<PAGE>
Audited Financial Statements
Pointe Royal Project

Years ended December 31, 1997, 1996, and 1995
with Report of Independent Auditors

(LOGO)

<PAGE>

            Pointe Royal Project
        Audited Financial Statements
 Years ended December 31, 1997, 1996, and 1995


Contents

Report of Independent Auditors                                       1

Audited Financial Statements

Statements of Assets, Liabilities and Project Deficit                2
Statements of Revenues and Expenses and Changes in Project Deficit   3
Statements of Cash Flows                                             4
Notes to Financial Statements                                        5

<PAGE>

           [LETTERHEAD OF ERNST & YOUNG LLP]

             Report of Independent Auditors


To the Partners of
FPI Royal View, Ltd., L.P.

We have audited the accompanying statements of assets, liabilities and 
project deficit of the Pointe Royal Project (the Project) as of December 
31, 1997 and 1996, and the related statements of revenues and expenses 
and changes in project deficit and cash flows for each of the three 
years in the period ended December 31, 1997. These financial statements 
are the responsibility of the Project's management. Our responsibility 
is to express an opinion on these financial statements based on our 
audits.

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

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


Memphis, Tennessee
January 30, 1998

                                                       1
<PAGE>

                     Pointe Royal Project

             Statements of Assets, Liabilities and
                       Project Deficit

<TABLE>
<CAPTION>
                                                     December 31
                                                 1997            1996
<S>                                             <C>            <C>
Assets
Property, at cost                               $23,970,628    $23,288,629
Less accumulated depreciation                    (7,869,324)    (7,065,474)
                                                 16,101,304     16,223,155
                                             
Restricted funds and escrows                        145,221        157,191
Cash                                                 72,186          3,400
Total assets                                    $16,318,711    $16,383,746


Liabilities and Project Deficit
Mortgage notes payable                          $23,808,000    $23,808,000
Due to FPI Royal View, Ltd., L.P. 
  and related entities                            1,180,778      1,183,763
Accrued interest payable                          6,278,092      4,235,079
Accrued real estate taxes                           172,135        177,100
Security deposits                                    57,520         64,890
Other accrued expenses                               66,527         64,043

Total liabilities                                31,563,052     29,532,875

Project deficit                                 (15,244,341)   (13,149,129)
Total liabilities and project deficit           $16,318,711    $16,383,746
</TABLE>

See accompanying notes. 
                                                                        2
<PAGE>

                       Pointe Royal Project

            Statements of Revenues and Expenses and
                  Changes in Project Deficit

<TABLE>
<CAPTION>
                                                  Year ended December 31
                                          1997             1996             1995
<S>                                  <C>              <C>              <C>
Revenues
Rental income                        $   3,734,047    $   3,771,718    $    3,615,886
Interest and other income                  128,129          165,052           137,665
                                         3,862,176        3,936,770         3,753,551

Expenses
Operating expenses                       2,398,690        2,064,220         1,686,854
Interest                                 2,754,848        2,600,663         2,524,077
Depreciation                               803,850          745,929           749,890
Loss on disposal of property                     -           43,941           354,386
                                         5,957,388        5,454,753         5,315,207

Expenses in excess of revenues          (2,095,212)      (1,517,983)       (1,561,656)
Project deficit at beginning of year   (13,149,129)     (11,631,146)      (10,069,490)
Project deficit at end of year        $(15,244,341)    $(13,149,129)     $(11,631,146)
</TABLE>

See accompanying note.
                                                                           3
<PAGE>
                                 Pointe Royal Project

                               Statements of Cash Flows

<TABLE>
<CAPTION>
                                                  Year ended December 31
                                          1997             1996             1995
<S>                                  <C>              <C>              <C>
Operating activities

Expenses in excess of revenues      $   (2,095,212)   $   (1,517,983)   $   (1,561,656)
Adjustments to reconcile 
  expenses in excess of 
  revenues to net cash 
  provided by operating 
  activities:

    Depreciation                           803,850           745,929           749,890
    Loss on disposal of property                 -            43,941           354,386
    Decrease in restricted 
      funds and escrows                     11,970             7,210            10,188
    (Decrease) increase in 
      Due to FPI Royal View, 
      Ltd., L.P. and related 
      entities                             (2,985)           (48,669)           13,077
    Increase in accrued 
      interest payable                  2,043,013          1,063,483           766,521
    (Decrease) increase in 
      accrued real estate 
      taxes                                (4,965)            (1,761)           35,308
    Decrease in security deposits          (7,370)            (8,190)          (20,781)
    Increase (decrease) in 
      other accrued expenses                2,484             28,708           (92,223)
Net cash provided by 
  operating activities                    750,785            312,668           254,710
Investing activities
Property additions                       (681,999)          (395,525)         (340,910)
Net increase (decrease) in cash            68,786            (82,857)          (86,200)
Cash at beginning of year                   3,400             86,257            12,457
Cash at end of year                    $   72,186          $   3,400        $   86,257
</TABLE>

See accompanying notes.
                                                                           4
<PAGE>
                              Pointe Royal Project
                          Notes to Financial Statements
                                December 31, 1997

1. Project Description

The Pointe Royal Project (the Project) is a 437 
unit residential rental property on 34.74 acres in 
Overland Park, Kansas. The Project, which is not a 
separate legal entity, is owned by FPI Royal View, 
Ltd., L.P. (the Partnership), a Kansas limited 
partnership. Avron B. Fogelman and Fogelman 
Enterprises, L.P. (FELP), which is directly and 
indirectly owned by Avron B. Fogelman, are general 
partners of the Partnership. FELP is also the sole 
limited partner. Through December 24, 1992, Avron 
B. Fogelman was also a general partner of Fogelman 
Mortgage L.P. I (FMLP), which holds the first 
mortgage note on the Project's property (see Note 
4). However, as of December 24, 1992, pursuant to 
settlement of certain claims brought by investors 
in FMLP, Mr. Fogelman and an affiliated entity 
withdrew as general partners from FMLP (see Note 
4).

Units are leased under short-term operating leases 
with monthly rentals due in advance. The Project, 
existing and future leases, and rents have been 
assigned as collateral for the related mortgage 
notes (see Note 4).

2. Summary of Significant Accounting Policies

Basis of Reporting

The accompanying financial statements are prepared 
on the accrual basis of accounting and represent 
the cumulative operations of the Project beginning 
with the inception of the FMLP loan agreement on 
April 23, 1987 (see Note 4).

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.

Statements of Cash Flows

The Project made payments of $711,835, $1,537,180, 
and $1,757,556, for interest during the years ended 
December 31, 1997, 1996, and 1995, respectively.

                                                                    5
<PAGE>
                              Pointe Royal Project
                   Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Restricted Funds and Escrows

Included in restricted funds and escrows are 
security deposits and real estate tax escrow 
deposits.

Income Taxes

No income taxes are paid by the Project or the 
Partnership since the results of operations are 
allocated to the partners of the Partnership. Any 
income tax liability or benefit resulting therefrom 
is the responsibility of the partners rather than 
the Partnership or the Project.

3. Property

Property is stated at cost. Depreciation is 
provided for financial statement reporting purposes 
using the straight-line method over estimated 
useful lives as follows:

<TABLE>
<CAPTION>
                               Useful                 Cost at December 31
                                Life                1997               1996
<S>                         <C>                <C>                <C>
Land                            N/A            $   3,496,000      $   3,496,000
Buildings                     30 years            16,537,712         16,537,712
Land improvements             15 years             1,864,748          1,618,401
Furniture and fixtures       5-7 years             2,072,168          1,636,516
                                               $  23,970,628      $  23,288,629
</TABLE>

Construction period interest incurred during 
Project development amounted to $1,347,428 and has 
been capitalized as a component of property costs.

The Project follows Financial Accounting Standards 
Board 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 Project adopted 
Statement 121 during 1996, with no effect on its 
financial statements.

As a result of normal capital improvements at the 
Project, certain property was replaced. The net 
book value of this property was written off and is 
reflected as a loss on disposal of property in the 
accompanying financial statements.

                                                           6
<PAGE>
                              Pointe Royal Project
                   Notes to Financial Statements (continued)

4. Mortgage Notes Payable

The Project is financed with nonrecourse mortgage 
notes payable consisting of the following at 
December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                      1997                          1996
                                             Accrued                         Accrued
                                             Interest                        Interest
                              Principal      Payable         Principal       Payable
<S>                           <C>           <C>              <C>             <C>
First mortgage note 
  payable to FMLP             $22,745,000   $5,587,575       $22,745,000     $3,717,722

Second mortgage note 
  payable to Avron B. 
  Fogelman                      1,063,000      690,517         1,063,000        517,357

                              $23,808,000   $6,278,092       $23,808,000     $4,235,079
</TABLE>

The first mortgage note was amended effective 
January 1, 1990 pursuant to a consensual 
reorganization of the business affairs of Avron B. 
Fogelman and related entities. The note, as 
amended, bears interest at the basic interest rate 
of 9.50% per annum and is payable monthly with the 
principal balance due April 23, 1999. If Property 
Cash Flow, as defined, is insufficient to pay the 
basic interest, then the interest paid shall be 
equal to the Property Cash Flow. Such insufficiency 
between basic interest at 9.50% and Property Cash 
Flow is accrued and bears interest at 9.50%, 
compounded monthly. If Property Cash Flow exceeds 
the basic interest, then the excess shall be 
applied against any unpaid accrued interest until 
all such accrued interest has been paid. 
Thereafter, any excess Property Cash Flow shall be 
paid to FMLP to be held in escrow as additional 
collateral for future interest obligations. If 
Property Cash Flow exceeds the basic interest for 
six consecutive months after payment of all accrued 
basic interest, then cash held as additional 
collateral shall be paid as contingent interest as 
provided under the original terms of the first 
mortgage note.

Contingent interest is payable from any Property 
Cash Flow, sale or refinancing proceeds received 
after January 1, 1989 as follows: (a) 75% thereof 
until the total interest (basic interest plus 
contingent interest) paid results in a 10.75% yield 
on the note; (b) 50% of the remaining balance until 
the total interest paid results in a 12.75% yield 
on the note; and (c) 25% of the remaining balance 
thereof.

Under the first mortgage note agreement, effective 
January 1, 1994, the principal may be repaid in 
whole, but not in part, upon the payment of a 
prepayment penalty equal to 5% of the outstanding 
principal balance. Thereafter, prepayment penalties 
decline 1% annually.

                                                                    7
<PAGE>
                              Pointe Royal Project
                   Notes to Financial Statements (continued)

4. Mortgage Notes Payable (continued)

During 1992, Mr. Fogelman, FMLP and other 
defendants settled litigation with certain 
investors in FMLP, the holder of the Project's 
first mortgage note. Pursuant thereto, funds placed 
by Mr. Fogelman in trust to satisfy his guarantee 
related to the mortgage note were released to FMLP 
and applied as payment of accrued basic interest. 
Mr. Fogelman was then released from his guarantee 
on the note and Mr. Fogelman and an affiliated 
entity withdrew as general partners from FMLP. 
Accordingly, the first mortgage note payable to 
FMLP is solely a nonrecourse note collateralized by 
the Project.

In accordance with the transfer of funds to FMLP 
discussed in the preceding paragraph, the Project 
recorded a second mortgage note payable to Mr. 
Fogelman in the amount of $1,063,000, which was the 
amount of funds transferred to FMLP. The note bears 
interest at the prime rate plus 2%, adjustable 
monthly (10.5% and 10.25% at December 31, 1997 and 
1996, respectively), and the principal and accrued 
interest mature April 23, 1999. The note and 
interest thereon are subordinate to the first 
mortgage note and related interest payable to FMLP 
discussed above. The note may be prepaid, subject 
to the subordination provisions above, at any time 
without penalty.

5. Related Party Transactions

Fogelman Management Co. (FMC), which is owned by 
Mr. Fogelman, manages the Project and charges 
management fees equal to 5% of gross operating 
revenues, as defined in the management agreement. 
Management fees paid by the Project were 
approximately $193,000, $196,000, and $188,000 for 
1997, 1996, and 1995, respectively.

FMC obtains insurance coverage for all properties 
it manages and allocates the related costs 
proportionately among the properties. 

6. Fair Values of Financial Instruments

The following methods and assumptions were used by 
the Project's management in estimating fair value 
disclosures for financial instruments:

The carrying amounts reported in the balance sheet 
for restricted funds and escrows, Due to FPI Royal 
View, Ltd., L. P. and related entities, and other 
accrued expenses approximate fair value. 

The fair value of the first mortgage note and 
accrued interest, when combined with the 
outstanding amount of the first mortgage note and 
accrued interest of FPI Chesterfield, L.P. 
($29,439,179), an affiliate, approximates the 
payoff amount described in Note 7.

                                                                    8
<PAGE>
                              Pointe Royal Project
                   Notes to Financial Statements (continued)

6. Fair Values of Financial Instruments (continued)

Management of the Project has determined that it is 
not practicable to estimate the fair value of the 
second mortgage note payable to Mr. Fogelman and 
related accrued interest since these obligations 
are subordinate to the first mortgage note.

7. Subsequent Event

On January 30, 1998, FELP, Avron B. Fogelman and 
FMLP entered into an agreement ("Payoff Agreement") 
which provides that FELP will pay (or cause to be 
paid on behalf of the Partnership) to FMLP, in full 
satisfaction of the first mortgage loan and related 
accrued interest of the Partnership, as well as, 
the first mortgage loan and related accrued 
interest of FPI Chesterfield, L.P. (collectively 
referred to as "Mortgage Loans"), the following: 
(i) $48,000,000 and (ii) an amount, if any, by 
which the aggregate amount of interest paid to FMLP 
with respect to the Mortgage Loans for the period 
October 1, 1997 through the closing is less than 
interest on the principal amount of the Mortgage 
Loans ($46,065,000) at an annual interest rate of 
7.7%.

The obligation of FMLP to close under the Payoff 
Agreement is subject to the approval by a majority 
in interest of the unitholders of FMLP. 
Additionally, FELP's obligation to close is subject 
to the closing occurring on or before May 29, 1998, 
unless FELP in its sole discretion agrees to the 
closing on a later date.

FELP and Avron B. Fogelman have reached an 
agreement in principle with (i) Connecticut General 
Life Insurance Company ("CIGNA") respecting the 
terms and conditions of new first mortgage 
financing and (ii) General Electric Capital 
Corporation ("GECC") respecting the terms of a new 
equity investment. The funds from CIGNA and GECC, 
together with funds provided by FELP and/or its 
affiliates, would repay the Mortgage Loans.
                                                       9
<PAGE>

Audited Financial Statements
Westmont Project

Years ended December 31, 1997, 1996, and 1995
with Report of Independent Auditors

(LOGO)

<PAGE>
                       Westmont Project

                  Audited Financial Statements
          Years ended December 31, 1997, 1996, and 1995

                            Contents

Report of Independent Auditors                                   1

Audited Financial Statements

Statements of Assets, Liabilities and Project Deficit             2
Statements of Revenues and Expenses and Changes in 
    Project Deficit                                               3
Statements of Cash Flows                                          4
Notes to Financial Statements                                     5

<PAGE>

                [LETTERHEAD OF ERNST & YOUNG LLP] 

Report of Independent Auditors


To the Partners of
FPI Chesterfield, L.P.

We have audited the accompanying statements of assets, 
liabilities and project deficit of the Westmont Project 
(the Project) as of December 31, 1997 and 1996, and the 
related statements of revenues and expenses and changes 
in project deficit and cash flows for each of the three 
years in the period ended December 31, 1997. These 
financial statements are the responsibility of the 
Project's management. Our responsibility is to express 
an opinion on these financial statements based on our 
audits.

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

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

Memphis, Tennessee
January 30, 1998

<PAGE>
                     Westmont Project
           Statements of Assets, Liabilities and
                      Project Deficit

<TABLE>
<CAPTION>
                                           December 31
                                    1997                     1996
<S>                              <C>                       <C>
Assets
Property, at cost                $23,480,010               $23,093,158
Less accumulated depreciation     (8,397,855)               (7,597,138)
                                  15,082,155                15,496,020

Restricted funds and escrows         163,243                   126,294
Cash                                 176,411                   151,421
Total assets                     $15,421,809               $15,773,735

Liabilities and Project Deficit
Mortgage notes payable           $24,409,000               $24,409,000
Due to FPI Chesterfield, L.P. 
  and related entities               611,413                   613,701
Accrued interest payable           6,826,586                 5,289,419
Security deposits                    165,333                   121,410
Other accrued expenses               138,698                    59,008

Total liabilities                 32,151,030                30,492,538
Project deficit                  (16,729,221)              (14,718,803)
Total liabilities and project 
  deficit                        $15,421,809               $15,773,735
</TABLE>

See accompanying notes.
                                                                 2
<PAGE>
                             Westmont Project
                 Statements of Revenues and Expenses and
                         Changes in Project Deficit

<TABLE>
<CAPTION>
                                            Year ended December 31
                                     1997            1996           1995
<S>                             <C>             <C>             <C>
Revenues
Rental income                   $   3,761,133   $   3,669,349   $   3,547,581
Interest and other income             137,721         137,427         161,780
                                    3,898,854       3,806,776       3,709,361

Expenses
Operating expenses                  2,173,193       1,651,281       1,812,435
Interest                            2,881,056       2,774,158       2,693,697
Depreciation                          837,524         782,138         795,726
Loss on disposal of property           17,499               -               -
                                    5,909,272       5,207,577       5,301,858
Expenses in excess of 
  revenues                         (2,010,418)     (1,400,801)     (1,592,497)
Project deficit at 
  beginning of year               (14,718,803)    (13,318,002)    (11,725,505)
Project deficit at end of 
  year                           $(16,729,221)   $(14,718,803)   $(13,318,002)
</TABLE>

See accompanying notes.
                                                                      3

<PAGE>

                              Westmont Project
                           Statements of Cash Flows
<TABLE>
<CAPTION>
                                                Year ended December 31
                                         1997            1996             1995
<S>                                 <C>             <C>               <C>
Operating activities
Expenses in excess of revenues   $   (2,010,418)    $   (1,400,801)   $(1,592,497)
Adjustments to reconcile 
  expenses in excess of 
  revenues to net cash 
  provided by operating 
  activities:
   Depreciation                         837,524            782,138        795,726
   Loss on disposal of property          17,499                  -             -
   (Increase) decrease in 
     restricted funds and 
     escrows                            (36,949)           127,426          2,853
   (Decrease) increase in 
     Due to FPI Chesterfield, 
     L.P. and related entities           (2,288)           (42,850)         5,532
   Increase in accrued 
     interest payable                 1,537,167            749,884        891,362
   Increase (decrease) in 
     security deposits                   43,923              4,500         (8,695)
   Increase (decrease) in 
     other accrued expenses              79,690             10,041        (17,537)
Net cash provided by 
  operating activities                  466,148            230,338         76,744

Investing activities
Property additions                     (441,158)          (160,749)       (122,556)
Net increase (decrease) in cash          24,990             69,589         (45,812)
Cash at beginning of year               151,421             81,832         127,644
Cash at end of year                 $   176,411        $   151,421     $    81,832
</TABLE>
See accompanying notes.
                                                                      4

<PAGE>
                             Westmont Project
                        Notes to Financial Statements
                             December 31, 1997

1. Project Description

The Westmont Project (the Project) is a 489 unit 
residential rental property on 57.65 acres in 
Chesterfield, Missouri. The Project, which is not a 
separate legal entity, is owned by FPI 
Chesterfield, L.P. (the Partnership), a Missouri 
limited partnership. Avron B. Fogelman and Fogelman 
Enterprises, L.P. (FELP), which is directly and 
indirectly owned by Avron B. Fogelman, are general 
partners of the Partnership. Avron B. Fogelman is 
also the sole limited partner. Through December 24, 
1992, Avron B. Fogelman was also a general partner 
of Fogelman Mortgage L.P. I (FMLP), which holds the 
first mortgage note on the Project's property (see 
Note 4). However, as of December 24, 1992, pursuant 
to settlement of certain claims brought by 
investors in FMLP, Mr. Fogelman and an affiliated 
entity withdrew as general partners from FMLP (see 
Note 4).

Units are leased under short-term operating leases 
with monthly rentals due in advance. The Project, 
existing and future leases, and rents have been 
assigned as collateral for the related mortgage 
notes (see Note 4).

2. Summary of Significant Accounting Policies

Basis of Reporting

The accompanying financial statements are prepared 
on the accrual basis of accounting and represent 
the cumulative operations of the Project beginning 
with the inception of the FMLP loan agreement on 
July 8, 1987 (see Note 4).

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.

Statements of Cash Flows

The Project made payments of $1,343,889, 
$2,024,274, and $1,802,335, for interest during the 
years ended December 31, 1997, 1996, and 1995, 
respectively.

                                                              5
<PAGE>
                             Westmont Project
                Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Restricted Funds and Escrows

Included in restricted funds and escrows are 
security deposits and real estate tax escrow 
deposits.

Income Taxes

No income taxes are paid by the Project or the 
Partnership since the results of operations are 
allocated to the partners of the Partnership. Any 
income tax liability or benefit resulting therefrom 
is the responsibility of the partners rather than 
the Partnership or the Project.

3. Property

Property is stated at cost. Depreciation is 
provided for financial statement reporting purposes 
using the straight-line method over estimated 
useful service lives as follows:

<TABLE>
<CAPTION>
                                Useful              Cost at December 31
                                 Life           1997                 1996
<S>                           <C>           <C>                  <C>
Land                             N/A        $   2,386,320        $   2,386,320
Buildings                      30 years        17,029,627           17,027,526
Land improvements              15 years         2,001,847            1,931,757
Furniture and fixtures        5-7 years         2,062,216            1,747,555
                                              $23,480,010          $23,093,158
</TABLE>

Construction period interest incurred during 
Project development amounted to $1,358,694 and has 
been capitalized as a component of property costs.

The Project follows Financial Accounting Standards 
Board 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 Project adopted 
Statement 121 during 1996, with no effect on its 
financial statements.

As a result of normal capital improvements at the 
Project, certain property was replaced. The net 
book value of this property was written off and is 
reflected as a loss on disposal of property in the 
accompanying financial statements.

                                                              6
<PAGE>
                             Westmont Project
                Notes to Financial Statements (continued)

4. Mortgage Notes Payable

The Project is financed with nonrecourse mortgage 
notes payable consisting of the following at 
December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                    1997                            1996
                                          Accrued                        Accrued
                                          Interest                       Interest
                          Principal       Payable         Principal      Payable
<S>                      <C>             <C>             <C>            <C>
First mortgage 
 note payable 
 to FMLP                 $23,320,000     $6,119,179      $23,320,000    $4,759,407

Second mortgage 
 note payable 
 to Avron B. 
 Fogelman                  1,089,000        707,407        1,089,000       530,012
                         $24,409,000     $6,826,586      $24,409,000    $5,289,419
</TABLE>

The first mortgage note was amended effective 
January 1, 1990 pursuant to a consensual 
reorganization of the business affairs of Avron B. 
Fogelman and related entities. The note, as 
amended, bears interest at the basic interest rate 
of 9.50% per annum and is payable monthly with the 
principal balance due July 1, 1999. If Property 
Cash Flow, as defined, is insufficient to pay the 
basic interest, then the interest paid shall be 
equal to the Property Cash Flow. Such insufficiency 
between basic interest at 9.50% and Property Cash 
Flow is accrued and bears interest at 9.50%, 
compounded monthly. If Property Cash Flow exceeds 
the basic interest, the excess shall be applied 
against any unpaid accrued interest until all such 
accrued interest has been paid. Thereafter, any 
excess Property Cash Flow shall be paid to FMLP to 
be held in escrow as additional collateral for 
future interest obligations. If Property Cash Flow 
exceeds the basic interest for six consecutive 
months after payment of all accrued basic interest, 
then cash held as additional collateral shall be 
paid as contingent interest as provided under the 
original terms of the first mortgage note.

Contingent interest is payable from any Property 
Cash Flow, sale or refinancing proceeds received 
after January 1, 1989 as follows: (a) 75% thereof 
until the total interest (basic interest plus 
contingent interest) paid results in a 10.75% yield 
on the note; (b) 50% of the remaining balance until 
the total interest paid results in a 12.75% yield 
on the note; and (c) 25% of the remaining balance 
thereof.

Under the first mortgage note agreement, effective 
January 1, 1994, the principal may be repaid in 
whole, but not in part, upon the payment of a 
prepayment penalty equal to 5% of the outstanding 
principal balance. Thereafter, prepayment penalties 
decline 1% annually.

                                                              7
<PAGE>
                             Westmont Project
                Notes to Financial Statements (continued)

4. Mortgage Notes Payable (continued)

During 1992, Mr. Fogelman, FMLP and other 
defendants settled litigation with certain 
investors in FMLP, the holder of the Project's 
first mortgage note. Pursuant thereto, funds placed 
by Mr. Fogelman in trust to satisfy his guarantee 
related to the mortgage note were released to FMLP 
and applied as payment of accrued basic interest. 
Mr. Fogelman was then released from his guarantee 
on the note and Mr. Fogelman and an affiliated 
entity withdrew as general partners from FMLP. 
Accordingly, the first mortgage note payable to 
FMLP is solely a nonrecourse note collateralized by 
the Project. 

In accordance with the transfer of funds to FMLP 
discussed in the preceding paragraph, the Project 
recorded a second mortgage note payable to Mr. 
Fogelman in the amount of $1,089,000, which was the 
amount of funds transferred to FMLP. The note bears 
interest at the prime rate plus 2%, adjustable 
monthly (10.5% and 10.25% at December 31, 1997 and 
1996, respectively), and the principal and accrued 
interest mature July 1, 1999. The note and interest 
thereon are subordinate to the first mortgage note 
and related interest payable to FMLP discussed 
above. The note may be prepaid, subject to the 
subordination provisions above, at any time without 
penalty.

5. Related Party Transactions

Fogelman Management Co. (FMC), which is owned by 
Mr. Fogelman, manages the Project and charges 
management fees equal to 5% of gross operating 
revenues, as defined in the management agreement. 
Management fees paid by the Project were 
approximately $195,000, $190,000, and $185,000, for 
1997, 1996, and 1995, respectively.

FMC obtains insurance coverage for all properties 
it manages and allocates the related costs 
proportionately among the properties. 

6. Fair Values of Financial Instruments

The following methods and assumptions were used by 
the Project's management in estimating fair value 
disclosures for financial instruments:

The carrying amounts reported in the balance sheet 
for restricted funds and escrows, Due to FPI 
Chesterfield, L. P. and related entities, and other 
accrued expenses approximate fair value. 

The fair value of the first mortgage note and 
accrued interest, when combined with the 
outstanding amount of the first mortgage note and 
accrued interest of FPI Royal View, Ltd., L.P. 
($28,332,575), an affiliate, approximates the 
payoff amount described in Note 7.

                                                              8
<PAGE>
                             Westmont Project
                Notes to Financial Statements (continued)

6. Fair Values of Financial Instruments (continued)

Management of the Project has determined that it is 
not practicable to estimate the fair value of the 
second mortgage note payable to Mr. Fogelman and 
related accrued interest since these obligations 
are subordinate to the first mortgage note.

7. Subsequent Event

On January 30, 1998, FELP, Avron B. Fogelman and 
FMLP entered into an agreement ("Payoff Agreement") 
which provides that FELP will pay (or cause to be 
paid on behalf of the Partnership) to FMLP, in full 
satisfaction of the first mortgage loan and related 
accrued interest of the Partnership, as well as, 
the first mortgage loan and related accrued 
interest of FPI Royal View, Ltd., L.P. 
(collectively referred to as "Mortgage Loans"), the 
following: (i) $48,000,000 and (ii) an amount, if 
any, by which the aggregate amount of interest paid 
to FMLP with respect to the Mortgage Loans for the 
period October 1, 1997 through the closing is less 
than interest on the principal amount of the 
Mortgage Loans ($46,065,000) at an annual interest 
rate of 7.7%.

The obligation of FMLP to close under the Payoff 
Agreement is subject to the approval by a majority 
in interest of the unitholders of FMLP. 
Additionally, FELP's obligation to close is subject 
to the closing occurring on or before May 29, 1998, 
unless FELP in its sole discretion agrees to the 
closing on a later date.

FELP and Avron B. Fogelman have reached an 
agreement in principle with (i) Connecticut General 
Life Insurance Company ("CIGNA") respecting the 
terms and conditions of new first mortgage 
financing and (ii) General Electric Capital 
Corporation ("GECC") respecting the terms of a new 
equity investment. The funds from CIGNA and GECC, 
together with funds provided by FELP and/or its 
affiliates, would repay the Mortgage Loans.

                                                              9
<PAGE>
                                                          1997
--------------------------------------------------------------------------------
Fogelman Mortgage L.P. I                                  Annual
                                                          Report
 <PAGE>
<PAGE>
                            FOGELMAN MORTGAGE L.P. I
                           LETTER TO THE UNIT HOLDERS
                      FOR THE YEAR ENDED DECEMBER 31, 1997
 
                                       1
 <PAGE>
<PAGE>
Price Waterhouse LLP (LOGO)
1177 Avenue of the Americas
New York, NY 10036
Telephone 212 596-7000
Facsimile 212 596-8910
 
Report of Independent Accountants
 
February 13, 1998
To the Unitholders and
General Partner of
Fogelman Mortgage L.P. I
 
In our opinion, the accompanying statements of financial condition and the
related statements of operations, changes in partners' capital and cash flows
present fairly, in all material respects, the financial position of Fogelman
Mortgage L.P. I at December 31, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the general partner; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by the general
partner, and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed above.
 
/s/ Price Waterhouse LLP
 
                                       2
<PAGE>
Deloitte & Touche LLP (LOGO)
Two World Financial Center
New York, New York 10281-1414
Telephone (212) 436-2000
Facsimile (212) 436-5000
 
Independent Auditors' Report
 
To the Partners of
Fogelman Mortgage L.P. I
 
We have audited the accompanying statements of operations, changes in partners'
capital and cash flows of Fogelman Mortgage L.P. I (a Tennessee Limited
Partnership) for the year ended December 31, 1995. These financial statements
are the responsibility of the General Partner. Our responsibility is to express
an opinion on these financial statements based on our audit.
 
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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
the General Partner, as well as evaluating the overall financial 
statement presentation. We believe that our audit provides a reasonable 
basis for our opinion.
 
In our opinion, such financial statements present fairly, in all material
respects, the results of operations and cash flows of Fogelman Mortgage L.P. I
for the year ended December 31, 1995 in conformity with generally accepted
accounting principles.
 
/s/ Deloitte & Touche LLP
February 12, 1996
 
                                       2A
<PAGE>
                            FOGELMAN MORTGAGE L.P. I
                            (a limited partnership)
                       STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                                              December 31,
                                                                       ---------------------------
                                                                          1997            1996
<S>                                                                    <C>             <C>
--------------------------------------------------------------------------------------------------
ASSETS
Investments in mortgage loans                                          $25,701,746     $26,123,955
Cash and cash equivalents                                                  420,884       1,708,313
Deferred general partner's fees (net of accumulated amortization
  of $2,153,435 in 1997 and $1,949,939 in 1996)                            285,565         489,061
                                                                       -----------     -----------
Total assets                                                           $26,408,195     $28,321,329
                                                                       -----------     -----------
                                                                       -----------     -----------
 
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Deposits held for tax obligations of underlying properties             $    86,068     $    88,550
Due to affiliates                                                           73,238          71,794
Accrued expenses                                                           177,179          45,362
                                                                       -----------     -----------
Total liabilities                                                          336,485         205,706
                                                                       -----------     -----------
Partners' capital
Unitholders (54,200 units issued and outstanding)                       26,305,236      28,328,711
General partner                                                           (233,526)       (213,088)
                                                                       -----------     -----------
Total partners' capital                                                 26,071,710      28,115,623
                                                                       -----------     -----------
Total liabilities and partners' capital                                $26,408,195     $28,321,329
                                                                       -----------     -----------
                                                                       -----------     -----------
--------------------------------------------------------------------------------------------------
                 The accompanying notes are an integral part of these statements.
</TABLE>
                                       3
<PAGE>
                            FOGELMAN MORTGAGE L.P. I
                            (a limited partnership)
                            STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                    Year ended December 31,
                                                            ----------------------------------------
                                                               1997           1996           1995
<S>                                                         <C>            <C>            <C>
----------------------------------------------------------------------------------------------------
REVENUES
Equity income from the underlying properties                $1,633,515     $2,557,797     $2,166,858
Interest income                                                 49,251         85,190        103,340
                                                            ----------     ----------     ----------
                                                             1,682,766      2,642,987      2,270,198
                                                            ----------     ----------     ----------
EXPENSES
General and administrative                                     322,261        124,620        137,046
Amortization of deferred general partner's fees                203,496        203,496        203,496
                                                            ----------     ----------     ----------
                                                               525,757        328,116        340,542
                                                            ----------     ----------     ----------
Net income                                                  $1,157,009     $2,314,871     $1,929,656
                                                            ----------     ----------     ----------
                                                            ----------     ----------     ----------
ALLOCATION OF NET INCOME
Unitholders                                                 $  917,417     $2,063,701     $1,682,338
                                                            ----------     ----------     ----------
                                                            ----------     ----------     ----------
General partner:
Special distribution                                        $  230,325     $  230,325     $  230,325
Other                                                            9,267         20,845         16,993
                                                            ----------     ----------     ----------
                                                            $  239,592     $  251,170     $  247,318
                                                            ----------     ----------     ----------
                                                            ----------     ----------     ----------
Net income per depositary unit                              $    16.93     $    38.08     $    31.04
                                                            ----------     ----------     ----------
                                                            ----------     ----------     ----------
----------------------------------------------------------------------------------------------------
</TABLE>
 
                            FOGELMAN MORTGAGE L.P. I
                            (a limited partnership)
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
                                                                            GENERAL
                                                           UNITHOLDERS      PARTNER         TOTAL
<S>                                                        <C>             <C>           <C>
----------------------------------------------------------------------------------------------------
Partners' capital (deficit)--December 31, 1994             $31,053,609     $(185,566)    $30,868,043
Net income                                                   1,682,338       247,318       1,929,656
Distributions                                               (3,116,500)     (261,805)     (3,378,305)
                                                           -----------     ---------     -----------
Partners' capital (deficit)--December 31, 1995              29,619,447      (200,053)     29,419,394
Net income                                                   2,063,701       251,170       2,314,871
Distributions                                               (3,354,437)     (264,205)     (3,618,642)
                                                           -----------     ---------     -----------
Partners' capital (deficit)--December 31, 1996              28,328,711      (213,088)     28,115,623
Net income                                                     917,417       239,592       1,157,009
Distributions                                               (2,940,892)     (260,030)     (3,200,922)
                                                           -----------     ---------     -----------
Partners' capital (deficit)--December 31, 1997             $26,305,236     $(233,526)    $26,071,710
                                                           -----------     ---------     -----------
                                                           -----------     ---------     -----------
----------------------------------------------------------------------------------------------------
                  The accompanying notes are an integral part of these statements.
</TABLE>
                                       4
<PAGE>
                            FOGELMAN MORTGAGE L.P. I
                            (a limited partnership)
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                    Year ended December 31,
                                                          -------------------------------------------
                                                             1997            1996            1995
<S>                                                       <C>             <C>             <C>
-----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received from mortgage loans                     $ 2,055,724     $ 3,561,452     $ 3,559,892
Interest received from cash equivalents                        49,251          85,190         103,340
Cash received for tax obligations of underlying
  properties                                                  640,207         480,838         615,068
Cash paid for tax obligations of underlying properties       (642,689)       (620,853)       (586,186)
General and administrative expenses paid                     (189,000)       (143,315)       (124,503)
                                                          -----------     -----------     -----------
Net cash provided by operating activities                   1,913,493       3,363,312       3,567,611
 
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners                                  (3,200,922)     (3,618,642)     (3,378,305)
                                                          -----------     -----------     -----------
Net increase (decrease) in cash and cash equivalents       (1,287,429)       (255,330)        189,306
Cash and cash equivalents at beginning of year              1,708,313       1,963,643       1,774,337
                                                          -----------     -----------     -----------
Cash and cash equivalents at end of year                  $   420,884     $ 1,708,313     $ 1,963,643
                                                          -----------     -----------     -----------
                                                          -----------     -----------     -----------
 
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
 
Net income                                                $ 1,157,009     $ 2,314,871     $ 1,929,656
                                                          -----------     -----------     -----------
Adjustments to reconcile net income to net cash
  provided by operating activities:
Amortization of deferred general partner's fees               203,496         203,496         203,496
Equity income from the underlying properties               (1,633,515)     (2,557,797)     (2,166,858)
Interest received from mortgage loans                       2,055,724       3,561,452       3,559,892
Changes in:
  Deposits held for tax obligations of underlying
  properties                                                   (2,482)       (140,015)         28,882
  Due to affiliates                                             1,444         (24,161)         12,022
  Accrued expenses                                            131,817           5,466             521
                                                          -----------     -----------     -----------
Total adjustments                                             756,484       1,048,441       1,637,955
                                                          -----------     -----------     -----------
Net cash provided by operating activities                 $ 1,913,493     $ 3,363,312     $ 3,567,611
                                                          -----------     -----------     -----------
                                                          -----------     -----------     -----------
-----------------------------------------------------------------------------------------------------
                  The accompanying notes are an integral part of these statements.
</TABLE>
                                       5
<PAGE>
                            FOGELMAN MORTGAGE L.P. I
                            (a limited partnership)
                         NOTES TO FINANCIAL STATEMENTS
 
A. General
 
   Fogelman Mortgage L.P. I (the 'Partnership'), a Tennessee limited
partnership, was formed on September 4, 1986 and will terminate on December 31,
2016 unless terminated sooner under the provisions of the Amended and Restated
Certificate and Agreement of Limited Partnership, as amended ('Partnership
Agreement'). The Partnership was formed to invest in and hold loans evidenced by
notes secured by first liens on two apartment complexes developed by affiliates
of Avron B. Fogelman ('ABF'). The Partnership invested in two mortgage loans
(the 'Mortgage Loans') which provided construction and permanent financing for
the development of two multi-family residential apartment complexes.
 
   The general partner of the Partnership is Prudential-Bache Properties, Inc.
('PBP' or the 'General Partner'), a wholly owned subsidiary of Prudential
Securities Group Inc.  Prudential-Bache Investor Services II, Inc. is the
Assignor Limited Partner of the Partnership. ABF and Fogelman Mortgage Partners
I, Inc. ('FMPI') withdrew from the Partnership and transferred their interests
as general partners to PBP as of December 14, 1992.
 
   On January 30, 1998, the Partnership entered into an amended and restated
payoff agreement (the 'Payoff Agreement') with Fogelman Enterprises, L.P., a
Delaware limited partnership ('FELP') and ABF. Through PBP, the Partnership has
advised FELP that the Partnership will accept the Payoff Amount, as hereinafter
defined, in full satisfaction of the Mortgage Loans if the Transactions, as
hereinafter defined, are approved by a majority in interest of the Unitholders
of the Partnership. PBP has received a written opinion from its advisor to the
effect that the offer to pay off the Mortgage Loans pursuant to the terms of the
Payoff Agreement (the 'Transactions') are fair to the Partnership and the
Unitholders from a financial point of view. If the Transactions are approved by
the Unitholders, the Partnership intends to consummate the Transactions,
distribute the Payoff Amount (net of expenses) and the remaining net assets of
the Partnership and liquidate the Partnership.
 
   Pursuant to the Payoff Agreement, FELP has agreed to pay to the Partnership
the payoff amount ('Payoff Amount') of $48,000,000 and an amount, if any, by
which the aggregate amount of interest paid to the Partnership in respect of the
Mortgage Loans for the period from October 1, 1997, through the closing of the
Transactions is less than the interest on the face amount of the Mortgage Loans
during such period calculated at an annual rate of 7.7%.
 
   The Transactions must be consummated not later than May 29, 1998.
 
B. Summary of Significant Accounting Policies
 
Basis of accounting
 
   The books and records of the Partnership are maintained on the accrual basis
of accounting in accordance with generally accepted accounting principles.
 
   The preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partner to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
Deferred general partner's fees
 
   Deferred general partner's fees are amortized on a straight-line basis over
the lives of the mortgage loans, which are twelve years.
 
Investments in mortgage loans
 
   Investments in mortgage loans are accounted for on the equity method. Such
investments are adjusted for net income or loss from the underlying properties
(before the accrual of interest expense and depreciation of certain capitalized
costs not financed by the Partnership) and are decreased by interest received
from the mortgage loans.
 
                                       6
 <PAGE>
<PAGE>
Cash and cash equivalents
 
   Cash and cash equivalents include money market funds whose cost approximates
market value.
 
Income taxes
 
   The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the individual partners. The Partnership may be subject to other
state and local taxes in jurisdictions in which it operates.
 
Profit and loss allocation and distributions
 
   Net profits or losses are allocated 99% to the Unitholders and 1% to the
General Partner after giving effect to the allocation of the special
distribution. As more fully described in the Partnership Agreement, PBP receives
a special distribution equal to 0.5% per annum of the mortgage loan principal
outstanding, limited to 10% of all distributions of adjusted cash from
operations, payable quarterly. In addition, distributions of cash are made based
on adjusted cash flow from operations as defined in the Partnership Agreement
after giving effect to the special distribution to the General Partner.
 
C. Investments in Mortgage Loans
 
   A summary of the investments in mortgage loans is as follows:
 
<TABLE>
<CAPTION>
                                                       Pointe Royal           Westmont
                                                           Loan                 Loan             Total
<S>                                                 <C>                    <C>                <C>
                                                    ------------------     --------------     -----------
Balance at December 31, 1994                           $ 14,386,564         $ 14,134,080      $28,520,644
Equity income from the underlying properties              1,013,501            1,153,357        2,166,858
Interest received from mortgage loans                    (1,757,556)          (1,802,336)      (3,559,892)
                                                    ------------------     --------------     -----------
Balance at December 31, 1995                             13,642,509           13,485,101       27,127,610
Equity income from the underlying properties              1,132,286            1,425,511        2,557,797
Interest received from mortgage loans                    (1,537,179)          (2,024,273)      (3,561,452)
                                                    ------------------     --------------     -----------
Balance at December 31, 1996                             13,237,616           12,886,339       26,123,955
Equity income from the underlying properties                710,719              922,796        1,633,515
Interest received from mortgage loans                      (711,835)          (1,343,889)      (2,055,724)
                                                    ------------------     --------------     -----------
Balance at December 31, 1997                           $ 13,236,500         $ 12,465,246      $25,701,746
                                                    ------------------     --------------     -----------
                                                    ------------------     --------------     -----------
</TABLE>
 
   The Partnership has invested in Mortgage Loans with two partnerships in which
ABF and FELP are the general partners: FPI Royal View Ltd., L.P. on April 23,
1987 for $22,745,000 (the 'Pointe Royal Loan') and FPI Chesterfield, L.P. on
July 8, 1987 for $23,320,000 (the 'Westmont Loan'). At December 31, 1997, the
accrued interest liability at the property level was approximately $5,588,000
and $6,119,000 for Pointe Royal and Westmont, respectively. This accrued
interest plus the original loan principal balances aggregate approximately
$57,772,000. The ultimate collectibility of the accrued interest as well as the
full principal balances of the mortgages will depend upon the value of the
underlying properties, which are estimated, based on the most recent third party
appraisals, to be less than the amounts due. However, the estimated property
values exceed the carrying amount of the Partnership's investment in mortgage
loans which is recorded using the equity method of accounting. The values of
Pointe Royal and Westmont estimated in the appraisal reports were $24,200,000
and $25,600,000, respectively, as of April 15, 1997. (See Note A for discussion
of the proposed payoff of the Mortgage Loans.)
 
   A plan for the consensual reorganization of the business and affairs of ABF
and related entities closed on July 31, 1990 (the 'Plan'). The Plan provided
for, among other things, the modification of loans and credit relationships
between lenders and ABF and related affiliates, including those of the
Partnership. The two notes executed by FPI Royal View, Ltd., L.P. and FPI
Chesterfield, L.P. and the loan agreements executed in connection with such
notes and the two mortgages with respect to Westmont Apartments and Pointe Royal
Apartments securing those notes were modified, effective as of January 1, 1990.
The principal effect of such modifications was to make the indebtedness
evidenced by the notes repayable on a cash flow basis, with the difference
between the amount actually paid and the original pay rate of 9.5% per annum
being accrued
 
                                       7
 <PAGE>
<PAGE>
in a separate account on the books of FPI Royal View, Ltd., L.P. and FPI
Chesterfield, L.P., as discussed above, and bearing interest at 9.5% per annum.
 
   For the three years ended December 31, 1997, interest received from the net
property cash flow has been less than the original pay rate of 9.5% per annum.
 
D. Income Taxes
 
   The following is a reconciliation of net income for financial reporting
purposes to net income for tax reporting purposes.
 
<TABLE>
<CAPTION>
                                                          Year ended December 31,
                                                 -----------------------------------------
                                                    1997           1996           1995
                                                 -----------    -----------    -----------
<S>                                              <C>            <C>            <C>
Net income per financial statements              $1,157,009     $2,314,871     $1,929,656
Equity income from the underlying properties     (1,633,515 )   (2,557,797 )   (2,166,858 )
Interest received from mortgage loans             2,055,724      3,561,452      3,559,892
                                                 -----------    -----------    -----------
Tax basis net income                             $1,579,218     $3,318,526     $3,322,690
                                                 -----------    -----------    -----------
                                                 -----------    -----------    -----------
</TABLE>
 
   The differences between the tax basis and book basis of partners' capital are
primarily attributable to the cumulative effect of the book to tax income
adjustments and the timing of distributions.
 
E. Related Parties
 
   The General Partner and its affiliates perform services for the Partnership
which include, but are not limited to: accounting and financial management;
registrar, transfer and assignment functions; asset management; investor
communications; printing and other administrative services. The amount of
reimbursement from the Partnership for these services is limited by the
provisions of the Partnership Agreement. The costs and expenses were
approximately $79,000, $52,000 and $79,000 for the years ended December 31,
1997, 1996 and 1995, respectively.
 
   An affiliate of FMPI continues to manage the properties for which it earned
approximately $388,000, $386,000 and $373,000 for the years ended December 31,
1997, 1996 and 1995, respectively.
 
   The Partnership maintains an account with the Prudential Institutional
Liquidity Portfolio Fund, an affiliate of PBP, for investment of its available
cash in short-term instruments pursuant to the guidelines established by the
Partnership Agreement.
 
   Prudential Securities Incorporated, an affiliate of PBP, owns 835 units at
December 31, 1997.
 
F. Summarized Property Financial Information
 
   Presented below is summarized property financial information for the
properties underlying the Partnership's two mortgage loan investments.
<TABLE>
<CAPTION>
                                                                                                               December
                                  December 31, 1997                           December 31, 1996                31, 1995
                       WESTMONT     POINTE ROYAL      TOTAL        WESTMONT     POINTE ROYAL      TOTAL        WESTMONT
<S>                   <C>           <C>            <C>            <C>           <C>            <C>            <C>
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
Assets:
Property, net of
 accumulated
 depreciation         $15,082,155   $ 16,101,304   $31,183,459    $15,496,020   $ 16,223,155   $31,719,175    $16,117,409
Other assets              339,654        217,407       557,061        277,715        160,591       438,306        335,552
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
                      $15,421,809   $ 16,318,711   $31,740,520    $15,773,735   $ 16,383,746   $32,157,481    $16,452,961
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
Liabilities:
First mortgage note
 payable to the
 Partnership          $23,320,000   $ 22,745,000   $46,065,000    $23,320,000   $ 22,745,000   $46,065,000    $23,320,000
Second mortgage note
 payable to ABF         1,089,000      1,063,000     2,152,000      1,089,000      1,063,000     2,152,000      1,089,000
Other liabilities       7,742,030      7,755,052    15,497,082      6,083,538      5,724,875    11,808,413      5,361,963
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
                      $32,151,030   $ 31,563,052   $63,714,082    $30,492,538   $ 29,532,875   $60,025,413    $29,770,963
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
 
<CAPTION>
 
                      POINTE ROYAL      TOTAL
<S>                   <C>            <C>
                      ------------   ------------
Assets:
Property, net of
 accumulated
 depreciation         $ 16,617,500   $32,734,909
Other assets               250,658       586,210
                      ------------   ------------
                      $ 16,868,158   $33,321,119
                      ------------   ------------
                      ------------   ------------
Liabilities:
First mortgage note
 payable to the
 Partnership          $ 22,745,000   $46,065,000
Second mortgage note
 payable to ABF          1,063,000     2,152,000
Other liabilities        4,691,304    10,053,267
                      ------------   ------------
                      $ 28,499,304   $58,270,267
                      ------------   ------------
                      ------------   ------------
</TABLE>
 
                                       8
 <PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                                              Year Ended
                                     Year Ended                                  Year Ended                    December
                                  December 31, 1997                           December 31, 1996                31, 1995
                      -----------------------------------------   -----------------------------------------   -----------
                       WESTMONT     POINTE ROYAL      TOTAL        WESTMONT     POINTE ROYAL      TOTAL        WESTMONT
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
<S>                   <C>           <C>            <C>            <C>           <C>            <C>            <C>
Revenues:
Rental income         $ 3,761,133   $  3,734,047   $ 7,495,180    $ 3,669,349   $  3,771,718   $ 7,441,067    $ 3,547,581
Interest and other
 income                   137,721        128,129       265,850        137,427        165,052       302,479        161,780
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
                        3,898,854      3,862,176     7,761,030      3,806,776      3,936,770     7,743,546      3,709,361
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
Expenses:
Operating               2,173,193      2,398,690     4,571,883      1,651,281      2,064,220     3,715,501      1,812,435
Interest                2,881,056      2,754,848     5,635,904      2,774,158      2,600,663     5,374,821      2,693,697
Depreciation              837,524        803,850     1,641,374        782,138        745,929     1,528,067        795,726
Write-off of fixed
 assets                    17,499             --        17,499             --         43,941        43,941             --
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
                        5,909,272      5,957,388    11,866,660      5,207,577      5,454,753    10,662,330      5,301,858
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
Net loss              $(2,010,418)  $ (2,095,212)  $(4,105,630 )  $(1,400,801)  $ (1,517,983)  $(2,918,784 )  $(1,592,497)
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
                      -----------   ------------   ------------   -----------   ------------   ------------   -----------
 
<CAPTION>
 
                      POINTE ROYAL      TOTAL
                      ------------   ------------
<S>                   <C>            <C>
Revenues:
Rental income         $  3,615,886   $ 7,163,467
Interest and other
 income                    137,665       299,445
                      ------------   ------------
                         3,753,551     7,462,912
                      ------------   ------------
Expenses:
Operating                1,686,854     3,499,289
Interest                 2,524,077     5,217,774
Depreciation               749,890     1,545,616
Write-off of fixed
 assets                    354,386       354,386
                      ------------   ------------
                         5,315,207    10,617,065
                      ------------   ------------
Net loss              $ (1,561,656)  $(3,154,153 )
                      ------------   ------------
                      ------------   ------------
</TABLE>
 
G. Subsequent Event
 
   On January 30, 1998, the Partnership entered into the Payoff Agreement with
FELP and ABF (see Note A).
 
   In February 1998, distributions of approximately $623,000 were paid to the
Unitholders and distributions of approximately $6,000 were paid to the General
Partner for the quarter ended December 31, 1997.
 
                                       9
 <PAGE>
<PAGE>
                            FOGELMAN MORTGAGE L.P. I
                            (a limited partnership)
   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                                   OPERATIONS
 
Liquidity and Capital Resources
 
   The Partnership provides permanent financing for two multi-family residential
apartment complexes. As of December 31, 1997, the Partnership had $421,000 of
funds available which may be used to pay distributions, unanticipated or
extraordinary expenses, real estate taxes and other costs relating to the
operation and administration of the Partnership's business. Significant amounts
of cash were expended at the properties in 1997 for improvements and repairs and
maintenance. These expenditures partially offset cash flow paid by the
properties to the Partnership in the form of interest.
 
   The distribution for the three months ended December 31, 1997 was funded from
current and prior undistributed cash flow from operations. Because of the
increased competition in the two market areas in which the properties underlying
the Partnership's mortgage loan investments are located, there has been an
increase in the properties' capital expenditures in order to maintain their
competitiveness. As a result of these increased capital expenditures, the
General Partner has lowered the distribution to 4.6% on an annualized basis or
$11.50 per unit per quarter beginning with the distribution made for the second
quarter of 1997. The Partnership currently does not expect that quarterly cash
distributions will continue to be paid in the future subject to the approval by
the Unitholders of the proposed disposition of the Mortgage Loans. (See Note A
to the financial statements.)
 
Results of Operations
 
   Net income decreased by $1,158,000 and increased by $385,000 for the years
ended December 31, 1997 and 1996, respectively, as compared to the prior years.
 
   For financial reporting purposes, the Partnership's Mortgage Loans are
considered, in substance, to be investments in real estate and are accounted for
using the equity method. Equity income from the underlying properties (which
increases the carrying value of the original investment) decreased $924,000 and
increased $391,000 for the years ended December 31, 1997 and 1996, respectively,
as compared to the prior years. The 1997 decrease was primarily due to increased
repairs and maintenance at Pointe Royal and Westmont of $269,000 and $431,000,
respectively. In addition, depreciation expense increased at Pointe Royal and
Westmont by $58,000 and $55,000, respectively, as a result of increased capital
improvements at both properties. The 1996 increase was primarily due to higher
rental rates at both properties.
 
   Interest received from mortgage loans for the years ended December 31, 1997
and 1996 of $2,056,000 and $3,561,000, respectively, is accounted for as
distributions and, accordingly, reduces the carrying value of the original
investment. Interest received (paid from property cash flow) decreased
$1,505,000 for the year ended December 31, 1997 as compared to the same period
in 1996 primarily due to the reasons discussed above in addition to an increase
in capital improvements at the properties. Capital improvements increased
$286,000 and $280,000 at Pointe Royal and Westmont, respectively, in 1997 as
compared to 1996.
 
   At December 31, 1997, the accrued interest liability at the property level
was $5,588,000 and $6,119,000 for Pointe Royal and Westmont, respectively. This
accrued interest plus the original loan principal balances aggregate
$57,772,000. As of December 31, 1997, 1996 and 1995, the cumulative differences
between the original pay rate of 9.5% per annum and the cash paid were
$11,707,000, $8,477,000 and $6,975,000, respectively, including accrued interest
on the unpaid balance. The ultimate collectibility of the accrued interest as
well as the full principal balances of the mortgage loans will depend upon the
value of the underlying properties which are estimated, based on the most recent
third party appraisals, to be less than the amounts due. However, the estimated
property values exceed the Partnership's carrying amount of the investment in
mortgage loans which is recorded using the equity method of accounting. (See
Note A to the financial statements for discussion of the proposed payoff of the
Mortgage Loans.)
 
                                       10
 <PAGE>
<PAGE>
   Average occupancy rates for the underlying properties were as follows:
 
<TABLE>
<CAPTION>
                               December 31,
                         ------------------------
                         1997      1996      1995
                         ----      ----      ----
<S>                      <C>       <C>       <C>
Westmont                 96.7%     96.2%     96.2%
Pointe Royal             96.7      98.0      98.3
</TABLE>
 
   Despite the occupancy rates, competition in local markets results in rental
rates that are below what is required to pay debt service at the original pay
rate of 9.5%.
 
   Interest income from cash equivalents decreased by $36,000 and $18,000
respectively, for 1997 and 1996 as compared to the respective prior years
primarily due to lower cash balances in 1997 compared to 1996 and lower interest
rates in 1996 compared to 1995.
 
   General and administrative expenses increased by $198,000 in 1997 and
decreased by $12,000 in 1996. The increase in 1997 was primarily due to
professional fees incurred in connection with the Partnership preparing a
consent solicitation statement to the Unitholders in connection with the
proposed payoff of the Partnership's Mortgage Loans.
 
                                       11
 <PAGE>
<PAGE>
                               OTHER INFORMATION
 
   The Partnership's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available to Unitholders without charge upon written
request to:
 
        Fogelman Mortgage L.P. I
        P.O. Box 2016
        Peck Slip Station
        New York, New York 10272-2016
 
                                       12
 <PAGE>

<PAGE>
                                   BULK RATE
Peck Slip Station
                                  U.S. POSTAGE
P.O. Box 2016
                                      PAID
New York, NY 10272
                                 Automatic Mail
FMLP/170970