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

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 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 1-10272

                         SECURITY CAPITAL PACIFIC TRUST
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                               MARYLAND 74-6056896
                (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
               INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)


                        7670 SOUTH CHESTER STREET, 80112
                         ENGLEWOOD, COLORADO (ZIP CODE)
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (303) 708-5959
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)



              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                          IF CHANGED SINCE LAST REPORT)

     Indicate by check mark whether the registrant (1) has filed all reports
 required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
    1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
                          filing for the past 90 days.


                                    Yes X No

     The number of shares outstanding of the Registrant's common stock as of
                        November 4, 1997 was 92,504,044.


<PAGE>







                                         SECURITY CAPITAL PACIFIC TRUST

                                                       INDEX

<TABLE>
<CAPTION>

                                                                                                          PAGE
                                                                                                         NUMBER
                                                                                                        --------
PART I.       Condensed Financial Information

<S>           <C>                                                                                       <C>
  Item 1.     Financial Statements
              Condensed Balance Sheets--September 30, 1997 (unaudited) and December 31, 1996                3
              Condensed Statements of Operations--Three and nine months ended September 30,
              1997 and 1996  (unaudited)...............................................................     4
              Condensed Statement of Shareholders' Equity--Nine months ended September 30, 1997
              (unaudited)..............................................................................     5
              Condensed Statements of Cash Flows--Nine  months ended September 30, 1997
              and 1996  (unaudited)....................................................................     6
              Notes to Condensed Financial Statements (unaudited)......................................     7
              Independent Auditors' Review Report......................................................    16

  Item 2.     Management's Discussion and Analysis of Financial Condition and Results of
              Operations...............................................................................    17

PART II.      Other Information

  Item 4.     Submission of Matters to a Vote of Securities Holders....................................    29
  Item 6.     Exhibits and Reports on Form 8-K.........................................................    29

</TABLE>

                                                            2
<PAGE>




                                            SECURITY CAPITAL PACIFIC TRUST

                                               CONDENSED BALANCE SHEETS

                                          (IN THOUSANDS, EXCEPT SHARE DATA)






<TABLE>
<CAPTION>
                                                                                       SEPTEMBER 30,     DECEMBER 31,
                                        ASSETS                                              1997             1996
                                                                                       -------------   --------------
                                                                                         (UNAUDITED)
<S>                                                                                    <C>             <C>
Real estate  ..........................................................................$   2,465,625   $   2,153,363
Less accumulated depreciation..........................................................      115,613          97,574
                                                                                       -------------   --------------
                                                                                           2,350,012       2,055,789
Homestead Notes........................................................................      279,092         176,304
Other mortgage notes receivable........................................................       15,845          13,525
                                                                                       -------------   --------------
             Net investments...........................................................    2,644,949       2,245,618
Cash and cash equivalents..............................................................        6,172           5,601
Restricted cash in tax-deferred exchange escrow........................................       22,960              42
Accounts receivable and accrued interest...............................................       11,729           4,157
Other assets...........................................................................       32,314          27,014
                                                                                       -------------   --------------
             Total assets.............................................................. $  2,718,124   $   2,282,432
                                                                                       =============   ==============
<CAPTION>
                         LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                                                    <C>             <C>
Liabilities:
     Credit facilities.................................................................  $    99,433    $    110,200
     Long-Term Debt....................................................................      630,000         580,000
     Mortgages payable.................................................................      283,254         217,188
     Distributions payable.............................................................           --          24,537
     Accounts payable..................................................................       31,634          22,782
     Accrued expenses and other liabilities............................................       63,986          60,217
                                                                                       -------------   --------------
             Total liabilities.........................................................    1,108,307       1,014,924
                                                                                       -------------   --------------
Shareholders' equity:
     Series A Preferred Shares (5,517,199 convertible shares in 1997 and 6,494,967
          in 1996; stated liquidation preference of $25 per share).....................      137,930         162,374
     Series B Preferred Shares (4,200,000 shares issued; stated liquidation
          preference of $25 per share).................................................      105,000         105,000
     Common Shares (shares issued--92,481,177 in 1997 and 75,510,986 in................
     1996). ...........................................................................       92,481          75,511
     Additional paid-in capital........................................................    1,266,035         918,434
     Employee share purchase notes.....................................................      (17,100)             --
     Unrealized holding gain on Homestead Notes........................................      115,349          74,923
     Distributions in excess of net earnings...........................................      (89,878)        (68,734)
                                                                                       -------------   --------------
             Total shareholders' equity................................................    1,609,817       1,267,508
                                                                                       -------------   --------------
             Total liabilities and shareholders' equity................................$   2,718,124   $   2,282,432
                                                                                       =============   ==============

</TABLE>

The  accompanying  notes  are  an  integral   part  of  the  condensed financial
                                  statements.

                                       3

<PAGE>




                                        SECURITY CAPITAL PACIFIC TRUST

                                      CONDENSED STATEMENTS OF OPERATIONS

                                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                     SEPTEMBER 30,              SEPTEMBER 30,
                                                                -------------------------   -----------------------

                                                                    1997         1996          1997        1996
                                                                -------------  ----------    ---------   ----------
<S>                                                             <C>            <C>           <C>         <C>
Revenues:
     Rental revenues........................................... $      85,760  $   84,802    $ 247,122   $  240,102
     Interest income on Homestead Notes........................         4,430          --       11,404           --
     Other income..............................................           686         590        2,024        1,589
                                                                -------------  ----------    ---------   ----------
                                                                       90,876      85,392      260,550      241,691
                                                                -------------  ----------    ---------   ----------
Expenses:
     Rental expenses...........................................        22,484      24,972       62,711       67,001
     Real estate taxes.........................................         7,135       6,594       21,059       19,953
     Property management fees:
          Paid to affiliate....................................         2,139       2,960        7,642        8,788
          Paid to third parties................................           194         267          651          803
     Depreciation on real estate investments...................        13,364      10,987       38,052       32,230
     Interest..................................................        15,943       8,624       45,702       22,401
     REIT management fee paid to affiliate.....................         3,717       5,866       13,040       17,145
     General and administrative................................           723         264        1,311          770
       Administrative services fee paid to affiliate...........           228          --          228           --
     Costs incurred in acquiring management companies
        from an affliliate.....................................        71,707          --       71,707           --
     Other.....................................................            99         140        1,963          501
                                                                -------------  ----------    ---------   ----------
                                                                      137,733      60,674      264,066      169,592
                                                                -------------  ----------    ---------   ----------
Earnings (loss) from operations................................       (46,857)     24,718       (3,516)      72,099
        Gain on disposition of investments, net................        10,723      25,257       47,930       33,340
                                                                -------------  ----------    ---------   ----------
Net earnings (loss) before extraordinary item..................       (36,134)     49,975       44,414      105,439
        Less extraordinary item--loss on early extinguishment
          of debt..............................................            --          --            --         870
                                                                -------------  ----------    ---------   ----------
Net earnings (loss)............................................       (36,134)     49,975       44,414      104,569

        Less Preferred Share dividends.........................         4,785       6,182       14,625       18,956
                                                                -------------  ----------    ---------   ----------
Net earnings (loss) attributable to Common Shares.............. $     (40,919) $   43,793     $ 29,789   $   85,613

Weighted-average Common Shares outstanding.....................        81,506      72,628       78,280       72,355
                                                                =============  ==========    =========   ==========

Per Common Share amounts:
     Primary................................................... $      (0.50) $      0.60  $      0.38 $       1.18
                                                                =============  ==========    =========   ==========
     Fully diluted............................................. $      (0.50) $      0.57  $      0.38 $       1.18
                                                                =============  ==========    =========   ==========
        Distributions paid..................................... $       0.32  $      0.31  $     0.975 $       0.93
                                                                =============  ==========    =========   ==========




</TABLE>



     The accompanying notes are an integral part of the condensed financial
                                  statements.

                                       4

<PAGE>




                                       SECURITY CAPITAL PACIFIC TRUST

                                 CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY

                                     NINE MONTHS ENDED SEPTEMBER 30, 1997

                                      (IN THOUSANDS, EXCEPT SHARE DATA)
                                                 (UNAUDITED)




<TABLE>
<CAPTION>
                                    SHARES OF BENEFICIAL
                                  ------------------------
                                  INTEREST, $1.00 PAR VALUE
                                  -------------------------

                                   SERIES A    SERIES B
                                   PREFERRED   PREFERRED
                                   SHARES AT   SHARES AT     COMMON                  EMPLOYEE
                                   AGGREGATE   AGGREGATE     SHARES    ADDITIONAL     SHARE     UNREALIZED  DISTRIBUTIONS
                                  LIQUIDATION LIQUIDATION    AT PAR      PAID-IN     PURCHASE     HOLDING   IN EXCESS OF
                                  PREFERENCE  PREFERENCE     VALUE      CAPITAL      NOTES         GAINS    NET EARNINGS     TOTAL
                                  ---------   ---------    ---------  ----------  -----------  -----------  ------------  ----------
<S>                             <C>         <C>          <C>        <C>         <C>          <C>          <C>           <C>
Balances at January 1, 1997....  $ 162,374   $ 105,000    $  75,511  $  918,434  $       --   $   74,923    $  (68,734)  $1,267,508

    Net earnings...............        --           --           --          --           --          --        44,414       44,414
    Shareholder distributions..        --           --           --          --           --          --       (65,558)     (65,558)
        Issuance of shares to
          affiliate............        --           --        3,296      68,780           --          --                     72,076
    Sale of shares, net of 
          expenses.............        --            --      11,420     236,956           --          --            --      248,376
        Shares issued  under
            employee share
            purchase plan......        --            --         813      17,109       (17,100)        --            --          822
    Conversion  of  977,768
        Series A Preferred
        Shares into 1,316,909
           Common Shares.......   (24,444)           --       1,317      23,127           --          --            --           --
    Change in unrealized holding
      gain on Homestead Notes..        --            --          --          --           --      40,426            --       40,426

    Exercise of warrants and
      options..................        --            --         124       1,629           --          --            --        1,753
                                 ---------     ---------  ---------  ----------  ------------ ----------  -------------  -----------
Balances at September  30,
  1997.........................  $ 137,930     $ 105,000  $  92,481  $1,266,035  $   (17,100) $  115,349  $    (89,878)  $1,609,817
                                 =========     =========  =========  ==========  ============ ==========  =============  ===========




















</TABLE>


     The accompanying notes are an integral part of the condensed financial
                                  statements.


                                       5
<PAGE>




                                            SECURITY CAPITAL PACIFIC TRUST
                                            CONDENSED STATEMENTS OF CASH FLOWS
                                                    (IN THOUSANDS)
                                                     (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                          NINE MONTHS ENDED
                                                                                            SEPTEMBER 30,
                                                                                       -------------------------

                                                                                          1997         1996
                                                                                       ------------  -----------
<S>                                                                                    <C>            <C>
Operating activities:
     Net earnings..................................................................... $     44,414   $ 104,569
     Adjustments to reconcile net earnings to net cash flow provided by operating
        activities:...................................................................
          Depreciation and amortization...............................................       39,334      33,658
          Gain on disposition of investments, net.....................................      (47,930)    (33,340)
          Provision for possible loss on investments..................................        1,500         --
          Costs incurred in acquiring management companies from an affiliate..........       71,707         --
     Change in accounts payable.......................................................        1,097      (2,261)
     Change in accrued expenses and other liabilities.................................        3,771         784
     Change in other operating assets.................................................      (12,225)     (6,822)
                                                                                       ------------  -----------
          Net cash flow provided by operating activities..............................      101,668      96,588
                                                                                       ------------  -----------
Investing activities:
     Real estate investments..........................................................    (468,720)    (462,412)
     Change in tax-deferred exchange escrow...........................................     (22,918)     (13,503)
     Funding of Homestead Notes.......................................................     (61,250)         --
     Advances on other mortgage notes receivable......................................      (3,763)         --
     Principal repayments on other mortgage notes receivable..........................       1,443        1,450
     Gross proceeds from dispositions.................................................     290,516      186,000
     Closing costs related to dispositions............................................      (6,325)      (3,510)
                                                                                       ------------  -----------
          Net cash flow used in investing activities..................................    (271,017)    (291,975)
                                                                                       ------------  -----------
Financing activities:
     Proceeds from Long-Term Debt.....................................................      50,000      250,000
     Debt issuance costs incurred.....................................................      (1,424)      (3,123)
     Prepayment of mortgages payable due to community dispositions....................     (26,543)     (25,845)
     Regularly scheduled principal payments on mortgages payable......................      (2,225)      (1,461)
     Proceeds from credit facilities..................................................     884,782      353,235
     Principal payments on credit facilities..........................................    (895,549)    (310,885)
     Proceeds from sale of Common Shares, net.........................................     249,223          --
     Cash distributions paid on Common Shares.........................................     (75,472)     (67,325)
     Cash dividends paid on Preferred Shares..........................................     (14,625)     (18,956)
     Proceeds from exercise of warrants and options...................................       1,753           --
                                                                                       ------------  -----------
          Net cash flow provided by financing activities..............................     169,920      175,640
                                                                                       ------------  -----------
Net change in cash and cash equivalents...............................................         571      (19,747)
Cash and cash equivalents at beginning of period......................................       5,601       26,919
                                                                                       ------------  -----------
Cash and cash equivalents at end of period............................................ $     6,172   $    7,172
                                                                                       ============  ===========

Non-cash investing and financing activities:
     Market value of Common Shares issued to affiliate in Merger...................... $     73,326  $       --
     Market value of tangible net assets acquired from affiliate in Merger............ $      1,619  $       --
     Notes received for Common Shares issued under Long-term Incentive Plan .......... $     17,100  $       --
     Assumption of mortgages payable upon purchase of multifamily communities......... $     94,834  $   88,711
     Series A Preferred Shares converted to Common Shares............................. $     24,444  $   12,425
     Change in unrealized holding gain on Homestead Notes............................. $     40,426  $       --
</TABLE>

     The accompanying notes are an integral part of the condensed financial
                                  statements.

                                       6

<PAGE>



                    SECURITY CAPITAL PACIFIC TRUST

               NOTES TO CONDENSED FINANCIAL STATEMENTS


                    SEPTEMBER 30, 1997 AND 1996
                            (UNAUDITED)

(1) GENERAL

     The  condensed  financial  statements  of SECURITY  CAPITAL  PACIFIC  TRUST
("PTR") are unaudited and certain information and footnote  disclosures normally
included in financial  statements  have been  omitted.  While  management of PTR
believes that the disclosures  presented are adequate,  these interim  financial
statements should be read in conjunction with the financial statements and notes
included in PTR's 1996 Annual Report on Form 10-K.

     In  the  opinion  of  management,   the  accompanying  unaudited  financial
statements  contain all adjustments  necessary for a fair  presentation of PTR's
financial  statements  for  the  interim  periods  presented.   The  results  of
operations  for the three and nine month  periods  ended  September 30, 1997 and
1996 are not necessarily indicative of the results to be expected for the entire
year.

     The accounts of PTR, its  majority-owned  subsidiaries  and PTR Development
Services  Incorporated are consolidated in the accompanying  condensed financial
statements.  All significant  intercompany  accounts and transactions  have been
eliminated in consolidation.

     The preparation of these financial  statements in conformity with generally
accepted  accounting  principles  ("GAAP") required management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of contingent  liabilities  at the dates of the financial  statements
and the reported amounts of revenues and expenses during the reporting  periods.
Actual amounts realized or paid could differ from those estimates.

   RECLASSIFICATIONS

     Certain  1996  amounts  have  been  reclassified  to  conform  to the  1997
presentation.

   PER SHARE DATA

     Primary earnings per share is computed based on the weighted average number
of common  shares of  beneficial  interest,  par value $1.00 per share  ("Common
Share(s)"),  outstanding.  Fully diluted earnings per Common Share is calculated
from the weighted average Common Shares  outstanding plus the Common Shares that
would be  outstanding  assuming  conversion  of the weighted  average  number of
outstanding  cumulative  convertible  Series A  Preferred  Shares of  Beneficial
Interest,   par  value  $1.00  per  share  ("Series  A  Preferred  Shares")  and
outstanding  stock options using the treasury stock method.  For purposes of the
fully  diluted  earnings  per  share  calculation,  dividends  on the  Series  A
Preferred Shares are added back to net earnings attributable to Common Shares.

     PTR will adopt  Statement of Financial  Accounting  Standards  ("SFAS") No.
128,  EARNINGS PER SHARE,  which changes the method used to compute earnings per
share,  in the fourth quarter of 1997. The impact of SFAS No. 128, which will be
applied  retroactively,  on the  calculation  of PTR's earnings per share is not
expected to be material.



                                       7

<PAGE>



                                    SECURITY CAPITAL PACIFIC TRUST

                          NOTES TO CONDENSED FINANCIAL STATEMENTS -- (Continued)

(2) REAL ESTATE

   INVESTMENTS

         Equity  investments in real estate,  at cost,  were as follows  (dollar
amounts in thousands):

<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30, 1997                DECEMBER 31, 1996
                                                                 -----------------------------   ----------------------------

                                                                 INVESTMENT          UNITS        INVESTMENT         UNITS
                                                                 -------------   -------------    -------------    -------------
<S>                                                             <C>              <C>            <C>              <C>
     Multifamily:
          Operating communities.................................. $ 2,121,365           42,184   $   1,861,561         42,702
          Communities under construction (1).....................     233,148            5,480         186,710          5,479
          Development communities in planning (1) (2):
               Owned.............................................      53,191            3,502          64,685          4,921
               Under control (3).................................          --            7,250              --          6,041
                                                                 ------------    -------------   -------------    -----------
                    Total development communities in planning....      53,191           10,752          64,685         10,962

     Other land held.............................................      31,876               --          13,862             --
                                                                 ------------    -------------   -------------    -----------
                    Total multifamily............................   2,439,580           58,416       2,126,818         59,143
                                                                 ------------    =============   -------------    ===========
     Non-multifamily.............................................      26,045                           26,545
                                                                 ------------                    -------------
                    Total real estate............................ $ 2,465,625                    $   2,153,363
                                                                 ============                    =============
</TABLE>
----------
(1)  Unit  information  is  based  on  management's  estimates  and has not been
     audited or reviewed by PTR's independent auditors.
(2)  During the third quarter of 1997, PTR changed its definition of development
     communities  in planning.  In planning is now defined as  developments  for
     which construction is anticipated to commence within 36 months, rather than
     12 months, as previously  defined.  This change was made due to the lengthy
     entitlement process required for new developments in many of PTR's markets.
     Accordingly,  December 31, 1996  balances have been adjusted to give effect
     to this change in definition for comparison purposes.
(3)  PTR's  investment  as of  September  30,  1997 and  December  31,  1996 for
     developments under control was $5.6 million and $2.0 million, respectively,
     and is reflected in the "Other assets" caption of PTR's balance sheets.

     The  change  in  investments  in real  estate,  at cost,  consisted  of the
following (in thousands):


<TABLE>
<S>                                                                                    <C>
            Balance at January 1, 1997.............................................    $  2,153,363
            Multifamily:
                 Acquisition and renovation expenditures...........................         395,517
                 Development expenditures, excluding land acquisitions.............         162,010
                 Acquisition and improvement of land held for development..........           6,044
                 Recurring capital expenditures....................................           6,464
                 Dispositions......................................................        (255,690)
                 Provisions for possible loss on investments.......................          (1,500)
                                                                                     --------------
            Net multifamily activity subtotal......................................       2,466,208
            Non-multifamily dispositions...........................................            (583)
                                                                                     --------------
            Balance at September 30, 1997..........................................   $   2,465,625
                                                                                     ==============


</TABLE>


                                        8

<PAGE>



                       SECURITY CAPITAL PACIFIC TRUST

              NOTES TO CONDENSED FINANCIAL STATEMENTS -- (Continued)

     At September 30, 1997, PTR had  contingent  contracts or letters of intent,
subject to PTR's  final due  diligence  and  approval  of all  entitlements,  to
acquire land for the development of an estimated 7,250 multifamily units with an
aggregate  estimated  development cost of approximately  $664.5 million.  At the
same date,  PTR also had contingent  contracts or letters of intent,  subject to
final due diligence, for the acquisition of 208 additional operating multifamily
units with a total  expected  investment  of $18.8  million,  including  planned
renovations.

     At  September  30,  1997,  PTR had  unfunded  development  commitments  for
developments under construction of $136.9 million.

GAINS ON DISPOSITIONS OF INVESTMENTS

     Each year, PTR  formulates  operating and capital plans based on an ongoing
active  review  of PTR's  portfolio.  Based in part  upon  the  market  research
purchased  from Security  Capital Real Estate  Research  Group  Incorporated  (a
subsidiary of Security Capital Group Incorporated, PTR's principal shareholder (
"Security  Capital  Group")),  and  in  an  effort  to  optimize  its  portfolio
composition,  PTR may  from  time to time  seek to  dispose  of  assets  that in
management's  view no longer meet PTR's  long-term  investment  objectives.  The
proceeds from these selected  dispositions  are  redeployed,  typically  through
tax-deferred  exchanges,  into assets that in PTR's view offer better  long-term
cash flow growth prospects.  As part of this asset  optimization  strategy,  PTR
disposed of 25 multifamily communities,  one industrial building and two parcels
of land during the nine months  ended  September  30, 1997,  representing  gross
proceeds of $290.5  million,  and disposed of 12  multifamily  communities,  one
industrial  building  and one  parcel  of land  during  the  nine  months  ended
September  30,  1996,  representing  gross  proceeds  of $186.0  million.  As of
September  30,  1997,  PTR  held a  portion  of the  1997  disposition  proceeds
aggregating  $23.0  million  in an  interest  bearing  escrow  account,  pending
acquisition  of other  multifamily  communities  to  complete  the  tax-deferred
exchange.  For federal  income tax  purposes,  the majority of the 1997 and 1996
dispositions  were  structured as  tax-deferred  exchanges  which  deferred gain
recognition.   However,  for  financial  reporting  purposes,  the  transactions
qualified for profit  recognition and aggregate gains of $47.9 million and $33.3
million were  recorded for the nine months  ended  September  30, 1997 and 1996,
respectively.

     As part of PTR's asset optimization strategy,  ten multifamily  communities
and four parcels of land were held for disposition as of September 30, 1997. The
aggregate  carrying value of properties held for  disposition was  approximately
$104.2  million at September 30, 1997.  Each  property's  carrying value is less
than or equal to its  estimated  fair market  value,  net of estimated  costs to
sell. Operating communities are not depreciated during the period for which they
are determined to be held for disposition.  Subject to normal closing risks, PTR
expects to complete the disposition of these properties during 1997 and 1998 and
redeploy the net proceeds from such  dispositions,  where  appropriate,  through
tax-deferred  exchanges into the  acquisition of  multifamily  communities.  The
property level earnings, after interest and depreciation,  from communities held
for  disposition at September 30, 1997 which are included in PTR's earnings from
operations  for the nine  months  ended  September  30,  1997 and 1996 were $5.8
million and $6.1 million, respectively.

(3) HOMESTEAD NOTES

     In addition to  multifamily  investment  activity,  PTR had  developed  and
operated extended-stay lodging facilities under the Homestead Village name since
1992. On October 17, 1996, PTR contributed its Homestead  Village  properties to
Homestead Village Incorporated ("Homestead"),  a new publicly-traded company, in
exchange for certain  Homestead  securities.  As of the  contribution  date, the
Homestead Village(R)  properties  constituted  approximately 7.1% of PTR's total
assets, at cost. The Homestead Village properties  generated  approximately 8.5%
of PTR's net operating income (rental revenues less rental expenses, real estate
taxes and  property  management  fees) for the nine months ended  September  30,
1996.

     During  the nine month  period  ended  September  30,  1997,  PTR funded an
additional  $61.3  million  under  its  $198.8  million  commitment  to  provide
development  funding to  Homestead  in the form of  convertible  mortgage  notes
("Homestead Notes"),  resulting in a total amount funded of $162.4 million as of
September 30, 1997.


                                       9

<PAGE>



                          SECURITY CAPITAL PACIFIC TRUST

                 NOTES TO CONDENSED FINANCIAL STATEMENTS -- (Continued)

     Following is a  reconciliation  of the Homestead  Notes'  components to the
amount reflected in the accompanying Balance Sheet (in thousands):

<TABLE>
<CAPTION>

                                                                       SEPTEMBER 30,
                                                                            1997
                                                                      ----------------
<S>                                                                   <C>
         Face amount of Homestead Notes.............................. $        180,820
         Original issue discount.....................................          (18,382)
                                                                      ----------------
         Amount funded...............................................          162,438
         Amortization of original issue discount.....................              791
         Conversion feature-initial value............................           12,736
         Unamortized discount on conversion feature..................          (12,222)
         Fair value adjustment.......................................          115,349
                                                                      ----------------
         Carrying value and fair value............................... $        279,092
                                                                      ================
</TABLE>

     The Homestead  Notes are  convertible  into  Homestead  common stock on the
basis of one share of Homestead  common stock for every $11.50 of principal face
amount  outstanding.  Accordingly,  fair  value was  calculated  based  upon the
conversion  value of the  Homestead  Notes using the trading  price of Homestead
common  stock at  September  30, 1997 of $17.75.  The fair value  adjustment  is
recognized as an unrealized gain in  shareholders'  equity.  PTR will adopt SFAS
No.  130,  REPORTING   COMPREHENSIVE  INCOME  in  1998.  As  a  result  of  this
pronouncement,  PTR will report changes in the  unrealized  gain or loss ($115.3
million  unrealized  gain as of September 30, 1997) on the Homestead Notes as an
element of comprehensive income.

     PTR expects to complete the funding  of the remaining $36.4  million  under
its funding commitment in 1997 and early 1998.


(4) BORROWINGS

   CREDIT FACILITIES

     PTR has a $350  million  unsecured  revolving  line of  credit  with  Texas
Commerce Bank, National  Association  ("TCB"), as agent for a group of financial
institutions (collectively,  the "Lenders"). The line matures in August 1999 and
may be  extended  annually  for an  additional  year  with the  approval  of the
Lenders.  The line of credit  bears  interest  at the  greater of prime (8.5% at
September  30, 1997) or the federal  funds rate plus 0.50%,  or at PTR's option,
LIBOR ( 5.6875% at  September  30, 1997) plus 0.75%  (6.4375% at  September  30,
1997).  The spread over LIBOR can vary from LIBOR plus 0.50% to LIBOR plus 1.50%
based upon the rating of PTR's  long-term  unsecured  senior  notes  ("Long-Term
Debt"). Additionally,  there is a commitment fee on the average unfunded line of
credit balance. The commitment fee was $280,000 and $294,000 for the nine months
ended September 30, 1997 and 1996, respectively.

     A summary of PTR's line of credit  borrowings  is as  follows  (dollars  in
thousands):



<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED       YEAR ENDED
                                                                         SEPTEMBER 30, 1997   DECEMBER 31, 1996
                                                                         -------------------  ------------------
<S>                                                                      <C>                 <C>
            Total line of credit.......................................       $    350,000        $    350,000
            Borrowings outstanding at end of period....................             80,000              99,750
            Weighted-average daily borrowings..........................            116,470             112,248
            Maximum borrowings outstanding at any month end............            205,000             188,750
            Weighted-average daily nominal interest rate...............               6.8%                7.3%
            Weighted-average daily effective interest rate.............               8.5%                8.8%
            Weighted-average nominal interest rate at end of period....               6.4%                6.6%
</TABLE>

     On September 9, 1996, PTR entered into a short-term,  unsecured,  borrowing
agreement  with TCB.  The loan matures  March 18, 1998 and bears  interest at an
overnight  rate which  ranged from 5.94% to 7.13%  during the nine months  ended
September 30, 1997. At September 30, 1997,  there was $19.4 million  outstanding
under this agreement.


                                       10

<PAGE>



                       SECURITY CAPITAL PACIFIC TRUST

            NOTES TO CONDENSED FINANCIAL STATEMENTS -- (Continued)

     On March 10, 1997, PTR borrowed $60 million under a short-term,  unsecured,
borrowing agreement with a financial institution. On April 4, 1997, PTR borrowed
an additional  $40 million under a short-term,  unsecured,  borrowing  agreement
with the same financial institution, having approximately the same interest rate
and repayment  terms. The proceeds from both loans were used to repay borrowings
under PTR's line of credit.  At maturity on September  10, 1997,  PTR repaid the
entire  outstanding  balance  of both  loans in full,  by  drawing on PTR's $350
million line of credit.

LONG-TERM DEBT

     PTR has issued Long-Term Debt which bears interest at fixed rates,  payable
semi-annually.  Funds from such issuances  were used primarily for  acquisition,
development  and renovation of multifamily  communities and to repay balances on
credit facilities incurred for such purposes. The following table summarizes the
Long-Term Debt as of September 30, 1997:

<TABLE>
<CAPTION>
                                         ISSUANCE                      AVERAGE EFFECTIVE
                                            AND                          INTEREST RATE,      AVERAGE
                                        OUTSTANDING       AVERAGE      INCLUDING OFFERING    ORIGINAL
DATE OF ISSUANCE                         PRINCIPAL        COUPON         DISCOUNTS AND         LIFE
                                          AMOUNT            RATE         ISSUANCE COSTS       (YEARS)
                                       -------------      --------     ------------------    -------
<S>                                    <C>                <C>          <C>                   <C>
March 31, 1997......................   $ 50 million        7.905%           7.850%            16.00
October 21, 1996....................     130 million       7.350            7.500              6.85
August 06, 1996.....................     100 million       7.840            7.950             15.60
February 23, 1996...................     150 million       7.710            7.840             15.50
February 08, 1994...................     200 million       7.240            7.370             14.25
                                       -------------      --------     ------------------    -------
Grand Total/Average.................   $ 630 million       7.530%           7.640%            13.37
                                       =============      ========     ==================    =======
</TABLE>

     From time to time, PTR utilizes derivative financial  instruments as hedges
in  anticipation  of  future  debt  offerings  in order to  manage  well-defined
interest rate risk. In anticipation of a future debt offering,  PTR entered into
four separate  interest rate  contracts in August and October 1997 with notional
amounts  aggregating  $120  million,  which  PTR  plans  to  terminate  when the
anticipated offering is completed. As of October 21, 1997, the fair market value
of these contracts was an unrealized loss of approximately $618,000. The gain or
loss  ultimately  realized  upon  termination  of the hedge will be deferred and
amortized into interest expense over the term of the related debt.

MORTGAGES PAYABLE

     Mortgages  payable at September 30, 1997 consisted of the following (dollar
amounts in thousands):

<TABLE>
<CAPTION>

                                                   EFFECTIVE            PRINCIPAL             PRINCIPAL
                                                   INTEREST             BALANCE AT            BALANCE AT
             TYPE OF MORTGAGE                      RATE (1)           SEPTEMBER 30, 1997  DECEMBER 31, 1996
------------------------------------------     -----------------      -----------------   ------------------

<S>                                            <C>                    <C>                <C>
     Conventional fixed rate............                   8.05%      $      151,824      $        162,337
     Tax-exempt fixed rate (2)..........                   6.81               57,077                33,655
     Tax-exempt floating rate (2).......                   4.88               68,540                15,336
     Combined (3).......................                   8.84                5,813                 5,860
                                                -----------------      -------------      ----------------
               Total/Average Mortgage Debt                 7.05%      $      283,254      $        217,188
                                               =================      ==============      ================
</TABLE>
----------

(1) Represents the effective interest rate, including loan cost amortization and
    other ongoing fees and expenses.
(2) Tax-exempt effective interest rates include credit  enhancement  and  other
    bond-related  costs,  where applicable.
(3) This category  represents  one  multifamily  community  which was refinanced
    in 1990 pursuant to multifamily bonds aggregating  $6.2  million.  The bonds
    consist  of  $ 4.5 million   Series A tax-exempt fixed rate bonds  and  $1.7
    million  Series  B taxable fixed rate bonds.


                                      11

<PAGE>



                      SECURITY CAPITAL PACIFIC TRUST

             NOTES TO CONDENSED FINANCIAL STATEMENTS -- (Continued)


     The changes in mortgages payable during  the nine  months  ended  September
30, 1997 consisted of the following (in thousands):


<TABLE>
<S>                                                                                     <C>
           Balance at January 1, 1997.................................................. $      217,188
           Mortgage notes assumed......................................................         94,834
           Principal payments, including prepayments upon community dispositions.......        (28,768)
                                                                                         -------------
           Balance at September 30, 1997............................................... $      283,254
                                                                                         =============
</TABLE>

SCHEDULED DEBT MATURITIES

     Approximate principal payments due during each of the calendar years in the
20-year  period  ending  December 31, 2016 and  thereafter,  as of September 30,
1997, are as follows (in thousands):

<TABLE>
<CAPTION>

                                                     Credit       Long-Term
                                                  Facilities         Debt          Mortgages             Total
                                                  -----------    -------------   -------------       -------------
<S>         <C>                                   <C>           <C>             <C>                 <C>
            1997.............................      $ 19,433       $         --     $    24,442         $    43,875
            1998.............................        80,000                 --          28,503             108,503
            1999.............................          --               30,000           8,680              38,680
            2000.............................          --                   --          30,642              30,642
            2001.............................          --               12,500          24,510              37,010
            2002.............................          --               32,500          18,070              50,570
            2003.............................          --               38,750           2,532              41,282
            2004.............................          --               38,750           2,746              41,496
            2005.............................          --               38,750          12,975              51,725
            2006.............................          --               38,750           3,222              41,972
            2007.............................          --               38,750          14,608              53,358
            2008.............................          --               38,750          20,093              58,843
            2009.............................          --               36,250           2,931              39,181
            2010.............................          --               38,750           2,762              41,512
            2011.............................          --               25,000           2,836              27,836
            2012.............................          --               30,000           3,007              33,007
            2013.............................          --               35,000           3,252              38,252
            2014.............................          --               42,500          16,378              58,878
            2015.............................          --               40,000          24,560              64,560
            2016.............................          --               45,000           3,092              48,092
                Thereafter...................          --               30,000          33,413              63,413
                                                  -----------    -------------   -------------       -------------
                Total........................      $ 99,433       $    630,000     $   283,254         $ 1,012,687
                                                  ===========    =============   =============       =============
</TABLE>
   GENERAL

     PTR's debt instruments  generally  contain certain  covenants common to the
type of  facility  or  borrowing,  including  financial  covenants  establishing
minimum debt service  coverage ratios and maximum  leverage  ratios.  PTR was in
compliance  with all covenants  pertaining to its debt  instruments at September
30, 1997.

     Interest  paid on all  borrowings  for the nine months ended  September 30,
1997 was $45.8  million,  net of $13.3  million of interest  capitalized  during
construction.  Interest  paid  on all  borrowings  for  the  nine  months  ended
September  30,  1996  was  $20.8  million,  net of  $12.8  million  of  interest
capitalized during construction.

     Amortization  of  loan  costs  included  in interest expense for  the  nine
months  ended  September 30, 1997 and 1996 was $ 2.4 million and   $ 1.4 million
respectively.


                                       12

<PAGE>



                       SECURITY CAPITAL PACIFIC TRUST

               NOTES TO CONDENSED FINANCIAL STATEMENTS -- (Continued)

(5) CASH DISTRIBUTIONS

     PTR paid first,  second and third quarter 1997  distributions of $0.325 per
Common Share on February  20, May 29, and August 27,  1997.  On October 29, 1997
the Board of Trustees (the "Board")  declared a cash  distribution of $0.325 per
Common  Share,  payable on  November  26,  1997,  to  shareholders  of record on
November  12,  1997.  On March 31, June 30, and  September  30,  1997,  PTR paid
quarterly dividends of $0.4377425 per cumulative  convertible Series A Preferred
Share  and  $0.5625  per  Series B  cumulative  redeemable  preferred  shares of
beneficial interest (the "Series B Preferred Shares").

(6) SHAREHOLDERS' EQUITY

     On March 27, 1997,  PTR filed a $300 million  shelf  registration  with the
Securities and Exchange  Commission to supplement an existing shelf registration
with a balance of $170 million.  These  securities can be issued on an as-needed
basis, subject to PTR's ability to effect offerings on satisfactory terms.

     On June 4, 1997, PTR sold 2,500,000  Common Shares to Goldman,  Sachs & Co.
for an  aggregate  purchase  price of $54.5  million.  The net proceeds of $54.3
million (net of $150,000 of offering costs) were used to repay  borrowings under
PTR's  $350  million  unsecured  revolving  line of  credit  and its  short-term
borrowing agreement with TCB.

     In connection  with the Merger  described in Note 7, PTR commenced a rights
offering on August 6, 1997 pursuant to which it distributed to its  shareholders
transferable  rights  ("Rights")  to subscribe  for and purchase up to 7,433,433
Common   Shares  at  a   subscription   price  of  $21.8125  per  Common  Share.
Simultaneously  with the offering of Common Shares to Rights  holders,  Security
Capital Markets Group Incorporated  ("Capital Markets Group"), which is owned by
Security   Capital  Group,   sought  investors  on  a  best  efforts  basis,  to
oversubscribe  and acquire  Common  Shares that were not  purchased  through the
exercise of Rights ("Unsubscribed  Shares").  Due to strong investor demand, PTR
sold and issued an additional  1,486,686  Common Shares for a total of 8,920,119
Common  Shares  at  the  subscription  price of  $21.8125  per  share.   The net
proceeds of $194.1 million (net of $450,000 of offering  costs) were used to pay
down PTR's $350 million unsecured revolving line of credit.

     After giving effect to the offerings described above and the $50 million in
Long-Term Debt issued March 31, 1997,  PTR has  approximately  $170.9 million in
shelf-registered securities available for issuance.

(7) CONSUMMATION OF MERGER

     On September 8, 1997,  PTR terminated  its REIT  management  agreement with
Security  Capital  Pacific  Incorporated  (the "REIT  Manager") and the property
management  agreement  with SCG  Realty  Services  Incorporated  (the  "Property
Manager")  (collectively  the  "Management  Companies"),  pursuant  to a  merger
transaction  (the " Merger")  whereby PTR acquired the operations and businesses
of the Management  Companies valued at approximately $75.8 million from Security
Capital  Group in exchange for  3,295,533  Common  Shares.  The number of Common
Shares issued to Security  Capital Group was determined using a per Common Share
price of $23.0125  (the average  market price of Common Shares over the five-day
period  prior  to  the  August  6,  1997  record  date  for  determining   PTR's
shareholders  entitled to vote on the  Merger).  The Board  approved  the Merger
based on the recommendation of a special committee  comprised of independent PTR
Trustees  who  received a fairness  opinion  on the  Merger  from a  third-party
investment  bank.  The Merger,  which  required  the  approval  of a  two-thirds
majority of PTR's outstanding  Common Shares,  was approved by approximately 99%
of the shareholders  voting on the transaction on September 8, 1997. As a result
of the transaction,  PTR became an internally  managed REIT and Security Capital
Group remains PTR's largest shareholder (33.2% ownership at September 30, 1997).

     The market value of the 3,295,533  Common Shares issued to Security Capital
Group on the Merger date was  approximately  $73.3 million,  based on the $22.25
per share  closing  price of the  Common  Shares,  of which  approximately  $1.6
million was  allocated to the  estimated  fair value of the net tangible  assets
acquired.  The $71.7 million  difference  was accounted for as costs incurred in
acquiring the Management  Companies from an affiliate,  rather than  "goodwill",
since the  Management  Companies did not qualify as  businesses  for purposes of
applying APB Opinion No. 16 BUSINESS COMBINATIONS.

                                      13

<PAGE>



                          SECURITY CAPITAL PACIFIC TRUST

                  NOTES TO CONDENSED FINANCIAL STATEMENTS -- (Continued)



     As a result of the Merger,  PTR no longer pays REIT management and property
management  fees to Security  Capital Group.  Instead,  PTR directly  incurs the
personnel  and other costs  related to these  functions.  The costs  relating to
property management are recorded as rental expenses whereas the costs associated
with  managing  the REIT are  recorded as general and  administrative  expenses.
Direct and incremental  costs related to successful  development and acquisition
activities  are  capitalized  as  part  of the  related  real  estate  basis  in
accordance with GAAP.

     Upon  closing of the Merger,  PTR entered into an  Administrative  Services
Agreement  ("ASA") with  Security  Capital  Group for the  provision of services
which  include,  but are not  limited  to,  payroll  and human  resources,  cash
management, accounts payable, data processing, research, investor relations, and
insurance, legal and tax administration. PTR may purchase all or any combination
of these services in exchange for a fee equal to Security  Capital  Group's cost
of such  services  plus 20%.  These  fees may not  exceed  market  rates and are
subject to a maximum of approximately  $2.2 million during 1997 and $5.5 million
during 1998.  Cost savings  experienced by Security  Capital Group under the ASA
accrue to PTR and  accordingly,  management  expects  actual fees for 1998 to be
less than the $5.5  million  maximum.  The ASA , which  expires on December  31,
1998,  provides for annual renewals of consecutive  one-year  terms,  subject to
approval by a majority of the independent members of the PTR Board.

     In addition, after the closing of the Merger, Security Capital Group issued
$102.0  million of warrants pro rata  directly to holders of PTR's Common Shares
and Series A Preferred  Shares (other than Security  Capital Group),  to acquire
3,644,430  shares of Class B common stock of Security  Capital Group. PTR common
shareholders  received 0.052646 warrants for each Common Share held and Series A
preferred shareholders received 0.070909 warrants for each preferred share held.
Each warrant can be exercised  for one share of Security  Capital Class B common
stock at an exercise price of $28 per share and has a term of one year. Security
Capital Group issued these warrants to PTR  shareholders as an incentive to vote
in favor of the Merger and to raise  additional  equity  capital at a relatively
low cost, in addition to other benefits.

(8) LONG-TERM INCENTIVE PLAN

     On  September  8, 1997,  PTR's  common  shareholders  approved a  long-term
incentive plan (the "Incentive Plan") which  provides for awards  consisting of
(1) options to purchase  Common  Shares,  (2) dividend equivalent units ("DEUs")
on  options, (3) a  share  purchase  program,  and (4)  share  awards.  No more 
than 5,650,000 Common Shares in the aggregate may be awarded under the Incentive
Plan and no individual may be granted awards with respect to more  than  500,000
Common Shares in any one-year period.

      Under the  Incentive  Plan,  certain  employees of PTR  purchased  813,430
Common  Shares at a price of $22.0625 per share (the average of the high and low
price per share on  September  8,  1997).  PTR  financed  up to 95% of the total
purchase price through ten-year  recourse loans to the participants  aggregating
$17.1  million.  The  loans,  which  have  been  recognized  as a  reduction  of
Shareholders'  Equity,  bear  interest at a floating  rate equal to the lower of
PTR's annual dividend yield (5.9% at September 8, 1997) on the initial  purchase
price or 6% per annum. The loans are secured by the Common Shares purchased. For
each Common Share purchased,  participants  were granted options to purchase two
additional  Common Shares at a price of $22.0625 per share.  This share purchase
opportunity  and the  options  awarded in  connection  therewith  were issued in
connection with the Merger and is not expected to be repeated.

     Also,  under the Incentive  Plan, PTR granted  options to purchase  206,461
Common Shares at an exercise price of $22.0625 per share to officers and certain
employees of PTR. These options are entitled to DEUs which are calculated as the
difference  between PTR's annual dividend yield and the S&P 500 average dividend
yield times the number of shares under  option.  Previously  awarded DEUs accrue
additional DEUs based on PTR's annual dividend rate. As of September 30, 1997 no
DEUs had been  issued.  PTR  expects to award  options of this type on an annual
basis.  Options awarded to date under the Incentive Plan have a term of 10 years
and generally vest at 25% per year commencing on the second  anniversary date of
the grant.

     PTR has adopted the provisions of SFAS No. 123, ACCOUNTING FOR STOCK  BASED
COMPENSATION.   Under these provisions,  PTR has elected to continue to account
                                       14

<PAGE>



                         SECURITY CAPITAL PACIFIC TRUST

                NOTES TO CONDENSED FINANCIAL STATEMENTS -- (Concluded)


for stock-based compensation under APB Opinion  No. 25,   ACCOUNTING  FOR  STOCK
ISSUED TO EMPLOYEES  and related interpretations.  Accordingly,  no compensation
cost has been recognized as the exercise  price of options  awarded was equal to
the  market price  at the date  of grant. PTR intends to provide  the  pro forma
disclosures  required  by  SFAS  No.  123 in  its  December  31,  1997 financial
statements.

                                      15

<PAGE>





                   INDEPENDENT AUDITORS' REVIEW REPORT



The Board of Trustees and Shareholders
SECURITY CAPITAL PACIFIC TRUST:



     We have  reviewed  the  accompanying  condensed  balance  sheet of SECURITY
CAPITAL PACIFIC TRUST as of September 30, 1997, the related condensed statements
of operations for the three and nine-month  periods ended September 30, 1997 and
1996,  the statement of  shareholders'  equity for the  nine-month  period ended
September 30, 1997, and the statements of cash flows for the nine-month  periods
ended September 30, 1997 and 1996. These condensed financial  statements are the
responsibility of the Trust's management.

     We conducted our review in accordance  with  standards  established  by the
American  Institute  of  Certified  Public  Accountants.  A  review  of  interim
financial  information consists principally of applying analytical procedures to
financial  data and making  inquiries of persons  responsible  for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the  expression  of an opinion  regarding the  financial  statements  taken as a
whole. Accordingly, we do not express such an opinion.

     Based on our review,  we are not aware of any material  modifications  that
should be made to the condensed financial  statements referred to above for them
to be in conformity with generally accepted accounting principles.

     We have previously  audited, in accordance with generally accepted auditing
standards,  the balance sheet of SECURITY  CAPITAL  PACIFIC TRUST as of December
31, 1996, and the related statements of earnings, shareholders' equity, and cash
flows for the year then ended (not  presented  herein);  and in our report dated
January  29,  1997,  except  as to Note 13,  which is as of March 10,  1997,  we
expressed an unqualified opinion on those financial statements.  In our opinion,
the  information  set forth in the  accompanying  condensed  balance sheet as of
December 31, 1996 is fairly stated, in all material respects, in relation to the
balance sheet from which it has been derived.



                                                   KPMG PEAT MARWICK  LLP

Chicago, Illinois
October 21, 1997


                                      16

<PAGE>





ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS
OF OPERATIONS

     The following  information  should be read in  conjunction  with PTR's 1996
Form 10-K as well as the financial  statements  and notes  included in Item 1 of
this report.  See PTR's 1996 Form 10-K for a discussion  of various risk factors
associated with forward-looking statements made in this document.


OVERVIEW

   GENERAL

     PTR's results of  operations,  financial  position and liquidity  have been
influenced  primarily  by  the  operations  of and  investments  made  in  PTR's
multifamily  communities.  The  term  "multifamily"  as used  herein  refers  to
garden-style  communities and excludes Homestead Village  extended-stay  lodging
assets, which were contributed to a new publicly-traded  company,  Homestead, on
October 17, 1996, in exchange for certain Homestead securities.

   CONSUMMATION OF MERGER

     On September 8, 1997, PTR terminated its REIT management agreement with the
Management  Companies pursuant to the Merger whereby PTR acquired the operations
and businesses of the Management Companies valued at approximately $75.8 million
from Security Capital Group in exchange for 3,295,533 Common Shares.  The number
of Common Shares issued to Security  Capital  Group was  determined  using a per
Common Share price of $23.0125  (the average  market price of Common Shares over
the  five-day  period  prior to the August 6, 1997 record  date for  determining
PTR's  shareholders  entitled to vote on the  Merger).  The Board  approved  the
Merger  based  on  the  recommendation  of  a  special  committee  comprised  of
independent  PTR Trustees  who received a fairness  opinion on the Merger from a
third-party  investment  bank.  The Merger,  which  required  the  approval of a
two-thirds  majority  of  PTR's  outstanding  Common  Shares,  was  approved  by
approximately 99% of the shareholders  voting on the transaction on September 8,
1997. As a result of the transaction,  PTR became an internally managed REIT and
Security  Capital Group remains PTR's largest  shareholder  (33.2%  ownership at
September 30, 1997).

     The financial  impact of the Merger is discussed in more detail below under
"--Results of Operations" and "--Liquidity and Capital Resources".

     LONG-TERM INCENTIVE PLAN

     On September 8, 1997,  PTR sold 813,430 Common Shares at $22.0625 per share
to eligible  employees in exchange for 10-year recourse loans  aggregating $17.1
million and cash of $0.8 million.  Participants were awarded options to purchase
1,626,860  Common  Shares at an exercise  price of $22.0625 per share.  PTR will
recognize  interest income of approximately  $1.0 million annually in connection
with the share purchase loans.  Distributions  paid on the shares purchased will
be used first to service the interest and then the  principal on the  respective
employee loans, with any excess paid to the participant.

     Also on September 8, 1997, PTR granted  options to purchase  206,461 Common
Shares to officers and certain  employees  at an exercise  price of $22.0625 per
share.  PTR  will  recognize  compensation  cost  related  to  the  DEU  feature
associated with these options. No DEUs had been issued as of September 30, 1997.
No  compensation  cost is recognized for the fair value of the awarded  options,
since the exercise price was equal to the market price at the date of grant.

     See "Item 1. Financial  Statements,  Note 8, Long-Term Incentive  Plan" for
additional information regarding vesting, interest rates, and other terms of the
Long-Term Incentive Plan.











                                      17

<PAGE>




MULTIFAMILY INVESTMENTS

     The following table provides an overview of PTR's multifamily portfolio and
related  investment  activity  for the  periods  indicated  (dollar  amounts  in
thousands):
<TABLE>
<CAPTION>

                                                         THREE MONTHS  THREE MONTHS   THREE MONTHS          NINE MONTHS
                                                             ENDED         ENDED         ENDED                ENDED
                                                        MARCH 31, 1997 JUNE 30, 1997 SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
                                                        -------------- ------------- ------------------ ------------------
<S>                                                     <C>            <C>           <C>                <C>
     OPERATING COMMUNITIES:
               Communities.............................           133            129                133                133
               Units...................................        40,874         40,786             42,184             42,184
               Total expected investment(1)............ $   1,928,702   $  2,060,586    $     2,155,676   $      2,155,676
     COMMUNITIES UNDER CONSTRUCTION:
          STARTS DURING PERIOD:
               Communities.............................             1              6                --                   7
               Units...................................           192          1,733                --               1,925
               Total expected investment(1)............ $       9,393   $    123,769                --    $        133,162
          COMPLETIONS DURING PERIOD:
               Communities.............................              --            2                 3                   5
               Units...................................              --          732             1,192               1,924
               Total expected investment(1)............              -- $     46,590    $       67,211    $        113,801
          STABILIZATIONS DURING PERIOD:
               Communities.............................              --            1                 2                   3
               Units...................................              --          364               696               1,060
               Total expected investment(1)............              -- $     22,139     $      42,663    $         64,802
          UNDER CONSTRUCTION AT END OF PERIOD:
               Communities.............................              18         . 22                18                  18
               Units...................................           5,671        6,672             5,480               5,480
               Total expected investment(1)............  $      359,366 $    435,195     $     370,081    $        370,081
               Investment to date......................  $      227,325 $    254,843     $     233,148    $        233,148
          DEVELOPMENT EXPENDITURES DURING PERIOD.......  $       52,883 $     61,597     $      47,530    $        162,010
     ACQUISITIONS:
               Communities.............................               5            6                 3                  14
               Units...................................           1,652        2,065               688               4,405
               Total expected investment(1)............  $      144,112 $    188,089     $      45,611    $        377,812
     DISPOSITIONS:
               Communities.............................              12           11                 2                  25
               Units...................................           3,480        2,885               482               6,847
                    Gross sales proceeds (2)...........  $      142,137 $    107,679     $      40,700    $        290,516
                    Gains (2)..........................  $       25,335 $     11,872     $      10,723    $         47,930
</TABLE>
---------
(1)  For operating  communities and  acquisitions,  represents  cost,  including
     budgeted  renovations,  as of the end of each period. For communities under
     construction,  represents total budgeted  development cost as of the end of
     each period,  which includes the cost of land, fees,  permits,  payments to
     contractors, materials, architectural and engineering fees and interest and
     property taxes to be capitalized during the construction period.
(2)  Includes the sale of an industrial  building and two  unrelated  parcels of
     land with gross sales proceeds of  approximately  $772,241 and an aggregate
     gain of approximately $382,863.

CURRENT DEVELOPMENT ACTIVITY

     PTR believes that  development of multifamily  communities  from the ground
up, which are built for long-term  ownership and designed to meet broad resident
preferences and demographic trends, will continue to provide an important source
of  long-term  cash  flow  growth.  PTR  believes  its  ability  to  compete  is
significantly  enhanced  relative  to other  companies  because  of its depth of
development  and  acquisition  personnel and presence in local markets  combined
with PTR's access to investment  capital.  The following table  summarizes PTR's
development  communities  under  construction  as of September  30, 1997 (dollar
amounts in thousands):

                                       18

<PAGE>




<TABLE>
<CAPTION>

                                                                   START      ACTUAL OR        EXPECTED
                                                        TOTAL      DATE   EXPECTED DATE FOR  STABILIZATION
                                NUMBER OF     PTR      EXPECTED  (QUARTER/   FIRST UNITS         DATE
                                  UNITS   INVESTMENT INVESTMENT(1) YEAR)  (QUARTER/YEAR)(2)  (QUARTER/YEAR)  % LEASED (3)
                                --------- ---------- ------------ ------  -----------------  --------------  -----------
<S>                             <C>       <C>        <C>          <C>     <C>                <C>             <C>
COMMUNITIES UNDER
CONSTRUCTION AND IN
LEASE UP (4):
CENTRAL REGION:
  DALLAS, TEXAS:
    Park Meadows...............        368  $  16,165   $  16,963    Q3/96          Q2/97           Q2/98      59.8%
                                     -----  ---------   ---------
NORTHWEST REGION:
  PORTLAND, OREGON:
    Arbor Heights..............        348     21,206      22,818    Q2/96          Q3/97           Q3/98       19.3
    Cambridge Crossing.........        250     13,783      15,564    Q3/96          Q3/97           Q3/98       25.2
                                     -----  ---------   ---------
      Total Portland...........        598     34,989      38,382
                                     -----  ---------   ---------
  SALT LAKE CITY, UTAH:
    Mountain Shadow Expansion..         88      4,216       4,726    Q4/96          Q3/97           Q1/98       35.2
    Riverview..................        492     25,984      32,558    Q2/96          Q2/97           Q3/98       25.6
                                     -----  ---------   ---------
      Total Salt Lake City.....        580     30,200      37,284
                                     -----  ---------   ---------
  SEATTLE, WASHINGTON:
    Canyon Creek...............        336     24,547      25,335    Q2/96          Q1/97           Q4/97       79.8
    Harbour Pointe.............        229     14,466      15,073    Q3/96          Q2/97           Q1/98       46.7
                                     -----  ---------   ---------
      Total Seattle............        565     39,013      40,408
                                     -----  ---------   ---------
        Total Northwest Region.      1,743    104,202     116,074
                                     -----  ---------   ---------

WEST REGION:
  PHOENIX, ARIZONA:
    San Palmera................        412     25,569      25,454    Q4/95          Q4/96           Q4/97       87.4
                                     -----  ---------   ---------
            Total in Lease-up..      2,523    145,936     158,491
                                     -----  ---------   ---------


OTHER COMMUNITIES
UNDER CONSTRUCTION (5):
CENTRAL REGION:
  DALLAS, TEXAS:
    Timber Ridge II............        192      6,751       9,393    Q1/97          Q4/97           Q2/98        n/a
                                     -----  ---------   ---------
  DENVER, COLORADO:
    Federal Heights............        384      8,107      22,772    Q2/97          Q1/98           Q2/99        n/a
                                     -----  ---------   ---------
  HOUSTON, TEXAS:
    Memorial Heights II........        256     12,882      15,880    Q4/96          Q4/97           Q3/98        n/a
                                     -----  ---------   ---------
      Total Central Region.....        832     27,740      48,045
                                     -----  ---------   ---------

NORTHWEST  REGION:
  PORTLAND, OREGON:
    Hedges Creek...............        408      9,661      27,307    Q2/97          Q2/98           Q2/99        n/a
                                     -----  ---------   ---------
  SEATTLE, WASHINGTON:
    Forestview.................        192      3,992      15,340    Q2/97          Q2/98           Q1/99        n/a
    Stonemeadow................        280      6,767      21,723    Q2/97          Q2/98           Q1/99        n/a
                                     -----  ---------   ---------
      Total Seattle............        472     10,759      37,063
                                     -----  ---------   ---------
        Total Northwest Region.        880     20,420      64,370
                                     -----  ---------   ---------

WEST REGION:
  ORANGE COUNTY, CALIFORNIA:
    Las Flores Apartment Homes.        504     15,470      43,894    Q4/96          Q1/98           Q2/99        n/a
    Sorrento...................        241      8,323      21,539    Q2/97          Q1/98           Q4/98        n/a
                                     -----  ---------   ---------
      Total Orange County......        745     23,793      65,433
                                     -----  ---------   ---------
  PHOENIX, ARIZONA:
    Arrowhead I................        272      9,462      18,654    Q3/96          Q4/97           Q3/98        n/a
                                     -----  ---------   ---------
  RENO, NEVADA:
    Meadowview I...............        228      5,797      15,088    Q2/97          Q1/98           Q4/98        n/a
                                     -----  ---------   ---------
        Total West Region......      1,245     39,052      99,175
                                     -----  ---------   ---------
          Total Other..........      2,957     87,212     211,590
                                     -----  ---------   ---------
            Total Communities
              Under Construction     5,480  $ 233,148   $ 370,081
                                     =====  =========   =========
</TABLE>
---------
(1)  Represents  total  budgeted  development  cost,  which includes the cost of
     land, fees, permits, payments to contractors,  materials, architectural and
     engineering  fees and interest and property taxes to be capitalized  during
     the construction period.
(2)  Represents the quarter that the first  completed  units were made available
     for leasing  (or are  expected to be made  available).  PTR begins  leasing
     completed units prior to completion of the entire community.
(3)  The percentage leased is based on leased units divided by  total number  of
     units in the community (completed and under construction).
(4)  A development community is considered in "lease-up" once  the  first  units
     are delivered.
(5)  Lease-up has not yet commenced.

     See PTR's 1996 Form 10-K for a discussion of various risks  associated with
PTR's development and construction activities.

                                       19
<PAGE>

 RECENT ACQUISITIONS

     In addition to its development activity, during the nine month period ended
September 30, 1997, PTR completed the  acquisition  of 14 operating  multifamily
communities  (4,405 units) in California,  Seattle and Salt Lake City at a total
expected investment of $377.8 million.

     See PTR's 1996 Form 10-K for a discussion of various risks  associated with
PTR's acquisition activities.

RESULTS OF OPERATIONS

  NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO SEPTEMBER 30, 1996

         Net earnings for the nine months ended September 30, 1997 and 1996 were
$44.4  million and $104.6  million,  respectively,  a decrease of $60.2  million
(57.5%).  This decrease resulted from a one-time operating expense adjustment of
approximately  $71.7  million  related to the costs  incurred in  acquiring  the
businesses  and operations of the  Management  Companies  from Security  Capital
Group in the Merger.  See "--Costs  Incurred in Acquiring  Management  Companies
from an Affiliate" below. The impact of this one-time  expense,  the elimination
of earnings from Homestead  Village  properties and higher interest expense were
partially  offset  by a $14.6  million  increase  in gains on  dispositions  and
increased earnings from multifamily  communities,  primarily in California,  the
Pacific Northwest and Salt Lake City ("West Coast Markets"). A discussion of the
major components of PTR's results of operations follows.

PROPERTY OPERATIONS AND ACQUISITION OF PROPERTY MANAGER

     The following  table  summarizes  the Net Operating  Income  generated from
property operations for each period (in thousands):


<TABLE>
<CAPTION>
                                                                        HOMESTEAD   OTHER NON-
                                                             MULTIFAMILY VILLAGE    MULTIFAMILY  TOTAL
                                                             ----------- --------   -----------  -----
<S>                                                         <C>          <C>        <C>          <C>
     Net Operating Income--Nine Months Ended
        September 30, 1997(1).............................    $ 152,219  $     --    $  2,840    $ 155,059
     Net Operating Income--Nine  Months Ended
        September 30, 1996(1).............................      129,039    12,190       2,328      143,557
                                                              ---------  --------    --------   ----------
                         Increase (decrease)..............    $  23,180  $(12,190)   $    512    $  11,502
                                                              =========  ========    ========   ==========
</TABLE>

---------
(1)  Net Operating  Income is defined as rental  revenues less rental  expenses,
     real estate taxes and property management fees.

     At September 30, 1997,  multifamily  investments  comprised  99.2% of PTR's
total real estate  portfolio,  based on total expected  investment.  The overall
$23.2  million  increase  in  Net  Operating   Income  from  PTR's   multifamily
communities for the nine months ended September 30, 1997 as compared to the nine
months ended September 30, 1996 was  attributable to a $29.9 million increase in
rental revenues  partially offset by a $6.7 million increase in rental expenses,
real estate taxes and property management fees ("Operating Expenses"). The $29.9
million  increase in rental  revenues  from  $214.4  million for the nine months
ended  September 30, 1996 to $244.3 million for the nine months ended  September
30, 1997 was attributable primarily to increases in rental revenues generated by
existing multifamily communities  and increased  revenues from   new investments

                                     20

<PAGE>




in West Coast Markets.   Similarly,  the  $6.7  million  increase  in  Operating
Expenses from $85.4 million for the nine  months  ended  September  30,  1996 to
$92.1  million for the nine months  ended  September 30,  1997  is  attributable
primarily  to  additional  Operating   Expenses  from   new communities,  higher
operating costs in new markets and  increases in Operating  Expenses  associated
with  existing  multifamily communities.  Multifamily  property  management fees
for the nine months  ended September  30,  1997 as  compared  to the same period
in 1996,  decreased  $0.4 million  primarily as a result of the  termination  of
the  property  management  agreement upon  consummation of the Merger. After the
Merger,  PTR directly incurs personnel  and  other  costs  related  to  property
management, in lieu of paying a  property  management fee  to  Security  Capital
Group. As a result of these factors,  PTR's  multifamily  net  operating  income
as a  percentage  of rental  revenues increased from 60.2% in  1996 to  62.3% in
1997. Additional  information for  these communities is  presented  below  under
"--Same Store Communities".

     PTR  categorizes  operating  multifamily  communities  (which  include  all
communities not under development) as either  "stabilized" or  "pre-stabilized."
The term "stabilized" means that renovation,  repositioning,  new management and
new  marketing  programs  (or  development  and  marketing  in the case of newly
developed  communities) have been completed for a sufficient period of time (but
in no event longer than 12 months, except for major  rehabilitations) to achieve
93%  occupancy  at market  rents.  Prior to being  "stabilized",  a community is
considered  "pre-stabilized".  Approximately  71.9% and 76.3% of PTR's operating
multifamily  portfolio was classified as stabilized as of September 30, 1997 and
1996, respectively, based on total expected investment.

     The $12.2 million in Homestead  Village Net Operating  Income shown for the
nine months ended September 30, 1996 resulted from rental  revenues  aggregating
$23.3 million offset by Operating  Expenses  aggregating $11.1 million generated
from 28  properties  operating  as of September  30,  1996.  The decrease in Net
Operating  Income  related to  the  Homestead   Village   properties in the nine
months  ended  September  30, 1997 is entirely  due to the  contribution  of all
properties to Homestead, a newly formed company, on October 17, 1996.

   SAME STORE COMMUNITIES

     The  following  table  illustrates   selected  quarterly  and  year-to-date
performance  data  for  PTR's   communities  which  were  fully  operational  in
comparable  periods of 1996 and 1997  ("Same  Store  Communities")  followed  by
selected same store community information by region and market:

<TABLE>
<CAPTION>
                                                              FULLY OPERATIONAL       FULLY OPERATIONAL
                                                                COMMUNITIES ON         COMMUNITIES ON
                                                                JULY 1, 1996           JANUARY 1, 1996
                                                              -----------------      ------------------
PORTFOLIO (DOLLAR AMOUNTS IN THOUSANDS):
<S>                                                           <C>                    <C>
      Communities...............................                             88                      69
     Units......................................                         27,793                  21,034
     Total expected investment(1)...............                     $1,171,771                $844,192
     % of total PTR portfolio(2)................                          46.39%                  33.42%

                                                              THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                SEPTEMBER 30,           SEPTEMBER 30,
                                                                   1997                    1997
                                                              -----------------      ------------------
OPERATING PERFORMANCE VS. PRIOR YEAR:
     Collections growth(3)......................                           3.25%                   2.59%
     Property Operating Expense growth..........                           2.82%                   2.61%
     Net Operating Income growth................                           3.55%                   2.58%


     Recurring capital expenditures per unit (4)                      $       39                $    150



                                                              THREE MONTHS ENDED      THREE MONTHS ENDED
                                                              SEPTEMBER 30, 1997      SEPTEMBER 30, 1996
                                                              -----------------      ------------------
SUMMARY INFORMATION ON JULY 1, 1996 SAME STORE
  COMMUNITIES (IN ACTUAL DOLLARS):
     Average physical occupancy.................                          94.74%                  94.54%
     Property operating expense ratio(5)........                          40.13%                  40.30%
     Average rental rate per unit(6)............                       $    644                $    625

     See notes following next table.
</TABLE>

                                      21

<PAGE>
<TABLE>
<CAPTION>






                                                             AVERAGE PHYSICAL
                                                                OCCUPANCY %      COLLECTIONS GROWTH
                                                               THREE MONTHS          THREE MONTHS      7/1/96 SAME     TOTAL PTR
                                                                  ENDED                 ENDED             STORE        PORTFOLIO %
MARKET DISTRIBUTION                                            SEPTEMBER 30,      SEPTEMBER 30, 1996   COMMUNITIES %       BY
                                                           ---------------------
                                                            1997           1996   1997 VS. 1996 (3)    BY MARKET (2)   MARKET(2)
                                                           -------        ------  -----------------    -------------   ---------
<S>                                                        <C>            <C>     <C>                  <C>             <C>
CENTRAL REGION:
     Austin...........................................      94.55%        95.43%         2.97%             2.39%          2.85%
     Dallas...........................................      96.38         96.19          3.75              3.99           2.89
     Denver...........................................      96.37         97.02          6.05              9.16           5.15
     El Paso..........................................      94.05         94.46         (2.45)             7.21           3.35
     Houston..........................................      96.15         96.12          7.14              4.88           5.07
     San Antonio......................................      95.75         92.22          6.07             11.32           5.25
                                                            -----         -----         -----             -----          -----
     CENTRAL REGION SUBTOTAL..........................      95.49%        94.70%         4.09%            38.95%         24.56%
                                                            -----         -----         -----             -----          -----
NORTHWEST REGION:
     Portland.........................................      94.06%        91.79%         7.88%             3.94%          5.42%
     Salt Lake City...................................      93.06         94.47          3.56              3.11           5.15
     Seattle..........................................      96.21         95.71         11.19              5.57           9.97
                                                            -----         -----         -----             -----          -----
     NORTHWEST REGION SUBTOTAL........................      94.68%        94.23%         8.25%            12.62%         20.54%
                                                            -----         -----         -----             -----          -----
WEST REGION:
     Albuquerque......................................      94.06%        94.72%        (2.61%)            7.37%          5.24%
     Las Vegas........................................      92.22         96.14         (3.17)             8.52           3.95
     Phoenix..........................................      93.82         94.23          0.65             13.41           9.85
     Northern California..............................      97.13         97.00          5.86              3.35          13.88
     Southern California..............................      94.72         92.63          6.87             12.91          17.69
     Tucson...........................................      91.86         93.98          0.31              1.24           1.59
                                                            -----         -----         -----             -----          -----
     WEST REGION SUBTOTAL.............................      93.86%        94.38%         1.28%            46.80%         52.20%
                                                            -----         -----         -----             -----          -----
Other Markets.........................................      96.43%        96.31%        (0.58%)            1.63%          2.70%
                                                            -----         -----         -----            ------         ------
Totals  ..............................................      94.74%        94.54%         3.25%           100.00%        100.00%
                                                            =====         =====         =====            ======         ======
Same Store Communities as a percentage
   of total PTR portfolio                                                                                 46.39%
                                                                                                         ======
</TABLE>
--------
(1) Represents cost, including budgeted renovations.

(2) Based on total expected investment as of September 30, 1997.

(3) Represents percentage growth in rental revenues, net of vacancies,  bad
    debts and concessions.

(4) Actual recurring  capital  expenditures per unit for PTR's multifamily
    communities  that were fully operating  during the entire nine months ended
    September 30, 1997.

(5) Represents  Operating  Expenses as a  percentage  of rental  revenues.

(6) Represents weighted-average monthly "asking rents" during each period.

     Approximately 53% of PTR's total capital is currently  deployed in its West
Coast  Markets.  These  communities  currently  represent only 29% of PTR's same
store portfolio,  however, this percentage will increase  significantly over the
next three calendar  quarters as recent  acquisitions and developments are added
to the same  store  portfolio.  Management  believes  that the  addition  of new
communities  in the West Coast Markets to its same store  portfolio  will have a
positive impact on future growth in rental revenues,  Net Operating Income,  and
cash flow provided by operating activities.

   HOMESTEAD INTEREST AND HOMESTEAD NOTES

     Through  September 30, 1997,  PTR had funded  $162.4  million of its $198.8
million  Homestead  funding  commitment of which $61.3 million was funded during
the nine months ended  September  30, 1997.  This leaves a remaining  commitment
under the funding  commitment  agreement of approximately  $36.4 million,  which
will be provided to Homestead throughout the remainder of 1997 and early 1998 to
fund developments as needed on development properties contributed by PTR.


                                    22

<PAGE>




     During the nine months ended September 30, 1997, PTR recorded $11.4 million
in interest  income  ($10.5  million  for  purposes  of  calculating  funds from
operations) from the Homestead Notes. PTR deducts from net earnings the interest
income   related  to  the   amortization   of  the   conversion   discount   and
warrant-related deferred revenue in calculating funds from operations. Homestead
interest  income is expected to increase in future  periods as PTR  continues to
fund  Homestead's   development  activity  up  to  its  $198.8  million  funding
commitment.

     Upon full  funding,  PTR will have funded  $198.8  million in exchange  for
Homestead Notes having a face amount of $221.3 million.  The Homestead Notes are
convertible  into Homestead  common stock on the basis of one share of Homestead
common stock for every $11.50 of principal face amount outstanding,  which would
result in the ownership of approximately 19.2 million shares of Homestead common
stock at full funding.  Under these  assumptions  and using the trading price of
Homestead  common stock at September 30, 1997 of $17.75,  PTR's  ownership would
result in the following  incremental value per PTR Common Share at September 30,
1997 (in thousands, except per share amounts:)

<TABLE>

<S>                                                                     <C>     
   Homestead common stock price.........................................$ 17.750
   Conversion price.....................................................  11.500
                                                                        --------
        Incremental value per share of Homestead common stock...........$   6.25
      Shares of Homestead common stock upon conversion (at full funding)  19,246
                                                                        --------
        Total incremental value from conversion.........................$120,288
      PTR Common Shares outstanding.....................................  92,481
                                                                        --------
        Assumed incremental value per PTR Common Share..................$   1.30
                                                                        ========
</TABLE>

     Upon  full  funding  of the  Homestead  Notes by PTR and  Security  Capital
Atlantic  Incorporated  ("ATLANTIC"),  PTR's conversion rights would represent a
34.7%  ownership  interest in  Homestead.  This  ownership  interest  assumes no
further equity offerings by Homestead,  conversion of all Homestead Notes by PTR
and ATLANTIC and exercise of all outstanding Homestead warrants.

DEPRECIATION EXPENSE

     The increase in depreciation  expense resulted  primarily from the increase
in the  number  of  operating  communities  partially  offset  by  dispositions,
including  those related to the  contribution  of assets to Homestead on October
17, 1996.

INTEREST EXPENSE

     The following table summarizes PTR's interest expense (in thousands):

<TABLE>
<CAPTION>
                                               NINE MONTHS         NINE MONTHS
                                                  ENDED               ENDED
                                           SEPTEMBER 30, 1997  SEPTEMBER 30, 1996      INCREASE       % INCREASE
                                           ------------------  ------------------      --------       ----------
<S>                                        <C>                 <C>                     <C>            <C>
            Credit facilities.............     $   11,294         $   7,428            $  3,866          52.0%
            Long-Term Debt................         34,456            18,958              15,498          81.7
            Mortgages payable.............         13,284             8,839               4,445          50.3
            Capitalized interest..........        (13,332)          (12,824)               (508)          4.0
                                               -----------        ----------           ---------       -------
                 Total interest expense...     $   45,702         $  22,401            $ 23,301         104.0%
                                               ===========        ==========           =========       =======
</TABLE>
     The  increase  in  interest  expense on PTR's  credit  facilities  resulted
primarily from higher average  outstanding  balances.  Average borrowings on the
line of credit were  approximately  $116.5  million  (with an average  effective
interest  rate of 8.5%) during the nine months  ended  September  30,  1997,  as
compared to average borrowings of approximately  $114.0 million (with an average
effective interest rate of 8.56%) for the same period in 1996. Additionally, PTR
borrowed  $60 million and $40 million  under two separate  short-term  borrowing
agreements  bearing interest at LIBOR plus 0.60%, on March 10, 1997 and April 4,
1997 respectively.  Both borrowing  agreements were repaid in full upon maturity
on September 10, 1997.

     Long-Term Debt interest expense  increased due primarily to the issuance of
$380 million of Long-Term Debt during the  year-ended  December 31, 1996 and $50
million of Long-Term Debt in March 1997.

     Mortgage   interest   expense   increased   as  a  result   of   additional
weighted-average  debt  outstanding  due  to  mortgage  assumptions  related  to
community  acquisitions  which were partially offset by prepayments  during 1996
and 1997.
                                     23

<PAGE>



     The  increase in  interest  costs were  partially  offset by an increase in
capitalized  interest  which was  primarily  attributable  to  higher  levels of
multifamily development activity for the nine months ended September 30, 1997 as
compared to the same period in 1996.

   REIT MANAGEMENT FEE AND ACQUISITION OF REIT MANAGER

      The REIT  management  fee paid by PTR  decreased  by  approximately  23.9%
during the nine months ended  September  30, 1997 as compared to the same period
in 1996 due  primarily to the  Homestead  transaction  described  above,  higher
Long-Term Debt levels and the termination of the REIT management  agreement upon
closing of the Merger on September 8, 1997.

      Pursuant to the consummation of the Merger,  PTR acquired the REIT Manager
and became an internally-managed  REIT. Subsequent to September 8, 1997 the REIT
management fee is replaced with the actual  personnel and other  operating costs
associated  with the REIT  management  function.  These  costs are  recorded  as
general and administrative expenses, which resulted in the $0.5 million increase
in  this  line  item.   Direct  and  incremental  costs  related  to  successful
development  and  acquisition  activities are capitalized as part of the related
real estate basis in accordance with GAAP.

      Upon closing of the Merger, PTR entered into the ASA with Security Capital
Group for the  provision  of  services  which  include,  but are not limited to,
payroll and human resources, cash management, accounts payable, data processing,
research,  investor relations and insurance,  legal and tax administration.  PTR
may  purchase  all or any  combination  of these  services in exchange for a fee
equal to Security Capital Group's cost of service plus 20%, subject to a maximum
of  approximately  $2.2  million  during 1997 and $5.5  million  for 1998.  Cost
savings  experienced  by Security  Capital Group under the ASA accrue to PTR and
accordingly,  management  expects  actual fees for 1998 to be less than the $5.5
million  maximum.  ASA fees expensed from the Merger date through  September 30,
1997 under this  agreement  aggregated  $0.2 million.  The ASA, which expires on
December 31, 1998, provides for annual renewals for consecutive  one-year terms,
subject to approval by a majority of the independent members of the PTR Board.

COSTS INCURRED IN ACQUIRING MANAGEMENT COMPANIES FROM AN AFFILIATE

      The market value of the 3,295,533 Common Shares issued to Security Capital
Group on the Merger date was  approximately  $73.3 million,  based on the $22.25
per share  closing  price of the  Common  Shares,  of which  approximately  $1.6
million was  allocated  to the  estimated  fair value of the tangible net assets
acquired.  The $71.7 million  difference  was accounted for as costs incurred in
acquiring the  Management  Companies from an affiliate,  rather than  "goodwill"
since the  Management  Companies did not qualify as  businesses  for purposes of
applying APB Opinion No.  16  BUSINESS  COMBINATIONS.  This one-time  adjustment
was recorded as an expense on PTR's Statement of Operations but was not deducted
for purposes of calculating funds from operations,  due to the non-recurring and
non-cash nature of this expense.

GAINS ON DISPOSITIONS OF INVESTMENTS

     PTR employs a market  research-based  asset optimization  strategy aimed at
optimizing its portfolio  composition  in order to maximize  growth in cash flow
from  operating  communities.  Since the  inception of this strategy in December
1995 and through  September 30, 1997,  PTR has  redeployed  gross  proceeds from
dispositions  aggregating  $590.1  million  from  markets  with less  attractive
economic fundamentals to well-located  communities primarily in PTR's West Coast
Markets  which have high  barriers  to entry  against  new  supply and  stronger
long-term growth prospects.

     During the nine  months  ended  September  30,  1997,  PTR  disposed  of 25
multifamily  communities,  one  industrial  building  and two  parcels  of land,
representing  gross  proceeds of $290.5  million.  As of September 30, 1997, PTR
held a portion of the 1997 disposition  proceeds aggregating $23.0 million in an
interest  bearing  escrow  account,  pending  acquisition  of other  multifamily
communities  to  complete  the  tax-deferred   exchange.   PTR  disposed  of  12
multifamily  communities,  one  industrial  building  and  one  parcel  of  land
representing  gross  proceeds of $186.0  million  during the nine  months  ended
September 30, 1996.  For federal  income tax purposes,  the majority of the 1997
and 1996 dispositions  were structured as tax-deferred  exchanges which deferred
gain recognition.  However,  for financial reporting purposes,  the transactions
qualified for profit recognition, and aggregate gains of $47.9 million and $33.3
million,  were  recorded for the nine months ended  September 30, 1997 and 1996,
respectively.

         Ten  multifamily  communities  and four  parcels  of land were held for
disposition as of September 30, 1997. The aggregate carrying value of properties
held for  disposition  was  approximately  $104.2 million at September 30, 1997.
Subject to normal  closing  risks,  PTR expects to complete the  disposition  of
these  properties  during 1997 and 1998 and redeploy the net proceeds  from such
dispositions,  where  appropriate,  through  tax-deferred  exchanges,  into  the
acquisition of multifamily communities.

                                       24
<PAGE>


   THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997 AND 1996

     Revenues  and  expenses  for the three  months  ended  September  30,  1997
compared to the three months ended September 30, 1996 reflect changes similar to
those  discussed in the  preceding  paragraphs  for the  comparison  of the nine
months ended on the same dates.  The changes are  substantially  attributable to
the same reasons discussed in the preceding paragraphs for the nine months ended
September 30, 1997 and 1996.

ENVIRONMENTAL MATTERS

     PTR is  subject to  environmental  regulations  related  to the  ownership,
operation,  development  and  acquisition  of  real  estate.  As part of its due
diligence  procedures,  PTR has conducted Phase I  environmental  assessments on
each community  prior to acquisition.  The cost of complying with  environmental
regulations  was not  material  to PTR's  results of  operations  during  either
period.  PTR  is  not  aware  of  any  environmental  condition  on  any  of its
communities  that is likely to have a material adverse effect on PTR's financial
position or results of operations.

LIQUIDITY AND CAPITAL RESOURCES

     PTR considers  its  liquidity and ability to generate cash from  operations
and  financings to be adequate and expects it to continue to be adequate to meet
PTR's  operating and capital  investment  requirements  as well as its Homestead
funding obligation and shareholder distribution requirements.

   OPERATING ACTIVITIES

     Net cash flow  provided by operating  activities  increased by $5.1 million
(5.3%) for the nine  months  ended  September  30,  1997 as compared to the same
period in 1996.  This increase was due primarily to increased  cash generated by
multifamily communities.

   INVESTING AND FINANCING ACTIVITIES

     During the nine months ended September 30, 1997 and 1996, PTR invested cash
of $468.7 million and $462.4 million,  respectively,  in real estate investments
relating  primarily to the  significant  acquisition  and  development  activity
summarized in "--Overview" above. The $468.7 million invested in real estate and
$61.3  million in  fundings of  Homestead  Notes  during the nine  months  ended
September 30, 1997 were financed  primarily  from $261.3 million in net proceeds
from  property  dispositions  (excluding  $22.9  million held in escrow  pending
tax-deferred  exchanges),  and borrowings under PTR's credit  facilities.  These
credit facilities were partially repaid from proceeds primarily related to PTR's
$50 million  offering of Long-Term  Debt issued in March 1997,  $54.3 million in
net  proceeds  from the sale of  2,500,000  Common  Shares  in June 1997 and the
$194.1 million in net proceeds from the Rights and Oversubscription  Offering in
September  1997.  The  $462.4  million  invested  during the nine  months  ended
September 30, 1996 was financed  primarily  from $182.5  million in net proceeds
from property  dispositions and borrowings  under PTR's credit  facilities which
were  partially  repaid from $250 million in proceeds  related to Long-Term Debt
issued during the nine months ended September 30, 1996.

     Other significant  financing activity included the payment of $90.1 million
and $86.3  million  in Common and  Preferred  Share  distributions  for the nine
months  ended  September  30,  1997 and  1996,  respectively.  The  increase  is
primarily  attributable to a 4.8% increase in the distributions  paid per Common
Share and an  increase  in the  overall  number of  Common  Shares  outstanding.
Preferred  Share  dividends  decreased  approximately  $4.3  million  during the
respective  periods as a result of  conversion  of Series A Preferred  Shares to
Common Shares which also resulted in increased Common Share  distributions.  PTR
prepaid  mortgages  due to  community  dispositions  of $26.5  million and $25.8
million for the nine months ended September 30, 1997 and 1996, respectively.

     Significant non-cash investing and financing activities for the nine months
ended  September 30, 1997 included (i) the  acquisition  of the  operations  and
businesses  of the  Management  Companies in exchange  for Common  Shares with a
market value on the date of the Merger of $73.3  million (ii) the  assumption of
$ 94.8  million  and  $ 88.7  million  of  mortgage  debt  during 1997 and 1996,
respectively,  in  connection  with   community  acquisitions  and   (iii)   the


                                       25
<PAGE>

conversion  of Series A Preferred  Shares to Common Shares   aggregating   $24.4
million  and  $12.4  million  in  1997  and  1996, respectively.  During   1997,
the  unrealized  gain  associated  with  the  Homestead  Notes  increased $ 40.4
million to $115.3 million as of September 30, 1997.

   BORROWINGS

     PTR  has  a  $350  million   unsecured   revolving   line  of  credit  with
approximately  $123.0 million of borrowings  outstanding as of October 31, 1997.
The line of credit  matures  August  1999 and may be  extended  annually  for an
additional  year with the approval of the Lenders.  The LIBOR spread was reduced
from  1.125% to 0.75% on the line of  credit  effective  August  13,  1997.  The
aggregate amount of borrowings  outstanding under all of PTR's credit facilities
as of October 31, 1997 was $145.0 million.

     At  maturity  on  September  10,  1997,  PTR repaid the entire  outstanding
balance aggregating $100 million on two separate short-term, unsecured borrowing
agreements  with a  financial  institution  by  drawing  on PTR's  $350  million
unsecured, revolving line of credit.

     See "Item 1.  Financial  Statements,  Note 4,  Borrowings"  for  additional
information regarding credit availability,  outstanding debt balances,  interest
rates, scheduled debt maturities and other terms.

   COMMITMENTS AND CONTINGENCIES

     At September 30, 1997, PTR had  contingent  contracts or letters of intent,
subject to PTR's  final due  diligence  and  approval  of all  entitlements,  to
acquire land for new development communities with an estimated 7,250 multifamily
units at a total development cost of approximately  $664.5 million.  At the same
date, PTR also had contingent  contracts or letters of intent,  subject to final
due diligence, for the acquisition of 208 additional operating multifamily units
with  a  total  expected   investment  of  $18.8  million,   including  budgeted
renovations. At September 30, 1997, PTR had unfunded development commitments for
developments under construction of $136.9 million. For a description of unfunded
commitments   in  connection   with  the  Homestead   Notes  see  "--Results  of
Operations--Homestead Interest and Homestead Notes."

     PTR expects to finance these  activities  and other future  investment  and
operating needs with cash on hand,  borrowings  under its credit  facilities and
disposition  proceeds from its asset optimization  strategy,  prior to arranging
long-term capital. The credit facilities should facilitate an efficient response
to  market  opportunities  while  minimizing  the  amount  of cash  invested  in
short-term  investments at lower yields.  Other sources of future  liquidity and
financial  flexibility  include  $170.9 million in  shelf-registered  securities
which can be issued on an as-needed  basis,  subject to PTR's  ability to effect
offerings on  satisfactory  terms.  PTR believes  that its current  conservative
ratio of long-term debt to total  long-term  undepreciated  book  capitalization
(the  sum  of  long-term  debt  and  shareholders'   equity  after  adding  back
accumulated  depreciation) of 34.6% at September 30, 1997, provides considerable
flexibility with respect to its ability to finance its investment activities.

     From time to time, PTR utilizes derivative financial  instruments as hedges
in  anticipation  of  future  debt  offerings  in order to  manage  well-defined
interest rate risk. In anticipation of a future debt offering,  PTR entered into
four separate  interest rate  contracts in August and October 1997 with notional
amounts  aggregating  $120  million  , which  PTR  plans to  terminate  when the
anticipated offering is completed. As of October 21, 1997, the fair market value
of these contracts was an unrealized loss of approximately $618,000. The gain or
loss  ultimately  realized  upon  termination  of the hedge will be deferred and
amortized into interest expense over the term of the related debt.

     In  anticipation  of the $50 million  Long-Term  Debt  offering that closed
March 31, 1997, PTR entered into interest rate  contracts with notional  amounts
aggregating $50 million in 1996. Upon completion of the offering, PTR terminated
the interest rate contracts,  realizing a gain of  approximately  $819,000 which
has been deferred and is being  amortized as an offset to interest  expense over
the term of the Long-Term Debt that was issued.

  DISTRIBUTIONS

     PTR paid first,  second and third quarter 1997  distributions of $0.325 per
Common Share on February  20, May 29, and August 27, 1997.  On October 29, 1997,
the Board declared a cash  distribution  of $0.325 per Common Share,  payable on
November 26, 1997, to  shareholders of record on November 12, 1997. On March 31,
June 30, and September 30, 1997,  PTR paid  quarterly  dividends on the Series A
Preferred Shares of $0.4377425 per share and quarterly dividends on its Series B
Preferred Shares of $0.5625 per share.

                                       26
<PAGE>





   FUNDS FROM OPERATIONS

     Funds from  operations  is defined as net earnings  computed in  accordance
with GAAP, excluding gains (or losses) from real estate transactions, provisions
for possible losses,  extraordinary items,  significant  non-recurring items and
real estate depreciation.  PTR believes that funds from operations is helpful to
the reader as a measure of the performance of an equity REIT because, along with
cash  flow  from  operating  activities,   financing  activities  and  investing
activities,  it  provides a reader with an  indication  of the ability of PTR to
incur and service  debt,  to make  capital  expenditures  and to fund other cash
needs. The funds from operations measure presented by PTR, while consistent with
the National  Association of Real Estate Investment Trusts (NAREIT)  definition,
will not be comparable to similarly titled measures of other REIT's which do not
compute  funds  from  operations  in a manner  consistent  with PTR.  Funds from
operations  should not be  considered as an  alternative  to net earnings or any
other  GAAP  measurement  of  performance  as an  indicator  of PTR's  operating
performance  or as an alternative to cash flows from  operating,  investing,  or
financing  activities  as a measure of liquidity.  Funds from  operations is not
intended to represent cash made available to  shareholders.  Cash  distributions
paid to shareholders are described above under "--Distributions".

     In 1996, PTR contributed its Homestead Village extended-stay lodging assets
to Homestead. Management believes that funds from operations for the nine months
ended  September  30,  1996  should be  adjusted  to reflect  the effects of the
Homestead  transaction to provide a more meaningful comparison to the historical
1997 results.  Accordingly,  pro forma funds from operations for the nine months
ended September 30, 1996 has been calculated as if the Homestead transaction had
occurred on January 1, 1996. The funds from operations  information is unaudited
and the pro forma funds from  operations is not  necessarily  indicative of what
actual funds from  operations  would have been if the Homestead  transaction had
occurred on January 1, 1996.



                                       27
<PAGE>




Funds from operations and pro forma funds from operations  (1996) are as follows
(amounts in thousands):

<TABLE>
<CAPTION>
                                                                      FOR THE THREE MONTHS    FOR THE NINE  MONTHS
                                                                       ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                                                         1997        1996       1997         1996
                                                                         ----        ----       ----         ----
<S>                                                                    <C>       <C>        <C>          <C>
Net earnings attributable to Common Shares............................ $(40,919) $  43,793  $  29,789    $  85,613
Add (Deduct):
     Depreciation on real estate investments..........................   13,364     10,987     38,052       32,230
     Provision for possible loss on investments.......................       --         --      1,500           --
     Gain on disposition of investments, net..........................  (10,723)   (25,257)   (47,930)     (33,340)
     Extraordinary item-loss on early extinguishment of debt, net.....       --        (49)        --          788
     Amortization related to Homestead Notes..........................     (340)        --       (868)          --
     Costs incurred in acquiring Management Companies
        from an affiliate.............................................   71,707         --     71,707           --
                                                                       --------   --------  ----------   ---------
Historical funds from operations attributable to Common Shares........   33,089     29,474     92,250       85,291
Add (deduct) pro forma adjustments relating to the contribution of
   Homestead Assets:
     Reduction in revenues and operating expenses (1).................       --     (4,635)        --      (12,190)
     Increase in interest income (2)..................................       --      1,668         --        3,691
     Increase in interest expense (3).................................       --       (157)        --         (446)
     Reduction in capitalized interest (4)............................       --       (857)        --       (2,035)
     REIT Management fee effect (5)...................................       --        953         --        2,400
     Other   .........................................................       --        (34)        --          (26)
                                                                       --------   --------  ----------   ---------
          Total pro forma adjustments.................................       --     (3,062)        --       (8,606)
                                                                       --------   --------  ----------   ---------
Funds from operations attributable to Common Shares
   (Pro forma for 1996)............................................... $ 33,089  $  26,412  $  92,250    $  76,685
                                                                       ========  =========  =========    =========
Weighted-average Common Shares outstanding............................   81,506     72,628     78,280       72,355
                                                                       ========  =========  =========    =========

</TABLE>

----------
(1)  Represents   the  elimination   of  Homestead's   historical  revenues  and
     operating expenses.

(2)  Represents  the  interest  income which would have been  recognized  on the
     Homestead  Notes,  assuming  that PTR  received  Homestead  common stock in
     exchange for its  contribution  first, and then Homestead Notes in exchange
     for the balance of its contribution over the respective time periods.

(3)  Represents the assumed amount of incremental  interest  expense which would
     have been  incurred  as a result of higher line of credit  balances  due to
     reduced cash flow.

(4)  Represents the reclassification of historical interest costs capitalized on
     Homestead developments to interest expense.

(5)  Represents the decrease in REIT  Management fee  that would  have  resulted
     from the pro forma adjustments.


                                       28
<PAGE>





                          PART II--OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS

         At a special meeting of PTR's common  shareholders held on September 8,
1997,  shareholders approved the Merger and Issuance Agreement which among other
things  contemplated  the  acquisition  of the  businesses and operations of the
Management  Companies  from  Security  Capital  Group in exchange for  3,295,533
Common Shares. Of the total Common Shares voted,  62,972,738  (99.3%) were voted
in favor and 463,192 (0.7%) were voted against the transaction.

         Additionally,  shareholders  approved an  amendment  to PTR's  Restated
Declaration of Trust exempting the Merger  transactions from certain  provisions
which restrict  transactions  with affiliates.  Of the total Common Shares voted
64,689,368  (99.3%) were voted in favor of the proposal and 457,816  (0.7%) were
voted against the proposal.

         The final proposal  approved by the shareholders at the special meeting
was the 1997  Long-Term  Incentive  Plan.  Of the  total  Common  Shares  voted,
60,389,291 (95.3%) were voted in favor of the proposal and 2,990,954 (4.7%) were
voted against the proposal.

<TABLE>


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits:
                                                               
<S>       <C>              <C>                                                   
          12.1    --       Computation of Ratio of Earnings to Fixed Charges.

          12.2    --       Computation of Ratio of Earnings to Fixed Charges and
                           Preferred Share Dividends.

          15      --       Letter from KPMG Peat Marwick LLP dated  November 13,
                           1997 regarding unaudited financial information.

          27      --       Financial Data Schedule
</TABLE>

       (b) Reports on Form 8-K:
<TABLE>
<CAPTION>


          DATE                 ITEM REPORTED           FINANCIAL STATEMENTS
      ------------            ---------------          --------------------
<S>   <C>                     <C>                      <C>
      July 21, 1997            Item 5, Item 7                   Yes
    September 9, 1997              Item 7                       Yes
   September 15, 1997         Item 5, Item 7                   No

</TABLE>


                                       29

<PAGE>




                                 SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                         SECURITY CAPITAL PACIFIC TRUST


                                             By: /s/ BRYAN J. FLANAGAN
                                           --------------------------------
                                                 Bryan J. Flanagan
                                               SENIOR VICE PRESIDENT
                                           (PRINCIPAL FINANCIAL OFFICER)


                                               BY: /s/ ASH K. ATWOOD
                                           --------------------------------
                                                   Ash K. Atwood,
                                           VICE PRESIDENT & CO-CONTROLLER
                                           (PRINCIPAL ACCOUNTING OFFICER)

Date: November 13, 1997













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