<PAGE>
 
                                                                    EXHIBIT 10.7

                             MANAGEMENT AGREEMENT

     THIS MANAGEMENT AGREEMENT (this "Agreement"), made and entered into as of
                                      ---------                               
the 1st day of October, 1996, by and between SECURITY CAPITAL PACIFIC TRUST, a
Maryland real estate investment trust (the "Owner"), and SCG REALTY SERVICES
                                            -----                           
INCORPORATED, a Texas corporation ("Manager").
                                    -------   

                              W I T N E S S E T H:

     This Agreement covers the apartment projects listed on Exhibit A (each is
                                                            ---------         
individually referred to herein as a "Project").  This Agreement constitutes a
                                      -------                                 
separate and independent contract between the Owner and the Manager for each
Project.

     Owner desires to employ Manager in the management and operation of the
Project by turning over to Manager the operation, direction, management and
supervision of the Project, as outlined below, and Manager desires to assume
such duties upon the terms and conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants herein contained, Owner and Manager agree as follows:

                                   ARTICLE 1
                                  Definitions
                                  -----------

The following terms shall have the following meanings when used in this
Agreement:

     1.1    Term.  The term of this Agreement shall commence on the date hereof
            ----                                                               
and shall, subject to the provisions hereof, terminate on September 30, 1997;
provided, however, that unless either Owner or Manager delivers written notice
to the other party on or before thirty (30) days prior to the expiration of the
initial, or any renewal term, the term of this Agreement shall automatically be
extended for successive one year terms.

     1.2    Fee.  The management fee payable each month by Owner to Manager
            ---                                                            
hereunder shall be an amount equal to 3% of the Gross Receipts of the Project
for such month if the Project is located in California, 3.5% of the Gross
Receipts of the Project for such month if the Project is located in Washington,
Oregon or Nevada, and 3.75% of the Gross Receipts of the Project for such month
if the Project is located in any other state.  Notwithstanding the foregoing,
the management fee payable for any Project identified on Exhibit A as a
                                                         ---------     
"construction project" shall commence on the date 30 days prior to the opening
of the leasing office or, if earlier, the first delivery of units, and the
management fee shall be equal to 90% of the Gross Receipts shown on a rent
schedule approved by Owner until the first to occur of (the "Conversion Date")
                                                             ---------------  
(a) the date 12 months after the commencement of payment of management fees, and
(b) the month in which the management fee payable under this sentence first
equals or exceeds the management fee that would be due if calculated under the
first sentence of this
<PAGE>
 
Section.  On and after the Conversion Date, the management fee shall be
calculated in accordance with the first sentence of this Section.

     1.3    Depository.  An FDIC insured national or state bank designated by
            ----------                                                       
Owner.

     1.4    Working Capital Reserve.  A reasonable working capital reserve for
            -----------------------                                           
each Project, as determined by Owner in its sole discretion, shall be delivered
by Owner to Manager concurrently with Owner's execution and delivery hereof, to
be maintained by Manager during the term hereof, used in connection with the
operation of the Project in accordance with the terms hereof, and restored per
the terms of Sections 4.4 and 4.5 hereof.

     1.5    Fiscal Year.  The year beginning January 1 and ending December 31,
            -----------                                                       
which is the fiscal year established by Owner for the Project.
 
     1.6    Budget.  A composite of (i) an Operations Budget, which shall be an
            ------                                                             
estimate of receipts and expenditures for the operation of the Project during a
Fiscal Year, including a schedule of expected apartment rentals (excluding
security deposits) for the period in question and a schedule of expected special
repairs and maintenance projects, and (ii) a Capital Budget, which shall be an
estimate of capital replacements, substitutions of and additions to the Project
for a Fiscal Year.

     1.7    Gross Receipts.  The entire amount of all receipts, determined on a
            --------------                                                     
cash basis, from (a) tenant rentals collected pursuant to tenant leases for each
month during the term hereof; provided, however, that there shall be excluded
from tenant rentals any tenant security deposits (except as provided below) and
any electric utility payments on behalf of tenants on all "BILLS PAID"
properties; (b) cleaning, security and damage deposits forfeited by tenants in
such period; (c) laundry and vending machine income; (d) any and all receipts
from the operation of the Project received and relating to the period in
question; (e) proceeds from rental interruption insurance, unless the entire
property is destroyed; in which event this agreement will terminate as to such
property and Owner will have no further obligation to Manager with respect to
such Project; and (f) any other sums and charges collected in connection with
termination of the tenant leases.  Gross Receipts do not include the proceeds of
(i) any sale, exchange, refinancing, condemnation, or other disposition of all
or any part of the Project, (ii) any loans to the Owner whether or not secured
by all or any part of the Project, (iii) any capital contributions by the Owner,
or (iv) any insurance (other than rental interruption insurance) maintained with
regard to the Project.

     1.8    Project Employees.  Those persons employed by Manager as a
            -----------------  
management staff (i.e., manager, assistant manager, leasing agents, maintenance
personnel, and other personnel necessary to be employed in order to maintain and
operate the Project).

                                       2
<PAGE>
 
                                   ARTICLE 2
                         Duties and Rights of Manager
                         ----------------------------

     2.1    Appointment of Manager.  During the Term of this Agreement, the
            ----------------------                                         
Manager agrees, for and in consideration of the compensation hereinafter
provided, and the Owner hereby grants to Manager the right, to supervise and
direct the leasing, management and operation of the Project.  Everything
performed by Manager under this Agreement shall be done as an independent
contractor of Owner.  All obligations or expenses incurred hereunder, including
the pro rata portion used in connection with or for the benefit of the Project
of all purchases of or contracts for sales or services in bulk or volume which
Manager may obtain for discount or convenience in connection with its operation
of other apartment projects, shall be for the account of, on behalf of, and at
the expense of Owner, expect as otherwise specifically provided; provided,
however, Owner shall not be obligated to reimburse Manager for expenses for
office equipment or office supplies of Manager (unless incurred for the
Project), for any overhead expenses of Manager incurred with respect to its
general offices, costs relating to accounting services performed hereunder, or
for any salaries of employees of Manager paid with respect to duties performed
on a supervisory level (except when Manager's supervisory employees are
performing tasks otherwise performed by a resident manager or (to the extent of
the savings achieved) where specialists are employed whose involvement creates
savings in performance of required duties).  Owner shall also have no obligation
to reimburse Manager for that portion of the salary of a resident manager which
represents payment for services rendered in respect to apartment projects other
than the Project.

     2.2    General Operation.  Subject to the limitations imposed by the
            -----------------                                            
Budget from time to time, Manager shall operate the Project in the same manner
as is customary and usual in operation of comparable facilities, and shall
provide such services as are customarily provided by operators of apartment
projects of comparable class and standing consistent with the Project's
facilities.  In addition to the other obligations of Manager set forth herein,
Manager shall render the following services and perform the following duties for
Owner in a faithful, diligent and efficient manner:  (a) maintain businesslike
relations with tenants whose service requests shall be received, considered and
recorded in systematic fashion in order to show the action taken with respect to
each; (b) collect all monthly rentals due from tenants and rent from users or
lessees of other non-dwelling facilities in the Project, if any; request,
demand, collect, receive and receipt for any and all charges or rents which
become due to Owner, and at Owner's expense take such legal action as may be
necessary or desirable to evict tenants delinquent in payment of monthly rental
or other charges (security deposits, late charges, etc.); (c) prepare or cause
to be prepared for execution by the Owner all forms, reports and returns, if
any, required to be filed by the Owner under applicable federal, state or local
laws and any other requirements relating to the employment of personnel
(anything contained herein to the contrary notwithstanding, however, Manager
shall not be obligated to prepare any of Owner's state or federal income tax
returns); (d) use all reasonable efforts at all times during the term of this
Agreement to operate and maintain the Project according to the highest standards
achievable consistent with the operation of comparable quality units; (e)
maintain the Project as a safe and secure environment and notify Owner of any
security risks or issues related to the Project that

                                       3
<PAGE>
 
become known to Manager; (f) advertise when necessary, at Owner's expense, the
availability for rental of the Project units and display "for rent" or other
similar signs upon the Project, it being understood that Manager may install one
or more signs on or about the Project stating that same is under management of
Manager and may use, in a tasteful manner, Manager's name and logo in any
display advertising which may be done on behalf of the Project; and (g) sign,
renew and cancel tenant leases for the Project, in compliance with standards
established by Owner under the provisions of written apartment leases to bona
fide individuals, for monthly rentals and otherwise on terms established by
criteria approved from time to time by Owner, based upon Manager's
recommendations; provided, however, that Project Employees may occupy apartment
units on a month-to-month basis with or without an executed tenant lease.

     2.3    Budget.
            ------ 

     (a)    Manager shall submit for Owner's approval no later than one hundred
twenty (120) days prior to the beginning of each successive Fiscal Year the
Budget for the ensuing Fiscal Year. The Budget shall be approved or rejected by
Owner within thirty (30) days after receipt. If Owner fails to approve or
disapprove the Budget within such period, the Budget shall be deemed to be
approved. In the event Owner rejects the Budget, Owner and Manager shall jointly
prepare the Budget as soon as may be reasonably possible. Until a new Budget is
approved, Manager shall operate on the Budget approved for the prior Fiscal
Year, with the exception of expenses for personnel, which must be increased
based upon existing competitive conditions, and expenses relating to taxes,
insurance and utilities. The Budget shall reflect the schedule of monthly rents
proposed for the new fiscal year and shall also constitute a major control under
which Manager shall operate the Project, and there shall be no substantial
deviations therefrom except as permitted by Section 2.6(a). Consequently,
without the prior consent of Owner, no expenses may be incurred or commitments
made by Manager in connection with the maintenance and operation of the Project
which exceed the total expenses allocated for the period in question in the
approved Budget by more than ten percent (10%). The limitation in the preceding
sentence, with respect to incurring any expense not covered by the Budget, shall
not apply to expenses relating to taxes, insurance or utilities or expenditures
required due to emergencies which threaten life or property or could result in
civil or criminal liability for Owner and/or Manager. Manager makes no guaranty,
warranty or representation whatsoever in connection with the accuracy of any
Budget, and Owner agrees that they are intended as good faith estimates only.

     (b)    In the event there shall be a substantial discrepancy between the
results of operations for any month and the estimated results of operations for
such month as set forth in the Budget, Manager shall upon request furnish to
Owner within twenty (20) days after the expiration of such month a written
explanation as to why the discrepancy occurred.  If substantial variations have
occurred or are anticipated by Manager during the course of any Fiscal Year,
Manager, upon Owner's reasonable request, shall prepare and submit to Owner a
revised forecast of annual income and expenses for the remainder of the Fiscal
Year based on actual year-to-date income and expenses and Manager's forecast of
income and expenses for the remainder of the Fiscal Year.

                                       4
<PAGE>
 
     2.4    Manager and Other Personnel.
            --------------------------- 

     (a)    Manager shall investigate, hire, train, instruct, pay, promote,
discharge and supervise the work of the Project Employees and shall supervise,
through the Project Employees, the hiring, promotion, discharge and work of all
other operating and service employees of Manager performing services in or about
the Project, all in the name of Manager.  Since some of the Project Employees
may need to reside at the Project and be available full time in order to perform
properly the duties of his/her employment, it is further understood and agreed
that the Project Employees (including his/her spouse and dependent children), in
addition to their salary and fringe benefits, may receive the normal maintenance
customarily provided managers, assistant managers, leasing agents, and
maintenance personnel of an apartment project, including employee housing, use
of all Project facilities and reimbursement for any and all expenses which such
persons may reasonably incur in the performance of their duties.  Any such
housing allowance that is provided will be considered as a payroll cost under
the Budget, and the amount of housing allowance will be credited as apartment
rental income.

     (b)    The Project Employees shall be employees of Manager.  Owner shall
reimburse Manager monthly, in advance, for the total aggregate compensation,
including salary and fringe benefits, payable with respect to the Project
Employees, any temporary employees residing at the Project and, on an agreed
basis, the Project's proportionate share of such costs relating to roving
maintenance, off-site operating staff and similar personnel.  The term "fringe
benefits" as used herein shall mean and include the employer's contribution of
F.I.C.A., unemployment compensation and other employment taxes, workmen's
compensation, group life and accident and health insurance premiums, performance
bonuses, and disability and other similar benefits paid or payable by the
employer with respect to employees in other apartment projects operated by
Manager.

     2.5    Contracts and Supplies.  Manager shall, except as provided herein,
            ----------------------                                    
in the name of and on behalf of Owner and at Owner's expense, and without
compensation directly or indirectly to Manager, except as expressly set forth
herein or agreed to by Owner or Manager, consummate arrangements with
concessionaires, licensees, tenants or other intended users of the facilities of
the Project, shall, except as provided herein, on Owner's behalf, enter into
contracts for the furnishing to the Project of electricity, gas, water, steam,
telephone, cleaning, vermin extermination, furnace and air conditioning
maintenance, security protection, pest control and any other utilities, services
and concessions which are provided in connection with the maintenance and
operation of an apartment project in accordance with standards comparable to
those prevailing in other similar apartment projects, and shall place purchase
orders for such equipment, tools, appliances, materials and supplies as are
necessary to properly maintain the Project.

     2.6    Alterations, Repairs and Maintenance.
            ------------------------------------ 

     (a)    Manager shall make or install, or cause to be made and installed,
or do or cause to be done at Owner's expense and in the name of Owner, all
necessary or desirable repairs,

                                       5
<PAGE>
 
interior and exterior cleaning, painting and decorating, plumbing, alterations,
replacements, improvements and other normal maintenance and repair work on and
to the Project as are customarily made by Manager in the operation of apartment
projects; provided, however, that no unbudgeted expenditure in excess of
$5,000.00 per item or a total of $20,000.00 annually may be made for such
purposes without the prior approval of Owner, unless emergency repairs involving
manifest danger to life or property are immediately necessary for the
preservation of the safety of the Project, or to avoid criminal or civil
liability or for the safety of the tenants, or are required to avoid the
suspension of any necessary service to the Project, in which event such
expenditures may be made by the Manager without prior approval and irrespective
of the cost limitations imposed by this Section 2.6, provided that Owner is
immediately thereafter given notice of such situation and all costs so incurred.

     (b)    In accordance with the terms of the Budget or after consultation
with, and written approval by, Owner (except in the case of emergency, in which
case such consultation shall be by telephone), Manager shall, at Owner's
expense, from time to time during the term hereof, make all required capital
replacements or repairs to the Project.  Subject to obtaining Owner's prior
written approval in regard to sums necessary to cover costs of such capital
replacements or repairs, Manager shall first use any excess funds held pursuant
to Section 4.5 and then funds furnished by Owner.

     2.7    Licenses and Permits.  Manager shall apply for, obtain, and
            --------------------                                       
maintain, in the name and at the expense of Owner, all licenses and permits
(including deposits and bonds) required of Owner or Manager in connection with
the management and operation of the Project. Owner agrees to execute and deliver
any and all applications and other documents and to otherwise cooperate to the
fullest extent with Manager in applying for, obtaining and maintaining such
licenses and permits.

     2.8    Compliance with Laws.  Manager, at Owner's expense, shall use all
            --------------------                                             
reasonable efforts to cause all such acts and things to be done in and about the
Project as Owner and/or Manager shall deem necessary, and Owner covenants
throughout the term of this Agreement at its expense to comply with all laws,
regulations and requirements of any federal, state or municipal government
having jurisdiction respecting the use or manner of use of the Project or the
maintenance or operation thereof.

     2.9    Legal Proceedings.  Manager shall institute, in its own name or
            -----------------                                              
in the name of Owner, but in any event at the expense of Owner, any and all
legal actions or proceedings which Manager deems reasonable to collect charges,
rent or other income from the Project or to dispossess tenants or other persons
in possession, or to cancel, terminate, or enforce any lease, license or
concession agreement for the breach thereof or default thereunder by the tenant,
licensee or concessionaire.

     2.10   Debts of Owner.  In the performance of its duties as Manager,
            --------------                                               
Manager shall act solely on behalf of Owner in Manager's capacity as an
independent contractor. Except as provided in Section 2.1, all debts and
liabilities to third persons incurred by Manager (which are

                                       6
<PAGE>
 
consistent with the terms and conditions of this Agreement), in the course of
its operation and management of the Project shall be the debts and liabilities
of the Owner only, and Manager shall not be liable for (and is hereby
indemnified in respect of) any such debts or liabilities, except to the extent
Manager has exceeded its authority hereunder.


                                   ARTICLE 3
                                Management Fees
                                ---------------

     3.1    Management Fee and Other Reimbursable Expenses.  Owner shall pay
            ----------------------------------------------                  
to Manager, during the term hereof, the Fee for the month on or before the 10th
day of each month.  At such time as the Fee is paid, Owner shall also reimburse
Manager for the expenses identified on Exhibit B actually incurred by Manager
                                       ---------                             
during the prior month.

     3.2    Place of Payment.  All sums payable by Owner to Manager hereunder
            ----------------                                                 
shall be payable to Manager at the address set forth below Manager's signature,
unless the Manager shall from time to time specify a different address in
writing.


                                   ARTICLE 4
             Procedure for Handling Receipts and Operating Capital
             -----------------------------------------------------

     4.1    Bank Deposits.  All monies received by Manager for or on behalf
            -------------                                                  
of Owner shall be deposited by Manager with the Depository.  Manager shall
maintain separate accounts for such funds consistent with the system of
accounting of the Project.  All funds on deposit shall be and remain under the
sole and exclusive control of Manager, subject to the provisions hereof.
Concurrently, with its execution and delivery hereof, Owner has deposited with
Manager the Working Capital Reserve.  All monies of Owner held by Manager
pursuant to the terms hereof shall be held by Manager in trust for the benefit
of Owner to be held and disbursed as herein provided, and shall not, unless
Owner otherwise has agreed or directed, be commingled with the funds of any
other person, including Manager or any affiliate of Manager.  However, Owner has
specifically approved the use of Manager's Central Disbursement account and the
movement of Owner's funds into that account when payments are made.  Except as
otherwise provided herein, the Manager shall be strictly liable for the proper
application of all funds of Owner held by Manager in accordance with the terms
of this Agreement.

     4.2    Security Deposits.  Subject to Owner's direction, a portion of
            -----------------                                             
security deposits collected in connection with the leasing of apartment units
shall be delivered to Owner who shall make same available to Manager for return
to tenants in accordance with their respective tenant leases to the extent Gross
Receipts are insufficient to repay same.  Manager shall comply with all
applicable laws with respect to such security deposits.  All funds held by
Manager representing security deposits shall at all times be the property of
Owner, subject to all applicable laws with respect thereto.

                                       7
<PAGE>
 
     4.3    Disbursement of Deposits.  Manager shall disburse and pay all
            ------------------------                                     
funds on behalf of and in the name of Owner in such amounts and at such times as
the same are required in connection with the ownership, maintenance and
operation of the Project on account of all taxes, assessments and charges of
every kind imposed by any governmental authority having jurisdiction over the
Project, and all costs and expenses of maintaining, operating and supervising
the operation of the Project, including, but not limited to, salaries, fringe
benefits and expenses of the Project Employees, insurance premiums, legal and
external accounting fees and the cost and expense of utilities, services and
concessions.  If Owner requests Manager to place or create any services for the
Project which are not generally provided at other comparable apartment complexes
managed by Manager, Owner shall reimburse Manager for any costs of Manager's
staff allocable to the placement and/or creation of such services.

     4.4    Working Capital.  In addition to the funds derived from the
            ---------------                                            
operation of the Project and the Working Capital Reserve, Owner shall furnish
and maintain in the operating accounts in the Depository such other funds as may
be necessary to discharge financial commitments required to efficiently operate
the Project, meet all payrolls and satisfy, before delinquency, all accounts
payable.  Manager shall have no responsibility or obligation with respect to the
furnishing of such funds.

     4.5    Excess Funds.  Any operating funds in excess of the Working
            ------------                                               
Capital Reserve shall be utilized at Owner's option, to pay debt service or
shall be transferred to a bank account opened and maintained solely by Owner;
provided, however, that Manager shall not be required to make any such transfer
if the transfer would reduce the balance of operating funds below an amount
equal to the Working Capital Reserve.  Owner shall designate the bank in which
the operating funds are maintained, and Manager shall have no liability for loss
of operating funds due to insolvency of such institution, even though the amount
of funds maintained exceeds the available federal or other deposit insurance.

     4.6    Authorized Signatories.  In addition to any signatory designated
            ----------------------                                          
by Owner, any persons from time to time designated by Manager shall be
authorized signatories on all bank accounts established by Manager hereunder and
shall have authority to make disbursements from such accounts.  Funds may be
withdrawn from all bank accounts established by Manager, in accordance with this
Article IV, only upon the signature of an individual who has been granted that
authority by Manager or Owner.  All persons who are authorized signatories or
who in any way handle funds for the Project shall be bonded in the minimum
amount of $500,000.00.  Any expense relating to such bonds for on-site employees
shall be borne by Owner and for off-site employees by Manager.

                                       8
<PAGE>
 
                                   ARTICLE 5
                                  Accounting
                                  ----------

     5.1    Books and Records.  On behalf of Owner, Manager shall keep, or shall
            -----------------                                             
supervise and direct the keeping, on an accrual basis, of a comprehensive system
of office records, books and accounts pertaining to the Project. Manager shall
use the computer accounting program designated by Owner or otherwise approved by
Owner. Such records shall be subject to examination by Owner or its authorized
agents, attorneys and accountants at all reasonable hours at the office where
such records are maintained.

     5.2    Periodic Statements; Audits.
            --------------------------- 

     (a)    On or before ten (10) days following the end of each calendar
month, Manager shall deliver or cause to be delivered to Owner (i) an unaudited
income and expense statement showing the results of operation of the Project for
the preceding calendar month and the Fiscal Year to-date; (ii) a comparison of
actual income and expenses with the income and expenses projected in the Budget;
and  (iii) cash balances for reserves and operating accounts as of the last day
of such month.  Manager shall at its option (i) preserve all invoices for a
period for four (4) years, or (ii) at the expiration of each Fiscal Year deliver
all invoices to Owner.  Such statements and computations shall be prepared from
the books of account of the Project.

     (b)    Within twenty (20) days after the end of such Fiscal Year, Manager
will deliver or cause to be delivered to the Owner an income and expense
statement as at the end of such Fiscal Year, and the results of operation of the
Project during the preceding Fiscal Year.

     (c)    In the event that Owner or Owner's Mortgagee(s) requires an audit,
the Manager shall cooperate with the auditors.  Owner shall pay all costs and
fees of the external auditors.

     (d)    Owner may request and Manager shall provide without further cost to
Owner, when available, such monthly, quarterly and/or annual leasing and
management reports that relate to the operations of the property as Manager
customarily provides the owners of properties it manages. If additional reports
are required, Manager shall quote Owner an additional fee for providing such
additional reports and, if Owner thereafter requests such reports, Owner shall
pay Manager such additional fee.

     5.3    Expenses.  All costs and expenses incurred in connection with the
            --------                                                         
preparation of any statements, budgets, schedules, computations and other
reports expressly required under this Article 5 or under any other provisions of
this Agreement shall be borne by Manager.  Any costs and expenses incurred in
connections with the preparation of any statement or reports not expressly
provided for under this Article V or any other provisions of this Agreement
shall be borne by Owner.

                                       9
<PAGE>
 
                                 ARTICLE 6
                     General Covenants of Owner and Manager
                     --------------------------------------

     6.1    Operating Expenses.  Except as otherwise provided herein, Owner
            ------------------                                             
shall be solely liable for the costs and expenses of maintaining and operating
the Project incurred by Owner or by Manager in accordance with the provisions of
this Agreement, and shall pay, or Manager shall pay on Owner's behalf, all such
costs and expenses, including, without limitation, the salaries of all Project
Employees.

     6.2    Owner's Right of Inspection and Review.  Owner and its accountants,
            --------------------------------------                
attorneys and agents shall have the right to enter upon any part of the Project
at all reasonable times during the term of this Agreement for any reason,
including, without limitation, examining or inspecting the Project or examining
or making extracts of books and records of the Project, but any inspection shall
be done with as little disruption to the business of the Project as possible.
Books and records of the Project shall be kept, beginning the date hereof, at
the Project or at the location where any central accounting and bookkeeping
services are performed by Manager, but at all times shall be the property of
Owner.

     6.3    Indemnity.  Owner, at its sole cost and expense, shall defend,
            ---------                                                     
indemnify and hold harmless Manager, its partners, employees, agents,
contractors and affiliates against and from any and all claims, losses, damages,
liabilities and expenses, including, but not limited to, attorneys' fees,
arising out of injuries or damages to persons or property, by reason of any
cause whatsoever, occurring on or around the Project. If the Owner's general
liability policy does not automatically include the manager as an additional
insured, Owner agrees to list the Manager as an additional insured on any and
all liability insurance policies maintained by Owner with insurance to that
effect. The indemnity set forth herein shall not apply if the claim results from
either (i) Manager's gross negligence; (ii) Manager's willful misconduct; or
(iii) Manager's failure to comply with the provisions of this Agreement;
provided that these exceptions shall not apply with respect to any action taken
or policy implemented upon the Owner's written request after consultation with
the Manager.

     6.4    Covenants Concerning Payment of Operating Expenses.  Except as
            --------------------------------------------------            
otherwise provided herein, Owner covenants to pay all sums for operating
expenses in excess of Gross Receipts required to operate the Project upon
written notice and demand from Manager within ten (10) days after receipt of
written notice.  Owner further recognizes that the Project may be operated in
conjunction with other phases and that costs may be allocated or shared between
such phases on a more efficient and less expensive method of operation.  In such
regard, Owner consents to the allocation of costs and/or the sharing of any
expenses in an effort to save costs and operate the Project in a more efficient
manner.

                                       10
<PAGE>
 
                                 ARTICLE 7
                         Defaults:  Termination Rights
                         -----------------------------

     7.1    Default by Manager.  Manager shall be deemed to be in default
            ------------------                                           
hereunder in the event Manager shall fail to keep, observe or perform any
material covenant, agreement, term or provision of this Agreement to be kept,
observed or performed by Manager, and such default shall (i) result from
Manager's grossly negligent acts or omissions or willful misconduct; (ii)
involve Manager's misappropriation or intentional misapplication of funds
received or held by Manager hereunder; or (iii) continue for a period of ten
(10) days after written notice thereof by Owner to Manager as to any default in
payment of money or thirty (30) days after notice thereof by Owner to Manager as
to any non-monetary default, or, if such non-monetary default cannot be cured
within thirty (30) days, then such additional period as shall be reasonable
provided that Manager is capable of curing same and has continuously attempted
to cure such default.

     7.2    Remedies of Owner.  Upon the occurrences of an event of default
            -----------------                                              
by Manager as specified in Section 7.1 hereof, Owner shall be entitled to
terminate this Agreement and Owner shall have the right to pursue any other
remedy it may have at law or in equity, it being expressly understood that
following such a termination, Owner shall have no further obligation to pay any
Fee due hereunder, however, notwithstanding such termination, Manager shall not
be relieved of any liability arising as a result of Manager's default and the
resulting termination of this Agreement.  Upon such termination, Manager shall
deliver to Owner such funds, books and records of Owner then in the possession
or control of Manager.

     7.3    Defaults by Owner.  Owner shall be deemed to be in default hereunder
            -----------------                                         
in the event Owner shall fail to keep, observe or perform any material covenant,
agreement, term or provision of this Agreement to be kept, observed or performed
by Owner, and such default shall continue for a period of ten (10) days after
written notice thereof by Manager to Owner as to any default in payment of money
or thirty (30) days after notice thereof by Manager to Owner as to any non-
monetary default, or, if such non-monetary default cannot be cured within thirty
(30) days, then such additional period as shall be reasonable provided that
Owner is capable of curing same and has continuously attempted to cure such
default.

     7.4    Remedies of Manager.  Upon the occurrence of an event of default by
            -------------------                                             
Owner as specified in Section 7.3 hereof, Manager shall be entitled to terminate
this Agreement and upon any such termination by Manager pursuant to this Section
7.4, Manager shall have the right to pursue any other remedy it may have at law
or in equity, except that Owner shall continue to be obligated to pay and
perform all of its obligations which have accrued as of the date of termination
and provided further that Owner shall pay Manager a termination fee for the
month in which this Agreement is terminated equal to the Fee paid for the last
full calendar month preceding the month in which the Agreement was terminated.

     7.5    Expiration of Term. Upon the expiration of the Term hereof pursuant
            ------------------                                         
to Section 1.10 hereof, or the earlier termination hereof pursuant to any of
Sections 7.2, 7.3 and 9.10,

                                       11
<PAGE>
 
Manager shall deliver to Owner all funds, including tenant security deposits,
books and records of Owner then in the possession or control of Manager, save
and except such sums as are then due and owing to Manager hereunder.  Within
sixty (60) days following expiration or termination, Manager shall deliver to
Owner a final accounting, in writing, with respect to the operations of the
Project.


                                   ARTICLE 8
                                   Insurance
                                   ---------

     8.1    Owner's Insurance Coverage.  Owner, at its expense, will obtain and
            --------------------------                                     
keep in force commercially reasonable commercial general liability insurance and
insurance against physical damage (e.g., fire and extended coverage endorsement,
boiler, and machinery, etc.) and insurance against liability for loss, damage,
or injury to property or persons which might arise out of the occupancy,
management, operation or maintenance of the Project, all as set forth on Exhibit
                                                                         -------
C attached hereto. Manager will be covered as an additional insured in all
liability insurance maintained with respect to the Project.

     The Manager shall furnish whatever information is requested by Owner for
the purpose of establishing the placement of insurance coverages and shall aid
and cooperate in every reasonable way with respect to such insurance and any
loss thereunder. Owner shall include in its hazard policy covering the Project,
the personal property, fixtures, and equipment located thereon (owned by either
Manager or Owner), appropriate clauses pursuant to which the insurance carriers
shall waive the rights of subrogation with respect to losses payable under such
policies.

     8.2    Manager's Insurance Coverage.  Pursuant to the provisions of Section
            ----------------------------                                
4.3, Manager shall provide and maintain, so long as this Agreement is in force,
workmen's compensation insurance in full compliance with all applicable state
and federal laws and regulations covering all employees of Manager performing
work in respect of the Project operations and liability insurance complying with
the terms of Exhibit D.
             --------- 

     8.3    Subrogation and Indemnity or Deductible Provisions.
            -------------------------------------------------- 

     (a)    Any insurance which is procured and maintained which in any way is
related to the Project or the authorized activities connected therewith is for
the sole benefit of the party securing such insurance and others named as
insureds, and Manager and Owner hereby release each other from all rights of
recovery under or through subrogation or otherwise for any loss or damage
insured under policies required by this Agreement, and agree that no insurer
shall have a right to recover any amounts paid in respect of a claim from Owner
or Manager, as the case may be, by way of subrogation to Manager's or Owner's
claim, assignment or otherwise, as the case may be.  Any insurance which is
procured and maintained by Manager insuring the interest and property of Owner
may contain indemnity or deductible provisions and the cost of such provisions
shall be borne by the Owner.

                                       12
<PAGE>
 
     (b)    Each of Owner and Manager hereby waives any and all claims and
demands of whatsoever nature against the other for damages, loss or injury to
the other's property in, upon or about the Project, except for claims and
demands arising out of the gross negligence or willful misconduct of Owner,
Manager, or either of their respective agents, employees, officers or
contractors.

     8.4    Environmental Indemnification.  Owner agrees to indemnify, defend
            -----------------------------                                    
and hold Manager and its partners, officers, employees and agents harmless from
any claims, judgments, damages (including consequential damages), penalties,
fines, costs, liabilities (including sums paid in settlement of claims) or
losses, direct or indirect, known or unknown, including without limit,
attorney's fees, consultant fees and expert fees, which Manager may incur as a
result of its being named as a "responsible party" or a "potential responsible
party" under any federal, state or local law governing or regulating the
environment for acts arising solely from its duties as manager under this
Agreement.


                                   ARTICLE 9
                            Miscellaneous Provisions
                            ------------------------

     9.1    Governing Law.  This Agreement shall be governed by and construed
            -------------                                                    
and interpreted in accordance with the laws of the State wherein jurisdiction of
the specific property is applicable.

     9.2    Notices.  Owner shall designate one person as Owner's representative
            -------                                              
in all dealings with Manager, who shall, until further notice, be the person
whose name is indicated beneath Owner's address set forth on the signature page
hereof. Any notice or communication hereunder must be in writing, and may be
given by registered or certified mail, and if given by registered or certified
mail, same shall be deemed to have been given and received when a registered or
certified letter containing such notice, properly addressed, with postage
prepaid, is deposited in the United States mail; and if given otherwise than by
registered mail, it shall be deemed to have been given when delivered to and
received by the party to whom it is addressed. Such notices or communications
shall be given to the parties hereto at the addresses set forth opposite the
names of the respective parties on the signature page hereof. Any party hereto
may at any time by giving ten (10) days' written notice to the other party
hereto designate any other address in substitution of the foregoing address to
which such notice or communication shall be given.

     9.3    Severability.  If any term, covenant or condition of this Agreement
            ------------                                             
or the application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement or such other
documents, or the application of such term, covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, covenant or condition of this
Agreement or such other documents shall be valid and shall be enforced to the
fullest extent permitted by law.

                                       13
<PAGE>
 
     9.4    No Joint Venture or Partnership.  Owner and Manager hereby agree
            -------------------------------                                 
that nothing contained herein or in any document executed in connection herewith
shall be construed as making Manager and Owner joint venturers or partners.  In
no event shall Manager have any obligation or liability whatsoever with respect
to any debts, obligations or liabilities of Owner.

     9.5    Modification; Termination.  This Agreement terminates any and all
            -------------------------                                        
prior management agreements between Owner and Manager, relating to the Project,
and any amendment, modification, termination or release hereof may be effected
only by a written instrument executed by Manager and Owner.

     9.6    Attorneys' Fees.  Should either party employ an attorney or
            ---------------                                            
attorneys to enforce any of the provisions hereof or to protect its interest in
any manner arising under this Agreement, or to recover damages for the breach of
this Agreement, the non-prevailing party in any action (the finality of which is
not legally contested) agrees to pay to the prevailing party all reasonable
costs, damages and expenses, including attorneys' fees, expended or incurred in
connection therewith.

     9.7    Total Agreement.  This Agreement (including any understanding
            ---------------                                              
referred to in Section 9.14 hereof) is a total and complete integration of any
and all undertakings existing between Manager and Owner and supersedes any prior
oral or written agreements, promises or representations between them.

     9.8    Competitive Projects.  Manager agrees that in its management of
            --------------------                                           
ventures or projects which are competitive with the Project, Manager will
exercise good faith towards and deal fairly with Owner and the Project.  Manager
agrees to notify Owner of any competitive projects.

     9.9    Successors and Assigns. Owner has entered into this Agreement with
            ----------------------                                        
Manager based on Manager's abilities and, accordingly, Manager may not assign
this Agreement without the prior written consent of Owner. Notwithstanding the
foregoing limitation on assignment, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted successors
and assigns.

     9.10   Sale of the Project.  In the event the Project is sold, conveyed
            -------------------                                             
or transferred during the term hereof, Owner may assign this Agreement to the
purchaser of the Project, subject to obtaining Manager's prior written consent,
or Owner may terminate this Agreement, and Owner shall pay to Manager a
termination fee equal to the Fee payable hereunder for the month prior to the
month of termination.  Manager, unless otherwise agreed, shall have no duties in
connection with any such sale except reasonable cooperation with brokers and
purchasers.

     9.11   Termination.  The term of this Agreement shall be for a period of
            -----------                                                   
one year, and shall be automatically renewed for successive periods of one year
each unless either party provides thirty (30) days' notification of its intent
not to renew. Subject to the provisions of the

                                       14
<PAGE>
 
sentences next following, either party may terminate this Agreement at any time
with or without cause by giving the other party at least thirty (30) days prior
notice in writing.  Owner recognizes that Manager will sustain significant
start-up and mobilization costs, therefore, in the event that Owner terminates
this Agreement without cause within one (1) year from the date hereof, Manager
shall be entitled to receive a termination fee as a condition precedent to the
effectiveness of such termination, in an amount equal to three (3) times the
management fee which accrued during the thirty (30) days immediately prior to
the effective date of termination.

     9.12   Prior Agreement.  This Agreement supersedes and replaces all prior
            ---------------                 
agreements.

     9.13   Limitation of Liability.  Owner is a Maryland real estate investment
            -----------------------                                  
trust, and, in accordance with the declaration of trust of Owner, notice is
hereby given that neither the trustees, officers, employees nor shareholders of
Owner assume any personal liability for obligations entered into by or on behalf
of Owner.


                                   ARTICLE 10
                           Subordination to Mortgages
                           --------------------------

     10.1    Subordination.  This Agreement and Manager's interest and rights
             -------------                                                   
hereunder, are and shall be subject and subordinate at all times to the lien of
any first or second mortgage, whether now existing or hereafter created on or
against the Project, and all amendments, restatements, renewals, modifications,
consolidations, refinancings, assignments and extensions thereof ("Security
                                                                   --------
Documents") without the necessity of any further instrument or act on the part
---------                                                                     
of the Manager.  Manager agrees, at the election of the holder of any such
Security Documents (the "Secured Party"), to attorn to the Secured Party.  The
                         -------------                                        
term "mortgage" as used herein shall be deemed to include deeds of trust,
security assignments and any other encumbrances, and any reference to the
"holder" of a Security Document shall be deemed to include the beneficiary under
a deed of trust.  Notwithstanding the foregoing, nothing herein shall obligate
the Manager to continue its performance under this Agreement unless it continues
to be paid in accordance with the terms of this Agreement.

     10.2   Rights after Events of Default.  Upon an Event of Default (as such
            ------------------------------          
term is defined in any Security Document), the Manager shall continue to perform
its obligation under this Agreement until the earlier to occur of (a) the
termination of this Agreement with respect to the Project or the termination of
this Agreement in its entirety by the Secured Party, either of which may occur
in the Secured Party's sole discretion, or (b) the Secured Party's (or its
assignee's or nominee's) acquisition of title to the Project through the
foreclosure, a deed-in-lieu thereof, or otherwise. On and after an Event of
Default, there shall be no material changes in the terms and conditions of this
Agreement without the prior written consent of the Secured Party having been
obtained, which consent may be arbitrarily withheld.

                                       15
<PAGE>
 
          IN WITNESS WHEREOF, the parties hereto have executed this Management
Agreement as of the day and year first above written.

                                    OWNER:

ADDRESS:                            SECURITY CAPITAL PACIFIC TRUST

125 Lincoln Avenue, 3rd Floor
Santa Fe, NM  87501


                                    By: /s/ Patrick R. Whelan
                                       -------------------------------
                                    Name: Patrick R. Whelan
                                    Its: Managing Director



                                    MANAGER:

ADDRESS:                            SCG REALTY SERVICES
                                    INCORPORATED
125 Lincoln Avenue, 3rd Floor
Santa Fe, NM  87501



                                    By: /s/ Jeffrey A. Klopf
                                       -------------------------------
                                    Name: Jeffrey A. Klopf
                                    Its: Senior Vice President

                                       16