<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, 1996                                
                           -------------------------------------------------    
                                      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 11, 1997 was 2,792,653 shares, and the aggregate market value of the
shares held by non-affiliates (based upon $12.375 per share, the average of the
high bid and low asked prices reported by The National Quotation Bureau) was
approximately $7,095,033.

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
<PAGE>
 
                     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 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 62.

                                   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.
<PAGE>
 
      A.  Registrant's Homebuilding Projects
          ----------------------------------

          1.  Skyline Hill's, Prince George's County, Maryland.
              ------------------------------------------------
Clearing, grading, sewers and construction of model homes have been completed
for this 179 single family homes and 43 townhomes project.  During 1996 three
single family homes and 16 townhomes were sold and settled.  As of February 28,
1997, one single family home and three townhomes were under contract of sale.


          2.  Terraco Acres, Prince George's County, Maryland.
              -----------------------------------------------
This 134 single family home development has been completed.  The last three
homes were sold in 1996.

          3.  St. Mary's County, Maryland.  This project originally consisted of
              ---------------------------                                       
64 subdivided lots, which range in size from .87 acres to 6.36 acres and 31
farmsteads, of 15 to 30 acres each, totalling 949 acres.  As of February 28,
1997, 11 farmsteads totalling 254 acres remain to be sold.

          4.  Oak Hill Towns, Prince George's County, Maryland.
              ------------------------------------------------ 
The final development plan for 83 townhouses on this 11.1 acre tract has been
approved and recorded.  Clearing, grading and installation of sewers and
construction of model homes have been completed.  During 1996, 18 townhomes were
sold and settled.  As of February 28, 1997, six homes are under contract of
sale.

          5.  Yorkshire Knolls, Prince George's County, Maryland.  The final
              --------------------------------------------------            
development plan for 252 townhouses on this 31.5 acre tract has been approved
and recorded.  Clearing and grading has been completed and four model homes have
been completed.  During 1996, 22 homes were sold and settled.  As of February
28, 1997, 11 homes are under contract of sale.

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


          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 

                                      -3-
<PAGE>
 
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 


                                      -4-
<PAGE>
 
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
general 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-recourse mortgage and
note ("purchase money mortgage") in the original principal amount of
$11,525,616.  As of December 31, 1996, the balance due Registrant on the
purchase money mortgage was $1,898,808.  In addition, Registrant was due
$1,188,895 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 89% leased.

          2.  Bank Building.  This building of 3,478 rentable square feet on
              -------------                                                 
two-thirds of an acre is fully occupied by a branch of Nations Bank.

          3.  Paradise Sudley North Office Buildings.  In March, 1987,
              --------------------------------------                  
Registrant, through a subsidiary, and various officers and employees of Sequoia,
formed Paradise Sudley North Limited Partnership ("Sudley") to develop a 16.35
acre parcel of the Tract.  In December, 1991, these officers assigned their
interests in Sudley to Registrant in return for a release from bank debt and
guarantees.  Registrant's subsidiary is the sole general partner of the
Partnership, owning a 55% partnership 

                                      -5-
<PAGE>
 
interest, and 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 63% leased.  Registrant has entered
into two leases for 4,369 square feet which will increase occupancy to 83% by
April, 1997.

                   Building B, 62,420 square feet, is 47% leased.

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

                   Building D, 69,374 square feet, is 100% leased.  In 
January, 1988, Sudley contributed the 6.9 acres of land under Building D to a
new limited partnership, Paradise Sudley North Building D Partnership. Sudley is
a 50% partner in the new partnership 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 the new
partnership's 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 urban renewal area.  (See "Southwest Washington, DC Urban 
Renewal Area", below).  Registrant constructed these apartment buildings.

                                      -6-
<PAGE>
 
          As of December 31, 1996, approximately 95% 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 is owned by Trilon Plaza Company ("Trilon") an affiliate; the other
building 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.

                                      -7-
<PAGE>
 
          GSA Lease.  The United States General Services Administration ("GSA")
          ---------                                                            
leases 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 $19.5 million for
approximately 905,000 square feet plus 216,000 square feet of parking space (the
"GSA Lease"). Approximately 282,000 square feet of the portion of the shopping
center owned by Registrant is included in the lease at an annual rental of
approximately $5.6 million, as is 56,000 square feet owned by S.E.W. Investors,
another affiliate, and 172,000 square feet 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 was renewed in June, 1993 for a five year term, which 
commenced as of September, 1992.

          In November, 1994, GSA elected to extend the lease for a further five
years to September, 2002.  As required by the lease, the annual rental was
reduced, retroactive to the September, 1992 commencement date, from $21.8
million to $19.5 million.  GSA has the option to cancel the lease on certain
space during the second five years and on certain other space at any time after
the eighth year.

          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".

                                      -8-
<PAGE>
 
          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 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".

                                      -9-
<PAGE>
 
          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 partnership interests 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, 1996, 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 $4,058,719 has been paid as of March 19, 1997.  It is
payable in annual installments over the 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, 1996. 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 

                                     -10-
<PAGE>
 
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. Ninety-three percent of the apartments were occupied as of December 31,
1996.

          4.  St. Mary's County, Maryland Project.  On November 22, 1989,
              -----------------------------------                        
Registrant purchased a 79% limited partnership interest in Foxchase Village
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.  Ninety percent of the
apartments were occupied as of December 31, 1996.

          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 interests as follows:


                                     -11-
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                             Contract
       Property Managed            Compensation(1)          Expiration
       ----------------            ---------------          ----------       
<S>                                <C>               <C>
 
414 apartment units,
    20 townhouses (5)                   5%           December, 2000 (2) (3)
390,000 square feet of office                        
    space(5)                            3% (9)       December, 1997 (4)
185,000 square feet of office                        
    space(6)                            3% (9)       December, 1997  (4)
256 apartment units (7)                 5%           September, 1999 (2) (3)
105,000 square feet of                               
    shopping-office                                  
    center (8)                          3% (9)       December, 1997  (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)  These properties are located in the Southwest Washington, D.C. Urban
         Renewal Area and are managed for Trilon Plaza Company, an affiliate.

    (6)  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.

    (7)  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.


                                     -12-
<PAGE>
 
(8)      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.)

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

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

          Operation of Holiday Inn.  Registrant owns and operates a 151 room
          -------------------------                                         
Holiday Inn 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.

          Occupancy averaged 51% in 1996.

          In March, 1997 Registrant agreed with Holiday Inns to convert the
facility to a Holiday Inn Express.  The conversion requires substantial
renovation of the existing facility, and will be effective when the renovations
are completed.  Renovation is ongoing, and completion is scheduled for
approximately July, 1997.

          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 Washington, D.C. area
is highly competitive.

          The Colonnade, Baltimore, Maryland.  The Colonnade is a multi-purpose
          ----------------------------------                                   
condominium apartment, hotel, office and retail building adjacent to the Johns
Hopkins University in Baltimore, Maryland.  The building consists of 119
condominium apartments owned by others on the fourth through twelfth floors; 125
hotel rooms operated by Registrant as a Doubletree Hotel on the first three
floors, 252 condominium parking spaces (of which the 

                                     -13-
<PAGE>
 
Registrant's affiliate owns 21), a restaurant, a small amount of retail and
office space and a parking garage.

          Hotel occupancy averaged 69% in 1996.

          On July 12, 1993, Uptown Hotel Corporation ("Uptown"), a wholly owned
subsidiary of Registrant, purchased the secured mortgage on the Colonnade from
the lender for its then outstanding balance of $15,336,290.86.  To finance the
purchase, Uptown borrowed $13,836,291 from the lender, due in September 1995
(with the right to extend to 1998 under certain conditions), secured by an
assignment of the Colonnade mortgage and a guaranty by Registrant.  To secure
its guarantee, Registrant in May 1992 granted lender a mortgage on the apartment
property known as "The Commons" in the Southwest Washington, D.C. Urban Renewal
Area to the extent of $6,000,000, and its Holiday Inn property to the extent of
$4,000,000.  Registrant's guaranty was further secured by mortgages on the
Paradise Bank property (see "Paradise Bank at Bull Run" above) and 11
convenience stores (see "Convenience Stores" below).  On December 27, 1996, 
Registrant paid the mortgage in full.

          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 91%
occupied as of February 28, 1996.

          Convenience Stores.  In June, 1986, Registrant acquired 16 convenience
          ------------------                                                    
stores, primarily located in southern and southeastern states, for an aggregate
consideration of approximately $3,390,000.  Registrant acquired title to each
store building, but holds leasehold interests in the underlying 

                                     -14-
<PAGE>
 
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 under the name "Circle K." On May 15, 1990, Circle K and
certain of 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 February 28, 1997,
Registrant has rented four of these stores and has sold five stores. Registrant
is attempting to relet or sell the other three stores.

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

          Lakewood 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.  The facility is now 97% occupied.

          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 

                                     -15-
<PAGE>
 
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%).

          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, 1996 of about $2,753,000.

          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 heavy duty construction and transportation
equipment with a net book value as of December 31, 1996, of approximately
$1,782,000.  The partnership debt on these acquisitions as at December 31, 1996,
was approximately $1,380,000 of which Registrant is personally liable for 
approximately $267,000.

                                     -16-
<PAGE>
 
          Registrant 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 Florida and
Maryland. The telephones are now being serviced by a management company in
Maryland and by a partnership, of which Registrant's subsidiary is a 50%
partner, in Florida.

Employment
----------

          On February 21, 1997, Registrant and its subsidiaries employed 
approximately 125 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.

                                     -17-
<PAGE>
 
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
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.
Defendants filed motions for judgment notwithstanding the verdict, which the
Court granted in November 1995, as to $716,000.  Plaintiffs have filed a notice
of appeal.  The cases of the other plaintiffs remain to be tried.  Management
believes the claims are without merit and intends to continue to contest the
case vigorously.

                                      -18-
<PAGE>
 
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)

<TABLE>
<CAPTION>
 
                                                Present Positions
                                                and Offices with      Date Elected
Name                         Age                Registrant            to Office
----                         ---                ---------------       ------------
<S>                          <C>                <C>                   <C>
                                                                
Charles S. Bresler           69                 Chief Executive       June 2, 1970
                                                Officer, Chairman                                             
                                                of the Board
                                                and Director                                                      
                                                                
Burton J. Reiner             68                 President and         June 2, 1970
                                                Director                                                      
                                                                
William L. Oshinsky          54                 Treasurer and         April 6, 1994
                                                Director              November 15, 1994                  
                                                                
Edwin Horowitz               65                 Secretary and         June 2, 1970
                                                Director
</TABLE>

          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.

          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.

                                      -19-
<PAGE>
 
                                    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, 1995
----------------------------

           Quarter                                 Price
           ---------------------------------------------
           
           1st               High                    11  
                             Low                     10 
           ---------------------------------------------
                                                         
           2nd               High                    11 
                             Low                     10 
           ---------------------------------------------
                                                         
           3rd               High                    10 
                             Low                      9 
           ---------------------------------------------
                                                         
           4th               High                  10.50
                             Low                     10 
           ---------------------------------------------

                                      -20-
<PAGE>
 
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  
                              Low                 10.75 
           ---------------------------------------------


          The above quotations represent prices between dealers and do not
include retail markup, markdown or commissions and do not represent actual
transactions.

          As of March 11, 1997, there were 156 record holders of Common Stock.

                                      -21-
<PAGE>
 
Item 6.  Selected Financial Data
         -----------------------

<TABLE>
<CAPTION>
                  1996        1995/*/        1994/*/        1993/*/        1992/*/
              ------------  ------------  -------------  -------------  -------------
<S>           <C>           <C>           <C>            <C>            <C>
 
Revenues     $ 35,143,000  $ 33,824,000  $ 39,563,000   $ 31,683,000   $ 34,086,000
Net (loss)
income
before
extra-
ordinary
item and
cumulative
effect of
accounting
change       $ 10,805,000  $  4,404,000  $ (4,109,000)  $ (8,408,000)  $ (1,973,000)

Net income
(loss)       $  7,273,000  $  6,140,000  $  3,404,000   $ (5,133,000)  $ (1,973,000)
             ============  ============  ============   ============   ============
Earnings
per common
share
before
extra-
ordinary
item and
cumulative
effect of
accounting
change       $       2.60  $       1.57  $      (1.45)  $      (2.96)  $       (.70)

Earnings
per common
share        $       2.60  $       2.18  $       1.20   $      (1.81)  $       (.70)
             ============  ============  ============   ============   ============
Total
Assets       $ 94,926,000  $100,419,000  $102,425,000   $151,544,000   $163,895,000
             ============  ============  ============   ============   ============
Long Term
Obliga-
tions        $ 22,238,000  $ 33,729,000  $ 42,495,000   $ 91,336,000   $ 91,177,000
             ============  ============  ============   ============   ============
Cash divi-
dends per
common
share            (1)           (1)           (1)            (1)             (1)
             ============  ============  ============   ============   =============
__________________________
</TABLE> 

                                      -22-
<PAGE>
 
(1)  No dividends have been declared or paid.

/*/  Restated to reflect reclassifications.

                                      -23-
<PAGE>
 
Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations
         -------------------------------------------------

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

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

     During 1996, Registrant sold 63 homes for $8,669,000 as compared with 56
homes and three lots in 1995 totalling $8,117,000 and 65 homes and six
condominium units totalling $11,236,000 in 1994.  Continued slow economic
growth, employment uncertainty and proposed government reduction in the
Washington, DC metropolitan area affected sales at Registrant's projects, and
has resulted in increased inventory of homes as purchasers have terminated sales
agreements.

Rentals Income - Apartments and Commercial
------------------------------------------

     The lease with the General Services Administration ("GSA") of the Waterside
Mall office area provided that the rent was to be reduced, if GSA elected before
December 31, 1994 to extend the lease for a further five years.  GSA exercised
the option in November 1994.   The reduction will be about $895,000 per year in
the Registrant's revenues from the lease, plus $350,000 per year in leasing and
management fees and income from Town Center office building discussed below.
GSA has the option to cancel the lease on certain space effective any time
during the second five years and on certain other space at any time after the
eighth year.

Hotel Income
------------

     Included in the 1996 results is $4,217,000 of income and $3,289,000 of
expenses relating to the Colonnade, as compared to 1995 income of $3,570,000 and
expenses of $3,317,000.

     Due to the remodeling of the Holiday Inn, operating income for 1996
decreased to $1,672,000 as compared to $1,963,000 in 1995.  Expenses for 1996
were $1,651,000 versus $1,767,000 in 1995.  Income for 1997 is being impacted by
the renovation.

                                      -24-
<PAGE>
 
Leasing Fees, Affiliates
------------------------

     The 1994, 1995 and 1996 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
---------------

     During 1994, there was a reduction in notes receivable, other due to the
refinancing of those notes, thus reducing Interest, Other. The 1995 increase
resulted from higher cash balances.

     The 1996 results reflect higher interest income on invested funds as
compared with interest income in prior years.  Registrant has greater cash
balances in interest bearing accounts and in U.S. Treasury instruments.

Gain on Sales of Realty Interests, Net
--------------------------------------

     On June 30, 1992, Registrant sold its Philadelphia nursing home to an
unaffiliated nursing home operator.  The sale price was $4,200,000, of which
Registrant received $500,000 in cash and a wrap-around mortgage of $3,700,000.
In May 1994 the nursing home was sold and the outstanding balance of $3,574,500
was paid off.  A gain of $1,145,000 was recorded in 1994.

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

     The components of this Item are as follows:
<TABLE>
<CAPTION>
 
Year Ended December 31           1996        1995        1994
----------------------           ----        ----        ----
<S>                            <C>        <C>         <C>
 
Orlando, Florida Apartments    $(14,000)   $(72,000)  $(125,000)

Town Center Office Building     779,000     809,000     936,000
Tech High Leasing Company        42,000      84,000     (25,000)
 
Other                            14,000    (180,000)    (23,000)
                               --------   ---------   ---------
</TABLE> 

                                      -25-
<PAGE>
 
<TABLE> 
                   <S>         <C>        <C>         <C> 
                   Total       $821,000   $641,000    $763,000
</TABLE>

     Registrant has a 46% partnership interest in Town Center East Office
Building at Waterside Mall.  Registrant's share of the earnings from that
partnership decreased in 1995 and 1996, due to decreased revenues from the GSA
lease.  See, "Rentals, Apartments and Commercial" above.

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

     Included for 1996 is a non-recurring claim recovery of about $232,000.

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

     The lower expense in 1996, compared to 1995, reflects lower executive and  
administrative expenses.

Costs and Expenses - Other
--------------------------

     Included in Receivables - Other at December 31, 1994 were amounts due
                 -------------------                                      
Registrant from a state Department of Public Welfare with respect to a nursing
home previously owned by Registrant. At September 30, 1995 Registrant reduced
this receivable by $545,000 to reflect the amount allowed by the Department of
Public Welfare.

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

     In 1994 Registrant wrote off the carrying value of the Fairfax, Virginia
property, which the Frying Pan partnership returned to the sellers.  This
resulted in a charge of $16,834,000, and a gain on elimination of debt of
$5,200,000 (before income tax effect).

     On February 10, 1994, Registrant entered into an agreement with the holder
of the first and second mortgages relating to the property owned by Country Club
Associates Partnership whereby Registrant paid $3,500,000, including a two year
secured note for $1,000,000, which was retired in 1996, for the release of
Registrant's guaranty of the first trust loan, the second trust 

                                      -26-
<PAGE>
 
note, the land exchange liability, any mechanics liens, real estate taxes and
unknown recourse claims.

     In accordance with generally accepted accounting principles, Registrant
reduced the carrying value of Country Club as at December 31, 1993, resulting in
a charge of $9,898,000.  In accordance with generally accepted accounting
principles, Registrant recorded a $6,398,000 gain on elimination of the Country
Club debt in the first quarter of 1994 to reflect the February, 1994
transaction.

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

     In January, 1994 the holder of the note on the Country Club Associates
property foreclosed and obtained possession of the property.  On February 10,
1994, Registrant entered into an agreement with the holder of the first and
second mortgages relating to the property owned by Country Club Associates
Partnership whereby Registrant paid $3,500,000, including a two year secured
note for $1,000,000, for the release of Registrant's guaranty of the first trust
loan, the second trust note, the land exchange liability, any mechanics liens,
real estate taxes and unknown recourse claims.  At that time Registrant recorded
the disposition of the property.  This transaction resulted in a pre-tax
extraordinary gain of $6,398,000 in the first quarter of 1994.

     Registrant also recorded pre-tax extraordinary gain of $5,200,000 in
December 1994 with respect to the disposition of the Fairfax, Virginia property.

     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.

                                      -27-
<PAGE>
 
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, 1995, Registrant generated cash flow
from operating activities of $11,264,000.  Cash flow from operating activities
was used in investing activities of $778,000, which consisted of investments in
U.S. Treasury instruments, purchase of treasury stock and other activities of
$2,263,000, 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.  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.

     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.

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.

                                      -28-
<PAGE>
 
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.

                                      -29-
<PAGE>
 
                                    Part IV


Item 14    

Exhibits and Financial Statement Schedules


                                                                        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                         31
          Consolidated Balance Sheets                                   32-33
          Consolidated Statements of Income                                34
          Consolidated Statements of Changes in Shareholders' Equity       35
          Consolidated Statements of Cash Flows                         36-37
          Notes to Consolidated Financial Statements                       38

     2. Financial Statement Schedules III and IV                           55

        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.

        
                                      30
<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, 1996 and 1995, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the three years ended
December 31, 1996. 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 an 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, 1996 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles .

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 24, 1997

                                      31



<PAGE>
 
                            BRESLER & REINER, INC.

                          CONSOLIDATED BALANCE SHEETS

                       AS OF DECEMBER 31, 1996 AND 1995

                                    ASSETS

<TABLE>
<CAPTION>
                                             1996          1995
                                          -----------  ------------    
<S>                                       <C>          <C>
        RENTAL PROPERTY AND EQUIPMENT,                              
         NET                              $36,488,000  $ 38,018,000 
        CONSTRUCTION IN PROCESS             8,035,000    10,198,000
        HOMES HELD FOR SALE                 3,169,000     3,650,000
        LAND HELD FOR SALE                  4,770,000     4,358,000
        RECEIVABLES:
          Mortgages and notes,                                      
           affiliates                       5,501,000     5,971,000 
          Mortgages and notes, other        1,094,000     1,228,000
          Direct financing leases             126,000     1,022,000
          Other                             1,300,000     1,838,000

         INVESTMENT IN AND ADVANCES TO
          JOINT VENTURES AND                                        
          PARTNERSHIPS                      4,366,000     4,233,000 
 
        CASH AND CASH EQUIVALENTS           6,761,000     9,547,000

        CASH DEPOSITS HELD IN ESCROW        3,427,000    11,215,000

        INVESTMENTS                        13,303,000     1,374,000

        INCOME TAXES RECEIVABLE                32,000       991,000

        DEFERRED CHARGES AND OTHER         
         ASSETS                             6,554,000     6,776,000      
                                          -----------  ------------    
          TOTAL ASSETS                    $94,926,000  $100,419,000
                                          ===========  ============    
</TABLE>


                                      32
<PAGE>
 
                            BRESLER & REINER, INC.

                          CONSOLIDATED BALANCE SHEETS

                       AS OF DECEMBER 31, 1996 AND 1995

                     LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                              1996          1995
                                          -----------   ------------ 
<S>                                       <C>           <C>
LIABILITIES:
Notes payable-
  Mortgages                               $22,202,000   $ 33,634,000
  Land and development                             -         500,000
  Leasing equipment                            36,000         95,000
 Accounts payable, trade                    2,662,000      2,703,000
 Accrued expenses                             742,000        859,000
 Tenant deposits                              253,000        275,000
 Deferred income                              325,000        207,000
 Deferred income taxes payable              2,694,000      2,871,000
 Due to affiliates                            577,000      1,000,000
                                          -----------   ------------ 
   Total liabilities                       29,491,000     42,144,000

MINORITY INTEREST                             193,000        306,000

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
 Common stock, $0.01 par value:
  4,000,000 shares authorized,
  2,839,603 shares issued 2,792,653            28,000         28,000
  shares outstanding at December 31,
  1996 and 1995
 Capital in excess of par                   7,565,000      7,565,000
 Retained earnings                         58,077,000     50,804,000
 Treasury stock                              (428,000)      (428,000)
                                          -----------   ------------ 
  Total shareholders' equity               65,242,000     57,969,000
                                          -----------   ------------ 
  Total liabilities and shareholders'                                
   equity                                 $94,926,000   $100,419,000 
</TABLE>                                  ===========   ============ 


                                      33
<PAGE>
 
                             BRESLER & REINER, INC.

                       CONSOLIDATED STATEMENTS OF INCOME
             FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>
<CAPTION>
                                              1996          1995          1994
                                          -----------   -----------   -----------        
REVENUES:
<S>                                       <C>           <C>           <C>
  Sales of homes and lots                 $ 8,669,000   $ 8,117,000   $10,567,000
  Other construction, net                   1,097,000     1,340,000       970,000
  Rental income - apartments and            
   commercial                              13,624,000    13,803,000    15,167,000
  Hotel income                              5,890,000     5,534,000     5,492,000
  Management fees, affiliates                 852,000       831,000       879,000
  Leasing fees, affiliates                    749,000       725,000       776,000
  Interest-                             
    Affiliates                                943,000     1,112,000     1,213,000
    Other                                   1,400,000       866,000       656,000
  Gain on sales of realty                   
   interests, net                             436,000       281,000     1,439,000
  Equipment leasing and vending               357,000       512,000     1,562,000
  Income from equity investments              821,000       641,000       763,000
  Other                                       305,000        62,000        79,000
                                          -----------   -----------   -----------                                              
     Total revenues                        35,143,000    33,824,000    39,563,000
                                          -----------   -----------   -----------                                              
COSTS AND EXPENSES:                        
   Cost of home and lot sales               8,207,000     7,927,000     9,702,000
   Rental expense                           6,119,000     6,594,000     6,854,000
   Hotel expense                            4,869,000     5,004,000     5,333,000
   Land development expense                   103,000       107,000       178,000
   General and  administrative              1,764,000     2,082,000     2,617,000
   Interest expense                         2,898,000     3,267,000     3,700,000
   Equipment leasing and  vending             321,000       448,000       815,000
   Provision for loss on real estate               -        200,000    16,834,000
   Other                                           -        673,000            -
                                          -----------   -----------   -----------         
     Total costs and expenses              24,281,000    26,302,000    46,033,000
                                          -----------   -----------   -----------          

NET INCOME (LOSS) BEFORE            
 INCOME TAXES, EXTRAORDINARY                                                       
 ITEM AND MINORITY INTEREST                10,862,000     7,522,000    (6,470,000) 

PROVISION FOR INCOME TAXES (BENEFIT)        3,532,000     3,087,000    (2,336,000)
                                          -----------   -----------   -----------                                              
NET INCOME (LOSS) BEFORE EXTRAORDINARY                                             
 ITEM AND MINORITY INTEREST                 7,330,000     4,435,000    (4,134,000) 

EXTRAORDINARY ITEM:                 
   Debt elimination                                                               
   (Net of  income tax of $942,000 in 
     1995, and $4,075,000 in 1994)                 -      1,736,000     7,513,000 
                                          -----------   -----------   -----------                                              
NET INCOME (LOSS) BEFORE                                                          
 MINORITY INTEREST                          7,330,000     6,171,000     3,379,000 

MINORITY INTEREST                             (57,000)      (31,000)       25,000
                                          -----------   -----------   -----------            
NET INCOME (LOSS)                         $ 7,273,000   $ 6,140,000   $ 3,404,000
                                          ===========   ===========   ===========           
EARNINGS PER COMMON SHARE BEFORE          
 EXTRAORDINARY ITEM                       $      2.60   $      1.57   $     (1.45)
EXTRAORDINARY ITEM                                 -            .61          2.65
                                          -----------   -----------   -----------                
EARNINGS PER COMMON SHARE                 $      2.60   $      2.18   $      1.20
                                          -----------   -----------   -----------            

</TABLE>


                                      34
<PAGE>
 
                            BRESLER & REINER, INC.

          CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<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,  1993     $28,000  $7,565,000  $41,260,000  $ (40,000)    $48,813,000
         Net income                  -           -     3,404,000         -        3,404,000
         Purchase of            
          Treasury stock             -           -            -      (3,000)         (3,000) 
                                -------  ----------  -----------  ---------     -----------   
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
                                =======  ==========  ===========  =========     ===========   
</TABLE>



                                      35
<PAGE>
 
                            BRESLER & REINER, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
               (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>


                                                  1996          1995           1994
                                                ----------   -----------   ------------ 
<S>                                             <C>          <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss) before extraordinary item    $7,273,000   $ 4,404,000   $ (4,109,000)
 Extraordinary item, net of tax                         -      1,736,000      7,513,000
                                                ----------   -----------   ------------  
 Net income (loss)                               7,273,000     6,140,000      3,404,000
 Adjustments to reconcile net income (loss)            
  to net cash provided by               
  operating activities-                        
   Extraordinary item - gain on debt             
    forgiveness                                        -      (2,678,000)   (11,588,000) 
   Depreciation and amortization                 2,315,000     2,434,000      2,368,000
   Gain on sales of realty interests, net         (436,000)     (281,000)    (1,439,000)
   Investment in direct financing leases                -             -         (54,000)
   Direct financing lease payments                 705,000     1,429,000      2,779,000
   Amortization of investment in direct         
    financing leases                                (8,000)     (141,000)      (329,000)
   Proceeds from sale of equipment              
    under direct financing leases                  230,000       789,000      1,484,000
   (Gain) loss from equity investments            (821,000)     (641,000)      (763,000)
   Provision for loss on real estate                    -        200,000     16,834,000
   Deferred income taxes                          (177,000)       80,000      1,960,000
   Other                                           (31,000)      (92,000)      (781,000)
   Changes in other assets and liabilities-                
    Decrease (increase) in:                    
     Construction in process                     2,163,000     2,619,000      3,322,000
     Homes held for sale                           481,000    (1,496,000)    (2,154,000)
     Land held for sale                           (412,000)      162,000       (793,000)
     Mortgages and notes receivable              1,040,000     1,857,000      3,290,000
     Income taxes receivable                       959,000     1,742,000     (1,675,000)
     Other assets                                  527,000      (311,000)    (1,326,000)
   All other liabilities                          (598,000)     (548,000)    (3,424,000)
                                                ----------   -----------   ------------  
      Total adjustments to reconcile net        
       income (loss) to net cash               
       provided by operating activities          5,937,000     5,124,000      7,711,000
                                                ----------   -----------   ------------        
      Net cash provided by operating            
       activities                               13,210,000    11,264,000     11,115,000 
                                                ----------   -----------   ------------        
</TABLE>


                                      36
<PAGE>
 
                            BRESLER & REINER, INC. 

                    CONSOLIDATED STATEMENTS OF CASH FLOWS 
            FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994 
               (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                      1996           1995           1994
                                                 -------------   -----------   ------------      
<S>                                               <C>            <C>           <C>
CASH FLOWS FROM INVESTING ACTIVITIES:           
  Investment in joint ventures                   $     688,000   $ 1,485,000   $  1,337,000
  Net purchases of investments                     (11,929,000)   (1,374,000)            -
  Purchase of treasury stock                                -       (385,000)        (3,000)
  Other                                               (552,000)     (504,000)       619,000
                                                 -------------   -----------   ------------     
    Net cash (used in) provided by                
      investing activities                         (11,793,000)     (778,000)     1,953,000
                                                 -------------   -----------   ------------     
CASH FLOWS FROM FINANCING ACTIVITIES:          
  Repayment of notes payable                       (11,991,000)   (4,089,000)   (11,490,000)
  Proceeds from notes payable                               -             -       6,500,000
                                                 -------------   -----------   ------------     
    Net cash used in financing                     
      activities                                   (11,991,000)   (4,089,000)    (4,990,000)
                                                 -------------   -----------   ------------     
NET (DECREASE) INCREASE IN CASH AND                
 CASH EQUIVALENTS                                  (10,574,000)    6,397,000      8,078,000
CASH AND CASH EQUIVALENTS AND CASH             
 DEPOSITS HELD IN ESCROW, beginning of year         20,762,000    14,365,000      6,287,000
                                                 -------------   -----------   ------------     
CASH AND CASH EQUIVALENTS AND CASH             
 DEPOSITS HELD IN ESCROW, end of year             $ 10,188,000   $20,762,000   $ 14,365,000
                                                 =============   ===========   ============     

SUPPLEMENTAL DISCLOSURES OF CASH FLOW          
 INFORMATION:                                  
   Cash paid during the year for-              
     Interest                                     $  3,020,815   $ 3,293,186   $  3,675,000
     Income taxes                                    1,610,112     1,109,138        949,000

SUPPLEMENTAL DISCLOSURES OF NONCASH             
 ACTIVITIES:                                   
  Escrowed cash deposits received                      135,633       176,325        214,000
  Escrowed cash deposits refunded                      155,717       151,980        193,000

REAL ESTATE ASSETS TRANSFERRED IN               
 SATISFACTION OF LIABILITIES:                  
  Land held for development                                 -             -      33,908,000
  Land                                                      -        171,000             -
  Building & equipment, net                                 -        553,000             -
  Accounts receivable and other assets                      -        128,000             -
  Mortgage payable                                          -      4,177,000     42,851,000
  Accounts payable                                          -             -       2,535,000
  Accrued expenses                                          -          8,000      2,610,000
</TABLE>                                  


                                      37
<PAGE>
 
                            BRESLER & REINER, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       AS OF DECEMBER 31, 1996 AND 1995


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 consolidated
financial statements.

                                      38
<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 determine that costs in excess of net
realizable value are charged to operations.

DIRECT FINANCING LEASES

The Company's leasing operations consist principally of the leasing of computer
equipment, tractors and trailers, rental store fixtures, and manufacturing plant
equipment.  The Company accounts for these leases as direct financing leases in
accordance with SFAS No. 13, "Accounting for Leases."

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

Earnings per common share is based upon the weighted average number of shares
outstanding during each year (2,792,653 shares in 1996, 2,823,866 shares in
1995, and 2,836,481 shares in 1994).

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

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, 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 1996.


                                      39
<PAGE>
 
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 the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain 1995 and 1994 amounts have been reclassified in order to conform to the
1996 presentation.

2.   RENTAL PROPERTY AND EQUIPMENT, NET:

<TABLE>
<CAPTION>
                                                        1996           1995
                                                    ------------   ------------ 
<S>                                                 <C>            <C>
            Land                                    $  3,278,000   $  3,278,000
            Buildings and improvements                55,108,000     54,650,000
            Equipment                                  3,201,000      3,268,000
                                                    ------------   ------------ 
                                                      61,587,000     61,196,000
                                                    ------------   ------------
            Less- Accumulated depreciation           (25,099,000)   (23,178,000) 
                                                    ------------   ------------ 
                                                    $ 36,488,000   $ 38,018,000
                                                    ============   ============
</TABLE>
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.


                                      40
<PAGE>
 
5. GAIN ON SALES OF REALTY INTERESTS, NET:

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

            Sales price                   $     -     $ 98,000(a)  $  485,000(a)            
            Cost of sales                       -      167,000        458,000
                                          --------    --------     ---------- 
            (Loss) gain recognized,                                
              current year transactions         -      (69,000)        27,000 
 
            Gain recognized from prior
              years' sales recorded using                                              
              the installment method       436,000     350,000      1,412,000(b) 
                                          --------    --------     ----------  
 
                                          $436,000    $281,000     $1,439,000
                                          ========    ========     ========== 
</TABLE>
(a) The Company sold one convenience store property in 1995 and three
    convenience store properties in 1994 which are accounted for using the
    full accrual method.

(b) During 1992, the Company sold a nursing home to an unaffiliated nursing home
    operator.  The Company received a note, and therefore accounted for the gain
    on the transaction under the installment method of accounting and deferred
    profit to the extent of the note received.  In 1994, the Company received
    the balance on the note and, therefore, the remaining deferred profit
    related to this transaction of $1,145,000 was recognized.

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>
                                  1996        1995        1994
                               ----------  ----------  ----------   
<S>                            <C>         <C>         <C>
Other construction revenues    $1,850,000  $2,137,000  $1,920,000
Other construction costs          753,000     797,000     950,000
                               ----------  ----------  ----------   
Total                          $1,097,000  $1,340,000  $  970,000
                               ==========  ==========  ==========  
</TABLE>


                                      41
<PAGE>
 
7. NOTES PAYABLE:

<TABLE>
<CAPTION>
                                                                                 
                                                                                          
                                                                                                                MATURITIES 
                                                                                                                 FOR DEBT  
                                                                                                                OUTSTANDING 
                                                                                   1996          1995           AT 12/31/96
                                                                                -----------   -----------       -----------
<S>                                                                             <C>           <C>               <C>               
              Mortgages payable, 5.25%  to 9.75%* collateralized                                                                   
               by rental properties                                             $22,202,000   $33,634,000        1997-2001       
                                                                                                                                  
              Notes payable, 4%                                                          -        500,000            -            
              Notes payable, 11.5%*, collateralized by                                                                   
               equipment                                                             36,000        95,000           1997 
 
</TABLE>
              * Interest rates relate to the 1996 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 these properties.  These mortgages
remain on the Company's books, as of December 31, 1996 and 1995, at balances of
$6,670,000 and $7,713,000, respectively, and are included in mortgages payable
above.

Of the mortgages and notes payable, $36,000 are recourse to the Company at
December 31, 1996.  In addition, the Company has recourse obligations totaling
$402,000 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 
                                                NOTES        PAYABLE, 
                                               PAYABLE       LEASING 
                                              MORTGAGES     EQUIPMENT   
                                             -----------    ---------     
                    <S>                      <C>            <C>
                    1997                     $ 1,457,000      $36,000
                    1998                       3,583,000           -
                    1999                       9,169,000           -
                    2000                       1,582,000           -
                    2001                       6,411,000           -
                    2002 and thereafter                -           -
                                             -----------      -------     
                                             $22,202,000      $36,000
                                             ===========      =======    
</TABLE>
 . During 1996, the Company retired approximately $10 million in debt due in
  March 1998.  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, 1996, the loan was
  current and had an outstanding balance of $2,052,000.

 . 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

                                      42
<PAGE>
 
  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.

 . Included in Notes Payable, Land, at December 31, 1993, was $25,399,000, which
  was settled on February 10, 1994. The Company entered into an agreement with
  the holder of the first and second mortgages relating to the property owned by
  Country Club Associates Partnership whereby the Company paid $3,500,000,
  including a two-year secured note for $1,000,000, for the release of the
  Company's guaranty of the first trust loan, the second trust note, the land
  exchange liability, any mechanics liens, real estate taxes, and unknown
  recourse claims. Based on continuing negotiations to tender the asset in
  satisfaction of the debt, the Company recorded a provision for loss on real
  estate of $9,898,000 in 1993 to reduce the asset to its estimated fair value
  of $19,000,000 at December 31, 1993. In accordance with generally accepted
  accounting principles, the Company recorded an extraordinary gain of
  approximately $6,398,000 due to satisfaction of the debt in the first quarter
  of 1994. The gain is presented as an extraordinary item net of tax in 1994 on
  the accompanying consolidated statements of income.

 . Included in Notes Payable, Land, at December 31, 1993, were nonrecourse
  mortgage notes totaling $18,452,000 that were secured by approximately 57
  acres of land held for development. During 1994, the Company reevaluated its
  investment and concluded that the long-term development plans for the property
  were no longer warranted given the continued softness in the commercial real
  estate market and the inability of the lenders to agree to continued debt
  modifications. As a result, the Company recorded a write down of $16.8 million
  representing the Company's estimate of the property value based on immediate
  liquidation. In December 1994, one of the lenders took a deed in lieu of
  foreclosure on a 17 acre tract and took possession of the property. The
  Company tendered the deed in lieu of foreclosure to the seller on the
  remaining 40 acres. As a result of this debt defeasance, the Company
  recognized an extraordinary gain of $5.2 million. The gain is presented as an
  extraordinary item net of tax in 1994 on the accompanying consolidated
  statements of income.



                                      43
<PAGE>
 
8. MORTGAGES AND NOTES RECEIVABLES, AFFILIATES:

<TABLE>
<CAPTION>
                                       1996       1995      
                                   ----------  ----------  
<S>                                <C>         <C>                            
       Mortgages and Notes:                                    
         Due 2001 (a)              $  394,000  $  473,000
         Due 2009                   1,313,000   1,322,000
                                                   
       Installment Sales:                          
         Due 1999 (b)               1,810,000   1,883,000
         Due 2000 (c)               1,984,000   2,293,000
                                   ----------  ----------  
                                   $5,501,000  $5,971,000
                                   ==========  ==========  
</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 $10,000, 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 are net of deferred gains of $1,398,000 and $1,454,000 in 1996
    and 1995, 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.

(C) Amounts due are net of deferred gain of $2,357,000 and $2,725,000 in 1996
    and 1995, 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.

9.   MORTGAGES AND NOTES RECEIVABLES, OTHER:

<TABLE>
<CAPTION>
                                                         1996        1995
                                                      ----------  ----------   
<S>                                                     <C>       <C>

        Mortgages and notes:

         Home sales, 8% to 12.5%, due through 2020    $  368,000  $  433,000
         Condominium sales, 8% to 13%, net of          
          deferred gain of $163,000 in 1996 and          158,000     189,000
          $195,000 in 1995                       
                                               
        Notes receivable:                      
         Other, 8% to 10%                                529,000     567,000
         Tenant improvement, 10%                          39,000      39,000
                                                      ----------  ----------   
                                                      $1,094,000  $1,228,000
                                                      ==========  ========== 
</TABLE>


                                      44
<PAGE>
 
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, 1996                
                              -----------------                      ------------------------------------------------------------- 
                              GENERAL   LIMITED    CURRENT STATUS                                 NONRECOURSE        PARTNERSHIP   
                              PARTNER   PARTNER    OF PARTNERSHIPS     ASSETS    RECOURSE DEBT       DEBT         EQUITY (DEFICIT)  
                              -------   -------    ---------------   ----------  -------------  ----------------  ----------------
<S>                          <C>        <C>       <C>                <C>         <C>            <C>               <C>
Entities Accounted for
Under the Equity Method:
Town Center East, L.P.            1%     45%      Owns and
                                                  operates an
                                                  office building
                                                  in Southwest                                                                     
                                                  Washington, D.C.   $5,917,000  $           -         $1,739,000       $ 3,465,000 
SEW Associates                    1%      -       Owns and
                                                  operates a
                                                  segment of a
                                                  Shopping Mall in                                                                 
                                                  Southwest,
                                                  Washington, D.C.    4,787,000              -         4,341,000           192,000 
Third Street S.W. Investors       1%      -       Owns and
                                                  operates 256 Apt
                                                  units in                                                                          
                                                  Southwest
                                                  Washington, D.C.    1,444,000              -         4,521,000        (4,261,000) 
Tech High Leasing                50%      -       Leveraged
                                                  equipment leasing   2,814,000        267,000         1,113,000         1,421,000
Builders Leasing                 20%      -       Leveraged           
                                                  equipment leasing   4,419,000        135,000         2,617,000         1,639,000
Pine Club II                      -      64%      Owns and
                                                  Operates 160
                                                  Apt. units in                                                                    
                                                  Orlando, FL         6,100,000              -         5,312,000           405,000 
</TABLE>
11.  COMMITMENTS AND CONTINGENCIES:

FINANCIAL COMMITMENTS


The Company is contingently liable for $402,000 of outstanding liabilities of
nonconsolidated partnerships and joint ventures in which it has investments at
December 31, 1996.  The Company also pledged its interests in the General
Services Administration's ("GSA") lease to the lender as security for Town
Center East, L.P.'s mortgage and Trilon Plaza Company's (an entity affiliated
with the Company) mortgages totaling $7.2 million.

During 1990 and 1989, the Company purchased limited partnership interests in
limited partnerships which operate low income housing units.  The
required capital contributions over the next 5 years are projected to aggregate
$1,749,000.  The amount of projected contributions are to be adjusted annually
to be a percentage of tax benefits derived.  


                                      45
<PAGE>
 
The Company anticipates that the annual tax benefits will be more than
sufficient to fund the annual capital contributions.

At December 31, 1996, the Company had approximately $3,025,000 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 lease expired in September
1992; however, in June 1993 the Company negotiated a new lease with GSA 
effective retroactively for the five-year period beginning September 1992.

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 24, 1997, the GSA has not
exercised this option.

In aggregate, approximately 22% of the Company's 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.

                                      46
<PAGE>
 
12.  DIRECT FINANCING LEASES:

The Company engages in personal property leveraged equipment leasing.  These
leases involve computer equipment, tractors and trailers, rental store fixtures,
and manufacturing plant equipment.

<TABLE>
<CAPTION>
                                            1996       1995
                                          --------  ----------  
<S>                                       <C>       <C>
Total minimum lease payments to be        
 received                                 $ 42,000  $  125,000       
Unamortized initial direct costs                -        3,000
Estimated residual values of leased
 property (not guaranteed)                  86,000     906,000
                                          --------  ----------  
                                           128,000   1,034,000
Less unearned income                         2,000      12,000
                                          --------  ----------  
Net investment in direct financing       
  leases                                  $126,000  $1,022,000 
                                          ========  ========== 
</TABLE>

Future minimum lease payments to be received under the above noncancelable lease
agreements as of December 31, 1996, are as follows:

<TABLE>
<CAPTION>
                               MINIMUM
                                LEASE     
                               PAYMENTS   
                              ---------    
                    <S>       <C>
                    1997       $42,000
                    1998          -
                    1999          -
                    2000          -
                    2001          -
                               -------     
                               $42,000
                               =======     
</TABLE>
13.  INCOME TAXES:

The Company follows SFAS No. 109, "Accounting for Income Taxes."  SFAS No. 109
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.


                                      47
<PAGE>
 
The Company and its subsidiaries file a consolidated Federal income tax return.
The provision (benefit) for income taxes includes the following components:

<TABLE>
<CAPTION>
                                             1996        1995         1994
                                          ----------  ----------  -----------            
<S>                                       <C>         <C>         <C>
      Provision for income taxes         
        Current tax (benefit)             $3,355,000  $3,007,000  $(4,296,000)
        Deferred tax                         177,000      80,000    1,960,000
                                          ----------  ----------  -----------            
       Total provision for               
        income taxes (benefit)             3,532,000   3,087,000   (2,336,000)
                                          ----------  ----------  -----------            
       Extraordinary item -              
        income tax effect                         -      942,000    4,075,000
                                          ----------  ----------  -----------            
       Total income tax                  
        expense                           $3,532,000  $4,029,000  $ 1,739,000
                                          ==========  ==========  ===========            
</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 (benefit) shown on the consolidated income statements
follows:

<TABLE>
<CAPTION>
                                          1996   1995   1994
                                          ----   ----   ----    
<S>                                       <C>    <C>    <C>
       Statutory rate                     34.0%  34.0%  34.0%
       Increase (decrease) resulting
        from:                 
         State taxes, net of Federal                               
          income tax benefit               6.2    3.8    3.8
         Low income housing tax 
          benefits                        (4.5)  (5.2)  (3.8)
         Other                            (3.2)   8.4     -
                                          ----   ----   ----    
                                          32.5%  41.0%  34.0%  
                                          ====   ====   ====      

</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 TAX LIABILITY 
                                DEFERRED INCOME TAX               (ASSET) FOR THE YEAR ENDED              
                                PROVISION (BENEFIT)                      DECEMBER 31,       
                                FOR THE YEAR ENDED             -------------------------------               
                                 DECEMBER 31, 1996                1996                 1995 
                                -------------------            ----------          ----------- 
<S>                             <C>                            <C>                 <C>
 Basis in property                 $  99,000                   $2,202,000          $ 2,103,000
  Investment in                                                             
   partnerships                     (174,000)                   1,367,000            1,541,000
 Installment sales                    20,000                      196,000              176,000
 Leases                             (394,000)                     491,000              885,000
 Debt elimination                    334,000                     (803,000)          (1,137,000)
 Other                               (62,000)                    (759,000)            (697,000)
                                   ----------                  ----------          -----------          
   Total                           $(177,000)                  $2,694,000          $ 2,871,000
                                   ==========                  ==========          ===========          
</TABLE>                                                               
                                                                       
                                     48   
                                                                    
<PAGE>
 
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 involvement in low income housing projects. The realizability of these
credits is dependent upon the Company's ability to produce taxable income in the
future.

14.  OPERATING LEASES:

AS A LESSEE

At December 31, 1996, 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, 1996, 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 1996, 1995, and 1994 was approximately $88,000,
$78,000, and $93,000, 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, 1996,
are as follows:

<TABLE>
<CAPTION>
                                            AMOUNT
                                         ----------       
<S>                                      <C>
                  1997                   $   78,000
                  1998                       79,000
                  1999                       80,000
                  2000                       50,000
                  2001                       43,000
                  2002 and thereafter     2,451,000
                                         ----------     
                       Total             $2,781,000
                                         ==========     
</TABLE>


                                      49
<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>
       1997                     $10,311,000  $        -
       1998                       5,929,000    4,216,000
       1999                       2,403,000    5,621,000
       2000                       1,966,000    5,621,000
       2001                       1,447,000    5,621,000
       2002 and thereafter        2,686,000    3,981,000
                                -----------  ----------- 
       Total                    $24,742,000  $25,060,000
</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>
                                   1996       1995        1994
                                 --------  ----------  ----------      
<S>                              <C>       <C>         <C>
         Revenues
          Leasing fees           $749,000  $  725,000  $  776,000
          Management fees         841,000     825,000     879,000
          Interest                943,000   1,112,000   1,213,000
         Cost and expenses:
          Lumber and millwork       8,000      11,000      25,000
          Insurance               303,000     677,000     740,000

</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.


                                      50
<PAGE>
 
The net periodic pension costs for 1996, 1995, and 1994 are computed as follows:

<TABLE>
<CAPTION>
                                             1996        1995         1994
                                          ---------   ----------   ----------
     <S>                                  <C>         <C>          <C>
     Services cost - benefits earned
      during the year                     $ 181,000   $  300,000   $  383,000
 
     Interest cost on projected benefit                
      obligation                            179,000      409,000      442,000
     Return on Plan assets                 (284,000)    (455,000)    (314,000)
     Amortization of unrecognized net                  
      obligation                             57,000       57,000       57,000
     Asset gain recognized                        -            -     (211,000)
     Loss recognized on settlements               -            -        3,000
                                          ---------   ----------   ----------
     Net periodic pension cost            $ 133,000   $  311,000   $  360,000
                                          =========   ==========   ==========
</TABLE> 

The following table details the Plan's net pension asset at December 31, 1996
and 1995:
<TABLE> 
<CAPTION> 
                                                         1996         1995
                                                      ----------   ----------
<S>                                                   <C>          <C> 
 Actuarial Present Value of Benefit Obligation:
  Vested benefits                                     $2,175,000   $6,121,000
  Nonvested benefits                                      92,000       54,000
                                                      ----------   ----------
    Accumulated benefit obligation                     2,267,000    6,175,000

  Effect of projected future compensation increases      879,000    1,032,000
                                                      ----------   ----------
  Projected benefit obligation                         3,146,000    7,207,000
  Plan assets at fair value                            3,904,000    7,970,000
                                                      ----------   ----------
  Plan assets in excess of projected benefit                    
    obligation                                           758,000      763,000
  Unrecognized net (gain) loss                          (753,000)    (681,000)
  Unrecognized net obligation at date of                        
    adoption being recognized over 22 years              738,000      794,000
                                                      ----------   ----------
      Net pension asset                               $ (743,000)  $ (876,000)
                                                      ==========   ==========
</TABLE>
The net periodic pension cost is treated as a reduction of the net pension asset
in the accompanying consolidated financial statements.

<TABLE>
<CAPTION>
Interest assumptions used were:
                                                   1996   1995
                                                  -----  -----
        <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>


                                      51
<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, 1996.
  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.

                                      52

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

<TABLE>
<CAPTION>
                                          DECEMBER 31, 1996             DECEMBER 31, 1995
                                     ----------------------------  ----------------------------
                                          CARRYING                      CARRYING 
                                           AMOUNT     FAIR VALUE        AMOUNT       FAIR VALUE
                                     ---------------  -----------  ---------------  -----------  
<S>                                  <C>              <C>          <C>              <C>
Financial assets:
 Cash and cash equivalents               $ 6,761,000  $ 6,761,000      $ 9,547,000  $ 9,547,000
 Cash deposits held in escrow              3,427,000    3,427,000       11,215,000   11,215,000
 Investments                              13,303,000   13,303,000        1,374,000    1,374,000
 Receivables-
  Mortgages and notes, affiliates          5,501,000    6,027,000        5,971,000    7,522,000
  Mortgages and notes, others              1,094,000    1,182,000        1,228,000    1,246,000
  Other                                    1,300,000    1,300,000        1,838,000    1,838,000
Financial liabilities:
 Notes payable-
  Mortgages                               22,202,000   22,503,000       33,634,000   33,901,000
  Land and development                             -            -          500,000      498,000
     Accounts payable, trade               2,662,000    2,662,000        2,703,000    2,703,000
</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.


                                      53
<PAGE>
 
18.  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):

<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 (loss) before income 
    taxes, minority interest and 
    extraordinary items                      2,275,000       2,972,000       2,619,000      2,996,000
   Net income (loss) before                             
    extraordinary items                      1,472,000       1,913,000       1,480,000      2,408,000
   Net income (loss)                         1,472,000       1,913,000       1,480,000      2,408,000
   Earnings per common share before                                      
    extraordinary item                             .53             .68             .52            .86
   Earnings per common share                       .53             .68             .52            .86
 
                                                                   THREE MONTHS ENDED
                                          -----------------------------------------------------------
                                            MARCH 31,       JUNE 30,     SEPTEMBER 30,   DECEMBER 31, 
                                              1995            1995           1995           1995
                                          ------------    ------------   -------------   ------------
<S>                                       <C>             <C>            <C>             <C>
  Revenues                                  $9,098,000      $7,855,000      $8,585,000     $8,286,000
  Net income before income taxes,
   minority interest and
   extraordinary items                       2,007,000       2,650,000       1,308,000      1,557,000
  Net income before extraordinary                                                          
   items                                     1,296,000       1,693,000         855,000        591,000
  Extraordinary item-Debt                                                                  
   elimination, net of tax                          --              --       1,736,000              -
  Net income                                 1,296,000       1,693,000       2,591,000        591,000
  Earnings per common share before                                                         
   extraordinary item                              .46             .59             .30            .21
  Earnings per common share                        .46             .59             .91            .21
 
</TABLE>


                                      54

<PAGE>
 
                            BRESLER & REINER, INC.
                            ----------------------

            SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
                            (DOLLARS IN THOUSANDS)

<TABLE>                              
<CAPTION>                            
                                                              COLUMN C              COLUMN D                COLUMN E
                                                        ------------------  -----------------------  -----------------------------
                                                                             COST CAPITALIZATION       GROSS AMOUNT AT WHICH 
                                                          INITIAL COST TO        SUBSEQUENT TO           CARRIED AT CLOSE OF
            COLUMN A                        COLUMN B          COMPANY             ACQUISITION                  PERIOD
----------------------------------      --------------  --------------------  ---------------------  ----------------------------- 
                                                                BUILDING AND               CARRYING          BUILDING AND
          DESCRIPTION                    ENCUMBRANCES    LAND   IMPROVEMENTS  IMPROVEMENT    COST     LAND   IMPROVEMENTS   TOTAL
----------------------------------      --------------  ------  ------------  -----------  --------  ------  ------------  -------  
 <S>                                    <C>             <C>     <C>           <C>          <C>       <C>     <C>           <C>      
YEAR ENDED DECEMBER 31, 1996:        
Allentown Apartments (Apartments                                                                                                    
 in Suitland, Maryland)                                 $  --     $   --       $   --         $ --    $ --    $   --       $  -- 
Charlestown North (Apartments        
 in Greenbelt, Maryland)                                   --       2,179          358          --      --      2,340        2,340
Commons (Apartments in                     
 Washington, D.C.)                                         277      1,047          547          --      387     1,501        1,888  
Waterside Mall East (Shopping                       
 Center in Washington, D.C.)                               --       6,631       13,219          111     --     15,621       15,621
Georgian Gardens (Apartments         
 in Oxon Hill, Maryland)                                   --         289          415          --      --        687          687
Lakeview Manor Nursing Home                       
 (Lakewood, New Jersey)                                    100      4,026          --           --      101     4,026        4,127
Uptown (Hotel in Baltimore,                                
 Maryland)                                                 --       7,368          165          --      --      5,582        5,582
Allentown Road Motel                              
 (Suitland, Maryland)                                      378      2,793          914          --      378     3,887        4,265 
Egap (Convenience Stores in                         
 Florida, Louisiana, and             
 North Carolina)                                            58      3,388          --           --      142     2,333        2,475 
Nations Bank Building (Office                             
 Building in Manassas, Virginia)                            63        798           43          --       90       787          877
Paradise/Sudley North                
 (4 Office  Buildings in Manassas,                       
 Virginia)                                               2,216     12,679        3,808          --    1,898    16,392       18,290  
7800 Building (Office                            
 Building in Manassas, Virginia)                           317      1,636          481          --      283     1,999        2,282 
----------------------------------      --------------  ------  ------------  -----------  --------  ------  ------------  -------
                                                        $3,409    $42,834      $19,950        $111   $3,279   $55,155      $58,434
                                                        ======  ============  ===========  ========  ======  ============  =======
</TABLE>                             

<TABLE>                             
<CAPTION>                           
            COLUMN A                       COLUMN F      COLUMN G      COLUMN H        COLUMN I
----------------------------------       ------------  ------------  ------------  ----------------  
                                                                                     LIFE ON WHICH
                                                                                    DEPRECIATION ON
                                                                                     LATEST INCOME
                                         ACCUMULATED     DATE OF         DATE        STATEMENT IS
          DESCRIPTION                    DEPRECIATION  CONSTRUCTION    ACQUIRED        COMPUTED
----------------------------------       ------------  ------------  ------------  ----------------  
 <S>                                     <C>           <C>           <C>           <C> 
YEAR ENDED DECEMBER 31, 1996:       
Allentown Apartments (Apartments           
 in Suitland, Maryland)                     $  --          --            1971          5-40 years
Charlestown North (Apartments       
 in Greenbelt, Maryland)                     1,675         --            1971          5-40 years
Commons (Apartments in               
 Washington, D.C.)                             938         --            1971          5-40 years
Waterside Mall East (Shopping        
 Center in Washington, D.C.)                 9,263        1975            --           8-40 years
Georgian Gardens (Apartments        
 in Oxon Hill, Maryland)                       622         --          Various         20 years
Lakeview Manor Nursing Home          
 (Lakewood, New Jersey)                      2,265         --            1984          5-30 years
Uptown (Hotel in Baltimore,          
 Maryland)                                     455         --            1993(a)         --
Allentown Road Motel                 
 (Suitland, Maryland)                        1,670         --            1987          19 years
Egap (Convenience Stores in          
 Florida, Louisiana, and            
 North Carolina)                             1,294         --            1987          19 years 
Nations Bank Building (Office        
 Building in Manassas, Virginia)               127        1991            --           31-1/2 years
Paradise/Sudley North               
 (4 Office  Buildings in Manassas,   
 Virginia)                                   4,207        1987            --           31-1/2 years
7800 Building (Office                
 Building in Manassas, Virginia)               538        1990            --           15-31-1/2 years
----------------------------------       ------------
                                           $23,504
                                         ============
</TABLE>                             

(a) Asset acquisition recorded December 31, 1993.

                                      55
<PAGE>
 
                            BRESLER & REINER, INC.
                            ----------------------

            SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
                            (DOLLARS IN THOUSANDS)

<TABLE>                              
<CAPTION>                            
                                                              COLUMN C              COLUMN D                COLUMN E
                                                        ------------------  -----------------------  -----------------------------
                                                                             COST CAPITALIZATION         GROSS AMOUNT AT WHICH 
                                                          INITIAL COST TO        SUBSEQUENT TO             CARRIED AT CLOSE OF
            COLUMN A                        COLUMN B          COMPANY             ACQUISITION                    PERIOD
----------------------------------      --------------  --------------------  ---------------------  ----------------------------- 
                                                                BUILDING AND               CARRYING          BUILDING AND
          DESCRIPTION                    ENCUMBRANCES    LAND   IMPROVEMENTS  IMPROVEMENT    COST     LAND   IMPROVEMENTS   TOTAL
----------------------------------      --------------  ------  ------------  -----------  --------  ------  ------------  -------  
 <S>                                    <C>             <C>     <C>           <C>          <C>       <C>     <C>           <C>      
YEAR ENDED DECEMBER 31, 1996:        
Allentown Apartments (Apartments                                                                                                    
 in Suitland, Maryland)                                 $  --     $   --       $   --         $ --    $ --    $   --       $  -- 
Charlestown North (Apartments        
 in Greenbelt, Maryland)                                   --       2,179          358          --      --      2,340        2,340
Commons (Apartments in                     
 Washington, D.C.)                                         277      1,047          429          --      387     1,388        1,775  
Waterside Mall East (Shopping                       
 Center in Washington, D.C.)                               --       6,631       13,131          111     --     15,533       15,533
Georgian Gardens (Apartments         
 in Oxon Hill, Maryland)                                   --         289          397          --      --        668          668
Lakeview Manor Nursing Home                       
 (Lakewood, New Jersey)                                    100      4,026          --           --      101     4,026        4,127
Uptown (Hotel in Baltimore,                                
 Maryland)                                                 --       7,368          125          --      --      5,980        5,980
Allentown Road Motel                              
 (Suitland, Maryland)                                      378      2,793          411          --      378     3,384        3,762 
Egap (Convenience Stores in                         
 Florida, Louisiana, and             
 North Carolina)                                            58      3,388          --           --      142     2,334        2,476 
Nations Bank Building (Office                             
 Building in Manassas, Virginia)                            63        798           43          --       90       787          877
Paradise/Sudley North                
 (4 Office  Buildings in Manassas,                       
 Virginia)                                               2,216     12,679        3,758          --    1,898    16,342       18,240  
7800 Building (Office                            
 Building in Manassas, Virginia)                           317      1,636          399          --      283     1,917        2,200 
----------------------------------      --------------  ------  ------------  -----------  --------  ------  ------------  -------
                                                        $3,409    $42,834      $19,051        $111   $3,279   $54,699      $57,978
                                                        ======  ============  ===========  ========  ======  ============  =======
</TABLE>                             

<TABLE>                             
<CAPTION>                           
            COLUMN A                       COLUMN F      COLUMN G      COLUMN H        COLUMN I
----------------------------------       ------------  ------------  ------------  ----------------  
                                                                                     LIFE ON WHICH
                                                                                    DEPRECIATION ON
                                                                                     LATEST INCOME
                                         ACCUMULATED     DATE OF         DATE        STATEMENT IS
          DESCRIPTION                    DEPRECIATION  CONSTRUCTION    ACQUIRED        COMPUTED
----------------------------------       ------------  ------------  ------------  ----------------  
 <S>                                     <C>           <C>           <C>           <C> 
YEAR ENDED DECEMBER 31, 1996:       
Allentown Apartments (Apartments           
 in Suitland, Maryland)                     $  --          --            1971          5-40 years
Charlestown North (Apartments       
 in Greenbelt, Maryland)                     1,601         --            1971          5-40 years
Commons (Apartments in               
 Washington, D.C.)                             889         --            1971          5-40 years
Waterside Mall East (Shopping        
 Center in Washington, D.C.)                 8,937        1975            --           8-40 years
Georgian Gardens (Apartments        
 in Oxon Hill, Maryland)                       607         --          Various         20 years
Lakeview Manor Nursing Home          
 (Lakewood, New Jersey)                      2,129         --            1984          5-30 years
Uptown (Hotel in Baltimore,          
 Maryland)                                     303         --            1993(a)         --
Allentown Road Motel                 
 (Suitland, Maryland)                        1,475         --            1987          19 years
Egap (Convenience Stores in          
 Florida, Louisiana, and            
 North Carolina)                             1,171         --            1987          19 years 
Nations Bank Building (Office        
 Building in Manassas, Virginia)               101        1991            --           31-1/2 years
Paradise/Sudley North               
 (4 Office  Buildings in Manassas,   
 Virginia)                                   3,619        1987            --           31-1/2 years
7800 Building (Office                
 Building in Manassas, Virginia)               464        1990            --           15-31-1/2 years
----------------------------------       ------------
                                           $21,296
                                         ============
</TABLE>                             
(a)  Asset acquisition recorded December 31, 1993.

                                      56
<PAGE>
 
                            BRESLER & REINER, INC.
                            ----------------------

                             NOTES TO SCHEDULE III
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                    1996     1995
                                                   -------  -------
<S>                                                <C>      <C>
LAND AND BUILDING AND IMPROVEMENTS:     
  Balance, January 1                               $57,978  $59,676
    Additions during period-            
      Improvements                                     899      241
                                                   -------  -------
                                                    58,877   59,917
    Deductions during period-
      Write-off of fully depreciated assets              5        -
      Other                                            438    1,939
                                                   -------  -------
  Balance, December 31                             $58,434  $57,978
                                                   =======  =======
ACCUMULATED DEPRECIATION:   
  Balance, January 1                               $21,296  $20,654
    Additions during period-
      Depreciation expense                           1,763    1,713
                                                   -------  -------
                                                             22,367
    Deductions during period-
      Write-off of fully depreciated assets              5        -
      Other                                              -    1,071
                                                   -------  -------
  Balance, December 31                             $23,054  $21,296
                                                   =======  ======= 
</TABLE>


                                      57
<PAGE>
 
                            BRESLER & REINER, INC.

                  SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
             FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>                                                      
<CAPTION>                                                    
                            COLUMN A                               COLUMN B            COLUMN C           COLUMN D       COLUMN E
------------------------------------------------------------  -----------------  --------------------  --------------  ------------
                                                                                                           PERIODIC 
                                                                                      MATURITY             PAYMENT         PRIOR    
                          DESCRIPTION                              INTEREST             DATE                TERMS          LIENS    
------------------------------------------------------------  -----------------  --------------------  --------------  ------------
<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.)        9-1/2%              1999           $36,600/mo.(a)       None
      SEW Investors (S.W. Washington, D.C.)                         12%                 2000            95,700/mo.(b)       None
      Town Center East Investors (S.W. Washington, D.C.)            8-1/2%              2001             9,670/mo.          None
      3rd Street Southwest Investors (S.W. Washington, D.C.)        9-1/2%              2009            11,200/mo.(c)       None
                                                                             
  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 
</TABLE>                                                      

<TABLE>                                                      
<CAPTION>                                                    
                            COLUMN A                              COLUMN F        COLUMN G            COLUMN H    
------------------------------------------------------------  ---------------  -------------  -----------------------  
                                                                                               PRINCIPAL AMOUNT OF 
                                                                                 CARRYING        LOANS SUBJECT TO   
                                                                FACE AMOUNT      AMOUNT OF      DELINQUENT PRINCIPAL 
                          DESCRIPTION                           OF MORTGAGES     MORTGAGES          OR INTEREST        
------------------------------------------------------------  ---------------  -------------  -----------------------
<S>                                                           <C>              <C>            <C> 
FOR THE YEAR ENDED DECEMBER 31, 1996:                                                        
  Related parties-                                                                           
    Second mortgages:                                                                                     
      3rd Street Southwest Investors (S.W. Washington, D.C.)       $4,350,000     $1,810,000            None 
      SEW Investors (S.W. Washington, D.C.)                         9,300,000      1,984,000            None 
      Town Center East Investors (S.W. Washington, D.C.)            1,200,000        394,000            None 
      3rd Street Southwest Investors (S.W. Washington, D.C.)        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> 
                         

                                      58
<PAGE>
 
                            BRESLER & REINER, INC.

                  SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
             FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>                                                      
<CAPTION>                                                    
                            COLUMN A                               COLUMN B            COLUMN C           COLUMN D       COLUMN E
------------------------------------------------------------  -----------------  --------------------  --------------  ------------
                                                                                                           PERIODIC 
                                                                                      MATURITY             PAYMENT         PRIOR    
                          DESCRIPTION                              INTEREST             DATE                TERMS          LIENS    
------------------------------------------------------------  -----------------  --------------------  --------------  ------------
<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.)        9-1/2%              1999           $36,600/mo.(a)       None
      SEW Investors (S.W. Washington, D.C.)                         10%                 2000            95,700/mo.(b)       None
      Town Center East Investors (S.W. Washington, D.C.)            8-1/2%              2001             9,670/mo.          None
      3rd Street Southwest Investors (S.W. Washington, D.C.)        9-1/2%              2009            11,200/mo.(c)       None
                                                                             
  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 
</TABLE>                                                      

<TABLE>                                                      
<CAPTION>                                                    
                            COLUMN A                              COLUMN F        COLUMN G            COLUMN H    
------------------------------------------------------------  ---------------  -------------  -----------------------  
                                                                                               PRINCIPAL AMOUNT OF 
                                                                                 CARRYING        LOANS SUBJECT TO   
                                                                FACE AMOUNT      AMOUNT OF      DELINQUENT PRINCIPAL 
                          DESCRIPTION                           OF MORTGAGES     MORTGAGES          OR INTEREST        
------------------------------------------------------------  ---------------  -------------  -----------------------
<S>                                                           <C>              <C>            <C> 
FOR THE YEAR ENDED DECEMBER 31, 1995:                                                        
  Related parties-                                                                           
    Second mortgages:                                                                                     
      3rd Street Southwest Investors (S.W. Washington, D.C.)       $4,350,000     $1,883,000            None 
      SEW Investors (S.W. Washington, D.C.)                         9,300,000      2,293,000            None 
      Town Center East Investors (S.W. Washington, D.C.)            1,200,000        473,000            None 
      3rd Street Southwest Investors (S.W. Washington, D.C.)        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> 
                         
                                      59
<PAGE>
 
                            BRESLER & REINER, INC.

                  SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
             FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>                                                      
<CAPTION>                                                    
                            COLUMN A                               COLUMN B            COLUMN C           COLUMN D       COLUMN E
------------------------------------------------------------  -----------------  --------------------  --------------  ------------
                                                                                                           PERIODIC 
                                                                                      MATURITY             PAYMENT         PRIOR    
                          DESCRIPTION                              INTEREST             DATE                TERMS          LIENS    
------------------------------------------------------------  -----------------  --------------------  --------------  ------------
<S>                                                           <C>                <C>                   <C>             <C>        
FOR THE YEAR ENDED DECEMBER 31, 1994:                                                         
  Related parties-                                                           
    Second mortgages:                                                         
      3rd Street Southwest Investors (S.W. Washington, D.C.)        9-1/2%              1999           $36,600/mo.(a)       None
      SEW Investors (S.W. Washington, D.C.)                         12%                 1995            95,700/mo.(b)       None
      Town Center East Investors (S.W. Washington, D.C.)            8-1/2%              1996             9,670/mo.          None
      3rd Street Southwest Investors (S.W. Washington, D.C.)        9-1/2%              2009            11,200/mo.(c)       None
                                                                             
  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 
    PNHG, Inc. (Philadelphia, PA)                                     9%                2012
</TABLE>                                                      

<TABLE>                                                      
<CAPTION>                                                    
                            COLUMN A                              COLUMN F        COLUMN G            COLUMN H    
------------------------------------------------------------  ---------------  -------------  -----------------------  
                                                                                               PRINCIPAL AMOUNT OF 
                                                                                 CARRYING        LOANS SUBJECT TO   
                                                                FACE AMOUNT      AMOUNT OF      DELINQUENT PRINCIPAL 
                          DESCRIPTION                           OF MORTGAGES     MORTGAGES          OR INTEREST        
------------------------------------------------------------  ---------------  -------------  -----------------------
<S>                                                           <C>              <C>            <C> 
FOR THE YEAR ENDED DECEMBER 31, 1994:                                                        
  Related parties-                                                                           
    Second mortgages:                                                                                     
      3rd Street Southwest Investors (S.W. Washington, D.C.)       $4,350,000     $1,948,000            None 
      SEW Investors (S.W. Washington, D.C.)                         9,300,000      2,534,000            None 
      Town Center East Investors (S.W. Washington, D.C.)            1,200,000        545,000            None 
      3rd Street Southwest Investors (S.W. Washington, D.C.)        1,333,000      1,331,000            None 
                                                                                  ----------
                                                                                  $6,358,000  
                                                                                  ==========
  Other-                                                          
    First mortgages:                                                                                      
      Home loans (Montgomery County, Maryland) ($50,000 to      
       $159,000) (8 units)                                                        $  484,000            None    
    Developed land loans (St. Mary's County, Maryland)                                                          
     ($20,000 to $50,000) (11 units)                                                 155,000            None    
    Condominium loans (Oxon Hill, Maryland)                                                                     
     ($10,000 to $20,000) (38 units)                                                 202,000            None    
    PNHG, Inc. (Philadelphia, PA)                                                         --            None
                                                                                  ----------
                                                                                     841,000          
                                                                                  ----------
                                                                                  $7,199,000          
                                                                                  ==========
</TABLE> 
                         
                                      60
<PAGE>
 
                            BRESLER & REINER, INC.

                             NOTES TO SCHEDULE IV

<TABLE>
<CAPTION>
                                             1996        1995        1994
                                          ----------  ----------  -----------
<S>                                       <C>         <C>         <C>
CARRYING VALUE AT JANUARY 1               $6,593,000  $7,199,000  $ 9,038,000
  Additions during period-
    New mortgage loans                            --      80,000    1,333,000
                                          ----------  ----------  -----------
                                           6,593,000   7,279,000   10,371,000
  Deductions during period-
    Collections of principal                 566,000     686,000    3,172,000
                                          ----------  ----------  -----------
CARRYING VALUE AT DECEMBER 31             $6,027,000  $6,593,000  $ 7,199,000
                                          ==========  ==========  ===========
</TABLE>
(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 $1,082,000 due in
     2009.

                                      61
<PAGE>
 
     (b) Reports on Form 8-K.  Registrant filed a Form 8-K on December 30, 1996
         -------------------                                                   
with regard to Item 1 "Changes in Control of Registrant".  The date of the
earliest event reported was December 23, 1996.

     (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
<PAGE>
 
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.

          (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.                      66

Exhibit 27     Financial Data Schedule.                         67

                                      63
<PAGE>
 
                              S I G N A T U R E S
                              -------------------


          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 duly authorized.

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

Date:  March 25, 1997                             /s/ Charles S. Bresler
                                                  ------------------------------
                                                  Charles S. Bresler, Chairman
                                                  of the Board
                                                  (Chief Executive Officer)

Date:  March 25, 1997                             /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 25, 1997                             /s/ Charles S. Bresler
                                                  ------------------------------
                                                  Charles S. Bresler, Director
                                                  
Date:  March 25, 1997                             /s/ William L. Oshinsky
                                                  ------------------------------
                                                  William L. Oshinsky, Director

Date:  March 25, 1997                             /s/ Edwin Horowitz
                                                  ------------------------------
                                                  Edwin Horowitz, Director

Date:  March 25, 1997                             /s/ Burton J. Reiner
                                                  ------------------------------
                                                  Burton J. Reiner, Director

                                      64
<PAGE>
 
Date:  March 25, 1997                             /s/ Stanley S. DeRisio
                                                  ------------------------------
                                                  Stanley S. DeRisio, Director


Date:  March 25, 1997                             /s/ Ralph S. Childs, Jr.
                                                  ------------------------------
                                                  Ralph S. Childs, Jr., Director

                                      65