SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10 - K


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


  For the fiscal year ending December 31, 1996 Commission file number 0-13693


                       VININGS INVESTMENT PROPERTIES TRUST
                                AND SUBSIDIARIES
             (Exact name of registrant as specified in its charter)

         Massachusetts                                            13-6850434
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                               Identification No.)

3111 Paces Mill Road, Suite A-200, Atlanta, GA                      30339
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code:            (770) 984-9500
                                                            -----------------

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

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

                 Shares of Beneficial Interest without par value
                                (Title of Class)

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

       Yes   X                                                           No
            ---

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-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
             ---
Based on the  average  bid and asking  price on March 21,  1997,  the  aggregate
market value of the Registrant's shares held by non-affiliates of the Registrant
was $3,119,262.

The number of shares outstanding as of March 21, 1997 was 1,080,517.

                       DOCUMENTS INCORPORATED BY REFERENCE

                 Portions of the Trust's Proxy Statement relating
                          to its 1997 Annual Meeting of
              Shareholders are incorporated by reference into Part III


<PAGE>

                       VININGS INVESTMENT PROPERTIES TRUST
                                AND SUBSIDIARIES
                               INDEX TO FORM 10-K


PART I.....................................................................3
    ITEM 1 - Business......................................................3
    ITEM 2 - Properties....................................................7
    ITEM 3 - Legal Proceedings.............................................8
    ITEM 4 - Submission of Matters to a Vote of Shareholders...............8

PART II....................................................................9
    ITEM 5 - Market for Registrant's Shares of Beneficial Interest.........9
    ITEM 6 - Selected Financial Information...............................11
    ITEM 7 - Management's Discussion and Analysis of Financial
                    Condition and Results of Operations...................12
    ITEM 8 - Financial Statements and Supplementary Data..................17
    ITEM 9 - Changes in and Disagreements with Accountants on
                    Accounting and Financial Disclosure...................17

PART III..................................................................18
    ITEM 10 - Directors and Executive Officers of the Registrant..........18
    ITEM 11 - Executive Compensation......................................18
    ITEM 12 - Security Ownership of Certain Beneficial Owners
                      and Management......................................18
    ITEM 13 - Certain Relationships and Related Transactions..............18

PART IV...................................................................19
    ITEM 14 - Exhibits, Financial Statements and Schedule and
                      Reports on Form 8-K.................................19

Signatures ...............................................................21


<PAGE>
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Trust's actual results could differ materially from those projected
in the  forward-looking  statements.  Certain  factors  that might  cause such a
difference  are set forth in the section  entitled  "Certain  Factors  Affecting
Future  Operating   Results",   in  the  relevant  paragraphs  of  "Management's
Discussion and Analysis of Results of Operations and Financial  Condition",  and
elsewhere in this report.

                                     PART I

ITEM 1 - BUSINESS

General Development of Business
-------------------------------

Vinings  Investment  Properties  Trust,  a  Massachusetts  business  trust  (the
"Trust")  (formerly known as Mellon  Participating  Mortgage  Trust,  Commercial
Properties  Series  85/10),  was  organized on December 7, 1984 as a twenty year
finite-life real estate  investment trust ("REIT").  Its original purpose was to
invest  in  participating,  shared  appreciation,  convertible  and  fixed  rate
mortgages and joint venture financing  secured by office,  industrial and retail
facilities  located  throughout  the United  States.  The  Declaration  of Trust
provided,  among other things, that the Trustees would use their best efforts to
terminate the Trust within approximately 10 years,  provided,  however, that the
Trustees  would have the  absolute  discretion  to  determine in good faith such
termination  date as would be in the best interests of the  shareholders  of the
Trust. As provided in the Declaration of Trust, the Trustees  proceeded with the
orderly  liquidation of assets and distribution of proceeds to the shareholders.
As of December 31, 1995 all of the assets to be liquidated  had been sold except
the Hawthorne Note, as hereinafter defined, which was sold on January 3, 1996.

In connection  with the  liquidation,  final  distributions  of $15.60 and $1.28
(adjusted for the Share Split, as hereinafter  defined) were paid on February 2,
1996 and March 8, 1996,  respectively.  The  remaining  assets of the Trust were
Peachtree Business Center and approximately $163,000 in cash.

On December 21, 1995, the Trust entered into an Agreement Regarding Tender Offer
(the "Agreement  Regarding Tender Offer") with A&P Investors,  Inc. ("A&P"),  an
unaffiliated  third party.  Pursuant to an Assignment and Amendment of Agreement
Regarding Tender Offer (the "Assignment and Amendment  Agreement" and,  together
with the Agreement Regarding Tender Offer, the "Tender Offer Agreement"),  dated
as of January 16, 1996,  by and between  A&P,  the Trust and Vinings  Investment
Properties, Inc. (the "Purchaser"),  a corporation formed by A&P for the purpose
of making the Tender  Offer (as  hereinafter  defined),  A&P assigned all of its
interest in the Tender Offer Agreement to the Purchaser.

Pursuant to the Tender  Offer  Agreement,  on January 31,  1996,  the  Purchaser
commenced a cash tender offer (the  "Tender  Offer") for a minimum of a majority
and a maximum of 85% of the  outstanding  shares of  beneficial  interest of the
Trust,  without par value (the  "Shares"),  at a price of $0.47 per Share ($3.76
adjusted for the Share Split, as hereinafter defined).  The Tender Offer expired
in  accordance  with its terms at midnight on February 28, 1996.  The  Purchaser
accepted an aggregate of 6,337,279 Shares (792,159 Shares adjusted for the Share
Split, as hereinafter  defined) validly  tendered  pursuant to the Tender Offer,
representing approximately 73.3% of the outstanding Shares.

The purpose of the Tender Offer was for the Purchaser to acquire  control of the
Trust and to  rebuild  the  Trust's  assets by  expanding  into the  multifamily
property  markets.  In connection with the consummation of the Tender Offer, all
of the  trustees  and  officers of the Trust  resigned  and were  replaced  with
designees of the Purchaser.  In addition,  prior to the Tender Offer,  the Trust
was an  externally  advised REIT for which it paid advisory fees to an unrelated
third  party  (the  "Advisor").  Upon  consummation  of the  Tender  Offer,  the
relationship   with  the   Advisor   was   terminated   and  the  Trust   became
self-administered.

On  June  11,  1996,  Vinings  Investment   Properties,   L.P.  (the  "Operating
Partnership"),  a Delaware limited partnership,  was organized. The Trust is the
sole general  partner and a 98% limited  partner in the  Operating  Partnership.
Through its  ownership of Vinings  Holdings,  Inc., a Delaware  corporation  and
wholly-owned  subsidiary  of the Trust,  which is also a limited  partner in the
Operating  Partnership,  the Trust was a 100%  economic  owner of the  Operating
Partnership at December 31, 1996. (This structure is commonly  referred to as an
umbrella partnership REIT or "UPREIT.")

On July 1, 1996,  the Trust  effected a 1-for-8  reverse share split (the "Share
Split") of its 8,645,000 outstanding Shares.  Shareholders tendered their Shares
and received one Share for every eight Shares owned. The Trust has purchased and
continues to purchase any fractional  Shares at a cost of $5.50 per share. As of
December  31,  1996,  fractional  Shares  totaling 97 had been  repurchased  and
retired leaving 1,080,528 Shares outstanding.

At December 31, 1996,  approximately  ninety-four  percent  (94%) of the Trust's
total assets were invested in two real estate assets.  They were (1) The Thicket
Apartments  ("Thicket"),  a  254-unit  apartment  complex  located  in  Atlanta,
Georgia, owned through Thicket Apartments, L.P., a Delaware limited partnership,
of  which  the  Operating  Partnership  is a 99%  limited  partner  and  Thicket
Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Trust,
is the sole general partner and (2) Peachtree Business Center ("Peachtree"),  an
approximately 75,000 square foot, single-story business park located in Atlanta,
Georgia, owned through its wholly-owned subsidiary, PBC Acquisition, Inc.

The Trust has elected to be taxed as a REIT under the  Internal  Revenue Code of
1986,  as amended,  and intends to maintain its  qualification  as a REIT in the
future.  As a REIT,  the Trust will  generally not be subject to federal  income
taxation on that portion of its income that  qualifies as REIT taxable income to
the  extent  that it  distributes  at least  95% of its  taxable  income  to its
shareholders and satisfies certain other requirements.

The Trust's  executive offices are located at 3111 Paces Mill Road, Suite A-200,
Atlanta, Georgia 30339, (770) 984-9500.
<PAGE>
Financial Information About Industry Segments
---------------------------------------------

The Trust's operations and identifiable long-term assets have been attributed to
the real estate  industry for the entirety of its existence.  While  investments
prior to the Tender Offer were primarily  mortgage loans,  the current assets of
the Trust are equity  investments.  Management  plans to continue  making equity
investments in the multifamily real estate markets.

Narrative Description of Business
---------------------------------

The primary objective of the Trust is to continue to expand into the multifamily
real  estate  markets   through  the   acquisition  of  garden  style  apartment
communities  which are  leased to  middle-income  residents.  The  middle-income
resident is a more stable and broader  based market,  often  referred to as "the
renter by necessity."  Management believes that middle market properties provide
greater  potential for appreciation  through  increased  revenues and cash flows
than  the more  expensive  high-end  apartment  communities  which  cater to the
"renter by choice."

Management  believes that these investments will provide  attractive  sources of
income to the Trust  which  will not only  provide  cash  available  for  future
distributions,  but will increase the value of the Trust's real estate portfolio
as well.

In the past,  the Trust has reviewed each real estate  investment in the Trust's
portfolio on a quarterly basis. Management plans to continue this review as well
as to  carefully  review each  acquisition  to insure that the Trust makes sound
investments  on  behalf  of its  shareholders.  In this  regard,  the  Trust has
established an Acquisition  Committee  comprised of four members of the Board of
Trustees,  one of which  is also an  officer.  The  Board  has also  established
certain  investment  criteria which must be met. The Acquisition  Committee must
review and approve  each  potential  acquisition  before it is  presented to the
Board for final approval.

Growth and Expansion Strategy
-----------------------------

Management  intends to implement its growth and expansion  strategy by targeting
properties that have been under managed and under maintained,  and purchase such
properties at a price which is below replacement  cost.  Through strategic value
added  and  return  oriented  capital   improvements   and  intensive   property
management,  the Trust  believes  that cash  flow,  and in turn  value,  will be
increased.

The Trust currently  anticipates  that these  acquisitions  will include certain
properties  within the  existing  multifamily  property  portfolios  of entities
affiliated with management of the Trust which meet certain criteria,  as well as
properties  acquired from  unaffiliated  third parties.  These properties may be
acquired either for cash, through debt financing,  in exchange for Shares of the
Trust or Operating  Partnership units or any combination  thereof.  In addition,
the Trust believes it can raise capital through  private  offerings for specific
acquisitions. <PAGE>

Operating Strategy
------------------

The Trust  believes  that  conducting  its business and  operations  through the
Operating  Partnership will have certain  strategic  advantages over the Trust's
previous  structure,  which  allowed only direct  investment in the Trust's real
estate portfolio through the purchase of Shares of the Trust. In particular, the
Operating Partnership structure will provide the Trust with greater flexibility,
in certain circumstances,  in facilitating future acquisitions by permitting the
issuance of partnership units on a tax advantaged basis to owners of real estate
properties  who contribute  such  properties to the Operating  Partnership.  The
Trust believes that many potential  sellers of multifamily  properties  would be
unwilling  to sell their  properties  except in  transactions  that would  defer
income tax. In addition, holders of partnership units will have the right, under
certain circumstances, to convert such units into Shares of the Trust, resulting
in long-term  liquidity for such holders.  The overall effect of this structure,
the Trust believes,  will be an enhanced ability of the Trust to access the real
estate and capital markets.

Competition
-----------

The Trust  competes  with a number of  housing  alternatives  for its  residents
including  other  multifamily  communities and single family homes available for
rent as well as purchase.  This competition could have an affect not only on the
properties' ability to lease units but also on the rents charged. The Trust also
competes with other investors for potential acquisitions, some of which may have
greater  resources  with  which  to  purchase  projects  that the  Trust  may be
interested in acquiring.

Advisory and Property Management Services
-----------------------------------------

Through February 28, 1996, the Trust's day-to-day operations were managed by the
Advisor.  See Note 8 to the Trust's  December 31, 1996,  Consolidated  Financial
Statements  which  provides  additional   information   regarding  the  advisory
agreement.  After the consummation of the Tender Offer, the Trust terminated the
services of the Advisor and became self-administered. The Trust has entered into
a management  agreement with Vinings  Properties,  Inc. for property  management
services  for The Thicket  Apartments  for a fee equal to five  percent of gross
revenues.  Vinings  Properties,  Inc. is an  affiliate  of certain  officers and
trustees of the Trust.  In addition,  as a commitment  to the  rebuilding of the
Trust, The Vinings Group,  Inc., the parent  corporation of Vinings  Properties,
Inc.,  (collectively  "Vinings")  has  provided  numerous  services to the Trust
relating to administration, acquisition, and capital and asset advisory services
at little or no cost to the  Trust.  The Trust  does not  anticipate  that these
services will continue to be provided free of charge.  However,  while the Trust
is in its  rebuilding  stages,  the  officers  and  trustees  are  committed  to
providing  as many  services as possible  to promote  the  Trust's  growth.  The
Peachtree Business Center is managed by a third-party  property  management firm
not affiliated with management.

Employees
---------

At December 31, 1996,  The Thicket  Apartments  had six  employees who performed
on-site property management services for the community, and were paid with funds
generated from Thicket.  The Trust paid a total of $15,000 to Vinings for <PAGE>
shareholder  services  performed  exclusively  for  the  Trust  by  one  of  its
employees.  None of the  officers of the Trust  received  compensation  from the
Trust for their services.

Environmental Policy
--------------------

Investments in real property create a potential for  environmental  liability on
the part of the Trust.  Owners of real property may be held liable for all costs
and liabilities  relating to hazardous  substances  present on or emanating from
their properties.  Current management,  as did the previous Advisor, assesses on
an as needed  basis,  measures  that may need to be been  taken to  comply  with
environmental  laws and  regulations.  In the event that there is a potential of
environmental  responsibility,  the costs to comply with  environmental laws and
regulations would be estimated at that time. At December 31, 1996, the Trust was
not aware of any potential  environmental  contamination relating to investments
in its portfolio.

Certain Factors Affecting Future Operating Results
--------------------------------------------------

This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Trust's actual results could differ materially from those set forth
in the  forward-looking  statements.  Certain  factors  that might  cause such a
difference  include  the  following:  the  inability  of the  Trust to  identify
properties  within  existing   multifamily   property   portfolios  of  entities
affiliated with management  which will have a strategic fit with the Trust,  the
inability of the Trust to identify unaffiliated properties for acquisition,  the
less than  satisfactory  performance  of any property which might be acquired by
the Trust,  the  inability  to access the  capital  markets in order to fund the
Trust's present growth and expansion  strategy,  the cyclical nature of the real
estate market generally and locally in Georgia and the surrounding  southeastern
states, the national economic climate, the local economic climate in Georgia and
the surrounding  southeastern  states,  and the local real estate conditions and
competition in Georgia and the surrounding  southeastern states. There can be no
assurance  that, as a result of the foregoing  factors,  the Trust's  growth and
expansion strategy will be successful or that the business and operations of the
Trust will not be adversely affected thereby.

ITEM 2 - PROPERTIES

As of December 31, 1996, all of the Trust's  investments were equity investments
in real estate.  While the Trust still owns Peachtree,  a single-story  business
park, it intends to continue  investing  only in  multifamily  communities.  The
Trust's two real estate investments are summarized below by property type:

                                  Amount of         Investment       Occupancy
                                  Investment        Percentage      at 12/31/96
                                  ----------        ----------      -----------
The Thicket Apartments          $  8,547,570           79%             97%
Peachtree Business Center          2,310,966           21%             91%
                                 -----------          -----
Totals                           $10,858,536          100%
                                 ===========          =====

<PAGE>
The above  investment  amounts are net of  accumulated  depreciation.  The Trust
incorporates  herein by  reference  the  description  of owned real  property on
Schedule III and the notes  thereto.  This  schedule is made part of the Trust's
December 31, 1996 Consolidated Financial Statements.

ITEM 3 - LEGAL PROCEEDINGS

Neither the Trust,  nor its  properties  are  presently  subject to any material
litigation or, to the Trust's knowledge,  is any material litigation  threatened
against the Trust or either of its  properties,  other than  routine  actions or
claims  and  administrative  proceedings  arising  in  the  ordinary  course  of
business.  Some of these claims are expected to be covered by insurance  and all
of which  collectively are not expected to have a material adverse effect on the
business, the financial condition, or the results of operations of the Trust.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

No matters  were  submitted  to a vote of the  Trust's  shareholders  during the
fourth quarter of the fiscal year ended December 31, 1996.
<PAGE>

                                     PART II

ITEM 5 - MARKET FOR REGISTRANT'S SHARES OF BENEFICIAL INTEREST

Stock Quotation
---------------

The Trust's Shares are currently  traded on the Nasdaq SmallCap Market under the
symbol "VIPIS".

The Trust was  informed by the Nasdaq  Stock  Market,  Inc. on February 28, 1996
that, as a result of the liquidating dividends and the purchase of Shares by the
Purchaser  pursuant  to the  Tender  Offer,  the Shares no longer met all of the
requirements for continued  inclusion on the Nasdaq National  Market.  The Trust
requested  and was  granted an  extension  of time in order to meet the  initial
inclusion  criteria for a transfer from the Nasdaq National Market to the Nasdaq
SmallCap Market.

Market Information
------------------

On July 1,  1996,  the Trust  effected  a  1-for-8  reverse  Share  Split of its
8,645,000  outstanding Shares.  Shareholders  tendered their Shares and received
one Share for every eight Shares owned. The Trust has purchased and continues to
purchase any fractional  Shares at a cost of $5.50 per share. As of December 31,
1996,  fractional  Shares  totaling 97 had been  repurchased and retired leaving
1,080,528 Shares outstanding.  All Share prices and dividends have been restated
to reflect the Share  Split.  The high and low sales  prices for each  quarterly
period during fiscal 1996 and 1995, which reflect inter-dealer  prices,  without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions, are as follows:

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

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

Quarter Ended              High        Low          High        Low
-------------              ----        ---          ----        ---
March 31                    22           3            32         26
June 30                      6 1/2       3            30         20
September 30                 6           4            28         19
December 31                  5           4 3/8        28         16


Dividends
---------

The Trust's  dividend policy up to the  consummation of the Tender Offer, was to
distribute all liquidating proceeds. These dividends were 100% return of capital
in fiscal 1996 and 1995 (as summarized  below) which  historically had an effect
on the Trust's  Share price.  The effect of dividend  distributions  reduced the
book value of the Trust, and therefore, reduced the market price for the Shares,
especially  with  regard to the final  liquidating  dividends  paid in the first
quarter of 1996.  On March 21,  1997,  the  closing  sales price for the Trust's
Shares, as reported on the Nasdaq SmallCap Market, was $4.50.

<PAGE>

The Trust paid quarterly cash distributions to shareholders sufficient to enable
the Trust to  qualify  as a REIT.  For  fiscal  years  1996 and 1995,  the Trust
declared  cash  distributions  per  share as  reported  for  generally  accepted
accounting  principles  (adjusted  for the Share  Split) as shown  below.  For a
discussion of the federal income tax consequences of these distributions,  refer
to Note 9 of the Trust's December 31, 1996, Consolidated Financial Statements.


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

  Payment Date       Distributions   Payment Date      Distributions


  February 2, 1996        $15.60    April 19, 1995            $ 5.20
  March 8, 1996             1.28    August 17, 1995             0.64
                                    October 27, 1995            5.60
                                    December 31, 1995           0.80
                          ------                              ------
  Total                   $16.88        Total                 $12.24
                          ======                              ======


Since the  consummation  of the  Tender  Offer,  management  has not  issued its
dividend policy for the Trust,  nor has it declared any dividends.  In an effort
to rebuild the Trust's  assets,  all  operating  cash flow has been reserved for
future growth and expansion.  However, as assets are acquired and operating cash
flow  increases,  the Trust  intends to pay  distributions  to  shareholders  in
amounts at least sufficient to enable the Trust to qualify as a REIT.

Holders
-------

The Trust had 755 holders of record of its Shares as of March 21, 1997.

<PAGE>


ITEM 6 - SELECTED FINANCIAL INFORMATION

The following table sets forth selected financial  information for the Trust and
should be read in  conjunction  with  "Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations" as well as the Trust's  December
31, 1996,  Consolidated Financial Statements which are made part of this report.
All share and per share  information  have been  restated  to reflect  the Share
Split. <TABLE>

<CAPTION>
                                                                      For the year ended December 31,
                                        --------------------------------------------------------------------------------------------
                                            1996               1995               1994                1993                1992
                                        --------------     --------------     --------------     ---------------     ---------------

<S>                                      <C>               <C>                <C>                  <C>                 <C>
Revenues                                 $ 1,796,917        $ 3,244,908        $ 4,159,170         $ 6,668,425         $  7,731,951

Expenses                                   2,580,195          1,779,475          2,477,923           2,163,286            1,712,408
                                         ------------       ------------       ------------        ------------        -------------
Income (loss) before loss on
  real estate investments                   (783,278)         1,465,433          1,681,247           4,505,139            6,019,543

Loss on real estate investments              (26,800)          (886,887)          (816,307)         (1,325,000)         (16,507,006)
                                         ------------       ------------       ------------        ------------        -------------
Net income (loss)                        $  (810,078)       $   578,546        $   864,940         $ 3,180,139         $(10,487,463)
                                         ============       ============       ============        ============        =============

Per share information:
Income (loss) before loss on
  real estate investments                $     (0.73)       $      1.36        $      1.56         $      4.17         $       5.57
                                         ============       ============       ============        ============        =============
Net income (loss)                        $     (0.75)       $      0.54        $      0.80         $      2.94         $      (9.71)
                                         ============       ============       ============        ============        =============

Dividends declared and paid:
Ordinary income                          $       -          $       -          $      0.08         $      4.08         $       2.16

Return of capital                              16.88              12.24              24.64                 -                   2.40
                                         ------------       ------------       ------------        ------------        -------------
Total dividends declared paid            $     16.88        $     12.24        $     24.72         $      4.08         $       4.56
                                         ============       ============       ============        ============        =============

Total assets                             $11,519,469        $21,878,357        $34,348,242         $60,514,634         $ 61,570,899
                                         ============       ============       ============        ============        =============
Shareholders' equity                     $ 2,232,548        $21,284,112        $33,932,908         $59,781,018         $ 61,009,829
                                         ============       ============       ============        ============        =============

Weighted average shares outstanding        1,080,528          1,080,625          1,080,625           1,080,625            1,080,625
                                         ============       ============       ============        ============        =============
</TABLE>


<PAGE>


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

Overview
--------

The Trust was  organized on December 7, 1984 as a twenty year  finite-life  REIT
whose  original  purpose was to invest in  participating,  shared  appreciation,
convertible  and fixed rate  mortgages  and joint venture  financing  secured by
office,  industrial and retail facilities  located throughout the United States.
The Declaration of Trust provided,  among other things,  that the Trustees would
use their best efforts to terminate the Trust within approximately 10 years. The
Trustees  proceeded with the orderly  liquidation of assets and the distribution
of proceeds to the  shareholders.  As of December 31, 1995, all of the assets to
be liquidated had been sold except the Hawthorne  Note, as hereinafter  defined,
which was sold on  January  3,  1996.  The  remaining  assets of the Trust  were
Peachtree Business Center and approximately $163,000 in cash.

On January 31, 1996,  Vinings  Investment  Properties,  Inc.  (the  "Purchaser")
commenced a cash tender offer (the  "Tender  Offer") for a minimum of a majority
and a maximum of 85% of the  outstanding  shares of  beneficial  interest of the
Trust (the  "Shares").  The Tender Offer expired in accordance with its terms at
midnight on February 28, 1996, and the Purchaser accepted approximately 73.3% of
the outstanding Shares. In connection with the consummation of the Tender Offer,
all of the trustees and officers of the Trust ("Prior Management")  resigned and
were replaced with designees of the Purchaser  ("Management").  In addition, the
Trust  was an  externally  advised  REIT for which it paid  advisory  fees to an
unrelated third party (the  "Advisor").  Upon  consummation of the Tender Offer,
the  relationship   with  the  Advisor  was  terminated  and  the  Trust  became
self-administered.

The purpose of the Tender  Offer was for  Management  to acquire  control of the
Trust and to rebuild the Trust's assets by expanding into the  multifamily  real
estate markets  through the  acquisition of garden style  apartment  communities
which are leased to  middle-income  residents.  Management  believes  that these
investments  will provide  attractive  sources of income to the Trust which will
not  only   increase   net  income  and  provide  cash   available   for  future
distributions,  but will increase the value of the Trust's real estate portfolio
as well.

On  June  11,  1996,  Vinings  Investment   Properties,   L.P.  (the  "Operating
Partnership")  was  organized.  The Trust is the sole general  partner and a 98%
limited partner in the Operating  Partnership.  Through its ownership of Vinings
Holdings,  Inc., a wholly-owned subsidiary of the Trust, which is also a limited
partner in the Operating Partnership, the Trust was a 100% economic owner of the
Operating  Partnership at December 31, 1996 (this structure is commonly referred
to as an umbrella partnership REIT or "UPREIT").

Management  believes that  conducting  its business and  operations  through the
Operating  Partnership will have certain  strategic  advantages over the Trust's
previous  structure,  which  allowed  investment  in the Trust only  through the
purchase  of Shares of the  Trust.  In  particular,  the  Operating  Partnership
structure  will  provide  the  Trust  with  greater   flexibility,   in  certain
circumstances, in facilitating future acquisitions by permitting the issuance of
partnership  units on a tax advantaged basis to owners of real estate properties
who contribute such properties to the Operating Partnership.  The overall effect
of this structure,  the Trust believes, will be an enhanced ability of the Trust
to access the real estate and capital markets. On July 1, 1996, the Trust
effected a 1-for-8  reverse  share  split (the "Share  Split") of its  8,645,000
outstanding  Shares.  Shareholders  tendered their Shares and received one Share
for every eight Shares owned.  The Trust has purchased and continues to purchase
any  fractional  Shares at a cost of $5.50 per share.  As of December  31, 1996,
fractional Shares totaling 97 had been repurchased and retired leaving 1,080,528
Shares outstanding.

As a result of the Tender Offer,  much of Management's  efforts during 1996 were
focused  on  the  Trust's  organizational  structure  and  preparing  the  Trust
strategically for future acquisitions. The Thicket Apartments (the "Thicket"), a
254-unit apartment community in Atlanta,  Georgia, was acquired on June 28, 1996
as the Trust's only  acquisition for the year. At December 31, 1996, the Trust's
two real estate assets were Thicket and Peachtree, which were 97% and 91% leased
respectively.

The following  discussion and analysis of the financial condition and results of
operations  should be read in  conjunction  with the  accompanying  consolidated
financial statements of the Trust and the notes thereto.

Results of Operations
---------------------

Because it was the original intent of the Trust to terminate after approximately
ten  years,  the net  income,  as well as the  asset  value,  of the  Trust  has
decreased  over the last several  years.  Revenues have steadily  decreased from
fiscal  years  ended  December  31,  1994 to 1995 to 1996.  Operating  expenses,
however,  increased substantially in 1996 due to a number of non-recurring costs
associated with the Tender Offer and the structural reorganization of the Trust.
This resulted in a net loss for 1996.

All of the gains (losses) on real estate  investments since 1994 were the result
of Prior Management's liquidation of the Trust's investments.

As a  result  of the  liquidation  of  assets,  change  in  management,  and the
redirection of the Trust's business objectives,  substantially all of the income
producing  assets held in fiscal years 1995 and 1994,  are no longer held by the
Trust,  with the exception of Peachtree.  With the  acquisition of Thicket,  the
Trust  obtained a mortgage  note  payable  and a line of  credit,  and  incurred
interest expense and amortization of deferred financing costs for the first time
in 1996.

Comparison of Operating Results of 1996 to Operating Results of 1995
--------------------------------------------------------------------

Total revenues decreased $1,447,991,  or 45%, from $3,244,908 to $1,796,917 as a
result of the Trust's liquidation of investments.

Rental and Other property revenues increased $952,029, or 159%, from $600,454 to
$1,552,483 as a result of the acquisition of Thicket on June 28, 1996.  Revenues
from Peachtree remained fairly constant.
<PAGE>
There was no Partnership  income during 1996, as compared to $1,730,508 in 1995,
due to the  sale  of  the  interest  in the  Mellon\Pier  I  Properties  Limited
Partnership I (the "Pier I Interest") on December 29, 1995.

Interest income decreased by $798,842,  or 90%, from $891,499 to $92,657. One of
the  Trust's  major  sources of  revenues  prior to 1996 was its  investment  in
mortgage loan receivables.  Interest earned on these  investments  generated the
Trust's  interest  income in 1995. In 1996,  interest  income was generated from
cash  investments  primarily  in the first two months of the year,  prior to the
payment of liquidating dividends.

Property  operating and maintenance  expense increased  $295,882,  or 102%, from
$290,548 to $586,430, also as a result of the acquisition of Thicket.

Depreciation  and  amortization  decreased  $116,903,  or 32%,  from $361,013 to
$244,110.  There was no depreciation generated from the Pier I Interest in 1996,
as compared to $277,601 in 1995. The Thicket generated  depreciation of $162,965
for the six months held in 1996.  Depreciation  and  amortization  on  Peachtree
increased slightly.

The Trust  incurred a mortgage  note  payable and  established  a line of credit
during 1996, both associated with the acquisition of Thicket. (See Note 6 to the
Trust's December 31, 1996 Consolidated Financial Statements). In connection with
these liabilities, the Trust incurred financing costs, which are being amortized
over the lives of the  obligations,  and interest  expense  associated  with the
notes. These amounts totaled $19,502 and $408,719, respectively.

General and administrative  expense increased $221,627, or 29%, from $766,346 to
$987,973. The majority of the increased expense relates to costs associated with
the Tender Offer and the structural  reorganization  of the Trust.  In addition,
the 1996 expense  includes  $180,987 of  non-recurring  directors' and officers'
insurance  obtained  for the sole  benefit of Prior  Management,  as well as the
Trust's continuing directors' and officers' insurance coverage.

Investment  advisor's fees decreased $28,107,  or 8%, from $361,568 to $333,461.
All of the advisor's fees were incurred during January and February, 1996 as the
services of the Advisor were terminated at the consummation of the Tender Offer.

The loss on real estate investment of $26,800 represents commissions and fees on
the sale of the Harwthorne Note, as hereinafter defined, on January 3, 1996. The
Trust  established  a valuation  allowance  of $895,000 at December  31, 1995 to
reflect the note's net realizable value.

The Trust  incurred a net loss of $810,078 for 1996 as compared to net income of
$578,546 for 1995, representing a decrease of $1,388,624.  This decrease was the
direct result of the Trust's  liquidation of its assets and the  consummation of
the subsequent Tender Offer.

<PAGE>

Comparison of Operating Results of 1995 to Operating Results of 1994
--------------------------------------------------------------------

Total  revenues  decreased by $914,262,  or 22%, from  $4,159,170 to $3,244,908.
This decrease  resulted  primarily from lost revenue due to the sale of mortgage
loans  ($726,647,  or 17%), and the vacancy and subsequent sale of the Hawthorne
Research and Development Complex  ("Hawthorne")  ($140,000,  or 3%). Income from
the Pier I Interest and rental income from Peachtree remained fairly constant.

Total  operating  expenses  decreased by $698,448,  or 28%,  from  $2,477,923 to
$1,779,475.  This was  primarily  due to a reduction in the  operating  expenses
associated  with the  ownership of Hawthorne  and a mortgage note secured by the
Hall Street  Industrial  Complex ("Hall Street")  ($579,667,  or 23%) which were
sold in 1995 and 1994,  respectively.  Investment  advisor fees decreased due to
the  declining  asset value of the Trust upon which the fees were  based.  Other
expenses remained fairly constant.

The net realized  loss of $886,887  resulted  from the sales and  adjusted  fair
value allowances of Hawthorne,  the Pier I Interest,  two mortgage notes secured
by Arbutus and Pacesetter  Shopping Centers ("Arbutus and Pacesetter"),  and the
write-down of the Hawthorne  Note, as  hereinafter  defined.  (See Note 4 to the
Trust's December 31, 1996 Consolidated Financial Statements.)

Hawthorne was sold on March 30, 1995 for $5,095,000 of which $3,500,000 was paid
at closing.  A note for the balance of  $1,595,000  (the  "Hawthorne  Note") was
received by the Trust.  The Trust  realized a net gain on this sale of $152,825.
On January 3, 1996, the Hawthorne Note was sold for $700,000. As of December 31,
1995,  an  allowance  to reduce  the note  receivable  to fair  market  value of
$895,000 was recognized on the Hawthorne Note.

The Arbutus and Pacesetter mortgages were sold on August 2, 1995 for $6,515,000.
These sales  resulted in a total loss of  $1,845,035,  comprised of a $1,647,000
write-down to reflect the  realizable  values,  and selling,  legal and advisory
expenses of $198,035.

The Pier I Interest  was sold on December  29, 1995 for total sales  proceeds of
$15,788,680.  After legal and advisory  fees of $189,648,  the Trust  recorded a
gain of $1,700,323.

The net income of $578,546 for 1995 was a decrease of $286,394, or 33%, from the
1994 net income of $864,940.

Liquidity and Capital Resources
-------------------------------

Because Prior  Management was liquidating the assets of the Trust, net cash used
in operating  activities for fiscal year ended December 31, 1996 was $704,965 as
compared to net cash provided by operating  activities of $1,820,321  for fiscal
year ended  December 31, 1995.  This is the direct result of decreased  revenues
and increased  expenses due to the Tender Offer as described in  "Comparison  of
Operating Results of 1996 to Operating Results of 1995."

<PAGE>

Cash flows from investing activities changed dramatically from fiscal year ended
December  31, 1995 to fiscal year ended  December  31,  1996.  Cash  provided by
investing  activities of $27,321,390 for 1995 was comprised of proceeds from the
sale of  Hawthorne,  the  Arbutus  and  Pacesetter  mortgage  loans,  the Pier I
Interest,  and  principal  due on a purchase  money note received at the sale of
Hall Street.  (See Notes 4 and 5 to the Trust's  December 31, 1996  Consolidated
Financial  Statements.)  As  a  result  of  the  Tender  offer,  Management  has
implemented  a  growth  and  expansion  strategy.  Net  cash  used in  investing
activities of $8,067,197  for fiscal year ended December 31, 1996 was the result
of the Trust's  purchase of Thicket in June,  1996.  This was offset slightly by
net  proceeds of $673,200  from the sale of the  Hawthorne  Note in January 1996
(the final asset to be liquidated by Prior Management).

Cash flows used in financing  activities were comprised of (1)  distributions to
shareholders,  and (2) debt incurred.  Distributions  to shareholders  increased
$5,013,608,  or 38%, from $13,227,342  during 1995, to $18,240,950  during 1996.
Increased  distributions were the result of final liquidating  dividends paid to
shareholders.  During 1996, the Trust received net proceeds of $7,392,000 from a
mortgage note payable, in addition to $1,568,104 in proceeds from a secured line
of credit, all of which were used in the acquisition of Thicket.

Management  believes that many of the costs  associated  with the liquidation of
Trust assets and the subsequent  Tender Offer and  organizational  restructuring
that were incurred  during 1996,  will not continue into 1997.  The cash held by
the Trust at December 31, 1996,  plus the cash flow from Thicket and  Peachtree,
is  expected  to  provide  sources of  liquidity  to allow the Trust to meet all
current operating obligations.  It is anticipated that the line of credit, which
is due in 1997, will be renewed or refinanced.  In addition,  Management intends
to seek new  capital  sources,  both  public  and  private,  as well as  explore
financing  alternatives,  so as to allow the Trust to expand and grow its income
producing  investments.  (See  "Growth  and  Expansion  Strategy  and  Operating
Strategy".)

This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Trust's actual results could differ materially from those set forth
in the  forward-looking  statements.  Certain  factors  that might  cause such a
difference  include  the  following:  the  inability  of the  Trust to  identify
properties  within  existing   multifamily   property   portfolios  of  entities
affiliated with management  which will have a strategic fit with the Trust,  the
inability of the Trust to identify unaffiliated properties for acquisition,  the
less than  satisfactory  performance  of any property which might be acquired by
the Trust,  the  inability  to access the  capital  markets in order to fund the
Trust's present growth and expansion  strategy,  the cyclical nature of the real
estate market generally and locally in Georgia and the surrounding  southeastern
states, the national economic climate, the local economic climate in Georgia and
the surrounding  southeastern  states,  and the local real estate conditions and
competition in Georgia and the surrounding  southeastern states. There can be no
assurance  that, as a result of the foregoing  factors,  the Trust's  growth and
expansion strategy will be successful or that the business and operations of the
Trust will not be adversely affected thereby.

<PAGE>

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated  financial  statements and supplementary  data are listed under
Item 14(a) and filed as part of this report on the pages indicated.

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

The  information  required by this Item 9 was  previously  reported in a Current
Report on Form 8-K filed with the Securities and Exchange  Commission on January
14, 1997.

<PAGE>

                                    PART III


ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information concerning the Trustees and Executive Officers of the Registrant
required  by Item 10  shall  be  included  in the  Proxy  Statement  to be filed
relating  to the 1997 Annual  Meeting of the  Registrant's  shareholders  and is
incorporated herein by reference.

ITEM 11 - EXECUTIVE COMPENSATION

The information concerning the Trustees and Executive Officers of the Registrant
required  by Item 11  shall  be  included  in the  Proxy  Statement  to be filed
relating  to the 1997 Annual  Meeting of the  Registrant's  shareholders  and is
incorporated herein by reference.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT

The information concerning Ownership of Certain Beneficial Owners and Management
required  by Item 12  shall  be  included  in the  Proxy  Statement  to be filed
relating  to the 1997 Annual  Meeting of the  Registrant's  shareholders  and is
incorporated herein by reference.  Except as described in ITEM 1 BUSINESS, there
are no  arrangements  known to the registrant  which may, at a subsequent  date,
result in a change in control of the registrant.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  concerning  Certain  Relationships  and  Related  Transactions
required  by Item 13  shall  be  included  in the  Proxy  Statement  to be filed
relating  to the 1997 Annual  Meeting of the  Registrant's  shareholders  and is
incorporated herein by reference.

<PAGE>
<TABLE>

                                     PART IV
<CAPTION>

ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND
          REPORTS ON FORM 8-K

         <S>                                                                                       <C>
         14(a)  (1) and (2)  Index to  Consolidated  Financial  Statements  and Schedule           Page
         Schedule

         Report of Independent Public Accountants--As of December 31, 1996
         and for the year then ended                                                                 22

         Report of Independent Auditors--As of December 31, 1995 and 1994                            23
         and for each of the two years then ended

         Consolidated Balance Sheets--As of December 31, 1996 and 1995                               24

         Consolidated Statements of Operations--For the years ended
         December 31, 1996, 1995 and 1994.                                                           25

         Consolidated Statements of Shareholders' Equity--For the years ended
         December 31, 1996, 1995 and 1994                                                            26

         Consolidated Statements of Cash Flows--For the years ended
         December 31, 1996, 1995 and 1994                                                            27

         Notes to Consolidated Financial Statements--For the years ended
         December 31, 1996, 1995 and 1994                                                            28

         Consolidated Financial Statement Schedule                                                   38
</TABLE>

         14(a) (3) Exhibits
<TABLE>
<CAPTION>

<S>                            <C>
Exhibit No.                    Description
-----------                    -----------
       3.1             ---     Second  Amended  and  Restated  Declaration  of Trust of the Trust  (incorporated  by
                               reference  to Exhibit 3.1 to the Trust's  Registration  Statement  on Form S-11,  No.
                               2-94776).

       3.2             ---     Amended and Restated  Bylaws of the Trust  (incorporated  by reference to Exhibit 3.2
                               to the Trust's Registration Statement on Form S-11, No. 2-94776).
       3.3             ---     Amendment No. 1 to the Second Amended and Restated  Declaration of Trust of the Trust
                               (filed herewith).

       3.4             ---     Amendment No. 2 to the Second Amended and Restated  Declaration of Trust of the Trust
                               (filed herewith).

      10.1             ---     Agreement  of Purchase  and Sale for The Thicket  Apartments,  dated March 27,  1996,
                               between The Patrician  Mortgage  Company and A&P  Investors,  Inc.  (incorporated  by
                               reference to Exhibit 99.1 to the Trust's  Current  Report on Form 8-K,  filed July 2,
                               1996).

      10.2             ---     Amendment to Agreement  of Purchase and Sale for The Thicket  Apartments,  dated June
                               25, 1996,  between The Patrician  Mortgage  Company and A&P  Investors,  Inc.  (filed
                               herewith).

      10.3             ---     Assignment of Agreement for Purchase and Sale for The Thicket Apartments,  dated June
                               25, 1996, between Thicket Apartments, L.P. and A&P Investors, Inc. (filed herewith).
      10.4             ---     Commercial  Credit Agreement between Hardwick Bank and Trust Company and the Trustees
                               of the Trust  (incorporated  by  reference  to Exhibit  10.1 to the  Trust's  Current
                               Report on Form 8-K/A, filed September 11, 1996).

      10.5             ---     Deed to Secure Debt and Security Agreement by and between Thicket  Apartments,  L.P.,
                               as mortgagor,  and Univest Mortgage Capital,  LLC, as mortgagee,  dated June 27, 1996
                               (incorporated  by  reference to Exhibit  10.2 to the Trust's  Current  Report on Form
                               8-K/A, filed September 11, 1996).

      10.6             ---     Promissory  note from Thicket  Apartments,  L.P. to Univest  Mortgage  Capital,  LLC,
                               dated  June 27,  1996  (incorporated  by  reference  to Exhibit  10.3 to the  Trust's
                               Current Report on Form 8-K/A, filed September 11, 1996).
      10.7             ---     Agreement  of Limited  Partnership  of Vinings  Investment  Properties,  L.P.  (filed
                               herewith).

      10.8             ---     Management Contract dated June 25, 1996 between Thicket Apartments,  L.P. and Vinings
                               Properties, Inc. (filed herewith).

      10.9             ---     Management  Contract  dated July 6, 1990 between PBC  Acquisition,  Inc. and Carter &
                               Associates Enterprises, Inc.  (filed herewith).

      21.1             ---     Subsidiaries of the Trust (filed herewith).

      27               ---     Financial Data Schedule (filed herewith).

</TABLE>

         14(b) Reports on Form 8-K
         -------------------------

         No  reports  on Form 8-K have been  filed by the Trust  during the last
         quarter of the year ended December 31, 1996.

         14(c) Index to Exhibits
         --------------

         See Item 14(a)(3) above.

<PAGE>

                                   SIGNATURES

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

                       Vinings Investment Properties Trust

                                 By: /s/ Peter D. Anzo
                                 ---------------------
                                 Peter D. Anzo
                                 President and Chief
                                 Executive Officer

Dated:  March 28, 1997

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

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

/s/ Peter D. Anzo              Chief Executive Officer,          March 28, 1997
-------------------------      President and Trustee
Peter D. Anzo


/s/ Stephanie A. Reed          Vice President, Treasurer,        March 28, 1997
-------------------------      Secretary and Trustee
Stephanie A. Reed


/s/ Martin H. Petersen         Trustee                           March 28, 1997
-------------------------
Martin H. Petersen


/s/ Gilbert H. Watts, Jr.      Trustee                           March 28, 1997
-------------------------
Gilbert H. Watts, Jr.


/s/ Phill D. Greenblatt        Trustee                           March 28, 1997
-------------------------
Phill D. Greenblatt


/s/ Henry Hirsch               Trustee                           March 28, 1997
-------------------------
Henry Hirsch

/s/ Thomas B. Bender           Trustee                           March 28, 1997
-------------------------
Thomas B. Bender


<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Trustees and Shareholders of
Vinings Investment Properties Trust:


We  have  audited  the  accompanying   consolidated  balance  sheet  of  Vinings
Investment  Properties Trust and  subsidiaries  (the "Trust") as of December 31,
1996 and the related consolidated statements of operations, shareholders' equity
and cash flows for the year then ended. These consolidated  financial statements
and the  schedule  referred  to  below  are the  responsibility  of the  Trust's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements and schedule based on our audit.

We conducted our audit 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
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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Vinings Investment
Properties  Trust and  subsidiaries  as of December  31, 1996 and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements  taken as a whole.  The  schedule  listed in the  index to  financial
statements  is  presented  for  purposes of complying  with the  Securities  and
Exchange  Commission's rules and is not part of the basic financial  statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic  financial  statements  and, in our opinion,  fairly  states in all
material  respects  the  financial  data  required  to be set forth  therein  in
relation to the basic financial statements taken as a whole.

/s/ ARTHUR ANDERSEN LLP


Atlanta, Georgia
March 7, 1997


<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


To the Board of  Shareholders of
Vinings Investment Properties Trust:


We  have  audited  the  accompanying  consolidated  balance  sheets  of  Vinings
Investment   Properties  Trust  and  Subsidiaries   (formerly  known  as  Mellon
Participating Mortgage Trust,  Commercial Properties Series 85/10) (the "Trust")
as of  December  31, 1995 and 1994 and the related  consolidated  statements  of
operations,  changes in shareholders'  equity and cash flows for each of the two
years in the period  ended  December  31,  1995.  Our audits also  included  the
financial  statement  schedules  listed in the  index as Item 14 (a) (2).  These
financial  statements  and  schedules  are  the  responsibility  of the  Trust'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
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 the
Trust as of  December  31, 1995 and 1994 and the  consolidated  results of their
operations  and their cash  flows for each of the two years in the period  ended
December 31, 1995, in conformity with generally accepted accounting  principles.
Also, it is our opinion,  that the related financial  statement schedules above,
when considered in relation to the basic financial  statements taken as a whole,
present fairly, in all material respects, the information set forth therein.


/s/ Ernst & Young LLP


Atlanta, Georgia
February 23, 1996


<PAGE>
<TABLE>

                       VININGS INVESTMENT PROPERTIES TRUST
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                                  December 31,
                                                        ------------------------------
                                                            1996             1995
                                                        -------------    -------------

<S>                                                      <C>              <C>
ASSETS

Real estate assets:
    Land                                                 $  1,470,500     $   400,000
    Buildings and improvements                              9,218,263       2,332,057
    Furniture, fixtures & equipment                           783,691             -
     Less:  accumulated depreciation                         (613,918)       (374,524)
                                                         -------------    ------------
         Net real estate assets                            10,858,536       2,357,533

Real estate investments:
    Mortgage loans receivable, net of valuation
        allowance of $895,000 at December 31, 1995                 -          700,000


Cash and cash equivalents                                     171,736      18,470,031
Cash escrows                                                  192,611             -
Receivables and other assets                                   86,002         346,057
Deferred financing costs, less accumulated amortization
    of $19,502 at December 31, 1996                           204,925             -
Deferred leasing costs, less accumulated amortization of
    $28,470 and $23,754 at December 31, 1996 and 1995,
    respectively                                                5,659           4,736
                                                         -------------    ------------
Total Assets                                             $ 11,519,469     $21,878,357
                                                         =============    ============


LIABILITIES AND SHAREHOLDERS' EQUITY

Mortgage note payable                                    $  7,371,676     $       -
Line of credit                                              1,568,104             -
Accounts payable and accrued liabilities                      347,141         301,358
Due to affiliate                                                  -           292,887
                                                         -------------    ------------

       Total Liabilities                                    9,286,921         594,245
                                                         -------------    ------------

Contingencies (Note 11)

Shareholders' Equity:
    Shares  of  beneficial  interest,
    without  par  value,   unlimited  shares
      authorized,  1,080,528 and  1,080,625
      shares  issued and  outstanding  at
      December 31, 1996 and 1995, respectively             18,731,763      36,973,249

    Cumulative earnings                                    37,879,314      38,689,392

    Cumulative distributions                              (54,378,529)    (54,378,529)
                                                         -------------    ------------
       Total Shareholders' Equity                           2,232,548      21,284,112
                                                         -------------    ------------

Total Liabilities and Shareholders' Equity               $ 11,519,469     $ 21,878,357
                                                         =============    ============



         The accompanying notes are an integral part of these Balance Sheets.
</TABLE>

<PAGE>
<TABLE>

                       VININGS INVESTMENT PROPERTIES TRUST
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS




<CAPTION>
                        For the years ended December 31,
                                                                    -----------------------------------------
                                                                        1996           1995           1994
                                                                    -----------    -----------    -----------
<S>                                                                 <C>            <C>            <C>
REVENUES
     Rental revenues                                                $ 1,482,419    $   576,216    $   693,864
     Other property revenues                                             70,064         24,238         27,490
     Income from partnership                                               --        1,730,508      1,727,519
     Interest income                                                     92,657        891,499      1,594,398
     Other income                                                       151,777         22,447        115,899
                                                                    -----------    -----------    -----------
                                                                      1,796,917      3,244,908      4,159,170
                                                                    -----------    -----------    -----------
EXPENSES
     Property operating and maintenance                                 586,430        290,548        917,981
     Depreciation and amortization                                      244,110        361,013        397,076
     Amortization of deferred financing costs                            19,502           --             --
     Interest expense                                                   408,719           --             --
     General and administrative                                         987,973        766,346        749,584
     Investment advisor's fees                                          333,461        361,568        413,282
                                                                    -----------    -----------    -----------
                                                                      2,580,195      1,779,475      2,477,923
                                                                    -----------    -----------    -----------
      Income (loss) before gain (loss) on real estate investments      (783,278)     1,465,433      1,681,247
                                                                    -----------    -----------    -----------

GAIN (LOSS) ON REAL ESTATE INVESTMENTS
     Gain (loss) on real estate investments                             (26,800)     1,655,113      1,033,333
     Allowance to reduce real estate investments
       to fair market value                                                --       (2,542,000)    (1,849,640)
                                                                    -----------    -----------    -----------
                                                                        (26,800)      (886,887)      (816,307)
                                                                    -----------    -----------    -----------
     Net income (loss)                                              $  (810,078)   $   578,546    $   864,940
                                                                    ===========    ===========    ===========

EARNINGS PER SHARE
      Income (loss) before loss on real estate investments          $     (0.73)   $      1.36    $      1.56
      Loss on real estate investments                                     (0.02)         (0.82)         (0.76)
                                                                    -----------    -----------    -----------
     Net income (loss)                                              $     (0.75)   $      0.54    $      0.80
                                                                    ===========    ===========    ===========
WEIGHTED AVERAGE SHARES OUTSTANDING                                   1,080,528      1,080,625      1,080,625
                                                                    ===========    ===========    ===========





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

</TABLE>


<PAGE>
<TABLE>

                       VININGS INVESTMENT PROPERTIES TRUST
                                AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years
                     ended December 31, 1994, 1995 and 1996



<CAPTION>

                                            Shares of                                         Total
                                            beneficial     Cummulative     Cummulative     shareholders'
                                             interest        earnings      distributions      equity
                                           ------------    ------------    -------------   -------------

<S>                                        <C>             <C>             <C>             <C>
BALANCE AT DECEMBER 31, 1993               $ 76,913,641    $ 37,245,906    $(54,378,529)   $ 59,781,018

Net Income                                         --           864,940            --           864,940

Distributions to shareholders
     ($24.72 per share of which $24.64
     represented a return of capital
     for federal income tax purposes)       (26,713,050)           --              --       (26,713,050)
                                           ------------    ------------    -------------   -------------

BALANCE AT DECEMBER 31, 1994                 50,200,591      38,110,846     (54,378,529)     33,932,908

Net Income                                         --           578,546            --           578,546

Distributions to shareholders
     ($12.24 per share return of capital
     for federal income tax purposes)       (13,227,342)           --              --       (13,227,342)
                                           ------------    ------------    -------------   -------------

BALANCE AT DECEMBER 31, 1995                 36,973,249      38,689,392     (54,378,529)     21,284,112

Net Loss                                           --          (810,078)           --          (810,078)

Retirement of Shares                               (536)           --              --              (536)

Distributions to shareholders
     ($16.88 per share return of capital
     for federal income tax purposes)       (18,240,950)           --                       (18,240,950)
                                           ------------    ------------    -------------   -------------

BALANCE AT DECEMBER 31, 1996               $ 18,731,763    $ 37,879,314    $(54,378,529)   $  2,232,548
                                           ============    ============    =============   =============



The accompanying notes are an integral part of these financial statements

</TABLE>


<PAGE>
<TABLE>

                      VININGS INVESTMENT PROPERTIES TRUST
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>
                        For the years ended December 31,
                                                                       --------------------------------------------
                                                                            1996           1995            1994
                                                                       ------------    ------------    ------------
<S>                                                                     <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)                                                      $   (810,078)   $    578,546    $    864,940

Adjustments to  reconcile  net income  (loss) to net cash  provided by (used in)
   operating activities:

        Depreciation and amortization                                       244,110         409,450         439,957
        Amortization of deferred financing costs                             19,502            --              --
        Loan discount amortization                                             --          (101,800)           --
        Estimated allowance to reduce mortgage
          receivable to fair value                                             --         2,542,000         388,000
        Estimated allowance to reduce real
          estate to fair value                                                 --              --         1,461,640
        (Gain) loss on real estate investments                               26,800      (1,655,113)     (1,033,333)
        Changes in assets and liabilities:
          Cash escrows                                                     (192,611)           --              --
          Receivables and other assets                                      260,055           3,768         150,394
          Capitalized leasing costs                                          (5,639)           --            (6,953)
          Accounts payable, accrued liabilities and due to affiliate       (247,104)         43,470        (202,383)
                                                                       ------------    ------------    ------------
        Total adjustments                                                   105,113       1,241,775       1,197,322
                                                                       ------------    ------------    ------------
Net cash used in operating activities                                      (704,965)      1,820,321       2,062,262
                                                                       ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of The Thicket Apartments                                       (8,660,900)           --              --
The Thicket capital expenditures                                            (49,635)           --              --
Peachtree capital expenditures                                              (29,862)        (16,751)         (6,682)
Principal payments on notes receivable                                         --         2,000,000          32,400
Sales proceeds from real estate investments                                 673,200      25,338,141      19,156,693
                                                                       ------------    ------------    ------------
Net cash provided by (used in) investing activities                      (8,067,197)     27,321,390      19,182,411
                                                                       ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from mortgage note payable                                   7,392,000            --              --
Net proceeds from line of credit                                          1,568,104            --              --
Deferred financing costs                                                   (224,427)           --              --
Principal repayments on mortgage payable                                    (20,324)           --              --
Purchase of retired shares                                                     (536)           --              --
Distributions to shareholders                                           (18,240,950)    (13,227,342)    (26,713,050)
                                                                       ------------    ------------    ------------
Net cash used in financing activities                                    (9,526,133)    (13,227,342)    (26,713,050)
                                                                       ------------    ------------    ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    (18,298,295)     15,914,369      (5,468,377)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                         18,470,031       2,555,662       8,024,039
                                                                       ------------    ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                             $    171,736    $ 18,470,031    $  2,555,662
                                                                       ============    ============    ============
<FN>
SUPPLEMENTAL DISCLOSURE OF CASH AND NONCASH INVESTING AND FINANCING ACTIVITIES:

The Trust paid  interest of $353,032  during 1996.  In addition,  the  Hawthorne
Research and Development Facility was sold on March 30, 1995 for $5,095,000. The
Trust received a note for $1,595,000 with a below market interest rate. See Note
4.

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

</FN>

</TABLE>

<PAGE>


                      VININGS INVESTMENT PROPERTIES TRUST
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994


NOTE 1 - FORMATION AND ORGANIZATION

         Vinings  Investment  Properties  Trust (the  "Trust") was  organized on
         December 7, 1984 under the laws of the Commonwealth of Massachusetts as
         a twenty-year  finite-life real estate  investment trust ("REIT") under
         the Internal  Revenue Code of 1986. The Trust was originally  organized
         for the purpose of making real estate investments  consisting primarily
         of mortgage loans and was to liquidate at the end of approximately  ten
         years in accordance with its Declaration of Trust,  provided,  however,
         that the Trustees  would have the absolute  discretion  to determine in
         good faith such  termination  date as would be in the best interests of
         the shareholders.  On January 3, 1996, the final asset to be liquidated
         was sold and final dividends were declared.

         On  January  31,  1996,  Vinings  Investment  Properties,   Inc.  ("the
         Purchaser")  commenced a tender offer for a minimum of a majority and a
         maximum  of 85% of the  issued  and  outstanding  shares of  beneficial
         interest  without par value of the Trust (the "Shares"),  at a purchase
         price of $0.47 per share ($3.76 per share adjusted for the Share Split,
         as hereinafter  defined) (the "Tender Offer"). The Tender Offer expired
         in accordance  with its terms on February 28, 1996,  and, in connection
         therewith,  the  Purchaser  accepted an aggregate  of 6,337,279  Shares
         (792,159 Shares adjusted for the Share Split, as hereinafter  defined),
         representing approximately 73.3% of the outstanding Shares, for a total
         acquisition price of $2,978,521. The remaining assets of the Trust were
         Peachtree  Business  Center and  approximately  $163,000  in cash.  The
         purpose of the Tender Offer was for the Purchaser to acquire control of
         the Trust and to  rebuild  the  Trust's  assets by  expanding  into the
         multifamily  property  markets.  In connection with the consummation of
         the  Tender  Offer,  all of the  Trustees  and  officers  of the  Trust
         resigned and were replaced with designees of the Purchaser.

         Until the consummation of the Tender Offer, the Trust was an externally
         advised  REIT for which it paid  advisory  fees to an  unrelated  third
         party (the  "Advisor").  Upon  consummation  of the Tender  Offer,  the
         relationship  with the  Advisor  was  terminated  and the Trust  became
         self-administered.

         On June 11, 1996, Vinings Investment  Properties,  L.P. (the "Operating
         Partnership"), a Delaware limited partnership, was organized. The Trust
         is the sole general  partner and a 98% limited partner in the Operating
         Partnership.  Through  its  ownership  of  Vinings  Holdings,  Inc.,  a
         Delaware corporation and wholly-owned subsidiary of the Trust, which is
         also a limited  partner in the Operating  Partnership,  the Trust was a
         100% economic owner of the Operating  Partnership at December 31, 1996.
         (This structure is commonly referred to as an umbrella partnership REIT
         or "UPREIT.")

<PAGE>
         The Trust currently owns The Thicket Apartments ("Thicket"), a 254-unit
         apartment  complex  located  in  Atlanta,   Georgia,   through  Thicket
         Apartments,   L.P.,  a  Delaware  limited  partnership,  of  which  the
         Operating  Partnership is a 99% limited  partner and Thicket  Holdings,
         Inc., a Delaware corporation and wholly-owned  subsidiary of the Trust,
         is the sole general partner. The Trust also owns the Peachtree Business
         Center ("Peachtree"), an approximately 75,000 square foot, single-story
         business  park located in Atlanta,  Georgia,  through its  wholly-owned
         subsidiary,  PBC  Acquisition,  Inc. At December 31, 1996,  Thicket and
         Peachtree were 97% and 91% leased, respectively.

         On July 1, 1996, the Trust effected a 1-for-8  reverse share split (the
         "Share  Split")  of  its  8,645,000  outstanding  Shares.  Shareholders
         tendered  their  Shares and  received  one Share for every eight Shares
         owned. The Trust has purchased and continues to purchase any fractional
         Shares  at a  cost  of  $5.50  per  share.  As of  December  31,  1996,
         fractional  Shares totaling 97 had been repurchased and retired leaving
         1,080,528 Shares outstanding.  All share and per share data included in
         the  accompanying  financial  statements  and notes  thereto  have been
         restated to reflect the Share Split.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation
         ---------------------

         The   accompanying   consolidated   financial   statements  of  Vinings
         Investment  Properties  Trust  include  the  consolidated  accounts  of
         Vinings   Investment   Properties  Trust  and  its  subsidiaries.   All
         significant intercompany balances and transactions have been eliminated
         in  consolidation.  The term  "Trust"  hereinafter  refers  to  Vinings
         Investment  Properties  Trust  and  its  subsidiaries,   including  the
         Operating Partnership.

         Income Taxes
         ------------

         The Trust has elected to be taxed as a REIT under the Internal  Revenue
         Code of 1986,  as amended  (the  "Code").  As a result,  the Trust will
         generally not be subject to federal income  taxation on that portion of
         its income that qualifies as REIT taxable income to the extent the REIT
         distributes at least 95% of its taxable income to its  shareholders and
         satisfies  certain other  requirements.  Accordingly,  no provision for
         federal income taxes has been included in the accompanying consolidated
         financial statements.

         Cash and Cash Equivalents
         -------------------------

         The Trust  considers all highly liquid  investments  purchased  with an
         original maturity of three months or less to be cash equivalents. As of
         December 31, 1995,  cash and cash  equivalents  included  $2,407,118 of
         short-term investments in U.S. Treasury bills.

<PAGE>

         Cash Escrows
         ------------

         Cash escrows consist of real estate tax, insurance, replacement reserve
         and repair  escrows held by the  mortgagee.  These funds are restricted
         accounts  and  released  solely  for the  purpose  for which  they were
         established.

         Use of Estimates
         ----------------

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

         Mortgage Loan Receivables
         -------------------------

         Mortgage  loan  receivables  are  stated  at the  lower  of cost or net
         realizable value.

         Real Estate Assets
         ------------------

         Real estate assets are stated at depreciated cost. Ordinary repairs and
         maintenance   are  expensed  as  incurred.   Major   improvements   and
         replacements  are  capitalized  and  depreciated  over their  estimated
         useful  lives when they extend the useful  life,  increase  capacity or
         improve efficiency of the related asset.  Depreciation is computed on a
         straight-line  basis over the useful  lives of the real  estate  assets
         (buildings  and  improvements,  5-40  years;  furniture,  fixtures  and
         equipment, 5 years; and tenant improvements, generally over the life of
         the related lease.)

         During  1995,  the Trust  adopted  Statement  of  Financial  Accounting
         Standards No. 121,  "Accounting for the Impairment of Long-Lived Assets
         and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"), which, among
         other things,  requires  impairment losses to be recorded on long-lived
         assets to be held or 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.  SFAS 121
         also addresses the  accounting for long-lived  assets that are expected
         to be  disposed  of. The  adoption  of SFAS 121 did not have a material
         affect  on  the  accompanying  consolidated  financial  statements.  In
         management's opinion,  there has been no impairment of the Trust's real
         estate assets as of December 31, 1996.

         Revenue Recognition
         -------------------

         All leases are  classified  as  operating  leases and rental  income is
         recognized   when  earned   which   materially   approximates   revenue
         recognition on a straight-line basis.

<PAGE>

         Deferred Financing Costs and Amortization
         -----------------------------------------

         Deferred  financing  costs  include  fees and costs  incurred to obtain
         financing  and are  capitalized  and  amortized  over  the  term of the
         related debt.

         Earnings (Loss) Per Share
         -------------------------

         Earnings  (loss) per share is computed  based on the  weighted  average
         number of shares  outstanding  during the period. All references in the
         accompanying financial statements and notes to the financial statements
         to the weighted  average number of shares  outstanding  and to earnings
         (loss) per share have been restated to reflect the Share Split.

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

         Certain   1995  and  1994   financial   statement   amounts  have  been
         reclassified to conform with the current year presentation.


NOTE 3 - REAL ESTATE ASSETS

         The Thicket Apartments
         ----------------------

         On June 28,  1996,  the Trust  acquired  The Thicket  Apartments  for a
         purchase  price  of  $8,650,000.  The  acquisition  was  financed  by a
         mortgage  loan  on  the  property  in  the  amount  of  $7,392,000  and
         borrowings from the Trust's line of credit.

         Peachtree Business Center
         -------------------------

         The Trust acquired  Peachtree  through a deed-in-lieu of foreclosure on
         April 12, 1990.  Peachtree was recorded at $1,700,000,  its fair market
         value,  which  was less  than the book  value of the  Trust's  mortgage
         investment at the date of foreclosure.  Subsequent to the  acquisition,
         approximately $1,062,000 of improvements have been capitalized.


NOTE 4 - REAL ESTATE INVESTMENTS

         Hall Street Note
         ----------------

         On October 4, 1994, the Trust sold The Hall Street  Industrial  Complex
         which it had  previously  acquired  through  foreclosure  for an amount
         equal to its carrying value of $4,000,000. The buyer paid $2,000,000 in
         cash and executed an  interest-only  $2,000,000 note payable (the "Hall
         Street Note"), at an interest rate of prime plus 2% per annum, maturing
         on April 30,  1995.  On February 22,  1995,  the  borrower  prepaid the
         outstanding balance of the Hall Street Note with accrued interest.

<PAGE>

         Arbutus and Pacesetter Notes
         ----------------------------

         On August 2, 1995, the Trust sold participating  mortgage loans secured
         by  the  Arbutus  and  Pacesetter   Shopping   Centers   ("Arbutus  and
         Pacesetter") for $3,615,000 and $2,900,000,  respectively.  These sales
         resulted  in a total  loss of  $1,845,035,  comprised  of a  $1,647,000
         write-down  to reflect the  realizable  value,  and selling,  legal and
         advisory expenses of $198,035.

         Hawthorne Note
         --------------

         The Trust  acquired  the  Hawthorne  Research and  Development  Complex
         ("Hawthorne")  in 1992 through  foreclosure  of its mortgage  note. The
         Trust's  investment  in the property was written down from 1992 through
         1994 to $4,605,702 to reflect its anticipated net realizable  value. On
         March 30,  1995,  the Trust  sold  Hawthorne  for  $5,095,000  of which
         $3,500,000  was  paid  at  closing.  The  balance  of  $1,595,000  (the
         "Hawthorne Note") was payable pursuant to a non-recourse purchase money
         note and was subordinate to first mortgage liens totaling  $10,360,000.
         In connection with the sale of Hawthorne,  the Trust reported a gain of
         $152,825.

         In connection with the liquidation of assets, the Trust entered into an
         agreement  with the first  mortgage  lien holder to sell the  Hawthorne
         Note for  $700,000.  At December  31,  1995,  the Trust  established  a
         valuation  allowance of $895,000 to reflect its net realizable value of
         $700,000.  On  January  3,  1996,  the Trust  closed on the sale of the
         Hawthorne Note and recorded commissions and fees for a loss on the sale
         of $26,800.

NOTE 5 - INVESTMENT IN PARTNERSHIP

         The Trust held partnership  interests totaling 35.5% in the Mellon/Pier
         I Properties Limited Partnership I (the "Pier I Partnership"). The Pier
         I  Partnership  was formed to  acquire  land and  buildings  which were
         leased  to  affiliates  of the Pier I  Partnership's  managing  general
         partner, Pier I, and operated as Pier I Imports retail stores.

         On December 29, 1995, the Trust sold its partnership  interests to Pier
         I. Total  sales  proceeds  to the Trust were  $15,788,680,  which after
         legal and advisory fees of $189,648, resulted in a gain of $1,700,323.

NOTE 6 - NOTES PAYABLE

         Mortgage Note Payable
         ---------------------

         At December 31, 1996,  the Trust had a 9.04%  mortgage  note payable in
         the  original  principal  amount of  $7,392,000,  which is  secured  by
         Thicket and which  matures on July 1, 2003.  Principal and interest are
         payable in monthly  installments of $59,691.  At December 31, 1996, the
         outstanding  principal balance was $7,371,676.  Scheduled  maturites of
         the mortgage note payable as of December 31, 1996, are as follows:

                                1997   $   52,007
                                1998       56,909
                                1999       62,272
                                2000       68,140
                                2001       74,562
                          Thereafter    7,057,786
                                       ----------
                          Total        $7,371,676
                                       ==========
          Line of Credit
          --------------

          The  Trust  obtained  a one  year  line of  credit  in the  amount  of
          $2,000,000  which  bears  interest  at  the  bank's  base  rate  which
          approximates prime. At December 31, 1996, the interest rate was 8.25%.
          Interest is payable monthly with the entire  principal  balance due on
          June 28, 1997. The line of credit is secured by Peachtree. At December
          31,  1996,  the  outstanding   balance  of  the  line  of  credit  was
          $1,568,104.

NOTE 7 - RELATED PARTY TRANSACTIONS

          During  1996,  the Trust  entered  into a  management  agreement  with
          Vinings Properties,  Inc. for property management services for Thicket
          for a fee equal to five percent of gross  revenues plus a fee for data
          processing.  Vinings  Properties,  Inc.  is an  affiliate  of  certain
          officers and trustees of the Trust.  A total of $44,459 in  management
          fees and $7,620 in data  processing  fees were  incurred  by the Trust
          during 1996.

          In  addition,  as a commitment  to the  rebuilding  of the Trust,  The
          Vinings  Group,  Inc., the parent  corporation of Vinings  Properties,
          Inc. (collectively  "Vinings"),  has provided numerous services to the
          Trust relating to administration,  acquisition,  and capital and asset
          advisory  services  at little or no cost to the Trust.  The Trust does
          not  anticipate  that these services will continue to be provided free
          of charge,  and  certain  costs paid on the  Trust's  behalf have been
          reimbursed  to  Vinings.  However,  while the Trust is in its  initial
          growth stages, the officers and trustees are committed to providing as
          many services as possible to promote the growth of the Trust.  A total
          of $15,000 was paid to Vinings for shareholder  services  provided for
          the sole  benefit  of the Trust by one of  Vinings'  employees  during
          1996.  The  officers did not receive  compensation  from the Trust for
          their services.

<PAGE>

         In connection with the acquisition of Thicket, a broker's commission of
         $150,000 was paid by the seller of the property to MFI Realty,  Inc., a
         wholly-owned subsidiary of The Vinings Group, Inc.

         In addition, the Trust has entered into an agreement dated February 28,
         1997 with Northshore  Communications,  Inc., a company  affiliated with
         one of the Trustees,  for the design and production of the Trust's 1996
         annual report for a total of $20,500.  This cost is substantially  less
         than the Trust's cost for its annual report for the previous year.

NOTE 8 - ADVISORY AGREEMENT

         Prior to the  consummation  of the Tender Offer,  the Trust had engaged
         the  Advisor to provide  investment  advisory  services  and act as the
         administrator  of Trust  operations.  The  agreement  with the Advisor,
         which was terminated upon  consummation  of the Tender Offer,  provided
         for the payment of administrative, asset management and other servicing
         fees to the Advisor for services  rendered in administering the Trust's
         operations.  The  Advisor  earned  administrative,   asset  management,
         special  services,  and mortgage  servicing fees aggregating  $333,461,
         $290,684 and $254,502 for the years ended December 31, 1996,  1995, and
         1994, respectively.  The Trust also amortized deferred loan acquisition
         fees of $70,884 and $158,780 for the years ended  December 31, 1995 and
         1994, respectively,  which are recorded as investment advisor's fees in
         the accompanying financial statements.

NOTE 9 - DISTRIBUTIONS

         Distributions declared and distributed for the years ended December 31,
         1996,  1995,  and  1994  aggregated   $18,240,950,   $13,227,342,   and
         $26,713,050, respectively, or $16.88, $12.24, and $24.72 per share.

         For  federal  income  tax  purposes,   all  distributions  received  by
         shareholders for the years ended December 31, 1996 and 1995 represented
         a return of capital. As the Trust's last 1994 distribution of $0.80 was
         made on  December  31,  1994,  and  received by  shareholders  in 1995,
         dividends received by shareholders for federal income tax purposes were
         $13.04  and  $23.92  per  share for 1995 and  1994,  respectively.  For
         federal income tax purposes, of the distributions received for the year
         ended  December  31,  1994,  $23.84 per share  represented  a return of
         capital, while the taxable ordinary income portion was $0.08 per share.

<PAGE>

NOTE 10 - LEASING ACTIVITY

         The following is a schedule of future minimum rents due under operating
         leases that have  initial or  remaining  noncancellable  lease terms in
         excess of one year as of December 31, 1996, at Peachtree:


                   1997                  $  506,378
                   1998                     475,471
                   1999                     425,832
                   2000                     350,214
                   2001                     318,864
                   Thereafter               132,860
                                         ----------
                   Total                 $2,209,619
                                         ==========


         One tenant  generated 54% of  Peachtree's  revenues for the fiscal year
         ended December 31, 1996. The same tenant accounts for 78% of the future
         minimum lease payments. While this tenant's lease does not expire until
         May 31, 2002, it contains a 90-day cancellation clause which management
         is currently negotiating to extend to one year.

NOTE 11 - CONTINGENCIES

         The Trust is, from time to time,  subject to various  claims that arise
         in the ordinary course of business. These matters are generally covered
         by insurance. While the resolution of these matters cannot be predicted
         with  certainty,  management  believes  that the final  outcome of such
         matters  would not have a  material  adverse  effect  on the  financial
         position or results of operations of the Trust.

NOTE 12 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

         Based on interest rates and other  pertinent  information  available to
         the Trust as of December 31, 1996 and 1995,  the Trust  estimates  that
         the  carrying  value  of  cash  and  cash  equivalents,  mortgage  note
         receivables,  the mortgage note payable,  the line of credit, and other
         liabilities  approximate their fair values when compared to instruments
         of similar type, terms and maturity.

         Disclosure  about  fair  value  of  financial  instruments  is based on
         pertinent  information  available to management as of December 31, 1996
         and 1995.  Although  management  is not aware of any factors that would
         significantly  affect its estimated  fair value  amounts,  such amounts
         have not been comprehensively  revalued for purposes of these financial
         statements since December 31, 1996.

<PAGE>
NOTE 13 - SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


          Unaudited  summarized  quarterly  results of operations  for the years
          ended December 31, 1996 and 1995 are as follows:

---------------------------     ----------   ---------   ----------   ---------
1996                               First       Second       Third       Fourth
---------------------------     ----------   ---------   ----------   ---------

Total revenues                   $ 393,473   $ 169,281   $  613,310   $ 620,853
                                 =========   =========   ==========   =========

Loss before loss on real estate
  investments                    $(380,871)  $(127,349)  $  (76,093)  $(198,965)

Loss on real estate investments
                                   (26,800)       --           --          --
                                 ---------   ---------   ----------   ---------

Net loss                         $(407,671)  $(127,349)  $  (76,093)  $(198,965)
                                 =========   =========   ==========   =========

Per share:
Loss before loss on real estate
  investments                    $    (.36)  $    (.12)  $     (.07)  $    (.18)

Loss on real estate investments
                                      (.02)         --          --          --
                                 ---------     ---------   ---------- ----------

Net loss                         $    (.38)  $    (.12)  $     (.07)  $    (.18)
                                 ==========  ==========  ==========   ==========

Dividends declared and paid      $   16.88   $    --     $     --     $    --
                                ===========  ==========  ==========   ==========

<PAGE>

----------------------------    ---------   ------------  ----------    --------
1995                              First        Second       Third        Fourth
----------------------------    ---------   ------------  ----------    --------

Total revenues                  $ 908,308   $   906,296   $ 699,013     $731,291
                                =========   ============   =========    ========

Income before gain (loss) on
 real estate investments        $ 570,162   $   465,391   $ 256,190     $173,690

Gain (loss) on real estate
investments                       169,448    (1,663,623)   (150,300)     757,588
                                ---------   ------------   ---------    --------

Net income (loss)               $ 739,610   $(1,198,232)  $ 105,890     $931,278
                                =========   ============   =========    ========

Per share:
Income before gain (loss) on
real estate investments            $ 0.53        $ 0.43     $  0.24       $ 0.16

Gain (loss) on real estate
investments                          0.15         (1.54)      (0.14)        0.70
                                ---------   ------------   ---------    --------

Net income (loss)                  $ 0.68        $(1.11)    $  0.10       $ 0.86
                                =========   ============   =========    ========

Dividends declared and paid        $ 5.20        $ 0.64     $  5.60       $ 0.80
                                =========   ============   =========    ========

<PAGE>

<TABLE>

                       VININGS INVESTMENT PROPERTIES TRUST
             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1996




<CAPTION>
                                                                                             Gross amounts at which
                                               Initial Cost to Trust                       carried at close of period
                                              ----------------------                    ---------------------------------
                                                       Buildings and                              Buildings and
Description                    Encumbrance     Land     Improvements  Improvements       Land     Improvements    Total
--------------------------------------------------------------------------------------------------------------------------

<S>                          <C>           <C>         <C>            <C>             <C>         <C>           <C>
Peachtree Business Center    $ 1,568,104   $  400,000  $1,300,000     $1,061,919      $  400,000  $ 2,361,919   $ 2,761,919

The Thicket Apartments         7,371,676    1,070,500   7,590,400         49,635       1,070,500    7,640,035     8,710,535
                             ----------------------------------------------------------------------------------------------
Totals                       $ 8,939,780   $1,470,500  $8,890,400     $1,111,554      $1,470,500  $10,001,954   $11,472,454
                             ==============================================================================================



                                                Life on which                    Date of
                               Accumulated      Depreciation        Date         Original
Description                    Depreciation     is Computed       Acquired     Construction
-------------------------------------------------------------------------------------------

Peachtree Business Center    $   450,953         5-40 Years       April 1990       1984

The Thicket Apartments           162,965         5-40 Years       June 1996        1989
                             -----------
                             $   613,918
                             ===========

The accompanying notes are an integral part of this schedule.

</TABLE>

<PAGE>



                       VININGS INVESTMENT PROPERTIES TRUST

                              NOTES TO SCHEDULE III
                                December 31, 1996


(A)      The  Peachtree  investment  was  acquired  through  a deed  in-lieu  of
         foreclosure of an original mortgage note investment.  In June 1996, the
         Trust  obtained  a  $2,000,000  line of  credit  which  is  secured  by
         Peachtree.  At December 31, 1996,  $1,568,104  was  outstanding  on the
         line.

(B)      The  Thicket  Apartments  was  acquired  on June  28,  1996  for a
         purchase  price of  $8,650,000.  It was financed by a mortgage loan in
         the original amount of $7,392,000 and borrowings from the Trust's line
         of credit, which is secured by Peachtree.

(C)      Gross capitalized costs of real estate assets are summarized as follows
<TABLE>

<CAPTION>
                                                        ------------------     ----------------     -------------------
                                                              1996                  1995                   1994
                                                        ------------------     ----------------     -------------------
<S>                                                         <C>                   <C>                  <C>
       Balance at beginning of period                       $ 2,732,057           $7,445,666           $12,900,624

          Additions during period:
              Acquisition of Thicket                          8,660,900                   -                      -
              Improvements                                       74,497               16,751                 6,682
                                                        ------------------     ----------------     -------------------
                   Total additions                            8,740,397               16,751                 6,682
                                                        ------------------     ----------------     -------------------

           Deductions during period:
              Hall Street                                             -                    -              4,000,000
              Hawthorne                                               -            4,730,360                    -
              Estimated valuation losses and
                 allowances to fair market value                      -                    -             1,461,640
                                                        ------------------     ----------------     -------------------
                   Total deductions                                   -            4,730,360             5,461,640
                                                        ------------------     ----------------     -------------------

       Balance at close of period                           $11,472,454          $ 2,732,057           $ 7,445,666
                                                        ==================     ================     ===================
</TABLE>



<PAGE>



         (D) Accumulated depreciation on real estate assets is as follows:


<TABLE>
<CAPTION>
                                           ---------------     ----------------     -------------
                                                1996                1995                1994
                                           ---------------     ----------------     -------------

<S>                                            <C>                 <C>                   <C>
Balance at beginning of period                 $374,524            $ 424,332             $318,361

 Additions during period:
     Hawthorne Property                              -                   -                 30,685
     Peachtree Business Center                   76,429              75,480                75,286
     The Thicket Apartments                     162,965                  -                     -
                                            ---------------     ----------------     -------------
           Total additions                      239,394              75,480               105,971
                                           ---------------     ----------------      -------------
 Deductions during period:
     Retirements/sales                               -               (125,288)                 -
                                           ---------------     ----------------     -------------
          Total deductions                           -               (125,288)
                                                                                               -
                                           ---------------     ----------------     -------------

Balance at close of period                     $613,918            $  374,524            $424,332
                                           ===============     ================     =============

</TABLE>

<PAGE>

<TABLE>


                                INDEX TO EXHIBITS
<CAPTION>

<S>                            <C>
Exhibit No.                    Description
-----------                    -----------
       3.1             ---     Second Amended and Restated  Declaration of Trust of the Trust (incorporated by reference
                               to Exhibit 3.1 to the Trust's Registration Statement on Form S-11, No. 2-94776).
       3.2             ---     Amended and  Restated  Bylaws of the Trust  (incorporated  by reference to Exhibit 3.2 to
                               the Trust's Registration Statement on Form S-11, No. 2-94776).
       3.3             ---     Amendment  No. 1 to the Second  Amended and  Restated  Declaration  of Trust of the Trust
                               (filed herewith).
       3.4             ---     Amendment  No. 2 to the Second  Amended and  Restated  Declaration  of Trust of the Trust
                               (filed herewith).
      10.1             ---     Agreement of Purchase and Sale for The Thicket Apartments,  dated March 27, 1996, between
                               The Patrician  Mortgage  Company and A&P Investors,  Inc.  (incorporated  by reference to
                               Exhibit 99.1 to the Trust's Current Report on Form 8-K, filed July 2, 1996).
      10.2             ---     Amendment to Agreement  of Purchase and Sale for The Thicket  Apartments,  dated June 25,
                               1996, between The Patrician Mortgage Company and A&P Investors, Inc. (filed herewith).
      10.3             ---     Assignment of Agreement for Purchase and Sale for The Thicket Apartments,  dated June 25,
                               1996, between Thicket Apartments, L.P. and A&P Investors, Inc. (filed herewith).
      10.4             ---     Commercial  Credit Agreement  between Hardwick Bank and Trust Company and the Trustees of
                               the Trust  (incorporated  by reference to Exhibit 10.1 to the Trust's  Current  Report on
                               Form 8-K/A, filed September 11, 1996).
      10.5             ---     Deed to Secure Debt and Security  Agreement by and between Thicket  Apartments,  L.P., as
                               mortgagor,  and  Univest  Mortgage  Capital,  LLC,  as  mortgagee,  dated  June 27,  1996
                               (incorporated  by reference to Exhibit 10.2 to the Trust's  Current Report on Form 8-K/A,
                               filed September 11, 1996).
      10.6             ---     Promissory note from Thicket  Apartments,  L.P. to Univest Mortgage  Capital,  LLC, dated
                               June 27, 1996  (incorporated  by reference to Exhibit 10.3 to the Trust's  Current Report
                               on Form 8-K/A, filed September 11, 1996).
      10.7             ---     Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed herewith).
      10.8             ---     Management  Contract  dated June 25, 1996 between  Thicket  Apartments,  L.P. and Vinings
                               Properties, Inc. (filed herewith).
      10.9             ---     Management  Contract  dated  July 6, 1990  between  PBC  Acquisition,  Inc.  and Carter &
                               Associates Enterprises, Inc.  (filed herewith).
      21.1             ---     Subsidiaries of the Trust (filed herewith).
      27               ---     Financial Data Schedule (filed herewith).

</TABLE>