<PAGE>

                               1996 ANNUAL REPORT
<PAGE>
                                   1996
--------------------------------------------
Prudential-Bache/Equitec           Annual
Real Estate Partnership            Report
<PAGE>
<PAGE>
 
               PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
                        A California Limited Partnership
 
Message to our Unitholders:

                                        1
<PAGE>

Deloitte &
   Touche LLP
                        --------------------------------------------------------
                 50 Fremont Street                     Telephone: (415) 247-4000
                 San Francisco, California 94105-2230  Facsimile: (415) 247-4329


 
                          INDEPENDENT AUDITORS' REPORT
 
Prudential-Bache/Equitec Real Estate Partnership
  (a California limited partnership):
 
We have audited the accompanying consolidated statements of financial condition
of Prudential-Bache/Equitec Real Estate Partnership (a California limited
partnership) as of December 31, 1996 and 1995 and the related 
consolidated statements of operations, changes in partners' capital and
cash flows for the years ended December 31, 1996 and 1995 and October 31, 1994,
and the period November 1, 1994 through December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of Prudential-Bache/Equitec Real
Estate Partnership at December 31, 1996 and 1995 and the results of its
operations and its cash flows for the years ended December 31, 1996 and 1995 and
October 31, 1994, and the period November 1, 1994 through December 31, 1994, in
conformity with generally accepted accounting principles.
 
/s/ Deloitte & Touche LLP
San Francisco, California

February 18, 1997

-----------------
Deloitte Touche
Tohmatsu
International
-----------------

                                       2
 <PAGE>
<PAGE>
 
               PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
                        A California Limited Partnership
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                                       December 31,     December 31,
                                                                           1996             1995
----------------------------------------------------------------------------------------------------
                                                                              (in thousands)
<S>                                                                    <C>              <C>
ASSETS
Investment in property:
Land                                                                     $ 10,842         $ 10,870
Buildings, improvements and equipment                                      40,545           39,735
Less: Accumulated depreciation                                            (19,634)         (17,905)
      Allowance for loss on impairment of assets                             (500)            (500)
                                                                       ------------     ------------
Net investment in property                                                 31,253           32,200
Cash and cash equivalents                                                     697              806
Prepaid expenses and other assets, net                                      1,396            1,382
                                                                       ------------     ------------
Total assets                                                             $ 33,346         $ 34,388
                                                                       ------------     ------------
                                                                       ------------     ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Notes payable                                                            $ 26,650         $ 26,621
Due to affiliates                                                             705              700
Accounts payable and accrued liabilities                                      266              291
Security deposits and deferred revenue                                        335              232
Real estate taxes payable                                                      57               73
                                                                       ------------     ------------
Total liabilities                                                          28,013           27,917
                                                                       ------------     ------------
Partners' capital
Unitholders (68,795 depositary units issued and outstanding)                5,587            6,714
General partners                                                             (254)            (243)
                                                                       ------------     ------------
Total partners' capital                                                     5,333            6,471
                                                                       ------------     ------------
Total liabilities and partners' capital                                  $ 33,346         $ 34,388
                                                                       ------------     ------------
                                                                       ------------     ------------
----------------------------------------------------------------------------------------------------
</TABLE>
          The accompanying notes are an integral part of these statements

                                       3
 <PAGE>
<PAGE>
 
               PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
                        A California Limited Partnership
                     CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                        Year ended           November 1
                                                       December 31,           through        Year ended
                                                    -------------------     December 31,     October 31,
                                                     1996        1995           1994            1994
--------------------------------------------------------------------------------------------------------
                                                                       (in thousands,
                                                            except per depositary unit amounts)
<S>                                                 <C>         <C>         <C>              <C>
REVENUES
Operating                                           $ 5,987     $ 5,982        $1,039          $ 5,997
Recovery of expenses                                    394         559            86              547
Gain on land conveyance                                  33          --            --               --
                                                    -------     -------     ------------     -----------
                                                      6,414       6,541         1,125            6,544
                                                    -------     -------     ------------     -----------
EXPENSES
Property operating                                    2,873       2,813           472            2,711
Interest                                              2,429       2,411           391            2,364
Depreciation and amortization                         2,025       1,965           328            1,883
General and administrative                              225         384            56              380
                                                    -------     -------     ------------     -----------
                                                      7,552       7,573         1,247            7,338
                                                    -------     -------     ------------     -----------
Net loss                                            $(1,138)    $(1,032)       $ (122)         $  (794)
                                                    -------     -------     ------------     -----------
                                                    -------     -------     ------------     -----------
ALLOCATION OF NET LOSS
Unitholders                                         $(1,127)    $(1,022)       $ (121)         $  (786)
                                                    -------     -------     ------------     -----------
                                                    -------     -------     ------------     -----------
General partners                                    $   (11)    $   (10)       $   (1)         $    (8)
                                                    -------     -------     ------------     -----------
                                                    -------     -------     ------------     -----------
Net loss per depositary unit                        $(16.38)    $(14.86)       $(1.76)         $(11.43)
                                                    -------     -------     ------------     -----------
                                                    -------     -------     ------------     -----------
--------------------------------------------------------------------------------------------------------
</TABLE>
            CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
                                                                               GENERAL
                                                               UNITHOLDERS     PARTNERS      TOTAL
---------------------------------------------------------------------------------------------------
                                                                          (in thousands)
<S>                                                            <C>             <C>          <C>
Partners' capital (deficit)--October 31, 1993                    $ 8,643        $ (224)     $ 8,419
Net loss                                                            (786)           (8)        (794)
                                                               -----------     --------     -------
Partners' capital (deficit)--October 31, 1994                      7,857          (232)       7,625
Net loss                                                            (121)           (1)        (122)
                                                               -----------     --------     -------
Partners' capital (deficit)--December 31, 1994                     7,736          (233)       7,503
Net loss                                                          (1,022)          (10)      (1,032)
                                                               -----------     --------     -------
Partners' capital (deficit)--December 31, 1995                     6,714          (243)       6,471
Net loss                                                          (1,127)          (11)      (1,138)
                                                               -----------     --------     -------
Partners' capital (deficit)--December 31, 1996                   $ 5,587        $ (254)     $ 5,333
                                                               -----------     --------     -------
                                                               -----------     --------     -------
---------------------------------------------------------------------------------------------------
</TABLE>
             The accompanying notes are an integral part of these statements
 
                                       4
 <PAGE>
<PAGE>
 
               PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
                        A California Limited Partnership
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                        Year ended           November 1
                                                       December 31,           through        Year ended
                                                   --------------------     December 31,     October 31,
                                                     1996        1995           1994            1994
--------------------------------------------------------------------------------------------------------
                                                                      (in thousands)
<S>                                                <C>          <C>         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                           $ (1,138)    $(1,032)       $ (122)         $  (794)
                                                   --------     -------     ------------     -----------
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
Depreciation and amortization                         2,025       1,965           328            1,883
Lease concessions-effective rents                        72          69            13              138
Bad debt expense                                          1          --            --               18
Gain on land conveyance                                 (33)         --            --               --
Leasing commissions paid                               (271)       (260)          (18)            (125)
Changes in:
  Prepaid expenses and other assets                     195        (145)          (21)            (122)
  Due to affiliates                                       5          (7)           10               42
  Accounts payable and accrued liabilities              (25)         (2)         (208)             (16)
  Security deposits and deferred revenue                103         (30)            2              (21)
  Real estate taxes payable                             (16)        (37)           --              (92)
                                                   --------     -------     ------------     -----------
Total adjustments                                     2,056       1,553           106            1,705
                                                   --------     -------     ------------     -----------
Net cash provided by (used in) operating
  activities                                            918         521           (16)             911
                                                   --------     -------     ------------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Building and tenant improvements                       (810)       (592)          (30)            (336)
Proceeds from land conveyance                            61          --            --               --
                                                   --------     -------     ------------     -----------
Net cash used in investing activities                  (749)       (592)          (30)            (336)
                                                   --------     -------     ------------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan refinancing                       26,650          --            --               --
Principal payments on notes                         (26,621)       (241)          (55)            (411)
Loan fees                                              (307)         --            --               --
                                                   --------     -------     ------------     -----------
Net cash used in financing activities                  (278)       (241)          (55)            (411)
                                                   --------     -------     ------------     -----------
Net increase (decrease) in cash and cash
  equivalents                                          (109)       (312)         (101)             164
Cash and cash equivalents at beginning of
  period                                                806       1,118         1,219            1,055
                                                   --------     -------     ------------     -----------
Cash and cash equivalents at end of period         $    697     $   806        $1,118          $ 1,219
                                                   --------     -------     ------------     -----------
                                                   --------     -------     ------------     -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid                                      $  2,409     $ 2,546        $  533          $ 2,369
                                                   --------     -------     ------------     -----------
                                                   --------     -------     ------------     -----------
--------------------------------------------------------------------------------------------------------
</TABLE>
             The accompanying notes are an integral part of these statements
 
                                       5
 <PAGE>
<PAGE>
 
               PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
                        A California Limited Partnership
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
A. General
 
   Prudential-Bache/Equitec Real Estate Partnership, A California Limited
Partnership (the ``Partnership''), was formed on June 19, 1984 and will
terminate on December 31, 2009 unless ended sooner under the provisions of the
Amended and Restated Limited Partnership Agreement (the ``Partnership
Agreement''). The Partnership was formed for the purpose of purchasing, holding,
operating, leasing and selling various real properties. The general partners of
the Partnership are Prudential-Bache Properties, Inc. (``PBP'') and Glenborough
Corporation (formerly Glenborough Realty Corporation) and Robert Batinovich
(together, ``Glenborough'') (collectively, the ``General Partners''). At
December 31, 1996, the Partnership owned five properties.
 
   Glenborough replaced Equitec Financial Group, Inc. (``EFG'') as co-General
Partner of the Partnership on May 4, 1994 when EFG transferred its general
partner interest to Glenborough and withdrew and retired as general partner.
This substitution occurred as a result of the consent of a majority of interests
of the limited partners approving the transaction which was detailed in a proxy
statement dated December 1, 1993. PBP continues as co-General Partner.
Glenborough Corporation, continues to receive fees and expense reimbursements in
the same amount that was provided in the property management agreement (see Note
E).
 
B. Summary of Significant Accounting Policies
 
Basis of accounting principles
 
   The books and records of the Partnership are maintained on the accrual basis
of accounting in accordance with generally accepted accounting principles.
 
   The preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partners to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
   The Partnership's fiscal year for financial reporting purposes now ends on
December 31. On November 21, 1994, the General Partners approved a change in the
Partnership's fiscal year for financial reporting purposes from October 31 to
December 31.
 
   The consolidated financial statements of the Partnership include the accounts
of Montrose Office Park Limited Partnership, in which the Partnership owns a
100% interest.
 
Investment in property
 
   Statement of Financial Accounting Standards (``SFAS'') No. 121, ``Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of,'' was adopted by the Partnership as of January 1, 1995. Under SFAS No. 121,
impairment for properties to be held and used is determined to exist when
estimated amounts recoverable through future operations on an undiscounted basis
are below the properties' carrying value. If a property is determined to be
impaired, it should be recorded at the lower of its carrying value or its
estimated fair value. For properties that are held for sale, SFAS No. 121 states
that they should be reported at the lower of carrying amount or estimated fair
value less cost to sell. The implementation of SFAS No. 121 did not affect the
Partnership's results of operations or financial position for the year ended
December 31, 1995.
 
   Prior to 1995, property investments were carried at the lower of depreciated
cost or estimated amounts recoverable through future operations and ultimate
disposition of the property. A provision for loss on impairment of assets would
be recorded when estimated amounts recoverable through future operations and
ultimate disposition of the property on an undiscounted basis were below
depreciated cost.
 
   Property investments are depreciated or amortized using the straight-line
method over their estimated economic lives which range from 3 to 30 years
depending on property type.
                                       6
 <PAGE>
<PAGE>
 
Cash and cash equivalents
 
   Cash and cash equivalents include money market funds whose cost approximates
market value.
 
Other assets
 
   Other assets consist primarily of loan fees, lease concessions, and lease
commissions. Loan fees are capitalized and amortized on a straight-line basis
over the terms of the respective loans. Lease concessions and lease commissions
are deferred and amortized over the terms of the respective leases.
 
Income taxes
 
   The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the individual partners. The Partnership may be subject to other
state and local taxes in jurisdictions in which it operates.
 
   The following is a reconciliation of net loss for financial reporting
purposes with net loss for tax reporting purposes.
 
<TABLE>
<CAPTION>
                                                                    Year ended December 31,
                                                                 -----------------------------
                                                                  1996        1995       1994
                                                                 -------     -------     -----
        <S>                                                      <C>         <C>         <C>
                                                                        (in thousands)
        Net loss, financial statement basis                      $(1,138)    $(1,032)    $(819)
        Rental concessions recorded for books not tax                 --        (120)       --
        Book depreciation in excess of tax depreciation              481         475       338
                                                                 -------     -------     -----
        Net loss, tax basis                                      $  (657)    $  (677)    $(481)
                                                                 -------     -------     -----
                                                                 -------     -------     -----
</TABLE>
 
Profit and loss allocations/distributions
 
   For financial and tax reporting purposes, net profits or losses are allocated
99% to the Unitholders and 1% to the General Partners.
 
   No distributions have been paid since 1988.
 
C. Investment in Property and Notes Payable
 
   The Partnership's properties, net of accumulated depreciation, and the
related debt at December 31, 1996 and 1995 were:
<TABLE>
<CAPTION>
                                                             Investment             Notes Payable
                                                         -------------------     -------------------
Property                                                  1996        1995        1996        1995
----------------------------------------------------------------------------------------------------
                                                                       (in thousands)
<S>                                                      <C>         <C>         <C>         <C>
Montrose Office Park, Rockville, MD                      $16,541     $16,786     $    --     $13,055
Gateway and Park Plaza, Sacramento, CA                     6,623       7,104          --       6,439
Totem Valley Business Center, Kirkland, WA                 4,891       5,074          --       3,645
Poplar Tower, Memphis, TN                                  3,698       3,736          --       3,482
Less: allowance for loss on impairment of assets            (500)       (500)         --          --
Note payable                                                  --          --      26,650          --
                                                         -------     -------     -------     -------
                                                         $31,253     $32,200     $26,650     $26,621
                                                         -------     -------     -------     -------
                                                         -------     -------     -------     -------
</TABLE>
 
   During 1996, a small parcel of land was conveyed to a local jurisdiction to
be used for a road project at the Totem Valley property for proceeds of
approximately $61,000 resulting in a gain of approximately $33,000.
 
   Loans held on two of the Partnership's properties, Poplar Towers and Montrose
Office Park matured on October 1, 1996 and December 31, 1996, respectively. As a
result, the Partnership, on December 20, 1996, pursuant to a loan agreement
dated December 13, 1996 with Wells Fargo Bank, N.A. (``WFB''), consolidated and
refinanced all of the existing loans on the five properties owned by the
Partnership (the ``Loan''). WFB held mortgages on the Partnership's three
remaining properties Totem Valley, Gateway and Park Plaza.
 
                                       7
 <PAGE>
<PAGE>
 
   The Loan from WFB is in the amount of $26,650,000 (which approximates the
total amount of the individual loans on each of the five properties). The Loan
will mature on December 9, 1997 and bears interest at LIBOR + 3.5% reset
monthly. The Loan is secured by Deeds of Trust on each of the respective
properties and by security interests in the respective property's leases and
rents, and equipment and fixtures contained therein. The Partnership has the
ability to refinance the loan at maturity based on the current appraised values
on the underlying properties.
 
D. Lease Agreements
 
   The provisions of the leases generally require tenants to pay for their
proportionate share of increases in building operating costs and property tax
increases. Future minimum rental receipts due under the noncancellable operating
leases with tenants are as follows:
 
<TABLE>
<CAPTION>
  Year ending
  December 31,                   (in thousands)
----------------                 --------------
<S>                              <C>
1997                                $  6,169
1998                                   5,499
1999                                   4,187
2000                                   2,578
2001                                   1,551
Thereafter                             4,178
                                 --------------
Total                               $ 24,162
                                 --------------
                                 --------------
</TABLE>
 
   For the years ended December 31, 1996, December 31, 1995 and October 31,
1994, respectively, the following properties' rental revenues exceeded 15% of
the Partnership's total revenue:
 
<TABLE>
<CAPTION>
                                                                      1996    1995    1994
                                                                      ----    ----    ----
           <S>                                                        <C>     <C>     <C>
           Montrose Office Park                                        40%     43%     46%
           Poplar Towers                                               19      --      --
</TABLE>
 
   During the year ended December 31, 1996, Technical Resources, Inc., a tenant
in the Montrose Office Park property, did account for approximately 10% of the
Partnership's total revenue and, on an annualized basis, had its new lease 
covered the entire year, would have accounted for approximately 10% of the 
Partnership's total revenue for the year ended December 31, 1995. During the 
year ended October 31, 1994, Intersolv, a tenant in the Montrose Office Park 
property, accounted for approximately 10% of the Partnership's total revenue.
 
                                       8
 <PAGE>
<PAGE>
 
E. Related Parties
 
   The General Partners and their affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; property management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Partnership Agreement. The costs and expenses were:
<TABLE>
<CAPTION>
                                                                         November 1,
                                                       Year ended          through        Year ended
                                                      December 31,       December 31,     October 31,
                                                     1996      1995          1994            1994
-----------------------------------------------------------------------------------------------------
                                                              (in thousands)
<S>                                                  <C>       <C>       <C>              <C>
PBP and affiliates
  General and administrative                         $ 60      $112          $ 10            $ 136
                                                     -----     -----       ------         -----------
Glenborough Corporation and affiliates
  Property management fee and expenses                634       663           103              212
  Leasing commissions                                 131       136            18               31
                                                     -----     -----       ------         -----------
                                                      765       799           121              243
                                                     -----     -----       ------         -----------
                                                     $825      $911          $131            $ 379
                                                     -----     -----       ------         -----------
                                                     -----     -----       ------         -----------
</TABLE>
---------------
 
   PBP is not being paid on a current basis for general and administrative
expenses other than printing costs. During the year ended December 31, 1996, PBP
was reimbursed approximately $48,000, which was applied to prior years' general
and administrative expenses due. At December 31, 1996 and 1995, the total
liability outstanding to PBP was approximately $705,000 and $700,000,
respectively.
 
   The Partnership maintains an investment account with the Prudential
Institutional Liquidity Portfolio Fund, an affiliate of PBP, for investment of
its available cash in short-term instruments pursuant to the guidelines
established by the Partnership Agreement.
 
   Prudential Securities Incorporated (``PSI''), an affiliate of PBP, owns 180
depositary units at December 31, 1996.
 
                                       9
 <PAGE>
<PAGE>
 
               PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
                        A California Limited Partnership
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
 
Liquidity and Capital Resources
 
   All of the Partnership's properties generated cash flow from operations after
debt service during the year ended December 31, 1996.
 
   During the year ended December 31, 1996, the Partnership incurred
approximately $810,000 for building and tenant improvements primarily at the
Montrose Office Park, Totem Valley, Park Plaza, and Poplar Towers properties. Of
this amount, approximately $525,000 was expended at Montrose Office Park
primarily for build out of space for new tenants. In order to keep the
Partnership's properties competitive, building and tenant improvements will
continue to be required. Building and tenant improvements for 1997 are currently
budgeted for approximately the same amount as 1996.
 
   The Partnership had cash of approximately $697,000 at December 31, 1996. PBP
is not being reimbursed for its general and administrative expenses (other than
printing) on a current basis. During the year ended December 31, 1996, PBP was
reimbursed approximately $48,000, which was applied to prior years' general and
administrative expenses due. At December 31, 1996, the total liability
outstanding (including printing) was approximately $705,000. Cash on hand plus
any cash generated from operations may not be sufficient to fund building and
tenant improvements and to pay deferred general and administrative expenses.
 
   The Partnership in December 1996 consolidated and refinanced all of the
existing loans on the five properties. The new loan in the amount of $26,650,000
will mature in December 1997 and is secured by all of the properties.
 
   The General Partners continue to evaluate all of the properties' prospects
for eventual sale. It is unlikely that investors will be returned a significant
portion of their original investment upon the sale of the properties and
ultimate dissolution of the Partnership.
 
Results of Operations
 
1996 versus 1995
   The Partnership's net loss increased by approximately $106,000 for the year
ended December 31, 1996 as compared to 1995 for the reasons discussed below.
 
   Property operating revenue increased by approximately $5,000 for the year
ended December 31, 1996 as compared to 1995 as increases at the Totem Valley,
Gateway, Park Plaza and Poplar Tower properties were more than offset by a
decrease at Montrose Office Park due to a major tenant's lease expiring in May
1996. The increase and decreases in operating revenue were primarily the result
of corresponding changes in average occupancies.
 
   Recovery of expenses decreased by approximately $165,000 for the year ended
December 31, 1996 as compared to 1995 primarily due to lower tenant recoveries
at the Montrose property as a result of a major tenant's lease expiring in May
1996, partially offset by increases in expense recoveries at the Totem Valley
property.
 
   Property operating expenses increased by approximately $60,000 for the year
ended December 31, 1996 as compared to 1995 due primarily to increased utility
expenses, building management fees and salaries at Poplar Towers.
 
   Depreciation and amortization increased by approximately $60,000 for the year
ended December 31, 1996 as compared to 1995 due to increased building and tenant
improvement additions.
 
   General and administrative expenses decreased by approximately $159,000 for
the year ended December 31, 1996 as compared to 1995 primarily due to appraisal
fees recorded in 1995.
 
1995 versus 1994
   The Partnership's net loss increased by approximately $238,000 for the year
ended December 31, 1995 as compared to the year ended October 31, 1994 (``fiscal
1994'') for the reasons discussed below.
 
   Operating revenues decreased by approximately $15,000 for the year ended
December 31, 1995 as compared to fiscal year 1994 as increases at the Totem
Valley, Gateway, and Poplar Tower properties were

                                       10
 <PAGE>
<PAGE>
more than offset by decreases at the Park Plaza and Montrose properties. The
increases and decreases in operating revenue were primarily the result of
corresponding changes in average occupancies.
 
   Recovery of expenses increased by approximately $12,000 for the year ended
December 31, 1995 as compared to fiscal 1994 primarily due to greater tenant
work order recoveries at the Montrose property offset by decreases in various
other expense recoveries at all of the properties.
 
   Property operating expenses increased by approximately $102,000 during the
year ended December 31, 1995 as compared to fiscal 1994 due primarily to
increased tenant work order costs and increased utilities expenses.
 
   Depreciation and amortization increased by approximately $82,000 during the
year ended December 31, 1995 as compared to fiscal 1994 due to increased
building and tenant improvement additions.
 
   Interest expense increased by approximately $47,000 during the year ended
December 31, 1995 as compared to fiscal 1994 because of increases in interest
rates on variable rate notes.
                                       11
 <PAGE>
<PAGE>
 
                               OTHER INFORMATION
 
   The Partnership's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available to limited partners without charge upon written
request to:
 
       Prudential-Bache/Equitec Real Estate Partnership
       P.O. Box 2016
       Peck Slip Station
       New York, N.Y. 10272-2016
                                       12
 <PAGE>
<PAGE>
 
P.O. Box 2016
                                   BULK RATE
Peck Slip Station
                                  U.S. POSTAGE
New York, NY 10272
                                      PAID
                                 Automatic Mail
PBEQ86/170368