179,704     1,570,450         4,203          0
MARK LANDING I          FL      1,338,708       1,338,708      250,827     1,481,543        32,904          0
MARSHLANDING II         GA        982,213         934,175       28,851       918,445         2,778          0
MEADOWOOD               OH        493,934         493,934       50,520       573,536             0          0
MEADOWOOD II            IN        760,434         760,434       61,771     1,193,299           463          0
MERRIFIELD              MD      2,127,341       2,127,341      210,294     2,271,824         2,546          0
MIGUEL PLACE            FL      1,504,500       1,504,500      237,234     1,125,414             0          0
MILL RUN                GA      1,283,468       1,283,468      187,772     1,260,209             0          0
MONTROSE SQUARE         OH      1,759,807       1,759,807      568,914     2,184,937             0          0
NEWBERRY II             MI      1,331,331         738,819       91,315       715,532             0          0
OAK GARDENS             FL      2,756,106       1,868,311      582,419     1,758,597           484          0
OAKWOOD VILLAGE         FL        757,708         314,630      103,045       566,398             0          0
PELICAN POINTE I        FL      1,354,265       1,354,265      221,311     1,204,527         9,730          0
PELICAN POINTE II       FL      1,038,343       1,038,343      158,390     1,190,595         9,290          0
PICKERINGTON MEADOWS    OH      1,186,165       1,186,165      150,000     1,200,000             0          0
PINE BARRENS            FL      1,560,120       1,560,120      302,399     1,405,048        51,675          0
</TABLE>

                                      F-35

<PAGE>
                                      100


<TABLE>
                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1996

------------------------------------------------------------------------------------------------------------------------
<CAPTION>
     COLUMN A             |          COLUMN B              |     COLUMN C             |       COLUMN D
------------------------------------------------------------------------------------------------------------------------
                          |                                |                          |
     DESCRIPTION -        |       ENCUMBRANCES             |  INITIAL COST TO THE     |            COSTS CAPITALIZED
 (ALL GARDEN APARTMENTS)  |                                |        COMPANY           |              SUBSEQUENT TO
                          |                                |                          |               ACQUISITIONS
                          |                                |                          |
------------------------------------------------------------------------------------------------------------------------
                       |  |       AT     |        AT       |           |  BUILDINGS   |
                       |  |  CONTRACTUAL | STATED CARRYING |    LAND   |     &        | IMPROVEMENTS   CARRYING
 PROPERTY NAME         |ST|     VALUE    |      VALUE      |           | IMPROVEMENTS |                   COSTS
------------------------------------------------------------------------------------------------------------------------

<S>                     <C>  <C>            <C>             <C>         <C>             <C>               <C>
PINE VIEW               FL      1,496,190       1,068,154      260,359       986,494         3,764          0
RAMBLEWOOD II           GA      1,935,831       1,935,831      264,381     1,906,078             0          0
RAVENWOOD               SC      1,718,721       1,718,721      169,601     1,507,589             0          0
RED DEER II             OH      1,261,013       1,261,013      235,173     1,474,820             0          0
RIDGEWOOD               IN      1,223,260       1,223,260      100,301     1,320,200             0          0
RIDGEWOOD II & III      IN      1,393,574       1,393,574      100,795     1,564,956             0          0
RIVER GLEN I            OH      1,106,752       1,106,752      146,287     1,287,027             0          0
RIVER GLEN II           OH      1,184,132       1,184,132      178,568     1,230,268             0          0
RIVERS END II           FL      1,176,332       1,176,332      160,894       936,779             0          0
RIVERVIEW ESTATES       OH      1,392,390       1,392,390       74,073     1,609,026        38,800          0
ROSEWOOD COMMONS II     IN      1,318,698       1,318,698      121,194     1,172,776           201          0
SHERBROOK               IN      1,225,203       1,225,203      141,991     1,254,354             0          0
SHERBROOK               PA      1,397,504       1,397,504      355,188     1,492,285         8,400          0
SKY PINES II            FL      1,070,741       1,070,741      266,498       676,283        50,450          0
SPICEWOOD APT           IN      1,036,385       1,036,385       90,619     1,025,442         2,927          0
SPRINGBROOK             SC      1,742,965       1,742,965      120,467     1,762,353        32,645          0
SPRINGWOOD              KY        839,305         839,305       85,723       844,029        26,000          0
STEWART WAY I           GA      1,396,413       1,396,413      260,869     1,614,962        16,447          0
STEWART WAY II          GA      1,252,664       1,252,664      215,612     1,468,190             0          0
SUFFOLK GROVE II        OH      1,096,137       1,096,137      154,263     1,248,211         2,085          0
SUNSET WAY I            FL      1,685,131       1,685,131      621,326     1,353,585             0          0
SUNSET WAY II           FL      2,719,585       2,144,007      649,409     1,678,049             0          0
THE WILLOWS I           OH        601,932         601,932      157,611       761,576        14,736          0
THE WILLOWS III         OH        884,000         884,000       44,602       871,216         6,054          0
THYMEWOOD II            FL      1,729,672         838,033      429,480       731,592             0          0
VALLEYBROOK             GA      1,586,737       1,586,737      129,440     1,353,762             0          0
WALKER PLACE            TX      1,198,295       1,198,295      269,890     1,196,059             0          0
WHISPERING PINES II     FL        638,957         638,957       71,433       505,435             0          0
WILLCREST WOODS         GA      1,067,846       1,067,846      245,513     1,189,165        16,260          0
WILLOW LAKE             SC      2,099,515       2,099,515      188,704     1,738,232             0          0
WILLOWOOD II            IN      1,065,380       1,065,380      149,671     1,310,162        21,600          0
WILLOWOOD II            OH        957,792         957,792       35,657       622,170             0          0
WINDWOOD I              FL        606,231         606,231       24,569       457,382        27,495          0
WINTHROP COURT II       OH        760,000         760,000      145,906       825,115           300          0
WOODLANDS II            PA      1,189,328       1,189,328      118,447     1,346,599          (249)         0
                             ----------------------------------------------------------------------------------
TOTALS                       $157,381,602    $148,056,017  $23,652,841  $146,087,543      $712,425         $0
                             ==================================================================================
</TABLE>

                                      F-36

<PAGE>
                                      101


<TABLE>

                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
       COLUMN A           |                  COLUMN E                 |   COLUMN F    |   COLUMN G   |  COLUMN H  |    COLUMN I
-----------------------------------------------------------------------------------------------------------------------------------
                          |                                           |               |              |            |
                          |     GROSS AMOUNT AT WHICH CARRIED AT      |               |              |            |  LIFE ON WHICH
     DESCRIPTION -        |     CLOSE OF PERIOD, DECEMBER 31, 1996    |               |              |            | DEPRECIATION IN
 (ALL GARDEN APARTMENTS)  |            NOTES (1) AND (2)              |               |              |            |  LATEST INCOME
----------------------------------------------------------------------|               |              |            |    STATEMENT
                       |  |            |    BUILDINGS   |             |  ACCUMULATED  |   DATE OF    |    DATE    |    IS COMPUTED
                       |  |     LAND   |       &        |    TOTAL    | DEPRECIATION  | CONSTRUCTION |  ACQUIRED  |     NOTE (3)
 PROPERTY NAME         |ST|            |   IMPROVEMENTS |             |    NOTE (3)   |              |            |
-----------------------------------------------------------------------------------------------------------------------------------

<S>                     <C> <C>          <C>              <C>           <C>             <C>             <C>             <C>
ACADIA COURT II         IN     398,032      1,602,171       2,000,203        52,800        06/06/86         N/A           N/A
AMBERWOOD               OH     171,878      1,001,682       1,173,560        31,600        10/01/87         N/A           N/A
AMESBURY I              OH     136,179      1,021,288       1,157,467        34,000        02/17/86         N/A           N/A
AMESBURY II             OH     168,000      1,623,162       1,791,162        54,300          N/A          09/26/95        N/A
ANNHURST II             OH     123,397      1,128,155       1,251,552        36,983        07/01/86         N/A           N/A
ANNHURST III            OH      70,246        978,257       1,048,503        30,300        05/05/88         N/A           N/A
APPLEGATE APTS II       IN     163,470      1,823,186       1,986,656        58,500        06/01/87         N/A           N/A
APPLERIDGE I            OH     214,233        717,454         931,687        25,824        01/01/87         N/A           N/A
ARAGON WOODS            IN     298,431      1,171,393       1,469,824        37,800        12/26/86         N/A           N/A
ASHFORD HILLS           OH     359,522        927,802       1,287,324        30,577        06/23/86         N/A           N/A
BEL AIRE II             FL      81,451        395,381         476,832        13,229        01/01/86         N/A           N/A
BLUBERRY HILL           FL      63,610        362,275         425,885        11,700        12/01/86         N/A           N/A
BRADFORD PLACE          IL     215,924        615,347         831,271        20,158        07/23/86         N/A           N/A
BRUNSWICK APTS          IL      53,500      1,607,542       1,661,042        53,200        04/01/86         N/A           N/A
BRUNSWICK II            WV     104,000      1,693,983       1,797,983        56,400          N/A          09/26/95        N/A
CALIFORNIA GARDENS      FL      96,067        396,171         492,238        12,550        07/01/87         N/A           N/A
CAMBRIDGE COMMONS III   IN       1,087      1,171,693       1,172,780        36,475        01/29/88         N/A           N/A
CANTERBURY CROSSING     FL      78,303        546,200         624,503        19,614        12/01/83         N/A           N/A
CEDARGATE II            KY     123,475        867,384         990,859        28,500        06/01/86         N/A           N/A
CEDARHILL               TN     235,269      1,225,967       1,461,236        40,300        05/30/86         N/A           N/A
CEDARWOOD II            KY     173,648        885,104       1,058,752        29,600        01/01/86         N/A           N/A
CEDARWOOD III           KY     122,917        988,875       1,111,792        33,400        05/20/86         N/A           N/A
CENTRE LAKE I, II & III FL   1,210,779      3,109,169       4,319,948       102,700        06/01/86         N/A           N/A
CHERRY GLEN I           IN     203,862      1,450,193       1,654,055        47,500        07/10/86         N/A           N/A
CHERRY GLENN II         IN       4,343      1,682,732       1,687,075        54,000        04/01/87         N/A           N/A
CHERRY TREE APT         MD     623,153      2,428,672       3,051,825        79,300        09/01/86         N/A           N/A
CLEARWATER APTS         OH     132,478        966,579       1,099,057        31,900        11/01/86         N/A           N/A
COLONY WOODS II         GA     273,901      1,502,115       1,776,016        46,600        03/28/88         N/A           N/A
CRYSTAL COURT II        FL     268,168      1,217,477       1,485,645        40,000        06/01/86         N/A           N/A
DARTMOUTH PLACE II      OH     114,393      1,082,021       1,196,414        35,700        07/18/86         N/A           N/A
DOGWOOD GLEN I          IN     248,246      1,305,749       1,553,995        43,746        07/18/86         N/A           N/A
ELMTREE PARK I          IN     208,426      1,172,043       1,380,469        38,500        06/08/86         N/A           N/A
ELMTREE PARK II         IN      45,751      1,105,662       1,151,413        35,300        05/01/87         N/A           N/A
FOREST GLEN             FL     229,086        915,022       1,144,108        31,000        01/01/86         N/A           N/A
FORSYTHIA COURT II      MD     283,697      1,469,727       1,753,424        46,811        06/01/87         N/A           N/A
FOXHAVEN                OH     403,075      1,576,864       1,979,939        52,100        08/18/86         N/A           N/A
GARDEN COURT            MI     127,573      2,161,190       2,288,763        67,000        04/22/88         N/A           N/A
GARDEN TERRACE I        FL      89,123        839,083         928,206        33,900        09/01/81         N/A           N/A
GLEN ARM MANOR          GA     148,679      1,181,627       1,330,306        41,000        01/01/86         N/A           N/A
</TABLE>

                                      F-37

<PAGE>
                                      102


<TABLE>
                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
       COLUMN A           |                  COLUMN E                 |   COLUMN F    |   COLUMN G   |  COLUMN H  |    COLUMN I
-----------------------------------------------------------------------------------------------------------------------------------
                          |                                           |               |              |            |
                          |     GROSS AMOUNT AT WHICH CARRIED AT      |               |              |            |  LIFE ON WHICH
     DESCRIPTION -        |     CLOSE OF PERIOD, DECEMBER 31, 1996    |               |              |            | DEPRECIATION IN
 (ALL GARDEN APARTMENTS)  |            NOTES (1) AND (2)              |               |              |            |  LATEST INCOME
----------------------------------------------------------------------|               |              |            |    STATEMENT
                       |  |            |    BUILDINGS   |             |  ACCUMULATED  |   DATE OF    |    DATE    |    IS COMPUTED
                       |  |     LAND   |       &        |    TOTAL    | DEPRECIATION  | CONSTRUCTION |  ACQUIRED  |     NOTE (3)
 PROPERTY NAME         |ST|            |   IMPROVEMENTS |             |    NOTE (3)   |              |            |
-----------------------------------------------------------------------------------------------------------------------------------

<S>                     <C> <C>          <C>              <C>           <C>             <C>             <C>             <C>
GLENVIEW                AL     178,221      1,596,313       1,774,534        52,200        08/01/86         N/A           N/A
GLENWOOD VILLAGE        GA     156,445        656,472         812,917        21,216        12/01/86         N/A           N/A
HARVEST GROVE           OH     251,000      1,201,181       1,452,181        40,100          N/A          09/26/95        N/A
HARVEST GROVE I         OH     225,001      1,157,494       1,382,495        37,700        09/08/86         N/A           N/A
HATCHERWAY              GA     111,336      1,089,384       1,200,720        37,000        01/01/86         N/A           N/A
HAYFIELD PARK           KY     341,799      1,516,918       1,858,717        50,200        07/17/86         N/A           N/A
HEATHMOORE I            MI     128,605      1,190,421       1,319,026        38,900        07/31/86         N/A           N/A
HERON POINTE            FL     367,599      1,417,656       1,785,255        48,000        01/01/86         N/A           N/A
HIDDEN ACRES            FL     388,349        437,395         825,744        14,041        01/01/87         N/A           N/A
HILLSIDE TRACE          FL     197,277        831,948       1,029,225        26,200        09/01/87         N/A           N/A
HOLLY SANDS II          FL     231,970        962,066       1,194,036        33,100        06/01/86         N/A           N/A
HUNTER GLEN             IL     256,720      1,314,349       1,571,069        42,100        03/01/87         N/A           N/A
INDIAN LAKE I & II      GA     898,265      4,878,142       5,776,407       154,600        08/11/87         N/A           N/A
JEFFERSON WAY           FL     116,366      1,057,936       1,174,302        33,800        08/01/87         N/A           N/A
JUPITER COVE I          FL     219,698        877,950       1,097,648        27,728        09/01/87         N/A           N/A
JUPITER COVE III        FL     285,929      1,024,831       1,310,760        32,300        09/01/87         N/A           N/A
KINGS COLONY            GA     237,393      1,226,496       1,463,889        38,424        11/15/87         N/A           N/A
LAKESHORE I             GA      45,846        893,969         939,815        29,300        06/20/86         N/A           N/A
LAUREL BAY              MI     164,159      1,070,561       1,234,720        31,800        10/01/89         N/A           N/A
LAUREL GLEN             GA     265,974      1,625,191       1,891,165        53,600        04/04/86         N/A           N/A
LINDENDALE APTS         OH     188,724      1,632,869       1,821,593        52,300        03/01/87         N/A           N/A
MARABOU MILLS II        IN      84,391      1,144,923       1,229,314        35,000          N/A          10/29/93        N/A
MARABOU MILLS III       IN      75,122      1,097,431       1,172,553        34,400        12/01/87         N/A           N/A
MARIBOU MILLS           IN     179,704      1,572,233       1,751,937        51,700        06/23/86         N/A           N/A
MARK LANDING I          FL     250,827      1,512,164       1,762,991        48,900        11/01/87         N/A           N/A
MARSHLANDING II         GA      28,851        882,456         911,307        28,595        12/31/86         N/A           N/A
MEADOWOOD               OH      50,520        572,652         623,172        19,100        01/01/86         N/A           N/A
MEADOWOOD II            IN      61,771      1,040,637       1,102,408        34,200        05/30/86         N/A           N/A
MERRIFIELD              MD     210,294      2,198,381       2,408,675        68,900        01/11/88         N/A           N/A
MIGUEL PLACE            FL     237,234      1,083,604       1,320,838        34,200        10/01/87         N/A           N/A
MILL RUN                GA     187,772      1,258,267       1,446,039        41,500        04/14/86         N/A           N/A
MONTROSE SQUARE         OH     568,914      2,160,316       2,729,230        72,000        01/01/87         N/A           N/A
NEWBERRY II             MI      91,315        626,087         717,402        20,204        12/26/86         N/A           N/A
OAK GARDENS             FL     582,419      1,249,586       1,832,005        39,063        01/01/88         N/A           N/A
OAKWOOD VILLAGE         FL     103,045        210,100         313,145         6,994        01/01/86         N/A           N/A
PELICAN POINTE I        FL     221,311      1,212,401       1,433,712        38,500        11/01/87         N/A           N/A
PELICAN POINTE II       FL     158,390      1,121,018       1,279,408        35,700        11/01/87         N/A           N/A
PICKERINGTON MEADOWS    OH     150,000      1,198,151       1,348,151        39,900          N/A          03/29/95        N/A
PINE BARRENS            FL     302,399      1,454,558       1,756,957        49,800        06/01/86         N/A           N/A
</TABLE>
                                      F-38

<PAGE>
                                      103


<TABLE>
                         CARDINAL REALTY SERVICES, INC.
                                AND SUBSIDIARIES
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1996

-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
       COLUMN A           |                  COLUMN E                 |   COLUMN F    |   COLUMN G   |  COLUMN H  |    COLUMN I
-----------------------------------------------------------------------------------------------------------------------------------
                          |                                           |               |              |            |
                          |     GROSS AMOUNT AT WHICH CARRIED AT      |               |              |            |  LIFE ON WHICH
     DESCRIPTION -        |     CLOSE OF PERIOD, DECEMBER 31, 1996    |               |              |            | DEPRECIATION IN
 (ALL GARDEN APARTMENTS)  |            NOTES (1) AND (2)              |               |              |            |  LATEST INCOME
----------------------------------------------------------------------|               |              |            |    STATEMENT
                       |  |            |    BUILDINGS   |             |  ACCUMULATED  |   DATE OF    |    DATE    |    IS COMPUTED
                       |  |     LAND   |       &        |    TOTAL    | DEPRECIATION  | CONSTRUCTION |  ACQUIRED  |     NOTE (3)
 PROPERTY NAME         |ST|            |   IMPROVEMENTS |             |    NOTE (3)   |              |            |
-----------------------------------------------------------------------------------------------------------------------------------

<S>                     <C> <C>          <C>              <C>           <C>             <C>             <C>             <C>
PINE VIEW               FL     260,359        810,665       1,071,024        26,105        05/01/87         N/A           N/A
RAMBLEWOOD II           GA     264,381      1,763,395       2,027,776        57,400        10/01/86         N/A           N/A
RAVENWOOD               SC     169,601      1,505,266       1,674,867        48,100        05/07/87         N/A           N/A
RED DEER II             OH     235,173      1,380,894       1,616,067        43,700        08/01/87         N/A           N/A
RIDGEWOOD               IN     100,301      1,320,199       1,420,500        18,336          N/A          08/01/96        N/A
RIDGEWOOD II & III      IN     100,795      1,415,338       1,516,133        46,900        03/01/86         N/A           N/A
RIVER GLEN I            OH     146,287      1,244,725       1,391,012        39,900        04/01/87         N/A           N/A
RIVER GLEN II           OH     178,568      1,196,259       1,374,827        37,600        11/01/87         N/A           N/A
RIVERS END II           FL     160,894        908,316       1,069,210        30,300        01/01/86         N/A           N/A
RIVERVIEW ESTATES       OH      74,073      1,645,347       1,719,420        60,100        01/01/87         N/A           N/A
ROSEWOOD COMMONS II     IN     121,194      1,171,170       1,292,364        37,300        06/01/87         N/A           N/A
SHERBROOK               IN     141,991      1,201,653       1,343,644        39,400        06/16/86         N/A           N/A
SHERBROOK               PA     355,188      1,436,005       1,791,193        46,700        12/20/86         N/A           N/A
SKY PINES II            FL     266,498        725,691         992,189        25,800        06/01/86         N/A           N/A
SPICEWOOD APT           IN      90,619        983,867       1,074,486        32,700        03/16/86         N/A           N/A
SPRINGBROOK             SC     120,467      1,725,155       1,845,622        58,000        06/13/86         N/A           N/A
SPRINGWOOD              KY      85,723        868,728         954,451        30,000        01/01/86         N/A           N/A
STEWART WAY I           GA     260,869      1,617,084       1,877,953        54,600        01/01/86         N/A           N/A
STEWART WAY II          GA     215,612      1,465,928       1,681,540        47,400        12/01/86         N/A           N/A
SUFFOLK GROVE II        OH     154,263      1,191,012       1,345,275        38,000        06/01/87         N/A           N/A
SUNSET WAY I            FL     621,326      1,351,499       1,972,825        42,800        08/01/87         N/A           N/A
SUNSET WAY II           FL     649,409      1,475,311       2,124,720        45,703        04/27/88         N/A           N/A
THE WILLOWS I           OH     157,611        754,543         912,154        27,500        01/01/87         N/A           N/A
THE WILLOWS III         OH      44,602        839,952         884,554        26,900        07/01/87         N/A           N/A
THYMEWOOD II            FL     429,480        362,932         792,412        12,118        01/01/86         N/A           N/A
VALLEYBROOK             GA     129,440      1,351,676       1,481,116        43,900        10/15/86         N/A           N/A
WALKER PLACE            TX     269,890      1,194,216       1,464,106        37,200        01/25/88         N/A           N/A
WHISPERING PINES II     FL      71,433        504,656         576,089        16,700        03/31/86         N/A           N/A
WILLCREST WOODS         GA     245,513      1,171,951       1,417,464        38,500        12/31/86         N/A           N/A
WILLOW LAKE             SC     188,704      1,754,417       1,943,121        56,785        12/12/86         N/A           N/A
WILLOWOOD II            IN     149,671      1,222,104       1,371,775        39,700        06/01/87         N/A           N/A
WILLOWOOD II            OH      35,657        596,607         632,264        19,500        08/01/86         N/A           N/A
WINDWOOD I              FL      24,569        484,172         508,741        16,100        05/01/88         N/A           N/A
WINTHROP COURT II       OH     145,906        823,536         969,442        27,400        02/25/86         N/A           N/A
WOODLANDS II            PA     118,447      1,281,910       1,400,357        41,100        03/01/87         N/A           N/A
                           ---------------------------------------------------------
                           $23,652,841   $137,917,083    $161,569,924    $4,478,379
                           =========================================================
</TABLE>

                                      F-39


<PAGE>
                                      104


<TABLE>

                         CARDINAL REALTY SERVICES, INC.
                             NOTES TO SCHEDULE III
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>

Note (1) Schedule III Reconciliation:                1996              1995             1994
                                            ----------------- ----------------- ------------------

<S>                                         <C>               <C>               <C>                 <C>
Balance as of beginning of year             $    164,334,055  $     166,430,698 $     170,171,409  (4)

  Additions during the year

     Acquisitions of Property                      1,420,501          6,391,600                 0

     Costs Capitalized                               702,056                  0                 0

  Deductions during the period

     Disposals through foreclosure                (4,886,688)        (3,380,382)       (3,607,081)

     Other (4)                                             0           (937,482)         (253,908)

     Application of Income from the
     Effective Date through
     December 31, 1995 upon full
     consolidation from "Held for Sale"
     classification                                        0         (4,170,379)             N/A
                                            ----------------- ----------------- ------------------
Balance at close of period                       161,569,924        164,334,055      166,310,420

Other

     Furniture and Fixtures                                0          3,368,617        4,160,477

     Application of Income from the
     Effective  Date through
     December 31, 1995 upon full
     consolidation from "Held for Sale"
     classification                                       0          (3,368,617)             N/A
                                            ----------------- ----------------- ------------------
                                                161,569,924         164,334,055      170,470,897

Income for the Period from the
     Effective Date to December 31, 1995,
     and 1994, respectively                             N/A                 N/A       (6,236,719)

Other Assets Held for Sale                              N/A                 N/A              N/A
                                            ----------------- ----------------- ------------------
Balance, Operating Real Estate
     Assets, December 31, 1996,
     1995 & 1994, respectively                 $161,569,924        $164,334,055     $164,234,178
                                            ================= ================= ==================
<FN>
        Note (2) Tax  basis of  assets:  The tax basis for  federal  income  tax
        purposes in the real estate was  approximately  $117,700,000 at December
        31, 1996.

        Note (3) Depreciation:  No depreciation has been provided for the period
        September 11, 1992  (Effective  Date) to December 31, 1995 as the assets
        were  held  for  sale.  (See  Notes  1 and 2 to  Consolidated  Financial
        Statements).

        Note (4) Correction of interest  recorded in prior years;  such interest
        was  capitalized  during the period the  Wholly  Owned  Properties  were
        classified as Held for Sale and therefore has no impact on equity.
</FN>
</TABLE>
                                      F-40