<PAGE>



                                   FORM 10-K
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20001


[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended:  December 31, 1997
                         -----------------------------------------------

                                      OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from __________________ to _____________________
Commission File Number  0-6201
                        -------------------

                            BRESLER & REINER, INC.
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

           Delaware                                        52-0903424
----------------------------------              ---------------------------
(State or other Jurisdiction of             (IRS Employer Identification number)
incorporation or organization)

           401 M Street, S.W.
           Waterside Mall
           Washington, D.C.                                    20024
---------------------------------------               --------------------
(Address of principal executive office)                     (Zip Code)
Registrant's telephone number including area code:     (202) 488-8800
                                                       -------------------------
Securities registered pursuant to Section 12(b) of the Act:     None
 Securities registered pursuant to Section 12 (g) of the Act:
                         Common Stock, $.01 par value
                         ----------------------------
                               (Title of Class)
Indicate by check mark whether 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, and (2) has been subject to such filing requirements
for at least the past 90 days.  Yes  X
                                     -

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 3 of this Form 10-K or any amendment to this
Form 10-K.    [X]

The number of shares outstanding of Registrant's common stock ($.01 par value)
at March 19, 1998 was 2,780,528 shares, and the aggregate market value of the
shares held by non-affiliates (based upon $27.00 per share, the average of the
high bid and low asked prices reported by The National Quotation Bureau) was
approximately $15,480,072.

Documents Incorporated by Reference:
 Part III -- Item 10.  Directors and Executive Officers of Registrant
             Item 11.  Executive Compensation
             Item 12.  Security Ownership of Certain Beneficial Owners and
                       Management
             Item 13.  Certain Relationships and Related Transactions

          The information required by this Part will be incorporated by
reference to a definitive proxy statement which Registrant intends to file with
the

<PAGE>

Commission pursuant to Regulation 14A involving the election of directors within
120 days after the end of its fiscal year.

         The Exhibit Index is found on page 50.

                                    PART I

Item 1.  Business
         --------

          Registrant has two principal activities, Residential Land Development
and Construction and Rental Property Ownership and Management, primarily in
Maryland, Virginia and the District of Columbia.

Residential Land Development and Construction
---------------------------------------------

          Registrant owns several partially developed residential tracts of land
within the greater Washington, D.C. area. On these tracts, it develops
residential lots for sale and to construct and develop single family homes and
townhouses as part of residential subdivisions. Registrant may decide to sell
certain of its land if it determines that it is in the best interest of
Registrant to do so.

          Registrant also has general and limited partnership interests in
entities which are operating properties located in the Northern Virginia suburbs
of Washington, DC and Orlando, Florida.

          While the following information represents Registrant's current
intentions, the number of units, commencement dates, and other specific details
of a project may vary, depending on Registrant's ability to secure adequate
financing on acceptable terms, labor conditions, approval of land use plans, and
other regulatory requirements, general economic conditions, demand for housing
and other factors.

          Registrant designs and constructs its homes in accordance with its
periodic evaluation of the prevailing market for new homes. Its current plan is
to continue to build homes that appeal to the entry level homeowner, which will
give the purchaser the maximum amount of space for the purchase price.
Registrant generally avoids custom features and offers a limited number of home
models. It also generally does not build homes in advance of sales contracts
other than models and certain units for immediate sales.

          A.  Registrant's Homebuilding Projects
              ----------------------------------

           1.  Skyline Hill's, Price George's County, Maryland. This project
               -----------------------------------------------
consists of 179 single family homes and 43 townhomes. Five single family homes
and nine townhouses were sold and settled in 1997. As of March 15, 1998, three
townhouses were under contract of sale. 11 single family lots and 11 townhouses,
together with one single family model and three townhouse models, remain unsold.

          23.  St. Mary's County, Maryland. This project consists of 64
               ---------------------------
subdivided lots, all of which have been sold, and 31 farmsteads, of 15 to 30
acres each. As of March 15, 1998, nine farmsteads totaling 210 acres remain to
be sold.

           3. Oak Hill Towns, Prince George's County, Maryland. This project
              ------------------------------------------------
consists of 83 townhouses on an 11.1 acre tract. Eight townhomes were sold and
settled during 1997. As of March 15, 1998, five homes are under contract of
sale. When these homes are sold, the project will be completed.

                                      2















<PAGE>

        4.  Yorkshire Knolls, Prince George's Country, Maryland. This project
            ---------------------------------------------------
consists of 252 townhouses on a 31.5 acre tract. Clearing and grading for the
entire project has been completed. 19 homes were sold and settled during 1997.
As of March 15, 1998, 14 homes are under contract of sale. When these 14 homes
are sold, 155 townhomes will remain to be developed and/or sold.

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

        In the sale of homes by Registrant and entities controlled by it,
Registrant has utilized furnished model homes at each site. Sales are made by
independent real estate brokers to whom a commission is paid. In its production
of homes for sale, Registrant competes with numerous builders, which range from
well-financed and managed regional and national firms to small speculative
builders.

        When Registrant enters into an agreement of sale for a home, it
generally receives a deposit of $500 to $2,000 as is customary in its area of
business. These deposits may be refundable under certain circumstances,
including Registrant's inability to complete construction within specified time
periods, or the purchaser's inability to secure financing. Registrant generally
receives the balance of the purchase price in cash upon the closing of the sale,
but has in the past occasionally taken a note secured by a junior mortgage for a
portion of the purchase price.

        Although it is the responsibility of the home purchaser to obtain
financing for his purchase, Registrant seeks to obtain mortgage commitments from
lending institutions for its customers (subject to verification of individual
customer credit status) for purchases of homes in its developments. Registrant
may also be required to pay the lender a discount or points at the closing of
each loan, which in the case of loans insured by the Federal Housing
Administration, or the Veterans Administration, cannot be charged to customers.

        There can be no assurances that Registrant will in the future be able to
secure acceptable permanent mortgage commitments, and the absence of such
commitments could adversely affect its sale of homes.

        Because of its seasonal nature, home sales generally decline in the
first quarter of Registrant's fiscal year.

        B.  Joint Ventures with Sequoia Building Corporation of Virginia
            ------------------------------------------------------------
("Sequoia") at Manassas, Virginia. Starting in 1984, Registrant entered into a
---------------------------------
series of joint ventures and partnerships with Sequoia in Manassas, Prince
William County, Virginia. In 1984, Registrant and Sequoia organized a limited
partnership known as Paradise Developers ("Paradise") to develop a 418 acre
tract of land in Manassas, Virginia (the "Tract"). The Tract yielded
approximately 243 acres of residential land and 100 acres of commercial land
after streets, recreation facilities, parks and schools.

        Registrant's subsidiary is the sole general partner and managing
partner, owning a 50% partnership interest. Sequoia is a limited partner owning
a 50% partnership interest.

        Registrant originally owned the Tract and Paradise purchased the Tract
in two stages from Registrant in December, 1985 and September, 1986. The
consideration for this purchase was a subordinated non-resource mortgage and
note ("purchase money mortgage") in the original principal amount of
$11,525,616. As of December 31, 1997, the balance due registrant on the purchase
money mortgage was

                                       3

<PAGE>

$1,898,808.  In addition, Registrant is due $1,510,837 in unpaid interest, which
will be recognized in income when received.

           All of the residential land and 51 acres of the commercial land was
sold prior to 1993.  Paradise developed 18 acres of land into three commercial
projects; the 7800 Building, a bank building and Paradise Sudley North Office
Park.  31 acres of commercial land remain to be sold or developed.

          1.  7800 Building.  Paradise constructed a 15,460 square foot office
              --------------
building known as the 7800 Building on 1.52 acres of the Tract.  Paradise deeded
the property to Registrant's subsidiary in December, 1991.  The building is 100%
leased.

          2.  Bank Building.  This building of 3,478 rentable square feet on
              --------------
two-thirds of an acre is leased to NationsBank.  The lease terminates in
December, 2001, subject to NationsBank's option to renew for up to four
successive five-year terms.

          3.  Paradise Sudley North Office Buildings.  Registrant's subsidiary
              ---------------------------------------
is the sole general partner of Paradise Sudley North Limited Partnership
("Sudley"), owner of a 16.35 acre parcel of the Tract, and owns a 55% general
partnership interest.  Registrant also owns a 43.75% limited partnership
interest.  A former employee of Sequoia owns the remaining 1.25% interest.

          Sudley has developed on this site four office buildings, which
contain approximately 187,000 square feet of space, known as Buildings A, B, C
and D.

               Building A, 22,608 square feet, is 96% leased.

               Building B, 62,420 square feet, is 59% leased.

               Building C, 33,120 square feet, is 62% leased.

               Building D, 69,374 square feet, is 100% leased to Prince William
County, Virginia.  The lease expires December 31, 1998.  The lease provides that
Prince William County may extend the term of the lease for up to ten years.
Effective March 19, 1998, the term of the lease was extended through December
31, 2009. Prince William County may at its option extend the term of the lease
for an additional five years by written notice on or before December 31, 2007.
Building D and the 6.9 acres of land under Building D are owned by Paradise
Sudley North Building D Partnership. Sudley is a 50% partner, with a right to a
return of the value of its capital contribution before distributions to other
partners. The other partners are non-affiliates. Sudley is responsible for
managing day-to-day operations.

Rental Property Ownership and Management
----------------------------------------

          Registrant owns and manages apartment buildings, for itself and
others.  In the Southwest Washington, DC urban renewal area, as described below,
Registrant holds a 46% interest in an office building, and owns and manages a
portion of an enclosed shopping-office center.  It is the policy of Registrant
to manage and lease these rental properties through its own personnel.
Registrant also is a limited partner in certain properties described below,
which are operated by others.

          Apartments.  Registrant owns and operates two apartment complexes,
          ----------
with a total of 294 units in Greenbelt, Maryland, and in the southwest
Washington, DC

                                       4
<PAGE>

urban renewal area. (See "Southwest Washington, DC Urban Renewal Area", below).
Registrant constructed these apartment buildings.

         As of December 31, 1997, approximately 93% of Registrant's apartment
units were rented. In renting apartment units Registrant employs rental agents
and uses model apartments, advertising in local newspapers and displays on the
site. Each building or complex has a project manager employed by Registrant who
supervises rentals and general operations.

         Apartment leases generally provide for a fixed monthly rental over a
one year term and the tenant normally gives a security deposit. Registrant
estimates that the average length of occupancy of an apartment by its tenants is
approximately 30 months. Registrant pays for all utilities, except that certain
tenants pay for their own electricity. All of Registrant's properties are in
good condition, and in the opinion of Registrant, are adequately covered by fire
and other casualty insurance.

         Southwest Washington, D.C. Urban Renewal Area. Since 1964, Registrant
         ---------------------------------------------
has been the redeveloper of a portion of the Southwest Washington, D.C. Urban
Renewal Area (the "Area"), located immediately south of the "mall" which extends
from the United States Capitol Building to the Washington Monument. Registrant
has performed each of its principal business activities, as well as building
construction for others, in this Area.

         High Rise Office Buildings. Located in the Area are two matching 14
         --------------------------
story office buildings, which are leased and managed by Registrant. One
building, with approximately 153,000 square feet, is owned by Trilon Plaza
Company ("Trilon") an affiliate; the other building, with approximately, 173,000
square feet, is owned by Town Center East Investors ("TCELP"), a limited
partnership in which Registrant holds a 46% interest and serves as the general
partner.

         Trilon is a limited partnership, in which a substantial majority
interest is owned by Messrs. Bresler and Reiner, whose wholly owned corporation
is the general partner (other officers of Registrant hold minor interests) and
the balance is owned by non-affiliates. Trilon's principal assets are its
leasehold interests in the Area and the projects developed thereon.

         GSA Lease. The United States General Services Administration ("GSA")
         ---------
leases all of the two high rise buildings, as well as the second and third
floors of the adjacent shopping-office center and a portion of another smaller
structure (see "Shopping Center") at an annual rental of approximately $23.2
million for approximately 955,000 square feet plus 216,000 square feet of
parking space (the "GSA Lease"). The GSA lease covers 89.4% of the total
commercial and office space in the project. Approximately 327,550 square feet of
the portion of the shopping center owned by Registrant (97.1% of Registrant's
portion of the project) is included in the GSA lease at an annual rental of
approximately $6.8 million. 72,000 square feet are owned by S.E.W. Investors,
another affiliate. 173,000 square feet are owned by TCELP, in which Registrant
has a 46% interest. Registrant acts as managing and leasing agent for Trilon,
TCELP and S.E.W. Investors for their portions of the leased space. All four
owners, including Registrant, are jointly and severally liable as landlord to
GSA under the Lease. See "Management of Rental Properties".

         The GSA lease expires in September, 2002, and provides that the GSA
may, on one year's notice, terminate the GSA lease at any time after September,
2000. The GSA has not given any notice of early termination.

                                       5

<PAGE>


      The Environmental Protection Agency ("EPA"), the principal occupant under
the GSA lease, is in the process of relocating to new facilities and expects to
vacate Registrant's buildings by some time in 2001. The GSA has been attempting
to place other tenants in EPA space as it is vacated.

      In January, 1997 and February, 1998, the GSA leased an additional 5,000
square feet and 45,000 square feet, respectively, for use by the EPA. This
office space was previously leased to unrelated commercial government
contractors. These leases also will expire in September, 2002 and are subject to
cancellation after September, 2000.

      Total GSA rental from Registrant's portion of the mall complex is
currently $6.8 Million. Registrant also receives $748,500 in leasing fees and
$476,300 in management fees per year as the result of the GSA lease. The
commercial tenants in the mall complex also rely heavily on the GSA lease
occupants. If GSA does not place other tenants in the space being vacated by
EPA, the commercial tenants and Registrant may lose substantial revenue.

      The Southwest Community Council, in concert with the District of Columbia
government, has commissioned a study by the Urban Land Institute ("ULI") to
provide a detailed study and recommendations as to the use of the Waterside Mall
complex, if and when the GSA lease terminates. The ULI study commenced on March
1, 1998. The written report should be available for publication by June, 1998.

See "Management's Discussion and Analysis of Financial Condition and Results of
Operations- Rental Income- Commerical" for more information.

      Shopping-Office Center. An enclosed shopping-office center is located
      ----------------------
between the two high rise buildings containing approximately 750,000 square feet
of space. The center includes approximately 1,100 parking spaces located in an
underground parking garage and adjacent parking areas.

      Registrant acts as managing and leasing agent for Trilon and for S.E.W.
Investors, a limited partnership ("S.E.W. Investors") (see "Southeast Section"
below) for their portions of the shopping-office center, part of which is leased
to the GSA as described above and the balance is leased to other commercial
tenants. See "Management of Rental Properties".

      Registrant's portion of the shopping-office center, consisting of 231,023
square feet, is leased by Registrant from the District of Columbia Redevelopment
Land Agency ("RLA") for a term expiring in 2058. Under the lease, Registrant is
responsible for all expenses related to the land, including real estate taxes
and utilities. Registrant must obtain the approval of RLA before constructing
additional improvements on these tracts.

      Southeast Section. On October 10, 1980, Registrant assigned its leasehold
      -----------------
interest in a portion ("Southeast Section") of the shopping-office center to
S.E.W. Investors. The Southeast Section contains approximately 105,000 square
feet of rentable space in the three story and basement building, of which
approximately 49,000 square feet were completed prior to 1981. Tenant occupancy
commenced in February, 1982, including 56,000 square feet leased to the GSA.
S.E.W. Investors was organized by Registrant to acquire the Southeast Section.
Registrant is the sole general partner, with a 1% interest. Of the limited
partnership interests, 62% is held by non-affiliates and the remaining 37% is
held by certain directors and officers of Registrant, including Charles S.
Bresler, its Chairman of the Board and principal shareholder, and Burton J.
Reiner, its President, director

                                       6










<PAGE>

and principal shareholder. Registrant manages this building. See "Management of
Rental Properties".

          Town Center East Apartment Buildings. On August 1, 1979, Registrant
          ------------------------------------
assigned its leasehold interest in two high rise apartment buildings in the
redevelopment area, with 256 units,known as Town Center East Apartments,to Third
Street Southwest Investors,a limited partnership. Registrant is the sole general
partner in this limited partnership, with a 1% interest, and acts as management
agent for the project. In this partnership, 90% of the limited partnership
interests are held by unaffiliated persons, and the remaining 9% of the limited
partnership interests are held by certain directors and officers of Registrant,
including Charles S. Bresler, Chairman and Chief Executive Officer of Registrant
and Burton J Reiner, its President. Registrant manages these buildings. See
"Management of Rental Properties".

          Low Income Housing.  Registrant has interests in the following limited
          ------------------
partnerships which are operating low-income housing units:

          1.  Multi-State Projects. On November 15, 1988, Registrant purchased
              --------------------
99% limited partnerships interest in each of seven limited partnerships, which
collectively have constructed 266 rental apartments.  The projects are located
in small communities in Maryland (3), Pennsylvania (1), Virginia (2) and West
Virginia (1). At March 1 1998, the projects were 95% occupied. The projects are
financed by Farmers Home Administration mortgages and enjoy the benefits of low
income housing credits against federal income tax authorized under Section 42 of
the Internal Revenue Code of 1986, as amended, (the "Code"). The purchase price
for such limited partnership interests is approximately $5,168,000 in the
aggregate, of which $4,590,671 has been paid as of March 6, 1998. It is payable
in annual installments over ten years such tax credit is available, commencing
in March 1990, and is to be adjusted annually based on the annual tax benefits
generated.

          2.  Windsor, Connecticut Project. On April 27, 1989, Registrant
              ----------------------------
purchased a 97% limited partnership interest in a Connecticut limited
partnership. This partnership converted a former school house into 40
residential apartments in Windsor, Connecticut, a suburb of Hartford. The
partnership received the certificate of occupancy for the apartments and is
eligible for both Federal historic tax credit and Federal low income housing
credits against Federal income tax as authorized under Section 42 of the Code.
The purchase price for the partnership interest,payable in installments over the
ten (10) years the credits are available, is approximately $1,130,000,of which
$664,000 was paid as of December 31, 1997. The purchase price is to be adjusted
based on the tax benefits generated annually. The project is 90% occupied.

          3.  Orlando, Florida Project. On July 17, 1989, Registrant purchased a
              ------------------------
90% limited partnership interest in a Florida limited partnership. The general
partners of the partnership are three individuals and PAC Land Development
corporation, a Florida real estate development company ("PAC"). The partnership
developed and constructed a 28 acre, 312 unit apartment project in Orlando,
Florida, of which 63 units are eligible for Federal low income housing credits
and the balance of 249 units are market rate apartments. The purchase price for
the partnership interest was $1,600,000. The purchase price,other than the first
installment, is to be adjusted based on the tax benefits generated
annually,which may result in additional payments in the future. 91% of the
apartments were occupied as of December 31, 1997.

          4.  St. Mary's County, Maryland Project. On November 22, 1989,
              -----------------------------------
Registrant purchased a 79% limited partnership interest in Foxchase Village

                                       7
<PAGE>

Associates Limited Partnership, which has constructed a 134 unit apartment
project in St. Mary's County, Maryland. The project is eligible for Federal low
income housing credits against Federal income tax authorized under Section 42 of
the Code over the first ten years after occupancy. The purchase price for the
partnership interest was $3,200,000. 98% of the apartments were occupied as of
December 31, 1997.

          Competition.  In each of the areas where Registrant's rental
          -----------
properties are located, there are buildings which offer similar accommodations
at approximately the same rentals. The rents charged by Registrant for its
properties in the District of Columbia are subject to rent control regulation.

          Management of Rental Properties.  Registrant, through a subsidiary,
          -------------------------------
has contracts to act as managing agent and, in certain cases, leasing agent, for
residential and commercial projects of certain partnerships in which Registrant
is a general partner, and of certain partnerships in which Charles S. Bresler
and Burton J. Reiner, officers, directors, and principal shareholders of
Registrant, have substantial interests and other directors and officers have
minor interest as follows:
<TABLE>
<CAPTION>
     Property Managed                 Compensation(1)            Expiration
     ----------------                 ---------------            ----------
<S>                                   <C>                    <C>
414 apartment units (5)                    5%                December, 2000  (2) (3)
20 townhouses (6)                          5%                December, 2000  (2) (3)
390,000 square feet of office
    space                                  3% (10)           December, 1998  (4)
185,000 square feet of office
    space                                  3% (10)           December, 1998  (4)
256 apartment units (8)                    5%                September, 1999 (2) (3)
105,000 square feet of
    shopping-office
    center (9)                             3% (10)           December, 1998  (4)
</TABLE>

    (1)  As a percentage of gross rent collected.

    (2)  These contracts renew automatically for additional five year terms
         unless either party gives notice of termination at the end of the term
         stated above.

    (3)  This contract may be terminated at any time by the Federal Housing
         Commissioner or the mortgagee.

    (4)  These contracts may be terminated by the owners on 60 days prior
         written notice, subject to payment of the present value of the leasing
         fees (see note 9 below) for the remainder of the contract term.

    (5)  This property is located in the Southwest Washington, D.C. Urban
         Renewal Area and is managed for Waterside Towers, L.L.C., an affiliate
         of the Registrant.

    (6)  These properties are located in the Southwest Washington, D.C. Urban
         Renewal Area and are managed for Trilon Plaza Company and Waterside
         Towers, L.L.C., affiliates of the Registrant.


                                       8
<PAGE>

     (7)  The project is described in "Southwest Washington, D.C. Urban Renewal
          Area" and is managed for TCELP, a partnership in which Registrant has
          a 46% interest and is the general partner.

     (8)  These buildings are the Town Center East Apartments described in
          "Southwest Washington, D.C. Urban Renewal Area" and are managed for a
          partnership in which Registrant has a 1% interest and is general
          partner.

     (9)  This property is managed for a partnership in which Registrant has a
          1% interest and is a general partner. (See "Southwest Washington, D.C.
          Urban Renewal Area - Southeast Section" above.)

     (10) In addition, Registrant earns leasing fees of 5% of gross rents
          collected on the GSA Lease for these properties.

          Holiday Inn Express.  Registrant owns and operates a 151 room Holiday
          -------------------
Inn Express motel located in Camp Springs, Maryland, suburban Washington, D.C.,
opposite the main entrance to Andrews Air Force Base and an interchange of the
Capital Beltway. The motel commenced business in March, 1970.

          In March, 1997 Registrant commenced conversion of the facility from a
Holiday Inn to a Holiday Inn Express. The conversion required substantial
renovation of the Holiday Inn facility. Renovation was completed in December,
1997. Average occupancy in 1997 was 43%, compared to 52% in 1996. 1997 occupancy
was severely reduced during the renovation period.

          Under Registrant's franchise license agreement with Holiday Inns,
Inc., Registrant pays Holiday Inns a monthly royalty, and additional payments
for advertising and trading services. The new Holiday Inn Express license
agreement will expire in March, 2007.

          There are three other motels in the immediate vicinity of Registrant's
motel in suburban Washington, D.C. The motel business in the Washington, D.C.
area is highly competitive.

          The Colonnade, Baltimore, Maryland.  The Colonnade is a multi-purpose
          ----------------------------------
condominium apartment, hotel, office and retail building across from the Johns
Hopkins University campus in Baltimore, Maryland. Registrant's portion of the
building consists of 125 hotel rooms operated by Registrant as a Doubletree
Hotel, a 5,200 square foot restaurant, leased to an unrelated operator, 7,600
square feet of retail and office space and a 137 parking space garage. Hotel
occupancy averaged 72% in 1997.

          Pine Club Phase II Limited Partnership, Orlando, Florida.  Registrant
          --------------------------------------------------------
holds a 64.35% limited partnership interest in Pine Club Phase II, Ltd., a
Florida limited partnership. The general partners of this partnership are three
unaffiliated individuals and PAC, who own with others, in the aggregate, a
35.65% partnership interest.

          The partnership has constructed 160 residential apartment units on
approximately 14 acres of land in Orlando, Orange County, Florida. This land is
contiguous to Registrant's low-income housing and market rate housing project in
Orlando, Florida previously discussed under "Low Income Housing - Orlando,
Florida Project". The Project was completed in January 1991, and is 92% occupied
as of February 28, 1998.


                                       9

<PAGE>

          Convenience Stores. In June, 1986, Registrant acquired 16 Circle K
          -------------------
convenience store locations, in the southern and southeastern United States,for
an aggregate consideration of $3,390,000. Registrant acquired title to each
store building,but holds leasehold interests in the underlying parcels of land.
All of the stores were under lease through February,2000 on a net basis, to
Circle K Corporation,a large convenience store chain which operates the stores
are under the name "Circle K." On May 15,1990, Circle K and certain if its
affiliates filed Petitions under Chapter 11 of the Bankruptcy Code. One of
Circle K's rights under the Bankruptcy Code was to affirm or reject the rental
leases on its stores. At various times, Circle K rejected a total of 12 of the
sixteen leases owned by Registrant. As of March 15, 1998, six of these stores
are leased to unrelated parties (one of which is under contract to be sold).
Registrant has sold four stores. The remaining two stores have not yet been
sold or leased.

          Nursing Home. Registrant owns a New Jersey nursing home facility,
          -------------
Lakeview Manor, which it leases to an unaffiliated operating company.

          Lakeview Manor is a 120-bed nursing home facility in Lakewood, New
Jersey. The skilled and intermediate care facility is located on State Road 88,
Ocean County, New Jersey, approximately 60 miles south of New York City.
The one-story building of approximately 37,000 square feet, with brick exterior,
is situated on 11 acres of land.

          Since it acquired the property on December 31, 1984, Registrant has
leased the nursing home to an unaffiliated operator. The monthly rent is $48,295
for the first five years of a ten year term, with increased rent thereafter.
Tenant has several renewal options for up to 20 additional years. The lessee
pays taxes and other operating expenses, and all structural and nonstructural
repairs and replacements. The lessee has a right of first refusal in the event
Registrant seeks to sell the property. The lessee may assign the lease to
another experienced nursing home operator, subject to certain conditions.

          There are several other nursing homes in Lakewood, New Jersey. The
Nursing Home business is highly competitive. Nursing homes operate under state
licenses and are subject to extensive governmental regulations. Should Lakeview
Manor not be in compliance with these regulations, it would be subject to
termination of its qualification for federal assistance payment or termination
of its operating license by federal or state regulators.

Equipment Leasing and Vending
-----------------------------

          Registrant previously engaged in personal property leveraged equipment
leasing, both directly and through subsidiaries and general partnerships.  It
also acted as broker in arranging equipment sale and leaseback transactions for
a fee.

          In December, 1983, Registrant, with others, organized a general
partnership to engage in equipment leasing known as Builders Leasing Company,
and agreed to act as its managing partner with a 20% interest.  The initial
$2 Million capital of the partnership was contributed by each partner, in
proportion to his percentage interest, over five years in semiannual
installments. In addition to the initial capitalization, the partners
contributed $1,150,000 to the capital of the partnership in 1988, 1989 and 1990.
Registrant's capital contribution to date totals $630,000. Certain directors and
officers of Registrant also hold an aggregate of 27% of the partnership
interests, including Charles S. Bresler, Chairman of the Board and principal
shareholder (20%), and Burton J. Reiner, President, director and principal
shareholder (5%).

                                      10
<PAGE>

          Builders Leasing Company owns transportation barges and petroleum
transportation vehicles.  The partners are personally liable for debt of
Builders Leasing, with a balance at December 31, 1997 of about $2,342,000.

          In February 1984 Registrant organized Tech-High Leasing Company, a
general partnership in which it holds a 50% interest.  The other 50% is held by
a non-affiliated corporation.  Registrant and its partner have each contributed
$1,100,000.  Tech-High currently owns transportation equipment with a net book
value as of December 31, 1997 of approximately $700,000.  The partnership debt
on these acquisitions as of December 31, 1997, was approximately $826,000 of
which Registrant is personally liable for approximately $165,000.

          Registrant currently is no longer entering into new equipment leases.
The lease portfolio has been substantially reduced.

          Registrant, through a wholly owned subsidiary, has since August, 1987,
conducted a coin operated telephone business,  primarily in the Washington, D.C.
metropolitan area.  The telephones are now being serviced by a management
company in Maryland.

Employment
----------

          On March 15, 1998, Registrant and its subsidiaries employed
approximately 120 persons.

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

          Registrant borrows money from time to time on general credit and it
expects to continue such open account borrowing in the future.  It has also
granted mortgages or deeds of trust on its real estate and security interests in
its equipment leases and leased equipment.  Registrant's  business and earnings
are dependent in part on its ability to obtain interim construction and
permanent financing on acceptable terms for its construction and sale of single
family residences and for its development of rental property.  Certain of
Registrant's borrowing is tied to the prime interest rate.

          Registrant's business is substantially dependent on general economic
conditions, and the availability of construction labor and materials in the area
served.  Registrant's business is materially affected by federal housing
programs.  To the extent that Registrant's financing of projects is insured by
the Federal Housing Administration ("FHA"), Registrant is subject to FHA
construction, operation and other requirements, including provisions relating to
rentals, management agreements, various reserves, employment and leasing
practices.  The development of unimproved real estate is subject to Registrant's
obtaining appropriate governmental approvals, and availability of utilities,
including sewers.

Item 2.   Properties.
          -----------

          Rental properties of Registrant are described under "Rental Property
Ownership and Management" in Item 1.

Item 3.   Legal Proceedings.
          ------------------

          Registrant, S.E.W. Investors, Town Center Management Company (a
subsidiary of Registrant), Bresler and Reiner Companies (a subsidiary of

                                      11
<PAGE>

Registrant), and Trilon Plaza Company are defendants in a civil suit case no.
90-CA10594 filed October 12, 1990 in the Superior Court of the District of
Columbia by Joanne Bahura, et. al. (the "Plaintiffs"). The Plaintiffs are 19
individuals who state they are all present or former employees of the
Environmental Protection Agency, which leases certain office space at a high
rise office building in Washington, D.C. known as the "Waterside Mall Complex."
Four spouses of such employees are also plaintiffs. See "Management of Rental
Properties", "Southwest Washington, D.C. Urban Renewal Area", "High Rise Office
Buildings", "Shopping-Office Center" and "Southeast Section" in Item 1 above.
The Complaint, as amended (the "Complaint"), alleges that (i) the defendants are
the owners of the Waterside Mall Complex and (ii) certain renovations and
reconstruction to the Waterside Mall Complex were done in such a manner as to
cause the Plaintiffs multiple physiological and physical symptoms.

          The Complaint seeks damages aggregating $40,000,000 under claims of
negligence, breach of warranty of habitability, breach of contract, strict
liability, loss of consortium and punitive damages. The claims of six plaintiffs
were tried to a jury from October 25 to December 23, 1993, with verdicts for
plaintiffs totalling $948,000. No punitive damages were awarded. The judgments
in favor of four defendants were overturned following trial, reducing the total
award to $232,000. Plaintiffs have filed a notice of appeal, and appeals are
pending. The cases of fourteen primary plaintiffs and three loss of consortium
plaintiffs remain to be tried. Management believes the claims are without merit
and intends to continue to contest the case vigorously.

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

         Not Applicable.

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

                       Executive Officers of Registrant
                  (included pursuant to instruction 3 to Item
                           401(b) of Regulation S-K)

                                    Present Positions
                                    and Offices with          Date Elected
Name                      Age       Registrant                to Office
----                      ---       -----------------         ------------

Charles S. Bresler        70        Chief Executive           June 2, 1970
                                    Officer, Chairman
                                    of the Board
                                    and Director

Burton J. Reiner          69        President and             June 2, 1970
                                    Director

William L. Oshinsky       55        Treasurer and             April 6, 1994
                                    Director                  November 15, 1994

Edwin Horowitz            66        Secretary and             June 2, 1970
                                    Director

          In accordance with Article V of the By-Laws of Registrant, each
officer was elected to serve until his successor is chosen and shall have
qualified or until his earlier resignation or removal.


                                      12
<PAGE>

          There is no family relationship as defined in the instructions to this
Item between any of the above officers, except Mr. Oshinsky is the brother-in-
law of Mr. Reiner.

          Each officer has held the above positions as his principal occupation
for more than the past five years, except Mr. Oshinsky, who, prior to his
election as Treasurer, served as an officer of subsidiaries of Registrant for
more than the past five years.


                                    PART II
                                    -------

Item 5.  Market for Registrants Common Equity and Related Stockholder Matters.
         --------------------------------------------------------------------

          Registrant's Common Stock is traded in the over-the-counter market.
The following table presents the high and low bid quotations for the periods
shown, as reported by the National Quotation Bureau, Inc. No dividends were
declared or paid during the years reported.


Year Ended December 31, 1996
----------------------------

           Quarter                                Price
           --------------------------------------------
           1st                High                10.50
                              Low                 10.50
           --------------------------------------------
           2nd                High                10.50
                              Low                 10.50
           --------------------------------------------
           3rd                High                10.75
                              Low                 10.75
           --------------------------------------------
           4th                High                11.00
                              Low                 10.75
           --------------------------------------------


Year Ended December 31, 1997
----------------------------

           Quarter                                Price
           --------------------------------------------
           1st                High                11.50
                              Low                 11.00
           --------------------------------------------
           2nd                High                21.00
                              Low                 12.00
           --------------------------------------------
           3rd                High                21.50
                              Low                 21.00
           --------------------------------------------
           4th                High                21.50
                              Low                 20.25
           --------------------------------------------


          The above quotations, as reported by National Quotation Bureau, Inc.,
represent prices between dealers and do not include retail markup, markdown or
commissions and do not represent actual transactions.

          As of March 19, 1998, there were 145 record holders of Common Stock.

                                      13
<PAGE>

Item 6.  Selected Financial Data
         -----------------------

<TABLE>
<CAPTION>

                                         1997               1996             1995*              1994*             1993*
                                         ----               ----             -----              -----             -----
<S>                                   <C>                <C>              <C>                <C>                <C>
Revenues                              $34,029,000        $35,143,000      $ 33,824,000       $ 39,563,000       $ 31,683,000
Net (loss) income before
extraordinary item and
cumulative effect of
accounting change                     $12,823,000        $10,805,000      $  4,404,000       $ (4,109,000)      $ (8,408,000)

Net income (loss)                     $ 8,265,000        $ 7,273,000      $  6,140,000       $  3,404,000       $ (5,133,000)
                                      ===========        ===========      ============       ============       ============
Earnings per common
share before
extraordinary item
and cumulative effect
of accounting change                      $  2.96            $  2.60           $  1.57            $ (1.45)           $ (2.96)

Earnings per common
share                                     $  2.96            $  2.60           $  2.18            $  1.20            $ (1.81)
                                          =======            =======           =======            =======            =======

Total Assets                          $97,522,000        $94,926,000      $100,419,000       $102,425,000       $151,544,000
                                      ===========        ===========      ============       ============       ============
Long Term
Obligations                           $15,667,000        $22,238,000      $ 33,729,000       $ 42,495,000       $ 91,336,000
                                      ===========        ===========      ============       ============       ============

Cash dividends
per common share                          (1)                (1)               (1)                (1)                (1)
                                      ===========        ===========      ============       ============       ============
</TABLE>
------------------------------

     (1)  No dividends have been declared or paid.

      *   Restated to relect reclassifications.

                                      14

<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
of Operations.
-------------

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

Sales of Homes and Lots
-----------------------

     During 1997, Registrant sold 41 homes and two lots for $5,757,000 as
compared with 63 homes in 1996 totaling $8,669,000 and 56 homes and three lots
totaling $8,117,000 in 1995.

Rental Income - Apartments and Commercial
-----------------------------------------

     Apartments.  Rental income from apartments in 1997 was $2,389,000, a 2.0%
     ----------
increase from $2,342,000 in 1996. Total units in 1997 were 294, with an average
occupancy of 93% and an average monthly rental of $715, compared with 294 units,
an 86% occupancy rate and average monthly rental of $719 for 1996.  The increase
in rental revenues in 1997 was primarily due to increased occupancy.  Rental
income from apartments in 1996 decreased 3.4% from $2,424,000 in 1995.  Total
units in 1995 were 370, with an average occupancy of 79% and an average monthly
rental of $669.  The decrease in apartment rental revenues in 1996 was primarily
due to a reduction in the number of units, offset in part by higher occupancy
and rental rates in the remaining units.

     Commercial.  Rental income from commercial properties in 1997 was
     ----------
$11,885,342, a 5.4% increase from $11,273,733 in 1996.  Total commercial square
footage is 543,6000.  Average occupancy for 1997 was 92.4%, with an average
annual rental of $20.52 per square foot.  This compares with an 89.5% occupancy
rate and average annual rental of $20.10 per square foot for 1996.  The increase
in commercial rental revenues in 1997 was primarily due to increased occupancy
and higher per square foot rates.  Commercial rental income in 1996 decreased
0.9% from $11,379,077 in 1995.  Average occupancy in 1995 was 89.1%, with an
average annual rental of $19.58 per square foot.  The decrease in commercial
rental revenues in 1996 was primarily due to the recognition in 1995 of income
on elimination of certain reserves upon extension of the GSA lease.  Commercial
rental income for each year described above also included (i) rental income from
Lakeview Manor nursing home of $579,538 per year, (ii) utility reimbursements
from tenants and property tax refunds of $233,779 in 1997, $143,798 in 1996 and
$22,454 in 1995, (iii) maintenance fees of $236,799 in 1997, $188,811 in 1996
and $136,450 in 1995, (iv) revenues from convenience store properties of
$188,636 in 1997, $174,196 in 1996 and $187,702 in 1995, and (v) parking and
other miscellaneous revenues of $184,832 in 1997, $225,377 in 1996 and $183,891
in 1995.

     The GSA lease contributed 28% and 22% of Registrant's total revenues in
1997 and 1996, respectively.

     Hotel.  Hotel revenues for 1997 were $6,137,000 compared to $5,890,000 for
     -----
1996 and $5,534,000 for 1995.  Net income from all Hotel operations was
$1,219,000 for 1997, compared to $1,021,000 for 1996 and $530,000 for 1995.

     Holiday Inn property 1997 and 1996 results reflect reduced revenues and
increased expenses as the result of undergoing renovation to a Holiday Inn
Express format.

     The Colonnade Doubletree revenues increased 12% in 1997 over 1996
($4,726,000 compared to $4,217,000).  This was the result of increased average
room rates and occupancy.  1996 Colonnade Doubletree revenues increased 18% over
1995 revenues of

                                      15
<PAGE>


$3,570,000 as the result of increased average room rates.  Net income from
Colonnade operations was $1,534,000 in 1997, $928,000 in 1996 and $253,000 in
1995.  Average occupancy was 72%, 69% and 69% respectively.

Leasing Fees, Affiliates
------------------------

     The 1995, 1996 and 1997 results consist of a 5% real estate leasing fee
earned by Registrant resulting from the GSA lease.  These fees are recorded as
earned over the life of the lease, as rent is collected.  See "Rentals --
Apartments and Commercial".

Interest, Other
---------------

     Interest income for 1997 increased as the result of higher yields on U.S.
Treasury investments purchased by Registrant.

Income from Equity Investments
------------------------------

     The components of this Item are as follows:

   Year Ended December 31            1997             1996           1995
   ----------------------            ----             ----           ----

Orlando, Florida Apartments        $(17,000)        $(14,000)      $(72,000)
Town Center Office Building         792,000          779,000        809,000
Tech High Leasing Company           157,000           42,000         84,000
Other                               468,000(a)       (14,000)       180,000
                                 ----------         --------       --------
Total                            $1,400,000         $821,000       $641,000


(a)  In accordance with generally accepted accounting principles, distributions
in excess of basis from a partnership of $461,000 were included in 1997 "Other"
income.

Revenue - Other
---------------

     Included for 1997 is $377,000 consisting of a payment from the settlement
between the FDIC and commercial paper creditors resulting from the 1990 failure
of Washington Bancorp.  Included for 1996 is $232,000 from a non-recurring
settlement.

Interest Expense
----------------

     The reduction in interest expense from $2,898,000 in 1996 to $1,975,000 in
1997 is primarily due to the 1996 payoff of the Colonnade mortgage.

Provision for Loss on Real Estate
---------------------------------

     Registrant elects to write down the costs of substantially-completed
residential construction projects in excess of the market value of unsold units.
The write-down was $650,000, $60,000 and $578,000 in 1997, 1996 and 1995,
respectively.

Expenses - Other
----------------

     Commencing in 1997, Registrant determined to expense cash advances to a
partnership operating at loss.  "Expenses - Other" for 1995 included, among
other items, $545,000 representing a write-down of a receivable from a state
Department of Public Welfare to reflect the amount allowed by the Department
of Welfare.

                                      16
<PAGE>

General and Administrative
--------------------------

     The lower expenses in 1997, compared to 1996, reflected slightly lower
administrative expenses.  The lower expense in 1996, compared to 1995,
reflects lower executive compensation and administrative expenses.

Extraordinary Item-Debt Elimination
-----------------------------------

     In 1992 Registrant tendered a deed to the holder of the loan on Allentown
Apartments.  In September 1993 the holder refused the deed offered by
Registrant, had a receiver appointed and took possession of the property.
In May 1995 the holder foreclosed on the property. In August 1995 the Circuit
Court for Prince George's County, Maryland ratified the foreclosure sale. This
transaction resulted in a pre-tax extraordinary gain of $2,678,000 after payment
of $480,000 guaranteed by Registrant and related expenses.

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

     Registrant continues to fund its obligations out of current cash flow.  The
banking and finance communities continue to be adverse to most real estate
lending, requiring increased coverage on debt and significant owner investment
in properties.  There is no assurance that Registrant will be able to meet all
of its needs out of cash flow or that additional funding will be available to
Registrant if needed.

     During the year ended December 31, 1997, Registrant generated cash flow
from operating activities of $11,029,000.  Cash flow from operating activities
was used in investing activities of $11,000, which consisted of investments in
U.S. Treasury instruments and other activities of $2,240,000, less proceeds of
$2,251,000 related to investment in joint ventures.  The remaining cash flow
from operating activities was used in financing activities for the repayments of
notes payable and the purchase of treasury stock. Overall, cash flow from
operating, investing and financing resulted in an increase of $4,215,000 in
cash and cash equivalents and cash deposits held in escrow during the year ended
December 31, 1997.

     During the year ended December 31, 1996, Registrant generated cash flow
from operating activities of $13,210,000.  Cash flow from operating activities
was used in investing activities of $11,793,000, which consisted of investments
in U.S. Treasury instruments and other activities of $12,481,000, less proceeds
of $688,000 related to investment in joint ventures.  The remaining cash flow
from operating activities was used in financing activities for the repayment of
notes payable.  Overall, cash flow from operating, investing and financing
resulted in a decrease of $10,574,000 in cash and cash equivalents and cash
deposits held in escrow during the year ended December 31, 1996.

     During the year ended December 31, 1995, Registrant generated $11,264,000
in cash flow from operating activities.  Cash flow from operating activities was
used in investing activities of $393,000, which consisted of investments in U.S.
Treasury instruments and other activities of $1,878,000, less proceeds of
$1,485,000 related to investments in joint ventures.  The remaining cash flow
from operating activities was used in financing activities for the repayment of
notes payable and the purchase of treasury stock.  Overall, cash flow from
operating, investing and financing resulted in an increase of $6,397,000 in cash
and cash equivalents and cash deposits held in escrow during the year ended
December 31, 1995.

                                      17
<PAGE>

Year 2000 Issue
---------------

     The Registrant continues to assess the impact of the Year 2000 issue on its
operations, including the development of cost estimates for, and the extent of
programming changes required to address, this issue. Although final cost
estimates have yet to be determined, it is anticipated that the Year 2000 costs
will result in 1998 and 1999. The Registrant does not expect these costs to have
a material impact on the Registrant.

Item 8.   Financial Statements and Supplementary Data.
          -------------------------------------------

          The financial statements are listed under Item 14 in this annual
report and are included therein.

          No supplementary data are supplied because none are required.

Item 9.   Disagreements on Accounting and Financial Disclosure.
          ----------------------------------------------------

          None.

                                   PART III

Item 10.  Directors and Executive Officers of Registrant.
          ----------------------------------------------

          The information required by this item will be incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company pursuant to Regulation 14A within
120 days after the close of its fiscal year.

Item 11.  Executive Compensation.
          ----------------------

          The information required by this item will be incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company pursuant to Regulation 14A within
120 days after the close of its fiscal year, except for the information
contained under such definitive proxy statement under the captions "Board
Compensation Committee Report on Executive Compensation" and "Performance
Graph."

Item 12.  Security Ownership of Certain Beneficial Owners and Management.
          --------------------------------------------------------------

          The information required by this item will be incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company pursuant to Regulation 14A within
120 days after the close of its fiscal year.

Item 13.  Certain Relationships and Related Transactions.
          ----------------------------------------------

          The information required by this item will be incorporated by
reference to a definitive proxy statement involving the election of directors
which is expected to be filed by the Company pursuant to Regulation 14A within
120 days after the close of its fiscal year.

             (The remainder of this page intentionally left blank)



                                      18
<PAGE>

                                     Part IV



Item 14    Exhibits, Financial Statement Schedules, and Reports on Form 10-K

                                                                           Page
                                                                           ----
A.   The following documents are filed as part of this report:

     1.   Financial Statements

          Bresler & Reiner, Inc. Consolidated Financial Statements:

             Report of Independent Public Accountants                        20

             Consolidated Balance Sheets                                  21-22

             Consolidated Statements of Income                               23

             Consolidated Statements of Changes in Shareholders' Equity      24

             Consolidated Statements of Cash Flows                        25-26

             Notes to Consolidated Financial Statements                   27-42

     2.   Financial Statement Schedules III and IV                        43-49

          Schedules other than those listed above have been omitted
          because they are not required, not applicable, or the
          required information is set forth in the financial
          statements or notes thereto.

     3.   Exhibits                                                           50

          Shareholders may obtain a copy of any financial statement schedules
          and any exhibits filed with Form 10-K by writing to Edwin Horowitz,
          Secretary, Bresler & Reiner, Inc., at 401 M Street, S.W., Washington,
          D.C. 20024, who will advise shareholders of the fee for any exhibit.

                                     -19-
<PAGE>

                    Report of Independent Public Accountants



To Bresler & Reiner, Inc.:

We have audited the accompanying consolidated balance sheets of Bresler &
Reiner, Inc. (a Delaware corporation, the "Company") and subsidiaries, as of
December 31, 1997 and 1996, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These consolidated financial statements and
the schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedules based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company and subsidiaries as
of December 31, 1997 and 1996, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in the
index of financial statements are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not a required part of the
basic consolidated financial statements. This information has been subjected to
the auditing procedures applied in our audits of the basic consolidated
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic consolidated financial statements taken as a
whole.

                                               /s/ Arthur Andersen LLP


Washington, D.C.
March 20, 1998

                                     -20-
<PAGE>

                             Bresler & Reiner, Inc.


                           Consolidated Balance Sheets
                        As of December 31, 1997 and 1996




                                     Assets

                                                     1997                1996
                                                 -----------         -----------
Rental property and equipment, net               $36,250,000         $36,488,000

Construction in process                            8,594,000           8,035,000

Homes held for sale                                1,135,000           3,169,000

Land held for sale                                 4,237,000           4,770,000

Receivables:
     Mortgages and notes, affiliates               4,984,000           5,501,000
     Mortgages and notes, other                      923,000           1,094,000
     Direct financing leases                             -               126,000
     Other                                         2,318,000           1,300,000

Investment in and advances to joint
ventures and partnerships                          3,515,000           4,366,000

Cash and cash equivalents                          5,762,000           6,761,000

Cash deposits held in escrow                       8,641,000           3,427,000

Investments                                       13,667,000          13,303,000

Income taxes receivable                            1,156,000              32,000

Deferred charges and other assets                  6,340,000           6,554,000
                                                 -----------         -----------
                  Total assets                   $97,522,000         $94,926,000
                                                 ===========         ===========


The accompanying notes are an integral part of these consolidated balance
sheets.

                                     -21-
<PAGE>

                             Bresler & Reiner, Inc.


                           Consolidated Balance Sheets
                        As of December 31, 1997 and 1996




                      Liabilities and Shareholders' Equity

                                                     1997          1996
                                                 -----------   -----------
Liabilities:
     Notes payable-
         Mortgages                               $15,667,000   $22,202,000
         Leasing equipment                               -          36,000
     Accounts payable, trade                       1,810,000     2,662,000
     Accrued expenses                                691,000       742,000
     Tenant deposits                                 249,000       253,000
     Deferred income                                 341,000       325,000
     Deferred income taxes payable                 5,186,000     2,694,000
     Due to affiliates                                16,000       577,000
                                                 -----------   -----------
                  Total liabilities               23,960,000    29,491,000


Minority interest                                    309,000       193,000

Commitments and contingencies

Shareholders' equity:
     Common stock, $0.01 par value:
      4,000,000 shares authorized, 2,839,603
      shares issued, 2,780,528 and 2,792,653
      shares outstanding at December 31, 1997
      and 1996, respectively                          28,000        28,000

     Capital in excess of par                      7,565,000     7,565,000
     Retained earnings                            66,342,000    58,077,000
     Treasury stock                                 (682,000)     (428,000)
                                                 -----------   -----------
           Total shareholders' equity             73,253,000    65,242,000
                                                 -----------   -----------
           Total liabilities and                 $97,522,000   $94,926,000
            shareholders' equity                 ===========   ===========


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

                                     -22-

<PAGE>

                             Bresler & Reiner, Inc.


                        Consolidated Statements of Income
              For the Years Ended December 31, 1997, 1996, and 1995

<TABLE>
<CAPTION>

                                                                               1997           1996           1995
                                                                          ------------   ------------   ------------
<S>                                                                       <C>            <C>            <C>
Revenues:
     Sales of homes and lots                                              $  5,757,000   $  8,669,000   $  8,117,000
     Other construction, net                                                 1,048,000      1,097,000      1,340,000
     Rental income - apartments                                              2,389,000      2,342,000      2,424,000
     Rental income - commercial                                             11,885,000     11,282,000     11,379,000
     Hotel income                                                            6,137,000      5,890,000      5,534,000
     Management fees, affiliates                                               885,000        852,000        831,000
     Leasing fees, affiliates                                                  749,000        749,000        725,000
     Interest-
         Affiliates                                                            852,000        943,000      1,112,000
         Other                                                               1,566,000      1,400,000        866,000
     Gain on sales of realty interests, net                                    674,000        436,000        281,000
     Equipment leasing and vending                                             263,000        357,000        512,000
     Income from equity investments                                          1,400,000        821,000        641,000
     Other                                                                     424,000        305,000         62,000
                                                                           -----------    -----------    -----------
                  Total revenues                                            34,029,000     35,143,000     33,824,000
                                                                           -----------    -----------    -----------
Costs and expenses:
     Cost of home and lot sales                                              5,366,000      8,147,000      7,549,000
     Rental expense - apartments                                             1,503,000      1,712,000      2,015,000
     Rental expense - commercial                                             4,358,000      4,407,000      4,579,000
     Hotel expense                                                           4,918,000      4,869,000      5,004,000
     Land development expense                                                  103,000        103,000        107,000
     General and administrative                                              1,752,000      1,764,000      2,082,000
     Interest expense                                                        1,975,000      2,898,000      3,267,000
     Equipment leasing and vending                                             248,000        321,000        448,000
     Provision for loss on real estate                                         650,000         60,000        578,000
     Other                                                                     217,000              -        673,000
                                                                           -----------    -----------    -----------
                  Total costs and expenses                                  21,090,000     24,281,000     26,302,000
                                                                           -----------    -----------    -----------
Net income before income taxes, extraordinary item and minority
   interest                                                                 12,939,000     10,862,000      7,522,000

Provision for income taxes                                                   4,558,000      3,532,000      3,087,000
                                                                           -----------    -----------    -----------
Net income before extraordinary item and minority interest                   8,381,000      7,330,000      4,435,000

Extraordinary item:
     Debt elimination (Net of income tax of $942,000)                                -              -      1,736,000
                                                                           -----------    -----------    -----------
Net income before minority interest                                          8,381,000      7,330,000      6,171,000

Minority interest                                                             (116,000)       (57,000)       (31,000)
                                                                           -----------    -----------    -----------
Net income                                                                 $ 8,265,000    $ 7,273,000    $ 6,140,000
                                                                           ===========    ===========    ===========
Earnings per common share before extraordinary item                        $      2.96    $      2.60    $      1.57

Extraordinary item                                                                   -              -            .61
                                                                           -----------    -----------    -----------
Earnings per common share                                                  $      2.96    $      2.60    $      2.18
                                                                           ===========    ===========    ===========

</TABLE>
The accompanying notes are an integral part of these consolidated statements.

                                     -23-

<PAGE>

                            Bresler & Reiner, Inc.


          Consolidated Statements of Changes in Shareholders' Equity
             For the Years Ended December 31, 1997, 1996, and 1995

<TABLE>
<CAPTION>
                                                    Capital in                                           Total
                                         Common     Excess of        Retained         Treasury       Shareholders'
                                         Stock         Par           Earnings          Stock            Equity
                                       --------    -----------    ------------     ------------      --------------
<S>                                    <C>        <C>            <C>              <C>              <C>
Balance, December 31, 1994              $28,000     $7,565,000     $44,664,000       $ (43,000)       $52,214,000
     Net income                               -              -       6,140,000               -          6,140,000
     Purchase of treasury stock               -              -               -        (385,000)          (385,000)
                                       --------    -----------    ------------     ------------      --------------
Balance, December 31, 1995               28,000      7,565,000      50,804,000        (428,000)        57,969,000
     Net income                               -              -       7,273,000               -          7,273,000
                                       --------    -----------    ------------     ------------      --------------
Balance, December 31, 1996               28,000      7,565,000      58,077,000        (428,000)        65,242,000
     Net income                               -              -       8,265,000               -          8,265,000
     Purchase of treasury stock               -              -               -        (254,000)          (254,000)
                                       --------    -----------    ------------     ------------      --------------
Balance, December 31, 1997              $28,000     $7,565,000     $66,342,000       $(682,000)       $73,253,000
                                       ========    ===========    ============     ============      ==============
</TABLE>

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

                                      -24-
<PAGE>

                            Bresler & Reiner, Inc.


                     Consolidated Statements of Cash Flows
             For the Years Ended December 31, 1997, 1996, and 1995
               (Decrease) Increase in Cash and Cash Equivalents
<TABLE>
<CAPTION>
                                                                          1997            1996           1995
                                                                        -----------   ------------    ------------
<S>                                                                     <C>           <C>             <C>
Cash flows from operating activities:
     Net income before extraordinary item                                $8,265,000   $  7,273,000    $  4,404,000
     Extraordinary item, net of tax                                               -              -       1,736,000
                                                                        -----------   ------------    ------------
     Net income                                                           8,265,000      7,273,000       6,140,000
     Adjustments to reconcile net income to net cash provided by
       operating activities-
         Extraordinary item - gain on debt forgiveness                            -              -      (2,678,000)
         Depreciation and amortization                                    2,364,000      2,315,000       2,434,000
         Gain on sales of realty interests, net                            (674,000)      (436,000)       (281,000)
         Direct financing lease payments                                     57,000        705,000       1,429,000
         Amortization of investment in direct financing leases              (22,000)        (8,000)       (141,000)
         Proceeds from sale of equipment under direct financing
           leases                                                           120,000        230,000         789,000
         Income from equity investments                                  (1,400,000)      (821,000)       (641,000)
         Provision for loss on real estate                                  650,000         60,000         578,000
         Deferred income taxes                                            2,492,000       (177,000)         80,000
         Other                                                              (29,000)       (31,000)        (92,000)
         Changes in other assets and liabilities-
              Construction in process                                    (1,209,000)     2,103,000       2,241,000
              Homes held for sale                                         2,034,000        481,000      (1,496,000)
              Land held for sale                                            533,000       (412,000)        162,000
              Mortgages and notes receivable                              1,362,000      1,040,000       1,857,000
              Income taxes receivable                                    (1,124,000)       959,000       1,742,000
              Other assets                                               (1,054,000)       527,000        (311,000)
              All other liabilities                                      (1,336,000)      (598,000)       (548,000)
                                                                        -----------   ------------    ------------
                  Total adjustments to reconcile net income to net
                    cash provided by operating activities                 2,764,000      5,937,000       5,124,000
                                                                        -----------   ------------    ------------
                  Net cash provided by operating activities              11,029,000     13,210,000      11,264,000
                                                                        -----------   ------------    ------------
</TABLE>

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

                                      -25-
<PAGE>

                            Bresler & Reiner, Inc.

                     Consolidated Statements of Cash Flows
             For the Years Ended December 31, 1997, 1996, and 1995
               (Decrease) Increase in Cash and Cash Equivalents
                                  (Continued)

<TABLE>
                                                                          1997            1996           1995
                                                                        -----------  -------------      ----------
<S>                                                                     <C>          <C>               <C>
Cash flows from investing activities:
     Investment in joint ventures                                        $2,251,000  $     688,000      $1,485,000
     Net purchases of investments                                          (364,000)   (11,929,000)     (1,374,000)
     Other                                                               (1,876,000)      (552,000)       (504,000)
                                                                        -----------  -------------      ----------
                  Net cash provided by (used in)
                    investing activities                                     11,000    (11,793,000)       (393,000)
                                                                        -----------  -------------      ----------
Cash flows from financing activities:
     Repayment of notes payable                                          (6,571,000)   (11,991,000)     (4,089,000)
     Purchase of treasury stock                                            (254,000)             -        (385,000)
                                                                        -----------  -------------      ----------
                  Net cash provided by (used in)
                    financing activities                                 (6,825,000)   (11,991,000)     (4,474,000)
                                                                        -----------  -------------      ----------
Net increase (decrease) in cash and cash equivalents                      4,215,000    (10,574,000)      6,397,000

Cash and cash equivalents and cash deposits held in escrow,
   beginning of year                                                     10,188,000     20,762,000      14,365,000
                                                                        -----------  -------------      ----------
Cash and cash equivalents and cash deposits held in escrow, end of
   year                                                                 $14,403,000    $10,188,000     $20,762,000
                                                                        ===========  =============     ===========
Supplemental disclosures of cash flow information:
     Cash paid during the year for-
         Interest                                                        $2,030,986   $  3,020,815    $  3,293,186
         Income taxes                                                     3,398,915      1,610,112       1,109,138

Supplemental disclosures of escrow activities:
     Escrowed cash deposits received                                        191,742        135,633         176,325
     Escrowed cash deposits refunded                                        188,760        155,717         151,980

Real estate assets transferred in satisfaction of liabilities:
     Land                                                                         -              -         171,000
     Building & equipment, net                                                    -              -         553,000
     Accounts receivable and other assets                                         -              -         128,000
     Mortgage payable                                                             -              -       4,177,000
     Accrued expenses                                                             -              -           8,000
</TABLE>

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

                                      -26-
<PAGE>

                            Bresler & Reiner, Inc.


                  Notes to Consolidated Financial Statements
                       As of December 31, 1997 and 1996


1.   Summary of Significant Accounting Policies:

Organization and Principles of Consolidation

The consolidated financial statements include the accounts of Bresler & Reiner,
Inc., and its wholly and majority-owned subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated.

The Company's activities include residential land development and construction
and rental property ownership and management primarily in Maryland, Virginia and
the District of Columbia.

Investments in and Advances to Joint Ventures and Partnerships

The Company includes its share of the earnings or losses of unconsolidated joint
ventures and partnerships under the equity method of accounting.

Revenue Recognition

The Company accounts for revenue from sales of homes and condominiums and sales
of real property in accordance with the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 66, "Accounting for Sales of Real Estate."
Rental, construction, and management service fees are generally recorded when
earned. Leasing fees are recorded over the life of the lease.

Rental Property and Equipment and Depreciation

Rental property and equipment are stated at cost. Depreciation is recorded using
the straight-line method over the estimated useful lives of the related assets.

SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of," was issued in March 1995. This statement
establishes accounting standards for the impairment of long-lived assets. It
requires that long-lived assets, which are held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. It also requires
that long-lived assets to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. SFAS No. 121 was implemented by the
Company in 1996 and did not have a material effect on the 1996 and 1997
consolidated financial statements.

                                      -27-
<PAGE>

Construction in Process

When construction commences, costs are transferred to construction in process
where they are accumulated by project. Other project costs included in
construction in process include property taxes, materials, labor, and allocated
overhead. These costs are charged to costs of homes sold on a pro rata basis as
homes are sold, in accordance with SFAS No. 67, "Accounting for Costs and
Initial Rental Operations of Real Estate Projects." The Company generally
finances its homebuilding operations from internal cash flow. The Company
reviews its accumulated costs to ensure that costs in excess of net realizable
value are charged to operations.

Income Taxes

Deferred income taxes result principally from temporary differences related to
the timing of the recognition of real estate sales, lease income, interest
expense and real estate taxes during development, and depreciation for tax and
financial reporting purposes.

Earnings per Common Share

SFAS No. 128, "Earnings Per Share," was issued in February 1997. This statement
establishes new standards for computing, presenting and disclosing earnings per
share. The standard was implemented by the Company in 1997. The Company has no
dilutive securities, therefore, basic and diluted earnings per share are
identical. Earnings per common share is based upon the weighted average number
of shares outstanding during each year (2,789,863 shares in 1997, 2,792,653
shares in 1996 and 2,823,866 shares in 1995).

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.

Cash Deposits Held in Escrow

In addition to deposits held in escrow for tenants, the Company treats the cash
accounts of its management companies as restricted for the exclusive use of the
properties under management.

Investments

At December 31, 1997 and 1996, all investment securities are classified as
held-to-maturity and are therefore reported at amortized cost. Fair value of
these instruments approximates carrying value at year end. There were no
unrealized holding gains or losses. All of the instruments mature within one
year. There were no sales of investment securities during 1997.

Management's Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of

                                      -28-
<PAGE>

the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain 1996 and 1995 amounts have been reclassified in order to conform to the
1997 presentation.

2.   Rental Property and Equipment, Net:

                                                      1997              1996
                                                  ------------     ------------
          Land                                    $  3,278,000     $  3,278,000
          Buildings and improvements                55,971,000       55,108,000
          Equipment                                  4,197,000        3,201,000
                                                  ------------     ------------
                                                    63,446,000       61,587,000

          Less- Accumulated depreciation           (27,196,000)     (25,099,000)
                                                  ------------     ------------
                                                   $36,250,000      $36,488,000
                                                  ============     ============

Buildings and improvements and equipment are depreciated over the useful lives
of the related assets ranging from 5 to 40 and 3 to 12 years, respectively.

Substantially all rental property and equipment is pledged as collateral for
financing.

3.   Land Held for Sale:

Land held for sale represents land intended to be sold on the open market. The
land is recorded at the lower of cost or fair value less cost to sell.

4.   Homes Held for Sale:

Homes held for sale represents homes that have been substantially completed for
over one year and are held for sale on the open market. These homes are recorded
at the lower of cost or fair value less cost to sell.

                                      -29-
<PAGE>

5.  Gain on Sales of Realty Interests, Net:

<TABLE>
<CAPTION>
                                                           1997             1996           1995
                                                        ---------------------------------------------
          <S>                                            <C>              <C>           <C>
          Sales price                                    $299,000 (a)     $    -        $  98,000 (b)
          Cost of sales                                   111,000              -          167,000
                                                         --------         ---------     ---------
          Gain (loss) recognized, current year
               transactions                               188,000              -          (69,000)
          Gain recognized from prior years'
               sales recorded using the
               installment method                         486,000           436,000       350,000
                                                         --------         ---------     ---------
                                                         $674,000          $436,000      $281,000
                                                         ========         =========     =========

</TABLE>

(a)  In 1997, the Company sold the remaining 12.8 acres of the Meredith
     property, the full sales price of which was received in cash and is
     therefore accounted for using the full accrual method.

(b)  The Company sold a convenience store property in 1995 which was accounted
     for using the full accrual method.

6.   Other Construction, Net:

The Company engages in certain construction activities for the benefit of its
tenants. Revenues and costs related to these activities are as follows:

<TABLE>
<CAPTION>


                                                                1997            1996          1995
                                                             ----------      ----------    ----------
          <S>                                                <C>             <C>           <C>
          Other construction revenues                        $1,989,000      $1,850,000    $2,137,000
          Other construction costs                              941,000         753,000       797,000
                                                             ----------      ----------    ----------
          Net                                                $1,048,000      $1,097,000    $1,340,000
                                                             ==========      ==========    ==========
</TABLE>

7.   Notes Payable:


<TABLE>
<CAPTION>

                                                                            Maturities for
                                                                                Debt
                                                                            Outstanding at
                                                   1997           1996         12/31/97
                                               -----------    -----------   --------------
<S>                                            <C>            <C>           <C>
Mortgages payable, 5.25% to 9.75%*
   collateralized by rental properties         $15,667,000    $22,202,000     1998-2001
Notes payable, 11.5%,* collateralized by
   equipment                                             -         36,000             -

</TABLE>
*  Interest rates relate to the 1997 balances.

In connection with the assignment of leasehold interests in certain properties,
the Company received notes secured by the interests assigned. The proceeds of
the notes received, as the result of the assignment of these interests, are used
to pay the original underlying mortgages on

                                     -30-
<PAGE>

these properties. These mortgages remain on the Company's books, as of December
31, 1997 and 1996, at balances of $454,000 and $6,670,000, respectively, and are
included in mortgages payable above.

None of the mortgages and notes payable are recourse to the Company at December
31, 1997. In addition, the Company has recourse obligations totaling $71,000
related to guarantees given to creditors in certain of the Company's investments
in joint ventures. See Note 10.

Annual contractual principal payments are as follows.

<TABLE>
<CAPTION>
                                                    Notes
                                                   Payable,
                                                  Mortgages
                                                ------------
                   <S>                          <C>
                   1998                         $  2,466,000
                   1999                            7,946,000
                   2000                              239,000
                   2001                            5,016,000
                                                ------------
                                                 $15,667,000
                                                ============

</TABLE>
 .    During 1997, the Company retired approximately $5 million in debt due
     throughout the years 1998 to 2001. There was no extraordinary gain or loss
     associated with this transaction.

 .    Included in Mortgages payable, collateralized by rental properties, above
     is a renegotiated mortgage secured by an office building in Manassas,
     Virginia, which is substantially leased. At December 31, 1993, the note was
     in default and had a balance of $2,121,000. The mortgage was extended in
     1994 at a 9.75% interest rate, due December 1, 1998. As of December 31,
     1997, the loan was current and had an outstanding balance of $2,024,000.

 .    Included in Mortgages payable, collateralized by rental properties, as of
     December 31, 1994, was a $4,177,000 mortgage in default on a property for
     which the Company had not made required principal and interest payments
     since June 1992. The Company guaranteed the loan in an amount not to exceed
     $480,000. During 1992, the Company offered to tender a deed to the property
     in partial satisfaction of the debt, which was refused by the note holder.
     The note was then acquired by a note holder who purchased the note from the
     Resolution Trust Corporation. The new note holder had a receiver appointed
     who took possession of the property on September 22, 1993. The note holder
     then brought suit against the Company under the mortgage and guarantee. In
     May 1995, the note holder foreclosed on the property, and in August 1995,
     the Court ratified the foreclosure sale. At the time of foreclosure, the
     outstanding mortgage balance was $4,177,000 and the related net book value
     of the property, which approximated management's estimate of fair value,
     plus the guarantee and related expenses was $1,499,000 resulting in an
     extraordinary gain of $2,678,000. The gain is presented as an extraordinary
     item net of tax in 1995 on the accompanying consolidated statements of
     income.


                                     -31-
<PAGE>

8.   Mortgages and Notes Receivable, Affiliates:

<TABLE>
<CAPTION>

                                                              1997            1996
                                                          -----------     -----------
           <S>                                            <C>             <C>
           Mortgages and notes:
                Due 2001 (a)                              $   308,000     $   394,000
                Due 2009 (b)                                1,303,000       1,313,000

           Installment sales:
                Due 1999 (c)                                1,731,000       1,810,000
                Due 2000 (d)                                1,642,000       1,984,000
                                                           ----------      ----------
                                                           $4,984,000      $5,501,000
                                                           ==========      ==========
</TABLE>

(a)  In payment of construction costs, the Company accepted a second mortgage
     note with an office building pledged as collateral. The note is due in
     monthly installments of principal and interest of $9,670, at 8.5 percent,
     from a limited partnership in which the Company is the general partner and
     has a 46 percent interest. Certain of the Company's officers and directors
     own 4.5 percent of the limited partnership. The note matures in 2001.

(b)  Amounts due in monthly installments of $11,200, including interest at 9.5
     percent through 2009, with a final payment due 2009 of approximately
     $1,074,000 from a limited partnership in which the Company is the sole
     general partner and has a 1 percent interest. Certain of the Company's
     officers and directors own 9 percent of the limited partnership.

(c)  Amounts due are net of deferred gains of $1,337,000 and $1,398,000 in 1997
     and 1996, respectively. The amounts are due in monthly installments of
     $36,600, including interest at 9.5 percent through 1999, with a final
     payment due 1999 of approximately $2,838,000, from a limited partnership in
     which the Company is the sole general partner and has a 1 percent interest.
     The building sold is pledged as collateral for the note with no further
     recourse to the partnership. Certain of the Company's officers and
     directors own 9 percent of the limited partnership.

(d)  Amounts due are net of deferred gain of $1,951,000 and $2,357,000 in 1997
     and 1996, respectively. The amounts are due in monthly installments of
     $95,700, including interest at 10 percent, through 2000, with a final
     payment of approximately $1,031,000, from a limited partnership in which
     the Company is a sole general partner and has a 1 percent interest. The
     building sold is pledged as collateral for the note with no further
     recourse to the partnership. Certain of the Company's officers and
     directors own 37 percent of the limited partnership.

                                     -32-
<PAGE>

9.   Mortgages and Notes Receivable, Other:

<TABLE>
<CAPTION>
                                                                             1997        1996
                                                                           --------   ----------
          <S>                                                              <C>        <C>
          Mortgages and notes:
               Home sales, 8% to 12.5%, due through 2020                   $259,000   $  368,000
               Condominium sales, 8% to 13%, net of deferred
                gain of $134,000 in 1997 and $163,000 in 1996               129,000      158,000

          Notes receivable:
               Other, 8% to 10%, due through 2003                           487,000      529,000
               Tenant improvement, 10%, due through 2003                     48,000       39,000
                                                                           --------   ----------
                                                                           $923,000   $1,094,000
                                                                           ========   ==========

</TABLE>

Substantially all notes are collateralized by first trusts on houses,
residential property or undeveloped land.

10.  Investment in and Advances to
     Joint Ventures and Partnerships:

The Company has general and limited partnership interests in entities that are
developing or operating properties located in Northern Virginia, Washington,
D.C., Baltimore, Maryland, and Orlando, Florida.

The following is a summary of joint ventures and partnerships in which the
Company holds ownership interests.

<TABLE>
<CAPTION>

                          Company Interests                                        As of December 31, 1997
                         ------------------                          --------------------------------------------------
                                                                                                            Partnership
                         General    Limited     Current Status of                  Recourse    Nonrecourse    Equity
                         Partner    Partner      Partnerships          Assets       Debt         Debt        (Deficit)
                         -------    ------- ---------------------    ----------   ---------   ------------ ------------
<S>                      <C>        <C>     <C>                      <C>          <C>         <C>          <C>
Town Center East, L.P.      1%        45%   Owns and operates an
                                            office building in
                                            Southwest
                                            Washington, D.C.         $5,301,000   $       -    $  614,000   $ 4,687,000

SEW Associates              1%         -    Owns and operates a
                                            segment of a Shopping
                                            Mall in Southwest,
                                            Washington, D.C.          4,237,000           -     3,929,000       593,000

Third Street S.W.           1%         -    Owns and operates 256
Investors                                   Apt units in Southwest
                                            Washington, D.C.          1,551,000           -     5,767,000    (4,216,000)

Tech High Leasing          50%         -    Leveraged equipment
                                            leasing                   1,047,000      56,000       776,000       135,000

Builders Leasing           20%         -    Leveraged equipment
                                            leasing                     907,000      15,000     2,359,100    (1,465,899)

Pine Club II                -         64%   Owns and Operates 160
                                            Apt. units in
                                            Orlando, FL              $5,895,000   $     -      $5,509,000   $   386,000
</TABLE>

                                     -33-
<PAGE>

11.  Commitments and Contingencies:

Financial Commitments

The Company is contingently liable for $71,000 of outstanding liabilities of
nonconsolidated partnerships and joint ventures in which it has investments at
December 31, 1997. The Company also pledged its interests in the General
Services Administration's ("GSA") lease to the lender as security for Trilon
Plaza Company's (an entity affiliated with the Company) mortgages totaling $3.1
million.

The Company owns interests in certain limited partnerships which operate
low-income housing units. The required capital contributions over the next 3
years are projected to aggregate $1,197,000. The amount of projected
contributions are to be adjusted annually to be a percentage of tax benefits
derived. The Company anticipates that the annual tax benefits will be more than
sufficient to fund the annual capital contributions.

At December 31, 1997, the Company had approximately $2,227,000 of outstanding
letters of credit representing performance guarantees for land improvements in
home building and land development operations.

Litigation

The Company and other related entities are defendants in a suit filed in October
1990 by certain present and former employees of the Environmental Protection
Agency ("EPA"), which leases office space at the Waterside Mall Complex (a
portion of which is owned by the Company). The complaint alleges claims of
negligence, breach of contract, and other allegations relating to certain
renovations performed at the Waterside Mall Complex. The complaint seeks
$40,000,000 in damages. The claims of six plaintiffs were heard in a jury trial
in 1993, with verdicts for the plaintiffs totaling $948,000. The Company
appealed the verdicts and, in 1995, received a judgment that reduced the total
damages to $232,000. No punitive damages were awarded. The cases of the other
plaintiffs remain to be tried. Management believes, based on consultations with
outside counsel, that the claims are without merit and that the litigation
should not have a material adverse effect on results of operations or the
financial position of the Company.

Also, in the normal course of business, the Company is involved in other types
of litigation. In the opinion of management, based on its assessment and
consultation with outside counsel, the litigation that is currently pending
against the Company will not have a material impact on the financial condition
or future operations of the Company as a whole.

Significant Lease

The EPA occupies a significant amount of the space in the Company's portion of
the Waterside Mall. The EPA also occupies a significant amount of space of
several affiliated entities in which the Company has an equity interest. In
total, approximately 1.2 million square feet in the Waterside Mall Complex are
leased by the GSA. The EPA is the GSA's tenant. The Company's lease with the GSA
was for a five-year period beginning September 1992.


                                     -34-
<PAGE>

This GSA lease provided that the rent was to be reduced, if the GSA elected,
prior to December 31, 1994, to extend the lease an additional five years. In
November 1994, the GSA elected to extend the lease. This resulted in a reduction
of the annual rent. The lease extension and resulting reduction in rent is
accounted for prospectively over the remaining lease term.

The GSA has the option to cancel the lease with twelve months' notice under
certain conditions prior to that date. As of March 20, 1998, the GSA has not
exercised this option.

In aggregate, approximately 28 percent of the Company's 1997 revenues, including
related leasing and management fees and construction income, are from office
space leased by the GSA. As such, a significant portion of the Company's
operations are dependent on the continuation of the lease and if the lease is
not renewed or replaced by new tenants at similar terms, the Company's financial
position could be adversely affected.

12.  Direct Financing Leases:

The Company engaged in personal property leveraged equipment leasing which
terminated during 1997. These leases involved computer equipment, tractors and
trailers, rental store fixtures, and manufacturing plant equipment.

<TABLE>
<CAPTION>

                                                                                   1996
                                                                                ---------
          <S>                                                                   <C>
          Total minimum lease payments to be received                           $  42,000
          Unamortized initial direct costs                                           -
          Estimated residual values of leased property (not guaranteed)            86,000
                                                                                ---------
                                                                                  128,000
          Less unearned income                                                      2,000
                                                                                ---------
          Net investment in direct financing leases                              $126,000
                                                                                =========
</TABLE>
13.      Income Taxes:

SFAS No. 109, "Accounting for Income Taxes," establishes financial accounting
and reporting standards for the effects of income taxes that result from the
Company's activities during the current and preceding years. It requires an
asset and liability approach in accounting for income taxes, as such, balance
sheet accruals for income taxes are adjusted to reflect changes in tax rates in
the period such changes are enacted.



                                     -35-
<PAGE>

The Company and its subsidiaries file a consolidated Federal income tax return.
The provision for income taxes includes the following components:

<TABLE>
<CAPTION>
                                                                  1997             1996           1995
                                                              ------------     ------------   ------------
          <S>                                                   <C>              <C>            <C>
          Provision for income taxes
               Current tax                                      $2,066,000       $3,355,000     $3,007,000
               Deferred tax                                      2,492,000          177,000         80,000
          Total provision for income taxes                       4,558,000        3,532,000      3,087,000
          Extraordinary item - income tax effect                         -                -        942,000
                                                              ------------     ------------   ------------
          Total income tax expense                              $4,558,000       $3,532,000     $4,029,000
                                                              ============     ============   ============
</TABLE>
A reconciliation between the amount of income tax computed by multiplying income
before income taxes by the applicable statutory Federal income tax rate and the
income tax provision shown on the consolidated income statements follows:

<TABLE>
<CAPTION>
                                                                                   1997      1996     1995
                                                                                  ------    ------   ------
          <S>                                                                     <C>       <C>      <C>
          Statutory rate                                                            34.0%     34.0%    34.0%
          Increase (decrease) resulting from:
             State taxes, net of Federal income tax benefit                          5.5       6.2      3.8
             Low income housing tax benefits                                        (5.3)     (4.5)    (5.2)
             Other                                                                   1.0      (3.2)     8.4
                                                                                  ------    ------   ------
                                                                                    35.2%     32.5%    41.0%
                                                                                  ======    ======   ======
</TABLE>

Deferred income taxes result from temporary differences in the recognition of
revenue and expense for income tax and financial statement reporting purposes.
The sources of these differences and the estimated tax effect of each are as
follows:

<TABLE>
<CAPTION>
                              Deferred Income Tax      Deferred Tax Liability    Deferred Tax Liability
                            Provision (Benefit) for         (Asset) for                (Asset) for
                                 the Year Ended            the Year Ended            the Year Ended
                               December 31, 1997         December 31, 1997          December 31, 1996
                            -----------------------    ----------------------    ----------------------
<S>                         <C>                        <C>                       <C>
Basis in property                 $(269,000)                 $1,933,000                $2,202,000
Investment in partnerships        1,994,000                   3,361,000                 1,367,000
Installment sales                   (58,000)                    138,000                   196,000
Leases                             (123,000)                    368,000                   491,000
Debt elimination                    803,000                        -                     (803,000)
Other                               145,000                    (614,000)                 (759,000)
                                 ----------                 -----------               -----------
               Total              $2,492,00                  $5,186,000                $2,694,000
                                 ==========                 ===========               ===========
</TABLE>

Also, included in deferred charges and other assets on the accompanying
consolidated balance sheets are deferred tax credits earned as a result of the
Company's investments in low income housing projects. The realizability of these
credits is dependent upon the Company's ability to produce taxable income in the
future.

                                      -36-
<PAGE>

14.  Operating Leases:

As a Lessee

At December 31, 1997, the Company was obligated under a land lease, on which the
Company owns commercial properties, with the District of Columbia Redevelopment
Land Agency with aggregate annual rental payments of approximately $43,000 plus
certain expenses. The lease expires in 2058.

At December 31, 1997, the Company was obligated under a land lease for 8
parcels, on which the Company owns commercial property. The lease expires in
2000 and contains three renewal options of five years. Pursuant to the terms of
the lease, the aggregate annual rental is approximately $39,000, and the Company
has the option to purchase the land parcels at any time during the initial lease
term or renewal periods.

Rent expense for the years ended 1997, 1996, and 1995 was approximately $78,000,
$88,000 and $78,000, respectively.

Although certain leases require the Company to pay real estate taxes, insurance
and certain other operating expenses of the properties, the basic rental payment
for each lease is used in presenting minimum rentals below.

Minimum rentals to be paid under all noncancelable leases at December 31, 1997,
are as follows:
<TABLE>
<CAPTION>
                                                              Amount
                                                           ----------
 <S>                                                       <C>
 1998                                                      $   79,000
 1999                                                          80,000
 2000                                                          50,000
 2001                                                          43,000
 2002                                                          43,000
 2003 and thereafter                                        2,408,000
                                                           ----------
               Total                                       $2,703,000
                                                           ==========
</TABLE>

                                      -37-
<PAGE>

As a Lessor

Substantially all noncancelable leases of residential property are for a term of
one year or less. Other leases are subject to cancellation at the Lessee's
option under certain conditions. Minimum future rentals to be received for
commercial property subject to noncancelable and other leases are as follows:

<TABLE>
<CAPTION>
                                         Noncancelable               Other
                                            Leases                  Leases
                                        ---------------         --------------
<S>                                     <C>                     <C>
 1998                                     $11,384,000             $      -
 1999                                       4,430,000               5,170,000
 2000                                       2,186,000               6,894,000
 2001                                       1,778,000               6,894,000
 2002                                       1,380,000               5,170,000
 2003 and thereafter                        1,590,000                       -
                                         ------------            ------------
               Total                      $22,748,000             $24,128,000
                                         ============            ============
</TABLE>
15.  Transactions With Affiliates:

The Company has business transactions with several affiliates that are owned in
part by certain of the Company's shareholders, officers, and/or directors. These
transactions are summarized as follows:

<TABLE>
<CAPTION>

                                                       1997           1996        1995
                                                    -----------   -----------   ----------
          <S>                                       <C>           <C>           <C>
          Revenues:
             Leasing fees                             $749,000      $749,000    $ 725,000
             Management fees                           885,000       841,000      825,000
             Interest                                  852,000       943,000    1,112,000

          Cost and expenses:
             Lumber and millwork                      $  8,000      $  8,000    $  11,000
             Insurance                                 453,000       303,000      677,000
</TABLE>

See Notes 7, 8, 10, and 11 for additional information regarding related party
transactions.

16.  Pension Plan:

The Company and certain of its subsidiaries have a noncontributory defined
benefit pension plan (the "Plan") covering substantially all full-time
employees. The Plan provides for benefits to be paid to eligible employees at
retirement based primarily upon years of service with the Company and their
compensation rates for the five years preceding retirement. The Company's
funding policy is consistent with the funding requirements of Federal law and
regulations. Plan assets consist principally of mortgage notes receivable and
cash equivalents.

                                      -38-
<PAGE>

The net periodic pension costs for 1997, 1996, and 1995 are computed as follows:

<TABLE>
<CAPTION>
                                                          1997            1996           1995
                                                      ----------        ---------      ---------
          <S>                                         <C>               <C>            <C>
          Services cost - benefits earned during
            the year                                    $204,000         $181,000       $300,000
          Interest cost on projected benefit
            obligation                                   196,000          179,000        409,000
          Return on Plan assets                         (389,000)        (284,000)      (455,000)
          Amortization of unrecognized net
            obligation                                    57,000           57,000         57,000
                                                      ----------        ---------      ---------
          Net periodic pension cost                    $  68,000         $133,000       $311,000
                                                      ==========        =========      =========
</TABLE>
The following table details the Plan's net pension asset at December 31, 1997
and 1996:

<TABLE>
<CAPTION>
                                                                          1997              1996
                                                                       -----------       -----------
          <S>                                                          <C>               <C>
          Actuarial Present Value of Benefit Obligation:
             Vested benefits                                            $2,411,000        $2,175,000
             Nonvested benefits                                            100,000            92,000
                                                                       -----------       -----------
               Accumulated benefit obligation                            2,511,000         2,267,000
             Effect of projected future compensation
              increases                                                    937,000           879,000
                                                                       -----------       -----------
             Projected benefit obligation                                3,448,000         3,146,000
             Plan assets at fair value                                   4,129,000         3,904,000
                                                                       -----------       -----------

             Plan assets in excess of projected benefit
              obligation                                                   681,000           758,000
             Unrecognized net (gain) loss                                 (687,000)         (753,000)
             Unrecognized net obligation at date of
              adoption being recognized over 22 years                      681,000           738,000
                                                                       -----------       -----------
                       Net pension asset                                $  675,000        $  743,000
                                                                       ===========       ===========
</TABLE>

The net periodic pension cost is treated as a reduction of the net pension asset
in the accompanying consolidated financial statements.

Interest assumptions used were:
<TABLE>
<CAPTION>
                                                             1997       1996
                                                           --------   --------
         <S>                                               <C>        <C>
         Preretirement discount rate                         6.00%      6.00%
         Postretirement discount rate                        6.00       6.00
         Rate of increase in future compensation             4.00       4.00
         Long-term rate of return on Plan assets             7.00%      7.00%
</TABLE>

                                      -39-
<PAGE>

17.  Disclosure About Fair Value of Financial Instruments:

In December 1991, the Financial Accounting Standards Board issued SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments." SFAS No. 107 requires
all entities to disclose the fair value of financial instruments, both assets
and liabilities, recognized and not recognized in the statements of financial
condition, for which it is practicable to estimate fair value. If estimating
fair value is not practicable, SFAS No. 107 requires disclosure of descriptive
information pertinent to estimating the fair value of a financial instrument.
SFAS No. 107 is generally effective for financial statements issued for fiscal
years ending after December 15, 1992.

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

 .   Cash and Cash Equivalents, and Cash Deposits Held In Escrow

 .   Cash balances represent demand and short-term deposits with depository
    institutions as well as short-term liquid investments. The carrying amount
    is a reasonable estimate of fair value.

 .   Investments

 .   The carrying amount approximates fair value because of the short maturity
    of these instruments.

 .   Receivables

    The fair value of mortgage receivables is estimated by discounting the
    future cash flows using the current rates at which similar loans would be
    made to borrowers with similar credit ratings and for the same remaining
    maturities. For short-term loans, defined as those maturing or repricing in
    90 days or less, the carrying amount is a reasonable estimate of fair
    value. Other receivables represent short-term receivables for which the
    carrying amount is a reasonable estimate of fair value.

 .   Notes Payable

    Based on borrowing rates currently available to the Company for financing
    on similar terms for borrowers with similar credit ratings, the fair value
    of the notes payable approximates their carrying value at December 31,
    1997. Additionally, for short-term notes payable, the carrying amount is a
    reasonable estimate of fair value.

 .   Accounts Payable, Trade and Due to Affiliates

    The fair value of accounts payable, trade and due to affiliates is the
    carrying amount payable at the reporting date.

                                      -40-
<PAGE>

The estimated fair values of the Company's financial instruments are as follows:

<TABLE>
<CAPTION>
                                                   December 31, 1997                 December 31, 1996
                                              -------------------------------  ------------------------------
                                                Carrying                           Carrying
                                                 Amount           Fair Value        Amount        Fair Value
                                              --------------   --------------  -------------   --------------
<S>                                           <C>              <C>             <C>             <C>
Financial assets:
    Cash and cash equivalents                  $  5,762,000     $  5,762,000    $  6,761,000    $  6,761,000
    Cash deposits held in escrow                  8,641,000        8,641,000       3,427,000       3,427,000
    Investments                                  13,667,000       13,667,000      13,303,000      13,303,000
    Receivables-
       Mortgages and notes, affiliates            4,984,000        5,267,000       5,501,000       6,027,000
       Mortgages and notes, others                  923,000        1,034,000       1,094,000       1,182,000
       Other                                      2,318,000        2,318,000       1,300,000       1,300,000

Financial liabilities:
    Notes payable-
       Mortgages                                 15,667,000       15,724,000      22,202,000      22,503,000
    Accounts payable, trade                    $  1,810,000     $  1,810,000    $  2,662,000    $  2,662,000

</TABLE>

Changes in assumptions or estimation methodologies may have a material effect on
these estimated fair values. Management is concerned that reasonable
comparability between companies may not be likely due to the wide range of
permitted valuation techniques and numerous estimates that must be made given
the absence of active secondary markets for many of the financial instruments.
This lack of uniform valuation methodologies also introduces a greater degree of
subjectivity to these estimated fair values.

18.  Quarterly Results of Operations (Unaudited):

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                         -------------------------------------------------------------------------
                                               March 31,        June 30,         September 30,     December 31,
                                                 1997             1997              1997              1997
                                         ----------------   --------------     --------------     ----------------
<S>                                      <C>                <C>                <C>                <C>
Revenues                                    $7,742,000        $8,038,000         $8,422,000         $9,827,000
Net income before income taxes and
   minority interest                         2,813,000         3,222,000          3,166,000          3,738,000
Net income                                   1,658,000         2,117,000          1,957,000          2,533,000
Earnings per common share                         0.59              0.76               0.70               0.91
</TABLE>

                                      -41-
<PAGE>

<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                       --------------------------------------------------------------------
                                        March 31,         June 30,         September 30,      December 31,
                                          1996              1996               1996               1996
                                       -------------    -------------     -------------      -------------
<S>                                    <C>              <C>               <C>                <C>
Revenues                                 $8,008,000       $8,962,000        $9,147,000         $9,026,000
Net income before income taxes and
   minority interest                      2,275,000        2,972,000         2,619,000          2,996,000
Net income                                1,472,000        1,913,000         1,480,000          2,408,000
Earnings per common share                       .53              .68               .52                .86
</TABLE>

19.  New Accounting Pronouncement

In 1997, the FASB issued statement on Financial Accounting Standards No. 130 -
Reporting Comprehensive Income. The statement establishes standards for
financial statement disclosures related to reporting and display of
comprehensive income and its components. The statement is effective for
financial statements for periods beginning after December 15, 1997. The Company
will adopt this statement in the 1998 financial statements.

                                      -42-
<PAGE>
                             Bresler & Reiner, Inc.


             Schedule III - Real Estate and Accumulated Depreciation
                 For the Years Ended December 31, 1997 and 1996
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                          Column C                             Column D
                                                                  -------------------------       ----------------------------------
                                                                                                   Cost Capitalization Subsequent to
                 Column A                         Column B         Initial Cost to Company                    Acquisition
--------------------------------------------    -----------       -------------------------       ----------------------------------

                                                                               Building and                             Carrying
                Description                     Encumbrances      Land         Improvements         Improvements          Cost
--------------------------------------------   --------------    -------      --------------       --------------     --------------
<S>                                            <C>               <C>          <C>                  <C>                <C>
Year ended December 31, 1997:
Charlestown North (Apartments in
     Greenbelt, Maryland)                                         $ -              $ 2,179             $  358            $  -
Commons (Apartments in Washington, D.C.)                            277              1,047                651               -
Waterside Mall East (Shopping Center in
     Washington, D.C.)                                              -                6,631             13,259             111
Georgian Gardens (Apartments in Oxon Hill,
     Maryland)                                                      -                  289                425               -
Lakeview Manor Nursing Home (Lakewood,
     New Jersey)                                                    100              4,026                -                 -
Uptown (Hotel in Baltimore, Maryland)                               -                7,368                220               -
Allentown Road Motel (Suitland,
     Maryland)                                                      378              2,793              1,442               -
Egap (Convenience Stores in Florida,
     Louisiana, and North Carolina)                                  58              3,388                -                 -
Nations Bank Building (Office Building in
     Manassas, Virginia)                                             63                798                 43               -
Paradise/Sudley North (4 Office Buildings
     in Manassas, Virginia)                                       2,216             12,679              3,952               -
7800 Building (Office Building in
     Manassas, Virginia)                                            317              1,636                481               -
                                                               -----------       -----------        -----------       ----------
                                                                 $3,409            $42,834            $20,831            $111
                                                               ===========       ===========        ===========       ==========
<CAPTION>

                                                                Column E
                                               --------------------------------------------
                                                Gross Amount at Which Carried at Close of
                 Column A                                        Period                            Column F
--------------------------------------------   --------------------------------------------   ------------------
                                                              Building and                        Accumulated
                Description                      Land         Improvements         Total         Depreciation
--------------------------------------------  ----------    ----------------     ---------     ----------------
<S>                                           <C>           <C>                   <C>          <C>
Year ended December 31, 1997:
Charlestown North (Apartments in
     Greenbelt, Maryland)                       $ -           $  2,340         $  2,340        $  1,748
Commons (Apartments in Washington, D.C.)          387            1,605            1,992             997
Waterside Mall East (Shopping Center in
     Washington, D.C.)                            -             15,658           15,658           9,598
Georgian Gardens (Apartments in Oxon Hill,
     Maryland)                                    -                696              696             623
Lakeview Manor Nursing Home (Lakewood,
     New Jersey)                                  100            4,026            4,126           2,400
Uptown (Hotel in Baltimore, Maryland)             -              5,637            5,637             583
Allentown Road Motel (Suitland,
     Maryland)                                    378            4,416            4,794           1,874
Egap (Convenience Stores in Florida,
     Louisiana, and North Carolina)               142            2,333            2,475           1,417
Nations Bank Building (Office Building in
     Manassas, Virginia)                           90              787              877             153
Paradise/Sudley North (4 Office Buildings
     in Manassas, Virginia)                     1,898           16,536           18,434           4,804
7800 Building (Office Building in
     Manassas, Virginia)                          283            1,999            2,282             605
                                             -----------     -----------      -----------     -----------
                                               $3,278          $56,033          $59,311         $24,802
                                             ===========     ===========      ===========     ============

<CAPTION>

                 Column A                         Column G           Column H            Column I
--------------------------------------------  ----------------    --------------    --------------------
                                                                                       Life on Which
                                                                                      Depreciation on
                                                   Date of                             Latest Income
                Description                     Construction      Date Acquired    Statement is Computed
--------------------------------------------  -----------------  ----------------  ----------------------
<S>                                            <C>                <C>               <C>
Year ended December 31, 1997:
Charlestown North (Apartments in
     Greenbelt, Maryland)                          -                   1971            5 - 40 years
Commons (Apartments in Washington, D.C.)           -                   1971            5 - 40 years
Waterside Mall East (Shopping Center in
     Washington, D.C.)                            1975                   -             8 - 40 years
Georgian Gardens (Apartments in Oxon Hill,
     Maryland)                                     -                 Various           20 years
Lakeview Manor Nursing Home (Lakewood,
     New Jersey)                                   -                   1984            5 - 30 years
Uptown (Hotel in Baltimore, Maryland)              -                   1993(a)
Allentown Road Motel (Suitland,
     Maryland)                                     -                   1987            19 years
Egap (Convenience Stores in Florida,
     Louisiana, and North Carolina)                -                   1987            19 years
Nations Bank Building (Office Building in
     Manassas, Virginia)                          1991                   -             31 1/2 years
Paradise/Sudley North (4 Office Buildings
     in Manassas, Virginia)                       1987                   -             31  1/2 years
7800 Building (Office Building in
     Manassas, Virginia)                          1990                   -             15 - 31 1/2 years
</TABLE>



(a) Asset acquisition recorded December 31, 1993.

                                     -43-

<PAGE>

                             Bresler & Reiner, Inc.


             Schedule III - Real Estate and Accumulated Depreciation
                 For the Years Ended December 31, 1997 and 1996
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                            Column C                         Column D
                                                                    ------------------------          -------------------------
                                                                                                         Cost Capitalization
                 Column A                         Column B           Initial Cost to Company          Subsequent to Acquisition
--------------------------------------------    ------------        -------------------------         -------------------------
                                                                                 Building and                          Carrying
                Description                     Encumbrances          Land       Improvements         Improvements       Cost
--------------------------------------------    ------------        --------     ------------         ------------     --------
<S>                                             <C>                 <C>          <C>                  <C>              <C>
Year ended December 31, 1996:
Charlestown North (Apartments in
     Greenbelt, Maryland)                                             $  -          $ 2,179              $   358          $-
Commons (Apartments in Washington, D.C.)                                 277          1,047                  547           -
Waterside Mall East (Shopping Center in
     Washington, D.C.)                                                   -            6,631               13,219           111
Georgian Gardens (Apartments in Oxon Hill,
     Maryland)                                                           -              289                  415           -
Lakeview Manor Nursing Home (Lakewood,
     New Jersey)                                                         100          4,026                  -             -
Uptown (Hotel in Baltimore, Maryland)                                    -            7,368                  165           -
Allentown Road Motel (Suitland, Maryland)                                378          2,793                  914           -
Egap (Convenience Stores in Florida,
     Louisiana, and North Carolina)                                       58          3,388                  -             -
Nations Bank Building (Office Building in
     Manassas, Virginia)                                                  63            798                   43           -
Paradise/Sudley North (4 Office Buildings
     in Manassas, Virginia)                                            2,216         12,679                3,808           -
7800 Building (Office Building in
     Manassas, Virginia)                                                 317          1,636                  481           -
                                                                      ------        -------              -------          ----
                                                                      $3,409        $42,834              $19,950          $111
                                                                      ======        =======              =======          ====
<CAPTION>

                                                                       Column E
                                                       -----------------------------------------
                                                           Gross Amount at Which Carried at
                 Column A                                           Close of Period                      Column F
--------------------------------------------           -----------------------------------------       ------------
                                                                      Building and                     Accumulated
                Description                              Land         Improvements        Total        Depreciation
--------------------------------------------           ---------      ------------      ---------      ------------
<S>                                                    <C>            <C>               <C>            <C>
Year ended December 31, 1996:
Charlestown North (Apartments in
     Greenbelt, Maryland)                                 $  -            $ 2,340         $ 2,340         $ 1,675
Commons (Apartments in Washington, D.C.)                     387            1,501           1,888             938
Waterside Mall East (Shopping Center in
     Washington, D.C.)                                       -             15,621          15,621           9,263
Georgian Gardens (Apartments in Oxon Hill,
     Maryland)                                               -                687             687             622
Lakeview Manor Nursing Home (Lakewood,
     New Jersey)                                             100            4,026           4,127           2,265
Uptown (Hotel in Baltimore, Maryland)                        -              5,582           5,582             455
Allentown Road Motel (Suitland, Maryland)                    378            3,887           4,265           1,670
Egap (Convenience Stores in Florida,
     Louisiana, and North Carolina)                          142            2,333           2,475           1,294
Nations Bank Building (Office Building in
     Manassas, Virginia)                                      90              787             877             127
Paradise/Sudley North (4 Office Buildings
     in Manassas, Virginia)                                1,898           16,392          18,290           4,207
7800 Building (Office Building in
     Manassas, Virginia)                                     283            1,999           2,282             538
                                                          ------          -------         -------         -------
                                                          $3,278          $55,155         $58,434         $23,504
                                                          ======          =======         =======         =======

<CAPTION>

                 Column A                              Column G           Column H            Column I
--------------------------------------------         ------------     --------------    ---------------------
                                                                                            Life on Which
                                                                                           Depreciation on
                                                        Date of                             Latest Income
                Description                          Construction      Date Acquired    Statement is Computed
--------------------------------------------         ------------     --------------    ---------------------
<S>                                                    <C>            <C>               <C>
Year ended December 31, 1996:
Charlestown North (Apartments in
     Greenbelt, Maryland)                                    -              1971            5-40 years
Commons (Apartments in Washington, D.C.)                     -              1971            5-40 years
Waterside Mall East (Shopping Center in
     Washington, D.C.)                                    1975                 -            8-40 years
Georgian Gardens (Apartments in Oxon Hill,
     Maryland)                                               -           Various            20 years
Lakeview Manor Nursing Home (Lakewood,
     New Jersey)                                             -              1984            5-30 years
Uptown (Hotel in Baltimore, Maryland)                        -              1993 (a)        -
Allentown Road Motel (Suitland, Maryland)                    -              1987            19 years
Egap (Convenience Stores in Florida,
     Louisiana, and North Carolina)                          -              1987            19 years
Nations Bank Building (Office Building in
     Manassas, Virginia)                                  1991                 -            31-1/2 years
Paradise/Sudley North (4 Office Buildings
     in Manassas, Virginia)                               1987                 -            31-1/2 years
7800 Building (Office Building in
     Manassas, Virginia)                                  1990                 -            15-31-1/2 years
</TABLE>

(a)  Asset acquisition recorded December 31, 1993.

                                     -44-
<PAGE>

                            Bresler & Reiner, Inc.


                             Notes to Schedule III
                            (dollars in thousands)



                                                           1997         1996
                                                         -------      -------
Land and building and improvements:
     Balance, January 1                                  $58,434      $57,978
         Additions during period-
              Improvements                                   881          899
                                                         -------      -------
                                                          59,315       58,877
         Deductions during period-
              Write-off of fully depreciated assets            4            5
              Other                                            -          438
                                                         -------      -------
     Balance, December 31                                $59,311      $58,434
                                                         =======      =======
Accumulated depreciation:
     Balance, January 1                                  $23,054      $21,296
         Additions during period-
              Depreciation expense                         1,748        1,763
                                                         -------      -------
         Deductions during period-
              Write-off of fully depreciated assets            -            5
              Other                                            -            -
                                                         -------      -------
     Balance, December 31                                $24,802      $23,054
                                                         =======      =======

                                      -45-
<PAGE>

                            Bresler & Reiner, Inc.


                  Schedule IV - Mortgage Loans on Real Estate
             For the Years Ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
                                 Column A                                   Column B          Column C               Column D
--------------------------------------------------------------------     --------------  ------------------   ----------------------


                                                                                                                 Periodic Payment
                               Description                                  Interest        Maturity Date             Terms
--------------------------------------------------------------------     --------------  ------------------   ----------------------
<S>                                                                      <C>             <C>                  <C>
For the year ended December 31, 1997:
     Related parties-
         Second mortgages:
              3rd Street Southwest Investors (S.W. Washington, D.C.)     9-1/2%                    1999             $36,600/mo (a)
              SEW Investors (S.W. Washington, D.C.)                      12%                       2000              95,700/mo (b)

              Town Center East Investors (S.W. Washington, D.C.)         8-1/2%                    2001               9,670/mo
              3rd Street Southwest Investors (S.W. Washington, D.C.)     9-1/2%                    2009              11,200/mo (c)


     Other-
         First mortgages:
              Home loans (Montgomery County, Maryland)
               ($50,000 to $159,000) (5 units)                           9-1/2% to 13-1/2%    Various through 2013
              Developed land loans (St. Mary's County,
               Maryland) ($20,000 to $50,000) (7 units)                  14-1/2%              Various through 2013
              Condominium loans (Oxon Hill, Maryland)
               ($10,000 to $20,000) (38 units)                           8% to 13%                  2004
<CAPTION>
                        Column A                                Column E       Column F         Column G           Column H
-------------------------------------------------------------  ----------   --------------  ---------------  ----------------------
                                                                                                                Principal Amount
                                                                                                                   of Loans
                                                                            Face Amount of  Carrying Amount   Subject to Delinquent
                      Description                              Prior Liens    Mortgages       of Mortgages    Principal or Interest
-------------------------------------------------------------  -----------  --------------  ---------------  ----------------------
<S>                                                            <C>           <C>             <C>             <C>
For the year ended December 31, 1997:
   Related parties-
     Second mortgages:
       3rd Street Southwest Investors (S.W. Washington, D.C.)       None      $4,350,000       $1,731,000             None
       SEW Investors (S.W. Washington, D.C.)                        None       9,300,000        1,642,000             None
       Town Center East Investors (S.W. Washington, D.C.)           None       1,200,000          308,000             None
       3rd Street Southwest Investors (S.W. Washington, D.C.)       None       1,333,000        1,303,000             None
                                                                                               ----------
                                                                                                4,984,000
                                                                                               ==========
   Other-
    First mortgages:
      Home loans (Montgomery County, Maryland)
       ($50,000 to $159,000) (5 units)                                                           $215,000             None
      Developed land loans (St. Mary's County,
       Maryland) ($20,000 to $50,000) (7 units)                                                    44,000             None
      Condominium loans (Oxon Hill, Maryland)
       ($10,000 to $20,000) (38 units)
                                                                                                  129,000             None
                                                                                               ----------
                                                                                                  388,000
                                                                                               ----------
                                                                                               $5,372,000
                                                                                               ==========
</TABLE>

                                      -46-
<PAGE>


                             Bresler & Reiner, Inc.


                   Schedule IV - Mortgage Loans on Real Estate
              For the Years Ended December 31, 1997, 1996, and 1995

<TABLE>
<CAPTION>
                           Column A                                 Column B                Column C                 Column D
------------------------------------------------------------- ---------------------- ----------------------- -----------------------


                                                                                                                   Periodic Payment
                         Description                                Interest              Maturity Date                  Terms
-------------------------------------------------------------- --------------------- ----------------------- ----------------------
<S>                                                            <C>                   <C>                     <C>
For the year ended December 31, 1996:
 Related parties-
  Second mortgages:
   3rd Street Southwest Investors (S.W. Washington, D.C.)      9-1/2%                1999                           $36,600/mo (a)
   SEW Investors (S.W. Washington, D.C.)                       12%                   2000                            95,700/mo (b)
   Town Center East Investors (S.W. Washington, D.C.)          8-1/2%                2001                             9,670/mo
   3rd Street Southwest Investors                              9-1/2%                2009                            11,200/mo(c)

 Other-
  First mortgages:
   Home loans (Montgomery County, Maryland) ($50,000 to
     $159,000) (8 units)                                       9-1/2% to 13-1/2%     Various through 2013
   Developed land loans (St. Mary's County, Maryland)
     ($20,000 to $50,000) (11 units)                           14-1/2%               Various through 2013
   Condominium loans (Oxon Hill, Maryland)
     ($10,000 to $20,000) (38 units)                           8% to 13%             2004

<CAPTION>



                           Column A                          Column E       Column F         Column G                Column H
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Principal Amount of Loans
                                                                         Face Amount of   Carrying Amount    Subject to Delinquent
                         Description                       Prior Liens      Mortgages       of Mortgages     Principal or Interest
--------------------------------------------------------- ------------ ----------------- ----------------- -------------------------
<S>                                                        <C>           <C>              <C>              <C>
For the year ended December 31, 1996:
 Related parties-
  Second mortgages:
   3rd Street Southwest Investors (S.W. Washington, D.C.)        None        $4,350,000       $1,810,000             None
   SEW Investors (S.W. Washington, D.C.)                         None         9,300,000        1,984,000             None
   Town Center East Investors (S.W. Washington, D.C.)            None         1,200,000          394,000             None
   3rd Street Southwest Investors                                None         1,333,000        1,313,000             None
                                                                                              ----------
                                                                                              $5,501,000
                                                                                              ==========
 Other-
  First mortgages:
   Home loans (Montgomery County, Maryland) ($50,000 to
     $159,000) (8 units)                                                                      $ 291,000              None
   Developed land loans (St. Mary's County, Maryland)
     ($20,000 to $50,000) (11 units)                                                             77,000              None
   Condominium loans (Oxon Hill, Maryland)
     ($10,000 to $20,000) (38 units)                                                            158,000              None
                                                                                              ---------
                                                                                                526,000
                                                                                              ---------
                                                                                             $6,027,000
                                                                                             ==========
</TABLE>

                                     -47-
<PAGE>

                            Bresler & Reiner, Inc.


                  Schedule IV - Mortgage Loans on Real Estate
             For The Years Ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
                     Column A                                   Column B               Column C                   Column D
---------------------------------------------------------  -------------------   --------------------     ------------------------

                   Description                                  Interest             Maturity Date         Periodic Payment Terms
---------------------------------------------------------  -------------------   --------------------     ------------------------
<S>                                                        <C>                   <C>                      <C>
For the year ended December 31, 1995:
 Related parties-
  Second mortgages:
   3rd Street Southwest Investors (S.W. Washington, D.C.)    9-1/2%              1999                             $36,600/mo (a)

   SEW Investors (S.W. Washington, D.C.)                     10%                 2000                              95,700/mo (b)

   Town Center East Investors (S.W. Washington, D.C.)        8-1/2%              2001                               9,670/mo

   3rd Street Southwest Investors (S.W. Washington, D.C.)    9-1/2%              2009                              11,200/mo (c)



 Other-
  First mortgages:
   Home loans (Montgomery County, Maryland) ($50,000
     to $159,000) (3 units)                                  9-1/2% to 13-1/2%   Various through 2013

   Developed land loans (St. Mary's County, Maryland)
     ($20,000 to $50,000) (6 units)                          14-1/2%             Various through 2013

   Condominium loans (Oxon Hill, Maryland)
     ($10,000 to $20,000) (38 units)                         8% to 13%           2004


<CAPTION>
                     Column A                                Column E       Column F        Column G               Column H
--------------------------------------------------------- -------------  --------------  ---------------  -------------------------
                                                                                                          Principal Amount of Loans
                                                                         Face Amount of  Carrying Amount    Subject to Delinquent
                   Description                             Prior Liens     Mortgages      of Mortgages      Principal or Interest
--------------------------------------------------------- -------------  --------------  ---------------  -------------------------

<S>                                                       <C>            <C>             <C>              <C>
For the year ended December 31, 1995:
 Related parties-
  Second mortgages:
   3rd Street Southwest Investors (S.W. Washington, D.C.)       None        $ 4,350,000      $1,883,000                None
   SEW Investors (S.W. Washington, D.C.)                        None          9,300,000       2,293,000                None
   Town Center East Investors (S.W. Washington, D.C.)           None          1,200,000         473,000                None
   3rd Street Southwest Investors (S.W. Washington, D.C.)       None          1,333,000       1,322,000                None
                                                                                         ---------------
                                                                                             $5,971,000
                                                                                         ---------------
 Other-
  First mortgages:
   Home loans (Montgomery County, Maryland) ($50,000
     to $159,000) (3 units)                                                                  $  294,000                None
   Developed land loans (St. Mary's County, Maryland)
     ($20,000 to $50,000) (6 units)                                                             139,000                None
   Condominium loans (Oxon Hill, Maryland)
     ($10,000 to $20,000) (38 units)                                                            189,000                None
                                                                                         ---------------
                                                                                                622,000
                                                                                         ---------------
                                                                                             $6,593,000
                                                                                         ===============
</TABLE>

                                      -48-
<PAGE>

                            Bresler & Reiner, Inc.

                             Notes To Schedule IV



                                         1997           1996             1995
                                      ----------     ----------      ----------
Carrying value at January 1           $6,027,000     $6,593,000      $7,199,000
     Additions during period-
         New mortgage loans                    -              -          80,000
                                      ----------     ----------      ----------
                                       6,027,000      6,593,000       7,279,000
     Deductions during period-
         Collections of principal        655,000        566,000         686,000
                                      ----------     ----------      ----------
Carrying value at December 31         $5,372,000     $6,027,000      $6,593,000
                                      ==========     ==========      ==========


(a) The terms of this agreement call for a final payment of $2,838,000 due in
    1999.

(b) The terms of this agreement call for a final payment of $1,031,000 due in
    2000.

(c) The terms of this agreement call for a final payment of $1,074,000 due in
    2009.

                                      -49-
<PAGE>

B.   Reports on Form 8-K. Registrant filed no reports on Form 8-K during the
     fourth quarter of fiscal 1997.

C.   Exhibits

          Index to Exhibits
          -----------------

Exhibit 3

               (i)   Articles of Incorporation

          A.   Restated Certificate of Incorporation of Registrant filed
February 23, 1971, Amendment filed August 12, 1987, and Amendment filed May 31,
1991.

          (Incorporated by reference to Exhibit 3A of Registrant's Quarterly
Report on Form 10Q for the second quarter of 1991, dated August 14, 1991, filed
with the Securities and Exchange Commission.)

               (ii)  By-Laws

          B.   Revised By-laws of Registrant.

          (Incorporated by reference to Exhibit 3B of Registrant's Report on
Form 10-K for 1994, dated March 31, 1995, filed with the Securities and Exchange
Commission.)

Exhibit 10 - Material Contracts.

          C.   (i)   Amendment No. 1 to Agreement of December 2, 1974 among
Trilon Plaza Company, Town Center East Investors and Registrant, dated April 14,
1982.

               (ii)  Amendment dated March 10, 1983 to Agreement of December 2,
1974, among Trilon Plaza Company, Town Center East Investors and Registrant.
(Exhibits C(i) and C(ii) are incorporated by reference to Exhibits 19A and B to
Registrant's Report on Form 10-K for 1982, dated March 23, 1983, filed with the
62 Securities and Exchange Commission.)

          D.   Partnership Agreement of Builders Leasing Company dated December
14, 1983 among the Registrant and Robert J. Schattner, Charles Bresler, Philip
Friedman, Edwin Horowitz, Lloyd Needle and Burton J. Reiner.

          (Incorporated by reference to Exhibit 10D to Registrant's Report on
Form 10-K for 1983, dated March 21, 1984, filed with the Securities and Exchange
Commission.)

          E.   (i)   Deed of Trust Note dated September 3, 1986 from Paradise
Developers to Paradise Associates, Inc. (Manassas property)

          (Incorporated by reference to Exhibit 10E(i) to Registrant's Report on
Form 10-K for 1986, dated March 24, 1987, filed with the Securities and Exchange
Commission.)

               (ii)  Deferred Purchase Money Deed of Trust dated September 3,
1986 from Paradise Developers to Paradise Associates, Inc.



                                      50
<PAGE>

          (Incorporated by reference to Exhibit 10E(ii) to Registrant's Report
on Form 10-K for 1986 dated March 24, 1987, filed with the Securities and
Exchange Commission.)

Exhibit 21     Subsidiaries of Registrant.

Exhibit 27     Financial Data Schedule.


                                  SIGNATURES
                                  ----------

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

                                             BRESLER & REINER, INC.
                                       -----------------------------------
                                                     (Registrant)

Date:  March 26, 1998                    /s/ Charles S. Bresler
                                       -----------------------------------
                                           Charles S. Bresler, Chairman
                                           of the Board
                                           (Chief Executive Officer)

Date:  March 26, 1998                    /s/ William L. Oshinsky
                                       -----------------------------------
                                           William L. Oshinsky, Treasurer
                                           (Chief Financial and Chief
                                           Accounting Officer)

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

          The following persons constitute a majority of the Board of Directors
of Registrant.

Date:  March 26, 1998                    /s/ Charles S. Bresler
                                       -----------------------------------
                                        Charles S. Bresler, Director

Date:  March 26, 1998                    /s/ William L. Oshinsky
                                       -----------------------------------
                                        William L. Oshinsky, Director

Date:  March 26, 1998                    /s/ Edwin Horowitz
                                       -----------------------------------
                                        Edwin Horowitz, Director

Date:  March 26, 1998                    /s/ Burton J. Reiner
                                       -----------------------------------
                                        Burton J. Reiner, Director

Date:  March 26, 1998                    /s/ Stanley S. DeRisio
                                       -----------------------------------
                                        Stanely S. DeRisio, Director

Date: March 26, 1998                     /s/ Ralph S. Childs, Jr.
                                       -----------------------------------
                                        Ralph S. Childs, Jr., Director

  EXHIBIT 21.     Subsidiaries of Registrant

                                      51