<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549



                                   FORM 10-Q



             [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED SEPTEMBER 30, 1996
                                                        ------------------


                         Commission File Number 1-9648
                                                ------


                             NATIONAL REALTY, L.P.                 
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)





               Delaware                                 75-2163175    
     -------------------------------                -------------------
     (State or Other Jurisdiction of                 (I.R.S. Employer
      Incorporation or Organization)                Identification No.)




     10670 North Central Expressway, Suite 300, Dallas, Texas      75231  
     -----------------------------------------------------------------------
     (Address of Principal Executive Office)                  (Zip Code)



                                (214) 692-4700         
                        -------------------------------
                        (Registrant's Telephone Number,
                              Including Area Code)



Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  
Yes  X .  No    .
   ----     ----


Units of Limited Partner Interest                           6,300,872    
---------------------------------              ---------------------------------
        (Class)                                (Outstanding at November 1, 1996)





                                       1
<PAGE>   2
                         PART I - FINANCIAL INFORMATION



ITEM 1.  FINANCIAL STATEMENTS

The accompanying Consolidated Financial Statements have not been examined by
independent certified public accountants, but in the opinion of the management
of National Realty, L.P., all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of consolidated results of
operations, consolidated financial position and consolidated cash flows at the
dates and for the periods indicated, have been included.



                             NATIONAL REALTY, L.P.
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                             September 30,        December 31,
                                                                                  1996                1995   
                                                                             --------------       --------------
                                                                                   (dollars in thousands)
<S>                                                                          <C>                  <C>
                   Assets
                   ------
Real estate held for investment
 Land...........................................                             $       51,342       $       51,342
 Buildings and improvements.....................                                    394,345              391,097
                                                                             --------------       --------------
                                                                                    445,687              442,439
                                                   
 Less - accumulated depreciation................                                   (220,586)            (212,957)
                                                                             --------------       -------------- 
                                                                                    225,101              229,482
Notes and interest receivable, net of deferred     
 gains of $15,787 in 1996 and 1995..............                                     13,711               12,156
 Less - allowance for estimated losses..........                                     (1,910)              (1,910)
                                                                             --------------       -------------- 
                                                                                     11,801               10,246
                                                   
Cash and cash equivalents.......................                                      7,852               20,699
Accounts receivable.............................                                      2,106                1,220
Prepaid expenses (including $256 in 1996 to        
 affiliates)....................................                                        986                1,253
Escrow deposits and other assets................                                     17,379               14,930
Marketable equity securities of affiliate, at      
 market.........................................                                      1,113                  722
Deferred financing costs........................                                     12,997               14,378
                                                                             --------------       --------------
                                                                             $      279,335       $      292,930
                                                                             ==============       ==============
</TABLE>





             The accompanying notes are an integral part of these
                      Consolidated Financial Statements.





                                       2
<PAGE>   3
                             NATIONAL REALTY, L.P.
                    CONSOLIDATED BALANCE SHEETS - Continued





<TABLE>
<CAPTION>
                                                                              September 30,        December 31,
                                                                                  1996                1995    
                                                                             --------------       --------------
                                                                                    (dollars in thousands)
<S>                                                                          <C>                  <C>
    Liabilities and Partners' Equity (Deficit)
    ------------------------------------------
Liabilities
 Notes and interest payable......................                            $      326,977       $      326,500
 Pension notes and interest payable..............                                    13,081               12,034
 Accrued property taxes..........................                                     6,573                6,792
 Accounts payable and other liabilities..........                                     5,382               11,966
 Tenant security deposits........................                                     3,077                2,908
                                                                             --------------       --------------
                                                                                    355,090              360,200
Commitments and contingencies                     
                                                  
Redeemable General Partner Interest..............                                    31,997               31,997
                                                  
Partners' equity (deficit)                        
 General Partner.................................                                     2,626                2,656
 Limited Partners (6,329,709 units in 1996 and    
    6,418,044 units in 1995).....................                                   (75,050)             (66,204)
 Unrealized gain on marketable equity securities.                                       844                  453
                                                                             --------------       --------------
                                                                                    (71,580)             (63,095)
                                                  
 Less - Redeemable General Partner Interest......                                   (36,172)             (36,172)
                                                                             --------------       -------------- 

                                                                                   (107,752)             (99,267)
                                                                             --------------       -------------- 

                                                                             $      279,335       $      292,930
                                                                             ==============       ==============
</TABLE>





             The accompanying notes are an integral part of these
                      Consolidated Financial Statements.





                                       3
<PAGE>   4
                             NATIONAL REALTY, L.P.
                     CONSOLIDATED STATEMENTS OF OPERATIONS





<TABLE>
<CAPTION>
                                                For the Three Months                    For the Nine Months
                                                 Ended September 30,                     Ended September 30, 
                                          ----------------------------------      ---------------------------------
                                               1996               1995                 1996               1995   
                                          --------------      --------------      ---------------     -------------
                                                               (dollars in thousands, except per unit)
<S>                                       <C>                 <C>                 <C>                 <C>
Revenues
 Rents........................            $       27,636      $       27,300      $        81,821     $      80,404
 Interest.....................                       840                 818                2,350             2,169
                                          --------------      --------------      ---------------     -------------
                               
                                                  28,476              28,118               84,171            82,573
Expenses                       
 Interest.....................                     8,503               8,935               25,363            26,096
 Depreciation & amortization..                     2,589               2,569                7,629             7,655
 Property taxes & insurance...                     3,105               3,139                9,280             9,127
 Utilities....................                     3,012               2,955                8,815             8,617
 Property-level payroll costs.                     1,740               1,783                4,858             5,031
 Repairs and maintenance......                     6,696               6,033               18,766            18,070
 Other operating expenses.....                     1,048               1,151                3,118             3,397
 Property management fees.....                     1,176               1,168                3,503             3,447
 General and administrative...                     1,280               1,424                4,358             4,753
                                          --------------      --------------      ---------------     -------------
                               
                                                  29,149              29,157               85,690            86,193
                                          --------------      --------------      ---------------     -------------
                               
                               
Net (loss)....................            $         (673)     $       (1,039)     $        (1,519)    $      (3,620)
                                          ==============      ==============      ===============     ============= 
                               
Earnings per unit              
                               
Net (loss)....................            $         (.10)     $         (.16)     $          (.24)    $        (.56)
                                          ==============      ==============      ===============     ============= 
                               
Weighted average units of      
 limited partner interest      
 used in computing earnings    
 per unit.....................                 6,333,352           6,418,065            6,389,245         6,418,140
                                          ==============      ==============      ===============     ============= 
</TABLE>





             The accompanying notes are an integral part of these
                      Consolidated Financial Statements.





                                       4
<PAGE>   5
                             NATIONAL REALTY, L.P.
             CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996




<TABLE>
<CAPTION>
                                                                Unrealized                               
                                                                 Gain On        Redeemable               
                                                                Marketable       General         Partners'  
                                    General      Limited         Equity          Partner          Equity    
                                    Partner     Partners        Securities      Interest         (Deficit)  
                                   ---------    ---------       ---------       ---------        ---------  
                                                          (dollars in thousands)                  
<S>                                <C>          <C>            <C>              <C>              <C>        
Balance, January 1, 1996 .......   $   2,656    $ (66,204)      $     453       $ (36,172)       $ (99,267) 
                                                                                                            
                                                                                                            
Repurchase of units of limited                                                                              
 partner interest ..............        --           (954)           --              --               (954) 
                                                                                                            
Distributions ($1.00 per unit) .        --         (6,403)           --              --             (6,403) 
                                                                                                            
Unrealized gain on marketable                                                                               
 equity securities of affiliate         --           --               391            --                391  
                                                                                                            
Net (loss) .....................         (30)      (1,489)           --              --             (1,519) 
                                   ---------    ---------       ---------       ---------        ---------  
                                                                                                            
                                                                                                            
Balance, September 30, 1996 ....   $   2,626    $ (75,050)      $     844       $ (36,172)       $(107,752) 
                                   =========    =========       =========       =========        =========  
</TABLE>     
             




             The accompanying notes are an integral part of these
                      Consolidated Financial Statements.





                                       5
<PAGE>   6
                             NATIONAL REALTY, L.P.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                    For the Nine Months
                                                                                     Ended September 30,  
                                                                             ----------------------------------
                                                                                  1996                1995    
                                                                             --------------       -------------- 
Cash Flows From Operating Activities                                                (dollars in thousands)
<S>                                                                          <C>                  <C>
 Rents collected.................................                            $       81,567       $       80,104
 Interest collected..............................                                     2,158                1,966
 Interest paid...................................                                   (21,973)             (23,093)
 Payments for property operations................                                   (50,712)             (49,589)
 General and administrative expenses paid........                                    (4,506)              (4,608)
                                                                             --------------       -------------- 
    Net cash provided by operating activities....                                     6,536                4,780
                                                  
Cash Flows From Investing Activities              
 Acquisition of real estate......................                                       -                   (463)
 Real estate improvements........................                                    (3,247)              (2,662)
 Collections on notes receivable.................                                       -                     14
 Funding of note receivable......................                                    (1,485)                 -
 Acquisition and settlement of notes receivable..                                       -                 (1,207)
                                                                             --------------       -------------- 
    Net cash (used in) investing activities......                                    (4,732)              (4,318)
                                                  
Cash Flows From Financing Activities              
 Proceeds from notes payable.....................                                     8,116               23,233
 Payments from (to) affiliates, net..............                                      (235)               2,098
 Payments on notes payable.......................                                    (8,892)             (19,995)
 Distributions to unitholders....................                                   (12,360)              (1,284)
 Deferred financing costs........................                                      (326)                (446)
 Repurchase of shares of limited partner interest                                      (954)                 -  
                                                                             --------------       --------------
    Net cash provided by (used in) financing      
      activities................................                                    (14,651)               3,606
                                                                             --------------       --------------
                                                  
    Net increase (decrease) in cash and cash      
      equivalents...............................                                    (12,847)               4,068
Cash and cash equivalents at beginning of period.                                    20,699                3,748
                                                                             --------------       --------------
Cash and cash equivalents at end of period.......                            $        7,852       $        7,816
                                                                             ==============       ==============
                                                  
Reconciliation of net (loss) to net cash          
 provided by operating activities                 
Net (loss).......................................                            $       (1,519)      $       (3,620)
 Adjustments to reconcile net (loss) to net       
    cash provided by operating activities         
 Depreciation and amortization...................                                     7,629                7,655
 Decrease (increase) in other assets.............                                       588                 (996)
 (Increase) in interest receivable...............                                       (35)                 (66)
 Increase in interest payable....................                                       299                1,164
 (Decrease) increase in other liabilities........                                      (426)                 197
                                                                             --------------       --------------
    Net cash provided by operating activities....                            $        6,536       $        4,334
                                                                             ==============       ==============
                                                  
Schedule of noncash financing activities          
                                                  
 Note payable from acquisition of real estate....                            $          -         $        1,200
                                                  
 Unrealized gain (loss) on marketable equity      
    securities...................................                                       391                  126
</TABLE>

             The accompanying notes are an integral part of these
                      Consolidated Financial Statements.





                                       6
<PAGE>   7
                             NATIONAL REALTY, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  BASIS OF PRESENTATION

The accompanying Consolidated Financial Statements of National Realty, L.P. and
consolidated entities (the "Partnership") have been prepared in conformity with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
Operating results for the nine-month period ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.  For further information, refer to the Consolidated
Financial Statements and Notes thereto included in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K").

Certain balances for 1995 have been reclassified to conform to the 1996
presentation.  Units and per unit data have been restated for the three for one
forward unit split effected January 2, 1996.

NOTE 2.  EARNINGS PER UNIT

Net (loss) per unit of limited partner interest (per "unit") is computed based
upon the weighted average number of units outstanding during each period.  The
limited partners of National Realty, L.P. ("National Realty") have a 99%
interest and the general partner, Syntek Asset Management, L.P. (the "General
Partner" or "SAMLP"), has an aggregate 1% interest in the net income, net loss
and distributions of National Realty.  National Realty is allocated 99% of the
net income or net loss of National Operating, L.P. ("NOLP" or the "Operating
Partnership"), and the General Partner is allocated an aggregate 1% of the net
income or net loss of the Operating Partnership.  The 1% General Partner
interest in each of National Realty and the Operating Partnership is equal to a
1.99% interest on a combined basis.  Accordingly, net (loss) per unit is
derived by dividing 98.01% of the net (loss) in each period by the respective
weighted average units of limited partner interest.

NOTE 3.  NOTES RECEIVABLE

In June 1996, the Partnership funded a $1.5 million loan to JNC Enterprises,
Ltd. ("JNC").  The loan is secured by a first lien on 67 acres of unimproved
land in Collin County, Texas and by a second lien on 182 acres of unimproved
land in McKinney, Texas.  The loan bears interest at 16.0% per annum and
matures December 10, 1996, with a right to extend to June 10, 1997 upon a
payment of $250,000 plus all accrued but unpaid interest.  All principal and
interest is due at maturity.

NOTE 4.  NOTES PAYABLE

In March 1996, the Partnership refinanced the mortgage debt secured by the
Whispering Pines Apartments in Canoga Park, California in the amount of $2.4
million.  The Partnership received net cash of $37,000 after the





                                       7
<PAGE>   8
                             NATIONAL REALTY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 4.  NOTES PAYABLE (Continued)

payoff of $2.3 million in existing mortgage debt, which matured in December
1995.  The new mortgage bears interest at the rate of 7.5% per annum, requires
monthly payments of principal and interest of $19,000 and matures in April
2001.  The Partnership paid Basic Capital Management, Inc. ("BCM") a mortgage
brokerage and equity refinancing fee of $24,000 based on the $2.4 million
mortgage.

In September 1996, the Partnership obtained mortgage financing for the
previously unencumbered Harbor Plaza Shopping Center in Aurora, Colorado in the
amount of $1.8 million.  The Partnership received net cash of $1.6 million
after payment of various closing costs associated with the financing.  The
mortgage bears interest at 9.41% per annum, requires monthly payments of
principal and interest of $15,831 and matures October 1, 2006.  The Partnership
paid BCM a mortgage brokerage and equity refinancing fee of $18,000 based on
the $1.8 million mortgage.

NOTE 5.  WARRANTS

Pursuant to a litigation settlement agreement, on February 14, 1992, the
Partnership issued warrants to purchase an aggregate of 2,019,579 of its units
of limited partner interest subject to adjustment.  Each warrant entitles the
holder thereof to purchase three quarters of one unit at the exercise price
($12.00 per warrant), equal to $16.00 per unit, subject to adjustment.  The
warrants may be exercised for five years from the February 14, 1992 date of
issuance or until earlier redemption.  See NOTE 7. "LEGAL PROCEEDINGS - Moorman
Settlement."

NOTE 6.  INCOME TAXES

No federal or state income taxes have been provided for in the accompanying
Consolidated Statements of Operations as the partners include their share of
Partnership income or loss in their respective tax returns.  For income or loss
allocation purposes, limited partners are allocated their proportionate share
of income or loss commencing with the calendar month subsequent to their entry
into the Partnership.

NOTE 7.  LEGAL PROCEEDINGS

Moorman Settlement.  The Partnership is party to a settlement agreement, dated
as of May 9, 1990, between plaintiffs Joseph B. Moorman, et al. and defendants
Robert A. McNeil, National Realty, the Operating Partnership, SAMLP, Gene E.
Phillips and William S. Friedman, and Shearson Lehman Hutton Inc., successor-
in-interest to defendant E.F. Hutton & Company Inc., relating to the action
entitled Moorman, et al. v. Southmark Corporation, et al.  Such action was
filed on September 2, 1987, in the Superior Court of the State of California,
County of San Mateo.  On May 9, 1990, the Partnership agreed to settle such
action pursuant to the terms of a written agreement (the "Moorman Settlement
Agreement").  On June 29, 1990, after a hearing as to its fairness,
reasonableness and adequacy, the Moorman Settlement Agreement was granted final
court approval.





                                       8
<PAGE>   9
                             NATIONAL REALTY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 7.  LEGAL PROCEEDINGS (Continued)

The Moorman Settlement Agreement is complex and the following summary is
qualified in its entirety by reference to the text thereof, which was
previously included as an exhibit to the Partnership's Form 10-Q for the
quarter ended March 31, 1990, as filed with the Securities and Exchange
Commission.  The Moorman Settlement Agreement provides for a plan (the "Moorman
Settlement Plan") consisting of, among other things, the following:  (i) the
appointment and operation of a committee (the "Oversight Committee"), to
oversee the implementation of the Moorman Settlement Plan, (ii) the appointment
and operation of an audit committee having a majority of members unaffiliated
with Messrs. Phillips and Friedman or SAMLP, (iii) the establishment of
specified annually increasing targets described below (each a "Target") for
each of the next five years through May 1995, relating to the price of the
units of limited partner interest as decreased for certain distributions to
unitholders, (iv) an agreement by SAMLP not to seek reimbursement of  greater
than $500,000 per year for Messrs. Phillips' and Friedman's salaries for
serving as general partners of SAMLP, (Mr. Friedman resigned as general partner
of SAMLP effective March 4, 1994) and a deferral of such payments until such
time as a Target may be met, and, if SAMLP resigns as General Partner, a waiver
of any compensation so deferred, (v) a deferral until such time as a Target may
be met of certain future annual General Partner compensation payable, pursuant
to the Partnership's governing documents,  to SAMLP or its affiliates, and, if
SAMLP resigns as General Partner, a waiver of any compensation so deferred,
(vi) the required distribution to unitholders of all the Partnership's
operating cash flow in excess of certain renovation costs, unless the Oversight
Committee approves alternative uses for such operating cash flow, (vii) the
issuance of Warrants to purchase an aggregate of up to 2,019,579 units (the
"Warrants") to Class Members, (viii) the contribution by certain co-defendants
of cash and notes payable to the Partnership aggregating $5.5 million
(including $2.5 million to be contributed by SAMLP and its general partners
over a four-year period), (ix) the amendment of the Partnership Agreement to
reduce the vote required to remove the General Partner from a two-thirds vote
to a majority vote of the units, (x) the Partnership's redemption of its unit
purchase rights and an agreement not to adopt a similar rights plan without
Oversight Committee approval and (xi) the Partnership's payment of certain
settlement costs, including plaintiffs' attorneys' fees in the amount of $3.4
million.  The Moorman Settlement Plan will remain in effect until SAMLP has
resigned as General Partner and a successor general partner is elected and
takes office, and the Warrants will remain exercisable for five years from the
February 14, 1992 date of issuance or until earlier redemption.

SAMLP, on behalf of itself and its general partners, has made the payments of
$2.5 million (including accrued interest), to the Partnership, as required by
the Moorman Settlement Agreement.

If Targets are not met for any two successive years of the Moorman Settlement
Plan or for the final year of the Moorman Settlement Plan,





                                       9
<PAGE>   10
                             NATIONAL REALTY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 7.  LEGAL PROCEEDINGS (Continued)

SAMLP will be required to withdraw as General Partner effective at the time a
successor general partner is elected.  Upon, among other things, the withdrawal
of SAMLP as General Partner and the due election and taking office of a
successor, the Moorman Settlement Plan would terminate.

The Targets for the first and second anniversary dates were not met.  Since the
Targets were not met for two successive years, the Moorman Settlement Agreement
requires that SAMLP resign as General Partner, effective upon the election and
qualification of its successor.  On July 8, 1992, SAMLP notified the Oversight
Committee of the failure to meet the Target for two successive years.

Upon, among other things, the withdrawal of SAMLP as General Partner and the
due election and taking office of a successor, the Moorman Settlement Plan will
terminate. Withdrawal of SAMLP as General Partner pursuant to the Moorman
Settlement Agreement requires unitholders to elect a successor general partner
by majority vote.  Upon the withdrawal or removal of the General Partner
without the selection of a successor, the Partnership would be dissolved.

The Moorman Settlement Agreement provides that between the date of the
certification causing the General Partner's resignation and the date a
successor general partner takes office, the resigning General Partner shall
limit its activities, as General Partner, to the conduct of the business of the
Partnership in the ordinary course, shall not, without consent of the Oversight
Committee, purchase or sell any real estate or other assets of the Partnership
not in progress on said date, shall cooperate in the election of a successor
general partner and shall cooperate with its successor to facilitate a change
in the office of General Partner of the Partnership.  The resigning General
Partner will continue to receive fees, expenses and distributions, if any,
while the solicitation is prepared.

The withdrawal of the General Partner would require the Partnership to acquire
the General Partner's interest in the Partnership (the "Redeemable General
Partner Interest") at its then fair value, and to pay certain fees and other
compensation, as provided in the Partnership Agreement and the Moorman
Settlement Agreement.  Under the Moorman Settlement Agreement, payment for such
Redeemable General Partner Interest, fees and other compensation may, at the
Oversight Committee's option, be paid over a three year period pursuant to a
secured promissory note bearing interest at the prime rate and containing
commercially reasonable terms and collateral.  Under the Moorman Settlement
Plan, the purchase price for Redeemable General Partner Interest would be
calculated, as of the time SAMLP withdraws as General  Partner under the
Partnership's governing documents.  The Managing General Partner has calculated
the Redeemable General Partner Interest at December 31, 1995 to be $36.2
million, and believes there has been no material change in such value since
such date.  The Partnership would be





                                       10
<PAGE>   11
                             NATIONAL REALTY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 7.  LEGAL PROCEEDINGS (Continued)

entitled to offset against any such payment the then outstanding principal
balance ($4.2 million at September 30, 1996) plus all accrued but unpaid
interest ($5.9 million at September 30, 1996) on the note receivable from SAMLP
for its capital contribution to the Partnership.  In the accompanying
Consolidated Financial Statements, the Redeemable General Partner Interest is
shown as a reduction of Partners' Equity.  The note receivable from the General
Partner has been offset against the Redeemable General Partner Interest.  The
Oversight Committee previously has informed the Partnership that it calculated
the amount of such Redeemable General Partner Interest to be less than the
amount calculated by the Managing General Partner.  When SAMLP withdraws as
General Partner of the Partnership, the value of the Redeemable General Partner
Interest would depend on the fair value of the Partnership's assets at the time
of calculation and there can be no assurance that the Redeemable General
Partner Interest, fees and other compensation payable on any such withdrawal
will not be substantially higher or lower than any current estimate or
calculation.

On January 27, 1995, National Realty, SAMLP and the Oversight Committee
executed an Implementation Agreement which provides for the nomination of a
successor general partner and for the resolution of all related matters under
the Moorman Settlement.  On February 20, 1996, the parties to the
Implementation Agreement executed an Amended and Restated Implementation
Agreement.

Provided that the successor general partner is elected pursuant to the terms of
the Amended and Restated Implementation Agreement, SAMLP shall receive
$12,471,500 from the Partnership.  This amount represents a compromise
settlement of the net amounts owed by the Partnership to SAMLP upon SAMLP's
withdrawal as General Partner and any amounts which SAMLP and its affiliates
may owe to the Partnership.  This amount shall be paid to SAMLP pursuant to a
promissory note in accordance with the terms set forth in the Amended and
Restated Implementation Agreement.

The Amended and Restated Implementation Agreement has been submitted to the
Supervising Judge for tentative approval and approval of the notice to be sent
to the original class members.  On September 23, 1996, the Supervising Judge
entered an order granting tentative approval of the Amended and Restated
Implementation Agreement and the form of notice.  However, the order reserved
jurisdiction to determine other matters which must be resolved prior to final
approval.  Upon final approval by the Supervising Judge, the proposal to elect
the successor general partner will be submitted to the unitholders of National
Realty for a vote.  In addition, the unitholders will vote upon amendments to
the National Realty Partnership Agreement which relate to the proposed
compensation of the successor general partner and other related matters.

Upon approval by the unitholders, SAMLP shall resign as General Partner and the
successor general partner shall take office.  If the required





                                       11
<PAGE>   12
                             NATIONAL REALTY, L.P.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued



NOTE 7.  LEGAL PROCEEDINGS (Continued)

approvals are obtained, National Realty anticipates that the successor general
partner may be elected and take office during the first quarter of 1997.

The Amended and Restated Implementation Agreement provides that SAMLP, and its
affiliates owning units in National Realty, shall not vote to remove the
successor general partner, except for removal with cause, for a period of 36
months from the date the successor general partner takes office.

Upon the election and taking office of the successor general partner, the
Moorman Settlement Plan and the Oversight Committee shall  terminate.  If the
successor general partner nominee does not stand for election or is not
elected, the existing Moorman Settlement Agreement shall remain in full force
and effect and all of the provisions of the Amended and Restated Implementation
Agreement shall be voided.

On September 3, 1996, Joseph B. Moorman filed a Motion for Orders Compelling
Enforcement of the Moorman Settlement Agreement, Appointment to a Receiver and
Collateral Relief with the Superior Court of the State of California in and for
the County of San Mateo.  The motion alleged that the settling defendants had
failed or refused to perform their obligations under the Moorman Settlement
Agreement and had breached the Moorman Settlement Agreement.  The motion also
requested that SAMLP be removed as general partner and a receiver be appointed
to manage the Partnership.  The motion also requested that American Realty
Trust, Inc. ("ART") be ordered to deliver to the court all units which had been
purchased by ART since August 7, 1991.  A hearing was held on this motion on
October 4, 1996, and the court took the matter under submission.  No ruling has
been made on this matter.

Other.  The Partnership is involved in various lawsuits arising in the ordinary
course of business.  Management of the Partnership is of the opinion that the
outcome of these lawsuits would have no material impact on the Partnership's
financial condition.


NOTE 8.  SUBSEQUENT EVENTS

In November 1996, the Partnership made a second loan to JNC in the amount of
$2.0 million, $1.0 million of which was funded November 5, 1996.  The loan is
secured by a 73.7% limited partner interest in a partnership which owns 272
acres of undeveloped land in the Colony, Texas.  The note bears interest at 16%
per annum, requires monthly payments of interest only and matures November 4,
1997.  This loan is cross-collateralized with the loan made to JNC in June
1996.





                                       12
<PAGE>   13
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Introduction

National Realty, L.P. ("National Realty") is a Delaware limited partnership
formed on January 29, 1987, the business of which consists primarily of owning
and operating through National Operating, L.P., also a Delaware limited
partnership (the "Operating Partnership"), a portfolio of real estate.  Most of
the Operating Partnership's properties were acquired in transactions
consummated on September 18, 1987, pursuant to which National Realty acquired
all of the assets, and assumed all of the liabilities, of 35 public and private
limited partnerships.  National Realty and the Operating Partnership operate as
an economic unit and, unless the context otherwise requires, all references
herein to the "Partnership" shall constitute references to National Realty and
the Operating Partnership as a unit.

In November 1992, the Operating Partnership, in conjunction with a refinancing
of 52 of its apartment properties and a wraparound note receivable, transferred
such assets to Garden Capital, L.P. ("GCLP"), a Delaware limited partnership in
which the Operating Partnership holds a 99.3% limited partner interest.

Cash and cash equivalents aggregated $7.9 million at September 30, 1996
compared to $20.7 million at December 31, 1995.  The principal reasons for this
decrease in cash are discussed in the paragraphs below.

The Managing General Partner of the Partnership's General Partner has
discretion in determining methods of obtaining funds for the Partnership's
operations.  The Partnership's governing documents place no limitation on the
amount of leverage that the Partnership may incur either in the aggregate or
with respect to any particular property or other investment.  At September 30,
1996, the aggregate loan-to-value ratio of the Partnership's real estate
portfolio was 47.6%, computed on the basis of the ratio of total property-
related debt to aggregate appraised values as of December 31, 1995, as compared
with a loan-to-value ratio of 47.3% at December 31, 1995.

The Partnership's principal sources of cash flow have been and will continue to
be from property operations and externally generated funds.  Externally
generated funds include borrowings, proceeds from the sale of Partnership
properties and other assets and proceeds from the issuance of debt secured by
Partnership properties or mortgage notes receivable.  The Partnership expects
that its cash on hand, cash flow from property operations together with
externally generated funds will be sufficient to meet the Partnership's various
cash needs, including but not limited to the payment of distributions, debt
service obligations coming due and property maintenance and improvements, as
more fully discussed in the paragraphs below.

In November 1992, in conjunction with the transfer of the net assets of 52
apartment complexes and a wraparound note receivable to GCLP, such assets were
refinanced under a $223 million blanket mortgage loan.  The blanket mortgage
loan requires that cash flow from the GCLP properties





                                       13
<PAGE>   14
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (Continued)

be used to fund various escrow and reserve accounts and limits the payment of
distributions to the Partnership.  During the three and nine months ended
September 30, 1996, the Partnership received distributions from GCLP totaling
$250,000 and $1.1 million, compared to distributions totaling $400,000 and $1.7
million received during the three and nine months ended September 30, 1995.

In March 1996, the Partnership refinanced the mortgage debt secured by the
Whispering Pines Apartments in Canoga Park, California in the amount of $2.4
million.  The Partnership received net cash of $37,000 after the payoff of $2.3
million in existing mortgage debt.

In June 1996, the Partnership funded a $1.5 million loan to JNC Enterprises,
Ltd. ("JNC"), secured by a first lien on 67 acres of undeveloped land in Collin
County, Texas and by a second lien on 182 acres of undeveloped land in
McKinney, Texas.  In November 1996, the Partnership made a second loan in the
amount of $2.0 million to JNC, $1.0 million of which was funded on November 5,
1996.  The loan is secured by a 73.7% limited partner interest in a partnership
that owns 272 acres of undeveloped land in the Colony, Texas.

In September 1996, the Partnership obtained mortgage financing of $1.8 million
secured by the previously unencumbered Harbor Plaza Shopping Center in Aurora,
Colorado.  The Partnership received net cash of $1.6 million after the payment
of various closing costs associated with the financing.

The Partnership's net cash flow from property operations (rents collected less
payments for property operating expenses) increased from  $30.5 million for the
nine months ended September 1995 to $30.9 million for the nine months ended
September 1996.  This increase is primarily due to an increase in rental and
occupancy rates at the Partnership's apartment complexes and commercial
properties, partially offset by a decrease of $1.2 million due to the sale of
the Vineyards and Harbour Pointe Apartments in December 1995.  Net cash flow
from property operations decreased from $10.9 million for the three months
ended September 1995 to $9.8 million for the three months ended September 1996.
This decrease is primarily due to the sale of the Vineyards and Harbor Pointe
Apartments in December 1995 and to increased repair and maintenance expense at
the Partnership's apartment properties.

On January 2, 1996, the Partnership paid a total of $6.8 million in
distributions that had been declared in 1995.  In the first nine months of
1996, the Partnership declared and paid quarterly and special distributions
aggregating $1.00 per unit, or a total of $6.2 million.

In May 1996, the Partnership announced an offer to buy back its units of
limited partner interest from unitholders owning 99 or fewer units.  The
Partnership paid a premium of $.50 per unit over the average closing price of
its units as reported from May 10, 1996 through June 28, 1996,





                                       14
<PAGE>   15
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (Continued)

the expiration date of the offer.  On July 12, 1996, the Partnership
repurchased 77,725 units at a total cost of $841,000.  The Partnership extended
this repurchase offer through August 5, 1996.  On August 16, 1996, the
Partnership repurchased an additional 9,677 units at a total cost of $113,000.

As discussed in NOTE 7. "LEGAL PROCEEDINGS," the Moorman litigation settlement
agreement (the "Moorman Settlement Agreement") sets forth certain aggressive,
annually increasing targets relating to the price of the Partnership's units of
limited partner interest which were not met, resulting in, among other things,
the required withdrawal of the General Partner upon election of a successor and
the resulting required purchase of the Redeemable General Partner Interest, as
defined below.

The withdrawal of the General Partner requires the Partnership to acquire the
General Partner's interest in the Partnership (the "Redeemable General Partner
Interest") at its then fair value, and to pay certain fees and other
compensation, as provided in the Partnership Agreement and the Moorman
Settlement Agreement.  The Moorman Settlement Agreement provides that any
payment for such Redeemable General Partner Interest, fees and other
compensation during the pendency of the Moorman Settlement Agreement may, at
the option of the Oversight Committee (also established under the Moorman
Settlement Agreement), be made over three years pursuant to a secured
promissory note bearing interest at a financial institution's prime rate.  The
Managing General Partner has calculated the fair value of the Redeemable
General Partner Interest at December 31, 1995 to be $36.2 million, and believes
that there has been no material change in such value since that date.  The
Partnership would be entitled to offset against such payment the then
outstanding principal balance of the note receivable ($4.2 million at September
30, 1996) plus all accrued and unpaid interest ($5.9 million at September 30,
1996) on the note receivable from the General Partner representing its capital
contribution to the Partnership.  When Syntek Asset Management, L.P. ("SAMLP")
withdraws as General Partner of the Partnership, the fair value of the
Redeemable General Partner Interest would depend on the value of the
Partnership's assets at the time of calculation and there can be no assurance
that the Redeemable General Partner Interest, fees and other compensation
payable on any such withdrawal will not be substantially higher or lower than
any current estimate or calculation.

In the accompanying Consolidated Balance Sheets, the Redeemable General Partner
Interest is shown as a reduction in Partners' Equity and the note receivable
from the General Partner has been offset against the Redeemable General
Partner Interest.

On January 27, 1995, National Realty, SAMLP and the Oversight Committee
executed an Implementation Agreement which provides for the nomination of a
successor general partner and for the resolution of all related matters under
the Moorman Settlement.  On February 20, 1996, the parties to the
Implementation Agreement executed an Amended and Restated Implementation
Agreement.





                                       15
<PAGE>   16
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (Continued)

Provided that the successor general partner is elected pursuant to the terms of
the Amended and Restated Implementation Agreement, SAMLP shall receive
$12,471,500 from the Partnership.  This amount represents a compromise
settlement of the net amounts owed by the Partnership to SAMLP upon SAMLP's
withdrawal as General Partner and any amounts which SAMLP and its affiliates
may owe to the Partnership.  This amount shall be paid to SAMLP pursuant to a
promissory note in accordance with the terms set forth in the Amended and
Restated Implementation Agreement.

The Amended and Restated Implementation Agreement has been submitted to the
Supervising Judge for tentative approval and approval of the notice to be sent
to the original class members.  On September 23, 1996, the Supervising Judge
entered an order granting tentative approval of the Amended and Restated
Implementation Agreement and the form of notice.  However, the order reserved
jurisdiction to determine other matters which must be resolved prior to final
approval.  Upon final approval by the Supervising Judge, the proposal to elect
the successor general partner will be submitted to the unitholders of National
Realty for a vote.  In addition, the unitholders will vote upon amendments to
the National Realty Partnership Agreement which relate to the proposed
compensation of the successor general partner and other related matters.

Upon approval by the unitholders, SAMLP shall resign as General Partner and the
successor general partner shall take office.  If the required approvals are
obtained, National Realty anticipates that the successor general partner may be
elected and take office during the first quarter of 1997.

The Amended and Restated Implementation Agreement provides that SAMLP, and its
affiliates owning units in National Realty, shall not vote to remove the
successor general partner, except for removal with cause, for a period of 36
months from the date the successor general partner takes office.

Upon the election and taking office of the successor general partner, the
Moorman Settlement Plan and the Oversight Committee shall  terminate.  If the
successor general partner is not elected, the existing Moorman Settlement
Agreement shall remain in full force and effect and all of the provisions of
the Amended and Restated Implementation Agreement shall be voided.

On September 3, 1996, Joseph B. Moorman filed a Motion for Orders Compelling
Enforcement of the Moorman Settlement Agreement, Appointment to a Receiver and
Collateral Relief with the Superior Court of the State of California in and for
the County of San Mateo.  The motion alleged that the settling defendants had
failed or refused to perform their obligations under the Moorman Settlement
Agreement and had breached the Moorman Settlement Agreement.  The motion also
requested that SAMLP be removed as general partner and a receiver be appointed
to manage the Partnership.  The motion also requested that American Realty
Trust, Inc. ("ART") be ordered to deliver to the court all units which had been





                                       16
<PAGE>   17
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (Continued)

purchased by ART since August 7, 1991.  A hearing was held on this motion on
October 4, 1996, and the court took the matter under submission.  No ruling has
been made on this matter.

Results of Operations

The Partnership reported a net loss of $673,000 and $1.5 million for the three
and nine months ended September 30, 1996 as compared to a net loss of $1.0
million and $3.6 million for the three and nine months ended September 30,
1995.  The primary factors effecting the Partnership's operating results are
discussed in the following paragraphs.

Net rental income for the Partnership (rents less property operating expenses)
increased to $33.5 million for the nine months ended September 30, 1996 from
$32.7 million for the nine months ended September 30, 1995.  This increase is
primarily due to increased rental rates at the Partnership's apartment and
commercial properties.  Net rental income for the Partnership decreased to
$10.9 million for the three months ended September 30, 1996 from $11.1 million
for the three months ended September 30, 1995.  This decrease is due to
increased repair and maintenance expense at the Partnership's apartment
properties and to the sale of the Vineyards and Harbor Pointe Apartments in
1995.

Interest income increased from $818,000 and $2.2 million for the three and nine
months ended September 30, 1995 to $840,000 and $2.4 million for the three and
nine months ended September 30, 1996.  This increase is primarily attributable
to the note funded in June 1996 and a note acquired in July 1995, as well as
increased investment income.  These increases are partially offset by a
decrease due to a note paid off in October 1995.

Interest expense decreased from $8.9 million and $26.1 million for the three
and nine months ended September 30, 1995 to $8.5 million and $25.4 million for
the three and nine months ended September 30, 1996.  This decrease is due
primarily to the sale of two apartment properties in 1995, as well as a
decrease in the variable interest rate on the mortgage debt secured by several
apartment properties.

General and administrative expenses decreased from $1.4 million and $4.8
million for the three and nine months ended September 30, 1995 to $1.3 million
and $4.4 million for the three and nine months ended September 30, 1996.  This
decrease is primarily due to a decrease in cost reimbursements to Basic Capital
Management, Inc.  This decrease is partially offset by an increase in legal
fees related to the Moorman litigation.  See NOTE 7. "LEGAL PROCEEDINGS."

Tax Matters

National Realty is a publicly traded limited partnership and, for federal
income tax purposes, all income or loss generated by the Partnership is
included in the income tax returns of the individual





                                       17
<PAGE>   18
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)

Tax Matters (Continued)

partners.  In December 1987, Congress passed legislation requiring certain
publicly traded partnerships to be taxed as corporations.  National Realty
qualifies for "grandfather" treatment and will be treated as a partnership
until at least 1997, unless the Partnership adds a substantial new line of
business, which would require approval of the Oversight Committee, and will
continue to be so treated thereafter if 90% or more of its gross income
consists of qualifying income from real estate activities.  As presently
operated, the Partnership meets these requirements.  Under Internal Revenue
Service guidelines generally applicable to publicly traded partnerships and
thus to the Partnership, a limited partner's use of his or her share of
partnership losses is subject to special limitations.

Inflation

The effects of inflation on the Partnership's operations are not quantifiable.
Revenues from property operations generally fluctuate proportionately with
inflationary increases and decreases in housing costs.  Fluctuations in the
rate of inflation also affect the sales values of the Partnership's properties
and, correspondingly, the ultimate gains to be realized by the Partnership from
property sales.  To the extent that inflation affects interest rates, the
Partnership's earnings from short-term investments and the cost of new
borrowings as well as the cost of its variable rate borrowings will be
affected.

Environmental Matters

Under various federal, state and local environmental laws, ordinances and
regulations, the Partnership, may be potentially liable for removal or
remediation costs, as well as certain other potential costs relating to
hazardous or toxic substances (including governmental fines and injuries to
persons and property) where property-level managers have arranged for the
removal, disposal or treatment of hazardous or toxic substances.  In addition,
certain environmental laws impose liability for release of asbestos-containing
materials into the air, and third parties may seek recovery from the
Partnership for personal injury associated with such materials.

The General Partner is not aware of any environmental liability relating to the
above matters that would have a material adverse effect on the Partnership's
business, assets or results of operations.

Recent Accounting Pronouncement

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121 - "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of".
The statement requires that long-lived assets be considered impaired "...if the
sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset."  If impairment exists,
an impairment loss shall be recognized,





                                       18
<PAGE>   19
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Continued)

Recent Accounting Pronouncement (Continued)

by a charge against earnings, equal to "...the amount by which the carrying
amount of the asset exceeds the fair value of the asset."  If impairment of a
long-lived asset is recognized, the carrying amount of the asset shall be
reduced by the amount of the impairment, shall be accounted for as the asset's
"new cost" and such new cost shall be depreciated over the asset's remaining
useful life.

SFAS No. 121 further requires that long-lived assets held for sale "...be
reported at the lower of carrying amount or fair value less cost to sell."  If
a reduction in a held for sale asset's carrying amount to fair value less cost
to sell is required, a provision for loss shall be recognized by a charge
against earnings.  Subsequent revisions, either upward or downward, to a held
for sale asset's fair value less cost to sell shall be recorded as an
adjustment to the asset's carrying amount, but not in excess of the asset's
carrying amount when originally classified as held for sale.  A corresponding
charge or credit to earnings is to be recognized.  Long-lived assets held for
sale are not to be depreciated.  SFAS No. 121 is effective for fiscal years
beginning after December 15, 1995.  The Partnership adopted SFAS No. 121
effective January 1, 1996.

The adoption of SFAS No. 121 had no effect on the Partnership's depreciation or
reported net loss for the nine months ended September 30, 1996.


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


                          PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

See NOTE 7. "LEGAL PROCEEDINGS - Moorman Settlement," of NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS in PART I for information relating to legal proceedings.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

Exhibit
Number                            Description                         
-------  -------------------------------------------------------------

 11.0    Computation of Earnings Per Unit

 27.0    Financial Data Schedule

(b)  Reports on Form 8-K:

     None.





                                       19
<PAGE>   20
                             NATIONAL REALTY, L.P.


                                 Signature Page




Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                           NATIONAL REALTY, L.P.
                                           
                                           By its General Partner:
                                           
                                           SYNTEK ASSET MANAGEMENT, L.P.  
                                           
                                           By its Managing General Partner: 
                                           
                                           SYNTEK ASSET MANAGEMENT, INC.    





Date:    November 12, 1996                 By:  /s/ Randall M. Paulson  
     -------------------------                -------------------------------
                                              Randall M. Paulson
                                              President
                                           
                                           
                                           
                                           
                                           
Date:    November 12, 1996                 By:  /s/ Thomas A. Holland   
     -------------------------                -------------------------------
                                              Thomas A. Holland
                                              Executive Vice President and
                                              Chief Financial Officer
                                              (Principal Financial and
                                               Accounting Officer)






                                       20
<PAGE>   21
                             NATIONAL REALTY, L.P.

                                  EXHIBITS TO

                         QUARTERLY REPORT ON FORM 10-Q

                    For the Quarter ended September 30, 1996





<TABLE>
<CAPTION>
Exhibit                                                            Page  
Number                         Description                        Number 
-------     ---------------------------------------------------   ------ 
<S>         <C>                                                   <C>
  11.0      Computation of Earnings Per Unit                        22

  27.0      Financial Data Schedule                                 23
</TABLE>
             





                                       21