UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934.
                      For the year ended December 31, 1997

                                       OR

[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934.
                        For the transition period from to

                         Commission file number: 0-19438

                           RANCON PACIFIC REALTY L.P.
             (Exact name of registrant as specified in its charter)

                  Delaware                           33-0270528
                -----------                        ------------
      (State or other jurisdiction                 (IRS Employer
      of incorporation or organization)          Identification No.)

    400 South El Camino Real, Suite 1100             94402-1708
                                                   ------------
            San Mateo, California                   (Zip Code)
            ---------------------
  (Address of principal executive offices)

        Registrant's telephone number, including area code (650) 343-9300
        Securities registered pursuant to Section 12(b) of the Act: None
               Securities registered pursuant to Section 12(g) of the Act:

                          Exchange Units
                         (Title of Class)
                          Preferred Units
                         (Title of Class)

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

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
                                      ---    ---
State the aggregate market value of the voting stock held by  non-affiliates  of
the Registrant. Inapplicable

                      DOCUMENTS INCORPORATED BY REFERENCE:
Prospectus dated August 8, 1988, filed pursuant to Rule 424(b), File no. 2-17900
(the  Prospectus),  is  incorporated  by  reference  in Parts I, II,  III and IV
hereof.
               For additional items incorporated by reference, see Item 14.


                                  Page 1 of 28
<PAGE>


                                     PART I


Item 1.  Business

Incorporated by reference  herein is the information  regarding the organization
and   description  of  the  business  of  Rancon  Pacific  Realty  L.  P.,  (the
Partnership),  included  in the  Prospectus  (Exhibit  28.1  hereto)  under  the
captions "The Partnership" and "The Exchange Properties"  commencing at pages 18
and 34 of the Prospectus, respectively. The Partnership reached final funding in
June 1989. During the year ended December 31, 1992, the Partnership  repurchased
and retired 715  preferred  units and 828  exchange  units were  abandoned  by a
limited  partner.  During the year ended December 31, 1997, 2,756 exchange units
were abandoned and during the year ended December 31, 1996, 2,373 exchange units
and 500 preferred units were  abandoned.  Limited  Partners  abandon their units
when they desire to no longer receive a K-1 from the Partnership.  The equity of
the abandoned  limited partner units has been allocated to the remaining limited
partners.  At December 31, 1997, the Partnership had 701,543  exchange units and
2,121,285  preferred  units  issued  and  outstanding.  The  Partnership  has no
employees.

At December 31, 1997, the  Partnership  owned three  properties,  which are more
fully described in Item 2.

Competition within the Market

Management  believes that  characteristics  influencing the competitiveness of a
real  estate  project  are  the  geographic   location  of  the  property,   the
professionalism  of the property  manager and the  maintenance and appearance of
the  property,  in  addition  to  external  factors  such  as  general  economic
circumstances,  trends,  and the existence of new,  competing  properties in the
vicinity.   Although   management   believes  the  Partnership   properties  are
competitive   with  comparable   properties  as  to  those  factors  within  the
Partnership's control,  over-building and other external factors could adversely
affect  the  ability of the  Partnership  to attract  and  retain  tenants.  The
marketability  of the  properties  may also be affected  (either  positively  or
negatively)  by these factors as well as by changes in general or local economic
conditions,  including  prevailing  interest  rates.  Depending  on  market  and
economic conditions,  the Partnership may be required to retain ownership of its
properties for periods longer than  anticipated at  acquisition,  or may need to
sell earlier than anticipated or refinance a property,  at a time or under terms
and conditions that are less  advantageous than would be the case if unfavorable
economic or market conditions did not exist.

Working Capital

The  Partnership's  practice is to maintain  cash  reserves for normal  repairs,
replacements,  working capital and other contingencies. The Partnership knows of
no statistical information which allows comparison of its cash reserves to those
of its competitors.

Item 2.  Properties

<TABLE>
<CAPTION>
                                                                                 # of Units         Encumbrances at
     Name                  Location                Type            Size             Owned          December 31, 1997
<S>                                                             <C>                   <C>         <C>
Pacific Bay Club     San Diego, California       Residential    103,275 sq. ft.       159         $    4,404,000
  Apartments

La Jolla Canyon      San Diego, California       Residential     83,164 sq. ft.       157         $    5,360,000
  Apartments

Villa La Jolla       San Diego, California       Residential    271,369 sq. ft.       385         $   13,263,000
  Condominiums


</TABLE>



                                  Page 2 of 28
<PAGE>



Pacific Bay Club Apartments

Pacific Bay Club Apartments is a 159-unit garden  apartment  complex situated on
approximately  4.4 acres in San Diego,  California.  The property is located two
blocks  east of  Morena  Boulevard,  a major  north-south  frontage  road  along
Interstate  Highway  5. The  property  is  approximately  eight  miles  north of
downtown San Diego at 4070 Huerfano  Avenue,  San Diego,  California  92117. The
area  surrounding  the property is  primarily  single-family  residential,  with
middle and upper-middle income housing.  Immediately adjacent to the property to
the south and east are two condominium projects.

The  Pacific  Bay  Club  Apartments  complex  is  comprised  of two  three-story
buildings  with  elevators.  The buildings  were  constructed in 1972 using wood
frame construction and stucco exteriors, with flat, built-up roofs. The unit mix
is 66 studio  apartments  at 475 square feet each,  42  one-bedroom/one-bathroom
apartments at 650 square feet each and 51 two-bedroom/two bathroom apartments at
875 square feet each.  There are  clubhouse  and barbecue  facilities,  a heated
swimming pool, spa and sauna, four laundry facilities and 222 parking spaces.

All of the units are rented  unfurnished.  Each  apartment  is  equipped  with a
refrigerator,  electric range,  garbage disposal,  dishwasher  (except studios),
private patio, wall-to-wall carpeting and custom window coverings. All utilities
are paid by the landlord except  electricity and cable. There is one office used
for leasing activities.

According to the Partnership's  property  manager,  Pacific Bay Club's strongest
competition is located approximately 10 miles away, closer to the coast. Pacific
Bay  Club  Apartments  is  approximately  25  years  old and is  competing  with
properties  which  were built an  average  of seven  years  ago.  In order to be
competitive,  Pacific Bay Club's units offer  upgraded  amenities and continuing
efforts are devoted to the outside appearance of the complexes. Pacific Bay Club
is 98% leased at December 31, 1997, which is equal to the market average.

The  occupancy  levels at  December  31,  1997,  1996 and 1995,  expressed  as a
percentage of the total  apartments  available for rent,  were 98%, 98% and 96%,
respectively.  The average  monthly  rental rates for the apartments at December
31, 1997 are as follows:

         Rental rate:
           Studio                                         $     600
           One bedroom/one bathroom                       $     701
           Two bedroom/two bathroom                       $     820

In the opinion of management, the property is adequately covered by insurance.

At December 31, 1997, the Pacific Bay Club  Apartments  property  secures a note
payable in the amount of $4,404,000. The note matures November 1, 2018.

During 1997, the property was assessed  property taxes of approximately  $77,000
based on a tax rate of 1.12%.

La Jolla Canyon Apartments

La Jolla Canyon  Apartments is a 157-unit garden  apartment  complex situated on
approximately  4.7 acres in San  Diego,  California.  The  property  is  located
approximately  11 miles north of downtown San Diego and five miles  northeast of
La  Jolla  at 9515  Genessee  Avenue,  San  Diego,  California  92122 in an area
referred  to as "The  Golden  Triangle".  The Golden  Triangle  is formed by the
intersection  of  Interstate  5 and 805  and  Highway  52.  The  immediate  area
surrounding  the  property  is  primarily  single-family  homes and  condominium
projects.


                                  Page 3 of 28
<PAGE>

The La Jolla Canyon Apartments complex is comprised of six two-story  buildings.
The buildings were constructed in 1976 using wood frame  construction and stucco
exteriors,   with  sloping,   asphalt  shingle  roofs.   The  unit  mix  is  112
one-bedroom/one-bathroom   apartments   at  487   square   feet   each   and  45
two-bedroom/one-bathroom   apartments  at  636  square  feet  each.   There  are
recreation  facilities,  a solar-heated  swimming  pool,  spa and sauna,  modern
laundry facility and 205 parking spaces.

All of the units are rented  unfurnished.  Each  apartment  is  equipped  with a
refrigerator,  electric range,  garbage  disposal,  private patio,  wall-to-wall
carpeting  and  custom  window  coverings.  Some  units  have  dishwashers.  All
utilities  are paid by the  landlord  except  electricity  and cable.  A leasing
office and one decorated model apartment are used in leasing activities.

La Jolla  Canyon is close to the  University  of  California  San Diego  Campus,
Scripps  Clinic,  research  facilities such as the Salk Institute and many major
pharmaceutical and biotech  companies.  The improved economy in San Diego County
has  created  25,000  new  jobs in 1997 and the  need  for  additional  housing;
therefore,  although  quite  small,  the  units  have  been  easy to rent to the
surrounding community.

According to research conducted by the property manager, there are approximately
5,000  residential  units within the Golden  Triangle that compete with La Jolla
Canyon and the  construction of  approximately  1,000 units has been planned for
the next two  years.  In 1997,  a  500-unit  high rise  apartment  building  was
constructed  within three blocks of the La Jolla Canyon  Apartments  complex and
there  appears  to have  been no  significant  impact  on the  rental  rates  or
occupancy  levels obtained at La Jolla Canyon.  La Jolla Canyon is approximately
22 years old yet remains  competitive  in the market with an occupancy of 99% at
December 31, 1997, which is above the market average of 98%.

The  occupancy  levels at  December  31,  1997,  1996 and 1995,  expressed  as a
percentage of the total  apartments  available for rent,  were 99%, 98% and 95%,
respectively.  The average  monthly  rental rates for the apartments at December
31, 1996 were:

         Rental rate:
           One bedroom/one bathroom                           $     736
           Two bedroom/one bathroom                           $     834

In the opinion of management, the property is adequately covered by insurance.

At December 31, 1997,  the La Jolla Canyon  Apartments  property  secures a note
payable in the amount of $5,360,000. The note matures October 1, 2018.

During 1997, the property was assessed  property taxes of approximately  $91,000
based on a tax rate of 1.12%.

Villa La Jolla Condominiums

Villa La Jolla  Condominiums is part of a condominium  complex consisting of 500
garden-style  residential  units, of which the Partnership  owns 385 units;  the
other 115 units were sold to individual  owners prior to the  acquisition of the
property  by  the   Partnership.   The   condominium   complex  is  situated  on
approximately  18.28  acres in La Jolla,  California.  The complex was built and
opened as an apartment  complex in 1972 and converted to  condominiums  in 1980.
The property is located  approximately 11 miles north of downtown San Diego, two
miles north of downtown La Jolla and one mile east of the Pacific  Ocean at 8540
Villa Mallorca Drive, La Jolla, California 92037. The immediate area surrounding
the property  consists of  residential  condominium  projects and  single-family
homes.


                                  Page 4 of 28
<PAGE>

The portion of the complex owned by the Partnership is comprised of 52 two-story
buildings.  The buildings were  constructed  using wood frame  construction  and
stucco  exteriors,  with  sloping  asphalt  roofs.  The unit  mix is 101  studio
apartments at 505 square feet each, 222  one-bedroom/one-bathroom  apartments at
710 square feet each and 62 two-bedroom/two-bathroom  apartments at 1,012 square
feet each.  There are two swimming pools,  two spas, six laundry  facilities,  a
recreation facility (fitness center and clubhouse) and 395 parking spaces.

All  of  the  units  are  rented  unfurnished.  Each  unit  is  equipped  with a
refrigerator,  electric oven and range,  garbage  disposal,  private patio (with
storage),  wall-to-wall carpeting and custom window coverings. A majority of the
units have dishwashers.  All utilities are paid by the tenants. A leasing office
and two decorated model units are used in leasing activities.

According to research conducted by the Partnership's property manager, there are
seven properties in the immediate market area, comprising 2,500 units, competing
with the Villa La Jolla  property  and four  projects,  comprising  2,300 units,
slated for  construction  over the next few years. Due to the improved San Diego
County  economy and  increasing  population,  management  does not expect  these
projects to have a significant impact on the marketability of the Villa La Jolla
Condominiums.  At December 31, 1997, the 99% ocupancy rate at the Villa La Jolla
property is consistent with the average market occupancy.

The  occupancy  levels  at  December  31,  1997,  1996 and 1995  expressed  as a
percentage  of the  total  units  available  for rent,  were  99%,  97% and 97%,
respectively.  The average  monthly  rental  rates for the units at December 31,
1997 were:

         Rental rate:
           Studio                                       $     700
           One bedroom/one bathroom                     $     795
           Two bathroom/two bathroom                    $   1,009

In the opinion of management, the property is adequately covered by insurance.

At December 31, 1997, the Villa La Jolla  Condominiums  property  secures a note
payable in the amount of $13,263,000. The note matures September 1, 2002.

During 1997, the property was assessed property taxes of approximately  $239,000
based on a tax rate of 1.14%.

Item 3.  Legal Proceedings

None.

Item 4.  Submission of Matters to a Vote of Security Holders

None.




                                  Page 5 of 28
<PAGE>


                                     PART II



Item 5.  Market for Partnership's Common Equity and Related Stockholder Matters

Market Information
------------------
There is no  established  trading market for the Exchange Units or the Preferred
Units.

Holders
-------
As of December 31, 1997, a total of 1,365 persons held the Exchange  Units and a
total of 1,172  persons  held the  Preferred  Units  (collectively,  the Limited
Partners).

Dividends

Incorporated by reference herein is the information  regarding the Partnership's
distribution policies included in Paragraph 11 of the Partnership's Agreement of
Limited  Partnership  (Exhibit 3.1 hereto) and the Partnership's Third Amendment
to Agreement of Limited Partnership (Exhibit 3.3 hereto).

The following distributions of Cash from Operations were made by the Partnership
to the holders of Preferred Units during the last three fiscal years.

                        Amount          Amount        Amount
      Date of        Distributed      Distributed    Distributed to
   Distribution   to Limited Partners   Per Unit      General Partner
   ------------   -------------------   --------      ---------------
     11/26/97       $    175,000        $   0.08       $        --
     08/29/97       $    175,000        $   0.08       $        --
     05/30/97       $    175,000        $   0.08       $        --
     02/28/97       $    175,000        $   0.08       $        --
     11/30/96       $    175,000        $   0.08       $        --
     08/31/96       $    175,000        $   0.08       $        --
     06/30/96       $    175,000        $   0.08       $        --
     03/01/96       $    175,000        $   0.08       $        --
     12/15/95       $    175,000        $   0.08       $        --

Of the total  distributions paid in 1997 and 1996, $0.12 and $0.29 represented a
return of capital,  respectively. All distributions in 1995 represented a return
of capital.


                                  Page 6 of 28
<PAGE>

Item 6.  Selected Financial Data

The financial data should be read in conjunction  with the financial  statements
and related notes contained elsewhere in this report. This financial data is not
covered by the reports of the independent public accountants.

The following is selected  financial  data for the five years ended December 31,
(in thousands, except per Unit data).
<TABLE>
<CAPTION>

                                          1997             1996            1995           1994              1993
                                          ----            ------          ------         ------            -----
<S>                                  <C>               <C>             <C>            <C>             <C>
Rental Income                        $      6,224      $     5,758     $    5,465     $    5,249      $     5,286

Net income (loss)                    $        559      $        81     $     (148)    $     (349)     $      (139)

Net income (loss) allocable
 to limited partners                 $        554      $        80     $     (147)    $     (346)     $      (138)

Net (income) loss per limited
 partnership unit                    $      0.20       $      0.03     $    (0.05)    $    (0.12)     $     (0.05)

Total assets                         $     32,376      $    32,843     $   33,735     $   33,785      $    34,428

Long-term obligations                $     23,027      $    23,337     $   23,589     $   23,418      $    23,502

Cash distributions per limited partnership unit:
   Preferred Unit                    $      0.32       $     0.32      $     0.08     $     0.10      $       --
   Exchange Unit                     $        --       $       --      $       --     $       --      $       --
</TABLE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of operations

LIQUIDITY AND CAPITAL COMMITMENTS

Pursuant to a plan of exchange which was  consummated  in 1988, the  Partnership
issued 707,500 exchange units and rights to purchase  2,122,500  preferred units
at a cost of $7 per  preferred  unit in  exchange  for the assets of Shadow Hill
Partners,   Eastgate  Village  Partners  and  Brichard-La  Jolla  Partners  (the
Participating  Partnerships).  The  exchange  units  were  allocated  among  the
Participating  Partnerships using the appraised value of the real property owned
by them, less related  mortgage  indebtedness and adjusted for the book value of
other  specified  net assets as of  September,  1987.  Rights to purchase  three
preferred units were issued with each exchange unit.  Preferred Units covered by
unexercised  rights were then sold to other investors.  As of June 23, 1989, the
Partnership  was fully funded from the sale of 2,122,500  Preferred Units in the
amount of $14,857,500.

As of December  31,  1997,  the  Partnership  had cash and cash  equivalents  of
$1,876,000.  The remainder of the Partnership's assets consists primarily of its
investments  in three  residential  properties,  with a net book value  totaling
approximately $29,988,000 at December 31, 1997.

The increase in other liabilities of $24,000,  or 10%, from December 31, 1996 to
December  31,  1997  is  primarily  due to the  increase  in  security  deposits
collected  in 1997  when the  Partnership  raised  the  amount  of the  required
security  deposit  at the  Villa  La  Jolla  Condominiums  property.

                                  Page 7 of 28
<PAGE>

Management believes that the Partnership's available cash together with the cash
generated by the operations of the  Partnership's  properties will be sufficient
to finance  the  properties'  continued  operations  as well as meet future debt
commitments.  Management will continue to monitor market  conditions in order to
sell its properties for the best  obtainable  price prior to June 1999, the date
upon which the Partnership is due to terminate, or as soon as practicable.

During  1989,  management  discovered  the  presence  of  asbestos  at the three
properties  and elected to remove the asbestos  from the common areas as well as
to take the steps  necessary to notify tenants and on-site  staff.  Asbestos has
been  removed  from some of the  individual  apartment  and  condominium  units.
Management  will monitor the need for any additional  asbestos  removal and will
incur the costs only when a need for such removal arises.  Careful attention has
been taken by management to insure that the proper  notifications to tenants are
maintained.

RESULTS OF OPERATIONS

Rental income  increased  $466,000 and $293,000 for the year ended  December 31,
1997 compared to 1996 and 1996 compared to 1995, respectively,  primarily due to
an  increase  in rental  rates  and  steady  or  higher  occupancies  at all the
Partnership's properties.

The 6% and 31%  increases  in  interest  and  other  income  for the year  ended
December 31, 1997 compared to 1996 and 1996 compared to 1995, respectively,  are
due to  increases in the  Partnership's  invested  cash  balances as a result of
additional funds provided by operating activities.

Operating and  depreciation  expenses  remained  consistent  for the years ended
December 31, 1995 through 1997.

Interest  expense  continues  to decline due to the  decreasing  balances of the
Partnership's outstanding debt.

General and administrative  expenses decreased $24,000,  or 7%, in 1997 compared
to 1996  primarily  due to a  $12,000  decrease  in tax  preparation  fees and a
one-time  payment  of $5,000  for  professional  services  in 1996  rendered  in
connection  with the valuation of the limited  partner  interests,  as described
below.  The  remaining  difference  primarily  relates to the decrease in travel
related  expenses  from 1996 to 1997.  The  $55,000,  or 18%,  increase  in 1996
compared  to  1995 is due to an  increase  in  general  legal  fees  of  $14,000
associated with administering the Partnership's  day-to-day  affairs,  $5,000 in
fees rendered in connection  with  valuations of limited  partner  interests and
$24,000  and $7,000  for  additional  insurance  and loan  administration  fees,
respectively, as a result of the Villa La Jolla refinancing in September 1995.

Year 2000 Compliance

The Partnership  utilizes a number of computer  software  programs and operating
systems across its entire organization, including applications used in financial
business systems and various  administrative  functions.  To the extent that the
Partnership's  software  applications  contain  a source  code that is unable to
appropriately interpret the upcoming calendar year "2000" and beyond, some level
of  modification,  or replacement of such  applications  will be necessary.  The
Partnership has completed its  identification  of applications  that are not yet
"Year 2000"  compliant and has commenced  modification  or  replacement  of such
applications,  as  necessary.  Given  information  known at this time  about the
Partnership's  systems that are  non-compliant,  coupled with the  Partnership's
ongoing,  normal  course-of-business  efforts to  upgrade  or  replace  critical
systems,  as necessary,  management does not expect "Year 2000" compliance costs
to have any material  adverse impact on the  Partnership's  liquidity or ongoing
results of  operations.  No  assurance  can be given,  however,  that all of the
Partnership's  systems will be "Year 2000" compliant or that compliance costs or
the  impact of the  Partnership's  failure to achieve  substantial  "Year  2000"
compliance will not have a material adverse effect on the  Partnership's  future
liquidity or results of operations.


                                  Page 8 of 28
<PAGE>

Item 8.  Financial Statements and Supplementary Data

For information  with respect to Item 8, see Financial  Statements and Schedules
as listed in Item 14.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

None.


                                  Page 9 of 28
<PAGE>


                                     Part III


Item 10.          Directors and Executive Officers of the Partnership

RC Pacific Realty Partners L.P. (RCPLP) is a Delaware limited partnership formed
in 1987 to serve as the General Partner of the  Partnership.  RC Pacific Realty,
Inc.  (RCPRI) is the  general  partner  of RCPLP and RFC and  certain of its key
employees and others are limited  partners of RCPLP.  RCPRI was  incorporated in
California  in 1987 to serve as the  general  partner  of RCPLP.  The  executive
officers and directors of RCPRI are:

Daniel L. Stephenson       Chairman of the Board, President, Chief Executive
                           Officer and Chief Financial Officer

There is no fixed term of office for Mr. Stephenson.

Mr.  Stephenson,  age 54, founded RFC (formerly known as Rancon  Corporation) in
1971 for the purpose of  establishing  itself as a  commercial,  industrial  and
residential  property  syndication,   development  and  brokerage  concern.  Mr.
Stephenson  was President and Chief  Executive  Officer of RFC from 1971 to 1986
and  from  August  1991 to  September  1992,  and has from  inception,  held the
position of Chairman of the Board.  In addition,  Mr.  Stephenson is Chairman of
the Board of PacWest  Group,  Inc.,  a real  estate  firm  which has  acquired a
portfolio of assets from the Resolution Trust Corporation.

Item 11.          Executive Compensation

The Partnership  has no executive  officers.  For information  relating to fees,
compensation,   reimbursements   and  distributions  paid  to  related  parties,
reference is made to Item 13 below.

Item 12.          Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners

No person is known by the Partnership to be the beneficial owner of more than 5%
of the Units.

Security Ownership of Management
<TABLE>
<CAPTION>
                                               Amount and Nature of
<S>               <C>                          <C>                      <C>
Title of Class    Name of Beneficial Owner     Beneficial Ownership     Percent of Class
--------------    ------------------------     --------------------     ----------------

Preferred Units   Daniel L. Stephenson (IRA)  14,254 Units (indirect)  Less than 1 percent

</TABLE>

Changes in Control

The Limited  Partners  have no right,  power or authority to act for or bind the
Partnership.  However,  the  Limited  Partners  have the  power to vote upon the
following  matters  affecting the basic  structure of the  Partnership,  each of
which shall require the approval of Limited  Partners  holding a majority of the
outstanding  Units: (i) amendment of the  Partnership's  Partnership  Agreement;
(ii)  termination and dissolution of the  Partnership;  (iii) sale,  exchange or
pledge  of all or  substantially  all of the  assets  of the  Partnership;  (iv)
withdrawal or removal of the General Partner or any successor  General  Partner;
(v) purchase price of the withdrawing General Partners' interest;  (vi) election
of a new General  Partner;  (vii)


                                 Page 10 of 28
<PAGE>

the approval or  disapproval  of the terms of purchase of the General  Partner's
interest;  and (viii) the modification of the terms of any agreement between the
Partnership and the General Partner or an affiliate.

Item 13.          Certain Relationships and Related Transactions

For the year ended  December 31, 1997, the  Partnership  did not incur any costs
reimbursable to RFC.







                                 Page 11 of 28
<PAGE>



                                     Part IV

Item 14.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K

         (a)  The following documents are filed as part of the report

              (1)  Financial Statements:

                   Report of Independent Public Accountants

                   Consolidated Balance Sheets as of December 31, 1997 and 1996

                   Consolidated Statements of Operations for the Years Ended
                   December 31, 1997, 1996 and 1995

                   Consolidated Statements of Partners' Equity (Deficit) for the
                   Years Ended December 31, 1997, 1996 and 1995

                   Consolidated Statements of Cash Flows for the Years Ended
                    December 31, 1997, 1996 and 1995

                   Notes to Consolidated Financial Statements

              (2)  Financial Statement Schedule:

                   Schedule III -- Real Estate and  Accumulated  Depreciation as
                   of December 31, 1997 and Note thereto

                   All  other   schedules  are  omitted  because  they  are  not
                   applicable  or  the  required  information  is  shown  in the
                   consolidated financial statements or notes thereto.

              (3)  Exhibits:

                    (3.1)  Agreement of Limited  Partnership and First Amendment
                           thereto  (included as part of the Prospectus filed as
                           Exhibit 28.1 hereto)

                    (3.2)  Second Amendment to Agreement of Limited Partnership*

                    (3.3)  Third Amendment to Agreement of Limited Partnership *

                    (3.4)  Agreementof Limited Partnership and amendment thereto
                           of Villa, L.P.

                   (10.1)  Management,  administration and consulting  agreement
                           and  amendment   thereto  for  services  rendered  by
                           Glenborough  Inland Realty Corporation dated December
                           20, 1994 and March 30, 1995, respectively

                   (10.2)  Promissory  note  secured by a deed of trust on Villa
                           La Jolla  Condominiums  in the amount of  $13,500,000
                           dated August 31, 1995




                                 Page 12 of 28
<PAGE>



                   (28.1)  Prospectus  dated August 8, 1988 (portions of which
                           are incorporated  by reference into this annual
                           report.)*

                        *  Included  as an Exhibit in Form 10-K filed for fiscal
                           year ended December 31, 1992.

         (b)  Reports on Form 8-K

               None.



                                 Page 13 of 28
<PAGE>




                                   SIGNATURES




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


                                 RANCON PACIFIC REALTY L.P.,
                                 (Partnership)


                           By:   RC PACIFIC REALTY PARTNERS, L.P.
                                 General Partner




Date:    March 27, 1998    By:   /s/ Daniel L. Stephenson
                              ---------------------------
                                 Daniel  L.  Stephenson,
                                 Director,President, Chief Executive Officer
                                 and Chief Financial  Officer of
                                 RC Pacific  Realty,   Inc.,
                                 General Partner  of
                                 RC Pacific Realty Partners, L.P.





Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Partnership and in the
capacities and on the dates indicated.



Date:    March 27, 1998    By:   /s/ Daniel L. Stephenson
                               --------------------------
                                 Daniel  L.  Stephenson
                                 Director,President, Chief Executive Officer
                                 and Chief Financial  Officer of
                                 RC Pacific  Realty,   Inc.,
                                 General Partner  of
                                 RC Pacific Realty Partners, L.P.








                                 Page 14 of 28
<PAGE>




                          INDEX TO FINANCIAL STATEMENTS

                                  AND SCHEDULE





                                                                           Page

  Report of Independent Public Accountants                                  16

  Financial Statements:

     Consolidated Balance Sheets as of December 31, 1997 and 1996           17

     Consolidated Statements of Operations for the years ended
        December 31, 1997, 1996 and 1995                                    18

     Consolidated Statements of Partners' Equity (Deficit)
        for the years ended December 31, 1997, 1996 and 1995                19

     Consolidated Statements of Cash Flows for the years ended
        December 31, 1997, 1996 and 1995                                    20

     Notes to Consolidated Financial Statements                             21

  Schedule:

     III - Real Estate and Accumulated Depreciation
           as of December 31, 1997 and Note thereto                         27

      All other  schedules are omitted because they are not applicable or the
      required information is shown in the consolidated financial statements
      or notes thereto.




                                 Page 15 of 28
<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Partners of RANCON PACIFIC REALTY L.P.

We have audited the accompanying  consolidated  balance sheets of RANCON PACIFIC
REALTY  L.P.,  as of December  31, 1997 and 1996,  and the related  consolidated
statements  of  operations,  partners'  equity  (deficit) and cash flows for the
years ended  December  31, 1997,  1996 and 1995.  These  consolidated  financial
statements  and the  schedule  referred to below are the  responsibility  of the
Partnership's  management.  Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of RANCON PACIFIC
REALTY L.P., as of December 31, 1997 and 1996, and the  consolidated  results of
its operations  and its cash flows for the years ended  December 31, 1997,  1996
and 1995, in conformity with generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
consolidated  financial  statements taken as a whole. The accompanying  schedule
listed in the index to financial  statements  and schedule is presented  for the
purpose of complying with the Securities and Exchange  Commission's rules and is
not a  required  part  of the  basic  consolidated  financial  statements.  This
information has been subjected to the auditing  procedures applied in our audits
of the basic consolidated  financial  statements and, in our opinion,  is fairly
stated in all material respects in relation to the basic consolidated  financial
statements taken as a whole.





San Francisco, California                 /s/ Arther Andersen LLP
   February 11, 1998



                                 Page 16 of 28
<PAGE>


                           RANCON PACIFIC REALTY L.P.

                           Consolidated Balance Sheets
                           December 31, 1997 and 1996
                    (in thousands, except units outstanding)

<TABLE>
<CAPTION>
                                                                            1997                1996
                                                                            ----               ------
<S>                                                                 <C>                   <C>
Assets
Rental property, net of accumulated depreciation
    of $12,748 and $11,932 in 1997 and 1996, respectively           $       29,988        $      30,768
Cash and cash equivalents                                                    1,876                1,407
Deferred financing costs, net of accumulated amortization
    of $207 and $134 in 1997 and 1996, respectively                            425                  498
Other assets                                                                    87                  170
                                                                    --------------        -------------

         Total Assets                                               $       32,376        $      32,843
                                                                     =============        =============


Liabilities and Partners' Equity (Deficit)
Liabilities:
   Accounts payable and accrued expenses                            $           72        $          70
   Interest payable                                                            154                  155
   Notes payable                                                            23,027               23,337
   Other liabilities                                                           275                  251
                                                                    --------------        -------------

     Total liabilities                                                      23,528               23,813
                                                                    --------------        -------------

Commitments and contingent liabilities (see Note 4)

Minority interest                                                              382                  423
                                                                    --------------        -------------

Partners' equity (deficit):
   General Partner                                                             (85)                 (90)
   Limited Partners, 2,822,828 and 2,825,584 units outstanding in
    1997 and 1996, respectively (including 2,121,285 preferred
    units outstanding in 1997 and 1996)                                      8,551                8,697
                                                                    --------------        -------------

     Total partners' equity                                                  8,466                8,607
                                                                    --------------        -------------

         Total liabilities and partners' equity                     $       32,376        $      32,843
                                                                     =============        =============


</TABLE>






The  accompanying  notes are an integral  part of these  consolidated  financial
statements.




                                 Page 17 of 28
<PAGE>



                           RANCON PACIFIC REALTY L.P.

                      Consolidated Statements of Operations
              For the years ended December 31, 1997, 1996 and 1995
                     (in thousands, except per unit amounts)
<TABLE>
<CAPTION>

                                                                1997             1996                1995
                                                                ----            ------              -----
<S>                                                      <C>               <C>               <C>
Revenue:
    Rental income                                        $       6,224     $        5,758    $       5,465
    Interest and other income                                       54                 51               39
                                                         -------------     --------------    -------------

       Total revenue                                             6,278              5,809            5,504
                                                         -------------     --------------    -------------

Expenses:
   Operating                                                     2,517              2,495            2,402
   Interest                                                      1,919              1,952            2,047
   Depreciation                                                    912                910              902
   General and administrative                                      345                369              314
                                                         -------------     --------------    -------------

       Total expenses                                            5,693              5,726            5,665
                                                         -------------     --------------    -------------

Income (loss) from operations                                      585                 83             (161)

Minority interest                                                  (26)                (2)              13
                                                         --------------    --------------    -------------

Net income (loss)                                        $         559     $           81    $        (148)
                                                         =============     ==============    =============

Net income (loss) per limited partnership unit           $        0.20     $         0.03    $       (0.05)
                                                         =============     ==============    =============

Distributions per preferred unit:
   Representing return of capital                          $      0.12       $       0.29      $      0.08
   From net income                                                0.20               0.03              --
                                                         -------------     --------------    ------------

     Total distributions per preferred unit              $        0.32     $         0.32    $        0.08
                                                         =============     ==============    =============

Weighted average number of limited partnership
   units outstanding during the period used to compute
   net income (loss) per limited partnership unit        $   2,824,124     $    2,827,286    $   2,828,457
                                                             =========      =============     ============

Weighted average number of preferred units
   outstanding during the period used to compute
   distributions per preferred unit                      $   2,121,285     $    2,121,516    $   2,121,785
                                                          ============      =============     ============

</TABLE>







The  accompanying  notes are an integral  part of these  consolidated  financial
statements.



                                 Page 18 of 28
<PAGE>


                           RANCON PACIFIC REALTY L.P.

                   Consolidated Statements of Partners' Equity
                   (Deficit) For the years ended December 31,
                               1997, 1996 and 1995
                                 (in thousands)


                                    General         Limited
                                    Partner        Partners          Total

Balance at December 31, 1994      $     (89)    $     9,703      $    9,614

Distributions to partners                --            (175)           (175)

Net loss                                 (1)           (147)           (148)
                                  ---------     -----------      ----------

Balance at December 31, 1995            (90)          9,381           9,291

Distributions to partners                --            (700)           (700)

Net income                                1              80              81

Adjustment to minority interest          (1)            (64)            (65)
                                  ----------    ------------     -----------

Balance at December 31, 1996            (90)          8,697           8,607

Distributions to partners                --            (700)           (700)

Net income                                5             554             559
                                  ---------     -----------      ----------

Balance at December 31, 1997      $     (85)    $     8,551      $    8,466
                                  =========     ===========      ==========


















The  accompanying  notes are an integral  part of these  consolidated  financial
statements.



                                 Page 19 of 28
<PAGE>


                           RANCON PACIFIC REALTY L.P.

                         Consolidated Statements of Cash
                     Flows For the years ended December 31,
                               1997, 1996 and 1995
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                1997               1996                   1995
                                                                ----               ----                   ----
<S>                                                       <C>                  <C>                 <C>
Cash flows from operating activities:
 Net income (loss)                                        $        559         $        81         $       (148)
Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
        Depreciation                                               912                 910                  902
        Amortization of loan fees,
         included in interest expense                               73                  73                   47
        Minority interest in income (loss)                          26                   2                  (13)
Changes in certain assets and liabilities:
        Other assets                                                83                  29                 (137)
        Accounts payable and accrued expenses                        2                  13                   55
        Payable to sponsor                                          __                  --                  (72)
        Interest payable                                            (1)                 (4)                 159
        Other liabilities                                           24                  --                   (4)
                                                           -----------          ----------          ------------

     Net cash provided by operating activities                   1,678               1,104                  789
                                                           -----------          ----------          -----------

Cash flows from investing activities:
 Additions to rental properties                                   (132)                (44)                 (81)
                                                           ------------         ----------          ------------
     Net cash used for investing activities                       (132)                (44)                 (81)
                                                           ------------         ----------          ------------

Cash flows from financing activities:
 Notes payable principal payments                                 (310)               (253)                (187)
 Distributions to partners                                        (700)               (700)                (175)
 Distributions to minority interest holders                        (67)                (31)                 (23)
 Proceeds from note payable                                         --                  --               13,500
 Payoff of matured note payable                                     --                  --              (13,142)
 Closing costs and loan fees                                        --                  --                 (473)
                                                           -----------          ----------          -----------

     Net cash used for financing activities                     (1,077)               (984)                (500)
                                                           ------------         ----------          -----------

Net increase in cash and cash equivalents                          469                  76                  208

Cash and cash equivalents at beginning of year                   1,407               1,331                1,123
                                                           -----------          ----------          -----------

Cash and cash equivalents at end of year                  $      1,876         $     1,407         $      1,331
                                                           ===========          ==========          ===========

Supplemental disclosure of cash flow information:
 Cash paid for interest                                   $      1,847         $     1,883         $      1,842
                                                           ===========          ==========          ===========


</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.




                                 Page 20 of 28
<PAGE>




                           RANCON PACIFIC REALTY L.P.


                   Notes to Consolidated Financial Statements

                        December 31, 1997, 1996 and 1995


Note 1.           ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization
------------

Rancon Pacific  Realty L.P.,  (the  Partnership),  was formed for the purpose of
acquiring the assets,  subject to the liabilities,  of three California  limited
partnerships:  Shadow Hill Partners,  Eastgate  Village Partners and Brichard-La
Jolla  Partners.  The General  Partner of the  Partnership  is RC Pacific Realty
Partners  L. P. of which RC Pacific  Realty,  Inc.  is the  general  partner and
Rancon  Financial  Corporation  (RFC)  (the  Sponsor)  and  certain  of its  key
employees and others are limited partners.

Pursuant to a plan of exchange which was  consummated  in 1988, the  Partnership
issued 707,500 exchange units and rights to purchase  2,122,500  preferred units
at a cost of $7 per  preferred  unit in  exchange  for the assets of Shadow Hill
Partners,   Eastgate  Village  Partners  and  Brichard-La  Jolla  Partners  (the
Participating  Partnerships).  The  exchange  units  were  allocated  among  the
Participating  Partnerships using the appraised value of the real property owned
by them, less related  mortgage  indebtedness and adjusted for the book value of
other  specified  net assets as of  September  1987.  Rights to  purchase  three
preferred units were issued with each exchange unit.  Preferred Units covered by
unexercised rights were then sold to other investors.

The  Partnership  reached final funding in June 1989. In 1992,  the  Partnership
repurchased  and  retired  715  preferred  units  and 828  exchange  units  were
abandoned by a limited partner.  In 1996, 2,373 exchange units and 500 preferred
units were abandoned.  Limited  partners abandon their units when they desire to
no  longer  receive a K-1 from the  Partnership.  The  equity  of the  abandoned
limited partner units has been allocated to the remaining limited  partners.  At
December 31, 1997,  exchange and  preferred  units issued and  outstanding  were
701,543 and 2,121,285, respectively.

The Partnership and Transamerica  Realty Investment  Corporation formed Villa La
Jolla  Partners  (VLJP),  ("the Joint  Venture"),  which became the owner of the
Villa  La  Jolla  Condominiums.   Transamerica  Realty  Investment   Corporation
thereafter  transferred  its 26.2%  interest  in VLJP to  Transamerica  La Jolla
Partners  (TLJP).  During 1988 and 1989, the  Partnership  made  additional cash
contributions to VLJP in order to facilitate the payoff of the interim financing
provided by TLJP. Such cash  contributions  caused TLJP's ownership  interest to
decrease to 8.41% and the  Partnership's to increase to 91.59%.  During 1996, it
was  determined  that a  reallocation  in the amount of $65,000 to the  previous
years allocations of losses between TLJP and the Partnership was necessary. This
amount appears as an adjustment to minority interest on the  Partnership's  1996
consolidated statement of partners' equity.

In order to satisfy  certain  lender  requirements  for the  Partnership's  loan
secured by the Villa La Jolla  Condominiums (see Note 4), VLJ Partners (formerly
known as Villa, L.P.), a California limited partnership,  (VLJ LP) was formed as
of  September  1, 1995.  VLJP  contributed  the  property and all of its related
assets and  liabilities  to VLJ LP in  exchange  for a 99%  limited  partnership
interest. The general partner is VLJ, Inc., a California corporation, whose sole
shareholders are the owners of VLJP.



                                 Page 21 of 28
<PAGE>



General Partner and Management Matters
--------------------------------------

In December  1994, RFC entered into an agreement  with  Glenborough  Corporation
(successor by merger with Glenborough Inland Realty  Corporation)  (Glenborough)
whereby  RFC  sold to  Glenborough  the  contract  to  perform  the  rights  and
responsibilities  under RFC's  agreement with the  Partnership and other related
Partnerships  (collectively,  the Rancon Partnerships) to perform or contract on
the Partnership's  behalf  financial,  accounting,  data processing,  marketing,
legal,  investor  relations,  asset and  development  management  and consulting
services for the  Partnership for a period of ten years or to the liquidation of
the  Partnership,   whichever  comes  first.  According  to  the  contract,  the
Partnership  will pay Glenborough  for its services as follows:  (i) a specified
asset  administration  fee of $215,000  per year,  which is fixed for five years
subject to reduction in the year  following the sale of assets;  (ii) sales fees
of 2% for improved properties and 4% for land; (iii) a refinancing fee of 1% and
(iv) a management fee of 5% of gross rental receipts. As part of this agreement,
Glenborough will perform certain responsibilities for the General Partner of the
Rancon  Partnerships.  RFC has  agreed to  cooperate  with  Glenborough,  should
Glenborough  attempt  to  obtain a  majority  vote of the  limited  partners  to
substitute itself as the Sponsor for the Rancon Partnerships. This agreement was
effective  January  1,  1995.  Glenborough  is  not an  affiliate  of RFC or the
Partnership.

Significant Accounting Policies
-------------------------------

Basis of Accounting - The accompanying  financial  statements have been prepared
on the  accrual  basis of  accounting  in  accordance  with  generally  accepted
accounting  principles  under the presumption that the Partnership will continue
as a going concern.

Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that effect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported results of operations during the reporting period.
Actual results could differ from those estimates.

Risks and Uncertainties - The Partnership's ability to (i) achieve positive cash
flow  from   operations,   (ii)  meet  its  debt   obligations,   (iii)  provide
distributions  either  from  operations  or  the  ultimate  disposition  of  the
Partnership's properties or (iv) continue as a going concern, may be impacted by
changes in interest rates, property values,  geographic economic conditions,  or
the entry of other  competitors  into the  market.  The  accompanying  financial
statements do not provide for adjustments with regard to these uncertainties.

Principles of Consolidation - The consolidated  financial statements include the
accounts of the  Partnership  and VLJP. As of December 31, 1997,  1996 and 1995,
the Partnership owned an 91.59% interest in VLJP and thus reports the results of
its operations on a consolidated basis. The joint venture agreement provides for
distributions and profit/loss  allocations based on ownership  percentages.  All
significant  intercompany  balances and transactions have been eliminated in the
consolidation.

Rental  Property  - Rental  properties  are  stated  at cost  unless  events  or
circumstances  indicate  that cost cannot be  recovered,  in which case carrying
value is reduced to estimated  fair value.  Estimated  fair value:  (i) is based
upon the Partnership's plans for the continued operation of each property;  (ii)
is computed  using  estimated  sales price,  as determined by prevailing  market
values  for  comparable  properties  and/or  the  use  of


                                 Page 22 of 28
<PAGE>

capitalization  rates multiplied by annualized rental income based upon the age,
construction and use of the building, and (iii) does not purport, for a specific
property, to represent the current sales price that the Partnership could obtain
from third parties for such property. The fulfillment of the Partnership's plans
related to each of its  properties is dependent  upon,  among other things,  the
presence of economic conditions which will enable the Partnership to continue to
hold  and  operate  the  properties   prior  to  their  eventual  sale.  Due  to
uncertainties  inherent  in the  valuation  process  and in the  economy,  it is
reasonably  possible  that the actual  results of operating and disposing of the
Partnership's   properties   could  be   materially   different   than   current
expectations.  Depreciation is provided using the straight-line  method over the
useful lives of the respective assets (see Note 2).

Cash  Equivalents - The  Partnership  considers all  certificates of deposit and
money market funds with original  maturities of less than ninety days to be cash
equivalents.

Deferred Financing Costs - Deferred loan fees are amortized over the life of the
related loan on a straight-line basis.  Amortization expense,  which is included
in interest  expense,  was $73,000 for both of the years ended December 31, 1997
and 1996 and $47,000 for the year ended December 31, 1995.

Rental  Income - Rental  income is  recognized  as  earned  over the life of the
respective leases.

Allocation of Profits,  Losses and Cash  Distributions  - Allocation of profits,
losses and cash  distributions are made pursuant to the terms of the Partnership
Agreement dated December 31, 1987, which provide certain preferential  treatment
for holders of preferred units.

Net Income (Loss) Per Limited  Partnership  Unit - Net income (loss) per limited
partnership  unit is  calculated  using the weighted  average  number of limited
partners'  units  outstanding  during the period,  including  both preferred and
exchange  units,  and the limited  partners'  allocable  share of the net income
(loss).

Income  Taxes - No provision  for income  taxes is included in the  accompanying
financial  statements,  as the  Partnership's  results of operations  are passed
through to the partners for  inclusion in their  respective  income tax returns.
Net income and partners' equity (deficit) for financial  reporting purposes will
differ from the  Partnership  income tax return because of different  accounting
methods used for certain items, principally depreciation expense.

Reclassification  - Certain 1996 and 1995  balances  have been  reclassified  to
conform with the current year presentation.


                                 Page 23 of 28
<PAGE>



Note 2.           RENTAL PROPERTY, NET

Rental property as of December 31, 1997 and 1996 is as follows:
                                               1997                      1996
                                               ----                      ----
Land                               $      14,213,000       $       14,213,000
Buildings and improvements                27,121,000               27,083,000
Furniture and equipment                    1,402,000                1,404,000
                                    ----------------        -----------------
                                          42,736,000               42,700,000
Less: accumulated depreciation           (12,748,000)             (11,932,000)
                                    ----------------        -----------------
      Total                        $      29,988,000       $       30,768,000
                                    ================        =================

All the Partnership's property has been pledged as security for notes payable.

Note 3.           NOTES PAYABLE

Notes payable consists of the following as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>

                                                                                        1997                      1996
                                                                                        -----                     ----
<S>                                                                             <C>                     <C>
Note payable to Amresco  Capital  Corporation,  secured by a first deed of
trust on Villa La Jolla  Condominiums,  bearing  interest  at a fixed rate
of 8.625%,  payable in monthly  installments  of  principal  and  interest
in the  amount of  $105,000.  The  outstanding  balance  is due  September
1, 2002.                                                                        $      13,263,000       $      13,374,000

Note payable to California  Federal  Savings & Loan,  secured by a first deed of
trust on La Jolla Canyon Apartments,  bearing interest at the 11th District cost
of funds rate plus 2.25% per annum  (7.154% and 7.073% at December  31, 1997 and
1996, respectively),  payable in monthly installments. The outstanding principal
balance is due October 1, 2018.                                                 $       5,360,000       $       5,469,000

Note payable to California  Federal  Savings & Loan,  secured by a first deed of
trust on Pacific Bay Club Apartments, bearing interest at the 11th District cost
of funds rate plus 2.25% per annum  (7.154% and 7.073% at December  31, 1997 and
1996, respectively),  payable in monthly installments. The outstanding principal
balance is due November 1, 2018                                                 $       4,404,000       $       4,494,000
                                                                                -----------------       -----------------
                                                                                $      23,027,000       $      23,337,000
                                                                                =================       =================
</TABLE>



                                 Page 24 of 28
<PAGE>



The aggregate  annual  maturities  of notes payable for the years  subsequent to
December 31, 1997, are as follows:

   1998                       $       323,000
   1999                               350,000
   2000                               377,000
   2001                               408,000
   2002                            12,981,000
   Thereafter                       8,588,000
                              ---------------
     Total                    $    23,027,000
                               ==============

Note 4.  COMMITMENT AND CONTINGENCY

Organizational and Transitional Management  Fee

Pursuant  to a plan of  exchange  which was  consummated  in 1988,  Glenborough,
through  an  Assignment  of Right to  Receive  Organizational  and  Transitional
Management  Fee  from  the  Sponsor,  is to  receive  a fee  of up to 6% of  the
aggregate  appraised value of the property interests conveyed to the Partnership
in  consideration  for  organizational  and  transitional  management  services.
One-sixth  of this fee or  approximately  $350,000 was paid upon the exchange of
the property for Partnership Units. The remaining five-sixths of the fee was due
in 60 monthly  installments of $29,000.  Ten monthly  installments were paid for
the period from March 1, 1988 through  December  31,  1988.  The next 48 monthly
payments  related to the period from  January 1, 1989 to December  31, 1992 will
not be paid  unless  and  until  such time as (i) the  specified  amount of cash
distributions are made to the holders of the preferred units during any calendar
year or, (ii) the holders of the  preferred  units have received a return of the
full amount of their investment.  No monthly installments were paid during those
48  months.  Two  monthly  installments  of  $29,000  were paid in  January  and
February,  1993.  Payment of the balance of the fee of approximately  $1,395,000
related to the 48 monthly installments would not be paid unless and until one of
the two criteria set forth above is met.

Note 5.           TAXABLE INCOME

The  Partnership's  tax  returns,  the  qualification  of the  Partnership  as a
partnership  for federal  income tax purposes,  and the amount of income or loss
are subject to  examination  by federal and state  taxing  authorities.  If such
examinations result in changes to the Partnership's  taxable income or loss, the
tax liability of the partners could change accordingly.

The  Partnership's  tax returns are filed on a calendar year basis. As such, the
following is a reconciliation of the net income for financial reporting purposes
to the estimated taxable income, for the years ended December 31, 1997, 1996 and
1995,  determined in accordance with accounting practices used in preparation of
federal income tax returns (in thousands).




                                 Page 25 of 28
<PAGE>


<TABLE>
<CAPTION>

                                                    1997                 1996           1995
                                                    ----                 ----           ----
<S>                                             <C>                 <C>             <C>
Net income (loss) per financial statements      $      559          $      81       $    (148)
Financial reporting depreciation in excess
    of tax reporting depreciation                     (382)              (399)           (208)
Operating expenses recognized in a
    different period for tax reporting than
    for financial reporting, net                       149                 42            (251)
                                                  --------            -------        --------

Estimated net income (loss) for federal
    income tax purposes                         $      326          $    (276)      $    (607)
                                                 =========           ========        ========
</TABLE>


The  following  is a  reconciliation,  as of  December  31,  1997 and  1996,  of
partner's equity for financial  reporting purposes to estimated partners' equity
for federal income tax purposes (in thousands).
<TABLE>
<CAPTION>

                                                                        1997             1996
                                                                        ----             ----
<S>                                                                  <C>             <C>
Partners' equity per financial statements                            $   8,466       $    8,607
Cumulative provision for impairment of investment in real estate         2,754            2,754
Financial reporting depreciation in excess
    of tax reporting depreciation                                       (7,601)          (7,219)
Property taxes capitalized for tax                                         813              813
Operating expenses recognized in a different period for financial
    reporting than for tax reporting, net                                   74               42
Other, net                                                                  --             (165)
                                                                     ---------       ----------

Estimated partners' equity for
    federal income tax purposes                                      $   4,506       $    4,832
                                                                      ========       ==========
</TABLE>



                                 Page 26 of 28
<PAGE>



                           RANCON PACIFIC REALTY L.P.

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1997
                                 (In Thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
COLUMN A              COLUMN B           COLUMN C                    COLUMN D                 COLUMN E                COLUMN F
------------------------------------------------------------------------------------------------------------------------------------
                                                                  Cost Capitalized
                                     Initial Cost to               Subsequent to         Gross Amount Carried

                                      Partnership                   Acquisition           at December 31, 1997
                                     ---------------             ------------------     ---------------------
                                            Buildings                                         Building
                                              and                     Carrying                  and          (1)     Accumulated
Description         Encumbrances   Land    Improvements Improvements    Cost        Land     Improvements   Total   Depreciation
------------------------------------------------------------------------------------------------------------------------------------
Rental Properties:
Residential Property,
San Diego County,
California:
<S>                   <C>        <C>        <C>         <C>         <C>         <C>          <C>          <C>         <C>

La Jolla Canyon
 Apartments           $  5,360   $  4,442   $  5,290    $    88     $   --      $   4,442    $   5,378    $  9,820    $  2,582

Pacific Bay Club
 Apartments              4,404      1,431      7,350        141         --          1,431        7,491       8,922       3,330

Villa La Jolla
 Condominiums           13,263      9,300     17,364         84         --          9,300       17,448      26,748       6,836
  Less:  Provision for
  impairment of investment
  in real estate (2)       --        (960)    (1,745)       (49)        --           (960)      (1,794)     (2,754)         --
                      --------   ---------  ---------   ---------   ---------   -----------  ----------   ---------   ---------

                      $ 23,027   $ 14,213   $  28,259   $   264     $   --      $ 14,213    $   28,523    $ 42,736    $ 12,748
                      ========   =========  =========   =========   =========   =========== ===========   =========   =========

</TABLE>

--------------------------------------------------------------------------------
COLUMN A              COLUMN G   COLUMN H    COLUMN I
--------------------------------------------------------------------------------




                       Date                  Life
                     Construction   Date    Depreciated
Description            Began    Acquired     Over
--------------------------------------------------------------------------------
Rental Properties:
Residential Property,
San Diego County,
California:

La Jolla Canyon
 Apartments             N/A      4/29/85   5 -30 yrs.

Pacific Bay Club
 Apartments             N/A     12/14/84   5 -30 yrs.

Villa La Jolla
 Condominiums           N/A      8/30/85   5 -30 yrs.
  Less:  Provision fo
  impairment of inves
  in real estate (2)

(1) The aggregate cost for Federal income tax purposes is $44,169.

(2) During 1986 a  provision  for  impairment  of  investment  in real estate of
$2,754 was recorded based on the appraised value of Villa La Jolla Condominiums.

                                 Page 27 of 28
<PAGE>





                          RANCON PACIFIC REALTY L.P.



                           RANCON PACIFIC REALTY L.P.

         NOTE TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                 (In Thousands)


Reconciliation of gross amount at which real estate was carried:

                              For the years ended December 31,
                                       1997 1996 1995

<TABLE>
<CAPTION>
<S>                                       <C>                <C>               <C>
Investment in real estate:

  Balance at beginning of period          $    42,700        $    42,656       $     42,575

     Additions during period:
         Improvements                             132                 44                 81
     Deletions during period:
         Dispositions                             (96)                --                 --
                                          -----------        -----------       ------------

  Balance at end of period                $    42,736        $    42,700       $     42,656
                                           ==========         ==========        ===========

Accumulated Depreciation:

  Balance at beginning of period          $    11,932        $    11,022       $     10,120

     Additions charged to expenses                912                910                902
     Dispositions                                 (96)               --                --
                                           ----------        -----------       ------------
  Balance at end of period                $    12,748        $    11,932       $     11,022
                                           ==========         ==========        ===========
</TABLE>

                                 Page 28 of 28
<PAGE>