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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-K
 
  /X/    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
 
                         COMMISSION FILE NUMBER 1-6844
 
                            ------------------------
 
                              CALPROP CORPORATION
 
         Incorporated in California          I.R.S. Employer Identification
          13160 MINDANAO WAY, #180                   No. 95-4044835
      MARINA DEL REY, CALIFORNIA 90292
               (310) 306-4314
 
        Securities Registered Pursuant to Section 12(b) of the Act: NONE
 
Securities Registered Pursuant to Section 12(g) of the Act: COMMON STOCK, NO PAR
                                     VALUE
 
                            ------------------------
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K /X/
 
    State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
 
                        $2,826,552 AT FEBRUARY 25, 1999
 
    Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
 
               10,284,135 SHARES OUTSTANDING AT FEBRUARY 25, 1999
 
                      DOCUMENTS INCORPORATED BY REFERENCE:
 
    Portions of the registrant's definitive Proxy Statement for 1999 Annual
Meeting of Shareholders are incorporated by reference into Part III of this
report.
 
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                                     PART I
 
ITEM 1.  BUSINESS
 
GENERAL
 
    Calprop Corporation ("Calprop") designs, constructs and sells single-family
detached and attached homes and townhomes as part of condominiums or planned
unit developments in California and Colorado. The Company selects and acquires
the site, secures construction financing and constructs and sells homes. The
Company also sells improved lots in California. The Company selects projects of
varying types in several local markets in an effort to reduce the risks inherent
in the residential housing industry. To enable the Company to adapt to the
changing market conditions and to control its overhead expenses, the Company
performs its construction activities through independent subcontractors under
the direction of on-site construction supervisors employed by the Company rather
than employing a permanent construction work force. The Company does not
generally finance the purchase of its homes, but has done so in the past to
facilitate sales and may do so in the future to the extent it is feasible, if
market conditions require such financing. In addition to the continuing emphasis
on single-family construction, the Company also develops raw land through the
planning, zoning, and entitlement process.
 
    During 1998, the Company was primarily engaged in the development of lots,
and the construction and marketing of single-family detached homes and
townhomes. As of December 31, 1998, the Company had ten residential housing
projects in various stages of development, consisting of 196 homes under
construction (123 were in escrow), and 918 lots under development. Included in
the 196 homes under development are 27 model homes used in selling the various
types of housing developed. The Company's products range from less expensive
homes for first-time buyers to more expensive near custom homes.
 
RESIDENTIAL HOUSING INDUSTRY
 
    The residential housing industry includes several hundred developers and
home builders of various sizes and capabilities. The development process starts
with the acquisition of a raw parcel of land. The developer prepares preliminary
plans, environmental reports and obtains all necessary governmental approvals,
including zoning and conditional use permits before subdividing the land into
final tract maps and approved development plans. The subdivided parcel is then
graded and the infrastructure of roads, sewers, storm drains, and public
utilities are added to develop finished lots. Building permits are obtained and
housing is constructed, and then sold or rented. Residential housing is
constructed in a variety of types, including single-family detached homes
(ranging from the less expensive "first-time buyer" homes to the medium priced
"trade-up" homes to the more expensive "custom" homes), patio-homes (adjacent
homes with party walls), condominiums (owner-occupied multifamily housing), and
multifamily rental housing (apartments, retirement homes and other types of
nonowner occupied multifamily housing). Any of these types can be built as part
of a planned unit development with common areas such as green belts, swimming
pools and other recreational facilities for common use by occupants.
 
THE COMPANY'S STRATEGY
 
    The Company's strategy has been to acquire land in or near major urban
centers in California and to construct single-family housing for resale. During
the current year, the Company broadened its market to acquire land in or near
major urban centers in Colorado for development of single-family housing for
resale. The Company does not specialize in the construction of a specific type
or design of housing and does not limit its operation to any specific location.
The Company usually acquires project sites which are properly zoned and
subdivided so that the Company can construct and sell single-family housing in a
relatively short period of time, usually two to three years. The Company will
also acquire raw land that is not zoned or subdivided for investment or for
development by processing it through the entitlement process to obtain proper
zoning and other permits necessary for development into single-family housing
and other urban uses.
 
                                       2
<PAGE>
FUTURE PROJECTS
 
    As the Company intends to continue specializing in the construction and sale
of single-family and multifamily housing, the Company is continually considering
potential projects for development. In addition to the construction and sale of
single-family and multifamily housing, the Company is entering the market to
construct and lease single-family and multifamily housing. This market would
provide consistent cash flow in the cyclical industry of real estate
development. The Company currently has land in escrow for the purchase and
construction of single-family and multifamily housing for lease in 1999. The
following discussion is the process which the Company follows to acquire land,
entitle, market and build residential housing projects.
 
LAND ACQUISITION AND CONSTRUCTION
 
    In considering the purchase of land for the construction of housing, the
Company takes various factors into account, including, among others, population
growth patterns, availability of utilities and community services such as water,
gas, electricity, sewer, transportation and schools, the estimated absorption
rate for new housing, estimated costs of construction and success of the
Company's past projects in and familiarity with the area.
 
    The Company's long-term strategy is to acquire or option project sites which
are properly zoned and subdivided so that the Company can construct and sell
single-family housing in a relatively short period of time, usually less than
three years, after acquiring the land. Larger projects are constructed in
phases, and the Company determines the number of homes in each phase based upon
the estimated costs of construction and estimated sales schedule. The division
of a project into phases may also be required by the project construction
lender. Although a construction and marketing schedule is established for all
phases at the commencement of a project, the precise timing of construction of
each phase depends on the rate of sales of homes in previous phases.
 
    In certain instances, the Company purchases land which is not substantially
ready for construction. Depending on the stage of development of the parcel, the
Company might be required to obtain necessary entitlements to subdivide the
parcel of land; these entitlements include environmental clearances, zoning,
subdivision mapping, permits and other governmental approvals. After the
entitlement process the Company would then develop the land through grading lots
and streets, and building the infrastructure of water, sewer, storm drains,
utilities, curbs, streets, and possibly amenities, such as parks, pools and
recreational facilities.
 
    The Company acts as its own general contractor, and its supervisory
employees coordinate all work on a project. The services of independent
architectural, design, engineering and other consulting firms are engaged to
assist in the pre-construction aspects of the project. The Company's
construction activities are conducted through independent subcontractors, under
fixed-price contracts, operating in conformity with plans, specifications and
detailed drawings furnished by the Company and under the direction of on-site
construction supervisors employed by the Company. Generally, the Company
solicits bids from several potential subcontractors and awards a contract for a
single phase of a project based on the subcontracting bid as well as the
Company's knowledge of the subcontractor's work and reputation. Subcontracting
enables the Company to retain the necessary flexibility to react to changes in
the demand for housing, and to utilize the management strengths, specialization
capabilities, equipment and facilities of its subcontractors without large
capital investments of its own.
 
    The Company does not have long-term contractual commitments with any of its
subcontractors, consultants or suppliers of materials. The Company selects
subcontractors who it believes will perform the required work in a timely manner
and whose quality of workmanship meets the Company's standards. Although some
subcontractors employ unionized labor, the Company has not signed a master labor
agreement or experienced any significant delays in construction as a result of
strikes or stoppages; however, there can be no assurances that the Company will
not experience such delays in the future.
 
                                       3
<PAGE>
    The Company secures raw materials, fixtures and furnishings directly or
through its subcontractors from customary trade sources. Although certain
products have been in short supply from time to time, such shortages have not
impaired the Company's ability to conduct its business in the past and are not
expected to do so in the foreseeable future.
 
MARKETING
 
    The Company's marketing department coordinates the design of the homes to be
built and the interior design of model units and the design and preparation of
advertising materials. The Company builds, landscapes and furnishes model units
for public display. After each project is sufficiently completed so as to permit
retail sales to begin, the Company selects a realtor or realty company to market
homes which are under construction or completed.
 
    Projects in which product is currently in the marketing stage are Parc
Metropolitan, Mockingbird Canyon, Saddlerock, and Templeton Heights. All such
projects are being marketed through realtors who have no other affiliation with
the Company.
 
WARRANTIES
 
    The Company provides a one-year express warranty against defects in
workmanship and materials to purchasers of homes in its projects. In addition,
California and Colorado law provides the Company's customers certain implied
warranties, the scope and duration of which exceed the Company's express
warranties. The Company requires its subcontractors to indemnify the Company in
writing and requires the insurance of the subcontractor to provide that the
Company is a primary insured and an additional insured from its subcontractors
for liabilities arising from their work, except for liability arising through
the sole negligence or willful misconduct of the Company or from defects in
designs furnished by the Company. Nevertheless, the Company is primarily liable
to its customers for breach of warranty. The Company has builder's product
liability insurance coverage which it believes to be adequate in light of the
Company's claims history.
 
    Schedule II to the financial statements sets forth the Company's warranty
reserves which the Company believes are adequate. Normal warranty costs are
accrued at the close of escrow and held on a project until two years after the
project is completed and all completion bonds posted with governmental agencies
are released.
 
FINANCING
 
    Generally, the Company acquires a project site for a purchase price paid
with cash or a combination of cash and short-term acquisition financing secured
by the project site. The amount and terms of financing vary from project to
project.
 
    After final working drawings from architects are prepared, the Company
obtains a construction loan, secured by the portion of the project site to which
the loan relates. The Company's construction loans are used to finance projected
construction costs. In order to obtain the construction loan, the Company must
repay all acquisition financing or obtain a reconveyance of that portion of the
project site which is used to secure the construction loan. The construction
loan is due and payable shortly after completion of the construction being
financed. The Company repays construction financing from the proceeds of project
unit sales. The construction financing provides for release of individual lots
for sale during the term of the financing upon partial repayment of principal in
a specified amount per lot. All cash sales proceeds in excess of the specified
release amount are retained by the Company. If the Company experienced a delay
in unit sales following construction and was unable to extend the term of its
construction financing, the Company would be required to repay the construction
financing or obtain other financing in order to hold the unsold units until
market conditions improved. Although the Company does not arrange third-party
financing for its customers, it has provided secured purchase money financing
from time to time to the
 
                                       4
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extent required by market conditions. In addition, the Company in the future may
also subsidize home purchasers, as an alternative to providing direct financing,
by "buying down" the interest rate on loans from lending institutions, the
extent and amount of which would depend upon prevailing market conditions and
interest rate levels at the time.
 
    The Company usually receives the full sales price for its homes in cash at
the closing of purchase escrows. Most of the Company's home purchasers obtain
conventional financing from independent financial institutions. Depending upon
the price range of the homes in a particular project and the prevailing mortgage
market in the area, the financing obtained by the Company's qualifying home
purchasers may be insured either by the Federal Housing Administration ("FHA")
or guaranteed by the Veterans Administration ("VA"). As a result of government
regulations, FHA and VA financing of the purchase of homes from the Company is
limited because, among other things, the loan amount may not exceed certain
specified levels.
 
COMPETITION
 
    The home building industry is highly competitive, particularly in the large
urban areas of California. In each of the areas in which it operates, the
Company competes in terms of location, design, quality, price and available
mortgage financing with numerous other residential construction firms, including
large national and regional firms, many of which have greater financial
resources than the Company. The Company believes that no single competitor
dominates any single market area served by the Company.
 
    For projects in master planned developments, the Company's units are
adjacent to those of other builders and usually marketed at the same time
through participation in joint advertising programs. While this often increases
direct competition for the Company, it also attracts a larger group of potential
purchasers than would be the case if the Company advertised by itself.
 
BUSINESS RISKS
 
    The development, construction and sale of single-family homes generally are
subject to various risks, including, among others, possible changes in the
governmental structure of the project locality, possible shortages of suitable
undeveloped land at reasonable prices, unfavorable general and local economic
conditions such as employment conditions and income levels of the general
population, adverse local market conditions resulting from such unfavorable
economic conditions or competitive overbuilding, increases in prevailing
interest rates, increases in real estate taxes and the cost of materials and
labor, and the availability of construction financing and home mortgage
financing attractive to home purchasers. In addition, the demand for residential
housing depends in part on the tax consequences of home ownership to home
purchasers. There have been various tax legislation proposals before Congress
over the past few years which could reduce the tax advantages currently
associated with home ownership. There can be no assurances that any such
legislation, if enacted, would not adversely impact the residential housing
industry in general or the Company's business and results of operations.
 
    The Company's business in particular depends upon the successful completion
of construction and sale of homes on established schedules. Construction and
sale schedules may be adversely affected by a variety of factors which are not
within the Company's control, including the factors described above, inclement
weather conditions, earthquakes, labor and material shortages and strikes.
Although the Company has not experienced any serious labor or material shortages
in recent years, the residential housing industry from time to time experiences
serious labor and material shortages.
 
GOVERNMENTAL REGULATIONS
 
    The residential housing industry is also subject to increasing
environmental, building, zoning and real estate sales regulation by various
federal, state and local governmental authorities. Such regulations affect home
building by specifying, among other things, the type and quality of building
material which must be
 
                                       5
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used, certain aspects of land use and building design, as well as the manner in
which the Company conducts its sales, lending activities and other dealings with
its customers. For example, the Federal Consumer Credit Protection Act requires,
among other things, certain disclosures to purchasers about finance charges in
credit transactions, such as sales financed by the Company. California law
requires that full information concerning certain subdivisions be filed with the
California Real Estate Commissioner, and in such instances no sales may be made
to the public until the Commissioner has issued a public report which is
delivered to purchasers. Because the Company's competitors are also subject to
the foregoing regulation, the Company believes that it is not placed at a
competitive disadvantage, except to the extent that competitors with greater
financial resources and greater volume of development activity may more readily
withstand longer delays and increased costs in the development of projects.
 
    Although the strategy of the Company is to build homes on land which is
already subdivided, zoned and improved with utilities, the Company occasionally
undertakes projects which entail the subdivision of partially improved land. In
such cases the Company is required to obtain the approval of numerous
governmental authorities regulating such matters as permitted land uses and
levels of population density, access to utility services such as water and waste
disposal, and the dedication of acreage for open space, parks, schools and other
community purposes. Furthermore, changes in prevailing local circumstances or
applicable law, including moratoria, zoning changes and other governmental
actions, can require additional approvals or modification of approvals
previously obtained. As a result of such regulation, the time between the
original acquisition and the commencement and completion of a project can
increase significantly. Furthermore, the commencement or completion of a project
could be precluded entirely, in which case the Company would sustain a
substantial loss on the project.
 
EMPLOYEES
 
    The Company has approximately twenty nine full-time employees, including
five executive officers, sixteen persons in its finance, marketing and
operations departments, and eight field superintendents and general laborers.
The Company also employs temporary and part-time laborers from time to time as
necessary. None of the Company's employees is currently represented by a
collective bargaining unit. The Company compensates its employees with salaries
and fringe benefits that it believes are competitive with the building industry
and the local economy. The Company believes that relations with its employees
generally are excellent.
 
LICENSING
 
    The Company is licensed by the State of California as a general building
contractor, and this license is essential to its operations. This license must
be renewed every two years. The Company's current license expires in July 2002
and the Company expects to renew its license on or before expiration.
 
                                       6
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ITEM 2.  PROPERTIES
 
CURRENT PROJECTS
 
    The table below sets forth certain information relating to the Company's
current projects as of December 31, 1998 and certain information relating to the
Company's development operations during the previous twelve months.
 
<TABLE>
<CAPTION>
                                                                  UNITS                      UNITS       UNITS SOLD
                                                                 SOLD 12    UNITS UNDER    COMPLETED     SUBJECT TO     REMAINING
                                                                 MONTHS     CONSTRUCTION   AND UNSOLD   CONSTRUCTION     UNITS TO
                                                                  ENDED        AS OF         AS OF         AS OF       CONSTRUCT AS
PROJECT                                                         12/31/98      12/31/98      12/31/98      12/31/98     OF 12/31/98
--------------------------------------------------------------  ---------   ------------   ----------   ------------   ------------
<C><S>                                                          <C>         <C>            <C>          <C>            <C>
 1. Cierra Del Lago............................................     41           --            --            --              --
 2. Antares....................................................      8           92            --            75              --
 3. Summertree Park-Elk Grove..................................     24           18            --             6              45
 4. Montserrat.................................................     15           --            --            --              --
 5. Montserrat Estates.........................................     74           45            --            37              --
 6. Mockingbird Canyon.........................................     --           --            --            --              31
 7. Parkland Farms.............................................     --           26            --             5              89
 8. Parc Metropolitan..........................................     --           12            --            --             370
 9. Parcwest...................................................     --           --            --            --              68
10. High Ridge Court...........................................     --            3            --            --             167
11. Saddlerock.................................................     --           --            --            --              94
12. Templeton Heights..........................................     --           --            --            --              54
13. Mission Gorge..............................................     --           --            --            --              --
                                                                                               --
                                                                   ---          ---                         ---           -----
                                                                   162          196            --           123             918
                                                                                               --
                                                                                               --
                                                                   ---          ---                         ---           -----
                                                                   ---          ---                         ---           -----
   Total inventory units as of 12/31/98 (including 27 model
     units)...................................................                                                            1,114
                                                                                                                          -----
                                                                                                                          -----
</TABLE>
 
    BACKLOG--As noted in the above table, the total number of units sold subject
to construction ("backlog") at December 31, 1998, was 123 units, with gross
revenues of such backlog equal to $29,835,000. As of March 15, 1999, the backlog
was 140 units, representing $33,180,000 compared to a backlog of 145 units
representing $29,674,000 as of March 15, 1998. See also "Management Discussion
and Analysis of Financial Condition and Results of Operations" for additional
discussion of Real Estate Sales for 1998 and 1997.
 
1.  CIERRA DEL LAGO (RANCHO SANTA MARGUERITA, ORANGE COUNTY, CALIFORNIA)
 
    The Cierra Del Lago project, formerly Montana Del Lago, consists of 41 units
of single-family detached housing. The project consists of two models ranging
from 1,281 to 1,412 square feet with base sales prices before lot premiums or
sales incentives of $167,900 to $175,900. The Company closed escrow on all 41
units in 1998.
 
    The project is located about 50 miles southeast of Los Angeles along
Interstate 5 near Newport Beach.
 
    In 1996, the Company formed DMM Development Co., LLC, a California limited
liability company, ("DMM") with RGC Courthomes, Inc., a California Corporation,
("RGC"). In October, 1996, 41 lots in the Cierra Del Lago project were acquired
by DMM. The profits and losses of DMM are to be distributed between the members
as follows, 33.3% to RGC and 66.7% to the Company.
 
    As of December 31, 1998, there is no outstanding debt related to the Cierra
Del Lago project.
 
                                       7
<PAGE>
2.  ANTARES (DEL MAR HEIGHTS, SAN DIEGO COUNTY, CALIFORNIA)
 
    The Antares project, formerly Elysian 2, consists of 100 units of
single-family detached housing. The project consists of three models ranging
from 1,212 to 1,567 square feet with base sales prices before lot premiums or
sales incentives of $210,500 to $310,500. As of December 31, 1998, eight of the
units closed escrow, and 75 of the units were sold subject to construction. The
Company expects the majority of these units to close in the second and third
quarter of 1999.
 
    The project is located about 20 miles north of San Diego along Interstate 5.
 
    In 1996, the Company formed DMM with RGC. In December, 1996, 100 lots in the
Antares project were acquired by DMM. The profits and losses of DMM are to be
distributed between the members as follows, 33.3% to RGC and 66.7% to the
Company.
 
    The Company's construction loans for the 100 units was secured by Imperial
Bank in 1997. The loans permit borrowings by the Company of $17,029,313 on this
project and bear interest at the bank's reference rate plus 1.5%. As of December
31, 1998, the outstanding principal of these loans totaled $8,256,525, and the
Company had available $7,097,626. The Company believes these funds are adequate
to complete the construction of the project.
 
    The Company has an acquisition loan with the Curci-Turner Company on the
entire 100 lots of the project. The loan permits borrowing by the Company of
$3,050,000 on this project and bears interest at 12%. The loan contains a profit
sharing provision in the amount of 33.3% of "net proceeds" as defined in the
agreement. As of December 31, 1998, $2,816,600 of the principal of this loan was
outstanding.
 
3.  SUMMERTREE PARK (ELK GROVE, SACRAMENTO COUNTY, CALIFORNIA)
 
    The Summertree Park project consists of 120 units of single-family detached
housing. The first phase of 22 units and four models, which product has been
discontinued, and second phase of 19 units, the first phase of the new product
has been sold in its entirety as of December 31, 1998. The project presently
consists of two models ranging from 1,509 to 2,183 square feet with base sales
prices, before lot premiums or sales incentives, of $129,900 to $157,900. The
third phase of 19 units and nine units in the fourth phase was released in 1998.
As of December 31, 1998, 24 of the units were closed, six units were in escrow
and ten were under construction. Construction of the fifth phase of 20 units is
expected to begin in June 1999.
 
    The project is located about 20 miles south of Sacramento along Highway 99.
 
    The Company's construction loan on the third phase of construction was
secured with Imperial Bank. The loan permits borrowing by the Company of
$2,423,356 on this project and bears interest at the bank's reference rate plus
1.0%. As of December 31, 1998, the outstanding principal of this loan was
$439,670, and the Company had available $404,768. The Company believes these
funds are adequate to complete the construction of the third phase of
construction.
 
    The Company has an acquisition/construction loan with the Curci-Turner
Company on the entire 120 lots of the project. The loan permits borrowing by the
Company of $4,000,000 on this project and bears interest at the prime 1.5%. The
loan contains a profit sharing provision in the amount of 40% of "net proceeds"
as defined in the agreement. As of December 31, 1998, $1,701,894 of the
principal of this loan was outstanding.
 
4.  MONTSERRAT (MURRIETA, RIVERSIDE COUNTY, CALIFORNIA)
 
    The Montserrat project consists of 89 units of single-family detached
housing. The Company released for construction four models and 41 units in 1996.
The Company closed escrow on all 89 units as of December 31, 1998.
 
    The project is located about 65 miles southeast of Los Angeles along Highway
15.
 
                                       8
<PAGE>
    The Company secured a $1,346,000 acquisition loan from L & N Consultants,
Inc., the land seller, which bears interest at prime plus 2.0%. As of December
31, 1998, the loan had been paid in its entirety.
 
    The Company's construction loan on the 24 units in the fourth phase of
construction was secured in 1997 with Imperial Bank. The loan permits borrowing
by the Company of $4,226,170 and bears interest at the prime plus 1.25%. As of
December 31, 1998, the loan had been paid in its entirety.
 
    The Company has model and acquisition loans with the Curci-Turner Company on
four model units and 21 units of the project. The loans permit borrowing by the
Company of $400,000 and $1,487,500, respectively and bear interest at 12%. The
loans contain a profit sharing provision in the amount of 50% of "net proceeds"
as defined in the agreement. As of December 31, 1998, $104,250 was outstanding
on the model loan and the acquisition loan was paid off in its entirety.
 
5.  MONTSERRAT ESTATES (MURRIETA, RIVERSIDE COUNTY, CALIFORNIA)
 
    The Montserrat project consists of 119 units of single-family detached
housing. The project consists of four models ranging from 2,280 to 3,411 square
feet with base sales prices before lot premiums or sales incentives of $174,900
to $242,900. The Company released for construction 24 units in 1997. The Company
closed escrow on 74 units in 1998. As of December 31, 1998, the Company had 41
units under construction (37 were in escrow), and four models.
 
    The project is located about 65 miles southeast of Los Angeles along Highway
15.
 
    The Company secured a $752,000 acquisition loan from Oak Properties 24, LLC,
the land seller, which bears interest at 4.0%. As of December 31, 1998, the
outstanding balance on this loan was paid in its entirety.
 
    On October 30, 1997, the Company and PICal Housing Associates, L.P.
("PICal") formed Montserrat II, LLC. As part of the formation, Calprop
contributed 119 lots of its Montserrat Estates project as well as certain
obligations related to the lots, for a basis of $550,000, which approximated
book value and fair value. PICal contributed $2,000,000 at the formation and
contributed an additional $864,097 as of December 31, 1998. Pursuant to the
operating agreement of Montserrat II, LLC, losses are allocated 100% first to
Calprop until its capital account is zero, then to PICal. Income is allocated
first to reverse losses, then to PICal to attain a return on its capital, then
to Calprop. As of December 31, 1998, PICal attained its return on capital and
accordingly no longer owns ownership interest in Montserrat II, LLC.
 
    The Company's construction loan on the 36 units in the fourth phase of
construction was secured in 1998 with Imperial Bank. The loan permits borrowing
by the Company of $7,034,958 and bears interest at the prime plus 1.0%. As of
December 31, 1998, the outstanding principal of this loan was $2,897,820, and
the Company had available $4,789,265. The Company believes these funds are
adequate to complete the construction of the fourth phase of construction.
 
6.  MOCKINGBIRD CANYON (UNINCORPORATED TERRITORY OF RIVERSIDE COUNTY,
    CALIFORNIA)
 
    The Mockingbird Canyon project consists of 31 lots. The Company is planning
on building single-family homes averaging 3,694 to 4,137 square feet with
average sales prices before lot premiums or sales incentives of $419,900 to
$439,900. As of December 31, 1998, the Company had 31 lots under construction.
 
    The project is located about 90 miles east of Los Angeles and 30 miles south
of San Bernardino along Interstate 15.
 
    The Company has an acquisition/construction loan with the Curci-Turner
Company on the entire 31 lots of the project. The loan permits borrowing by the
Company of $3,500,000 on this project and bears interest at 12%. The loan
contains a profit sharing provision in the amount of 50% of "net proceeds" as
defined in the agreement. As of December 31, 1998, $2,513,000 of the principal
of this loan was outstanding.
 
                                       9
<PAGE>
7.  PARKLAND FARMS (HEALDSBURG, SONOMA COUNTY, CALIFORNIA)
 
    The Parkland Farms project, formerly Parkland Hills, consists of 115 units
of single-family detached housing. The project consists of three models ranging
from 1,902 to 1,926 square feet with base sales prices before lot premiums or
sales incentives of $224,900 to $269,900. The Company released for construction
23 units in 1998. As of December 31, 1998, the Company had 23 units under
construction (five were in escrow), and three models.
 
    The project is located about 75 miles north of San Francisco along highway
101.
 
    In 1998, the Company formed Parkland Farms Development Co., LLC, a
California limited liability company, ("Parkland") with an officer of the
Company. In September, 1998, 115 lots in the Parkland Farms project were
acquired by Parkland. The profits and losses of Parkland are to be distributed
between the members as follows, 1% to Partner and 99% to the Company.
 
    The Company has acquisition/construction loans with the Curci-Turner Company
on the entire 115 lots of the project. The loans permits borrowing by the
Company of $4,808,201 on this project and bears interest at 12%. The loan
contains a profit sharing provision in the amount of 50% of "net proceeds" as
defined in the agreement. As of December 31, 1998, the principal balance of the
loans totaled $3,532,739.
 
    The Company's construction loan on the 45 units in the first and second
phase of construction was secured in 1998 with Imperial Bank. The loan permits
borrowing by the Company of $13,400,000 and bears interest at the prime plus
1.0%. As of December 31, 1998, the outstanding principal of this loan was
$6,940,347, and the Company had available $6,040,744. The Company believes these
funds are adequate to complete the construction of the first two phases of
construction.
 
8.  PARC METROPOLITAN
 
    The Parc Metropolitan project consists of three separate projects/products,
Product A, Product B, and Product C.
 
    Product A consists of 130 lots. The Company is planning on building
single-family attached housing. The project consists of two models ranging from
1,415 to 1,788 square feet with base sales prices before lot premiums or sales
incentives of $290,000 to $310,000.
 
    Product B consists of 108 lots. The Company is planning on building
single-family attached housing. The project consists of six models ranging from
982 to 1,411 square feet with base sales prices before lot premiums or sales
incentives of $225,000 to $275,000.
 
    Product C consists of 144 lots. The Company is planning on building
single-family attached housing. The project consists of two models ranging from
1,346 to 1,533 square feet with base sales prices before lot premiums or sales
incentives of $270,000 to $290,000.
 
    The project is located approximately 45 miles south of San Francisco along
highway 880 in the Silicon Valley area.
 
    In 1998, the Company formed RGCCLPO Development Co., LLC, a California
limited liability company, ("RGCCLPO") with RGC Courthomes, Inc., a California
Corporation, ("RGC"). In September, 1998, 382 lots in the Metropolitan project
were acquired by RGCCLPO. The profits and losses of RGCCLPO are to be
distributed between the members as follows, 50% to RGC and 50% to the Company.
 
    The Company acquired the land through seller financing with Ford Motor
Company and Ford Motor Land Development Corporation on the entire 382 lots and
the land for the Parcwest Apartments project. The original note balance of
$12,850,000 bears interest at 9%. As of December 31, 1998, $11,241,567 was
outstanding.
 
                                       10
<PAGE>
    The Company's acquisition and development loan on the entire 382 lots of the
project was secured in 1998 with Lowe Enterprises Residential Advisors,
("Lowe"). The loan permits borrowing by the Company of $9,700,000 and bears
interest at the prime plus 2.0%. As of December 31, 1998, the outstanding
principal of this loan was $5,415,957, and the Company had available $4,789,265.
The Company believes these funds are adequate to complete the development of the
382 lots.
 
    The Company's construction loan on the first and second phase of
construction for Product A was secured with Imperial Bank in 1998. The loan
permits borrowing by the Company of $12,381,550 on this project and bears
interest at the bank's reference rate plus 1.0%. As of December 31, 1998, the
outstanding principal of this loan was $440,127, and the Company had available
$11,496,745. The Company believes these funds are adequate to complete the
construction of the second phase of construction.
 
9.  PARCWEST
 
    The Parcwest project consists of 68 lots. The Company is in the preliminary
planning stages of the project to start construction in 1999.
 
    The project is located approximately 45 miles south of San Francisco along
highway 880 in the Silicon Valley area.
 
10. HIGH RIDGE COURT
 
    The High Ridge Court project, former Hunters Chase, consists of 170 lots.
The Company is planning on building single-family housing. The project consists
of three models ranging from 1,809 to 2,484 square feet with base sales prices
before lot premiums or sales incentives of $151,900 to $162,900.
 
    The project is located approximately 3 miles west of I-25 in the city of
Thornton.
 
    The Company has an acquisition loan with the Curci-Turner Company on the
entire 170 lots of the project. The loan permits borrowing by the Company of
$2,500,000 on this project and bears interest at 12%. The loan contains a profit
sharing provision in the amount of 50% of "net proceeds" as defined in the
agreement. As of December 31, 1998, $2,025,000 of the principal of this loan was
outstanding.
 
    The Company's acquisition and development loan on the entire 170 lots of the
project was secured in 1998 with First American Bank Texas. The loan permits
borrowing by the Company of $1,723,050 and bears interest at the prime plus
1.0%. As of December 31, 1998, the outstanding principal of this loan was
$545,987, and the Company had available $1,049,403. The Company believes these
funds are adequate to complete the development of the 170 lots.
 
    The Company's revolving construction loan on the entire 170 lots of the
project was secured in 1998 with First American Bank Texas. The revolving loan
permits the Company to have a maximum balance of $5,000,000. The loan bears
interest at the prime plus 1.0%. As of December 31, 1998, the outstanding
principal of this loan was $108,754, and the Company had available $4,891,246.
The Company believes these funds are adequate to complete the construction of
the 170 units.
 
11. SADDLEROCK
 
    The Saddlerock project consists of 94 lots. The Company is planning on
building single-family homes averaging 2,515 square feet and average sales
prices near $275,000 on the 94 lots.
 
    The project is located adjacent to highway E470 approximately 7 miles east
of I-25 in the city of Aurora.
 
    The Company has an acquisition/construction loan with the Curci-Turner
Company on the entire 94 lots of the project. The loans permits borrowing by the
Company of $2,350,000 on this project and bears interest at 12%. The loan
contains a profit sharing provision in the amount of 50% of "net proceeds" as
 
                                       11
<PAGE>
defined in the agreement. As of December 31, 1998, $2,350,000 of the principal
of this loan was outstanding.
 
12. TEMPLETON HEIGHTS
 
    The Templeton Heights project consists of 54 lots. The Company is planning
on building single-family homes on the 54 lots.
 
    The project is located approximately 5 miles east of I-25 in the city of
Colorado Springs.
 
13. MISSION GORGE (SAN DIEGO, SAN DIEGO COUNTY, CALIFORNIA)
 
    In 1987, the Company purchased approximately 200 acres of land in San Diego.
The previous owners, as a part of a group of property owners, had entered into
an option agreement with another developer to acquire the group's property, upon
obtaining an Amended Community Plan for the community in which the property is
located. At the present time, the Amended Community Plan has not been completed.
The Company is actively pursuing alternative land development opportunities.
 
    The Company formed Mission Gorge, LLC, a California limited liability
company, with the Curci-Turner Company for the purposes of developing the 200
acres of the Mission Gorge project. The net proceeds are to be divided equally,
as defined in the operating agreement, among the two members, Calprop and
Curci-Turner Company.
 
LAND HELD FOR INVESTMENT
 
1.  BRENTWOOD (VICTORVILLE, SAN BERNARDINO COUNTY, CALIFORNIA)
 
    The Victorville project consisted of 517 lots. The Company substantially
completed the entitlement process on the project during 1992 that was part of a
Mello Roos Community Facilities District for major infrastructure in the
Victorville area.
 
    During 1996, the Company recorded an impairment loss associated with the
Victorville property, which was included as land held for investment, of
$1,626,198. The recognition of impairment loss was a result of the Company
valuing the land based on the sale of the vacant lots as opposed to the
development of the project.
 
    In addition, as of December 31, 1997, the Company had a delinquency of
$777,000 for the Victorville bond liability and $55,000 for property taxes.
Given the weakness in the Victorville housing market, the Company had determined
that paying these taxes and servicing the nonrecourse bond liability is not a
prudent use of capital. Subsequent to July 1997, accruals were no longer
recorded as the value of the property subject to the debt equaled the liability
of the debt. The debt is non-recourse and the Company was prepared to forfeit
the property if other options are deemed uneconomical.
 
    On December 29, 1998, the Company sold the Victorville property for
approximately the net book value. The purchase agreement called for the buyer to
assume all property tax, bond liability and related penalties and interest.
 
DEVELOPMENTS IN ESCROW
 
    The Company has entered into escrow to acquire 83 lots in Colorado Springs
and 17.60 acres of land in Boulder, Colorado. The Company is also in escrow to
acquire 92 lots in San Luis Obispo and 182 lots in San Diego, California.
 
                                       12
<PAGE>
ITEM 3.  LEGAL PROCEEDINGS
 
    There are no pending legal proceedings to which the Company is a party or to
which any of its properties are subject other than routine litigation incidental
to the Company's business, none of which is considered by the Company to be
material to its business or operations.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matters were submitted to a vote of Company's security holders during the
fourth quarter of 1998.
 
                                    PART II
 
ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
  MATTERS
 
    Since October 1, 1996, transactions in the Company's common stock, its only
class of common equity security, have been regularly quoted on the OTC Bulletin
Board under the symbol CLPO. Prior to October 1, 1996, the Company's common
stock was traded on the American Stock Exchange under the symbol, CPP.
 
<TABLE>
<CAPTION>
                                                        FIRST     SECOND      THIRD     FOURTH
                                                       QUARTER    QUARTER    QUARTER    QUARTER
                                                      ---------  ---------  ---------  ---------
<S>                                                   <C>        <C>        <C>        <C>
1998 stock price range--
  High..............................................  $1 1/4     $1 3/4     $1 7/8     $1 5/8
  Low...............................................  1 1/16     1 1/16     1 9/16     1 1/4
 
1997 stock price range--
  High..............................................  9/16       9/16       1 5/16     15/16
  Low...............................................  9/32       9/32       3/8        1/2
</TABLE>
 
    As of February 25, 1999, there were 549 record holders of common stock.
 
Dividends:  There have been no cash dividends declared in the past two years,
            nor was there a stock dividend declared during 1998 or 1997. The
            dividend policy, whether cash or stock, is reviewed by the Board of
            Directors on an annual basis. During 1998, there were no
            restrictions, as a result of a loan or other agreement, limiting the
            Company's ability to issue a dividend.
 
                                       13
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA
 
    The following data should be read in conjunction with the financial
statements of the Company and the related notes thereto which are included
elsewhere in this Form 10K and in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which is also
included elsewhere in this Form 10K.
 
                FOR THE FIVE YEAR PERIOD ENDED DECEMBER 31, 1998
 
<TABLE>
<CAPTION>
                                           1998           1997           1996           1995           1994
                                       -------------  -------------  -------------  -------------  -------------
<S>                                    <C>            <C>            <C>            <C>            <C>
SALES AND OPERATING REVENUE..........  $  33,071,722  $  22,908,649  $  13,717,126  $  17,061,239  $  18,733,525
NET INCOME (LOSS)....................      5,368,006     (1,620,211)    (9,200,342)       513,381     (1,628,889)
BASIC INCOME (LOSS) PER COMMON
  SHARE..............................  $        0.54  $       (0.18) $       (1.28) $        0.01  $       (0.44)
DILUTED INCOME (LOSS) PER COMMON
  SHARE..............................  $        0.52  $       (0.18) $       (1.28) $        0.01  $       (0.44)
 
AS OF DECEMBER 31:
TOTAL ASSETS.........................  $  72,521,889  $  30,956,802  $  27,533,378  $  31,805,263  $  30,433,365
LONG TERM OBLIGATIONS................  $  24,037,842  $  14,267,931  $  14,993,355  $  10,444,731  $   4,336,544
</TABLE>
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
    The Company began experiencing difficulties due to the downturn in the
California real estate market during the second quarter of 1990, and through
1996 the Company continued to be impacted by the general economic downturn. In
response to these conditions the Company began utilizing marketing programs
which included price reductions and incentives to potential buyers. During 1997
however, the California real estate market began to experience a recovery. In
general, the Company's products were well received, exemplified by an increase
in the number of units sold subject to construction ("backlog") at December 31,
1998 of 123 units compared to 114 units in 1997, and 33 units as of 1996.
Additionally, the Company's sales revenue increased from $13,717,126 in 1996 to
$22,908,649 in 1997, and to $33,071,722 in 1998. The increase in sales revenue
between 1996, 1997, and 1998 is primarily attributable to an increase in units
sold from 66 in 1996, 102 in 1997, and to 162 in 1998. The Company increased its
gross profit to $2,627,524 in 1998 from $54,702 in 1997 and from a gross loss of
$432,998 in 1996. The increase in gross profit is a result of the Company
beginning to sell homes in its Cierra Del Lago and Montserrat Estates projects.
During the prior year, the Company was selling homes in the Cypress Cove and
Summertree Park projects both of which had been adjusted for impairment in 1996.
 
    In 1996, the Company recognized impairment of real estate under development
and land held for investment in the amount of $6,093,475. Impairment losses
recognized on the Company's real estate under development projects, Pleasant
Oaks Estates, Cypress Cove, and Summertree Park, Elk Grove, were $1,014,629,
$1,540,972 and $1,911,676, respectively. The impairment loss recognized on the
Company's land held for investment, the Victorville project, was $1,626,198.
 
    The impairment loss on the Pleasant Oaks Estates project is primarily a
result of additional municipal requirements in 1996 which contributed to a
significant delay of the completion of the final units. Additional land
development costs were incurred to satisfy the municipal requirements, and as a
result of the delay, the Company incurred increased project overhead and
interest costs, and was forced to reduce sales prices and raise incentives as
the competition in this market increased. The project was completed in 1997.
 
    The impairment loss on the Cypress Cove project is due to the Company
incurring increased production overhead, interest and marketing costs as a
result of a slow down in absorption due to a
 
                                       14
<PAGE>
decreased customer base, and an increased production period, as the area
experienced the impact of inclement weather conditions in the winter and spring
of 1996, including the closure of a major access road from the San Francisco Bay
Area. Additionally, in order to revitalize the project subsequent to the storms
in 1996, the Company increased sales incentives. The project was completed in
1997.
 
    The impairment loss on the Summertree Park, Elk Grove project is primarily a
result of a slower absorption caused by a sagging real estate market in the
Sacramento area. As a result, the Company discontinued the product after the
first phase of production, and began to develop a new product line in 1996,
which the Company opened in April 1997. The Company incurred increased
capitalized marketing, production overhead and interest costs as models were
constructed for the new product line. Contributing to additional production
overhead and interest costs relating to the development of the new product, the
carrying costs for the development were further increased as inclement weather
conditions in the area during the winter and spring of 1996 hampered sales and
the development efforts. Additionally, in order to increase the absorption of
the old product line, the Company increased sales incentives. The Company had 63
remaining units as of December 31, 1998.
 
    The impairment loss recognized on the Company's land held for investment,
the Victorville property, was a result of the Company valuing the land based on
the sale of the vacant lots as opposed to the development of the project. The
Victorville property was sold in December 1998.
 
RESULTS OF OPERATIONS
 
    The Company had income before benefit of income taxes of $594,306 in 1998
from a net loss before benefit of income taxes of $1,806,068 in 1997, and a net
qloss of $9,200,342 in 1996. The change from a net loss to a net profit in 1998
is primarily due to increase in profit from operations as the Company began
selling homes in its Cierra Del Lago and Montserrat Estates projects. The net
loss in 1997 is primarily due to the impact of impairment losses on three
projects recognized in 1996 resulting in low gross profit in 1997. The net loss
suffered in 1996 is primarily a reflection of the recognition of asset
impairment of the Company's properties in the amount of $6,093,475.
 
    Gross revenues increased to $33,071,722 in 1998 from $22,908,649 in 1997, up
44.4%. Gross revenues were $13,717,126 in 1996. In 1998, the Company sold 162
homes, with an average sales price of $204,146. In 1997, the Company sold 102
homes, with an average sales price of $224,595. In 1996, the Company sold 66
homes, with an average sales price of $207,835.
 
    The overall gross profit percentage of the Company was a positive 7.9%,
0.2%, and negative 3.2% in 1998, 1997, and 1996, respectively.
 
    General and administrative expenses were $1,752,909 in 1998 and $1,444,096
in 1997, up 21.4%. General and administrative expenses were $2,332,444 in 1996.
The increase in 1998 from 1997 is the result of an increase in payroll costs,
and increased accounting costs due to the growth of the Company.
 
    Benefit for income taxes in 1998 of $4,773,700 includes the reduction of the
valuation allowance of $4,800,000 to recognize a deferred tax asset. The
recognized deferred tax asset is based upon expected utilization of net
operating loss carryforwards. Benefit for income taxes in 1997 of $185,857
represents the net refund resulting from a claim filed for the carryback of
losses related to certain qualifying expenses incurred in 1996.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    During 1995, the Company obtained a loan in the amount of $4,000,000 from
the Curci-Turner Company for the acquisition and development of the Summertree
Park project. In addition to interest, this loan contains a profit sharing
provision which provides that Curci-Turner Company receive 40% of Net Proceeds
as defined in the agreement, which is comparable to gross profit. As of December
31, 1998, the outstanding principal balance on this note was $1,701,894.
 
                                       15
<PAGE>
    During 1996, the Curci-Turner Company made a loan of $3,700,000 to the
Company secured by 41 lots in the Cierra Del Lago project in Rancho Santa
Marguerita and 100 lots in the Antares project in Del Mar Heights. In addition
to interest, this loan contains a profit sharing provision which provides that
Curci-Turner Company receive thirty-three percent of "Net Proceeds" as defined
in the agreement. As of December 31, 1998, the outstanding principal balance on
this note was $2,816,600.
 
    During 1996, the Curci-Turner Company made loans of $1,487,500 to the
Company secured by 21 lots and a four unit model complex in the Montserrat
project in Murrieta, California. In addition to interest, each loan contains a
profit sharing provision which provides that the Curci-Turner Company receive
50% of "Net Proceeds" as defined in the agreement, which is comparable to gross
profit. As of December 31, 1998, the outstanding principal balance on these
notes totaled $104,250.
 
    During 1997, the Company obtained a loan in the amount of $2,677,000 from
the Curci-Turner Company for the acquisition and development of the Parkland
Farms project in Healdsburg, Sonoma County, Calfornia. In addition to interest,
this loan contains a profit sharing provision which provides that the
Curci-Turner Company receive 50% of "Net Proceeds" as defined in the agreement,
which is comparable to gross profit. As of December 31, 1998, the outstanding
principal balance on this note was $2,383,306.
 
    During 1997, the Company obtained a loan in the amount of $2,000,000 from
Mission Gorge, LLC, a related party, for working capital purposes. The loan
provides for interest at 12%. As of December 31, 1998, the outstanding principal
on this note was $2,000,000.
 
    During 1998, the Company obtained a loan in the amount of $2,131,201 from
the Curci-Turner Company for the acquisition and development of the Parkland
Farms project in Healdsburg, Sonoma Country, California. In addition to
interest, this loan contains a profit sharing provision which provides that the
Curci-Turner Company receive 50% of "Net Proceeds" as defined in the agreement,
which is comparable to gross profit. As of December 31, 1998, the outstanding
principal balance on this note was $1,149,433.
 
    During 1998, the Company obtained a loan in the amount of $2,500,000 from
the Curci-Turner Company for the acquisition and development of the High Ridge
Court project in Thornton, Colorado. In addition to interest, this loan contains
a profit sharing provision which provides that the Curci-Turner Company receive
50% of "Net Proceeds" as defined in the agreement, which is comparable to gross
profit. As of December 31, 1998, the outstanding principal balance on this loan
totaled $2,291,297.
 
    During 1998, the Company obtained a loan in the amount of $2,350,000 from
the Curci-Turner Company for the acquisition and development of the Saddlerock
project in Aurora, Colorado. In addition to interest, this loan contains a
profit sharing provision which provides that the Curci-Turner Company receive
50% of "Net Proceeds" as defined in the agreement, which is comparable to gross
profit and is due on demand. As of December 31, 1998, the outstanding principal
balance on this loan totaled $2,350,000.
 
    During 1998, the Company obtained a loan in the amount of $3,500,000 from
the Curci-Turner Company for the acquisition and development of the Mockingbird
Canyon project in Riverside County, California. In addition to interest, this
loan contains a profit sharing provision which provides that the Curci-Turner
Company receive 50% of "Net Proceeds" as defined in the agreement, which is
comparable to gross profit. As of December 31, 1998, the outstanding principal
balance on this loan totaled $2,513,808.
 
    During 1998, the Curci-Turner Company made unsecured loans of $1,400,000 to
the Company. As of December 31, 1998, the outstanding principal balance on these
notes totaled $1,400,000.
 
    As of December 31, 1998, the Company had outstanding principal on notes to
an officer of $930,611 which accrues interest at 12%.
 
    During 1996, the Company converted its Preferred Stock to Common Stock.
Accrued Preferred Stock dividend due an officer of the Company and a related
party of $581,541 and $472,545, respectively, was
 
                                       16
<PAGE>
exchanged for notes with interest payable at 10%. As of December 31, 1998, the
outstanding principal due an officer of the Company and a related party on these
notes was $581,541 and $472,545, respectively.
 
    As of December 31, 1998, the Company had loans, which provide for interest
at 10% and are due on demand, from certain employees and related parties. As of
December 31, 1998, these loans totaled $175,000.
 
    As of December 1998, the Company has loans outstanding to financial
institutions, secured by the development projects' trust deeds, with rates
ranging from 9.0% to prime plus 2.0% and maturing June 1999 through May 2001. As
of December 31, 1998, the outstanding balances owing on these loans totaled
$37,524,510.
 
    As of December 31, 1998, the Company had remaining loan commitments from
banks and financial institutions of approximately $24,700,000, which may be
drawn down by the Company upon the satisfaction of certain conditions. The
Company continues to seek joint venture partners and additional financing to
fund its operations.
 
    As of December 31, 1998, the Company does not have any material commitments
for capital expenditures in 1998.
 
    As of December 31, 1998, the Company had ten remaining projects in various
stages of development. During 1998, the Company had five producing revenues from
completed homes: Montserrat, Summertree Park, Montserrat Estates, Cierra Del
Lago, and Antares. As of December 31, 1998, the Montserrat and Cierra Del Lago
project was completed and all homes were closed in escrow. The remaining seven
projects, Mockingbird Canyon, Parkland Farms, Parc Metropolitan, Parcwest
Apartments, High Ridge Court, Saddlerock, and Templeton Heights, are in the
initial stages of development. The Company enters 1999 with 156 homes under
construction, of which 123 are sold, and 32 model units. Additionally, the
Company has an inventory of 926 lots under development.
 
    Based on its agreements with its lenders, the Company believes that it will
have sufficient liquidity to finance its construction projects in 1999 through
funds generated from operations, funds available under its existing bank
commitments, funds generated from new lending institutions, and, if necessary,
funds that could be obtained by using its internally financed real estate
development in process as collateral for additional loans.
 
    Management's plan, with respect to managing cash flow includes the following
components: pay off debt that is coming due in 1999, minimize operating
expenses, and maintain control over costs. With regard to the debt coming due in
1999, management expects to extend the maturity dates of various loans and pay
the remaining loans off through cashflow from operations, prior to their
maturity date. With regard to minimizing operating expenses, management plans to
achieve this by continuing to closely examine overhead items. Management
anticipates that the funds generated from operations, including borrowings from
existing loan commitments, will be adequate to allow the Company to continue
operations throughout 1999.
 
                                       17
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
    The table below represents the contractual balances of our financial
instruments at the expected maturity dates as well as their fair value at
December 31, 1998. The expected maturity categories take into consideration
actual amortization of principal and does not take into consideration
reinvestment of cash. The weighted average interest rate for various liabilities
presented are actual as of December 31, 1998.
 
<TABLE>
<CAPTION>
                                                PRINCIPAL MATURING IN:                                       FAIR VALUE
                        ----------------------------------------------------------------------              DECEMBER 31,
                           1999        2000        2001        2002        2003     THEREAFTER    TOTAL         1998
                        ----------  ----------  ----------  ----------  ----------  ----------  ----------  ------------
<S>                     <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Interest rate
  sensitive
  liabilities
Variable rate
  borrowings..........  $19,198,445 $7,663,835  $       --                                      $26,862,280  $26,862,280
  Average interest
    rate..............        8.86%       9.57%                                                       9.06%
Fixed rate
  borrowings..........  15,158,506   5,273,353  11,100,654                                      31,532,513   31,532,513
  Average interest
    rate..............       11.81%      10.66%       9.00%                                          10.63%
                        ----------  ----------  ----------  ----------  ----------  ----------  ----------  ------------
                        $34,356,951 $12,937,188 $11,100,654                                     $58,394,793  $58,394,793
                        ----------  ----------  ----------  ----------  ----------  ----------  ----------  ------------
                        ----------  ----------  ----------  ----------  ----------  ----------  ----------  ------------
Weighted average
  interest rate.......       10.16%      10.01%       9.00%                                           9.91%
                        ----------  ----------  ----------  ----------  ----------  ----------  ----------  ------------
                        ----------  ----------  ----------  ----------  ----------  ----------  ----------  ------------
</TABLE>
 
YEAR 2000 READINESS
 
    The Company utilizes computer technologies throughout its business to
effectively carry out its day to day operations. Similar to most companies, the
Company must determine whether its systems are capable of recognizing and
processing date sensitive information properly as the year 2000 approaches. The
Company has reviewed each of its systems and programs and has determined that it
is Year 2000 compliant. No material costs have been or will be incurred related
to the Year 2000 compliance issue.
 
    The Company has initiated evaluation of its significant suppliers,
customers, and critical business partners to determine the extent to which the
Company may be vulnerable in the event that those parties fail to properly
remediate their own year 2000 issues. The Company will develop appropriate
contingency plans in the event that a significant exposure is identified
relative to the dependencies on third-party systems. While the Company is not
presently aware of any such significant exposure, there can be no guarantee that
the systems of third-parties on which the Company relies will be converted in a
timely manner, or that a failure to properly convert by another company would
not have a material adverse effect on the Company.
 
EFFECTS OF INFLATION
 
    Real estate has long been considered a hedge against inflation, and
inflation has often contributed to dramatic growth in property values. During
normal markets, the Company has been able to pass increased costs of materials
and labor to its buyers by increasing its sales prices. However, growth in
property values slowed or reversed during 1996 and 1997 in California, thus
preventing the Company from increasing sales prices to cover increased costs. In
1998, due to the strength and stability of the economy, starting in 1998 the
real estate market has experienced increases in sales price and the number of
home buyers.
 
                                       18
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
<TABLE>
<CAPTION>
  PAGE NO.     FINANCIAL STATEMENTS:
-------------  --------------------------------------------------------------------------------------------------------
<S>            <C>
         21    Independent Auditors' Report
 
         22    Consolidated Balance Sheets as of December 31, 1998 and 1997
 
         23    Consolidated Statements of Operations--Three Years Ended December 31, 1998
 
         24    Consolidated Statements of Stockholders' Equity--Three Years Ended December 31, 1998
 
         25    Consolidated Statements of Cash Flows--Three Years Ended December 31, 1998
 
         27    Notes to Consolidated Financial Statements
 
               SCHEDULE SUPPORTING FINANCIAL STATEMENTS:
 
         43    II--Valuation and Qualifying Accounts--Three Years Ended December 31, 1998
</TABLE>
 
ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
    None.
 
                                    PART III
 
    Items 10, 11, 12 and 13 are incorporated by reference from the Company's
definitive proxy statement to be filed within 120 days after the close of the
calendar year with the Commission, pursuant to Regulation 14A.
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
(a) (1) and (2) For a listing of financial statements and schedules, reference
    is made to Item 8 included in this Form 10-K.
 
   (3) The Exhibits listed on the accompanying Index to Exhibits immediately
   following Schedule II are filed as part of this report. Exhibits 10.1 through
   10.4 are compensatory plans.
 
(b) Reports on Form 8-K
 
    A Current Report on Form 8-K dated November 10, 1998 was filed with the
Securities and Exchange Commission (the "Commission") and included under Item 5
its unaudited consolidated financial statements for the quarter ended September
30, 1998, and under Item 7(c) a press release announcing Calprop Corporation's
1998 third quarter financial results.
 
                                       19
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
     CALPROP CORPORATION
------------------------------
         (REGISTRANT)
 
     /s/ VICTOR ZACCAGLIN                     March 26, 1999
------------------------------           ------------------------
       Victor Zaccaglin                            Date
    CHAIRMAN OF THE BOARD
 AND CHIEF EXECUTIVE OFFICER
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
 
      /s/ MARK F. SPIRO                       March 26, 1999
------------------------------           ------------------------
        Mark F. Spiro                              Date
 VICE PRESIDENT/SECRETARY AND
  TREASURER (CHIEF FINANCIAL
   AND ACCOUNTING OFFICER)
 
     /s/ RONALD S. PETCH                      March 26, 1999
------------------------------           ------------------------
       Ronald S. Petch,                            Date
          PRESIDENT
 
 /s/ GEORGE R. BRAVANTE, JR.                  March 26, 1999
------------------------------           ------------------------
   George R. Bravante, Jr.                         Date
           DIRECTOR
 
      /s/ JOHN L. CURCI                       March 26, 1999
------------------------------           ------------------------
        John L. Curci                              Date
           DIRECTOR
 
     /s/ VICTOR ZACCAGLIN                     March 26, 1999
------------------------------           ------------------------
       Victor Zaccaglin                            Date
    CHAIRMAN OF THE BOARD
   CHIEF EXECUTIVE OFFICER
 
                                       20
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors
and Stockholders of
Calprop Corporation and Subsidiaries:
 
    We have audited the accompanying consolidated balance sheets of Calprop
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1998. Our audits also
included the financial statement schedule listed in the Index at Item 8. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Calprop Corporation and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
Also, in our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
 
                                          DELOITTE & TOUCHE LLP
 
Los Angeles, California
March 25, 1999
 
                                       21
<PAGE>
                              CALPROP CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
 
                           DECEMBER 31, 1998 AND 1997
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                         1998           1997
                                                                                     -------------  -------------
<S>                                                                                  <C>            <C>
REAL ESTATE UNDER DEVELOPMENT (Notes 1, 2 and 5)...................................  $  65,282,197  $  26,325,978
INVESTMENT IN LAND (Note 3)........................................................             --      2,975,982
                                                                                     -------------  -------------
TOTAL INVESTMENT IN REAL ESTATE....................................................     65,282,197     29,301,960
                                                                                     -------------  -------------
OTHER ASSETS:
  Cash and cash equivalents (Note 1)...............................................      1,590,403      1,100,028
  Prepaid expenses.................................................................         88,775         23,149
  Deferred tax asset (Note 6)......................................................      4,800,000             --
  Other assets (Note 4)............................................................        760,514        531,665
                                                                                     -------------  -------------
    Total other assets.............................................................      7,239,692      1,654,842
                                                                                     -------------  -------------
                                                                                     $  72,521,889  $  30,956,802
                                                                                     -------------  -------------
                                                                                     -------------  -------------
</TABLE>
 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                                                         1998           1997
                                                                                     -------------  -------------
<S>                                                                                  <C>            <C>
TRUST DEEDS AND NOTES PAYABLE (Note 5).............................................  $  37,524,507  $   6,713,809
RELATED PARTY NOTES (Note 5 )......................................................     20,870,286     12,718,829
                                                                                     -------------  -------------
  Total trust deeds and notes payable..............................................     58,394,793     19,432,638
COMMUNITY FACILITIES DISTRICT SPECIAL TAX BONDS (Notes 3 and 5 )...................             --      2,336,544
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES...........................................      5,056,010      3,954,885
WARRANTY RESERVES (Note 1).........................................................        284,624        288,278
                                                                                     -------------  -------------
  Total liabilities................................................................     63,735,427     26,012,345
 
MINORITY INTEREST (Note 1).........................................................        326,941      2,187,847
 
COMMITMENTS AND CONTINGENCIES (Note 10)
 
STOCKHOLDERS' EQUITY (Notes 7 and 8):
  Common stock, no par value; 20,000,000 shares authorized; 10,284,135 and
    9,304,785 shares issued and outstanding at December 31, 1998 and 1997,
    respectively...................................................................     10,284,135      9,304,785
  Additional paid-in capital.......................................................     25,851,130     25,886,906
  Deferred Compensation (Note 8)...................................................       (241,130)      (106,595)
  Stock Purchase Loans (Note 8)....................................................       (474,134)            --
  Accumulated deficit..............................................................    (26,960,480)   (32,328,486)
                                                                                     -------------  -------------
    Total Equity...................................................................      8,459,521      2,756,610
                                                                                     -------------  -------------
                                                                                     $  72,521,889  $  30,956,802
                                                                                     -------------  -------------
                                                                                     -------------  -------------
</TABLE>
 
                 See notes to consolidated financial statements
 
                                       22
<PAGE>
                              CALPROP CORPORATION
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
<TABLE>
<CAPTION>
                                                                          1998           1997           1996
                                                                      -------------  -------------  -------------
<S>                                                                   <C>            <C>            <C>
DEVELOPMENT OPERATIONS (Notes 1 and 2):
  Real estate sales.................................................  $  33,071,722  $  22,908,649  $  13,717,126
  Cost of real estate sales.........................................     30,444,198     22,853,947     14,150,124
                                                                      -------------  -------------  -------------
                                                                          2,627,524         54,702       (432,998)
  Recognition of impairment of real estate under development and
    land held for investment (Note 2)...............................             --             --     (6,093,475)
                                                                      -------------  -------------  -------------
    Income (loss) from development operations.......................      2,627,524         54,702     (6,526,473)
 
Other income........................................................         87,405         91,738        181,788
 
Other expenses:
  General and administrative........................................      1,752,909      1,444,096      2,332,444
  Interest expense (Note 5).........................................        135,081        339,766        217,854
  Investment property holding costs (Note 3)........................             --        185,838        305,359
                                                                      -------------  -------------  -------------
    Total other expenses............................................      1,887,990      1,969,700      2,855,657
 
Minority interests (Note 1).........................................        232,633        (17,192)            --
                                                                      -------------  -------------  -------------
Income (loss) before benefit for income taxes.......................        594,306     (1,806,068)    (9,200,342)
Benefit for income taxes (Note 6)...................................      4,773,700        185,857             --
                                                                      -------------  -------------  -------------
NET INCOME (LOSS)...................................................  $   5,368,006  $  (1,620,211) $  (9,200,342)
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
NET INCOME (LOSS) ALLOCABLE TO COMMON STOCK.........................  $   5,368,006  $  (1,620,211) $  (9,402,589)
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
BASIC INCOME (LOSS) PER SHARE (NOTE 9)..............................  $        0.54  $       (0.18) $       (1.28)
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
DILUTED INCOME PER SHARE (NOTE 9)...................................  $        0.52  $       (0.18) $       (1.28)
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
</TABLE>
 
                 See notes to consolidated financial statement
 
                                       23
<PAGE>
                              CALPROP CORPORATION
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                         PREFERRED STOCK           COMMON STOCK        ADDITIONAL                    STOCK
                                     -----------------------  -----------------------    PAID-IN      DEFERRED     PURCHASE
                                       SHARES      AMOUNT       SHARES      AMOUNT       CAPITAL    COMPENSATION     LOANS
                                     ----------  -----------  ----------  -----------  -----------  -------------  ---------
<S>                                  <C>         <C>          <C>         <C>          <C>          <C>            <C>
BALANCE, January 1, 1996...........   3,571,368  $ 4,571,351   4,899,030  $ 4,899,030  $25,910,018   $   (87,938)         --
 
  Net loss.........................
 
  Cancellation of shares under 1989
    stock incentive plan (Note 8)..                               (3,680)      (3,680)       1,561
 
  Amortization of deferred
    compensation (Note 8)..........                                                                       19,283
 
  Redemption of preferred stock for
    cash...........................    (189,153)    (242,116)
 
  Conversion of preferred stock to
    common stock...................  (3,382,215)  (4,329,235)  4,329,235    4,329,235
 
  Dividend accrual--preferred
    stock..........................
                                     ----------  -----------  ----------  -----------  -----------  -------------  ---------
 
BALANCE, December 31, 1996.........          --           --   9,224,585    9,224,585   25,911,579       (68,655)         --
 
  Net loss.........................
 
  Net issuance of shares under 1989
    stock incentive plan (Note
    8).............................                               80,200       80,200      (24,673)      (55,527)
 
  Amortization of deferred
    compensation (Note 8)..........                                                                       17,587
                                     ----------  -----------  ----------  -----------  -----------  -------------  ---------
 
BALANCE, December 31, 1997.........          --           --   9,304,785  $ 9,304,785   25,886,806      (106,595)         --
 
  Net income.......................
 
  Net issuance of shares under 1989
    stock incentive plan (Note
    8).............................                               98,100       98,100       64,725      (162,825)
 
  Issuance of shares upon option
    exercise.......................                              151,250      151,250      (25,827)
 
  Issuance of shares upon executive
    loan (Note 8)..................                              730,000      730,000      (74,674)                 (455,938)
 
  Accrual of interest under stock
    purchase loan..................                                                                                  (18,196)
 
Amortization of deferred
  compensation (Note 8)............                                                                       28,290
                                     ----------  -----------  ----------  -----------  -----------  -------------  ---------
 
BALANCE, December 31, 1998.........          --           --  10,284,135  $10,284,135  $25,851,130   $  (241,130)  $(474,134)
                                     ----------  -----------  ----------  -----------  -----------  -------------  ---------
                                     ----------  -----------  ----------  -----------  -----------  -------------  ---------
 
<CAPTION>
                                                      TOTAL
                                     ACCUMULATED   STOCKHOLDERS'
                                       DEFICIT        EQUITY
                                     ------------  ------------
<S>                                  <C>           <C>
BALANCE, January 1, 1996...........  $(21,305,686)  $13,986,775
  Net loss.........................    (9,200,342)  (9,200,342)
  Cancellation of shares under 1989
    stock incentive plan (Note 8)..                     (2,119)
  Amortization of deferred
    compensation (Note 8)..........                     19,283
  Redemption of preferred stock for
    cash...........................                   (242,116)
  Conversion of preferred stock to
    common stock...................                         --
  Dividend accrual--preferred
    stock..........................      (202,247)    (202,247)
                                     ------------  ------------
BALANCE, December 31, 1996.........   (30,708,275)   4,359,234
  Net loss.........................    (1,620,211)  (1,620,211)
  Net issuance of shares under 1989
    stock incentive plan (Note
    8).............................                         --
  Amortization of deferred
    compensation (Note 8)..........                     17,587
                                     ------------  ------------
BALANCE, December 31, 1997.........   (32,328,486)   2,756,610
  Net income.......................     5,368,006    5,368,006
  Net issuance of shares under 1989
    stock incentive plan (Note
    8).............................                         --
  Issuance of shares upon option
    exercise.......................                    125,423
  Issuance of shares upon executive
    loan (Note 8)..................                    199,388
  Accrual of interest under stock
    purchase loan..................                    (18,196)
Amortization of deferred
  compensation (Note 8)............                     28,290
                                     ------------  ------------
BALANCE, December 31, 1998.........  $(26,960,480)  $8,459,521
                                     ------------  ------------
                                     ------------  ------------
</TABLE>
 
                 See notes to consolidated financial statements
 
                                       24
<PAGE>
                              CALPROP CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
<TABLE>
<CAPTION>
                                                                         1998           1997           1996
                                                                     -------------  -------------  -------------
<S>                                                                  <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)................................................  $   5,368,006  $  (1,620,211) $  (9,200,342)
  Adjustments to reconcile net income (loss) to net cash used in
    operating activities:
    Minority interests.............................................        232,633        (17,192)            --
    Depreciation and amortization..................................         73,414         50,677         48,109
    Deferred income taxes..........................................     (4,800,000)            --             --
    Recognition of impairment of real estate under development and
      land held for investment.....................................             --             --      6,093,475
    Provision for warranty reserves................................        288,977        207,844        399,905
  Change in assets and liabilities
    (Increase) in other assets.....................................       (196,368)      (209,943)       (49,600)
    (Increase) in investments in land..............................             --             --         (8,322)
    (Increase) decrease in prepaid expenses........................        (65,626)         6,438        258,961
    Increase (decrease) in accounts payable and accrued liabilities
      and warranty reserves........................................      1,447,932        748,135       (461,635)
    Additions to real estate development in process................    (69,400,417)   (26,210,556)   (15,663,366)
    Cost of real estate sales......................................     30,444,198     22,853,947     14,150,124
                                                                     -------------  -------------  -------------
      Net cash used in operating activities........................    (36,607,251)    (4,190,861)    (4,432,691)
 
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures.............................................        (77,605)       (21,152)       (73,875)
 
CASH FLOWS FROM FINANCING ACTIVITIES
  Borrowings under construction loans--related parties.............  $  13,852,845  $   6,652,968  $  10,855,868
  Payments under construction loans--related parties...............     (5,701,388)    (6,342,689)    (5,902,318)
  Borrowings under construction loans..............................     57,750,061     15,318,368      9,598,373
  Payments under construction loans................................    (26,939,363)   (13,616,425)    (9,269,433)
  Contributions from joint venture partners........................        770,558      2,483,019         10,000
  Distributions to joint venture partner...........................     (2,864,097)      (407,980)            --
  Payments of preferred stock dividends............................             --             --        (77,351)
  Redemption of convertible preferred stock........................             --             --       (242,116)
  Proceeds from issuance of common stock...........................        306,615             --             --
                                                                     -------------  -------------  -------------
    Net cash provided by financing activities......................     37,175,231      4,087,261      4,973,023
                                                                     -------------  -------------  -------------
  Net increase (decrease) in cash and cash equivalents.............        490,375       (124,752)       466,457
 
  Cash and cash equivalents at beginning of the year...............      1,100,028      1,224,780        758,323
                                                                     -------------  -------------  -------------
  Cash and cash equivalents at end of the year.....................  $   1,590,403  $   1,100,028  $   1,224,780
                                                                     -------------  -------------  -------------
                                                                     -------------  -------------  -------------
</TABLE>
 
                 See notes to consolidated financial statements
 
                                       25
<PAGE>
                              CALPROP CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
<TABLE>
<CAPTION>
                                                                                1998         1997         1996
                                                                            ------------  ----------  ------------
<S>                                                                         <C>           <C>         <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the year for:
    Interest (net of amount capitalized)..................................  $    135,081  $  339,766  $    217,854
    Income taxes..........................................................        26,300          --            --
 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Accrual of preferred dividend...........................................            --          --      (202,247)
  Conversion of preferred stock to common stock...........................            --          --     4,329,235
  Exchange of loan from related party to minority interest................            --     120,000            --
  Exchange of real estate development of $4,400,984, less a loan payable
    of $2,000,000 for fifty percent interest in joint venture.............            --          --     2,000,000
  Sale of the Victorville property........................................     2,975,982          --            --
  Reduction of debt related to the sale of the Victorville property.......     2,975,982          --            --
  Issuance of shares upon executive loan..................................       162,825          --            --
  Receipt of executive loan from issuance of shares.......................       455,938          --            --
</TABLE>
 
                 See notes to consolidated financial statement
 
                                       26
<PAGE>
                              CALPROP CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    NATURE OF OPERATIONS--Calprop Corporation ("the Company"), a California
    Corporation, constructs and sells single-family detached and attached homes
    and townhomes as part of condominiums or planned unit developments in
    California and Colorado. As of December 31, 1998, the Company had ten
    residential housing projects in various stages of development, consisting of
    156 homes under construction (123 were in escrow), and 926 lots under
    development. Additionally, the Company has 32 model homes used in selling
    the various types of housing developed. The Company's products range from
    less expensive homes for first-time buyers to more expensive near custom
    homes.
 
    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.
 
    SEGMENT INFORMATION--The Company is in one business segment, the residential
    housing industry, and as a result, substantially all of the assets of the
    Company are devoted to that segment and accordingly do not provide
    additional segment disclosure.
 
    REAL ESTATE SALES--Revenue from real estate sales and related costs are
    recognized at the close of escrow, when title passes to the buyer. The
    Company follows the guidelines for profit recognition as set forth by SFAS
    No. 66, "Accounting for Sales of Real Estate."
 
    The Company regularly reviews the carrying value of its real estate
    developments for impairment whenever events or changes in circumstances
    indicate that the carrying amount of the asset may not be recoverable. If
    the sum of the expected future cash flows is less than the carrying amount
    of the asset, the Company recognizes an impairment loss.
 
    Cost of real estate sales is based upon the relative sales value of units
    sold to the estimated total sales value of the respective projects.
 
    WARRANTY RESERVES--The Company provides a one-year warranty to purchasers of
    single-family homes. The Company accrues estimated warranty costs on
    properties as they are sold. Estimated warranty costs are based on actual
    warranty costs.
 
    The Company provides a one-year express warranty against defects in
    workmanship and materials to purchasers of homes in its projects. In
    addition, California and Colorado law provides the Company's customers
    certain implied warranties, the scope and duration of which exceed the
    Company's express warranties. The Company requires its subcontractors to
    indemnify the Company in writing and requires the insurance of the
    subcontractor to provide that the Company is a primary insured and an
    additional insured from its subcontractors for liabilities arising from
    their work, except for liability arising through the sole negligence or
    willful misconduct of the Company or from defects in designs furnished by
    the Company. Nevertheless, the Company is primarily liable to its customers
    for breach of warranty. The Company has builder's product liability
    insurance coverage which it believes to be adequate in light of the
    Company's claims history.
 
    CASH AND CASH EQUIVALENTS--For purposes of the statement of cash flows, cash
    and cash equivalents include readily marketable securities with an original
    maturity of 90 days or less.
 
                                       27
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    EMPLOYEE STOCK PLANS--The Company adheres to APB Opinion No. 25 to account
    for its stock based compensation awards to employees and will disclose the
    required pro forma effect on net income and earnings per share consistent
    with SFAS No. 123, "Accounting for Stock Based Compensation."
 
    FAIR VALUE OF FINANCIAL INSTRUMENTS--SFAS No. 107, "Disclosure about Fair
    Value of Financial Instruments," requires disclosure of fair value
    information on financial instruments, when it is practicable to estimate
    that value. Management believes the recorded value of notes payable to
    financial institutions approximate the fair market value as a result of
    variable interest rates and short term durations. Management also believes
    that it is not practical to estimate the fair value of related party notes.
 
    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--SFAS No. 133, "Accounting for
    Derivative Instruments and Hedging Activities," effective for years
    beginning after June 15, 1999. The Company has not yet completed the process
    of evaluating the impact the statement will have on its financial
    statements.
 
    RECLASSIFICATIONS--Certain prior year amounts have been reclassified to
    conform to the 1998 presentation.
 
    BASIS OF CONSOLIDATION--The accompanying financial statements include the
    accounts of Calprop Corporation and all its subsidiaries.
 
    The Company has consolidated the financial statements of Colorado Pacific
    Homes, Inc. ("CPH"), a corporation formed for the purpose of developing real
    estate in the state of Colorado, DMM Development, LLC ("DMM"), a joint
    venture formed for the development of the Cierra del Lago and Antares
    projects, Montserrat Development Co., LLC ("MDC"), a joint venture formed
    for the development of certain lots in the Montserrat project, and
    Montserrat II, LLC, a joint-venture formed for the development of 119 lots
    adjacent to Company's original Montserrat project, Parkland Farms
    Development Co., LLC ("Parkland"), a joint venture formed for the
    development of 115 lots in Healdsburg, California, and RGCCLPO Development
    Co., LLC ("RGCCLPO"), a joint venture formed for the development of 382 lots
    in Milpitas, California.
 
    Colorado Pacific Homes, Inc. is owned eighty percent by Calprop Corporation
    ("Calprop") and twenty percent by the President of CPH.
 
    Calprop Corporation is entitled to receive two-thirds of the profits of DMM,
    and the other owner, RGC Courthomes, Inc. ("RGC"), is entitled to receive
    the remaining one-third of the profits. As of December 31, 1998, RGC's
    ownership percentage in DMM was fifty percent.
 
    On February 10, 1997, the Company and an officer of the Company formed MDC.
    As part of the formation, the Company contributed 24 partially developed
    lots of its Montserrat project, in Murrieta, California, for a basis of
    $550,000, and the officer exchanged a $120,000 note due from the Company for
    a basis of $120,000. Ninety-nine percent of the profits or losses from the
    development of the 24 lots is to be received by Calprop Corporation, and the
    remaining one percent of the profits or losses is to be received by the
    officer. In July of 1997, the Company contributed an additional 29 partially
    developed lots to MDC to facilitate construction financing and based on the
    Company's agreement with the officer, the Company is to receive one hundred
    percent of the profits or losses from the development of these additional
    lots. During the third quarter of 1997, all of the initial 24 lots were
    sold, the officer was paid his equity and his share of the profits, and the
    Company became the sole owner of MDC. As of December 31, 1998, the entity
    was dissolved.
 
                                       28
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Pursuant to the operating agreement of Montserrat II, LLC, losses are
    allocated 100% first to Calprop until its capital account is zero, then to
    PICal Housing Associates, L.P. ("PICal"). Income is allocated first to
    reverse losses, then to PICal to attain a return on its capital, then to
    Calprop. As of December 31, 1998, PICal attained its return on capital and
    accordingly no longer retains an interest in Montserrat II, LLC.
 
    Pursuant to the operating agreement of Parkland, Calprop is entitled to
    receive ninety-nine percent of the profits of Parkland, and the other
    member, an officer of the Company, is entitled to receive the remaining one
    percent of the profits. As of December 31, 1998, the officer of the
    Company's ownership percentage in Parkland was one percent.
 
    Calprop is entitled to receive fifty percent of the profits of RGCCLPO, and
    the other member, RGC, is entitled to receive the remaining fifty percent of
    the profits. As of December 31, 1998, RGC's ownership percentage in RGCCLPO
    was fifty percent.
 
    As a result of the consolidations, the Company has recorded minority
    interest of $326,941 and $2,187,847 as of December 31, 1998, and December
    31, 1997, respectively.
 
(2) REAL ESTATE UNDER DEVELOPMENT
 
    Real estate under development at December 31, 1998 and 1997 is summarized as
    follows:
 
<TABLE>
<CAPTION>
                                                                   1998                         1997
                                                        --------------------------  ----------------------------
                                                           AMOUNT      UNITS/LOTS      AMOUNT       UNITS/LOTS
                                                        -------------  -----------  -------------  -------------
<S>                                                     <C>            <C>          <C>            <C>
Single-family residences..............................  $  27,653,597         184   $  15,110,870          160
Townhomes.............................................      2,731,232          12              --           --
                                                        -------------       -----   -------------          ---
Total single family residences........................     30,384,829         196      15,110,870          160
Land under development................................     32,417,774         918       8,753,849          317
                                                        -------------       -----   -------------          ---
Total real estate under development before investment
  in joint venture....................................     62,802,603       1,114      23,864,719          477
Investment in joint venture...........................      2,479,594                   2,461,259
                                                        -------------       -----   -------------          ---
Total real estate under development                     $  65,282,197       1,114   $  26,325,978          477
                                                        -------------       -----   -------------          ---
                                                        -------------       -----   -------------          ---
</TABLE>
 
    Investment in joint venture, shown above, represents the Company's
    investment in Mission Gorge, LLC. In 1996, Mission Gorge, LLC, a California
    limited liability company, was formed and the Company transferred its
    Mission Gorge property to the joint venture. In connection with the
    formation, the Curci-Turner Company, of which a principal is a stockholder
    of the Company, converted its $2,000,000 note into equity in Mission Gorge,
    LLC. As a result, Mission Gorge, LLC is 50% owned by both the Company and
    the Curci-Turner Company, and each is entitled to receive 50% of "Net
    Proceeds" as defined in the operating agreement.
 
                                       29
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(2) REAL ESTATE UNDER DEVELOPMENT (CONTINUED)
    Development operations in 1998, 1997 and 1996 are summarized as follows:
 
<TABLE>
<CAPTION>
                                                                      1998                  1997                  1996
                                                               -------------------   -------------------   -------------------
                                                                 AMOUNT      UNITS     AMOUNT      UNITS     AMOUNT      UNITS
                                                               -----------   -----   -----------   -----   -----------   -----
<S>                                                            <C>           <C>     <C>           <C>     <C>           <C>
REAL ESTATE SALES:
  Single-family residences..................................   $33,071,722    162    $14,283,509     71    $ 6,956,676     40
  Townhomes.................................................            --     --      8,625,140     31      6,760,450     26
                                                               -----------   -----   -----------   -----   -----------   -----
    Total Sales.............................................    33,071,722    162     22,908,649    102     13,717,126     66
 
COST OF REAL ESTATE SALES:
  Single-family residences..................................    30,124,006            14,090,308             7,005,459
  Townhomes.................................................        31,215             8,555,795             6,744,760
  Warranty..................................................       288,977               207,844               399,905
                                                               -----------           -----------           -----------
    Total Cost of Sales.....................................    30,444,198            22,853,947            14,150,124
 
  Recognition of impairment of real estate under development
    and land held for investment............................            --                    --            (6,093,475)
                                                               -----------           -----------           -----------
  Income (loss) from development operations.................   $ 2,627,524           $    54,702           $(6,526,473)
                                                               -----------           -----------           -----------
                                                               -----------           -----------           -----------
</TABLE>
 
    During 1996, the Company recorded an impairment loss on its Pleasant Oaks
    Estates project, the Cypress Cove project, and the Summertree Park, Elk
    Grove project of $1,014,629, $1,540,972 and $1,911,676, respectively.
 
    The impairment loss on the Pleasant Oaks Estates project was primarily a
    result of additional municipal requirements in 1996 which contributed to a
    significant delay of the completion of the final units. Additional land
    development costs were incurred to satisfy the municipal requirements, and
    as a result of the delay, the Company incurred increased project overhead
    and interest costs. Additionally, the Company was forced to reduce sales
    prices and raise incentives as the competition in this market increased.
 
    The impairment loss on the Cypress Cove project was due to the Company
    incurring increased production overhead, interest and marketing costs as a
    result of a slow down in absorption due to a decreased customer base, and an
    increased production period, as the area experienced the impact of inclement
    weather conditions in the winter and spring of 1996, including the closure
    of a major access road from the San Francisco Bay Area. Additionally, in
    order to revitalize the project subsequent to the storms in 1996, the
    Company increased sales incentives.
 
    The impairment loss on the Summertree Park, Elk Grove project was primarily
    a result of a slower absorption caused by a sagging real estate market in
    the Sacramento area. As a result, the Company discontinued the product after
    the first phase of production, and began to develop a new product line in
    1996, which the Company opened in April 1997. The Company incurred increased
    capitalized marketing, production overhead and interest costs as models were
    constructed for the new product line. Contributing to additional production
    overhead and interest costs relating to the development of the new product,
    the carrying costs for the development were further increased as inclement
    weather
 
                                       30
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(2) REAL ESTATE UNDER DEVELOPMENT (CONTINUED)
    conditions in the area during the winter and spring of 1996 hampered sales
    and the development efforts. Additionally, in order to increase the
    absorption of the old product line, the Company increased sales incentives.
 
(3) INVESTMENT IN LAND
 
    The Company deferred the development of the Victorville project in 1996 in
    San Bernardino County, California, due to market conditions.
 
    The Company regularly reviewed the carrying value of its investment in land
    whenever events or changes in circumstances indicated that the carrying
    amount of the asset may not be recoverable. If the sum of the expected
    future cash flows was less than the carrying amount of the asset, the
    Company recognized an impairment loss.
 
    During 1996, the Company recorded an impairment loss associated with the
    Victorville property, which is included as land held for investment, of
    $1,626,198. The recognition of impairment loss was a result of the Company
    valuing the land based on the sale of the vacant lots as opposed to the
    development of the project.
 
    The Company had expensed the holding costs related to the Victorville
    property, consisting primarily of property taxes, and debt service on the
    Victorville bond liability (Note 5). In addition, as of December 31, 1997,
    the Company had a delinquency of $777,000 for the Victorville bond liability
    and $55,000 for property taxes. Given the weakness in the Victorville
    housing market, the Company has determined that paying these taxes and
    servicing the nonrecourse bond liability is not a prudent use of capital.
    Subsequent to July 1997, accruals were no longer recorded as the value of
    the property subject to the debt equaled the liability of the debt. The debt
    is non-recourse and the Company was prepared to forfeit the property if
    other options are deemed uneconomical.
 
    On December 29, 1998, the Company sold the Victorville property for
    approximately the net book value. The purchase agreement called for the
    buyer to assume all property tax, bond liability and related penalties and
    interest.
 
                                       31
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(4) OTHER ASSETS
 
    Included in other assets is trust deeds receivable. The Trust deeds
    receivable at December 31, 1998 and 1997 are as follows:
 
<TABLE>
<CAPTION>
                                                                OUTSTANDING BALANCE
                                                INTEREST    ----------------------------
                                                  RATE          1998           1997
                                              ------------  -------------  -------------
<S>                                           <C>           <C>            <C>
Trust deeds receivable......................      10%-12%    $   132,240    $   148,655
Less reserve................................                     (50,000)       (50,000)
                                                            -------------  -------------
Net trust deeds receivable..................                      82,240         98,655
Income tax refund receivable................                          --        185,857
Deposits in escrow..........................                     225,000             --
Office equipment and other..................                     453,274        247,153
                                                            -------------  -------------
Other assets................................                 $   760,514    $   531,665
                                                            -------------  -------------
                                                            -------------  -------------
</TABLE>
 
    These trust deeds are collateralized by lots, houses, and condominium units
    sold by the Company, and mature from 1999 to 2014.
 
    Deposits in escrow in 1998 of $225,000 represents deposits in escrow to
    acquire 83 lots in Colorado Springs and 17.60 acres of land in Boulder,
    Colorado and 92 lots in San Luis Obispo and 182 lots in San Diego,
    California.
 
    Income tax refund receivable in 1997 of $185,857 represents the net refund
    receivable resulting from a claim filed for the carryback of losses related
    to certain qualifying expenses incurred in 1996.
 
(5) TRUST DEEDS AND NOTES PAYABLE
 
    Trust deeds and notes payable as of December 31, 1998 and 1997 are as
    follows:
 
<TABLE>
<CAPTION>
                                                                                          BALANCE
                                                                                ----------------------------
                                                                                    1998           1997
                                                                                -------------  -------------
<S>                                                                             <C>            <C>
Notes payable to financial institutions, secured by development projects'
  trust deeds - variable rates ranging from 6.25% to prime + 2.0%, (9.75% at
  December 31, 1998); maturing June 1999 through May 2001.....................  $  37,524,507  $   6,713,809
 
Notes payable to related parties, secured by development projects' trust deeds
  - rates of prime + 1.5%, (9.25% at December 31, 1998) and 12%; maturing on
  demand through December 2000................................................     16,710,588      8,899,743
 
Note payable to related parties, unsecured - rates of 10% and 12%; maturing on
  demand through June 1999....................................................      4,159,698      3,819,086
                                                                                -------------  -------------
 
Total trust deeds and notes payable...........................................  $  58,394,793  $  19,432,638
                                                                                -------------  -------------
                                                                                -------------  -------------
 
Community Facilities District Special Tax Bonds...............................  $          --  $   2,336,544
                                                                                -------------  -------------
                                                                                -------------  -------------
</TABLE>
 
                                       32
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(5) TRUST DEEDS AND NOTES PAYABLE (CONTINUED)
    As of December 31, 1998, the Company had remaining loan commitments from
    banks and financial institutions of approximately $24,700,000, which may be
    drawn down by the Company upon the satisfaction of certain conditions. The
    Company continues to seek joint venture partners and additional financing to
    fund its operations.
 
    During 1995, the Company obtained a loan in the amount of $4,000,000 from
    the Curci-Turner Company, a company which is partially owned by a
    shareholder of Calprop's outstanding common stock, for the acquisition and
    development of the Summertree Park project. In addition to interest, this
    loan contains a profit sharing provision which provides that Curci-Turner
    Company receive 40% of "Net Proceeds" as defined in the agreement, which is
    comparable to gross profit. As of December 31, 1998, the outstanding
    principal balance on this note was $1,701,894.
 
    During 1996, the Curci-Turner Company made a loan of $3,700,000 to the
    Company secured by 41 lots in the Cierra Del Lago project in Rancho Santa
    Marguerita and 100 lots in the Antares project in Del Mar Heights. In
    addition to interest, this loan contains a profit sharing provision which
    provides that the Curci-Turner Company receive thirty-three percent of "Net
    Proceeds" as defined in the agreement. As of December 31, 1998, the
    outstanding principal balance on this note was $2,816,600.
 
    During 1996, the Curci-Turner Company made loans of $1,487,500 to the
    Company secured by 21 lots and a four unit model complex in the Montserrat
    project in Murrieta, California. In addition to interest, each loan contains
    a profit sharing provision which provides that the Curci-Turner Company
    receive 50% of "Net Proceeds" as defined in the agreement, which is
    comparable to gross profit. As of December 31, 1998, the outstanding
    principal on these notes totaled $104,250.
 
    During 1997, the Company obtained a loan in the amount of $2,677,000 from
    the Curci-Turner Company for the acquisition and development of the Parkland
    Farms project in Healdsburg, Sonoma County, California. In addition to
    interest, this loan contains a profit sharing provision which provides that
    the Curci-Turner Company receive 50% of "Net Proceeds" as defined in the
    agreement, which is comparable to gross profit. As of December 31, 1998, the
    outstanding principal balance on this note was $2,383,306.
 
    During 1997, the Company obtained a loan in the amount of $2,000,000 from
    Mission Gorge, LLC, a related party, for working capital purposes. The loan
    provides for interest at 12%. As of December 31, 1998, the outstanding
    principal on this note was $2,000,000.
 
    During 1998, the Company obtained a loan in the amount of $2,131,201 from
    the Curci-Turner Company for the acquisition and development of the Parkland
    Farms project in Healdsburg, Sonoma Country, California. In addition to
    interest, this loan contains a profit sharing provision which provides that
    the Curci-Turner Company receive 50% of "Net Proceeds" as defined in the
    agreement, which is comparable to gross profit. As of December 31, 1998, the
    outstanding principal balance on this note was $1,149,433.
 
    During 1998, the Company obtained a loan in the amount of $2,500,000 from
    the Curci-Turner Company for the acquisition and development of the High
    Ridge Court project in Thornton, Colorado. In addition to interest, this
    loan contains a profit sharing provision which provides that the
    Curci-Turner Company receive 50% of "Net Proceeds" as defined in the
    agreement, which is
 
                                       33
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(5) TRUST DEEDS AND NOTES PAYABLE (CONTINUED)
    comparable to gross profit. As of December 31, 1998, the outstanding
    principal balance on this loan totaled $2,291,297.
 
    During 1998, the Company obtained a loan in the amount of $2,350,000 from
    the Curci-Turner Company for the acquisition and development of the
    Saddlerock project in Aurora, Colorado. In addition to interest, this loan
    contains a profit sharing provision which provides that the Curci-Turner
    Company receive 50% of "Net Proceeds" as defined in the agreement, which is
    comparable to gross profit and is due on demand. As of December 31, 1998,
    the outstanding principal balance on this loan totaled $2,350,000.
 
    During 1998, the Company obtained a loan in the amount of $3,500,000 from
    the Curci-Turner Company for the acquisition and development of the
    Mockingbird Canyon project in Riverside County, California. In addition to
    interest, this loan contains a profit sharing provision which provides that
    the Curci-Turner Company receive 50% of "Net Proceeds" as defined in the
    agreement, which is comparable to gross profit. As of December 31, 1998, the
    outstanding principal balance on this loan totaled $2,513,808.
 
    During 1998, the Curci-Turner Company made unsecured loans of $1,400,000 to
    the Company. As of December 31, 1998, the outstanding principal balance on
    these notes totaled $1,400,000.
 
    As of December 31, 1998, the Company had outstanding principal on notes to
    an officer of $930,611 which accrues interest at 12%.
 
    During 1996, the Company converted its Preferred Stock to Common Stock and
    the accrued Preferred Stock dividend due an officer of the Company and a
    related party of $581,542 and $472,545, respectively, was exchanged for
    notes with interest payable at 10%. As of December 31, 1998, the outstanding
    principal due an officer of the Company and a related party on these notes
    was $581,542 and $472,545, respectively.
 
    As of December 31, 1998, the Company had loans, which provide for interest
    at 10% and are due on demand from certain employees and related parties. As
    of December 31, 1998, these loans totaled $175,000.
 
    The $2,336,544 Community Facilities District Special Tax Bonds (CFD), were
    issued by the City of Victorville, California, to finance the construction
    of the infrastructure within the District, of which the Company's
    Victorville property is a part. The bonds are repaid through a special tax
    assessment on the parcels of land within the development. As the amount of
    the liability is fixed and determinable, and the related assets are subject
    to a lien, the liability and corresponding site improvement assets have been
    reflected in the financial statements as of December 31, 1997. During
    December 1998, the Company sold the Victorville property and no longer
    reflect the liability as of December 31, 1998.
 
                                       34
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(5) TRUST DEEDS AND NOTES PAYABLE (CONTINUED)
    Aggregate future principal payments due on trust deeds payable and notes
    payable are summarized as follows:
 
<TABLE>
<CAPTION>
                                                          PRINCIPAL
YEAR ENDED DECEMBER 31,                                   PAYMENTS
------------------------------------------------------  -------------
<S>                                                     <C>
1999..................................................  $  34,356,951
2000..................................................     12,937,188
2001..................................................     11,100,654
                                                        -------------
Total.................................................  $  58,394,793
                                                        -------------
                                                        -------------
</TABLE>
 
    During 1998, 1997 and 1996, the Company paid interest of $1,446,132,
    $1,081,847 and $743,401, respectively, on loans from related parties. The
    Company capitalized interest of approximately $330,000, $250,000 and $0 for
    1998, 1997 and 1996, respectively.
 
(6) INCOME TAXES
 
    The benefit for income taxes consisted of the following:
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                             -------------------------------------------
                                                 1998           1997           1996
                                             -------------  -------------  -------------
<S>                                          <C>            <C>            <C>
Current income tax expense.................   $    26,300             --             --
Net deferred income tax benefit............    (4,800,000)      (185,857)            --
                                             -------------  -------------  -------------
                                              $(4,773,700)   $  (185,857)            --
                                             -------------  -------------  -------------
                                             -------------  -------------  -------------
</TABLE>
 
    During the year ended December 31, 1998, the Company reduced the valuation
    allowance to recognize a deferred tax asset of $4,800,000. The recognized
    deferred tax asset is based upon expected utilization of net operating loss
    carryforwards. The realization of the deferred tax asset will require
    aggregate taxable income of approximately $12,000,000 in future years.
 
    The Company has assessed its past earnings history and trends, sales
    backlog, budgeted sales, and expiration dates of carryforwards and has
    determined that it is more likely than not that the $4,800,000 of deferred
    tax assets will be realized. The remaining valuation allowance of
    approximately $5,731,000 is maintained against deferred tax assets which the
    Company has not determined to be more likely than not realizable at this
    time.
 
    As of December 31, 1998, the Corporation had net operating loss
    carryforwards for federal and state income tax purposes of approximately
    $25,000,000 and $14,800,000, respectively. For federal and state tax
    purposes the net operating loss carryforwards expire from 2007 through 2019,
    and from 1999 through 2003, respectively.
 
    Benefit for income taxes in 1997 of $185,857 represents the net refund
    resulting from a claim filed for the carryback of losses related to certain
    qualifying expenses incurred in 1996.
 
                                       35
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(6) INCOME TAXES (CONTINUED)
    The deferred income tax assets, resulting from differences between
    accounting for financial statements purposes, and tax purposes less
    valuation allowance are as follows:
 
<TABLE>
<CAPTION>
                                                                1998            1997
                                                            -------------  --------------
<S>                                                         <C>            <C>
Inventory reserves........................................   $   927,000   $    3,758,000
Warranty reserves and others..............................       218,000          391,000
State net operating loss..................................       886,000        1,700,000
Federal operating loss....................................     8,500,000        5,282,000
                                                            -------------  --------------
                                                              10,531,000       11,131,000
Valuation allowance.......................................    (5,731,000)     (11,131,000)
                                                            -------------  --------------
                                                             $ 4,800,000   $           --
                                                            -------------  --------------
                                                            -------------  --------------
</TABLE>
 
    Deferred tax assets in 1998 of $4,800,000 represents the reduction of the
    valuation allowance to recognize a deferred tax asset. The recognized
    deferred tax asset is based upon expected utilization of net operating loss
    carryforwards.
 
    The following is a reconciliation of the federal statutory rate to the
    Company's effective rate for 1998, 1997, and 1996:
 
<TABLE>
<CAPTION>
                                                  1998                      1997                      1996
                                        -------------------------  -----------------------  -------------------------
                                           AMOUNT     PERCENTAGE     AMOUNT    PERCENTAGE      AMOUNT     PERCENTAGE
                                        ------------  -----------  ----------  -----------  ------------  -----------
<S>                                     <C>           <C>          <C>         <C>          <C>           <C>
Statutory rate........................  $    202,064         34%   $ (550,872)       (34%)  $ (3,128,116)       (34%)
Utilization of NOL....................      (202,064)       (34%)          --          --             --          --
State franchise tax, net of federal
  tax benefit.........................        26,300        4.4%           --          --             --          --
Utilization of unrecognized deferred
  income tax benefit..................    (4,800,000)    (807.6%)          --          --             --          --
Limitation of loss carryforward.......            --          --      550,872         34%      3,128,116         34%
                                        ------------  -----------  ----------       -----   ------------       -----
                                        $ (4,773,700)    (803.2%)  $       --          --   $         --          --
                                        ------------  -----------  ----------       -----   ------------       -----
                                        ------------  -----------  ----------       -----   ------------       -----
</TABLE>
 
(7) PREFERRED STOCK
 
    In the third quarter of 1996, the Company paid $319,467 to redeem 189,153
    shares of its Convertible Preferred Stock at the redemption price of $1.28
    per share, plus accrued dividends of approximately $0.32 per share, for
    shareholders of record on June 7, 1996. The remaining preferred shares
    (3,382,215) were converted into Common Stock. In addition, the shareholders
    received a promissory note in the amount of the preferred dividends accrued
    of $1,054,087, bearing interest at the rate of 10.0% per annum, payable
    quarterly. The total number of shares of Common Stock issued for Convertible
    Preferred Stock was 4,329,235 shares.
 
                                       36
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(8) QUALIFIED AND NON-QUALIFIED STOCK OPTION PLANS
 
    The Company has three stock-based compensation plans, which are described
    below. The Company applies APB Opinion 25 and related Interpretations in
    accounting for its stock-based compensation. Accordingly, no compensation
    costs have been recognized for its fixed stock option plans or issuance of
    warrants during 1996, 1997, and 1998. The compensation cost that has been
    charged against income for its stock incentive plan was $28,290 in 1998,
    $17,587 in 1997 and $19,283 in 1996. Had compensation costs for the
    Company's stock-based compensation plans and issuance of warrants been
    determined based on the fair value at the grant dates for awards under those
    plans consistent with SFAS No. 123, the Company's net income (loss) and
    income (loss) per share would have been reduced to the pro forma amounts
    indicated below:
 
<TABLE>
<CAPTION>
                                                                       1998          1997           1996
                                                                   ------------  -------------  -------------
<S>                                                <C>             <C>           <C>            <C>
Net (loss) income to common shareholders:          As reported     $  5,368,006  $  (1,620,211) $  (9,402,589)
                                                   Pro forma       $  5,079,334  $  (1,737,223) $  (9,519,652)
 
Diluted income (loss) per share:                   As reported     $       0.52  $       (0.18) $       (1.28)
                                                   Pro forma       $       0.49  $       (0.19) $       (1.30)
</TABLE>
 
    The 1983 Stock Option Plan authorized an aggregate of 653,006 (adjusted for
    stock dividends) shares of common stock to be reserved for grant. The 1983
    Stock Option Plan expired in September, 1993. Changes in the 1983 Stock
    Options Plan are summarized as follows:
<TABLE>
<CAPTION>
                                              1998                         1997
                                    -------------------------   --------------------------
                                             WEIGHTED-AVERAGE             WEIGHTED-AVERAGE
                                    SHARES    EXERCISE PRICE     SHARES    EXERCISE PRICE
                                    -------  ----------------   --------  ----------------
<S>                                 <C>      <C>                <C>       <C>
Outstanding, beginning of year....  154,500       $1.72          284,500       $1.37
Granted...........................       --                           --
Exercised.........................  (90,000)      $0.88               --
Canceled..........................     (500)      $2.50         (130,000)      $0.96
                                    -------       -----         --------       -----
Outstanding, end of year..........   64,000       $2.89          154,500       $1.72
                                    -------       -----         --------       -----
                                    -------       -----         --------       -----
Exercisable, end of year..........   44,000                      129,500
                                    -------                     --------
                                    -------                     --------
 
<CAPTION>
                                              1996
                                    -------------------------
                                             WEIGHTED-AVERAGE
                                    SHARES    EXERCISE PRICE
                                    -------  ----------------
<S>                                 <C>      <C>
Outstanding, beginning of year....  324,500       $1.53
Granted...........................       --
Exercised.........................       --
Canceled..........................  (40,000)      $2.69
                                    -------       -----
Outstanding, end of year..........  284,500       $1.37
                                    -------       -----
                                    -------       -----
Exercisable, end of year..........  237,500
                                    -------
                                    -------
</TABLE>
 
                                       37
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(8) QUALIFIED AND NON-QUALIFIED STOCK OPTION PLANS (CONTINUED)
    The 1993 Stock Option Plan, (amended by the shareholders May 23, 1996)
    authorizes an aggregate of 1,500,000 shares of the Company's common stock to
    be reserved for grant. The options fully vest a year from the date of grant.
    Changes in the 1993 Stock Option plan are summarized as follows:
<TABLE>
<CAPTION>
                                               1998                               1997                    1996
                                 ---------------------------------  ---------------------------------  ----------
                                                WEIGHTED-AVERAGE                   WEIGHTED-AVERAGE
                                    SHARES       EXERCISE PRICE        SHARES       EXERCISE PRICE       SHARES
                                 ------------  -------------------  ------------  -------------------  ----------
<S>                              <C>           <C>                  <C>           <C>                  <C>
Outstanding, beginning of
  year.........................     1,159,000       $    0.85            877,250       $    0.89          883,250
Granted........................       260,150       $    1.63            289,000       $    0.71            5,000
Exercised......................      (791,250)      $    0.89                 --                               --
Canceled.......................       (11,650)      $    0.77             (7,250)      $    0.87          (11,000)
                                 ------------           -----       ------------           -----       ----------
Outstanding, end of year.......       616,250       $    1.12          1,159,000       $    0.85          877,250
                                 ------------           -----       ------------           -----       ----------
                                 ------------           -----       ------------           -----       ----------
Exercisable, end of year.......       359,100                            870,000                          872,250
                                 ------------                       ------------                       ----------
                                 ------------                       ------------                       ----------
Available for grant, end of
  year.........................        91,000                            339,500                          621,250
                                 ------------                       ------------                       ----------
                                 ------------                       ------------                       ----------
 
<CAPTION>
                                  WEIGHTED-AVERAGE
                                   EXERCISE PRICE
                                 -------------------
<S>                              <C>
Outstanding, beginning of
  year.........................       $    0.89
Granted........................       $    0.69
Exercised......................
Canceled.......................       $    0.84
                                          -----
Outstanding, end of year.......       $    0.89
                                          -----
                                          -----
Exercisable, end of year.......
Available for grant, end of
  year.........................
</TABLE>
 
    The following table summarizes information about the outstanding options at
    December 31, 1998, from the Company's 1983 and 1993 stock option plans:
 
<TABLE>
<CAPTION>
                                            OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                              ------------------------------------------------  ------------------------------
                                NUMBER     WEIGHTED-AVERAGE                       NUMBER
                              OUTSTANDING     REMAINING      WEIGHTED-AVERAGE   EXERCISABLE  WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES      AT 12/31/98  CONTRACTUAL LIFE   EXERCISE PRICE    AT 12/31/98   EXERCISE PRICE
----------------------------  -----------  ----------------  -----------------  -----------  -----------------
<S>                           <C>          <C>               <C>                <C>          <C>
$0.69 to $0.96..............     312,050        6.8 years        $    0.72         312,050       $    0.72
$1.00 to $1.62..............     304,200        9.3 years        $    1.54          47,050       $    1.06
$2.50 to $3.00..............      64,000        3.0 years        $    2.89          44,000       $    2.84
                              -----------        --------            -----      -----------          -----
$0.69 to $3.00..............     680,250        7.6 years        $    1.29         403,100       $    0.99
                              -----------        --------            -----      -----------          -----
                              -----------        --------            -----      -----------          -----
</TABLE>
 
    The 1989 Executive Long-Term Stock Incentive Plan, (amended by the
    shareholders May 23, 1996) authorizes an aggregate of 500,000 (adjusted for
    stock dividends) shares of the Company's common stock to be reserved for
    awards to key employees of the Company. The stock, once granted to the key
    employees, vests at 20 percent a year from the date of grant. The non-vested
    shares represent
 
                                       38
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(8) QUALIFIED AND NON-QUALIFIED STOCK OPTION PLANS (CONTINUED)
    unearned compensation. Changes in the 1989 Executive Long-Term Stock
    Incentive plan are summarized as follows:
 
<TABLE>
<CAPTION>
                                                 1998           1997           1996
                                             -------------  -------------  -------------
<S>                                          <C>            <C>            <C>
Issued shares, beginning of year...........      337,580        257,380        261,060
Issued.....................................      103,500         82,000             --
Returned at termination of employment......       (5,400)        (1,800)        (3,680)
                                             -------------  -------------  -------------
Issued shares, end of year.................      435,680        337,580        257,380
                                             -------------  -------------  -------------
                                             -------------  -------------  -------------
Vested, end of year........................      229,180        174,180        131,980
                                             -------------  -------------  -------------
                                             -------------  -------------  -------------
Available for award, end of year...........       65,320        158,840        242,620
                                             -------------  -------------  -------------
                                             -------------  -------------  -------------
</TABLE>
 
    Included as a separate deduction of stockholder's equity is deferred
    compensation relating to this plan of $241,130 and $106,595 as of December
    31, 1998, and 1997, respectively.
 
    The 1992 Director Stock Option Plan authorizes an aggregate amount of
    100,000 shares to be granted. Each year, the directors that are members of
    the stock option committee are granted options to buy 7,500 shares at the
    market price at the date of grant, exercisable one year after grant, and
    expire 10 years after the grant date. During 1996, 1997 and 1998, 22,500
    shares, 15,000 shares and 15,000 shares, respectively, were granted under
    this plan at an exercise prices of $0.69, $0.44 and $1.13 per share,
    respectively. The exercise prices represent the market price at the date of
    grant. At December 31, 1998, 37,500 shares were outstanding related to this
    plan.
 
    On October 31, 1996, the Company issued warrants to purchase 150,000 shares
    of common stock to the minority owner of DMM Development, LLC (see Note 2).
    One-third of the warrants were exercisable immediately, one-third are
    exercisable one year after the grant date, and the remaining one-third are
    exercisable two years after the grant date. Such warrants have a $1.00
    exercise price and expire 5 years from the grant date. The market price of
    common stock at the date of issuance was less than the exercise price.
    Accordingly, no value was ascribed the warrants.
 
    The weighted-average fair value of the options and warrants granted during
    1998, 1997 and 1996 is $1.28, $0.60 and $0.38, respectively. The fair value
    of each option and warrant was estimated on the date of grant using the
    Black-Scholes option-pricing model with the following weighted-average
    assumptions for 1998, 1997 and 1996, respectively: risk-free interest rates
    of 6.5 percent for all years; dividend yield of zero percent for all years;
    expected lives of 9.7, 8.1, and 5.4 years; and volatility of 61, 106, and 67
    percent.
 
    Options and warrants to purchase 875,500 and 1,536,000 shares of common
    stock were outstanding during 1998 and 1997, respectively. For the years
    ended December 31, 1997 and 1996, options and warrants for the respective
    periods were not included in the computation of diluted net loss per common
    share because the effect would be antidilutive to the net loss in these
    periods. However, for the year ended December 31, 1998, 328,900 options and
    warrants were not included in the computation of diluted net income because
    their exercise prices were higher than the average market price per share of
    common stock.
 
                                       39
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(8) QUALIFIED AND NON-QUALIFIED STOCK OPTION PLANS (CONTINUED)
    On February 20, 1998, an officer of the company exercised options to
    purchase 130,000 shares of common stock with an exercise price of $0.825 per
    share. The Company received $107,250 cash as a result of the exercise of
    these options.
 
    On March 10, 1998, three officers and a director of the Company exercised
    options to purchase a total of 720,000 shares of common stock with a
    weighted-average exercise price of $0.8989 per share. The Company received
    $199,389 cash from an officer and received $447,813 in notes receivable from
    the remaining two officers and the director as a result of the exercise of
    these options. The notes receivable accrue interest at 4.987% and mature on
    March 10, 2001 and are guaranteed by the officers.
 
    On October 15, 1998, one officer of the Company exercised options to
    purchase a total of 10,000 shares of common stock with a weighted-average
    exercise price of $0.8125 per share. The Company received a note receivable
    for $8,125 from the officer as a result of the exercise of these options.
    The note receivable accrue interest at 4.987% and mature on October 15, 2001
    and is guaranteed by the officer.
 
    As of December 31, 1998, accrued interest for the stock purchase loans was
    $18,196. s
 
(9) EARNINGS PER SHARE
 
    The following table sets forth the computation of basic and diluted net
    income (loss) per common share:
 
<TABLE>
<CAPTION>
                                                 1998           1997           1996
                                             -------------  -------------  -------------
<S>                                          <C>            <C>            <C>
Numerator:
  Net income (loss)........................  $   5,368,006   $(1,620,211)   $(9,200,342)
  Preferred stock dividends................             --            --       (202,247)
                                             -------------  -------------  -------------
  Numerator for basic and diluted net
    income (loss) per share................  $   5,368,006   $(1,620,211)   $(9,402,589)
                                             -------------  -------------  -------------
                                             -------------  -------------  -------------
Denominator for basic net income (loss) per
  share....................................     10,005,565     9,242,386      7,346,772
  Effect of dilutive stock options.........        275,730            --             --
 
Denominator for dilutive net income (loss)
  per share (weighted average outstanding
  shares)..................................     10,281,295     9,242,386      7,346,772
                                             -------------  -------------  -------------
                                             -------------  -------------  -------------
Basic net income (loss) per share..........  $        0.54   $     (0.18)   $     (1.28)
                                             -------------  -------------  -------------
                                             -------------  -------------  -------------
Diluted net income per share...............  $        0.52   $     (0.18)   $     (1.28)
                                             -------------  -------------  -------------
                                             -------------  -------------  -------------
</TABLE>
 
(10) COMMITMENTS AND CONTINGENCIES
 
    There are several legal actions and claims pending against the Company.
    Based on the advice of legal counsel, management believes that the ultimate
    liability, if any, which may result from any of these lawsuits will not
    materially affect the financial position or results of operations of the
    Company.
 
                                       40
<PAGE>
                              CALPROP CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
(10) COMMITMENTS AND CONTINGENCIES (CONTINUED)
    The Company has operating leases that expire through 2003. Future minimum
    rent as of December 31, 1998, is $160,287 in 1999, $134,779 in 2000,
    $107,750 in 2001, $31,004 in 2002 and $18,085 in 2003, for a total of
    $451,906. Rent expense for the years ended December 31, 1998, 1997 and 1996
    was $137,854, $127,667, and $101,721, respectively.
 
(11) QUARTERLY FINANCIAL DATA--(UNAUDITED)
 
    YEAR ENDED DECEMBER 31, 1998
 
<TABLE>
<CAPTION>
                                                       FIRST         SECOND         THIRD         FOURTH
                                                    ------------  ------------  -------------  -------------
<S>                                                 <C>           <C>           <C>            <C>
Sales.............................................  $  2,805,786  $  7,632,478  $  12,020,548  $  10,612,910
Income (loss) from development operations.........       (82,503)      699,992      1,122,684        887,351
Net income (loss).................................  $   (494,163) $    105,667  $   2,896,652  $   2,859,850
                                                    ------------  ------------  -------------  -------------
                                                    ------------  ------------  -------------  -------------
Basic income (loss) per share.....................  $      (0.05) $       0.01  $        0.29  $        0.28
                                                    ------------  ------------  -------------  -------------
                                                    ------------  ------------  -------------  -------------
Diluted income per share..........................  $      (0.05) $       0.01  $        0.27  $        0.27
                                                    ------------  ------------  -------------  -------------
                                                    ------------  ------------  -------------  -------------
</TABLE>
 
    YEAR ENDED DECEMBER 31, 1997
 
<TABLE>
<CAPTION>
                                                       FIRST         SECOND         THIRD         FOURTH
                                                    ------------  ------------  -------------  -------------
<S>                                                 <C>           <C>           <C>            <C>
Sales.............................................  $  5,144,495  $  9,085,987  $   5,114,792  $   3,563,375
Income (loss) from development operations.........         1,207        32,462         32,071        (11,038)
Net loss..........................................  $   (492,726) $   (517,150) $    (325,344) $    (284,991)
                                                    ------------  ------------  -------------  -------------
                                                    ------------  ------------  -------------  -------------
Basic loss per share..............................  $      (0.05) $      (0.06) $       (0.04) $       (0.03)
                                                    ------------  ------------  -------------  -------------
                                                    ------------  ------------  -------------  -------------
</TABLE>
 
                                       41
<PAGE>
                              CALPROP CORPORATION
 
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1998
 
<TABLE>
<CAPTION>
                                                                                                       TRUST DEEDS
                                                                                           WARRANTY    RECEIVABLE
                                                                                          -----------  -----------
<S>                                                                                       <C>          <C>
Balance January 1, 1996.................................................................  $   301,700   $  50,000
  Additions charged to operations.......................................................      399,905          --
  Reductions............................................................................     (440,204)         --
                                                                                          -----------  -----------
Balance December 31, 1996...............................................................      261,401      50,000
  Additions charged to operations.......................................................      207,844          --
  Reductions............................................................................     (180,967)         --
                                                                                          -----------  -----------
Balance December 31, 1997...............................................................      288,278      50,000
  Additions charged to operations.......................................................      288,977          --
  Reductions............................................................................     (292,631)         --
                                                                                          -----------  -----------
Balance December 31, 1998...............................................................  $   284,624   $  50,000
                                                                                          -----------  -----------
                                                                                          -----------  -----------
</TABLE>
 
                                       42
<PAGE>
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
 EXHIBITS                                                                                                        PAGE
-----------                                                                                                    ---------
<C>          <S>                                                                                               <C>
       3.1   Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the
               Company's Amendment No. 1 to Form S-1 filed with Securities Exchange Commission on July 3,
               1994 bearing File #33-62516)..................................................................
 
       3.2   By-laws of the Company (Incorporated by reference to Exhibit 3.2 to the Company's Amendment No.
               1 to Form S-1 filed with Securities Exchange Commission on July 3, 1994 bearing File
               #33-62516)....................................................................................
 
      10.1   1983 Calprop Corporation Stock Option Plan (Incorporated by reference to the Company's Form S-8
               Registration Statement (File No. 2-86872), which became effective September 30, 1983).........
 
      10.2   1989 Executive Long-Term Stock Incentive Option Plan (Incorporated by reference to the Company's
               Form S-8 Registration Statement (File No. 33-33640), which became effective March 18, 1991)...
 
      10.3   1992 Directors Stock Option Plan (Incorporated by reference to the Company's Form S-8
               Registration Statement (File No. 33-57226), which became effective January 18, 1993)..........
 
      10.4   1993 Calprop Corporation Stock Option Plan (Incorporated by reference to Exhibit 10.3 to the
               Company's Amendment No. 1 to Form S-1 filed with Securities Exchange Commission on July 3,
               1993 bearing File #33-62516)..................................................................
 
      23     Independent Auditors' Consent...................................................................
 
      27     Financial Data Schedule.........................................................................
</TABLE>
 
                                       43
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
     CALPROP CORPORATION
------------------------------
         (REGISTRANT)
 
                                              March 26, 1999
------------------------------           ------------------------
       Victor Zaccaglin                            Date
    CHAIRMAN OF THE BOARD
 AND CHIEF EXECUTIVE OFFICER
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
 
                                              March 26, 1999
------------------------------           ------------------------
        Mark F. Spiro                              Date
 VICE PRESIDENT/SECRETARY AND
  TREASURER (CHIEF FINANCIAL
   AND ACCOUNTING OFFICER)
 
                                              March 26, 1999
------------------------------           ------------------------
       Ronald S. Petch                             Date
          PRESIDENT
 
                                              March 26, 1999
------------------------------           ------------------------
   George R. Bravante, Jr.                         Date
           DIRECTOR
 
                                              March 26, 1999
------------------------------           ------------------------
        John L. Curci                              Date
           DIRECTOR
 
                                              March 26, 1999
------------------------------           ------------------------
       Victor Zaccaglin                            Date
    CHAIRMAN OF THE BOARD
   CHIEF EXECUTIVE OFFICER
 
                                       45