DOCUMENTS INCORPORATED BY REFERENCE
  No                                         annual report to security  holders,
                                             proxy or information statement,  or
                                             prospectus    filed    under    the
                                             Securities    Act   of   1933,   is
                                             incorporated herein by reference.


                 SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C. 20549
                          ---------------

                            FORM 10-K

                FOR  ANNUAL  AND   TRANSITION   REPORTS
              PURSUANT   TO   SECTIONS   13  OR  15(d)  OF  THE
                    SECURITIES AND EXCHANGE ACT OF 1934.
(Mark One)
     |X|      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
              EXCHANGE ACT OF 1934 [FEE REQUIRED]

                  For the fiscal year ended December 31, 1995

                                       OR

     |_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                 For the transition period from ____ to ____

                      Commission File Number 1-11224
                                ------------

                        SOUTH WEST PROPERTY TRUST INC.
           (Exact name of registrant as specified in its charter)
            Maryland                                   75-2434995
  (State or other jurisdiction of           (I.R.S. employer identification no.)
   incorporation or organization)

      5949 Sherry Lane, Suite 1400, Dallas, Texas                 75225-8010
       (Address of principal executive offices)                   (Zip code

       Registrant's telephone number, including area code: (214) 369-1995

            SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

    Name of Each Exchange
     Title of Each Class                          on Which Registered
        Common Stock                            New York Stock Exchange
                                                 Pacific Stock Exchange

  8% Convertible Debentures Due 2003            New York Stock Exchange
                                                 Pacific Stock Exchange


        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                                           None

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of February 15, 1996: common stock, $0.01 par value - $282,583,000
(computed on the basis of $14.50 per share which was the  reported  closing sale
price  of the  registrant's  common  stock  on the New York  Stock  Exchange  on
February 15, 1996).

     The number of shares of the  registrant's  common stock  outstanding  as of
February 15, 1996: common stock, $0.01 par value - 20,413,649 shares.


<PAGE>
                                                       
                      SOUTH WEST PROPERTY TRUST INC.
                                   INDEX
                          FORM 10-K ANNUAL REPORT
                   FOR THE YEAR ENDED DECEMBER 31, 1995


Securities and Exchange Commission Item Number and Description              Page


                                 PART I

Item 1.    Business.....................................................      1
Item 2.    Properties...................................................      9
Item 3.    Legal Proceedings............................................      9
Item 4.    Submission of Matters to a Vote of Security Holders..........      9


                                 PART II

Item 5.    Market for Registrant's Common Equity and Related
              Stockholder Matters.......................................     10
Item 6.    Selected Financial Data......................................     11
Item 7.    Management's Discussion and Analysis of Financial 
              Condition and Results of Operations.......................     13
Item 8.    Financial Statements and Supplementary Data..................     14
Item 9.    Changes in and Disagreements with Accountants on 
               Accounting and Financial Disclosure......................     14


                                 PART III

Item 10.   Directors and Executive Officers of the Registrant...........     15
Item 11.   Executive Compensation.......................................     16
Item 12.   Security Ownership of Certain Beneficial Owners and Management    21
Item 13.   Certain Relationships and Related Transactions...............     23


                                  PART IV

Item 14.   Exhibits, Financial Statement Schedule and Reports on Form 8-K.   24




<PAGE>
                                  PART I

ITEM I.   Business.

General

         South West Property  Trust Inc., a Maryland  corporation  ("SWP" or the
"Company"),  is  a  self-administered,   fully-integrated,  equity  real  estate
investment  trust  ("REIT") that has acquired,  developed and managed  apartment
properties since 1973. As of February 15, 1996, the Company's portfolio included
39  properties  containing  12,291  apartment  units.  The Company also has five
development  properties  with 2,050 units  including one 436 unit property which
was completed in late 1995), and has under development, additions or substantial
modifications  to three existing  properties  which total 374 units. The Company
operates in the  southwest  and  southeast  regions of the United  States and is
headquartered in Dallas, Texas.

         The Company has  approximately  402  officers and  full-time  employees
involved in the  administration  of the Company and operation of its properties.
The  executive  officers  of the  Company  are  responsible  for the  day-to-day
operations  and will  continue  to be engaged in the  management  of real estate
exclusively  through the  Company.  The Board of  Directors (a majority of whose
members are independent)  are responsible for overall  direction of the Company.
The Company's  policies with respect to investment,  financing and dividends are
determined by its Board of Directors.

         SWP  is  the   successor-in-interest   to  Southwest  Realty,  Ltd.,  a
publicly-traded  limited partnership ("SRL"),  which began operations in January
1983 as a result  of a  consolidation  of  affiliated  partnerships  which  were
controlled by John S. Schneider, Robert F. Sherman and Lewis H. Sandler, each of
whom is an executive  officer of the Company.  In October 1992, SRL  reorganized
into the Company in order to elect REIT status (the "Reorganization").  The term
"Company" as used herein  includes SRL with respect to all matters  prior to the
Reorganization.

         The Company's  corporate  headquarters are located at 5949 Sherry Lane,
Suite 1400, Dallas,  Texas 75225. Its telephone number is (214) 369-1995 and its
fax number is (214) 369-6882.

Investment Objectives and Policies

         The  Company's  principal  objectives  are to  protect  its  investors'
capital,  increase both funds from operations per share and quarterly  dividends
to its stockholders,  and to maximize the value of its portfolio. As a result of
SWP's  experience  and capacity in all aspects of the  apartment  industry,  the
Company has been able to grow through acquisition, development and the intensive
management of its portfolio.

         The  Company's   acquisition   and   development   programs   focus  on
well-located  properties in high  job-growth  markets which appeal to middle and
upper-middle income apartment residents,  and which can be acquired or developed
at attractive prices.  Management believes that it is important to properly time
new investments, taking into consideration cycles in the real estate and capital
markets to avoid near-term  dilution and to maximize  long-term  appreciation of
its  portfolio.  Management  believes  the period from 1993 to 1995 was an ideal
time to invest in  apartments.  The Company  acquired 26  properties in 1993 and
1994 at prices  substantially  below  replacement cost, with yields in excess of
the cost of capital raised in the equity and debt markets.

         In response to rising  capital costs in 1994, SWP increased its minimum
initial  return  expectations  to 10% for apartment  acquisitions.  In addition,
prices of high quality  existing  apartments  were  approaching or exceeding the
cost  to  develop  new  properties.  The  Company  responded  by  utilizing  its
development and construction  capabilities to plan five new apartment properties
and additions or substantial  modifications  to three existing  properties.  SWP
currently  requires  an  estimated  minimum  initial  stabilized  return  on its
development properties of 11%.

     The Company has been  geographically  diversifying its portfolio but has no
policy  limiting the percentage of assets that may be invested in any particular
property.  The Company may participate with other entities in property ownership
through joint ventures or other types of ownership.  Equity  investments  may be
subject  to  existing  mortgage  financing  and other  indebtedness  which  have
priority over the equity interests of the Company. The executive officers of the
Company, including John S. Schneider, Robert F. Sherman, Lewis H. Sandler, Diana
M. Laing and David L. Johnston (the  "Executive  Officers"),  have no individual
economic  interest in the  properties in which the Company has an interest.  The
Company will not engage in transactions  in which these Executive  Officers have
an economic interest.

         Subject to REIT qualification requirements, the Company may also invest
in securities of other REITs or other entities engaged in real estate activities
or securities of other issuers.  The Company may, in the future,  acquire all or
substantially  all of the  securities  or  assets of other  REITs or other  real
estate  entities where such  investments  would be consistent with the Company's
investment  policies.  The  Company  does not  intend  that its  investments  in
securities  will  require it to register as an  "investment  company"  under the
Investment  Company Act of 1940, and the Company will divest any such securities
before registration would be required.  Further,  the Company does not intend to
invest in any securities which would violate the asset holding  requirements for
REITs.

Real Estate Investments

         The  following  tables set forth  certain  information  relating to the
properties in the Company's portfolio as of February 15, 1996:



<PAGE> 
                     SUMMARY DESCRIPTION OF PROPERTIES
                                (unaudited)

             
<TABLE>
                                                                                                          Average Rent Per Unit (a)
<CAPTION>
                                                          Average                        Unit Mix           Year Ended December 31,
                                                          Square            ------------------------------ -------------------------
                                       Number              Feet                                                                   
                                        of       Square    Per      Year        One        Two     Three                          
     Property          Location        Units      Feet   Per Unit   Built     Bedroom    Bedroom   Bedroom    1995    1994    1993
     --------          --------       --------  -------- --------   -----    --------    -------   -------    ----    ----    ----
<S>                     <C>              <C>     <C>         <C>     <C>         <C>        <C>        <C>    <C>     <C>     <C>

     Existing Properties:

     Citiscape          Dallas, TX       231     204,748     886     1973(e)     133         78        20     $553    $533        
     Foxfire (d)        Dallas, TX       310     239,098     771     1977        190        120         0      418     471     346
     High Ridge         Dallas, TX       360     259,434     721     1979        312         48         0      397     367     346
     Preston Oaks       Dallas, TX       200     165,160     826     1980        104         96         0      549     513    
     Preston Trace      Dallas, TX       228     182,120     799     1984        130         98         0      565     536     518
     Rock Creek         Dallas, TX       540     376,760     698     1979        476         64         0      451     416     390 
     Timbercreek        Dallas, TX     1,083     767,047     708     1977        888        195         0      281     372     358
     Windridge          Dallas, TX       444     359,820     810     1980        324        120         0      484     452     419
     Autumnwood         Arlington, TX    320     237,130     741     1984        224         96         0      469     444     417
     Cobblestone        Arlington, TX    344     289,628     842     1984        168        176         0      538     510     471
     Pavilion           Arlington, TX    500     442,616     885     1979(e)     192        216        92      527     520       
     Oak Park           Euless, TX       528     430,176     815     1980        240        240        48      461     435        
     Catalina           Lewisville, TX   208     164,064     789     1982         88        104        16      473     456        
     Wimbledon Court    Lewisville, TX   312     234,208     751     1983        152        160         0      485     453     421 
     Southern Oaks      Fort Worth, TX   248     182,352     735     1982        176         72         0      461     397        
     Hunter's Ridge     Fort Worth, TX   248     195,096     787     1981        144        104         0      471     393        
     Lakeridge          Irving, TX       244     165,628     679     1984        172         72         0      453     414     377
     Summergate         Irving, TX       176     119,424     679     1984        152         24         0      452     433     412 
     Dove Park          Grapevine, TX    263     250,908     954     1984         48        215         0      511     514        
     The Bluffs         San Antonio, TX  318     212,772     669     1978        282         36         0      408     387     352
     Westlake Villas    San Antonio, TX  325     222,865     686     1985        157        168         0      478     461     423
     Ashley Oaks        San Antonio, TX  216     151,612     702     1985        180         36         0      487     472     444
     Sunflower          San Antonio, TX  282     259,412     920     1974        122        112        48      528     506     463
     Woodscape          Houston, TX      544     348,768     641     1978        436        108         0      310     288     291
     Woodtrail          Houston, TX      304     209,126     688     1978        240         64         0      388     372     374
     Park Trails        Houston, TX      210     168,480     802     1983        130         80         0      452     428        
     The Creeks         Austin, TX       325     267,918     824     1975        180        145         0      442     437     396
     Pecan Grove        Austin, TX       192     115,200     600     1984        168         24         0      483     444     416
     Foxfire            Amarillo, TX     328     289,572     883     1978        136        176        16      445     427     391
     Chandler's Mill    Corpus Christi, TX248    183,320     739     1984        160         88         0      491     470     460
     Ryan's Mill        El Paso, TX      248     181,784     733     1985        168         80         0      444     452     430
     Turtle Creek       Little Rock, AR  216     172,248     797     1985        168         48         0      509     498        
     Shadow Lake        Little Rock, AR  296     248,000     838     1984        152        128        16      502     470        
     Greenway Park      Phoenix, AZ      200     163,904     820     1986        108         92         0      479     448     399
     Vista Point        Phoenix, AZ      192     138,352     721     1986        136         56         0      463     417     345 
     Sunset Pointe      Las Vegas, NV    336     294,332     876     1989        160        144        32      579     618        
     Bluff Creek        Oklahoma City, OK316     238,896     756     1984        216        100         0      396     377     363
     Alvarado           Albuquerque, NM  210     153,192     729     1984        175         35         0      540     511         
     Harbour Pointe     Raleigh, NC      198     172,320     870     1984         58        140         0      612     588         

     Subtotal or weighted average (f) 12,291   9,457,490     769                 64%        34%        2%     $455    $437    $395 
                                      ------   ---------     ---                 ---        ---        --     ----    ----    ---- 

</TABLE>
<TABLE>

                 TABLE 
  SUMMARY DESCRIPTION OF PROPERTIES (Cont.)
             (unaudited)

<CAPTION>

Economic Occupancy (b)     Gross             
Year Ended December 31,  Potential           
-----------------------   Rent (c)    Current
                         Per Sq. Ft.   Market
                         Year Ended   Rent Per
 1995     1994   1993   Dec 31, 1995  Sq. Foot
 ----     ----   ----   ------------  -------
<S>        <C>    <C>       <C>       <C>    

  92%      93%              $0.66     $0.71  
  91%      95%    84%        0.57      0.63  
  94%      92%    88%        0.56      0.62  
  94%      94%               0.69      0.76  
  93%      92%    92%        0.74      0.80  
  94%      90%    87%        0.66      0.71  
  87%      91%    90%        0.58      0.63  
  93%      90%    84%        0.61      0.65  
  94%      94%    92%        0.66      0.72  
  94%      95%    92%        0.67      0.73  
  92%      91%               0.63      0.66  
  92%      90%               0.57      0.65  
  89%      92%               0.65      0.69  
  92%      93%    89%        0.67      0.73  
  97%      96%               0.58      0.65  
  94%      92%               0.57      0.65  
  93%      90%    84%        0.70      0.76  
  94%      93%    94%        0.68      0.73  
  92%      94%               0.57      0.63  
  89%      91%    90%        0.64      0.72  
  90%      92%    93%        0.75      0.80  
  90%      94%    93%        0.75      0.82  
  93%      95%    94%        0.59      0.63  
  88%      85%    88%        0.53      0.56  
  88%      86%    89%        0.61      0.66  
  87%      88%               0.64      0.69  
  85%      91%    90%        0.61      0.65  
  97%      96%    97%        0.81      0.89  
  93%      96%    96%        0.52      0.57  
  92%      92%    97%        0.70      0.77  
  85%      90%    90%        0.69      0.69  
  93%      97%               0.67      0.73  
  94%      92%               0.62      0.68  
  89%      91%    86%        0.62      0.68  
  94%      92%    79%        0.63      0.71  
  87%      95%               0.67      0.75  
  92%      91%    92%        0.55      0.61  
  93%      96%               0.76      0.82  
  95%      93%               0.72      0.76  
                                             
  91%      92%    90%       $0.63     $0.68  
  ---      ---    ---       -----     -----  


</TABLE>





<PAGE> 
<TABLE>
<CAPTION>

                 SUMMARY DESCRIPTION OF PROPERTIES    
                             (unaudited)
                                                                                                            Average Rent Per Unit(a)

                                                           Average                       Unit Mix            Year Ended December 31,
                                                            Square            -----------------------------------------------------
                                       Number                Feet                                                                 
                                         of       Square     Per     Year        One        Two     Three                         
         Property          Location     Units      Feet   Per Unit   Built     Bedroom    Bedroom   Bedroom  1995     1994      1993
         --------          --------  ----------- -------- --------   -----    --------    -------   -------  ----     ----      ----
     
<S>                     <C>              <C>     <C>        <C>      <C>         <C>        <C>        <C>

     Development Properties:

     Oak Forest         Lewisville, TX   436     363,280     833     1995        292        120        24                         

     Promontory Pointe  San Antonio, TX  596     591,436     992     1996        312        284         0                         
     Sierra Palms       Chandler, AZ     320     329,640   1,030     1996         96        192        32                         
     Copper Mill        Durham, NC       278     264,896     953     1996        144        110        24                         
     Providence Court   Charlotte, NC    420     453,804   1,080     1997        144        204        72                          

     Ashley Oaks--Ph 2  San Antonio, TX  246     241,184     980     1996         48        118        80                         
     Oak Park--Ph 2     Euless, TX        80      68,448     856     1996         44         36                                   
     Sunset Pointe--Ph 2Las Vegas, NV     48      27,060     564     1996         48                                              

     Subtotal or weighted average (f)  2,424   2,339,748     965                 47%        44%        9%                         
                                     ------- -----------     ---                 ---        ---       ---                         

     Grand total or weighted average  14,715  11,797,238     802                 61%        35%        4%     $455    $437    $395
                                      ======  ==========     ===                 ===        ===      ====     ====    ====    ====

</TABLE>
<TABLE>

         SUMMARY DESCRIPTION OF PROPERTIES   (Cont.)   
                 (unaudited)

<CAPTION>


Economic Occupancy (b)     Gross                  
Year Ended December 31,   Potential               
-----------------------   Rent (c)     Current          
                         Per Sq. Ft.    Market    
                        Year Ended     Rent Per   
1995   1994   1993     Dec 31, 1995    Sq. Foot   
----   ----   ----    --------------   -------                                                      
<S>    <C>    <C>     <C>              <C>    
                                                                                                                                 
                                       $0.83 (g)  
                                                  
                                        0.80 (g)  
                                        0.80 (g)  
                                        0.83 (g)  
                                        0.79 (g)  
                                                  
                                        0.75 (g)  
                                        0.77 (g)  
                                        0.90 (g)  
                                                  
                                       $0.80      
                                       -----      
                                                  
   91%      92%    90%       $0.63     $0.71      
   ===      ===    ===       =====     =====      
                                                  
<FN>


     (a)  Represents average collected rental revenue per unit per month (after
          giving effect to vacancy, concessions, delinquent rent and non-revenue
          units) for all months owned during the period.
          
     (b) Represents collected rental revenue divided by gross potential rent for
     all months owned during the period.  (c) Represents  average lease rates on
     leased  units and market  rates on vacant units for all months owned during
     the period.  (d) During 1995,  the Company  acquired  100% interest in this
     property.  Prior to 1995,  the Company owned 5% of Phase I and 66% of Phase
     II.
     (e)  Substantially refurbished in 1993.
     (f)  The weighted average rent per unit and economic occupancy percentage 
          have been based on the Company's portfolio of wholly-owned apartments
          and its percentage of apartments owned in joint ventures in each of
          the periods presented.
     (g) For development properties not currently in lease-up phase,  represents
         management's estimate of market rent for the property.
</FN>
</TABLE>


     Management believes that its properties are adequately covered by liability
and casualty insurance, consistent with industry standards.


<PAGE>

<TABLE>
                                                    TABLE 2
                              SUMMARY DESCRIPTION OF PROPERTIES - DEBT FINANCING
                                             AS OF DECEMBER 31, 1995
                                                (in thousands)
                                                 (unaudited)
<CAPTION>


                                                             Balance                                       Balance
                                               Original         at          Interest         Due or        Due at
Name of Property                               Amount        12/31/95         Rate (a)      Call Date     Maturity

 MORTGAGE LOANS PAYABLE:
<S>                                            <C>          <C>             <C>             <C>           <C>    

 First Mortgage REMIC Financing (b).........   $   50,000   $   47,647        7.01%         12/10/00      $  39,953

 First Mortgage REMIC Financing (c).........       50,000       48,566        8.50%         02/10/01         41,735

 Oak Forest (d).............................       10,864       10,609  LIBOR + 2.25%       06/30/97         10,609

 Sunset Pointe (e)..........................        8,873        8,873        8.50%         06/01/96          8,873

 Turtle Creek (f)...........................        5,248        5,110        8.50%         10/01/99          4,891

 High Ridge (g).............................        4,865        4,693        8.50%         01/01/00          4,517

 Foxfire - Dallas (h)                               3,800        3,788    COFI + 2.75%      07/01/25
                                             ----   ---------    -----                              
                                                                                                                 0

      Total.................................    $ 133,650    $ 129,286                                   $  110,578
                                                  =======      =======                                     ========
</TABLE>
<TABLE>
<CAPTION>



                                                             Balance
                                               Maximum          at          Interest         Due or
                                                Amount       12/31/95        Rate (a)       Call Date

 CONSTRUCTION LOANS PAYABLE:
<S>                                             <C>             <C>      <C>                <C>    
 
 Promontory Pointe (i)......................    $  19,800  $    17,573  LIBOR + 2.25%       07/12/96

 Ashley Oaks Phase II (j)...................        7,354        6,297  LIBOR + 2.25%       06/30/97

 Sierra Palms (k)...........................       12,402        3,884    LIBOR + 2.25%     12/29/96

 Copper Mill (l)............................       10,700        4,501    LIBOR + 2.00%     04/13/97

 Providence Court (m).......................       18,250            1    LIBOR + 2.00%     03/12/98
                                             --    ----------------- -                              

        Total...............................    $  68,506   $   32,256
                                                  =======     ========



 REVOLVING LINE OF CREDIT (n):                  $  41,800   $   16,500  LIBOR + 1.50%       3/15/97
                                                  =======     ========                             




<PAGE>
<FN>

                                NOTES TO TABLE 2

(a)    At December 31,  1995,  the Company had an interest  rate swap  agreement
       with a notional amount of  $48,851,000.  The Company has entered into the
       interest  rate swap  agreement to convert  floating rate  liabilities  to
       fixed rate  liabilities.  The  agreement  fixes the interest  rate on the
       Company's  expected  variable rate debt at 7.9% through  April 1997.  The
       Company does not hold or issue interest rate swap  agreements for trading
       purposes.  The  Company  is  exposed  to  possible  credit  risk  if  the
       counterparty  fails  to  perform,  however,  this  risk is  minimized  by
       entering into the agreement with a highly rated counterparty. At December
       31, 1995, there were no defaults under this agreement.

(b)    In December 1993, the Company, through a wholly-owned subsidiary,  closed
       on the first phase of a $100,000,000 REMIC Financing.  The first phase is
       secured by first  mortgages on 13 properties  (Ashley  Oaks,  Autumnwood,
       Bluff Creek, Cobblestone,  The Creeks, Greenway Park, Lakeridge,  Preston
       Trace,  Rock  Creek,  Ryan's  Mill,   Summergate,   Wimbledon  Court  and
       Woodscape).  Monthly  payments of principal and interest in the amount of
       $388,000 are required.

(c)    In June 1994, the Company, through a wholly-owned  subsidiary,  closed on
       the second phase of the REMIC  Financing.  The second phase is secured by
       first  mortgages  on  14  properties  (Alvarado,  The  Bluffs,  Catalina,
       Citiscape,  Chandlers Mill,  Foxfire - Amarillo,  Park Trails,  Pavilion,
       Pecan Grove,  Preston Oaks, Vista Point,  Westlake Villas,  Windridge and
       Woodtrail).  Monthly  payments of principal and interest in the amount of
       $434,000 are required.

(d)    In June 1994,  the Company  closed a  construction  mortgage  note in the
       maximum  amount of  $10,864,000  for the  development  of the Oak  Forest
       Apartments.  The note, which is recourse to the Company,  has an original
       maturity date of June 30, 1997, with two optional one-year extensions.

(e)    In September  1994,  the Company  acquired the Sunset  Pointe  Apartments
       subject to a  non-recourse  first  mortgage  loan.  Monthly  payments  of
       interest in the amount of $62,850  are  required  through  March 1, 1996.
       Monthly  payments of in the amount of $105,937 are required from April 1,
       1996 through June 1, 1996. The mortgage loan matures June 1, 1996, and is
       prepayable on or after March 1, 1996.

(f)    In May 1994, the Company acquired the Turtle Creek Apartments  subject to
       a non-recourse  first mortgage  loan.  Monthly  payments of principal and
       interest in the amount of $40,353 are required.

(g)    In January 1995, the Company acquired the remaining  ownership  interests
       in High Ridge Apartments  subject to a non-recourse  first mortgage loan.
       Monthly  payments of principal  and interest in the amount of $36,335 are
       required.

(h)    In August 1995, the Company acquired the remaining ownership interests in
       the Foxfire  Apartments  in Dallas,  Texas,  subject to two  non-recourse
       first  mortgage  loans.  The mortgage  loans bear interest at the cost of
       funds index as published by the San  Francisco  National Bank plus 2.75%.
       Monthly  payments of principal  and interest in the amount of $27,242 are
       required.

(i)    In January 1994, the Company closed a construction  mortgage note for the
       development  of the  Promontory  Pointe  Apartments.  The note,  which is
       recourse to the Company,  has an original maturity date of July 12, 1996,
       with three optional one-year extensions.

(j)    In June 1994,  the Company  closed a  construction  mortgage  note in the
       maximum  amounts of  $7,354,000  for the  development  of the Ashley Oaks
       Apartments Phase II. The note,  which is recourse to the Company,  has an
       original  maturity  date of June 30,  1997,  with two  optional  one-year
       extensions.

(k)    In December 1994, the Company closed a construction  mortgage note in the
       maximum  amount of  $12,402,000  for the  development of the Sierra Palms
       Apartments.  The note, which is recourse to the Company,  has an original
       maturity  date  of  December  29,  1996,  with  three  optional  one-year
       extensions.

(l)    In April 1995,  the Company  closed a  construction  mortgage note in the
       maximum  amount of  $10,700,000  for the  development  of the Copper Mill
       Apartments.  The note, which is recourse to the Company,  has an original
       maturity date of April 13, 1997, with three optional one-year extensions.
(m)    In September 1995, the Company closed a construction mortgage note in the
       maximum amount of $18,250,000 for the development of the Providence Court
       Apartments.  The note, which is recourse to the Company,  has an original
       maturity date of March 21, 1998,  with two optional  one-year  extensions
       and one optional six-month extension.

(n)    In September 1994, the Company obtained a revolving line of credit in the
       maximum amount of $75,000,000.  The line of credit,  which is recourse to
       the  Company,  had a  revolving  period  of 18  months,  with a  one-year
       extension at the lender's option  followed by an  amortization  period of
       two years.  In November  1995, the lender agreed to extend the loan until
       March 15, 1997, and reduced the interest rate on the loan from LIBOR plus
       1.75% to LIBOR plus 1.50%.  The Company can currently  draw up to a total
       of  $41,800,000  on the  line  of  credit,  which  is  secured  by  seven
       properties  (Harbour  Pointe,  Hunter's  Ridge,  Oak Park,  Shadow  Lake,
       Southern Oaks,  Sunflower and Timbercreek).  This amount may be increased
       as  additional  properties  are added as security for the line of credit.
       Periodic payments of interest are required.

</FN>
</TABLE>

<PAGE>

Rental Operations

         Management's  objective  is  to  provide  residents  of  its  apartment
communities  with a  consistent,  high-quality  living  environment.  Management
services for the  properties  are provided by the  Company's  management  staff,
which includes  approximately  335 on-site  leasing,  management and maintenance
personnel, many of whom have extensive experience in apartment management.

         The Company  believes  that it has  developed  the people,  procedures,
operating  systems and financial  controls to maximize  rental income,  minimize
resident turnover and control operating  expenses.  A key aspect of management's
strategy  has  been  to  focus  on  maximizing  rental  revenue  as  opposed  to
concentrating  exclusively on occupancy.  This is accomplished primarily through
monthly  reviews of  competitive  conditions in each market and by  aggressively
increasing rent levels on each unit type and amenity.

Competition and Market Conditions

         Management believes that a geographically  diversified  portfolio is an
important  factor in  achieving  consistent  internal  growth  in the  apartment
industry.  When SWP's current development portfolio is completed,  approximately
23% of its apartment units will be located in Dallas, Texas, and 23% in suburban
Dallas  communities;  14% in San Antonio,  Texas;  7% in Houston,  Texas;  5% in
Phoenix,  Arizona; 4% each in Austin,  Texas, and Little Rock, Arkansas; 3% each
in Fort Worth, Texas, Raleigh/Durham and Charlotte, North Carolina; and about 2%
each in Las Vegas, Nevada, Amarillo, Corpus Christi and El Paso, Texas, Oklahoma
City, Oklahoma, and Albuquerque, New Mexico.

         The creation of new jobs, which management  believes is one of the most
important  factors  affecting demand for apartments,  continues to be greater in
SWP's markets than in the United States as a whole.  Non-agricultural employment
in the markets in which the Company owns property increased by a monthly average
of 354,000 jobs in 1995, a gain of 3.8% over the average  monthly growth for the
same markets in 1994. During the same period,  average monthly  non-agricultural
employment in the United States grew by 2,567,000 jobs, a 2.3% increase from the
monthly average for 1994.

         Management  believes that in 1996, for the first time in several years,
the supply of new apartments in most of its markets will modestly exceed demand.
As a result, the Company expects a small decline in overall market occupancy and
a slower pace of rental rate increases.  Management also believes that prices of
existing properties and the current cost to develop new properties are generally
too high to justify  significant  new  investment,  especially  considering  the
anticipated near-term softness in the apartment markets.  Consequently,  in 1996
SWP plans to maximize  internal growth through intense  management,  to continue
adding value through capital improvements to its existing portfolio and to build
additions  to a select few of its existing  properties  where the value added to
the overall property should be significant.

Dividend Policy

         A  primary  objective  of South  West  Property  Trust is to raise  its
dividend  annually.  For the  quarter  ended  March 31,  1996,  the  Company has
increased its quarterly dividend to $0.26 per share, bringing the total dividend
increase since 1992 to 49%. However,  because real estate is a capital-intensive
industry  and  raising  new equity is  generally  the most  expensive  source of
capital,  SWP  has  concurrently  lowered  the  percentage  of  its  funds  from
operations which it pays out in the form of dividends (its "payout ratio"). This
allows the Company to invest  internally  generated  funds in  revenue-enhancing
capital   improvements  to  its  existing  properties  and  in  its  development
properties.  In the fourth  quarter of 1992,  SWP paid out 97% of its funds from
operations  as dividends.  This payout ratio was lowered to 81% in 1993,  73% in
1994 and 71% in 1995.

         The  Company has a dividend  reinvestment  plan  designed to  encourage
individual  stockholder  participation.  The plan allows stockholders to acquire
additional common shares from SWP at a 5% discount to the market price.


<PAGE>



Policies with Respect to Certain Activities

         The following is a discussion of the Company's policies with respect to
certain activities. The Company's policies with respect to these activities have
been  determined  by the Board of  Directors  and may be amended or revised from
time to time at the  discretion of the Board of Directors  without a vote of the
stockholders of the Company.

         Financing Policies. To the extent that the Company's Board of Directors
determines  to obtain  additional  capital,  the Company may raise such  capital
through  additional equity  offerings,  debt financing or retention of cash flow
(subject to REIT distribution requirements), or a combination of these methods.

         Policies with Respect to Property  Additions  and Reserves.  Only those
expenditures  that generally do not recur annually and/or that will increase the
rental income  potential of its properties  are  capitalized.  Expenditures  for
replacement of items such as carpet, air conditioning  compressors,  appliances,
blinds and landscaping  (which aggregate  approximately  $212 per apartment unit
annually) are generally expensed. In addition,  the Company has cash reserves to
provide for predictable  expenditures for additions to property. The estimate of
the  requirements for these reserves is based on the replacement cost and useful
lives of exterior paint,  boilers,  roofs,  asphalt and miscellaneous  items. At
December 31, 1995,  the Company had cash  reserves  aggregating  $4,643,000  for
additions to property.  Annual cash reserve  additions  for 1996 are expected to
average $105 per apartment unit.

         Lending  Policies.  The Company may acquire mortgage loans on apartment
properties.  Once  acquired,  the Company may modify,  increase,  or extend such
loans as the Board of Directors shall deem appropriate.

         Policies  with  Respect  to  Other  Activities.  The  Company  does not
presently  intend  to  make  investments  other  than as  previously  described,
although it may do so. The Company has  authority to offer shares of its capital
stock and preferred or debt securities for cash or in exchange for securities or
properties,  and to  repurchase  or otherwise  reacquire its common stock or any
other  securities,  and may engage in such activities in the future. It may also
offer warrants, options and rights on such terms as the Board of Directors shall
determine  to be in the best  interests  of the  Company.  The Company  does not
intend to underwrite the securities of any other issuers.

         The Company intends to continue to qualify as a REIT for federal income
tax  purposes  unless,  because  of a change  in  circumstances  or  changes  in
applicable federal income tax laws, the Board of Directors determines that it is
no longer in the best interests of the Company to qualify as a REIT.

Federal Income Tax

         The Company  intends to operate in a manner as to qualify as a REIT for
federal income tax purposes, but no assurance can be given that the Company will
be able to qualify at all times. By qualifying as a REIT, the Company can deduct
dividend distributions to its stockholders for federal income tax purposes, thus
effectively  eliminating the "double taxation" (at the corporate and stockholder
levels) that typically applies to corporate dividends.


ITEM 2.   Properties.

     For  information  regarding  the  Company's   properties,   see  Item  1  -
"Business."


ITEM 3.   Legal Proceedings.

         As  of  December  31,  1995,   there  are  no  material  pending  legal
proceedings to which the Company or its property is subject.

ITEM 4.   Submission of Matters to a Vote of Security Holders.

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of 1995.

                                PART II

ITEM 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

     The  Company's  common  stock is listed  and  traded on the New York  Stock
Exchange  ("NYSE") and on the Pacific  Stock  Exchange  ("PSE") under the symbol
"SWP."

         The following table sets forth the high and low prices per common share
on the NYSE, for the two-year period ended December 31, 1995:
<TABLE>
<CAPTION>

                                                                             Year Ended December 31, 1995
<S>                                                                           <C>              <C>    
                                                                                 High                Low
       Quarter ended:
       December 31......................................................      $ 13 1/2         $    11 3/8
       September 30.....................................................        13                  11 3/8
       June 30..........................................................        12 5/8              11 3/8
       March 31 ........................................................        12 3/4              11 5/8
</TABLE>
<TABLE>
<CAPTION>

                                                                              Year Ended December 31, 1994
                                                                                High               Low
<S>                                                                           <C>            <C>    
       Quarter ended:
       December 31                                                            $ 12 3/8       $      11
       September 30.....................................................        13                  11
       June 30..........................................................        13 3/4              12
       March 31.........................................................        14                  12 1/4
</TABLE>

     At February 15, 1996,  management  estimated that there were  approximately
609 holders of record of the Company's  common  stock.  The closing price of the
common stock on February 15, 1996 was $14.50.

         Because  the  Company's  securities  are  listed  on a  national  stock
exchange,  they  are  marginable  if  they  otherwise  meet  the  minimum  price
requirements for marginability.

         The  Company  paid a  dividend  of $.22 per share for first  quarter of
1994; $.23 per share for each of the second,  third and fourth quarters of 1994;
and $.25 per share for each of the four quarters of 1995. The Company has raised
its quarterly dividend to $.26 per share for the quarter ending March 31, 1996.


<PAGE>



ITEM 6.  Selected Financial Data.

         The following table sets forth selected  financial data with respect to
the Company and its  subsidiaries for each of the five years in the period ended
December  31,  1995 and  should  be read in  conjunction  with the  Consolidated
Financial  Statements  and Notes thereto  which are contained  elsewhere in this
report (in thousands, except per share data):
<TABLE>
<CAPTION>

                                                                             Years ended December 31,
                                                             ------------------------------------------------
                                                         1995        1994           1993       1992(3)        1991(3)
                                                         ----        ----           ----      -----            ----   
Selected Consolidated Operating Data:
<S>                                                   <C>        <C>             <C>           <C>          <C>   

  Total revenues.................................     $ 71,862    $  58,928      $ 33,090      $ 19,758     $  18,937
  Income (loss) before extraordinary item........       13,031        9,963         3,182       ( 3,181)      ( 2,292)

  Per share(1):
      Income (loss) before extraordinary item....     $    .70    $     .64      $    .39      $(  3.31)    $(   3.24)
      Cash distributions and dividends(2):
        Common stock.............................     $   1.00    $     .91      $    .62        .38
                                                        ======      =======        ======        ===
        Preferred depositary receipts............                                              $   1.35     $    1.80
                                                                                                 ======       =======
</TABLE>
<TABLE>
<CAPTION>

                                                                                as of December 31,
                                                         1995        1994           1993       1992(3)        1991(3)
                                                         ----        ----           ----      -----           ----   
Selected Consolidated Balance Sheet Data:
<S>                                                   <C>         <C>            <C>           <C>          <C>   

  Real estate investments, net...................     $356,164    $ 302,878      $203,989      $ 55,797     $  58,147
  Total assets...................................      378,165      323,616       229,579        67,099        62,444
  Mortgage loans payable.........................      129,286      117,270        57,691        18,401        65,869
  Construction loans payable.....................       32,256        4,584
  Revolving line of credit.......................       16,500       27,700                       4,447
  Convertible debentures.........................                    13,529        28,378        55,000
  Preferred depositary receipts..................                                                               8,369
  Stockholders' equity (deficit).................      183,472      146,852      134,820         (17,07)      (17,757)

</TABLE>

<PAGE>

                         NOTES TO SELECTED FINANCIAL DATA:

(1)    Earnings per share is based on the net income or loss attributable to the
       common  stock and the weighted  average  number of shares of common stock
       and dilutive  common  stock  equivalents  outstanding  during the periods
       presented.  Earnings  per share for the year ended  December 31, 1995 was
       based on 18,627,322  weighted average shares of common stock  outstanding
       during the period  (15,633,291  in 1994,  8,099,900  in 1993,  961,870 in
       1992, and 708,391 in 1991).

       The  1995,  1994 and 1993 per  share  computations  include  options  and
       warrants  outstanding  during the period to  purchase  common  stock,  as
       calculated by application of the "treasury stock" method. Under generally
       accepted accounting principles,  the Company's debentures were not common
       stock  equivalents  and  therefore  were not  considered  in the  primary
       earnings per share computations;  the debentures were antidilutive to the
       computation of fully-diluted earnings per share.

       For periods prior to 1993, SRL's preferred  depositary  receipts were not
       common stock equivalents, and were not considered in primary earnings per
       share computation;  SRL's warrants,  options,  and specified  acquisition
       convertible  limited  partnership  interests  were  antidilutive  to  the
       computation of fully-diluted earnings per share.

(2)    The Company paid a dividend of $.175 per share for the fourth  quarter of
       1992; $.20 per share for each of the first,  second and third quarters of
       1993; $.22 per share for each of the fourth quarter of 1993 and the first
       quarter of 1994; $.23 per share for each of the second,  third and fourth
       quarters  of 1994;  and $.25 per share for each of the four  quarters  of
       1995. The Company has raised its quarterly dividend to $.26 per share for
       the quarter ending March 31, 1996.

(3)    The Reorganization of SRL into the Company has been accounted for similar
       to a pooling of interests and has been applied by restating the financial
       statements  of SRL,  with the only  impact  being the  classification  of
       certain  equity  accounts  and  disclosures  with respect to earnings per
       share.



<PAGE>

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

         The following  discussion  and analysis  should be read in  conjunction
with the Selected Financial Data and the Consolidated  Financial  Statements and
Notes appearing elsewhere herein.

Results of Operations

         Year ended  December 31, 1995 compared to year ended December 31, 1994.
Rental revenues in 1995 were  $70,396,000,  an increase of 22% from  $57,625,000
for 1994. This increase was due to the acquisition of eight apartment properties
in 1994, an approximate  4% rental rate increase on existing  properties and the
first contribution from the Company's development  properties.  Other income was
$1,466,000 in 1995, compared to $1,303,000 for 1994.
Total revenues were $71,862,000 in 1995, compared to $58,928,000 for 1994.

         Operating  expenses  (property  operating  expenses  plus  general  and
administrative  expenses) were $35,038,000 for 1995, compared to $30,083,000 for
the same  period  in 1994.  This  increase  was  primarily  attributable  to the
acquisition of eight apartment properties in 1994 and initial operating expenses
from three of the Company's development properties.

         Net operating income per unit (total revenues less operating  expenses,
divided by the  weighted  average  number of  apartment  unit  owned  during the
period) increased in 1995 for the seventh consecutive year. Net operating income
per unit in 1995 was $2,826, a 4% increase from $2,713 in 1994. This increase is
the result of increases in both gross income and operating  expenses per unit of
4%.

     Interest on debt was $10,878,000 for 1995, compared to $8,470,000 for 1994.
This increase is primarily  attributable to interest on the  construction  loans
and the line of credit.

         Additions to property in 1995 were $6,441,000 compared to $7,764,000 in
1994.  Depreciation  and  amortization  expense  increased  $2,461,000  in  1995
compared to 1994 as a result of a full year of  depreciation  on the  properties
acquired in 1994,  depreciation on completed  construction  and  depreciation on
capitalized improvements made to the properties.

         Year Ended  December 31, 1994 Compared to Year Ended December 31, 1993.
Rental revenues in 1994 were  $57,625,000,  an 80% increase from  $31,959,000 in
1993.  This  increase  was due  primarily  to the  acquisition  of 26  apartment
properties  in 1993 and 1994,  and to an  approximate  2%  increase  in economic
occupancy  and a 5% increase in rental  rates.  Other income was  $1,303,000  in
1994,  compared to $1,131,000 for 1993. Total revenues were $58,928,000 in 1994,
compared to $33,090,000 for 1993.

         Operating  expenses  (property  operating  expenses  plus  general  and
administrative  expenses) were $30,083,000 for 1994, compared to $17,868,000 for
the same period in 1993. This increase was attributable to the acquisition of 26
apartment properties during 1993 and 1994.

         Net operating income per unit (total revenues less operating  expenses,
divided by the  weighted  average  number of  apartment  units owned  during the
period) in 1994 was $2,713, a 25% increase from $2,176 in 1993. This increase is
due to an increase in gross  income per unit of 10% and a decrease in  operating
expenses per unit of 2% (which is the result of a combination of expense control
at the property level and general and administrative  expenses being spread over
a larger number of units).

         Interest on fixed-rate  mortgage debt and the debentures was $8,470,000
for  1994,   compared  to  $5,146,000  for  1993.  This  increase  is  primarily
attributable to the REMIC financing which closed in December 1993 and June 1994.

         Additions to property in 1994 were $7,764,000 compared to $3,615,000 in
1993.  Depreciation  and  amortization  expense  increased  $3,694,000  in  1994
compared to 1993 as a result of the  acquisition of properties  and  capitalized
improvements made to the properties. About 71% of the 1994 additions to property
was for  improvements  to building  exteriors,  parking  lots,  unit  interiors,
exterior lighting, carports and limited access perimeter fencing.


<PAGE>

Liquidity and Capital Resources

         Cash and cash  equivalents at December 31, 1995 aggregated  $2,406,000,
compared to  $1,334,000  at December  31,  1994.  In  addition,  the Company has
accumulated  cash  reserves of  $4,643,000  to fund  recurring  additions to its
properties.  The estimate of the requirements for these reserves is based on the
replacement cost and useful lives of exterior paint, boilers, roofs, asphalt and
miscellaneous  items. Annual cash reserve  requirements in 1996 are estimated to
be $105 per unit.  Management  anticipates  that cash  generated  from  property
operations  and  cash  on  hand  will  be  adequate  to  fund  working   capital
requirements for the foreseeable future.

         In September  1994, the Company  obtained a revolving line of credit in
the maximum amount of $75,000,000.  The Company can currently draw up to a total
of  $41,800,000  on the  line  of  credit,  which  amount  may be  increased  as
additional  properties are added as security for the loan. At December 31, 1995,
the outstanding balance on the line of credit was $16,500,000.

         At December 31, 1995,  the Company had an interest rate swap  agreement
with a notional amount of $48,851,000. The Company has entered into the interest
rate  swap  agreement  to  convert  floating  rate  liabilities  to  fixed  rate
liabilities.  The agreement  fixes the interest  rate on the Company's  expected
variable  rate debt at 7.9%  through  April 1997.  The Company  does not hold or
issue interest rate swap agreements for trading purposes. The Company is exposed
to possible credit risk if the counterparty fails to perform, however, this risk
is minimized by entering into the agreement with a highly rated counterparty. At
December 31, 1995, there were no defaults under this agreement.

         The  Company  plans to complete  construction  of four  properties  and
additions or  modifications  to three existing  properties in 1996 and 1997. The
total cost of the four properties and one addition  currently under construction
is  estimated  to be  $109,500,000,  and  the  Company  has  construction  loans
available totaling $68,506,000.  The Company has committed to fund the remaining
$40,994,000 from available funds or draws on the Company's line of credit.
As of  December  1995,  the  Company  has  funded  all  but  $3,814,000  of  its
commitment.

         SWP  plans  to  spend  approximately  $4,000,000  in  1996  on  capital
improvements  to increase the  revenue-generating  capabilities  of its existing
properties.  Funds  for these  improvements  will come from cash on hand or cash
generated from property operations.

         SWP plans to repay the $8,873,000  mortgage on Sunset Pointe Apartments
on March 1, 1996, with funds from its line of credit.


ITEM 8.   Financial Statements and Supplementary Data.

         The independent auditor's report, consolidated financial statements and
schedule listed in the accompanying  index are filed as part of this report. See
Index to Consolidated  Financial Statements and Consolidated Financial Statement
Schedule on page F-1.


     ITEM 9. Changes in and  Disagreements  with  Accountants  on Accounting and
Financial Disclosure.

         Not applicable.



<PAGE>

                                 PART III

ITEM 10.   Directors and Executive Officers of the Registrant.

Directors and Officers of the Company

         The Bylaws of the Company and the  provisions  of the Maryland  General
Corporation  Law (the  "Maryland  Law"),  under  which the  Company  was formed,
generally  provide that the Company  will be managed by its Board of  Directors,
which may appoint  officers to handle the  administration  of the  Company.  The
Bylaws of the Company  further provide that a majority of the Company's Board of
Directors shall at all times consist of independent Directors.

         The Directors and Officers of the Company as of February 15, 1996 are:

          Name                           Age              Principal Occupation

   John S. Schneider..................   57  Chairman of the Board
                                             and Chief Executive Officer
   Robert F. Sherman..................   53  President, Chief Operating Officer
                                               and Director
   Lewis H. Sandler...................   59  Executive Vice President,Secretary,
                                              General Counsel and Director
   Mark J. Sandler....................   53    Director
   Ira T. Wender......................   69  Director
   Larrie A. Weil.....................   52  Director
   Robert W. Scharar..................   46  Director
   David L. Johnston..................   51  Executive Vice President - Real 
                                               Estate Investments
   Diana M. Laing.....................   41  Executive Vice President, Chief 
                                               Financial Officer and Treasurer

     John S. Schneider has been Chief  Executive  Officer of the Company and its
predecessor-in-interest,  SRL,  since 1983 and is the  Chairman  of the Board of
Directors. He is primarily responsible for the overall direction of the Company.
Mr.  Schneider  graduated  from  the  Harvard  Business  School  in 1967 and was
employed by the investment banking firm of Donaldson,  Lufkin and Jenrette until
1973, when he cofounded a predecessor firm to SWP.

     Robert  F.  Sherman  has been in  charge  of SWP's  (or its  predecessors')
management  division since 1973 and is President and Chief Operating Officer and
a Director of the Company,  in charge of management services and responsible for
the on-site  management of the properties  owned or managed by the Company.  Mr.
Sherman has served as president of both the National  Apartment  Association and
the Dallas Apartment Association, and has been a director of the National, Texas
and Dallas Apartment Associations.

     Lewis  H.  Sandler  has  been  General  Counsel  of  the  Company  and  its
predecessors  since 1983 and is Executive  Vice  President,  Secretary,  General
Counsel and a Director of the  Company.  He was admitted to the Bar of the State
of New  York in 1962 and has  since  then  been a  practicing  attorney.  He was
admitted  to the Bar of the State of Texas in 1981.  He has acted as  counsel to
Messrs.  Schneider and Sherman, and their respective companies and partnerships,
since 1973.

     Mark J. Sandler was a senior managing director of Bear, Stearns & Co. Inc.,
an investment  banking firm, in charge of its real estate  operations from prior
to 1987 until his  retirement in October 1988.  Since that time, Mr. Sandler has
managed his personal and family  investments.  Mr.  Sandler is a Director of the
Company and a member of the Compensation and Audit  Committees.  Mark Sandler is
not related to Lewis Sandler.

     Ira T. Wender is a former  partner and is  currently  of counsel to the law
firm of Patterson,  Belknap,  Webb & Tyler, New York, NY, since July 1986. He is
also a Director of Dime Savings Bank of New York and REFAC Technology,  Inc. Mr.
Wender is a Director of the Company and a member of the  Compensation  and Audit
Committees. 

     Larrie A. Weil has been President and Chief Executive  Officer of QuickCall
Corporation,  an international  producer and distributor of wireless pay phones,
since June 1995.  On January 4, 1996,  QuickCall  Corporation  filed a voluntary
petition under Chapter 11, of the Federal  Bankruptcy  Code.  From March 1991 to
June 1995,  he was a principal  and in charge of  corporate  finance for Barre &
Company, Inc., an investment banking firm. From 1985 to 1989, he was employed by
Underwood,  Neuhaus & Co., Incorporated,  an investment banking firm, serving as
Chief Operating Officer from 1987 to 1989 and from January 1990 to March 1992 as
President of its  successor,  909 Corp. He was Senior Vice  President of Eppler,
Guerin & Turner,  Inc., an investment  banking firm, from 1981 to 1985. Mr. Weil
is a Chartered  Financial  Analyst.  Mr. Weil is a Director of the Company and a
member of the Compensation and Audit Committees.

     Robert W.  Scharar  is  President  and a  Director  of FCA  Corporation,  a
registered investment advisor which he founded in 1983. He is also president and
a director of FCA Investment Company, a Small Business  Investment Company,  and
serves as a trustee of First Commonwealth Mortgage Trust and of United Investors
Realty Trust, both of which are REITs. Mr. Scharar is also past president of the
American  Association  of  Attorneys  - CPAs.  Mr.  Scharar is a Director of the
Company and a member of the Compensation and Audit Committees.

     David  L.  Johnston  has  been  Executive  Vice  President  -  Real  Estate
Investments  since joining the Company in October 1992.  From 1989 to 1992,  Mr.
Johnston was Senior Vice President of Property  Company of America,  responsible
for the Southwestern Region,  acquiring  approximately 5,000 apartment units for
that company.  From 1982 to 1988, he was a Division President and Senior Partner
of the Trammell Crow Residential Company.  During his more than 20 years of real
estate experience,  Mr. Johnston has developed more than 10,000 apartment units,
primarily in Texas.

     Diana M. Laing has been employed by the Company and its predecessors  since
1982.  She is  Executive  Vice  President  and Chief  Financial  Officer  of the
Company.   She  has  previously   served  as  Controller,   Treasurer  and  Vice
President-Finance of the Company and its predecessors.  Ms. Laing is a Certified
Public Accountant and a member of the American  Institute of CPA's and the Texas
Society of CPA's.  Ms.  Laing is a Director of  Sterling  House  Corporation,  a
publicly-traded operator of assisted living centers.


ITEM 11.   Executive Compensation.

General

 .........The following table sets forth certain information regarding the annual
compensation  the Company  paid to the Chief  Executive  Officer and to the four
executive officers each of whose aggregate remuneration exceeded $100,000 during
1995:


<PAGE>
<TABLE>
<CAPTION>
                                 SUMMARY COMPENSATION TABLE

                                                                                     Long-Term
                                                                                    Compensation
                                                                             Shares
                                             Annual Compensation          Underlying                              All Other
                                                                            Options       LTIP Payouts(4)        Compensation
Name and Principal Position      Year   Salary ($)        Bonus ($)(1)          (#)             ($)                   (5)
---------------------------      ----   ----------        ------------  --------------   ----------------------    ------------
<S>                              <C>    <C>               <C>               <C>              <C>                    <C>

John S. Schneider                1995   $  236,400        $90,000           26,725(2)        $ 1,404                $4,000
   Chief Executive Officer       1994      225,000        67,500            70,000(3)             80                 4,000
                                 1993      190,000        54,900                                                     2,000

Robert F. Sherman                1995      189,000        86,940            17,000(2)            446                 3,000
    President                    1994      180,000        54,000            70,000(3)             55                 3,000
                                 1993      164,000        47,700                                                     2,000

Lewis H. Sandler                 1995      168,000        77,280            28,850(2)            749                 3,000
   Executive Vice President      1994      160,000        48,000            70,000(3)             45                 5,000
                                 1993      158,000        45,900                                                     2,000

David J. Johnston                1995      178,500        82,110                                 400
   Executive Vice President      1994      169,500        51,000            70,000(3)             55
                                 1993      158,000        45,900

Diana M. Laing                   1995      150,000        69,000                                 424                 3,000
   Chief Financial Officer       1994      120,000        36,000            70,000(3)             20                 2,000
                                 1993      100,000        28,800                                                     1,000
-----------------------------
<FN>


(1)    Amounts  represent  incentive/bonus  earned for the year. These amounts
       were paid in the following year.

(2)    Amounts represent options issued as reload options for stock tendered for
       a portion of the option  exercise price when  non-qualified  options were
       exercised.  In the aggregate,  reload options for 72,575 shares of common
       stock with exercise prices ranging from $12.375 to $13.00 were granted.

(3)    Each  Executive  Officer was granted  options for 50,000 shares of common
       stock with an  exercise  price of $13.00 per share and options for 20,000
       shares of common  stock  with an  exercise  price of $11.00  per share of
       common stock,  which will vest over four years  commencing  May 25, 1995.
       The exercise  price  represents the closing market price of the Company's
       common stock on the date of the grant.

(4)    Amounts earned through December 31, 1995 on deferred compensation under 
       non-qualified deferred compensation plan.

(5)    Company's matching contribution under 401(k) Plan.
</FN>
</TABLE>

         Indemnification.  The  Charter  and Bylaws of the  Company  provide for
indemnification  of the  officers  and  Directors  of the Company to the fullest
extent  permitted  under  Maryland  Law and permit the  indemnification,  at the
discretion  of the Board of  Directors,  of all other  persons  permitted  to be
indemnified to the extent the Board deems advisable as permitted under such law.
The Charter also contains a provision that limits the liability of the Directors
to the  Company  and its  stockholders  for  monetary  damages for a breach of a
Director's duty of care.


<PAGE>

         Employment   Agreements.   The  Company  has  entered  into  employment
agreements with each of Messrs. Schneider, Sherman, Sandler and Johnston and Ms.
Laing for the  payment of  certain  severance  compensation  in the event of the
voluntary or involuntary  termination  of their  employment.  These  agreements,
which may be terminated  by either party upon 90 days' notice,  also provide for
annual incentive  compensation  calculated as a percentage of base salary, based
upon the  increase in funds from  operations  per share of common  stock for the
current year over the prior year. Such agreements also provide that in the event
of  termination  of  employment  by the Company  (other than for cause or in the
event of death) the executive is entitled to severance pay equal to at least his
then current annual base salary plus the unpaid  portion of any  incentive/bonus
compensation payable and/or earned in that year. In the event of termination, at
the option of the  executive,  the Company is obligated to repurchase the common
stock owned by him at the then market price per share. If the executive proposes
to sell 10% or more of his  current  holdings of common  stock,  such shares are
subject to the Company's  right of first refusal at the then market price during
the term of employment and for a period of one year thereafter.


<PAGE>

<TABLE>
<CAPTION>


                                  OPTION GRANTS IN 1995

                                        Individual Grants                             Potential Realizable Value
                                                                                       at Assumed Annual Rates
                        Options   % of Total Options                                of Share Price Appreciation
                        Granted       Granted to        Exercise   Expiration            For Option Term
Name                    (#) (1)    Employees in 1995      Price        Date               5%($)   10%($)
----                  -----------  -----------------   ----------- -----------------      -------------
<S>                      <C>             <C>            <C>         <C>              <C>            <C>

John S. Schneider        4,095           0.7%           $12.625     June 5, 2001     $ 14,465       $ 31,791
                         4,095           0.7%            12.625     June 5, 2002       17,773         40,140
                         4,095           0.7%            12.625     June 5, 2003       21,246         49,324
                         4,095           0.7%            12.625     June 5, 2004       25,103         59,731
                         4,095           0.7%            12.625     June 5, 2005       28,943         70,874
                         1,563           0.2%            13.000    Sept 26, 2001        6,985         15,776
                         1,563           0.2%            13.000    Sept 26, 2002        8,350         19,385
                         1,562           0.2%            13.000    Sept 26, 2003        9,784         23,356
                         1,562           0.2%            13.000    Sept 26, 2004       11,375         27,855

Robert F. Sherman        2,200           0.4%            12.375     June 8, 2001        7,617         16,741
                         2,200           0.4%            12.375     June 8, 2002        9,359         21,138
                         2,200           0.4%            12.375     June 8, 2003       11,188         25,974
                         2,200           0.4%            12.375     June 8, 2004       13,219         31,454
                         2,200           0.4%            12.375     June 8, 2005       15,242         37,322
                         1,500           0.2%            13.000    Sept 26, 2001        6,703         15,140
                         1,500           0.2%            13.000    Sept 26, 2002        8,014         18,604
                         1,500           0.2%            13.000    Sept 26, 2003        9,389         22,414
                         1,500           0.2%            13.000    Sept 26, 2004       10,917         26,732

Lewis H. Sandler         4,520           0.7%            12.375     June 1, 2001       15,649         34,396
                         4,520           0.7%            12.375     June 1, 2002       19,229         43,429
                         4,520           0.7%            12.375     June 1, 2003       22,987         53,365
                         4,520           0.7%            12.375     June 1, 2004       27,160         64,625
                         4,520           0.7%            12.375     June 1, 2005       31,315         76,680
                         1,563           0.2%            13.000    Sept 26, 2001        6,985         15,776
                         1,563           0.2%            13.000    Sept 26, 2002        8,350         19,385
                         1,562           0.2%            13.000    Sept 26, 2003        9,784         23,356
                         1,562           0.2%            13.000    Sept 26, 2004       11,375         27,855

<FN>

     (1) Amounts  represent  options issued as reload options for stock redeemed
when options were exercised. In the aggregate,  reload options for 72,575 shares
of common  stock with  exercise  prices  ranging  from  $12.375  to $13.00  were
granted.
</FN>
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                      OPTION EXERCISES IN 1995 AND YEAR END OPTION VALUES


                                                                      Number of               Value of Unexercised
                                                                 Unexercised Options          In-the-Money Options
                             Shares              Value          at December 31, 1995         at December 31, 1995(2)
                           Acquired on         Realized            # Exercisable/                 Exercisable/
        Name               Exercise (#)         ($) (1)             Unexercisable                 Unexercisable
        ----              -------------      ------------    --------------------------     -------------------
<S>                          <C>             <C>                        <C>                <C>    

John S. Schneider            59,500          $   76,375                 0 / 205,225        $           0 / $382,000

Robert F. Sherman            73,500              83,875                 0 / 153,500        $           0 / $282,000

Lewis H. Sandler             63,500              70,125                 0 / 150,350        $           0 / $257,000

David L. Johnston                                                  63,500 / 121,500             $133,750 / $229,000

Diana M. Laing               20,000              45,000            36,500 / 112,500            $  66,250 / $206,000
<FN>

     (1)  Represents  the  spread  between  the market  value of the  underlying
securities at exercise minus the exercise price.

     (2) Represents the number of shares of common stock  underlying the options
(excluding options the exercise price of which was more than the market value of
the underlying securities) times the market price, minus the exercise price.
</FN>
</TABLE>



<PAGE>



ITEM 12.   Security Ownership of Certain Beneficial Owners and Management.

         As of February 15, 1996,  there were 20,413,649  shares of common stock
outstanding.  In addition,  there were vested options to purchase 420,200 shares
of common stock at exercise prices ranging from $11.00 to $13.00 per share.  The
following  ownership  tables  do not  include  ownership  of  shares  which  are
represented by unvested options to purchase common stock.

The following table sets forth certain information as to the number of shares of
common  stock  beneficially  owned  as of  February  15,  1996  by  each  person
(including any "group" as that term is used in Section  13(d)(3) of the Exchange
Act) who is known to the  Company to own  beneficially  5% or more of the common
stock:
<TABLE>
<CAPTION>

                                Security Ownership of Certain Beneficial Owners

          Names and Addresses of                               Amount & Nature of             Percentage
               Beneficial Owners                              Beneficial Ownership             of Class
<S>                                                                <C>                           <C>   

          Public Employee Retirement                               1,537,800(1)                  7.53%
             Systems of Ohio
          277 East Town Street
          Columbus, Ohio  43215-4642

          T. Rowe Price Associates, Inc.                           1,196,000(2)                  5.86%
          100 East Pratt Street
          Baltimore, Maryland  21202

          LaSalle Advisors Limited Partnership                     1,095,017(3)                  5.36%
          ABKB/LaSalle Securities Limited Partnership                470,300(4)                 2.30%
          11 South LaSalle Street
          Chicago, Illinois  60603

------------------------------
<FN>

     (1)  According  to the Schedule  13G filed by Public  Employees  Retirement
System of Ohio dated  January  30,  1996,  they  beneficially  own and have sole
dispositive and voting power of 1,537,800 shares of common stock.

     (2) According to the Schedule 13G filed by T. Rowe Price  Associates,  Inc.
dated February 14, 1996, they  beneficially own 1,196,000 shares of common stock
and have sole voting power over 31,000  shares and sole  dispositive  power over
1,196,000.

     (3)  According  to the  Schedule  13G  filed by  LaSalle  Advisors  Limited
Partnership  dated February 14, 1996, they  beneficially own 1,095,017 shares of
common stock and have sole voting and  dispositive  power over  539,000  shares.
They have shared voting power and shared  dispositive  power over 202,407 shares
and 556,107 shares, respectively,

     (4) According to the Schedule 13G filed by ABKB/LaSalle  Securities Limited
Partnership  dated February 14, 1996,  they  beneficially  own 470,300 shares of
common stock and have sole voting and  dispositive  power over  126,700  shares.
They have shared  voting  power and shared  dispositive  power over  178,100 and
343,600 shares, respectively.

</FN>
</TABLE>

<PAGE>



         The following table sets forth certain  information as to the number of
shares of common  stock  beneficially  owned as of February  15,  1996,  by each
Director and nominee for Director, by each of the named Executive Officers,  and
by all officers and Directors of the Company as a group:
<TABLE>
<CAPTION>

                                                                    Security Ownership of Management

          Names and Addresses of                                Amount & Nature of             Percentage
               Beneficial Owners                               Beneficial Ownership             of Class
<S>                                                                  <C>                           <C>    

          John S. Schneider                                          510,333(1)                    2.5%
          5949 Sherry Lane, Suite 1400
          Dallas, Texas  75225

          Robert F. Sherman                                          182,979(2)                     1%
          5949 Sherry Lane, Suite 1400
          Dallas, Texas  75225

          Lewis H. Sandler                                           170,703(3)                     1%
          5949 Sherry Lane, Suite 1400
          Dallas, Texas  75225

          Mark J. Sandler                                             52,387                         *
          16 West Road
          Short Hills, New Jersey 07078

          Robert W. Scharar                                           28,000(4)                      *
          5847 San Felipe, Suite 850
          Houston, Texas  77057

          Larrie A. Weil                                              31,366(5)                      *
          650 Century Plaza Drive, Suite D-120
          Houston, Texas  77073

          Ira T. Wender                                               37,264(6)                      *
          1133 Avenue of the Americas, 22nd Floor
          New York, New York  10036

          David L. Johnston                                           86,500(7)                      *
          5949 Sherry Lane, Suite 1400
          Dallas, Texas  75225

          Diana M. Laing                                              86,500(8)                      *
          5949 Sherry Lane, Suite 1400
          Dallas, Texas  75225

          All Officers and Directors                               1,621,232(9)                    7.9%
          as a group (16 persons)
------------------------------------
<FN>

*      Less than 1%.

(1)  Includes 79,650 shares held by a trust for his wife.

(2)  Includes 70,351 shares owned by members of Mr.  Sherman's  immediate family
     or by trusts for such  members and 28,000  shares which are issuable to Mr.
     Sherman  pursuant to options to purchase common shares which vested January
     1, 1996.


<PAGE>



(3)  Includes  15,780  shares held in trusts for members of Mr. Lewis  Sandler's
     immediate  family and 4,200 shares which are issuable to Mr. Lewis  Sandler
     pursuant to options to purchase common shares which vested January 1, 1996.

(4)  Includes 8,500 shares which are issuable to Mr. Scharar pursuant to options
     to purchase common shares which vested January 1, 1996.

(5)  Includes  28,000  shares which are issuable to Mr. Weil pursuant to options
     to purchase  common shares which vested  January 1, 1994,  May 25, 1995 and
     January 1, 1996.

(6)  Includes 8,500 shares which are issuable to Mr. Wender  pursuant to options
     to purchase common shares which vested January 1, 1996.

(7)  Includes  86,500  shares  which are  issuable to Mr.  Johnston  pursuant to
     options to purchase common shares which vested January 1, 1994,  January 1,
     1995, May 25, 1995 and January 1, 1996.

(8)  Includes  56,500 shares which are issuable to Ms. Laing pursuant to options
     to purchase  common shares which vested  January 1, 1994,  January 1, 1995,
     May 25, 1995 and January 1, 1996.

(9)  Includes  165,781  shares owned by members of the Officers' and  Directors'
     immediate family or by trusts for such members and 435,200 shares which are
     issuable pursuant to options to purchase common shares which have vested or
     will vest within 60 days of February 15, 1996.

</FN>
</TABLE>

ITEM 13.   Certain Relationships and Related Transactions.

         Except as hereafter noted,  there have been no transactions,  or series
of similar transactions,  since the beginning of the Company's last fiscal year,
nor are  there  any  currently  proposed  transactions,  or  series  of  similar
transactions,  to which the Company or any of its subsidiaries was or is to be a
party, in which the amount involved exceeds  $60,000,  and in which any director
or officer of the Company (or any investor  beneficially  owning more than 5% of
any class of the  Company's  voting  securities)  had, or will have, a direct or
indirect material interest.

         During 1995, the Company accepted notes receivable  totaling $1,945,000
from certain  officers  and  directors  to exercise  options to purchase  common
stock. The notes  receivable,  which mature on December 31, 2002, are in amounts
up to 80% of the  option  exercise  price and bear  interest  at the  Applicable
Federal  Rate (as  published  by the  Internal  Revenue  Service) at the date of
exercise.  Principal in the amount of 50% of the exercise price will be forgiven
ratably over seven years  beginning  January 1, 1997,  contingent upon continued
service as an officer or  director  and the absence of any default on the notes.
The  balance of such loans will be payable  ratably  over the same  period.  The
loans are secured by the common  stock  purchased.  Options to purchase  275,000
shares of common stock were exercised,  and 85,967  previously  issued shares of
common  stock were  applied  (at the market  price of such shares at the date of
such application) to the exercise price of the options and were retired.




<PAGE>
                                                                            
                              PART IV

ITEM 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) The index to the audited Consolidated  Financial Statements and Consolidated
Financial Statement Schedule is included on page F-1 of this report.

(b)    Reports on Form 8-K for the quarter ended December 31, 1995:

             None

(c)    Exhibits:

            Filed herewith or
          incorporated herein by
Number           Title                             reference

3.1  Articles of Incorporation of the         Exhibit No. 99.1 to Form 10-Q for
     Company, as amended                      the quarter ended June 30, 1994
                                              (File No. 1-11224)

3.2  Bylaws of the Company                    Exhibit No. 3.2 to Amendment No. 2
                                              to Form S-4 filed July 8, 1992
                                              (File No. 33-48122)

3.3  Rights Agreement dated August 17, 1994   Exhibit No. 1 to Form 8-K filed
     between South West Property Trust Inc.   August 17, 1994
     and Society National Bank, as Rights     (File No. 1-11224)
     Agent

4.1  Form of Indenture governing the          Exhibit No. 4.1 to Amendment No. 2
     Convertible Debentures                   to Form S-11 filed July 8, 1992
                                              (File No. 33-48121)

4.2  Form of Convertible Debenture            Exhibit No. 4.2 to Amendment No. 2
                                              to Form S-11 filed July 8, 1992
                                              (File No. 33-48121)

4.3  Form of Certificate representing         Exhibit No. 4.1 to Form S-2 filed
     common stock of the Company              March 15, 1993
                                              (File No. 33-59528)

10.1 Employment Agreement between the Company  Exhibit No. 10.1 to Form 10-K for
     and John S. Schneider                     the year ended December 31, 1994
                                               (File No. 1-11224)

10.2  Employment Agreement between the Company Exhibit No. 10.2 to Form 10-K for
      and Lewis H. Sandler                     the year ended December 31, 1994
                                               (File No. 1-11224)

10.3  Employment Agreement between the         Exhibit No. 10.3 to Form 10-K for
      Company and Robert F. Sherman            the year ended December 31, 1994
                                               (File No. 1-11224)

10.4  1992 Stock Option Plan (as amended)      Exhibit No. 10.5 to Amendment
                                               No. 3 to Form S-4 filed July 22,
                                               1992
                                               (File No. 33-48122)


<PAGE>

            Filed herewith or
         incorporated herein by
Number         Title                               reference

                                                                              
10.5  Lease Agreement dated March 14, 1994     Exhibit No. 10.4 to Form 10-K for
      between Sterling Plaza Limited           the year ended December 31, 1994
      Partnership, as landlord, and the       (File No. 1-11224)
      Company, as Tenant

10.7  Dividend and Interest Reinvestment and  Exhibit No. 10.1 to Post-Effective
      Share Purchase Plan                     Amendment No. 2 to Form S-3
                                              filed February 10, 1995
                                              (File No. 33-59526)

10.8  Credit Agreement dated December 1,      Exhibit No. 99.1 to Form 8-K dated
      1993 among SWP Properties, Inc., SWP    December 23, 1993
      Woodscape Properties, Inc., and SWP     (File No. 1-11224)
      Creeks Properties, Inc. and National
      Westminster Bank, PLC
 
10.9  Collection Account Agreement dated       Exhibit No.99.2 to Form 8-K dated
      December 1, 1993 among SWP Properties,   December 23, 1993
      Inc., SWP Woodscape Properties, Inc.     (File No. 1-11224)
      and SWP Creeks Properties, Inc.  
      (Mortgagor), Norwest Bank Minnesota,
       N.A. (Account Agent),Southwestern 
      Property Trust, Inc. (PropertyManager), 
      and Norwest Bank Minnesota,N.A. (Trustee)

10.10 Property Management Agreement dated        Exhibit No. 99.3 to Form 
      December 1, 1993 for properties covered    8-K dated December 23, 1993
      by the Credit Agreement described in       Exhibit No. 10.8 
      hereto between SWP Properties, Inc., SWP   (File No. 1-11224)
      Woodscape Properties, Inc., SWP Creeks
      Properties, Inc., and Southwestern Property
      Trust, Inc.

10.11 Property Manager Subordination Agreement    Exhibit No. 99.4 to Form 8-K 
      dated December 1, 1993 between National     dated December 23, 1993
      Westminster Bank, PLC, and Southwestern     (File No. 1-11224)
      Property Trust, Inc.

10.12 Certificate Purchase Agreement dated        Exhibit No. 99.5 to Form 8-K 
      December 22, 1993 between SWP               dated December 23, 1993
      Depositor, Inc, Southwestern Property       (File No. 1-11224)
      Trust, Inc., and National Westminster 
      Bank, PLC

10.13 Loan Purchase Agreement dated December 22,   Exhibit No. 99.6 to Form 8-K 
      1993 between National Westminster Bank, PLC  dated December 23, 1993
      and SWP Depositor, Inc.                      (File No. 1-11224)

10.14 Employment Agreement between the Company     Exhibit No. 10.14 to Form 
      and David L. Johnston                        10-K for the year ended 
                                                   December 31, 1994 
                                                   (File No. 1-11224)

10.15 Employment Agreement between the Company     Exhibit No. 10.15 to Form 
      and Diana M. Laing                           10-K for the year ended 
                                                   December 31, 1994   
                                                   (File No. 1-11224)

<PAGE>



10.16   Credit Agreement dated March 1, 1994       Exhibit No. 99.1 to Form 10-Q
        between SWP REMIC Properties II-A, L.P.    for quarter ended March 31, 
        and National Westminster Bank, PLC,        1994 
        New York Branch                            (File No. 1-11224)
 
                                            
10.17   Property Management Agreement dated        Exhibit No. 99.2 to Form 
        March 10, 1994 between SWP REMIC           10-Q for quarter ended 
        Properties II-A, L.P. and Southwestern     March 31, 1994
        Property Trust, Inc.                       (File No. 1-11224)
        

10.18   Property Manager Subordination             Exhibit No. 99.3 to Form 10-Q
        Agreement datedMarch 10, 1994 between      for quarter ended March 31, 
        National WestminsterBank, PLC, and         1994 
        Southwestern Property Trust, Inc.          (File No. 1-11224)

10.19   Note Purchase Agreement dated March        Exhibit No. 99.4 to Form 10-Q
        10, 1994 between SWP Depositor, Inc.,      for quarter ended March 31, 
        Southwestern Property Trust, Inc. and      1994      
        National Westminster Bank, PLC             (File No. 1-11224)

10.20   Form of Promissory Note dated March 10,    Exhibit No.99.5 to Form 10-Q 
        1994 in connection with REMIC Financing    for quarter ended March 31,
                                                   1994
                                                   (File No. 1-11224)

10.21   Form of Mortgage dated March 10, 1994      Exhibit No. 99.6 to Form 10-Q
        in connection with REMIC Financing         for quarter ended March 31, 
                                                   1994
                                                   (File No. 1-11224)

10.22   Indenture dated March 10, 1994 between     Exhibit No. 99.1 to Form 10-Q
        SWP Depositor, Inc. and Bankers Trust      for quarter ended June 30, 
        Company, as Trustee                        1994                      
                                                   (File No. 1-11224)

10.23   Loan Purchase Agreement dated June 30,     Exhibit No. 99.2 to Form 10-Q
        1994, between National Westminster Bank,   for quarter ended June 30, 
        PLC and SWP Depositor, Inc.                1994
                                                   (File No. 1-11224)
 
10.24   Collection Account Agreement dated         Exhibit No. 99.3 to Form 10-Q
        June 30, 1994 among SWP REMIC Properties   for quarter ended June 30, 
        II-A, L.P., BankersTrust Company, as       1994
        Account Agent, South West Property Trust,  (File No. 1-11224)
        as Property Manager, and Bankers
        Trust Company, as Indenture Trustee

10.25   Line of Credit Agreement dated             Exhibit No. 99.7 to Form 10-Q
        September 15, 1994 between South West      for quarter ended September 
        Properties, L.P., South West Property      30, 1994 
        Trust Inc. and Lehman Brothers Holdings   (File No. 1-11224)
        Inc.

10.26   Promissory Note dated September 15, 1994  Exhibit No. 99.8 to Form 10-Q 
        made by South West Properties, L.P. in   for quarter ended September 30,
        favor of Lehman Brothers Holdings Inc.   1994
        in the principal amount of $41,000,000   (File No. 1-11224)

10.27   Form of Deed of Trust and Security       Exhibit No. 99.9 to Form 10-Q 
        dAgreement ated September 15, 1994       for quarter ended September 30,
        from South West Properties, L.P. in      1994 
        favor of Robert J. Banta, as trustee,    (File No. 1-11224)
        and Lehman Brothers Holdings Inc.,
        as beneficiary


<PAGE>



22.1    Subsidiaries of the Registrant              Filed herewith

23.1    Consent of Ernst & Young LLP                Filed herewith



<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.

                                 SOUTH WEST PROPERTY TRUST INC.

                                 By:     /s/  JOHN S. SCHNEIDER
                                 John S. Schneider, Chairman of the Board
                                 and Chief Executive Officer

February 26, 1996

         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 in the capacities and on the dates indicated.


                                     Capacities in
          Signature                  which signed                     Date
     
/s/  JOHN S. SCHNEIDER          Chairman of the Board,         February 26, 1996
-------------------------------  and Chief Executive Officer
John S. Schneider                


/s/  ROBERT F. SHERMAN          President, Chief Operating     February 26, 1996
-------------------------------  Officer and Director
Robert F. Sherman                              


/s/  LEWIS H. SANDLER           Executive Vice President,      February 26, 1996
-------------------------------  Secretary, General Counsel
Lewis H. Sandler                  and Director


/s/  DIANA M. LAING             Executive Vice President,      February 26, 1996
-------------------------------  Chief Financial Officer and
Diana M. Laing                   Treasurer (Principal Financial 
                                 and Accounting Officer)
                                 


----------------------          Director
Mark J. Sandler


----------------------          Director
Ira T. Wender


  /s/  LARRIE A. WEIL           Director                       February 26, 1996
----------------------                                                   
Larrie A. Weil


----------------------          Director
Robert W. Scharar


<PAGE>



===============================================================================

===============================================================================


                                                                           
                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                   CONSOLIDATED FINANCIAL STATEMENT SCHEDULE



Report of Independent Auditors.............................................  F-2
Consolidated Financial Statements:
      Consolidated Statements of Operations for the years ended 
           December 31, 1995, 1994 and 1993................................  F-3
      Consolidated Balance Sheets at December 31, 1995 and 1994............  F-4
      Consolidated Statements of Stockholders' Equity (Deficit) 
           for the years ended December 31, 1995, 1994 and 1993............  F-5
      Consolidated Statements of Cash Flows for the years ended 
           December 31, 1995, 1994 and 1993................................  F-6
      Notes to Consolidated Financial Statements...........................  F-8
Consolidated Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation.................... F-18


All other  schedules for which  provision is made in the  applicable  accounting
regulation of the Securities and Exchange  Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.

<PAGE>



                       REPORT OF INDEPENDENT AUDITORS



Board of Directors and Stockholders
     South West Property Trust Inc.

         We have audited the accompanying  consolidated  balance sheets of South
West Property Trust Inc.  ("SWP") and  subsidiaries  as of December 31, 1995 and
1994,  and the related  consolidated  statements  of  operations,  stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 1995. Our audits also included the consolidated financial statement schedule
of SWP listed in the Index at F-1. These  financial  statements and schedule are
the  responsibility  of SWP's  management.  Our  responsibility is to express an
opinion on these financial statements and 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,  the  financial  statements  referred to above  present
fairly, in all material respects, the consolidated financial position of SWP and
subsidiaries  at December  31, 1995 and 1994,  and the  consolidated  results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 1995,  in  conformity  with  generally  accepted  accounting
principles. Also, in our opinion, the related 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.





                                                 ERNST & YOUNG LLP

Dallas, Texas
January 30, 1996


<PAGE>





                             See accompanying notes.
                                                                             
<TABLE>
<CAPTION>
                          SOUTH WEST PROPERTY TRUST INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands except per share amounts)

                                                                                     Years ended December 31,

                                                                          1995                 1994               1993
                                                                          ----                 ----               ----
<S>                                                                    <C>                  <C>               <C>   

Revenues:
    Rental operations...........................................       $   70,396           $  57,625         $   31,959
    Other income................................................            1,466               1,303              1,131
                                                                          -------              ------            -------
                                                                           71,862              58,928             33,090
                                                                          -------              ------            -------

Expenses:
    Property operating expenses:
       Personnel................................................            7,705               6,556              3,852
       Utilities................................................            4,940               4,259              2,521
       Repairs and maintenance..................................            6,556               5,617              3,363
       Real estate taxes........................................            6,499               5,266              2,785
       Marketing and other operating............................            7,301               6,107              3,895
                                                                          -------              ------            -------
                                                                           33,001              27,805             16,416

    Depreciation and amortization...............................           12,697              10,236              6,542
    Debenture and mortgage interest.............................           10,878               8,470              5,146
    Interest forfeited by debentureholders upon conversion......              220                 115                619
    General and administrative..................................            2,037               2,278              1,452
                                                                          -------              ------            -------
                                                                           58,833              48,904             30,175
                                                                          -------              ------            -------
Operating income................................................           13,029              10,024              2,915
Minority interest in net (income) loss of
    consolidated partnerships...................................         (      8)            (    61)               267
Gain on sale of real estate assets..............................               10
                                                                          -------
Net income......................................................       $   13,031           $   9,963         $    3,182
                                                                         ========             =======           ========

Primary and fully-diluted earnings per share:
    Net income..................................................       $      .70           $     .64         $      .39
                                                                         ========             =======           ========

</TABLE>



<PAGE>


<TABLE>
<CAPTION>


                             SOUTH WEST PROPERTY TRUST INC.
                               CONSOLIDATED BALANCE SHEETS
                     (in thousands except share and per share data)

                                                                                          December 31,

                                                                                   1995                1994
                                                                                   ----                ----
<S>                                                                             <C>               <C>    

ASSETS

Real estate investments:
    Property:
       Land............................................................         $   44,584        $    43,341
       Buildings and improvements......................................            311,694            287,023
                                                                                   -------           --------
                                                                                   356,278            330,364
       Less accumulated depreciation...................................           ( 69,584)         (  59,443)
                                                                                   -------           --------
                                                                                   286,694            270,921
    Construction in progress...........................................             69,436             25,592
    Mortgage notes receivable, net.....................................                                 6,365
                                                                                   -------           --------
                                                                                   356,164            302,878

Cash and cash equivalents..............................................              2,406              1,334
Cash reserved for additions to property, including $2,413
    and $2,794 of restricted cash in 1995 and 1994.....................              4,643              3,917
Escrow deposits........................................................              6,708              6,365
Deferred charges, less accumulated amortization of $1,664
    and $918 in 1995 and 1994, respectively............................              4,448              5,302
Other assets, net......................................................              3,830              3,820
                                                                                   -------           --------
                                                                                $  378,165        $   323,616
                                                                                  ========          =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Mortgage loans payable.................................................         $  129,286        $   117,270
Construction loans payable.............................................             32,256              4,584
Revolving line of credit...............................................             16,500             27,700
Convertible debentures.................................................                                13,529
Accounts payable and accrued expenses..................................              9,104              7,154
Dividends payable......................................................              5,112              3,770
Accrued interest.......................................................                557              1,142
Tenant security deposits...............................................              1,878              1,727
Minority interests in consolidated partnerships........................                             (     112)
                                                                                   -------           --------
                                                                                   194,693            176,764
                                                                                   -------           --------

Stockholders' equity (deficit):
    Preferred stock, $.01 par value; 10,000,000 shares
       authorized, none issued.........................................
    Common stock, $.01 par value;  50,000,000 shares authorized,  20,319,405 and
       16,182,019 shares issued and outstanding
       at December 31, 1995 and 1994, respectively.....................                203                161
    Paid-in capital....................................................            231,208            188,665
    Accumulated deficit................................................           ( 47,939)         (  41,974)
                                                                                   -------           --------
                                                                                   183,472            146,852
                                                                                   -------           --------
                                                                                $  378,165        $   323,616
                                                                                  ========          =========
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                                    See accompanying notes.
                                                                             
                                                                   SOUTH WEST PROPERTY TRUST INC.
                                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                                          (in thousands, except share and per share data)

                                                                                                             Total
                                                                                                         Stockholders'
                                                              Common Stock      Paid-In   Accumulated       Equity/
                                                         Shares     Amount      Capital      Deficit       (Deficit)
<S>                                                     <C>          <C>     <C>          <C>             <C>    

Balance, December 31, 1992......................        1,420,787    $  14   $   15,373   $(  32,459)     $(  17,072)
    Net income..................................                                               3,182           3,182
    Sale of common stock, net of offering costs.       10,350,000      104      130,580                      130,684
    Exercise of warrants for common stock.......           94,142        1          534                          535
    Conversion of debentures for common stock...        2,662,200       26       25,796                       25,822
    Common stock retired........................      (        10)
    Common stock dividends declared,
       $.62 per share...........................                                            (  8,331)       (  8,331)
                                                      -----------       --      -------      -------         -------

Balance, December 31, 1993......................      14,527,119       145      172,283     ( 37,608)        134,820
    Net income..................................                                               9,963           9,963
    Sale of common stock, net of offering costs.          115,000        1        1,403                        1,404
    Exercise of options for common stock........           55,000        1          646                         647
    Conversion of debentures to common stock....        1,484,900       14       14,333                       14,347
    Common stock dividends declared,
       $.91 per share...........................                                             (14,329)      (  14,329)
                                                      -----------       --      -------       ------        --------

Balance, December 31, 1994.....................        16,182,019      161      188,665      (41,974)        146,852
    Net income..................................                                              13,031          13,031
    Repurchase common stock.....................       (  115,000)    (  1)   (   1,508)                   (   1,509)
    Sale of common stock, net of offering costs.        2,711,853       27       30,648                       30,675
    Exercise of options for common stock, net
       of stock tendered in payment.............          189,033        2        2,036                        2,038
    Notes receivable from common stock options
       exercised................................                               (  1,945)                    (  1,945)
    Conversion of debentures to common stock....        1,351,500       14       13,312                       13,326
    Common stock dividends declared,
       $1.00 per share..........................                                             (18,996)       ( 18,996)
                                                      -----------       --      -------       ------         -------

Balance, December 31, 1995.....................        20,319,405    $ 203   $  231,208    $( 47,939)     $  183,472
                                                      ===========      ===     ========      =======        ========
</TABLE>



<PAGE>
<TABLE>
                                                                     See accompanying notes.
                                                                              
                                                                    SOUTH WEST PROPERTY TRUST INC.
                                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                            (in thousands)

                                                                                    Years ended December 31,

                                                                          1995                 1994               1993
                                                                          ----                 ----               ----
<S>                                                                    <C>                 <C>                <C>    

Cash flows provided by operating activities:
    Cash received from rental operations........................       $   70,824           $  57,755         $   32,175
    Cash received from other sources............................            1,473               1,246              1,137
    Operating expenses paid.....................................        (  34,173)           ( 33,008)         (  20,023)
    Interest paid...............................................        (  10,469)           (  8,061)         (   5,072)
                                                                         --------             -------           --------
       Net cash provided by operating activities................           27,655              17,932              8,217
                                                                         --------             -------           --------

Cash flows used in investing activities:
    Purchase of properties......................................        (   3,031)           ( 58,317)         ( 136,111)
    Proceeds from sale of real estate...........................            2,814
    Cost of construction in progress............................        (  60,405)           ( 25,592)
    Purchase of notes receivable................................                                               (  10,584)
    Additions to properties.....................................        (   6,441)           (  7,764)         (   3,615)
    Purchase additional partnership interests...................        (   1,593)           (  2,259)         (   2,489)
    Withdrawals from (additions to) capital
       improvement reserves.....................................        (     726)              1,269          (   5,081)
    Proceeds from mortgage notes receivable.....................            6,279
    Receipts on mortgage notes receivable.......................              108                 159                149
    Additions to mortgage notes receivable......................                                               (     162)
    Prepaid acquisition costs...................................        (     214)           (    761)         (     283)
    Insurance claim reimbursements (advances)...................        (     195)           (    218)               335
                                                                         --------             -------           --------
       Net cash used in investing activities....................        (  63,404)           ( 93,483)         ( 157,841)
                                                                         --------             -------           --------

Cash flows provided by financing activities:
    Net proceeds from issuance of common stock..................           30,675               1,404            130,684
    Cash received from mortgage loans...........................            1,000              50,000             53,468
    Cash received from construction loans.......................           38,280               4,584
    Revolving line of credit draws..............................           23,800              27,700              8,053
    Revolving line of credit payments...........................        (  35,000)                             (  12,500)
    Mortgage and notes payable principal payments...............        (   2,391)           (  4,479)         (  15,386)
    Repayment of Debentures.....................................        (      14)
    Payment of loan costs.......................................        (     459)           (  2,932)         (   1,820)
    Proceeds from exercise of warrants and options..............               93                 647                535
    Repurchase common stock.....................................        (   1,509)
    Redemption of preferred depositary receipts.................                                               (      26)
    Dividends and cash distributions............................        (  17,654)           ( 13,780)         (   5,824)
                                                                         --------             -------           --------
       Net cash provided by financing activities................           36,821              63,144            157,184
                                                                         --------             -------            -------

Net increase (decrease) in cash and cash equivalents............            1,072            ( 12,407)             7,560

Cash and cash equivalents at beginning of year..................            1,334              13,741              6,181
                                                                         --------             -------            -------

Cash and cash equivalents at end of year........................       $    2,406           $   1,334         $   13,741
                                                                         ========             =======           ========
</TABLE>



<PAGE>

<TABLE>
<CAPTION>


                                            SOUTH WEST PROPERTY TRUST INC.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (in thousands)

                                                                                    Years ended December 31,

                                                                          1995                 1994               1993
                                                                          ----                 ----               ----
<S>                                                                    <C>                  <C>              <C>    

Reconciliation of net income to net
    cash provided by operating activities:
      Net income..................................................     $   13,031           $   9,963         $   3,182
      Depreciation of real estate assets..........................         12,304               9,746              5,616
      Depreciation and amortization of other assets...............            393                 545                663
      Amortization of loan costs..................................            965                 414                263
      Interest forfeited by debentureholders upon conversion......            220                 115                619
      Adjustment for rental guaranty..............................                            (   193)
      Amortization of note receivable discount....................      (      17)            (    58)          (     45)
      Gain on sale of real estate assets..........................      (      10)
      Minority interest in income (loss) of
         consolidated partnerships................................              8                  61           (    267)
      Increase in other assets....................................      (     393)            ( 3,528)          (    989)
      Increase in escrow deposits.................................      (     314)            ( 2,994)          (    706)
      Increase (decrease) in accounts payable
         and accrued expenses.....................................          1,929             ( 3,765)          (    275)
      Accrued interest added to mortgage loans....................                                                     2
      Increase (decrease) in accrued interest.....................      (     608)            (    60)                72
      Increase in tenant security deposits........................            147                 156                 82
                                                                          -------              ------            -------
         Net cash provided by operating activities................     $   27,655           $  17,932         $    8,217
                                                                         ========             =======           ========

</TABLE>




<PAGE>



                        SOUTH WEST PROPERTY TRUST INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                    SOUTH WEST PROPERTY TRUST INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1995



                                                                               
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization  - South West Property Trust Inc.,  formerly  Southwestern
Property  Trust,  Inc.  ("SWP" or the "Company"),  a Maryland  corporation,  was
formed in 1992 for the  purpose of  acquiring  all of the assets  subject to the
liabilities  of  Southwest   Realty,   Ltd.   ("SRL")  in  connection  with  the
reorganization  of SRL into a corporation which would elect to qualify as a real
estate investment trust ("REIT") for federal income tax purposes.

         Consolidation and presentation - The consolidated  financial statements
include the accounts of the Company,  its wholly owned  corporate  subsidiaries,
and the  partnerships  in which  the  Company  owns at  least a 50%  controlling
interest.  The portion of net income or loss attributable to minority  interests
in consolidated partnerships is presented as a single line item in the Company's
statement of operations.  Investments in  partnerships in which the Company owns
less than a 50% interest are accounted for on the equity method. All significant
intercompany  accounts and transactions  have been eliminated in  consolidation.
Certain  prior year  amounts  have been  reclassified  to conform to the current
presentation.

         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 amounts reported in the financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

         Properties  -  Properties  are  stated  at the  Company's  cost  or the
historical  cost of SRL. For financial  reporting  purposes,  the properties are
depreciated  over their estimated  useful lives ranging from 5 to 35 years using
the straight-line method.

         In March 1995,  the FASB issued  Statement No. 121,  Accounting for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of,
which  requires  impairment  losses to be recorded on long-lived  assets used in
operations when indicators of impairment are present and the  undiscounted  cash
flows  estimated  to be  generated  by those  assets  are less than the  assets'
carrying  amount.  Statement 121 also  addresses the  accounting  for long-lived
assets that are expected to be disposed of. The Company adopted Statement 121 in
1995 and the adoption has no effect.

         Income  taxes - The  Company  has  elected  to be  taxed  as a REIT and
intends to operate in such  manner as to continue to qualify as a REIT under the
Internal Revenue Code. Under the Internal Revenue Code, if certain  requirements
are met in a  taxable  year,  a  corporation  that  is  treated  as a REIT  will
generally  not be subject to federal  income tax with respect to income which it
distributes to its stockholders. The Company made distributions in excess of its
taxable  income for 1995,  1994 and 1993.  Accordingly,  no provision for income
taxes has been reflected in the statements of operations.

         Earnings  and  profits,   which  will   determine  the   taxability  of
distributions  to  stockholders,  will  differ  from  net  income  reported  for
financial  reporting  purposes,  due primarily to  differences in the historical
cost and tax bases of the assets and the estimated  useful lives used to compute
depreciation.

         Cash and cash equivalents - Cash and cash equivalents consist primarily
of cash in demand deposit and money market  accounts and  short-term  commercial
paper  carried at cost,  which  approximates  fair  value.  Highly  liquid  debt
instruments  purchased with a maturity of three months or less are considered to
be cash equivalents.

         Cash  reserved  for  additions  to property - At December  31, 1995 and
1994,  the Company has set aside cash reserves in the amount of  $2,230,000  and
$1,123,000, respectively, to provide for the payment of planned additions to its
wholly-owned properties.  In addition,  reserves in the amount of $2,413,000 and
$2,794,000  at  December  31,  1995 and 1994,  respectively,  are being  held by
trustees  and  certain  mortgage  holders  for  recurring  replacements  to  the
properties  which  secure the REMIC  Financing  (see Note 5) and two other first
mortgages. The carrying amount of these deposits approximates their fair value.


<PAGE>



     Escrow  deposits - Escrow  deposits  consist  of  amounts  on deposit  with
lenders for payment of property taxes and insurance premiums.

     Deferred  charges  -  Deferred  charges  include  loan  origination  costs,
commitment  fees and debt issue costs which are  amortized  over the life of the
related
debt.

     Other assets - Other assets consist primarily of office furniture, fixtures
and  equipment,   miscellaneous   accounts   receivable  and  prepaid  expenses.
Furniture,  fixtures and equipment are depreciated  over their estimated  useful
lives ranging from three to five years using the straight-line method.

     Revenue  recognition  - The apartment  properties  are leased to individual
tenants on short-term  leases.  Rental  revenue is  recognized  monthly as it is
earned.

     Earnings  per share - Earnings per share is based on the net income or loss
attributable  to the common stock and the weighted  average  number of shares of
common  stock and  dilutive  common  stock  equivalents  outstanding  during the
periods  presented.  Earnings  per share for the years ended  December 31, 1995,
1994 and 1993 were based on 18,627,322, 15,633,291 and 8,099,900,  respectively,
weighted average shares of common stock outstanding.

     The number of shares  assumed  outstanding  related to options to  purchase
common stock has been  calculated by  application  of the treasury stock method.
The  Company's  Debentures  were not common stock  equivalents  as defined under
generally accepted accounting  principles and, therefore,  during the years they
were  outstanding,  were  not  considered  in the  primary  earnings  per  share
computations and are  antidilutive to the computation of fully-diluted  earnings
per share.


NOTE 2 - ACQUISITION OF PROPERTIES

         In August 1995, the Company sold the Meridian  Business Park located in
Oklahoma City,  Oklahoma,  for total  consideration of $3,000,000.  In September
1995, the Company sold the third-party  property  management  business in Little
Rock, Arkansas, for total consideration of $25,000. The Company recognized a net
gain on the sale of real estate assets of $10,000 from these two transactions.

         In August 1995, the Company acquired the remaining  ownership interests
in Foxfire  Apartments,  Phases I and II, located in Dallas,  Texas, for a gross
purchase price of $5,493,000 and subject to two first mortgage  loans.  Prior to
the  purchase,  the Company  held a 5% interest in the  partnership  which owned
Phase I of the property.  The Company sold its partnership  interest immediately
prior to this acquisition for $128,000.

         In March,  May and June  1994,  the  Company  purchased  six  apartment
properties  (in  separate  transactions)  aggregating  1,734  units  for a total
purchase price of $50,350,000.  Funds for the  acquisitions  came primarily from
the second phase of the REMIC  Financing which closed on June 30, 1994 (see Note
5). The  properties  are located in Fort Worth and Euless,  Texas;  Little Rock,
Arkansas;  and Raleigh,  North  Carolina.  In September and November  1994,  the
Company   purchased  two  apartment   properties   (in  separate   transactions)
aggregating 600 units for a total purchase price of  $22,633,000.  Funds for the
acquisitions  came  primarily from draws on the line of credit (see Note 7). The
properties  are located in Las Vegas,  Nevada,  and  Grapevine,  Texas (a Dallas
suburb).


<PAGE>



         In  January  1993,  the  Company  acquired  the  316-unit  Bluff  Creek
Apartments in Oklahoma City,  Oklahoma,  for  $6,250,000.  The  acquisition  was
financed,  in part,  by a new  three-year  first  mortgage loan in the amount of
$3,468,000 which was repaid in June 1993. Prior to this acquisition, the Company
held a 32% interest in the partnership that owned the property. On June 4, 1993,
the Company  acquired ten properties  totaling 2,588  apartment units located in
the Dallas  metropolitan  area,  San Antonio and El Paso,  Texas,  and  Phoenix,
Arizona,  for an  aggregate  cost  of  approximately  $73,836,000.  The  Company
acquired  three other  apartment  properties in 1993 (in separate  transactions)
aggregating 674 units for a total purchase price of $17,450,000.  The properties
are located in San Antonio,  Corpus Christi and Houston,  Texas. Funds for these
acquisitions  came primarily from the net proceeds from the sale of common stock
(see Note 11). On  December  23,  1993,  the Company  acquired  five  properties
totaling  1,349  apartment  units  located in the Dallas  metropolitan  area and
Albuquerque,  New Mexico,  for an aggregate price of approximately  $43,610,000.
Funds for this  acquisition  came primarily from the net proceeds from the first
phase of the REMIC Financing which closed December 22, 1993 (see Note 5).

<TABLE>
<CAPTION>

NOTE 3 - NONCASH INVESTING AND FINANCING ACTIVITIES (in thousands)

For the year ended December 31, 1995:
<S>                                                                                                <C>   

Conversion of debentures into 1,351,500 shares of common stock as follows -
    Principal amount of debentures converted..............................................         $    13,515
    Accrued interest forfeited by debenture holders upon conversion.......................                 220
    Unamortized debenture issue costs at date of conversion...............................           (     409)
                                                                                                      --------
                                                                                                   $    13,326

In  connection  with the  acquisition  of the  Foxfire  Phase I  Apartments  the
    Company assumed first lien mortgage debt and other liabilities as follows -
       Fair value of property acquired....................................................         $     5,154
       Mortgage debt assumed..............................................................          (    2,798)
       Tenant security deposits, property tax, accrued interest
          and other assets and liabilities assumed........................................                  77
                                                                                                     ---------
                                                                                                   $     2,433

For the year ended December 31, 1994:

Conversion of debentures into 1,484,900 shares of common stock as follows -
    Principal amount of debentures converted..............................................         $    14,849
    Accrued interest forfeited by debenture holders upon conversion.......................                 115
    Unamortized debenture issue costs at date of conversion...............................           (     617)
                                                                                                      --------
                                                                                                   $    14,347

In  connection  with the  acquisitions  of the Turtle Creek  Apartments  and the
    Sunset Pointe  Apartments,  the Company assumed first lien mortgage debt and
    other liabilities as follows -
       Fair value of property acquired....................................................         $    22,454
       Mortgage debt assumed..............................................................          (   14,058)
       Tenant security deposits, property tax and accrued interest
          liabilities assumed.............................................................          (      190)
                                                                                                     ---------

                                                                                                   $     8,206
</TABLE>

<PAGE>



NOTE 4 - MORTGAGE NOTES RECEIVABLE

         As of December 31, 1994,  the Company had a seven-year  purchase  money
all-inclusive  note  receivable  collateralized  by the Highland Oaks Apartments
with a balance  outstanding  of  $3,636,000.  Monthly  installments  of $31,875,
including  principal  and  interest  at 9.625%  per annum,  were  payable on the
underlying  first  mortgage  loan until its maturity in April 1995.  In February
1995,  the maturity date was extended to April 30, 1995. On April 27, 1995,  the
borrower repaid the notes.

         On June 4, 1993,  the Company  acquired the first  mortgage loan on the
Phase I Foxfire Apartments in Dallas (in which the Company held a 5% partnership
interest)  for  $2,645,000.  Under the terms of a modified loan  agreement,  the
Company also advanced an  additional  $162,000 for capital  improvements  to the
property.
On June 16, 1995, the borrower repaid the note in full.

         In 1993, the Company  purchased for $4,751,000 the first mortgage loans
on the Phase II Foxfire  Apartments in Dallas and the Pecan Grove  Apartments in
Austin.  The  Company  also  held  the  first  mortgage  loan  on the  Windridge
Apartments.  As a  result  of the  Company's  1994  purchase  of  the  remaining
partnership   interests  in  the  Pecan  Grove   Apartments  and  the  Windridge
Apartments, the related notes receivable and notes payable have been discharged.
The  Company  held a majority  interest in the Phase II Foxfire  Apartments  and
accordingly,  the mortgage note  receivable  held by the Company and the related
mortgage note payable have been eliminated for consolidated  financial reporting
purposes at December 31, 1994. In June 1995, the partnership owning the Phase II
Foxfire  Apartments  refinanced  its mortgage and repaid the Company's  mortgage
note receivable.


NOTE 5 - MORTGAGE LOANS PAYABLE

         General - Mortgage loans payable are collateralized by land,  buildings
and improvements  and are non-recourse to the Company.  Such debt bears interest
at a weighted average rate of approximately 7.9%, and consists of interest rates
ranging from 7.01% to 8.50%.  Such debt has a weighted  average  maturity of 5.4
years,  with  maturity or call dates  ranging  from 1996 to 2025.  The  carrying
values of the mortgage loans payable approximate fair value.

         REMIC  Financing  - The  Company,  through  wholly-owned  subsidiaries,
closed a $100,000,000 first mortgage financing package (the "REMIC  Financing").
The two $50,000,000  phases of the REMIC  Financing  closed on June 30, 1994 and
December 22, 1993. The REMIC Financing is  collateralized by 27 of the Company's
wholly-owned  properties,  bears  interest at an average fixed rate of 7.75% per
annum  and is  non-recourse  to the  Company.  Monthly  principal  and  interest
payments in the amount of $821,893  are  required.  The first phase of the REMIC
Financing  matures on December 10, 2000, at which time the principal  balance of
this phase is expected to be approximately $39,953,000,  and the second phase of
the REMIC  Financing  matures on February 10, 2001,  at which time the principal
balance of this phase is expected to be approximately  $41,735,000.  The balance
of the REMIC  Financing  as of December  31, 1995 and 1994 was  $96,212,000  and
$98,511,000, respectively.

         The REMIC Financing  requires that a debt service coverage ratio of not
less than 1.9 to 1.0 be maintained on the mortgaged  properties  (to be computed
quarterly  on the basis of the  trailing  four  quarters).  If such debt service
coverage  ratio falls to less than 1.6 to 1.0,  after notice and failure to cure
(which could be effected by paying down the principal),  the Company is required
to deposit all  collections  from the mortgaged  properties  into a debt service
coverage  reserve  account  until such time as the debt service  coverage  ratio
equals or  exceeds  1.9 to 1.0.  As of  December  31,  1995,  the  Company is in
compliance.

         The mortgage loan documents also require the Company to maintain escrow
deposits  with the  REMIC  trustees  for:  (i)  "basic  carrying  costs,"  i.e.,
insurance   premiums,   property  taxes  and  management   fees;   (ii)  capital
improvements,  at a rate of $100 per year per apartment  unit;  and (iii) tenant
security deposits. As of December 31, 1995 and 1994, the Company had such escrow
deposits  with  the  REMIC  trustees  aggregating   $8,347,000  and  $8,258,000,
respectively.


<PAGE>



         Other Mortgage Loans - In addition to the REMIC Financing,  the Company
has five non-recourse  first mortgages payable  including:  (i) a first mortgage
payable  secured by the Sunset  Pointe  Apartments  in the  principal  amount of
$8,873,000,  which  matures on June 1, 1996,  bears  interest at 8.5%,  requires
monthly  interest  only  payments of $62,850  through  March 1, 1996 and monthly
payments  of  $105,937  from April 1, 1996  through  June 1, 1996;  (ii) a first
mortgage  payable secured by the Turtle Creek Apartments in the principal amount
of  $5,110,000,  which bears  interest  at 8.5%,  requires  monthly  payments of
principal and interest of $40,353 and matures on October 1, 1999;  (iii) a first
mortgage payable secured by the High Ridge Apartments in the principal amount of
$4,693,000, which bears interest at 8.5%, requires monthly payments of principal
and  interest of $36,335 and matures on January 1, 2000;  (iv) a first  mortgage
payable secured by Phase I of the Foxfire  Apartments in the principal amount of
$2,791,000, which bears interest at the cost of funds index, as published by the
San Francisco  National Bank, plus 2.75%,  adjusted  monthly,  requires  monthly
payments of principal  and interest of $20,073 and matures on July 1, 2025;  and
(v) a first mortgage  payable  secured by Phase II of the Foxfire  Apartments in
the  principal  amount of  $997,000,  which bears  interest at the cost of funds
index,  as published by the San Francisco  National Bank,  plus 2.75%,  adjusted
monthly,  requires  monthly  payments of  principal  and  interest of $7,169 and
matures on July 1, 2025.

         In June 1994, the Company  closed a  construction  mortgage note in the
maximum amount of $10,864,000 for the development of the Oak Forest  Apartments.
The note which is recourse to the  Company,  bears  interest at LIBOR plus 2.25%
and has an original  maturity date of June 30, 1997, with two optional  one-year
extensions.  At  December  31,  1995,  the  outstanding  balance of the note was
$10,609.000.

         Under the terms of the loans,  principal  amortization  requirements at
December 31, 1995 are as follows for each of the next five years (in thousands):
<TABLE>
<CAPTION>

                                                         Normal              Balloon
                                                      Amortization          Payments            Total
<S>                                                    <C>                 <C>               <C>    

                 1996                                  $     2,604         $     8,873       $   11,477
                 1997                                        2,813                                2,813
                 1998                                        3,038                                3,038
                 1999                                        3,263              15,500           18,763
                 2000                                        3,262              44,470           47,732
                 Subsequent years                            3,728              41,735           45,463
                                                          --------            --------          -------
                                                       $    18,708         $   110,578       $  129,286
                                                         =========           =========         ========
</TABLE>

         During 1993,  the Company  purchased  the first  mortgage  loans on the
Phase II Foxfire  Apartments in Dallas and the Pecan Grove  Apartments in Austin
(properties  in which the Company  held,  majority  interests).  The Pecan Grove
first  mortgage loan had a balance of $3,785,000 at December 31, 1993.  The loan
was discharged when the Company purchased the balance of the ownership  interest
in the Pecan  Grove  Apartments  in 1994.  The Phase II Foxfire  (Dallas)  first
mortgage loan had a balance of $1,023,000 at December 31, 1994.  Concurrent with
the Company's  acquisition of the loan, the mortgage note agreement was modified
whereby  an  additional  $74,000  was  advanced  to  the  property  for  capital
improvements.  In June  1995,  the  partnership  that  owned  Phase  II  Foxfire
refinanced  the note.  In August  1995,  the  Company  purchased  the  remaining
interest in the property and assumed the mortgage payable.

         As a result  of the sale of  common  stock in June  1993,  the  Company
retired all of the remaining  first mortgage  indebtedness  on its  wholly-owned
properties for  $11,836,000 and purchased the first mortgage note underlying the
mortgage note  receivable on the Highland Oaks  Apartments for  $3,188,000  (see
Note 4).  Interest  rates on these  mortgage loans ranged from 8.75% to 9.5% per
annum.

<PAGE>

NOTE 6 - CONSTRUCTION LOANS PAYABLE

         The  construction  projects are financed  with  construction  loans for
approximately  70% of the estimated project costs. The Company funds the initial
30% of the  estimated  project costs from  available  funds or from draws on its
line of credit (see Note 7). Thereafter,  construction lenders fund construction
costs  upon  periodic  draws  in  accordance  with  specific  construction  loan
agreements.

         On January 13, 1994, the Company closed a construction mortgage note in
the maximum amount of $19,800,000 for the  development of the Promontory  Pointe
Apartments in San Antonio,  Texas.  The note,  which is recourse to the Company,
bears  interest at a variable rate based on LIBOR plus 2.25% and has an original
maturity  date of January 13, 1996,  with an optional  six-month  extension.  In
December 1995, the mortgage note was modified whereby the original  maturity was
extended to July 12, 1996, with three optional one-year extensions.  At December
31, 1995 and 1994,  the  outstanding  balance was  $17,573,000  and  $4,584,000,
respectively.
 
        In June 1994, the Company  closed a  construction  mortgage note in the
maximum amount of $7,354,000 for the  development of Ashley Oaks Phase II in San
Antonio,  Texas. The note,  which is recourse to the Company,  bears interest at
LIBOR plus 2.25%  with an  original  maturity  date of June 30,  1997,  with two
optional one-year  extensions.  At December 31, 1995, the outstanding balance of
this note is $6,297,000.  At December 31, 1994, no draws had been funded on this
note.

         In December 1994,  the Company  closed a construction  mortgage note in
the  maximum  amount of  $12,402,000  for the  development  of the Sierra  Palms
Apartments  in Chandler,  Arizona.  The note,  which is recourse to the Company,
bears  interest at a variable rate based on LIBOR plus 2.25% and has an original
maturity date of December 29, 1996, with three optional one-year extensions.  At
December 31, 1995, the outstanding balance was $3,884,000. At December 31, 1994,
no draws had been funded on this note.

         In April 1995, the Company  closed a construction  mortgage note in the
maximum amount of $10,700,000  for the development of the Copper Mill Apartments
in Durham,  North Carolina.  The note,  which is recourse to the Company,  bears
interest at a variable rate based on LIBOR plus 2% and has an original  maturity
date of April 13, 1997,  with three one-year  extensions,  each at the Company's
option. At December 31, 1995, the outstanding balance was $4,501,000.

         In September  1995, the Company closed a construction  mortgage loan in
the maximum amount of $18,250,000  for the  development of the Providence  Court
Apartments  in Charlotte,  North  Carolina.  The note,  which is recourse to the
Company,  bears  interest  at a variable  rate based on LIBOR plus 2% and has an
original  maturity  date of March 12, 1998,  with two one-year and one six-month
extensions,  each at the Company's option. At December 31, 1995, the outstanding
balance was $1,000.

     For the years ended December 31, 1995 and 1994, the Company has capitalized
interest expense of approximately $2,561,000 and $739,000, respectively, related
to construction and development of properties.

         At December 31, 1995,  the Company had an interest rate swap  agreement
with a notional amount of $48,851,000. The Company has entered into the interest
rate  swap  agreement  to  convert  floating  rate  liabilities  to  fixed  rate
liabilities.  The agreement  fixes the interest  rate on the Company's  expected
variable  rate debt at 7.9%  through  April 1997.  The Company  does not hold or
issue interest rate swap agreements for trading purposes. The Company is exposed
to possible credit risk if the counterparty fails to perform, however, this risk
is minimized by entering into the agreement with a highly rated counterparty. At
December 31, 1995, there were no defaults under this agreement.

<PAGE>

NOTE 7 - REVOLVING LINE OF CREDIT

         On September 15, 1994, the Company  obtained a revolving line of credit
in the maximum amount of $75,000,000.  The line of credit,  which is recourse to
the Company,  has a revolving period of 18 months,  with a one-year extension at
the lender's option, followed by an amortization period of two years. In October
1995, the Company requested and received a one-year extension to March 1997. The
extension modified the interest rate during the revolving period from LIBOR plus
1.75% to LIBOR plus  1.50%.  The  agreement  requires  quarterly  payments  of a
non-use fee equal to .25% per year  calculated on the average  unused portion of
the line of credit.  The Company can currently draw up to a total of $41,800,000
on the line of credit, which is secured by first liens on seven of the Company's
wholly-owned  properties.  This amount may be increased as additional properties
are added as security for the line of credit.

NOTE 8 - CONVERTIBLE DEBENTURES

         In  1992,  the  Company   concluded  an  initial  public   offering  of
$55,000,000  in principal  amount of 8%  Convertible  Debentures  Due 2003.  The
Debentures  could be  converted  into  shares of common  stock at any time after
October  15,  1993 on the basis of $10.00  per share.  In  September  1995,  the
Company  called the Debentures for redemption on October 16, 1995. As of October
16, 1995,  $8,875,000 of the outstanding  Debentures at September 30, 1995, were
converted to 887,500 shares of common stock. The remaining $14,000 in Debentures
were redeemed on October 16, 1995.

         During the year ended December 31, 1995 prior to call date,  $4,640,000
in principal amount of Debentures due were converted to 464,000 shares of common
stock. In addition, $220,000 of accrued Debenture interest that was forfeited by
Debenture  holders  and  $409,000  of  unamortized  Debenture  issue  costs were
reclassified to equity.

         During the year ended  December  31,  1994,  $14,849,000  in  principal
amount of  Debentures  was  converted to 1,484,900  shares of common  stock.  In
addition, $115,000 of accrued Debenture interest that was forfeited by Debenture
holders  during 1994 and  $617,000  of  unamortized  Debenture  issue costs were
reclassified to equity.

NOTE 9 - RELATED PARTY TRANSACTIONS

         The Company - The Company  generally  receives a computer services fee,
and property and asset  management fees in consideration  for services  provided
for  properties  in which the  Company  has  ownership  interests.  The  Company
received fees for these services  aggregating  $68,000 in 1995,  $75,000 in 1994
and $92,000 in 1993 from affiliated, unconsolidated partnerships which have been
included in other income for financial reporting purposes.

         In  connection   with  the  Company's   acquisition  of  the  remaining
partnership  interests in the Sunflower Apartments in 1993, two of the Executive
Officers  and a  Director  of the  Company  received  a  total  of  $172,000  as
consideration for their partnership interests.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

         Office  and  equipment  leases  - The  Company  is  obligated  under  a
five-year lease for its main office in Dallas,  Texas,  which commenced in 1994.
The  Company is also  obligated  under  leases  for its  regional  offices.  The
regional  office  leases  have terms  ranging  from nine  months to five  years.
Minimum  annual  future rental  payments  under all leases are $278,000 in 1996,
$248,000  in 1997,  $234,000 in 1998,  $171,000 in 1999 and $7,000 in 2000.  The
related  rental  expense  in 1995,  1994 and 1993  was  $261,000,  $243,000  and
$120,000, respectively.

NOTE 11 - STOCKHOLDERS' EQUITY (DEFICIT)

         Capital stock - Common  stockholders  are entitled to one vote for each
share held on all  matters  presented  for a vote of  stockholders.  There is no
right of  cumulative  voting  in  connection  with the  election  of  Directors.
Stockholders  are entitled to receive pro rata,  any  dividends  declared by the
Board of Directors in their  discretion from funds legally  available  therefor.
Upon  liquidation or dissolution,  stockholders are entitled to share ratably in
all assets available for distribution to the stockholders,  subject to the right
of the  holders  of the  Debentures  then  outstanding  and to the rights of any
preferred class of the Company's securities (if any are outstanding). The common
stock issued is fully paid and non-assessable,  has no conversion rights, and is
not subject to redemption,  except under certain circumstances determined by the
Board of Directors.

         The Company declared a special dividend to each record holder of shares
of common stock on March 17, 1995, of one non-transferable  right for each share
held on such date.  Four rights  entitled  the holder to  purchase  one share of
common  stock at a price of $11.875  per share (the  "Rights  Transaction").  On
April 10, 1995, the Rights  Transaction  concluded with 985,440 shares purchased
for total proceeds of $11,702,100. The net proceeds of approximately $11,400,000
were used to repay a portion of the line of credit.

         In April 1995,  the Company  concluded a public  offering of  1,714,560
shares of common  stock at a price of $11.875  per share for gross  proceeds  of
$20,360,400.  The net proceeds of approximately $18,600,000 were used to repay a
portion of the line of credit. During 1995, non-qualified options were exercised
to purchase  275,000  shares of common  stock at exercise  prices  ranging  from
$11.00  to  $13.00.  As of  December  31,  1995,  the  Company  had  outstanding
20,319,405  shares  of common  stock  and  1,718,000  non-qualified  options  to
purchase  common stock (of which 204,500 were vested) at exercise prices ranging
from $11.00 to $13.00 per share.

         On June 3, 1993, the Company  closed its public  offering of 10,350,000
shares of common stock at a price of $13.50 per share. The net proceeds from the
offering (in the amount of  $130,684,000)  and the net  proceeds  from the REMIC
Financing (See Note 5) were applied as follows:  (i) approximately  $141,146,000
(aggregate  purchase  price)  to  acquire  a total  of 19  apartment  properties
totaling  4,927 units (see Note 2); (ii)  approximately  $10,820,000  to acquire
first mortgage debt on certain properties in which the Company held an interest;
(iii)  approximately  $8,407,000  to  retire  all of the  remaining  debt on its
wholly-owned properties;  (iv) $12,500,000 to repay the revolving line of credit
debt; and (v) approximately $2,600,000 as a reserve for additions to properties.

         During 1994,  non-qualified  options were exercised to purchase  55,000
shares  of  common  stock at an  exercise  price of $11.00  each.  In  addition,
$14,849,000 in principal amount of Debentures were converted to 1,484,900 shares
of common stock. As of December 31, 1994, the Company had outstanding 16,182,019
shares of common stock and non-qualified options to purchase 1,467,000 shares of
common  stock (of which  161,500 were  vested) at exercise  prices  ranging from
$11.00 to $13.625 per share.  The Company also had  outstanding  $13,529,000  in
principal  amount of Debentures  (convertible  into  1,352,900  shares of common
stock).

         During 1995, the Company accepted notes receivable  totaling $1,945,000
from certain  officers  and  directors  to exercise  options to purchase  common
stock. The notes  receivable,  which mature on December 31, 2002, are in amounts
up to 80% of the  option  exercise  price and bear  interest  at the  Applicable
Federal  Rate (as  published  by the  Internal  Revenue  Service) at the date of
exercise.  Principal in the amount of 50% of the exercise price will be forgiven
ratably over seven years  beginning  January 1, 1997,  contingent upon continued
service as an officer or  director  and the absence of any default on the notes.
The  balance of such loans will be payable  ratably  over the same  period.  The
loans are secured by the common  stock  purchased.  Options to purchase  275,000
shares of common stock were exercised,  and 85,967  previously  issued shares of
common  stock were  applied  (at the market  price of such shares at the date of
such application) to the exercise price of the options and were retired.

<PAGE>

         Effective  April  1,  1994,  the  Company  entered  into an  employment
agreement  with  an  officer  of the  Company,  Senior  Vice  President  for the
Charlotte Regional Office of the Company. In connection with this agreement, the
officer  purchased from the Company 115,000 shares of the Company's common stock
for  approximately   $1,509,000  ($13.125  per  share).  In  January  1995,  his
employment agreement was terminated, and pursuant to that agreement, the Company
repurchased such shares at the purchase price he paid and cancelled such shares.

         For the Company to qualify as a REIT under the Internal  Revenue  Code,
not more  than  50% in  value of its  outstanding  common  stock  may be  owned,
directly or  indirectly,  by five or fewer  individuals.  In order to meet these
requirements,  the  Directors  of the  Company  are  given  power to  refuse  to
recognize  the  transfer  of a  sufficient  number of shares of common  stock to
maintain or bring the  ownership of common stock of the Company into  conformity
with such  requirements  and to refuse the  transfer of common  stock to persons
whose acquisitions thereof would result in a violation of such requirements.

         Dividends  - The  Company  paid  dividends  of $.25 per share of common
stock for the first three quarters of 1995. The Company also declared a dividend
of $.25 per share for the fourth  quarter of 1995  (which it paid on January 17,
1996).  Eighty-seven percent of the dividends paid in 1995 were characterized as
ordinary income and eight percent of the dividends were characterized as capital
gains for federal  income tax purposes  and five  percent of the 1995  dividends
were a return of capital.

         The Company  paid  dividends  of $.22 per share of common stock for the
first  quarter of 1994.  The Company paid  dividends of $.23 per share of common
stock for the second, third and fourth quarters of 1994. Eighty-seven percent of
the dividends  paid in 1994 were  characterized  as ordinary  income for federal
income  tax  purposes  and 13  percent  of the 1994  dividends  were a return of
capital.

         The  characterization  of the dividends for federal income tax purposes
is made based upon the earnings  and profits of the  Company,  as defined in the
Internal  Revenue Code,  for the years ended  December 31, 1995,  1994 and 1993,
respectively.

         Beginning  in 1995,  the  Company  introduced  a dividend  reinvestment
program that will allow its  shareholders  to acquire  additional  common shares
from the  Company  at a 5%  discount  to the fair  market  price.  The  dividend
reinvestment  program also permits  stockholders to purchase a limited number of
additional  shares of common  stock on the same  basis by making  optional  cash
payments.

         Stock Option Plans - In May 1992, the Company  adopted an incentive and
non-qualified  stock  option plan (the "Stock  Option  Plan") for the purpose of
attracting and retaining the Company's  directors,  executive officers and other
key employees  (including  any officer or director who is also an  employee).  A
maximum of 1,200,000 shares of common stock were reserved for issuance under the
Stock Option Plan. The Stock Option Plan allows for the grant of "incentive" and
"non-qualified"  options (within the meaning of the Internal  Revenue Code) that
are  exercisable  at a price that is at least equal to the fair market  value of
the  shares  of  common  stock at the date of the  grant as  established  by the
Compensation  Committee of the Board of  Directors.  In May 1994,  the Company's
stockholders  approved an amendment to the Stock Option Plan that  increased the
amount of shares  reserved for  issuance  under the Stock Option Plan by 600,000
shares to a maximum of 1,800,000  shares.  In 1995,  the Company's  stockholders
approved the 1995 Omnibus  Incentive  Plan,  which  provides for the granting of
stock options,  SAR's,  restricted shares and performance  units. Under the 1995
plan, 3,000,000 shares were reserved for issuance subject to the limitation that
the aggregate number of shares  underlying  outstanding  awards (including those
outstanding  under the 1992 plan) not exceed  approximately 10% of the Company's
outstanding  capital  stock on a fully  diluted  basis.  The shares  vest over a
period of up to 5 years and once vested must be  exercised  within 5 years.  The
Company  accounts  for its  options  to  purchase  shares  of  common  stock  in
accordance with APB No. 25.

<PAGE>

         During 1993,  the Company  granted  options  covering  75,000 shares of
common stock to other key employees of the Company.  These options also vest 20%
per year over five  years.  The  options  have an  exercise  price  equal to the
closing  market price of the stock at the date of grant  (exercise  prices range
from $13.625 to $14.75);  and once vested, these options may be exercised over a
period of five years from the date of vesting.

         During 1994,  the Company  granted  600,000  options to purchase a like
number of shares of common  stock at an  exercise  price of $13.00  and  100,000
options to  purchase  a like  number of shares at $11.00.  The  exercise  prices
reflect the closing  price of the shares on the date of each grant.  The options
vest over a period of up to five years (the first vesting date  generally  being
one year from the date of grant).  Once vested,  these  options may be exercised
over a period of five  years  from the date of  vesting.  Additionally,  233,000
options  previously granted were forfeited (and became available for reissuance)
due to employee attrition.

         During  1995,  626,000  options to purchase  shares of common  stock at
exercise prices ranging from $11.50 to $13.00 each were granted  pursuant to the
Company's   non-qualified  employee  stock  option  plan,  and  100,000  options
previously granted were forfeited due to employee attrition.  As of December 31,
1995, the Company had outstanding 1,718,000 options to purchase common stock (of
which 204,500 are vested).

         Rights  Agreement - In August 1994, the Company  declared a dividend of
one right (the  "Right")  for each  outstanding  share of the  Company's  common
stock.  The  Rights do not  become  detached  from the  common  stock  until the
occurrence  of a  triggering  event such as a tender offer or  acquisition  by a
person (or related parties) of 10% or more of the Company's  outstanding  common
stock.  At that time, the Rights (which expire in August 2004) may be exercised,
except by the party causing the triggering  event, to purchase for $30 an amount
of common stock from the Company having an aggregate market value of $60.


NOTE 12 - PROFIT SHARING AND SAVINGS PLAN

         The Company has a 401(k) plan for all full-time employees who have been
employed for at least 12 months.  Eligible employees may contribute up to 15% of
their  gross pay,  subject to certain  limitations.  In 1995,  1994 and 1993 the
Company matched 50% of the amount contributed by the employee,  up to 10% of the
employee's gross pay. In 1995, 1994 and 1993, expenses include $76,000,  $53,000
and $44,000, respectively,  representing the employer's matching contribution to
the plan.


NOTE 13 - QUARTERLY FINANCIAL DATA (Unaudited)

         Unaudited  summarized financial data by quarter for 1995 and 1994 is as
follows (in thousands, except per share data):


<TABLE>

<CAPTION>

Quarter Ended:                                   March 31           June 30       September 30          December 31
--------------                                   --------           -------       ------------          -----------
<S>                                            <C>            <C>                 <C>                  <C>    

1995
     Total revenues.........................   $    16,928     $     17,525       $     18,508          $    18,901
     Net income.............................         2,995            3,363              3,383                3,290
                                                     
     Earnings per share:
         Net income.........................   $       .18     $        .19       $        .18          $       .16

Quarter Ended:                                   March 31           June 30       September 30          December 31
--------------                                   --------           -------       ------------          -----------
1994
     Total revenues.........................   $   12,624      $     13,668       $     15,644          $    16,992
     Net income.............................        2,237             2,128              2,564                3,034
     Earnings per share:
         Net income.........................   $       .15     $        .14       $        .16          $       .19






<PAGE>


<CAPTION>

                          SOUTH WEST PROPERTY TRUST INC. Schedule III
                           REAL ESTATE AND ACCUMULATED DEPRECIATION
                                      December 31, 1995
                                        (in thousands)

                                                                      Costs Capitalized                  Gross Amount Carried
                                                Initial Cost      Subsequent to Acquisition               at Close of Period
                                           --------------------  ----------------------------      ------------------------------ 
                                                                                                                          
                                                                                                                                   
                                                      Buildings                      Exchange                 Buildings           
                                                        and             Net            or                        and           
                                Encum-                Improve-        Improve-       Purchase                  Improve-           
Property                        brance        Land     ments          ments(a)       Property      Land         ment          Total
--------                       --------       ----    --------      -----------       ------     ---------      -----         -----
<S>                           <C>         <C>       <C>             <C>                <C>       <C>          <C>         <C>       

Wholly-Owned:
  Alvarado                    (d)          $    841 $   6,170        $    154                    $    911     $  6,254    $   7,165
  Ashley Oaks                 (c)               813     5,440             525                         813        5,965        6,778
  Autumnwood                  (c)             1,132     7,548             521                       1,132        8,069        9,201
  Bluff Creek                 (c)             1,041     8,082             353           117         1,054        8,539        9,593
  Bluffs                      (d)               320     3,510             957           933           406        5,314        5,720
  Catalina                    (d)               851     4,823             230                         851        5,053        5,904
  Chandler's Mill             (d)               971     5,519             623                         971        6,142        7,113
  Citiscape                   (d)             1,091     7,301             203                       1,091        7,504        8,595
                                                                                                                                  
  Cobblestone                 (c)             1,458     9,719             583                       1,458       10,302       11,760
                                                                                                                                  
  Creeks                      (c)               600     4,020           1,885                         600        5,905        6,505
  Dove Park                                   1,224     6,935             908                       1,224        7,843        9,067
  Foxfire (Amarillo)          (d)               420     6,379           1,218                         420        7,597        8,017
  Foxfire (Dallas)           3,788 (f)          827     6,162              80           370           913        6,526        7,439
  Greenway Park               (c)               679     4,547             132                         679        4,679        5,358
  Harbour Pointe              (e)             1,367     7,771             478                       1,367        8,249        9,616
  High Ridge                 4,693              820     7,394             379         2,292           890        9,995       10,885
  Hunters Ridge               (e)               788     4,464             552                         788        5,016        5,804
  Lakeridge                   (c)               721     5,266             362                         721        5,628        6,349
  Oak Forest                10,609            1,387    15,176                                       1,387       15,176       16,563
  Oak Park                    (e)             1,805    11,090             734                       1,805       11,824       13,629
  Park Trails                 (d)               610     4,086             333                         610        4,419        5,029
  Pavilion                    (d)             2,401    13,605             775                       2,422       14,359       16,781
                                                                                                                                   
  Pecan Grove                 (d)               484     3,156             448           835           592        4,331        4,923
  Preston Oaks                (d)               935     5,301             436                         935        5,737        6,672
  Preston Trace               (c)             1,382     7,797             318                       1,382        8,115        9,497
  Rock Creek                  (c)             1,280     6,824           1,963         2,067         1,624       10,510       12,134
  Ryan's Mill                 (c)               771     5,663             384                         771        6,047        6,818
  Shadow Lake                 (e)             1,424     8,070             344                       1,424        8,414        9,838
  Southern Oaks               (e)               843     4,776             321                         843        5,097        5,940
  Summergate                  (c)               496     3,310             209                         496        3,519        4,015
  Sunflower                   (e)               978     3,912           1,097         1,212         1,204        5,995        7,199
  Sunset Pointe               8,873           2,166    12,290             214                       2,166       12,504       14,670



<PAGE>


<CAPTION>

                         SOUTH WEST PROPERTY TRUST INC. Schedule III
                           REAL ESTATE AND ACCUMULATED DEPRECIATION  (Cont.)
                                      December 31, 1995
                                        (in thousands)

 Accumu-                                 
 lated-    Date of                Depre- 
 Depre-   Construc-     Date      ciable 
 ciation    tion       Acquired   Life   
 -------  --------    --------    ----   
<S>         <C>         <C>       <C>    
                                                                            
$    512    1984        1993      5-35   
     595    1989        1993      5-35   
     868    1984        1993      5-35   
   3,922    1984        1993      5-35   
   3,324    1978        1977      5-35   
     460    1982        1993      5-35   
     547    1984        1993      5-35   
     541     1973       1993      5-35   
            (g)                          
   1,045                1993      5-35   
            1984                         
   3,780    1975        1974      5-35   
     244    1984        1994      5-35   
   4,429  1975-80       1974      5-35   
   1,179    1978        1978      5-35   
     475    1986        1993      5-35   
     391    1984        1994      5-35   
   4,678    1979        1978      5-35   
     343    1981        1994      5-35   
     608    1984        1993      5-35   
     148    1995        1995      5-35   
     597    1980        1994      5-35   
     424    1983        1993      5-35   
   1,084    1979(g)     1993      5-35   
     938  1983-84       1990      5-35   
     540    1980        1993      5-35   
     809    1984        1993      5-35   
   6,651    1979        1977      5-35   
     653    1985        1993      5-35   
     457    1984        1994      5-35   
     281    1982        1994      5-35   
     391    1984        1993      5-35   
   3,176    1974        1990      5-35   
     424    1989        1994      5-35   

<CAPTION>
                                                                 REAL ESTATE AND ACCUMULATED DEPRECIATION Continued
                                                                                 December 31, 1995
                                                                                   (in thousands)

                                                                     Costs Capitalized                  Gross Amount Carried
                                                Initial Cost      Subsequent to Acquisition               at Close of Period
                                           --------------------  ----------------------------      ------------------------------ 
                                                                                                                          
                                                                                                                                   
                                                      Buildings                      Exchange                 Buildings          
                                                        and             Net            or                        and              
                                Encum-                Improve-        Improve-       Purchase                  Improve-          
Property                        brance        Land     ments          ments(a)       Property      Land         ment          Total
--------                       --------       ----    --------      -----------       ------     ---------      -----         -----
<S>                           <C>             <C>      <C>            <C>            <C>          <C>         <C>           <C>
  
Wholly-Owned:

  Timbercreek                 (e)             1,621    11,844           4,981         3,218         2,057       19,607       21,664
  Turtle Creek                5,110           1,250     6,748             299                       1,250        7,047        8,297
  Vista Point                 (d)               757     5,069             153                         757        5,222        5,979
  Westlake Villas             (d)               985     6,536             362                         985        6,898        7,883
  Wimbledon Court             (c)             1,189     8,688             335                       1,189        9,023       10,212 
  Windridge                   (d)             2,202     8,832           1,439         1,171         2,436       11,208       13,644
  Woodscape                   (c)             1,387     5,219           1,407                       1,387        6,626        8,013
  Woodtrail                   (d)               396     3,253           2,360                         573        5,436        6,009 
                              ----            ------   ------         -------       --------     --------       ------        -----
                           $145,786        $ 42,713 $ 272,295        $ 29,055      $ 12,21       $ 44,584     $311,694    $ 356,278
                            -------         -------   -------          ------       --------      -------      -------     --------
  


<CAPTION>


                        SOUTH WEST PROPERTY TRUST INC. Schedule III
                           REAL ESTATE AND ACCUMULATED DEPRECIATION  (Cont.)
                                      December 31, 1995
                                        (in thousands)

 Accumu-                                 
 lated-    Date of                Depre- 
 Depre-   Construc-     Date      ciable 
 ciation    tion       Acquired   Life   
 -------  --------    --------    ----   
<S>       <C>            <C>       <C>    
 
  12,125  1975-78        1976      5-35 
      340    1985        1994      5-35 
      514    1986        1993      5-35 
      752    1985        1993      5-35 
      991    1983        1993      5-35 
    2,765  1979-80       1989      5-35 
    3,678  1977-82       1985      5-35 
    3,553     1978       1981      5-35 
   ------                               
 $ 69,232                               
  -------                               


<CAPTION>
                         
 REAL ESTATE AND ACCUMULATED DEPRECIATION   (Continued)
               December 31, 1995
                 (in thousands)
                                                       Buildings
                                                          and    
                                Encum-                  Improve- 
Property                        brance        Land       ments   
--------                       --------       ----      -------- 
<S>                        <C>             <C>      <C>       

Development Properties:
  Ashley Oaks - Phase II   $   6,297       $    330 $   10,857 (h)                                                                
  Copper Mill                  4,501          1,733      8,443 (h)                                                              
  Oak Park Phase II                             108        140 (h)                                                                
  Promontory Pointe           17,573          3,215     28,037 (h)                                                               
  Providence Court                 1          3,187      1,470 (h)
  Sierra Palms                 3,884          1,981      9,929 (h)       
  Sunset Pointe - Rehab                                      5 (h)    
                           $  32,256       $ 10,554 $   58,881                                                                    
                            ========         ======     ======                                                                    


-----------------------------
See notes on following page.

<PAGE>

<CAPTION>

 REAL ESTATE AND ACCUMULATED DEPRECIATION   (Continued)
               December 31, 1995
                 (in thousands)

        Accumu-                                 
        lated-                   
        Depre-              Date  
        ciation           Acquired      
        -------           --------       
<S>      <C>                <C>    

           41               1994     
                            1994     
                            1994     
          309               1994     
                                     
                            1994     
            2                        
                                     
                                     
     $    352                        
      =======                        
<FN>

                               NOTES TO SCHEDULE III

     (a)  Improvements are net of write-offs of fully  depreciated  assets which
          are no longer in use.

     (b)  Aggregate  cost for federal  income tax  purposes at December 31, 1995
          was approximately $334,970,000.

     (c)  These  properties  serve as security  for the first phase of the REMIC
          Financing.  The  outstanding  balance of the first  phase of the REMIC
          Financing at December 31, 1995 was $47,647,000.

     (d)  These  properties  serve as security for the second phase of the REMIC
          Financing.  The  outstanding  balance of the second phase of the REMIC
          Financing at December 31, 1995 was $48,566,000.

     (e)  These properties serve as collateral for the Company's line of credit.
          The outstanding balance of the line of credit at December 31, 1995 was
          $16,500,000.

     (f)  During 1995,  the Company  acquired  100%  interest in this  property.
          Prior to 1995, the Company owned 5% of Phase I and 66% of Phase II.

     (g)  These properties  underwent  substantial  rehabilitation  work in 1993
          prior to the Company's acquisition.

     (h)  These amounts represent construction in progress.

</FN>




<PAGE>                                                                

<CAPTION>

                           SOUTH WEST PROPERTY TRUST INC. Schedule III
                             REAL ESTATE RECONCILIATION      Continued
                                       (in thousands)


                                                                                 Years ended December 31,

                                                                     1995                1994             1993
                                                                     ----                ----             ----

<S>                                                                <C>               <C>               <C>   

Balance, beginning of period..............................         $330,364          $  247,220        $   87,750

  Additions during period:
      Improvements........................................            6,441               7,764             3,615
      Purchase of property................................            5,880              73,011           134,471
      Sale of property....................................        (   4,563)
      Purchase of additional partnership interests........            1,593               2,176            21,384
      Completed construction projects.....................           16,563                      
      Adjustment for rental guaranty......................                                  193
                                                             --------------        ----     ---

Balance, end of period....................................       $ 356,278            $ 330,364         $ 247,220
                                                                   --------             -------           -------



<CAPTION>


                                                                  ACCUMULATED DEPRECIATION RECONCILIATION

                                                                           Years ended December 31,

                                                                     1995                1994             1993
                                                                     ----                ----             ----

<S>                                                                <C>                 <C>              <C>   
 
Balance, beginning of period..............................         $ 59,443            $                $ 36,422
                                                                                         49,697

  Additions during period:
      Depreciation........................................           12,304               9,746            5,616
      Sale of property....................................        (   2,163)
      Purchase of additional partnership interests........                                                 7,659
                                                               -------------       ------------            -----

Balance, end of period....................................       $  69,584            $  59,443        $  49,697
                                                                   --------             -------          -------




<PAGE>



<CAPTION>

                                                                        INDEX TO EXHIBITS

                                                                         Filed herewith or
                                                                      incorporated herein by                 Sequential
  Number                         Title                                      reference                        Page Number
<S>           <C>                                                    <C>                                     

    3.1       Articles of Incorporation of the Company,              Exhibit 99.1 to Form 10-Q for
               as amended                                              the quarter ended June 30,1994
                                                                       (File No. 1-11224)

    3.2       Bylaws of the Company                                  Exhibit 3.2 to Amendment No. 2
                                                                       to Form S-4 filed July 8, 1992
                                                                       (File No. 33-48122)

    3.3       Rights Agreement dated August 17, 1994                 Exhibit 1 to Form 8-K filed
                between South West Property Trust Inc.                 August 17, 1994
                and Society National Bank, as Rights                   (File No. 1-11224)
                Agent

    4.1       Form of Indenture governing the Convertible            Exhibit 4.1 to Amendment No. 2
                Debentures                                             to Form S-11 filed July 8, 1992
                                                                       (File No. 33-48121)

    4.2       Form of Convertible Debenture                          Exhibit 4.2 to Amendment No. 2
                                                                       to Form S-11 filed July 8, 1992
                                                                       (File No. 33-48121)

    4.3       Form of Certificate representing common                Exhibit 4.1 to Form S-2 filed
                stock of the Company                                   March 15, 1993
                                                                       (File No. 33-59528)

   10.1       Employment Agreement between the                       Exhibit No. 10.1 to Form 10-K for
                Company and John S. Schneider                          the year ended December 31, 1994
                                                                       (File No. 1-11224)

   10.2       Employment Agreement between the                       Exhibit No. 10.2 to Form 10-K for
                Company and Lewis H. Sandler                           the year ended December 31, 1994
                                                                       (File No. 1-11224)

   10.3       Employment Agreement between the                       Exhibit No. 10.3 to Form 10-K for
                Company and Robert F. Sherman                          the year ended December 31, 1994
                                                                       (File No. 1-11224)

   10.4       1992 Stock Option Plan (as amended)                    Exhibit 10.5 to Amendment No. 3
                                                                       to Form S-4 filed July 22, 1992
                                                                       (File No. 33-48122)

   10.5       Lease Agreement dated March 14, 1994                   Exhibit No. 10.4 to Form 10-K for
                between Sterling Plaza Limited Partnership,            the year ended December 31, 1994
                as landlord, and the Company, as Tenant                (File No. 1-11224)

   10.7       Dividend and Interest Reinvestment and                 Exhibit No. 10.1 to Post-Effective
                Share Purchase Plan                                    Amendment No. 2 to Form S-3
                                                                       filed February 10, 1995
                                                                       (File No. 33-59526)

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                                                         Filed herewith or
                                                                      incorporated herein by                
                                                                            reference                       
   
                                                                                                          Sequential  
   Number                      Title                                                                      Page Number 
<S>           <C>                                                    <C>    
                                                                                                         
   10.8       Credit Agreement dated December 1, 1993                Exhibit No. 99.1 to Form 8-K
                among SWP Properties, Inc., SWP Woodscape              dated December 23, 1993
                Woodscape Properties, Inc., and SWP Creeks             (File No. 1-11224)
                Properties, Inc. and National Westminster
                Bank, PLC

   10.9       Collection Account Agreement dated December            Exhibit No. 99.2 to  Form 8-K
                1, 1993 among SWP Properties, Inc., SWP                dated December 23, 1993
                Woodscape Properties, Inc. and SWP Creeks              (File No. 1-11224)
                Properties, Inc. (Mortgagor), Norwest Bank
                Minnesota, N.A. (Account Agent), Southwestern
                Property Trust, Inc. (Property Manager), and
                Norwest Bank Minnesota, N.A. (Trustee)

   10.10      Property Management Agreement dated December           Exhibit No. 99.3 to Form 8-K
                1, 1993 for properties covered by the Credit           dated December 23, 1993
                Agreement described in Exhibit No. 10.8                (File No. 1-11224)
                hereto between SWP Properties, Inc., SWP
                Woodscape Properties, Inc., SWP Creeks
                Properties, Inc., and Southwestern Property
                Trust, Inc.

   10.11      Property Manager Subordination Agreement dated         Exhibit No. 99.4 to Form 8-K
                December 1, 1993 between National Westminster          dated December 23, 1993
                Bank, PLC, and Southwestern Property Trust,            (File No. 1-11224)
                Inc.

   10.12      Certificate Purchase Agreement dated December          Exhibit No. 99.5 to Form 8-K
                22,1993 between SWP Depositor, Inc.,                   dated December 23, 1993
                Southwestern Property Trust, Inc., and                 (File No. 1-11224)
                National Westminster Bank, PLC

   10.13      Loan Purchase Agreement dated December 22,             Exhibit to Form 8-K to Form 8-K
                1993 between National Westminster Bank,                dated December 23, 1993
                PLC and SWP Depositor, Inc.                            (File No. 1-11224)

   10.14      Employment Agreement between the Company               Exhibit No. 10.14 to Form 10-K
                and David L. Johnston                                  for the year ended December 31,
                                                                       1994  (File No. 1-11224)

   10.15      Employment Agreement between the Company               Exhibit No. 10.15 to Form 10-K
                and Diana M. Laing                                     for the year ended December 31,
                                                                       1994  (File No. 1-11224)

   10.16      Credit Agreement dated March 1, 1994 between           Exhibit 99.1 to Form 10-Q for
                SWP REMIC Properties II - A, L.P. and                  quarter ended March 31, 1994
                National Westminster Bank PLC, New York                (File No. 1-11224)
                New York Branch

   10.17      Property Management Agreement dated March              Exhibit 99.2 to Form 10-Q for
                10, 1994 between SWP REMIC Properties                  quarter ended March 31, 1994
                II-A, L.P. and Southwestern Property Trust,            (File No. 1-11224)
                Inc.

   10.18      Property Manager Subordination Agreement               Exhibit 99.3 to Form 10-Q for
                dated March 10, 1994 between National                  quarter ended March 31, 1994
                Westminster Bank, PLC, and Southwestern                (File No. 1-11224)
                Property Trust, Inc.

   10.19      Note Purchase Agreement dated March 10, 1994           Exhibit 99.4 to Form 10-Q for
                between SWP Depositor, Inc., Southwestern              quarter ended March 31, 1994
                Property Trust, Inc. and National Westminster          (File No. 1-11224)
                Bank, PLC

   10.20      Form of Promissory Note dated March 10, 1994           Exhibit 99.5 to Form 10-Q for
                in connection with REMIC Financing                     quarter ended March 31, 1994
                                                                       (File No. 1-11224)

   10.21      Form of Mortgage dated March 10, 1994 in               Exhibit 99.6 to Form 10-Q for
                connection with REMIC Financing                        quarter ended March 31, 1994
                                                                       (File No. 1-11224)

   10.22      Indenture dated March 10, 1994 between SWP             Exhibit 99.1 to Form 10-Q for
                Depositor, Inc. and Bankers Trust Company              quarter ended June 30, 1994
                as Trustee                                             (File No. 1-11224)

   10.23      Loan Purchase Agreement dated June 30, 1994            Exhibit 99.2 to Form 10-Q for
                between National Westminster Bank, PLC and             quarter ended June 30, 1994
                SWP Depositor, Inc.                                    (File No. 1-11224)

   10.24      Collection Account Agreement dated June 30,            Exhibit 99.3 to Form 10-Q for
                1994 among SWP REMIC Properties II-A, L.P.,            quarter ended June 30, 1994
                Bankers Trust Company, as Account Agent,               (File No. 1-11224)
                South West Property Trust, as Property Manager,
                and Bankers Trust Company, as Indenture Trustee

   10.25      Line of Credit Agreement dated September 15,           Exhibit 99.7 to Form 10-Q for
                1994 between South West Properties, L.P.,              quarter ended September 30, 1994
                South West Property Trust Inc. and Lehman              (File No.  1-11224)
                Brothers Holdings Inc.

   10.26      Promissory Note dated September 15, 1994 made          Exhibit 99.8 to Form 10-Q for
                by South West Properties, L.P. in favor of             quarter ended September 30, 1994
                Lehman Brothers Holdings Inc. in the principal         (File No. 1-11224)
                amount of $41,000,000

   10.27      Form of Deed of Trust and Security Agreement           Exhibit 99.9 to Form 10-Q for
                dated September 15, 1994 from South West               quarter ended September 30, 1994
                Properties, L.P. in favor of Robert J. Banta,          (File No. 1-11224)
                as trustee, and Lehman Brothers Holdings Inc.,
                as beneficiary

   22.1       Subsidiaries of the Registrant                         Filed herewith

   23.1       Consent of Ernst & Young LLP                           Filed herewith


</TABLE>

<PAGE>


                              Exhibit 22.1

                     Subsidiaries of the Registrant


                      SOUTH WEST PROPERTY TRUST INC.
                  SUBSIDIARIES AND AFFILIATES OF THE COMPANY
                            As of December 31, 1995



SWP Properties, Inc.                             SWP REMIC Properties II-A, L.P.
SWP Creeks Properties, Inc.                        Windridge Apartments
SWP Woodscape Properties, Inc.                     Pecan Grove Apartments
SWPT II Arizona Properties, Inc.                   Westlake Villas Apartments
SWP REMIC Properties II, Inc.                      Foxfire (Amarillo) Apartments
South West REIT Holding, Inc.                      Woodtrail Apartments
SWP Developers, Inc.                               Bluffs Apartments
Little Rock Apartment Management, Inc.             Chandlers Mill Apartments
SWP Depositor, Inc.                                Alvarado Apartments
    SRL Amarillo Investors, Inc.                   Catalina Apartments
SWP Arkansas Properties, Inc.                      Citiscape Apartments
    Turtle Creek Apartments                        Park Trails Apartments
MF-SWP Joint Venture                               Pavilion Apartments
    Promontory Pointe Apartments                   Preston Oaks Apartments
SWP Creeks, L.P.                                   Vista Point Apartments
    Creeks Apartments                              South West Properties, L.P.
SWP Woodscape I, L.P.                              Sunflower Apartments
    Woodscape Apartments                           Shadow Lake Apartments
SWP Properties I, L.P.                             Hunters Ridge Apartments
    Rock Creek Apartments                          Timbercreek Apartments
    Bluff Creek Apartments                         Southern Oaks Apartments
    Preston Trace Apartments                       Oak Park Apartments
    Wimbledon Court Apartments                     Dove Park Apartments
    Autumnwood Apartments                          Sunset Pointe Apartments
    Cobblestone Apartments                         Ashley Oaks 2 Apartments
    Summergate Apartments                          Oak Forest Apartments
    Lakeridge Apartments                           Foxfire (Dallas) Apartments
    Ryan's Mill Apartments                         High Ridge Apartments
    Greenway Park Apartments                       Sierra Palms Apartments
    Ashley Oaks Apartments                         Copper Mill Apartments
                                                   Providence Court Apartments



<PAGE>

                                Exhibit 23.1


                      CONSENT OF INDEPENDENT AUDITORS


     We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-70858, Form S-3 No. 33-59526, Form S-8 No. 33-67452 (pertaining
to the 1992  Nonqualified  Stock Option Plan) of South West Property  Trust Inc.
and in the related  Prospectuses  of our report  dated  January 30,  1996,  with
respect to the  consolidated  financial  statements  and  schedule of South West
Property  Trust Inc.  included  in this Annual  Report  (Form 10-K) for the year
ended December 31, 1995.



                                                        ERNST & YOUNG LLP

Dallas, Texas
February 20, 1996