SECURITIES AND EXCHANGE COMMISSION

                               WASHINGTON, D.C. 20549

                                    FORM 10-Q/A

(Mark One)

(x)   QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the quarterly period ended       SEPTEMBER 30, 1995

                                         OR

( )   TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE CHANGE ACT OF 1934

For the transition period from                 to

Commission file number                       1-12700


                    FRANKLIN REAL ESTATE INCOME FUND
(Exact name of registrant as specified in its charter)


     CALIFORNIA                                   77-0185558
(State or other jurisdiction of incorporation or organization) (I.R.S.
Employer Identification No.)


     P. O. BOX 7777,        SAN MATEO, CALIFORNIA    94403-7777
 (Address of principal executive offices)            (Zip Code)


Registrant's telephone number, including area code      (415) 312-2000

                                     N/A
Former name, former address and former fiscal year, if changed since last report


   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 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

Common Stock Shares Outstanding as of September 30, 1995, Series A:  3,999,515
Common Stock Shares Outstanding as of September 30, 1995, Series B:     319,308


                         PART I - FINANCIAL INFORMATION

                         Item 2. Management's Discussion
                       and Analysis of Financial Condition
                            AND RESULTS OF OPERATIONS


INTRODUCTION

Management's discussion and analysis of financial condition and results of
operations should be read in conjunction with the Financial Statements and Notes
thereto.

RESULTS OF OPERATIONS

COMPARISON OF THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994

Net income for the nine month period ended September 30, 1995 increased $58,000,
or 5%, as compared to the same period in 1994 due to the following factors: an
increase in rental revenue of $229,000; an increase in interest and dividends of
$10,000; a decrease in other income of $10,000; an increase in interest expense
of $30,000; an increase in depreciation and amortization of $29,000; an increase
in operating expenses of $165,000; an increase in related party expenses of
$10,000; an increase in consolidation expense of $62,000; a decrease in general
and administrative expense of $57,000, and a decrease in loss on the sale of
mortgage-backed securities of $68,000. Explanations of the material changes are
as follows:

Rental revenue for the nine month period ended September 30, 1995 increased
$229,000, or 7%, primarily due to the recognition of rental income from the Glen
Cove Shopping Center acquired on January 31, 1994 and improved occupancy and
rental rates at the Shores Office Complex. The average occupancy rate of net
rentable square feet for the nine month periods ended September 30, 1995 and
1994 at the Shores Office Complex was 98% and 91%; at the Northport Buildings
98% and 97%; at the Mira Loma Shopping Center 81% and 81%; and at the Glen Cove
Center 97% and 95%, respectively.

Total expenses increased for the nine month period ended September 30, 1995 by
$171,000, or 8%, from $2,134,000 in 1994 to $2,305,000. The increase in total
expenses is attributable to the following factors: an increase in interest
expense of $30,000; an increase in depreciation and amortization of $29,000, or
3%; an increase in operating expenses of $165,000, or 21%; an increase in
related party expense of $10,000, or 6%; an increase in consolidation expense of
$62,000 or 100%; a decrease in general and administrative expense of $57,000, or
31%, and a decrease in loss on sale of mortgage-backed securities of $68,000 or
100%.

Interest expense increased $30,000 reflecting the issuance of an unsecured loan
payable in January, 1994, related to the acquisition of the Glen Cove Center.
This loan was converted into a secured mortgage note in June, 1994.

Depreciation and amortization increased $29,000 reflecting tenant improvment
costs at the Shores Office Complex related to new leases commencing in late 1994
and the acquisition of rental property in January, 1994.

Related party expense increased $10,000 as a result of an increase in property
management fees due to the increases in rental revenue at the Company's
properties.

Consolidation expense of $62,000 relates to the proposed consolidation.

                           PART I - FINANCIAL INFORMATION

                          Item 2. Management's Discussion
                        and Analysis of Financial Condition
                             AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS (Continued)

General and administrative expense decreased $57,000 due to a decrease in
non-recurring consulting fees and legal expenses.

Loss on sale of mortgage-backed securities decreased $68,000 due to the sale of
mortgage-backed securities in January, 1994. The proceeds were used to invest in
rental property.

Operating expenses increased $165,000 due to an increase in utility and
insurance expense at the Company's properties and to a $100,000 writeoff of
building and equipment related to ceasing operations at the Mira Loma Car Wash
in August, 1995. The land will be paved and used as additional parking space at
the Mira Loma Shopping Center.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal source of capital for the acquisition of properties was
the proceeds from the initial public offering of its stock. The Company
completed its property acquisition phase in 1994 and no further acquisitions are
anticipated. The Company's funds from operations have been its principal source
of capital for property improvements, leasing costs and the payments of
quarterly dividends. At September 30, 1995, the Company's cash reserves,
including mortgage backed securities, aggregated $2,035,000.

As of September 30, 1995, one of the Company's properties was subject to secured
financing with an outstanding balance of approximately $1,948,000. Otherwise,
the Company's properties are owned free of any indebtedness. Interest on the
note accrues at a variable rate of 1.5% in excess of the Union Bank Reference
Rate. Monthly installments of principal and interest commenced August 1, 1994,
and continue until maturity of the note on May 1, 1999. Principal installments
are payable in the amount of $3,700 per month. The note may be prepaid in whole
or in part at any time without penalty.

For the foreseeable future, management believes that the Company's current
sources of capital will continue to be adequate to meet both its operating
requirements and the payment of dividends.

Net cash flow provided by operating activities for the nine month period ended
September 30, 1995 decreased $166,000 to $2,074,000 compared to the same period
in 1994. Although net income increased $58,000 in 1995, the Company collected a
$258,000 receivable in 1994 which increased that year's cash flow.

Funds from Operations for the nine month period ended September 30, 1995
increased $87,000, or 4%, to $2,094,000 compared to the same period in 1994. The
increase is primarily due to the improvement in net income as described under
"Results of Operations" above. The Company believes that Funds from Operations
is helpful in understanding a property portfolio in that such calculation
reflects income from operating activities and the properties' ability to support
general operating expenses and interest expense before the impact of certain
activities, such as gains and losses from property sales and changes in the
accounts receivable and accounts payable. However,

                           PART I - FINANCIAL INFORMATION

                          Item 2. Management's Discussion
                        and Analysis of Financial Condition
                             AND RESULTS OF OPERATIONS


LIQUIDITY AND CAPITAL RESOURCES (Continued)

it does not measure whether income is sufficient to fund all of the Company's
cash needs includingprincipal amortization, capital improvements and
distributions to shareholders. Funds from Operations should not be considered an
alternative to net income or any other GAAP measurement of performance or as an
alternative to cash flows from operating, investing, or financing activities as
a measure of liquidity. As defined by the National Association of Real Estate
Investment Trusts, Funds from Operations is net income ( computed in accordance
with GAAP ), excluding gains or losses from debt restructuring and sales of
property, plus depreciation and amortization, and after adjustment for
unconsolidated joint ventures.

IMPACT OF INFLATION
The Company's management believes that inflation may have a positive effect on
the Company's property portfolio, but this effect generally will not be fully
realized until such properties are sold or exchanged. On some leases, the
Company collects overage rents based on increased sales and increased base
rentals as a result of cost of living adjustments. The Company's policy of
negotiating leases which incorporate operating expense "pass-through" provisions
is intended to protect the Company against increased operating costs resulting
from inflation.

DIVIDENDS
Dividends are declared quarterly at the discretion of the Board of Directors.
The Company's present dividend policy is to at least annually evaluate the
current dividend rate in light of anticipated tenant turnover over the next two
or three years, the estimated level of associated improvements and leasing
commissions, planned capital expenditures, any debt service requirements and the
Company's other working capital requirements. After balancing these
considerations, and considering the Company's earnings and cash flow, the level
of its liquid reserves and other relevant factors, the Company seeks to
establish a dividend rate which:

       i)   provides  a stable  dividend  which is  sustainable  despite
            short term fluctuations in  property cash flows;
       ii)  maximizes  the  amount of cash  flow  paid out as  dividends
            consistent with the above listed objective;  and
       iii) complies with the Internal Revenue Code requirement that a REIT
            annually pay out as dividends not less than 95% of its taxable
            income.

For the nine-month period ended September 30, 1995, the Company declared
dividends totaling $1,500,000.

On November 2, 1995 the Board of Directors of the Company and of two other real
estate investment trusts that Franklin Properties, Inc. advises, Franklin
Advantage Real Estate Income Fund ("Advantage") and Franklin Select Real Estate
Income Fund ("Select"), authorized the execution of a Merger Agreement and the
filing of a Joint Proxy Statement/Registration Statement with the Securities and
Exchange Commission. The Registration Statement was filed on November 13, 1995.


                           PART I - FINANCIAL INFORMATION

                          Item 2. Management's Discussion
                        and Analysis of Financial Condition
                             AND RESULTS OF OPERATIONS


LIQUIDITY AND CAPITAL RESOURCES (Continued)

In the proposed merger, the Company and/or Advantage would be merged into
Select, which would be renamed Franklin Select Realty Trust. The shares of
Select will be offered to shareholders of the Company and Advantage in exchange
for their shares on the basis described in the Joint Proxy
Statement/Registration Statement. The merger is subject to certain conditions
including approval by a majority of the shareholders of Select, the Company,
and/or Advantage. A special meeting of the shareholders of each REIT will be
held to vote on the proposed merger upon the effectiveness of the Registration
Statement and the close of the solicitation period.



                                   SIGNATURE


Pursuant to the requirements 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.




                                           FRANKLIN REAL ESTATE INCOME FUND

                                           By:  /S/  DAVID P. GOSS
                                                David P. Goss
                                                Chief Executive Officer



                                           Date:       JANUARY 11, 1996