<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

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

                   For the Fiscal Year Ended DECEMBER 31, 1998

                             Commission File Number
                                     2-82765

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

                              REAL EQUITY PARTNERS

                        A CALIFORNIA LIMITED PARTNERSHIP

                  I.R.S. Employer Identification No. 95-3784125

         9090 WILSHIRE BLVD., SUITE 201, BEVERLY HILLS, CALIFORNIA 90211

        Registrant's Telephone Number, Including Area Code (310) 278-2191

      Securities Registered Pursuant to Section 12(b) or 12(g) of the Act:

                                      NONE

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

                                Yes [X]   No [ ]

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

<PAGE>   2

PART I.

ITEM 1. BUSINESS

Real-Equity Partners ("REP" or the "Partnership") is a limited partnership which
was formed under the laws of the State of California on September 9, 1981. The
Partnership was formed to invest in residential rental properties either
directly or through investment in joint ventures and other partnerships which
will invest in such real estate. Commencing on September 27, 1983, REP offered
30,000 units of the limited partnership interest (the "Units") through a public
offering managed by E.F. Hutton Inc. REP's public offering was completed within
a year of its commencement.

The general partners of REP are National Partnership Investments Corp.
("NAPICO"), a California corporation (the "Corporate General Partner"), and
National Partnership Investments Associates II, a California limited partnership
("NAPIA II"). NAPIA II consists of Charles H. Boxenbaum and an unrelated
individual as limited partners and NAPICO as general partner. The business of
REP is conducted primarily by NAPICO.

Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P. (the "Operating
Partnership"), a majority owned subsidiary of Casden Properties Inc., a real
estate investment trust organized by Alan I. Casden, purchased a 95.25% economic
interest in NAPICO. The current members of NAPICO's Board of Directors are
Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden and Henry C. Casden.

As of December 31, 1998, the Partnership remains invested in five apartment
projects. One property was foreclosed upon in 1996. Substantially all of the
buildings are leased on a month-to-month basis. The management of the
Partnership's properties is the responsibility of an affiliate of NAPICO (the
"Property Manager"). The principal business of the Property Manager is
residential property management.

The Partnership is subject to all of the risks incident to ownership of real
estate and interests therein, many of which relate to the lack of liquidity of
this type of investment. These risks include changes in general economic
conditions, adverse local market conditions due to over-building or a decrease
in employment or neighborhood values, changes in supply or demand of competing
properties in an area, changes in interest rates and the availability and terms
of permanent mortgage funds which may render the sale or refinancing of a
property difficult or unattractive, changes in real estate and zoning laws,
increases in real property tax rates, the potential imposition of rent controls,
and the occurrence of uninsured losses, such as earthquakes, floods or other
factors beyond the control of the General Partners. The illiquidity of real
estate investments generally will impair the ability of the Partnership to
respond promptly to changed circumstances.

As of September 25, 1998, the Partnership entered into an agreement to sell all
the properties owned by the Partnership to JH Real Estate Partners, Inc. for a
price of $31,900,000.

In December 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the sale of the properties
owned by the Partnership. In January 1999, the consents of the limited partners
to this sale were obtained and the transaction closed on February 17, 1999.
<PAGE>   3

During 1998, the projects in which REP had invested were substantially rented.

The following is a schedule of the occupancy status, as of December 31, 1998, of
the projects in which REP has invested:

               SCHEDULE OF PROJECTS IN WHICH REP HAS AN INVESTMENT
                                DECEMBER 31, 1998


<TABLE>
<CAPTION>
                                     No. of           Units           Percentage of
Name & Location                      Units           Occupied          Total Units
-----------------------              ------          --------         -------------
<S>                                  <C>             <C>              <C>
Arbor Glen
     West Covina, CA                  208               202                97%

Park Creek
     Canoga Park, CA                  123               115                94%

Warner Willows I
     Woodland Hills, CA                74                72                97%

Warner Willows II
     Woodland Hills, CA                73                72                99%

Willowbrook Apartments
     Reno, NV                         183               169                92%
                                      ---               ---
                                      661               630                95%
                                      ===               ===
</TABLE>

<PAGE>   4
ITEM 2. PROPERTIES

Through acquisition, REP holds interests in real estate properties. See Item 1
and Schedule XI for information pertaining to these properties.

ITEM 3. LEGAL PROCEEDINGS

As of December 31, 1998, the Partnership's Corporate General Partner was a
plaintiff or defendant in several lawsuits. Additionally, certain slip and fall
lawsuits, each of which is covered by insurance, are pending against the
Partnership although none are expected to result in any exposure to the
Partnership.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

In December 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the sale of the properties
owned by the Partnership to JH Real Estate Partners, Inc. for $31,900,000. In
January 1999, the consents of the limited partners to this sale were obtained
and the transaction closed on February 17, 1999.

PART II.

ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND RELATED SECURITY
        HOLDER MATTERS

The Limited Partnership Interests are not traded on a public exchange but were
sold through a public offering managed by E.F. Hutton Inc. It is not anticipated
that any public market will develop for the purchase and sale of any partnership
interest. Limited Partnership Interests may be transferred only if certain
requirements are satisfied. At December 31, 1998, there were 2,740 registered
holders of units in REP. It was intended that distributions of Net Cash From
Operations will be made to the limited partners of record on a quarterly basis
during the months of February, May, August, and November pro rata in proportion
to the number of units held. From November 1994 through May 1996, distributions
to the limited partners were not made due to the Partnership setting aside funds
for losses incurred by REP as a result of the January 17, 1994 Northridge
Earthquake. The Partnership made distributions of $600,000, $600,000 and
$300,000 to the limited partners in 1998, 1997 and 1996, respectively. In
addition, distributions of $66,668 and $900,856 were made to the Corporate
General Partner in 1998 and 1997, respectively.

<PAGE>   5
ITEM 6. SELECTED FINANCIAL DATA:

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                             ---------------------------------------------------------------------------------------
                                 1998               1997               1996              1995               1994
                             ------------       ------------       ------------      ------------       ------------
<S>                          <C>                <C>                <C>               <C>                <C>         
Rental Revenues              $  5,285,081       $  4,925,227       $  4,935,895      $  5,486,329       $  5,678,656

Interest Income                    74,303            105,777             89,711            49,476             37,710
                             ------------       ------------       ------------      ------------       ------------

   Total Revenues            $  5,359,384       $  5,031,004       $  5,025,606      $  5,535,805       $  5,716,366
                             ============       ============       ============      ============       ============

Net Income (Loss)            $   (805,843)      $   (245,972)      $    184,074      $   (324,850)      $ (1,024,765)
                             ============       ============       ============      ============       ============

Net Income (Loss)
   Per Limited
   Partnership Interest      $        (27)      $         (8)      $          6      $        (11)      $        (34)
                             ============       ============       ============      ============       ============

Rental Property
   Owned at Cost
   Less Accumulated
   Depreciation              $ 17,792,773       $ 18,531,185       $ 19,269,597      $ 23,563,382       $ 24,473,838
                             ============       ============       ============      ============       ============


Total Assets                 $ 19,193,206       $ 20,791,123       $ 22,049,995      $ 26,365,792       $ 26,668,029
                             ============       ============       ============      ============       ============


Mortgage Notes Payable       $ 14,181,382       $ 14,443,323       $ 14,064,914      $ 17,747,363       $ 17,959,940
                             ============       ============       ============      ============       ============


Accrued Fees Due
   General Partner           $    777,810       $    735,685       $    693,560      $    651,320       $    609,195
                             ============       ============       ============      ============       ============

Cash Distributions
   Declared Per Limited
   Partnership Interest      $      20.00       $      20.00       $      10.00      $       --         $      15.00
                             ============       ============       ============      ============       ============
</TABLE>


<PAGE>   6

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS:

LIQUIDITY

The Partnership's primary source of funds include cash flow from rental
operations and interest income on certificates of deposit and money market
accounts.

Distributions of net cash from operations were normally intended to be made to
the Limited Partners of record on a quarterly basis during the months of
February, May, August, and November pro rata in proportion to the number of
Units held. From November 1994 through May 1996, distributions to the limited
partners were not made due to the Partnership setting aside funds for losses
incurred by REP as a result of the January 17, 1994 Northridge Earthquake. The
Partnership made quarterly distributions, each in the amount of $150,000, to the
limited partners, starting with August 1996.

Currently, it is anticipated that the Partnership will continue to meet its
current and long-term obligations as they become due.

CAPITAL RESOURCES

As of December 31, 1984, REP received proceeds of $30,000,000 from the sale of
limited partnership interests, pursuant to a registration statement on Form
S-11.

RESULTS OF OPERATIONS

REP was formed to invest in residential rental properties either directly or
through investments in joint ventures and other partnerships which will invest
in such real estate, as discussed in Item 1. The seven rental properties
originally owned by REP were acquired at various times during 1984 and 1985. The
Partnership remains invested in five rental properties as of December 31, 1998.

Rental operations consist primarily of rental income and depreciation expense,
debt service, and normal operating expenses to maintain the properties.
Depreciation is provided on the straight-line method over the estimated useful
lives of the buildings and equipment. Substantially all of the rental units in
the apartment projects are leased on a month-to-month basis.

An annual property management fee, which shall in any event not exceed 5 percent
of gross revenues from each property under management, is payable by the
properties to an affiliate of NAPICO.

The Parkside Apartments rental property was operating at a deficit and NAPICO
was unsuccessful in its attempt to negotiate a mortgage modification with the
lender to improve the situation. In March 1995, the Parkside Apartments rental
property ceased making payments to the mortgage lender. The mortgage lender
filed a notice of default on January 17, 1996, and foreclosed on the property on
May 23, 1996. The foreclosure resulted in a gain of $259,088 because the
Partnership was relieved of nonrecourse liabilities which were in excess of the
net book value of the property. The foreclosure of this property in 1996
accounts primarily for the decrease in rental revenues and expenses in 1997 as
compared to 1996. Included in revenues and expenses for 1996 is $127,000 and
$179,000, respectively, related to Parkside Apartments. This was partially
offset by increases in revenues and expenses at the other properties.

Occupancy at the Warner Willows I and II properties averaged 98%, 98% and 94% in
1998, 1997 and 1996, respectively. Both properties operated with positive cash
earnings in 1998, 1997 and 1996 (excluding, depreciation and principal payments
on the mortgage loans). Positive cash earnings for 1998 were approximately
$19,000 and $2,000 for Warner Willows I and II, respectively, for 1997 they were
approximately $71,000 and $28,000 for Warner Willows I and II, respectively, and
for 1996 approximately $96,000 and $38,000 for Warner Willows I and II,
respectively. Occupancy at the Arbor Glen property averaged 97%, 94% and 96% in
1998, 1997 and 1996, respectively. The property operated

<PAGE>   7

positively in 1998, 1997 and 1996, and produced cash flows of approximately
$197,000, $288,000 and $189,000, respectively, (excluding depreciation and
principal payments on the mortgage loan).

Occupancy at the Park Creek property averaged 94%, 92% and 81% in 1998, 1997 and
1996, respectively. The property operated positively during 1998, 1997 and 1996
producing cash earnings of approximately $126,000, $119,000 and $97,000,
respectively, (excluding depreciation and principal payments on the mortgage
loan).

Occupancy at the Willowbrook property averaged 92%, 97% and 94%, in 1998, 1997
and 1996, respectively. The property operated positively during 1998, 1997 and
1996, producing cash flows of approximately $393,000, $353,000 and $364,000,
respectively, (excluding depreciation and principal payments on the mortgage
loan).

On January 17, 1994, the Park Creek and Warner Willows I and II rental
properties sustained damage, estimated at approximately $1,454,000, due to the
Northridge Earthquake in January 1994. Insurance proceeds of approximately
$630,000 have been allocated to the Partnership in 1994, as the estimated full
settlement under a master umbrella insurance policy covering earthquake damage
for these and other properties managed by a related party. The total estimated
expenditures needed to repair the properties, net of the insurance recoveries,
is approximately $824,000, and has been expensed in 1994 since they did not
extend the useful life of the properties. Included in liabilities is
approximately $506,000 at December 31, 1998 and 1997, related to the Northridge
Earthquake damages. Through December 31, 1997, approximately $948,000 has been
paid for earthquake repairs and of this amount approximately $859,000 was paid
to an affiliate of NAPICO. Included in payments to the affiliate of NAPICO was
approximately $122,000 paid under a contract for $123,456 entered into by the
Partnership on February 22, 1996, after receiving competitive bids.

In March 1996, the Partnership received from the insurance company a final
settlement payment of $334,591 related to the earthquake loss. This was accrued
in income in 1995.

The Partnership operations consist primarily of interest income earned on
certificates of deposit and other temporary investments of funds not required
for investment in projects. The amount of interest income varies with market
rates available on certificates of deposit and with the amount of funds
available for investment.

As of September 25, 1998, the Partnership entered into an agreement to sell all
the properties owned by the Partnership to JH Real Estate Partners, Inc. for a
price of $31,900,000.

In December, a consent solicitation statement was sent to the limited partners
setting forth the terms and conditions of the sale of the properties owned by
the Partnership. In January 1999, the consents of the limited partners to this
sale were obtained and the transaction closed on February 17, 1999. In March
1999, the Partnership made cash distributions from operations of $150,000 to the
limited partners and $16,667 to the general partners. In addition, the
Partnership distributed cash proceeds from sale of the rental property of
$14,854,986 to the limited partners and $150,050 to the general partners.

The partners intend to dissolve the Partnership in 1999.

Operating expenses of the Partnership consist substantially of recurring general
and administrative expenses and professional fees for services rendered to the
Partnership and interest on the deferred acquisition fee due the General
Partners. Included in partnership general and administrative expenses for 1998
and 1997 is $498,688 and $136,815, respectively, in expenses, related to the
aforementioned third-party review of the properties owned by the Partnership.

The Partnership is incurring interest expense at a rate of 8% per annum on the
unpaid fees due the corporate general partner. Under the terms of the Amended
and Restated Certificate and Agreement of Limited Partnership, the Partnership
is obligated to the corporate general partner for a deferred acquisition fee for
services rendered in connection with the selection, purchase, development, and
management of the Partnership and monitoring the operations of the properties,
in an amount which, when calculated on a present value basis (using a discount
factor of 8% for this purpose) from the date of payment to the general partners
to September 27, 1984 equals 10% of the gross proceeds of the offering
($3,000,000). Distribution of any part of this fee from net cash from operations
shall be subordinate to receipt by each limited partner
<PAGE>   8

of an amount equal to a cumulative noncompounded 6% distribution. The
acquisition fee distributed in any year from net cash from operations shall not
exceed an amount equal to 3% of investment in properties (approximately
$600,000) plus any proceeds from sale or refinancing of the properties. An
annual property management fee, which shall not in any event exceed 5% of gross
revenues from each property under management, is also payable to an affiliate of
the corporate general partner. As of December 31, 1998 and 1997, approximately
$778,000 and $736,000, respectively, of the deferred acquisition fee was due to
the corporate general partner. Interest expense to the corporate general partner
was approximately $42,000 in each of the years in the three year period ended
December 31, 1998.

The Partnership has assessed the potential impact of the Year 2000 computer
systems issue on its operations. The Partnership believes that no significant
actions are required to be taken by the Partnership to address the issue and
that the impact of the Year 2000 computer systems issue will not materially
affect the Partnership's future operating results or financial condition.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements and Supplementary Data are listed under Item 14.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

Not applicable.

<PAGE>   9
                              REAL-EQUITY PARTNERS
                       (A California limited partnership)

                              FINANCIAL STATEMENTS,
                          FINANCIAL STATEMENT SCHEDULE
                   AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
                                DECEMBER 31, 1998

<PAGE>   10

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Partners of
Real-Equity Partners
(A California limited partnership)

We have audited the accompanying balance sheets of Real-Equity Partners (a
California limited partnership) as of December 31, 1998 and 1997, and the
related statements of operations, partners' equity (deficiency) and cash flows
for each of the three years in the period ended December 31, 1998. Our audits
also included the financial statement schedule listed in the index in item 14.
These financial statements and financial statement schedule are the
responsibility of the management of the Partnership. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Real-Equity Partners as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

As discussed in Note 1, the Partnership sold its rental property on February 17,
1999. The Partnership intends to dissolve in 1999.


DELOITTE & TOUCHE LLP

Los Angeles, California
April 6, 1999
<PAGE>   11

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Partners of
Real-Equity Partners
(A California limited partnership)

We have audited the accompanying balance sheets of Real-Equity Partners (a
California limited partnership) as of December 31, 1997 and 1996, and the
related statements of operations, partners' equity (deficiency) and cash flows
for each of the three years in the period ended December 31, 1997. Our audits
also included the financial statement schedule listed in the index on item 14.
These financial statements and financial statement schedule are the
responsibility of the management of the Partnership. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Real-Equity Partners as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.


DELOITTE & TOUCHE LLP

Los Angeles, California
April 6, 1998

<PAGE>   12
                              REAL-EQUITY PARTNERS
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1997

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                     1998               1997
                                                                                 ------------       ------------
<S>                                                                              <C>                <C>         
RENTAL PROPERTY, at cost (Notes 1 and 2)
     Land                                                                        $  6,553,357       $  6,553,357
     Buildings                                                                     22,096,723         22,096,723
     Furniture and equipment                                                        3,720,901          3,720,901
                                                                                 ------------       ------------
                                                                                   32,370,981         32,370,981
     Less accumulated depreciation                                                (14,578,208)       (13,839,796)
                                                                                 ------------       ------------

                                                                                   17,792,773         18,531,185
                                                                                 ------------       ------------

CASH AND CASH EQUIVALENTS                                                             182,829          1,354,289
                                                                                 ------------       ------------

OTHER  ASSETS:
     Due  from affiliated rental agent, including restricted cash held for
          security deposits of $38,698 and $37,845 at December 31, 1998 and
          1997,
          respectively (Note 5)                                                       986,214            645,785
     Other receivables and prepaid expenses                                           231,390            259,864
                                                                                 ------------       ------------
                                                                                    1,217,604            905,649
                                                                                 ------------       ------------

          TOTAL ASSETS                                                           $ 19,193,206       $ 20,791,123
                                                                                 ============       ============


                                   LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
     Mortgage notes payable (Notes 2 and 8)                                      $ 14,181,382       $ 14,443,323
     Accrued fees and expenses due general partner
          (Notes 6 and 8)                                                             777,810            735,685
     Accrued interest payable (Note 2)                                                 57,247             56,383
     Accounts payable and accrued expenses (Note 1)                                   338,702            270,019
     Liability for earthquake loss (Note 1)                                           506,016            506,016
     Tenant security deposits                                                         241,929            217,066
                                                                                 ------------       ------------
                                                                                   16,103,086         16,228,492
                                                                                 ------------       ------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 6 and 7)

PARTNERS' EQUITY                                                                    3,090,120          4,562,631
                                                                                 ------------       ------------

           TOTAL LIABILITIES AND PARTNERS' EQUITY                                $ 19,193,206       $ 20,791,123
                                                                                 ============       ============
</TABLE>


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


<PAGE>   13
                              REAL-EQUITY PARTNERS
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                 1998              1997              1996
                                                             -----------       -----------       -----------
<S>                                                          <C>               <C>               <C>        
RENTAL OPERATIONS:
     Revenues
           Rental income                                     $ 5,103,753       $ 4,738,515       $ 4,764,778
           Other income                                          181,328           186,712           171,117
                                                             -----------       -----------       -----------
                                                               5,285,081         4,925,227         4,935,895
                                                             -----------       -----------       -----------
     Expenses
           Operating expenses                                  2,762,221         2,355,167         2,201,513
           Management fees - affiliate (Note 5)                  256,338           241,877           243,445
           Depreciation (Note 1)                                 738,412           738,412           824,434
           General and administrative expenses                   263,957           210,821           265,435
           Interest expense (Note 2)                           1,352,848         1,375,450         1,407,333
                                                             -----------       -----------       -----------

                                                               5,373,776         4,921,727         4,942,160
                                                             -----------       -----------       -----------

           (Loss) income from rental operations                  (88,695)            3,500            (6,265)
                                                             -----------       -----------       -----------

PARTNERSHIP OPERATIONS:
     Interest and Other income                                    74,303           105,777            89,711
                                                             -----------       -----------       -----------

     Expenses
           General and administrative expenses (Note 6)          701,069           250,248            77,939
           Professional fees                                      48,257            62,876            38,281
           Interest expense - general partner (Note 6)            42,125            42,125            42,240
                                                             -----------       -----------       -----------

                                                                 791,451           355,249           158,460
                                                             -----------       -----------       -----------

           Loss from partnership operations                     (717,148)         (249,472)          (68,749)
                                                             -----------       -----------       -----------

GAIN ON FORECLOSURE OF RENTAL PROPERTY
     (Note 1)                                                       --                --             259,088
                                                             -----------       -----------       -----------

NET (LOSS) INCOME                                            $  (805,843)      $  (245,972)      $   184,074
                                                             ===========       ===========       ===========

NET (LOSS) INCOME PER LIMITED PARTNERSHIP
     INTEREST (Note 4)                                       $       (27)      $        (8)      $         6
                                                             ===========       ===========       ===========
</TABLE>


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


<PAGE>   14
                              REAL-EQUITY PARTNERS
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                   STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


<TABLE>
<CAPTION>
                                                         General            Limited
                                                        Partners            Partners             Total
                                                      -----------         -----------         -----------
<S>                                                   <C>                 <C>                 <C>        

EQUITY (DEFICIENCY),
        January 1, 1996                               $  (720,324)        $ 7,145,709         $ 6,425,385

        Net loss for 1996                                   1,840             182,234             184,074
        Cash distributions ($10.00 per limited
        partner unit) for 1996 (Note 1)                      --              (300,000)           (300,000)
                                                      -----------         -----------         -----------

EQUITY (DEFICIENCY),
        December 31, 1996                                (718,484)          7,027,943           6,309,459

        Net loss for 1997                                  (2,460)           (243,512)           (245,972)
        Cash distributions ($20.00 per limited
        partner unit) for 1997 (Note 1)                  (900,856)           (600,000)         (1,500,856)
                                                      -----------         -----------         -----------

EQUITY (DEFICIENCY),
        December 31, 1997                              (1,621,800)          6,184,431           4,562,631

        Net loss for 1998                                  (8,058)           (797,785)           (805,843)

        Cash distributions ($20.00 per limited
        partner unit) for 1998 (Note 1)                   (66,668)           (600,000)           (666,668)
                                                      -----------         -----------         -----------

EQUITY (DEFICIENCY),
        December 31, 1998                             $(1,696,526)        $ 4,786,646         $ 3,090,120
                                                      ===========         ===========         ===========
</TABLE>


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


<PAGE>   15
                              REAL-EQUITY PARTNERS
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                                1998                1997                1996
                                                                            -----------         -----------         -----------
<S>                                                                         <C>                 <C>                 <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net (loss) income                                                     $  (805,843)        $  (245,972)        $   184,074
      Adjustments to reconcile net (loss) income  to net
         cash provided by operating activities:
            Depreciation                                                        738,412             738,412             824,434
            Gain on foreclosure of rental property                                 --                  --              (259,088)
      Changes in operating assets and liabilities:
            Decrease (increase) in:
                Due from affiliated rental agent                               (340,429)              7,138            (287,141)
                Other receivables and prepaid expenses                           28,474             (16,607)            (38,579)
                Receivable for earthquake loss                                     --                  --               334,591
            Increase (decrease) in:
                Accrued fees and expenses due general partner                    42,125              42,125              42,240
                Accounts payable and accrued expenses                            68,683              90,338             (13,866)
                Accrued interest payable                                            864                (158)            (50,548)
                Liability for earthquake loss                                      --               (10,134)           (111,588)
                Tenant security deposits                                         24,863             (12,624)             (5,388)
                                                                            -----------         -----------         -----------

                 Net cash (used in) provided by operating activities           (242,851)            592,518             619,141
                                                                            -----------         -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Distributions to partners                                                (666,668)         (1,500,856)           (300,000)
      Principal payments on mortgage notes payable                             (261,941)           (229,684)           (228,964)
      Proceeds from mortgage notes payable                                                        5,600,000                --
      Payment of mortgage notes payable                                                          (4,991,907)               --
                                                                            -----------         -----------         -----------

                  Net cash (used in) provided by
                       financing activities                                    (928,609)         (1,122,447)            528,964
                                                                            -----------         -----------         -----------

NET DECREASE  IN CASH AND CASH
      EQUIVALENTS                                                            (1,171,460)           (529,929)             90,177

CASH AND CASH EQUIVALENTS,
      BEGINNING OF YEAR                                                       1,354,289           1,884,218           1,794,041
                                                                            -----------         -----------         -----------

CASH AND CASH EQUIVALENTS,
      END OF YEAR                                                           $   182,829         $ 1,354,289         $ 1,884,218
                                                                            ===========         ===========         ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
      Interest paid                                                         $ 1,352,848         $ 1,375,608         $ 1,356,785
                                                                            ===========         ===========         ===========
</TABLE>


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


<PAGE>   16
                              REAL-EQUITY PARTNERS
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                                      1998              1997               1996
                                                                                  ------------        ----------        -----------
<S>                                                                               <C>                 <C>               <C>        

NON CASH INVESTING AND FINANCING ACTIVITIES
         During 1996, the Partnership was relieved of a nonrecourse mortgage
            note payable and related accrued interest upon foreclosure of a
            rental property, summarized as follows:
                Mortgage note payable                                             $       --          $     --          $ 3,453,485
                Accrued interest payable                                                  --                --              281,462
                Write off of rental property                                              --                --           (3,469,351)
                Write off of other assets and liabilities                                 --                --               (6,508)
                                                                                  ------------        ----------        -----------

                     Gain on foreclosure of rental property                       $       --          $     --          $   259,088
                                                                                  ============        ==========        ===========
</TABLE>


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


<PAGE>   17
                              REAL-EQUITY PARTNERS
                       (a California limited partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      a.   Organization

           Real-Equity Partners (the "Partnership") was formed under the
           California Limited Partnership Act on September 9, 1981. The
           Partnership was formed to invest in residential rental projects. The
           Partnership invested in seven residential apartment projects; one of
           these properties was foreclosed in March 1993. The general partners
           of the Partnership are National Partnership Investments Corp.
           (NAPICO), the corporate general partner, and National Partnership
           Investments Associates II (NAPIA II), a California limited
           partnership. The general partner of NAPIA II is NAPICO and one of the
           limited partners is an officer of NAPICO.

           Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of
           Casden Investment Corporation ("CIC"), which is wholly owned by Alan
           I. Casden. On December 30, 1998, Casden Properties Operating
           Partnership, L.P. (the "Operating Partnership"), a majority owned
           subsidiary of Casden Properties Inc., a real estate investment trust
           organized by Alan I. Casden, purchased a 95.25% economic interest in
           NAPICO. The current members of NAPICO's Board of Directors are
           Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden and Henry C.
           Casden.

           The Partnership offered and issued 30,000 units of limited
           partnership interests through a public offering. The terms of the
           Amended and Restated Certificate and Agreement of Limited Partnership
           (the "Partnership Agreement") provide, among other things, for
           allocation to the partners of profits, losses and any special
           allocations with respect thereto. Under the terms of the Partnership
           Agreement, cash available for distribution is to be allocated 90
           percent to the limited partners as a group and 10 percent to the
           general partners. Based on cash distributions made to the limited
           partners as of December 31, 1996, $834,188 was due to the general
           partners as their 10% percent share of cash available for
           distribution. This amount was paid to the general partners in 1997,
           in addition to the $66,668 paid related to 1997.

           In the case of the sale or refinancing of a property, the general
           partners shall first receive out of the net proceeds from sale or
           refinancing any unpaid portion of the deferred acquisition fee (see
           Note 6). Thereafter, the general partners shall receive 1 percent of
           the net proceeds from the sale or refinancing until the limited
           partners have received an amount equal to their adjusted capital
           value (as defined in the Partnership Agreement) plus cumulative
           distributions (including net cash from operations) equal to a
           non-compounded 6 percent annual distribution with respect to their
           adjusted capital value, and then the general partners shall receive
           15 percent of the balance of any net proceeds from sale or
           refinancing.

           Losses are allocated 99% to the limited partners and 1% to the
           general partners.

      b.   Use of Estimates

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


                                        5
<PAGE>   18
                              REAL-EQUITY PARTNERS
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      c.   Rental Property and Depreciation

           Rental property is stated at cost. Depreciation is provided on the
           straight-line method over the estimated useful lives of the buildings
           and equipment as follows:

<TABLE>
<CAPTION>
                     Asset                           Estimated Useful Lives
                     -----                           ----------------------
<S>                                                  <C>
                     Buildings                             30 years
                     Furniture and equipment                5 years
</TABLE>

           The Parkside Apartments rental property was operating at a deficit
           and NAPICO was unsuccessful in its attempt to negotiate a mortgage
           modification with the lender to improve the situation. In March 1995,
           the Parkside Apartments rental property ceased making payments to the
           mortgage lender. The mortgage lender filed a notice of default on
           January 17, 1996, and foreclosed on the property on May 23, 1996. The
           foreclosure resulted in a gain of $259,088 because the Partnership
           was relieved of nonrecourse liabilities which were in excess of the
           net book value of the property. The gain was classified as an
           ordinary gain because the fair value of the property approximated the
           liabilities that were relieved.

           On January 17, 1994, the Park Creek and Warner Willows I and II
           rental properties sustained damage, estimated at approximately
           $1,454,000, due to the Northridge Earthquake in the Los Angeles area.
           Insurance proceeds of approximately $630,000 have been allocated to
           the Partnership in 1994, as the estimated full settlement under a
           master umbrella insurance policy covering earthquake damage for these
           and other properties managed by a related party. The total estimated
           expenditures needed to repair the properties, net of the insurance
           recoveries, which nets to approximately $824,000, have been expensed
           in 1994 since they do not extend the useful life of the properties.

           In March 1996, the Partnership received from the insurance company a
           final settlement payment of $334,591 related to the earthquake loss.
           This was accrued in income in 1995.

           Substantially all of the apartments are leased on a month-to-month
           basis.

           The Partnership has been undergoing an extensive review of
           disposition, refinancing or re-engineering alternatives for the
           properties it owns. The Partnership has incurred expenses in
           connection with this review by various third party professionals,
           including accounting, legal, valuation, structural and engineering
           costs, which amounted to $498,688 and $136,815 for the years ended
           December 31, 1998 and 1997, respectively.

           As of September 25, 1998, the Partnership entered into an agreement
           to sell all the properties owned by the Partnership to JH Real Estate
           Partners, Inc. for a price of $31,900,000.


                                     6
<PAGE>   19
                              REAL-EQUITY PARTNERS
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

           In December 1998, a consent solicitation statement was sent to the
           limited partners setting forth the terms and conditions of the sale
           of the properties owned by the Partnership. In January 1999, the
           consents of the limited partners to this sale were obtained and the
           transaction closed on February 17, 1999. In March 1999, the
           Partnership made cash distributions from operations of $150,000 to
           the limited partners and $16,667 to the general partners. In
           addition, the Partnership distributed cash proceeds from sale of the
           rental property of $14,854,986 to the limited partners and $150,050
           to the general partners. The partners intend to dissolve the
           Partnership in 1999.

      d.   Cash and Cash Equivalents

           Cash and cash equivalents consist of unrestricted cash and bank
           certificates of deposits with an original maturity of three months or
           less.

      e.   Impairment of Long-Lived Assets

           The Partnership reviews long-lived assets to determine if there has
           been any permanent impairment whenever events or changes in
           circumstances indicate that the carrying amount of the asset may not
           be recoverable. If the sum of the expected future cash flows is less
           than the carrying amount of the assets, the Partnership recognizes an
           impairment loss.

2.    MORTGAGE NOTES PAYABLE

      Mortgage notes payable consists of the following:

<TABLE>
<CAPTION>
                                                              1998            1997
                                                           ----------      ----------
<S>                                                        <C>             <C>
      a.   Mortgage note bearing interest at the rate
           of 9.125 percent per annum, payable in
           monthly installments of $61,062 including
           interest through May 2007, at which time the
           then outstanding principal balance is due       $5,535,368      $5,574,398
           and payable. Secured by land and buildings
           with a net book value of $5,110,899 at
           December 31, 1998.                                  



      b.   Mortgage note bearing interest at the rate
           of prime plus two percent per annum,
           adjusted semi-annually; payable in monthly
           installments including interest, due date
           extended through the sales date. Secured by
           land and buildings with a net book value of
           $3,073,653 at December 31, 1998. The
</TABLE>


                                       7
<PAGE>   20
                              REAL-EQUITY PARTNERS
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998


2.    MORTGAGE NOTES PAYABLE (CONTINUED)

<TABLE>
<CAPTION>
                                                                                               1998           1997
                                                                                           -----------     -----------
<S>                                                                                        <C>             <C>
           interest rate at December 31, 1998 was 10.50 percent per annum.                   1,247,761       1,280,984

      c.   Mortgage note bearing interest at the rate of prime plus two percent
           per annum, adjusted semi-annually; payable in monthly installments
           including interest through March 1, 2001, at which time the then
           outstanding principal balance is due and payable.

           Secured by land and buildings with a net book value of $3,209,909 at
           December 31, 1998. The interest rate at December 31, 1998 was 10.50
           percent per annum.                                                                2,661,533       2,715,447

      d.   Mortgage note bearing interest at the rate of prime plus two percent
           per annum, adjusted semi-annually; payable in monthly installments
           including interest through March 1, 2001, at which time the then
           outstanding principal balance is due and payable. Secured by land and
           buildings with a net book value of $2,918,381 at December 31, 1998.
           The interest rate at December 31, 1998 was 10.50 percent per annum.               2,601,387       2,654,098

      e.   Mortgage note insured by the Department of Housing and Urban
           Development (HUD) under the Section 221(d)(4) program, bearing
           interest at the rate of 7 percent per annum, payable in monthly
           installments of $32,350 including interest through 2013, at which
           time the then outstanding principal balance is due and payable.
           Secured by land and buildings with a net book value of $3,479,931 at
           December 31, 1998. The project is regulated by HUD as to rent
           charges, operating methods and annual distributions.                              2,135,333       2,218,396
                                                                                           -----------     -----------
                                                                                           $14,181,382     $14,443,323
                                                                                           ===========     ===========
</TABLE>


                                        8
<PAGE>   21
                              REAL-EQUITY PARTNERS
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998


2.    MORTGAGE NOTES PAYABLE (CONTINUED)

      Maturities on the mortgage notes payable, are as follows:

<TABLE>
<CAPTION>
           Years Ended December 31,
           ------------------------
<S>                                              <C>        
             1999                                $   278,331
             2000                                    305,038
             2001                                    334,388
             2002                                    366,648
             2003                                    396,767
             Thereafter                           12,500,210
                                                 -----------
                                                 $14,181,382
                                                 ===========
</TABLE>

      The notes were paid off in connection with the sale of the rental property
      on February 17, 1999.

3.    INCOME TAXES

      No provision has been made for income taxes in the accompanying financial
      statements as such taxes, if any, are the liability of the individual
      partners. The major differences in tax and financial reporting result from
      the use of different bases and depreciation methods for rental property
      held by the Partnership.

4.    NET LOSS PER LIMITED PARTNERSHIP INTEREST

      Net loss per limited partnership interest was computed by dividing the
      limited partners' share of net loss by 30,000, the number of limited
      partnership interests outstanding during each year.

5.    RELATED PARTY TRANSACTIONS

      The Partnership has entered into agreements with an affiliate of NAPICO to
      manage the operations of the rental properties. The agreements are on a
      month-to-month basis and provide, among other things, for a management fee
      equal to 5% of gross rentals and other collections plus reimbursement of
      certain expenses. The affiliate received property management fees of
      $256,338 and $241,877 and $243,445 in 1998, 1997 and 1996, respectively.

      An affiliate of NAPICO performed certain of the earthquake repairs at the
      Park Creek and Warner Willows I and II rental properties. The payments to
      this affiliate for these repairs was approximately $859,000 as of December
      31, 1998 (Note 1). Included in payments to the affiliate of NAPICO was
      approximately $122,000 paid under a contract for $123,456 entered into by
      the Partnership on February 22, 1996, after receiving competitive bids.


                                        9
<PAGE>   22
                              REAL-EQUITY PARTNERS
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998


5.    RELATED PARTY TRANSACTIONS (CONTINUED)

      The Partnership reimburses NAPICO for certain expenses. The reimbursement
      to NAPICO was $12,601, $12,606 and $12,426 in 1998, 1997 and 1996,
      respectively, and is included in partnership general and administrative
      expenses.

6.    ACCRUED FEES DUE GENERAL PARTNER

      Under the terms of the Partnership Agreement, the Partnership is obligated
      to NAPICO for a deferred acquisition fee. This fee is for services
      rendered in connection with the management of the Partnership, and the
      selection, purchase, acquisition, development and monitoring the
      operations of its properties.

      Distribution of any part of this fee from net cash from operations shall
      be subordinated to receipt by each limited partner of an amount equal to a
      cumulative, non-compounded 6 percent annual distribution with respect to
      his adjusted capital value (as defined in the Partnership Agreement). The
      aggregate amount of the deferred acquisition fee distributed in any year
      from net cash from operations shall not exceed an amount equal to 3
      percent of the investment in properties plus any proceeds from sale or
      refinancing of the properties. The deferred acquisition fee shall be an
      amount which, when present valued at 8 percent from certain dates, as
      defined in the partnership agreement, equals 10 percent of the gross
      proceeds of the offering ($3,000,000). Distribution of the deferred
      acquisition fee will be made from net cash from operations and net
      proceeds from sale or refinancing for a maximum of 15 years, or until the
      above limit is met.

      The present value of the deferred acquisition fee of $1,783,767 has been
      reflected in the accompanying financial statements and has been
      capitalized as part of the cost of rental property acquired. The amount
      outstanding as of December 31, 1998 and 1997 was approximately $778,000
      and $736,000, respectively. This amount was paid in March 1999.

7.    CONTINGENCIES

      a)  Litigation

          The corporate general partner of the Partnership is a plaintiff in
          various lawsuits and has also been named as defendant in other
          lawsuits arising from transactions in the ordinary course of business.
          In the opinion of management and the corporate general partner, these
          claims will not result in any material liability to the Partnership.

      b)  Year 2000 Information

          The Partnership has assessed the potential impact of the Year 2000
          computer systems issue on its operations. The Partnership believes
          that no significant actions are required to be taken by the
          Partnership to address the issue and that the impact of the Year 2000
          computer systems issue will not materially affect the Partnership's
          future operating results or financial condition.


                                     10
<PAGE>   23
                              REAL-EQUITY PARTNERS
                       (a California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 1998

8.    FAIR VALUE OF FINANCIAL INSTRUMENTS

      Statement of Financial Accounting Standards No. 107, "Disclosure about
      Fair Value of Financial Instruments," requires disclosure of fair value
      information about financial instruments, when it is practicable to
      estimate that value. One of the mortgage notes payable is insured by HUD
      and is secured by a rental property. The operations generated by the
      property are subject to various government rules, regulations and
      restrictions which make it impracticable to estimate the fair value of
      this mortgage note payable. The book values of all other debt instruments
      approximate their fair values because the interest rates of these
      instruments are comparable to rates currently offered to the Partnership.
      The carrying amount of other assets and liabilities reported on the
      balance sheets that require such disclosure approximates fair value due to
      their short-term maturity.


                                     11
<PAGE>   24
                                                                    SCHEDULE III


                              REAL-EQUITY PARTNERS
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1998


<TABLE>
<CAPTION>
                                                                                                   Total Land,
                                                                               Buildings            Buildings,
   Partnership               Number of      Outstanding                      Furnishings and     Furnishings and    Accumulated
    Location                   Units          Mortgage           Land           Equipment            Equipment      Depreciation
------------------------   ------------     ------------     ------------    ---------------     ---------------    ------------
<S>                        <C>              <C>              <C>             <C>                 <C>                <C>         
Arbor Glen -                                                                                      
  West Covina, CA                   208     $  5,535,368     $  1,253,592     $  8,874,255         $ 10,127,847     $  5,016,947
                                                                                                  
Park Creek -                                                                                      
  Canoga Park, CA                   123        1,247,761        1,403,251        4,213,772            5,617,023        2,543,370
                                                                                                  
Warner Willows I -                                                                                
   Woodland Hills, CA                74        2,661,533        1,609,206        3,871,310            5,480,516        2,270,607
                                                                                                  
Warner Willows II -                                                                               
  Woodland Hills, CA                 73        2,601,387        1,419,077        3,531,025            4,950,102        2,031,722
                                                                                                  
Willowbrook Apartments -                                                                          
  Reno, NV                          183        2,135,333          868,231        5,327,262            6,195,493        2,715,562
                           ------------     ------------     ------------     ------------         ------------     ------------
                                                                                                  
                                    661     $ 14,181,382     $  6,553,357     $ 25,817,624         $ 32,370,981     $ 14,578,208
                           ============     ============     ============     ============         ============     ============
</TABLE>


<PAGE>   25
                                                                    SCHEDULE III
                                                                     (Continued)


                              REAL-EQUITY PARTNERS
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1998



NOTES:  1.      Rental property is stated at cost. Depreciation is provided for
                on the straight-line method over the estimated useful lives of
                the buildings and equipment. Substantially all of the apartments
                are leased on a month-to-month basis.

        2.      The total cost of land, buildings, and equipment for federal
                income tax purposes at December 31, 1998 is approximately
                $38,896,531.

        3.      Investments in property and equipment are as follows:


<TABLE>
<CAPTION>
                                                      Buildings
                                                     Furnishings,               
                                                          And
                                      Land             Equipment            Total
                                  ------------       ------------       ------------
<S>                               <C>                <C>                <C>         
Balance at January 1, 1996        $  7,077,565       $ 30,983,361       $ 38,060,926

Net additions, 1996                       --                 --                 --

Balance of December 31, 1996          (524,208)        (5,165,737)        (5,689,945)
                                  ------------       ------------       ------------

Net additions, 1997                  6,553,357         25,817,624         32,370,981

Less Parkside foreclosure                 --                 --                 --
                                  ------------       ------------       ------------

Balance at December 31, 1997         6,553,357         25,817,624         32,370,981

Net additions, 1998                       --                 --                 --
                                  ------------       ------------       ------------

Balance at December 31, 1998      $  6,553,357       $ 25,817,624       $ 32,370,981
                                  ============       ============       ============
</TABLE>


<PAGE>   26
                                                                    SCHEDULE III
                                                                     (Continued)


                              REAL-EQUITY PARTNERS
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1998


                                               Buildings,
                                              Furnishings,
                                                  And
                                                Equipment
                                              ------------
ACCUMULATED DEPRECIATION:                  
                                           
Balance at January 1, 1996                    $ 14,497,544
                                           
Net additions 1996                                 824,434
                                           
Less Parkside foreclosure                       (2,220,594)
                                              ------------
                                           
Balance at December 31, 1996                    13,101,384
                                           
Net additions 1997                                 738,412
                                              ------------
                                           
Balance at December 31, 1997                    13,839,796
                                           
Net additions 1998                                 738,412
                                              ------------
                                           
Balance at December 31, 1998                  $ 14,578,208
                                              ============


<PAGE>   27
PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:

REAL-EQUITY PARTNERS (the "Partnership") has no directors or executive officers
of its own.

Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P. (the "Operating
Partnership"), a majority owned subsidiary of Casden Properties Inc., a real
estate investment trust organized by Alan I. Casden, purchased a 95.25% economic
interest in NAPICO. The following biographical information is presented for the
directors and executive officers of NAPICO with principal responsibility for the
Partnership's affairs.

CHARLES H. BOXENBAUM, 69, Chairman of the Board of Directors and Chief Executive
Officer of NAPICO.

Mr. Boxenbaum has been associated with NAPICO since its inception. He has been
active in the real estate industry since 1960, and prior to joining NAPICO was a
real estate broker with the Beverly Hills firm of Carl Rhodes Company.

Mr. Boxenbaum has been a guest lecturer at national and state realty
conventions, certified properties exchanger's seminars, Los Angeles Town Hall,
National Association of Home Builders, International Council of Shopping
Centers, Society of Conventional Appraisers, California Real Estate Association,
National Institute of Real Estate Brokers, Appraisal Institute, various mortgage
banking seminars, and the North American Property Forum held in London, England.
In 1963, he was the winner of the Snyder Award, the highest annual award offered
by the National Association of Real Estate Boards for Best Exchange. He is one
of the founders and a past director of the First Los Angeles Bank, organized in
November 1974. Mr. Boxenbaum was a member of the Board of Directors of the
National Housing Council. Mr. Boxenbaum received his Bachelor of Arts degree
from the University of Chicago.

BRUCE E. NELSON, 47, President and a director of NAPICO.

Mr. Nelson joined NAPICO in 1980 and became President in February 1989. He is
responsible for the operations of all NAPICO sponsored limited partnerships.
Prior to that he was primarily responsible for the securities aspects of the
publicly offered real estate investment programs. Mr. Nelson is also involved in
the identification, analysis and negotiation of real estate investments.

From February 1979 to October 1980, Mr. Nelson held the position of Associate
General Counsel at Western Consulting Group, Inc., private residential and
commercial real estate syndicators. Prior to that time, Mr. Nelson was engaged
in the private practice of law in Los Angeles. Mr. Nelson received his Bachelor
of Arts degree from the University of Wisconsin and is a graduate of the
University of Colorado School of Law. He is a member of the State Bar of
California and is a licensed real estate broker in California and Texas.

ALAN I. CASDEN, 53, Chairman of Casden Properties Inc. and The Casden Company,
an affiliate of Casden Properties (formerly CoastFed Properties), a director and
member of the audit committee of NAPICO, and chairman of the Executive Committee
of NAPICO.

Mr. Casden is Chairman of the Board, Chief Executive Officer and a principal
shareholder of The Casden Company and Casden Investment Company. He also became
the Chairman of the Board Casden Properties Inc. in 1998. Previously, he was the
president and chairman of Mayer Group, Inc., which he joined in 1975. He is also
president of Mayer Management, Inc., a real estate management firm. Mr. Casden
has been involved in approximately $3 billion of real estate financings and
sales and has been responsible for the development and construction of more than
12,000 apartment units and 5,000 single-family homes and condominiums.

<PAGE>   28

Mr. Casden is a member of the American Institute of Certified Public Accountants
and of the California Society of Certified Public Accountants. Mr. Casden is a
member of the advisory board of the National Multi-Family Housing Conference,
the Multi-Family Housing Council, and the President's Council of the California
Building Industry Association. He also serves on the advisory board to the
School of Accounting of the University of Southern California. He holds a
Bachelor of Science degree from the University of Southern California.

HENRY C. CASDEN, 55, President, Chief Operating Officer and Secretary of The
Casden Company and a director and secretary of NAPICO.

Mr. Casden has been President and Chief Operating Officer of The Casden Company,
as well as a director of NAPICO since February 1988. He became secretary of both
companies in late 1994. He also became President of Casden Properties Inc. in
1998. From 1982 to 1988, Mr. Casden was of counsel and a partner in the Los
Angeles law firm of Troy, Casden & Gould. From 1978 to 1981, he was of counsel
and a partner in the Los Angeles law firm of Loeb & Loeb. From 1972 to 1978, Mr.
Casden was a member of the Beverly Hills law firm of Fink & Casden, Professional
Corporation.

Mr. Casden received his Bachelor of Arts degree from the University of
California at Los Angeles, and is a graduate of the University of San Diego Law
School. Mr. Casden is a member of the State Bar of California and has numerous
professional affiliations.

PAUL PATIERNO, 42, Chief Financial Officer.

Mr. Patierno joined NAPICO in 1998 and is responsible for its financial affairs,
as well as the limited partnerships sponsored by it. From 1995 until joining
NAPICO in September 1998, Mr. Patierno was a senior manager in the affordable
housing group of Altschuler, Melvoin and Glasser LLP, a national public
accounting firm. From 1990 to 1995, he practiced public accounting with a firm
specializing in real estate syndication. Mr. Patierno received his bachelor of
science degree in accounting from California State University at Northridge, and
is a member of the American Institute of Certified Public Accountants and the
California Society of Certified Public Accountants.

PATRICIA W. TOY, 68, Senior Vice President - Communications and Assistant
Secretary.

Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the
Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a
U.S. Naval Officer in communications and personnel assignments. She holds a
Bachelor of Arts degree from the University of Nebraska.

MARK L. WALTHER, 37, Executive Vice President, General Counsel and Assistant
Secretary.

Mr. Walther joined NAPICO in 1987 and is responsible for the legal affairs of
the NAPICO sponsored limited partnerships. Prior to joining NAPICO, Mr. Walther
worked in the San Francisco law firm of Browne and Kahn which specialized in
construction litigation. Mr. Walther received his Bachelor of Arts degree in
Political Science from the University of California, Santa Barbara and is a
graduate of the University of California, Davis, School of Law. He is a member
of the State Bar of Hawaii.

NAPICO and several of its officers, directors and affiliates, including Charles
H. Boxenbaum, Bruce E. Nelson and Alan I. Casden, consented to the entry, on
June 25, 1997, of an administrative cease and desist order by the U.S.
Securities and Exchange Commission (the "Commission"), without admitting or
denying any of the findings made by the Commission. The Commission found that
NAPICO and others had violated certain federal securities laws in connection
with transactions unrelated to the Partnership. The Commission's order did not
impose any cost, burden or penalty on any partnership managed by NAPICO and does
not impact NAPICO's ability to serve as the Partnership's Managing General
Partner.

<PAGE>   29

ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS

The Partnership has no officers, directors, or employees of its own. All of its
affairs are managed by the Corporate General Partner, NAPICO. The transactions
with NAPICO and its affiliates are primarily in the form of fees paid by the
Partnership to NAPICO for services rendered to the Partnership, as follows.

Under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to NAPICO for a deferred acquisition
fee for services rendered in connection with the management of the Partnership
and the selection, purchase, development, and monitoring the operations of the
properties, in an amount approximately equal to 10 percent (on a present value
basis) of the gross proceeds of the offering. Distribution of any part of this
fee shall be subordinated to receipt by each limited partner of an amount equal
to a cumulative noncompounded 6 percent annual distribution with respect to his
adjusted Adjusted Capital Value. The aggregate amount of the deferred
acquisition fee distributed in any year from net cash from operations shall not
exceed an amount equal to 3 percent of investment in properties (approximately
$600,000).

The Partnership reimburses NAPICO for certain expenses. The reimbursement to
NAPICO was $12,601, $12,606 and $12,426 in 1998, 1997 and 1996, respectively,
and is included in operating expenses.

An annual property management fee is also payable to an affiliate of NAPICO
which shall in any event not exceed 5 percent of gross revenues from each
property under management. Management fees charged to rental operations were
approximately $256,000, $242,000 and $243,000 for 1998, 1997 and 1996,
respectively.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)    Security Ownership of Certain Beneficial Owners

       The general partners own all of the outstanding general partnership
       interests of REP; no person is known to own beneficially in excess of 5
       percent of the outstanding limited partnership interests.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Real-Equity Partners has no officers, employees, or directors. However, under
the terms of the Restated Certificate and Agreement of Limited Partnership, the
Partnership is obligated to the corporate general partner for a deferred
acquisition fee for services rendered in connection with the management of the
Partnership and the selection, purchase, development, and monitoring the
operations of the properties, in an amount approximately equal to 10 percent (on
a present value basis) of the gross proceeds of the offering. Distribution of
any part of this fee shall be subordinated to receipt by each limited partner of
an amount equal to a cumulative noncompounded 6 percent annual distribution with
respect to his Adjusted Capital Value. The aggregate amount of the deferred
acquisition fee distributed in any year from net cash from operations shall not
exceed an amount equal to 3 percent of investment in properties (approximately
$600,000). The Partnership is incurring interest expense at a rate of 8% per
annum on the unpaid fees due the corporate general partner. Interest expense to
the corporate general partner was $42,125, $42,125 and $42,240 for the years
ended December 31, 1998, 1997 and 1996, respectively.

An annual property management fee is also payable to an affiliate of the NAPICO
which shall in any event not exceed 5 percent of gross revenues from each
property under management. Management fees charged to rental operations were
approximately $256,000, $242,000 and $243,000 for 1998, 1997 and 1996,
respectively.

An affiliate of the corporate general partner performed earthquake repairs at
the Park Creek and Warner Willows I and II rental properties. The payments to
this affiliate for these repairs was approximately $859,000 as of December 31,
1998.

<PAGE>   30
The Partnership reimburses NAPICO for certain expenses. The reimbursement to
NAPICO was $12,601, $12,606 and $12,426 in 1998, 1997 and 1996, respectively,
and is included in operating expenses.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:

FINANCIAL STATEMENTS

Report of Independent Public Accountants.

Balance Sheets as of December 31, 1998 and 1997.

Statements of Operations for the years ended December 31, 1998, 1997 and 1996.

Statements of Partners' Equity (Deficiency) for the years ended December 31,
1998, 1997 and 1996.

Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996.

Notes to Financial Statements as of December 31, 1998.

FINANCIAL STATEMENT SCHEDULE

Schedule III - Real Estate and Accumulated Depreciation, December 31, 1998.

The remaining schedules are omitted because the required information is included
in the financial statements and notes thereto or they are not applicable or not
required.

EXHIBITS

(3)   Articles of incorporation and bylaws: The registrant is not incorporated.
      The Partnership Agreement was filed with Form S-11 Registration No.
      2-82765 incorporated herein by reference.

(10)  Material contracts: The registrant is not party to any material contracts,
      other than the Amended and Restated Certificate and Agreement of Limited
      Partnership dated September 9, 1981, and the seven apartment projects
      located in California and Nevada as previously filed at the Securities
      Exchange Commission, File No. 2-82765 which is hereby incorporated by
      reference.

REPORTS ON FORM 8-K

A report on Form 8-K dated November 26, 1996, was filed with the Securities and
Exchange Commission. This Form 8-K disclosed that the registrant became aware of
an entity conducting a tender offer for units in the registrant. The General
Partners on behalf of the registrant, responded to the offer in registrant's
Semi-Annual Report mailed to the limited partners on or about November 18, 1996.
The Corporate General Partner advised the limited partners that it does not
believe that this reported offer appears to reflect the full value of the
limited partnership interests, and that each investor must consult with his or
her tax advisor regarding the amount and character of any tax gain or loss.

<PAGE>   31
                                   SIGNATURES


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


REAL-EQUITY PARTNERS

By: NATIONAL PARTNERSHIP INVESTMENTS CORP.
    The General Partner


/s/ CHARLES H. BOXENBAUM
------------------------------------------
Charles H. Boxenbaum
Chairman of the Board of Directors
and Chief Executive Officer


/s/ BRUCE E. NELSON
------------------------------------------
Bruce E. Nelson
Director and President


/s/ ALAN I. CASDEN
------------------------------------------
Alan I. Casden
Director


/s/ HENRY C. CASDEN
------------------------------------------
Henry C. Casden
Director


/s/ PAUL PATIERNO
------------------------------------------
Paul Patierno
Chief Financial Officer