<PAGE>   1
                                                                   EXHIBIT 10.21

                                 FIRST AMENDMENT
                                       TO
                              EMPLOYMENT AGREEMENT



               PAN PACIFIC RETAIL PROPERTIES, INC., a Maryland corporation (the
"Company") and STUART A. TANZ ("Executive") have entered into that certain
Employment Agreement (the "Agreement") effective as of August 13, 1997. In order
to amend the Agreement in certain respects, the Company and Executive hereby
agree as follows effective as of __________________, 1998.

                                       I.

               Section 5.2(a) of the Agreement is hereby amended in its entirety
to read as follows:

               (a) Amount. In the event the Company terminates Executive's
               services hereunder pursuant to Section 5.1, Executive shall
               continue to render services to the Company pursuant to this
               Agreement until the date of termination and shall continue to
               receive compensation, as provided hereunder, through the
               termination date. In addition to other compensation payable to
               Executive for services rendered through the termination date, the
               Company shall pay Executive no later than the date of such
               termination, as a single severance payment, an amount equal to
               the sum of (i) three times Executive's highest annual Base
               Compensation paid hereunder during the preceding twenty-four
               month period (or, if Executive has been employed less than twelve
               months, three times the amount of Base Compensation paid during
               the period employed) plus (ii) three times the average annual
               bonus (excluding any bonus payment deemed by the Compensation
               Committee in its sole discretion to be a "Special Bonus")
               received by the Executive during the preceding twenty-four month
               period (or during the period the Executive has been employed
               hereunder if shorter than twelve months) (the "Severance
               Amount").

                                       II.

               Section 5.2(c) of the Agreement is hereby amended in its entirety
to read as follows:

               (c)    280G "Gross-Up".

                      (i) Anything in this Agreement to the contrary
               notwithstanding, if it shall be determined that any payment or
               distribution to Executive or for his benefit (whether paid or
               payable or distributed or distributable) pursuant to the terms of
               this Agreement or otherwise (the "Payment") would be subject to
               the excise tax (the "Excise Tax") imposed by section 4999 of the
               Internal Revenue Code of 1986, as amended (the "Code"), then
               Executive shall be entitled to receive from the Company an
               additional payment (the "Gross-Up Payment") in an amount such
               that the net amount of the Payment and the Gross-Up Payment
               retained by Executive after the calculation and deduction of all
               Excise Taxes


<PAGE>   2


               (including any interest or penalties imposed with respect to such
               taxes) on the Payment and all federal, state and local income
               tax, employment tax and Excise Tax (including any interest or
               penalties imposed with respect to such taxes) on the Gross-Up
               Payment provided for in this Section 5.2(c), shall be equal to
               the Payment;

                      (ii) All determinations required to be made under this
               Section 5.2(c), including whether and when the Gross-Up Payment
               is required and the amount of such Gross-Up Payment, and the
               assumptions to be used in arriving at such determinations shall
               be made by the Accountants (as defined below) which shall provide
               Executive and the Company with detailed supporting calculations
               with respect to such Gross-Up Payment within fifteen (15)
               business days of the receipt of notice from Executive or the
               Company that Executive has received or will receive a Payment.
               For the purposes of this Section 5.2(c), the "Accountants" shall
               mean the Company's independent certified public accountants
               serving immediately prior to the Change in Control (as defined in
               Section 5.6). In the event that the Accountants are also serving
               as accountant or auditor for the individual, entity or group
               effecting the Change in Control, Executive shall appoint another
               nationally recognized public accounting firm to make the
               determinations required hereunder (which accounting firm shall
               then be referred to as the Accountants hereunder). All fees and
               expenses of the Accountants shall be borne solely by the Company
               and it shall be the Company's obligation to cause the Accountants
               to take any actions required hereby. For the purposes of
               determining whether any of the Payments will be subject to the
               Excise Tax and the amount of such Excise Tax, such Payments will
               be treated as "parachute payments" within the meaning of section
               280G of the Code, and all "parachute payments" in excess of the
               "base amount" (as defined under section 280G(b)(3) of the Code)
               shall be treated as subject to the Excise Tax, unless and except
               to the extent that in the opinion of the Accountants such
               Payments (in whole or in part) either do not constitute
               "parachute payments" or represent reasonable compensation for
               services actually rendered (within the meaning of section
               280G(b)(4) of the Code) in excess of the "base amount," or such
               "parachute payments" are otherwise not subject to such Excise
               Tax. For purposes of determining the amount of the Gross-Up
               Payment, Executive shall be deemed to pay Federal income taxes at
               the highest applicable marginal rate of federal income taxation
               for the calendar year in which the Gross-Up Payment is to be made
               and to pay any applicable state and local income taxes at the
               highest applicable marginal rate of taxation for the calendar
               year in which the Gross-Up Payment is to be made, net of the
               maximum reduction in federal income taxes which could be obtained
               from the deduction of such state or local taxes if paid in such
               year (determined without regard to limitations on deductions
               based upon the amount of Executive's adjusted gross income), and
               to have otherwise allowable deductions for federal, state and
               local income tax purposes at least equal to those disallowed
               because of the inclusion of the Gross-Up Payment in Executive's
               adjusted gross income. To the extent practicable, any Gross-Up
               Payment with respect to any Payment shall be paid by the Company
               at the time Executive is entitled to receive the Payment and in
               no event will any Gross-Up Payment be paid later than five



                                       2
<PAGE>   3


               days after the receipt by Executive of the Accountants'
               determination. Any determination by the Accountants shall be
               binding upon the Company and Executive. As a result of
               uncertainty in the application of section 4999 of the Code at the
               time of the initial determination by the Accountants hereunder,
               it is possible that the Gross-Up Payment made will have been an
               amount less than the Company should have paid pursuant to this
               Section 5.2(c) (the "Underpayment"). In the event that the
               Company exhausts its remedies pursuant to Section 5.2(c)(ii) and
               Executive is required to make a payment of any Excise Tax, the
               Underpayment shall be promptly paid by the Company to or for
               Executive's benefit; and

                      (iii) Executive shall notify the Company in writing of any
               claim by the Internal Revenue Service that, if successful, would
               require the payment by the Company of the Gross-Up Payment. Such
               notification shall be given as soon as practicable after
               Executive is informed in writing of such claim and shall apprise
               the Company of the nature of such claim and the date on which
               such claim is requested to be paid. Executive shall not pay such
               claim prior to the expiration of the 30-day period following the
               date on which Executive gives such notice to the Company (or such
               shorter period ending on the date that any payment of taxes,
               interest and/or penalties with respect to such claim is due). If
               the Company notifies Executive in writing prior to the expiration
               of such period that it desires to contest such claim, Executive
               shall:

                             (A) give the Company any information reasonably
                      requested by the Company relating to such claim;

                             (B) take such action in connection with contesting
                      such claim as the Company shall reasonably request in
                      writing from time to time, including, without limitation,
                      accepting legal representation with respect to such claim
                      by an attorney reasonably selected by the Company;

                             (C) cooperate with the Company in good faith in
                      order to effectively contest such claim; and

                             (D) permit the Company to participate in any
                      proceedings relating to such claims;

               provided, however, that the Company shall bear and pay directly
               all costs and expenses (including additional interest and
               penalties) incurred in connection with such contest and shall
               indemnify Executive for and hold Executive harmless from, on an
               after-tax basis, any Excise Tax or income tax (including interest
               and penalties with respect thereto) imposed as a result of such
               representation and payment of all related costs and expenses.
               Without limiting the foregoing provisions of this Section 5.2(c),
               the Company shall control all proceedings taken in connection
               with such contest and, at its sole option, may pursue or forgo
               any and all administrative appeals, proceedings, hearings and
               conferences with the taxing authority in respect of such claim
               and may, at its sole option, either direct Executive to pay the
               tax claimed and sue for a refund or contest the claim in any



                                       3
<PAGE>   4


               permissible manner, and Executive agrees to prosecute such
               contest to a determination before any administrative tribunal, in
               a court of initial jurisdiction and in one or more appellate
               courts, as the Company shall determine; provided, however, that
               if the Company directs Executive to pay such claim and sue for a
               refund, the Company shall advance the amount of such payment to
               Executive, on an interest-free basis, and shall indemnify
               Executive for and hold Executive harmless from, on an after-tax
               basis, any Excise Tax or income tax (including interest or
               penalties with respect thereto) imposed with respect to such
               advance or with respect to any imputed income with respect to
               such advance (including as a result of any forgiveness by the
               Company of such advance); provided, further, that any extension
               of the statute of limitations relating to the payment of taxes
               for the taxable year of Executive with respect to which such
               contested amount is claimed to be due is limited solely to such
               contested amount. Furthermore, the Company's control of the
               contest shall be limited to issues with respect to which a
               Gross-Up Payment would be payable hereunder and Executive shall
               be entitled to settle or contest, as the case may be, any other
               issue raised by the Internal Revenue Service or any other taxing
               authority.

                                      III.

               Section 5.6 of the Agreement is hereby amended in its entirety to
read as follows:

                      5.6 Change of Control. Executive may terminate this
               Agreement, upon at least 10 days' prior written notice to the
               Company at any time within one year after a "change in control"
               (as hereinafter defined) of the Company. In the event Executive
               terminates this Agreement within one year after a change in
               control pursuant to this Section 5.6, (i) Executive shall
               continue to render services pursuant hereto and shall continue to
               receive compensation, as provided hereunder, through the
               termination date, (ii) the Company shall pay Executive no later
               than the date of such termination, as a single severance payment,
               an amount equal to the Severance Amount and (iii) following such
               termination, the Company shall provide the Severance Benefits as
               required by Section 5.2(b). For purposes of this Agreement, a
               "change in control" shall mean the occurrence of any of the
               following events:

                             (a) the individuals constituting the Board as of
                      the date of the initial public offering of common stock of
                      the Company (the "Incumbent Board") cease for any reason
                      to constitute at least a majority of the Board; provided,
                      however, that if the election, or nomination for election
                      by the Company's stockholders, of any new director was
                      approved by a vote of at least a majority of the Incumbent
                      Board, such new director shall be considered a member of
                      the Incumbent Board;

                             (b) provided that the number of shares of common
                      stock of the Company directly held by PPD and its
                      subsidiaries (other than the Company and the Company's
                      subsidiaries) represents 50% or less of the total
                      outstanding shares of common stock of the Company, an
                      acquisition



                                       4
<PAGE>   5


                      of any voting securities of the Company (the "Voting
                      Securities") by any "person" (as the term "person" is used
                      for purposes of Section 13(d) or Section 14(d) of the
                      Securities Exchange Act of 1934, as amended (the "1934
                      Act")) immediately after which such person has "beneficial
                      ownership" (within the meaning of Rule 13d-3 promulgated
                      under the 1934 Act) of 20% or more of the combined voting
                      power of the Company's then outstanding Voting Securities;
                      or

                             (c) approval by the stockholders of the Company of:

                                    (i) a merger, consolidation, share exchange
                             or reorganization of the Company, unless the stock
                             holders of the Company, immediately before such
                             merger, consolidation, share exchange or
                             reorganization, own, directly or indirectly
                             immediately following such merger, consolidation,
                             share exchange or reorganization, at least 80% of
                             the combined voting power of the outstanding voting
                             securities of the corporation that is the successor
                             in such merger, consolidation, share exchange or
                             reorganization (the "Surviving Company") in
                             substantially the same proportion as their
                             ownership of the Voting Securities immediately
                             before such merger, consolidation, share exchange
                             or reorganization; or

                                    (ii) a complete liquidation or dissolution
                             of the Company; or

                                    (iii) an agreement for the sale or other
                             disposition of all or substantially all of the
                             assets of the Company.

               Executed at Vista, California this ___ day of ________ 1998.

THE COMPANY

PAN PACIFIC RETAIL PROPERTIES, INC.
a Maryland Corporation


By:
    ---------------------------------
        David L. Adlard
        Executive Vice President

EXECUTIVE


    ---------------------------------
        Stuart A. Tanz







                                       5