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

                                    FORM 10-K

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2004
                          -----------------

                                       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  1-9496

                        BNP RESIDENTIAL PROPERTIES, INC.
             (Exact name of registrant as specified in its charter)

            Maryland                                56-1574675
   (State or other jurisdiction of         (I.R.S. Employer Identification No.)
      incorporation or organization)

301 S. College St., Suite 3850,  Charlotte, NC                  28202-6024
------------------------------------------------                ----------
    (Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code  704/944-0100
                                                    ------------

Securities registered pursuant to Section 12(b) of the Act:

       Title of each class            Name of each exchange on which registered:

Common Stock, par value $.01 per share                American Stock Exchange
--------------------------------------                -----------------------

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __

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 the Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No __

The aggregate market value of the common stock held by non-affiliates of the
registrant at February 23, 2005, was approximately $144.2 million.

The number of shares of the registrant's common stock outstanding on February
23, 2005, was 9,101,667.

                                                  Index to exhibits at pate 82
<PAGE>



                        BNP RESIDENTIAL PROPERTIES, INC.
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

      Item No.                                      FINANCIAL INFORMATION                                   Page No.
         <S>           <C>                                                                                       <C>

                        PART I
          1             Business                                                                                   3
          2             Properties                                                                                 5
          3             Legal Proceedings                                                                         10
          4             Submission of Matters to a Vote of Security Holders                                       10
          X             Executive Officers of the Registrant                                                      10

                        PART II
          5             Market for Registrant's Common Equity, Related Stockholder Matters and Issuer             11
                             Purchases of Equity Securities
          6             Selected Financial Data                                                                   12
          7             Management's Discussion and Analysis of Financial Condition and Results of                15
                             Operations
          7A            Quantitative and Qualitative Disclosures About Market Risk                                27
          8             Financial Statements and Supplementary Data                                               28
          9             Changes in and Disagreements With Accountants on Accounting and Financial                 28
                             Disclosure
          9A            Controls and Procedures                                                                   28
          9B            Other Information                                                                         30

                        PART III
         10             Directors and Executive Officers of the Registrant                                        30
         11             Executive Compensation                                                                    33
         12             Security Ownership of Certain Beneficial Owners and Management                            34
         13             Certain Relationships and Related Transactions                                            36
         14             Principal Accounting Fees and Services                                                    37

                        PART IV
         15             Exhibits, Financial Statement Schedules, and Reports on Form 8-K                          38

                        Signatures                                                                                41

</TABLE>
<PAGE>


                                     PART I

ITEM 1.  BUSINESS

Company Profile

         BNP Residential Properties, Inc. is a self-administered and
self-managed real estate investment trust ("REIT") focused on owning and
operating apartment communities. We own and operate 25 apartment communities
containing a total of 6,113 apartments. We also provide third-party management
services for seven apartment communities containing a total of 1,799 apartments.
In January 2005, we acquired an economic interest in and became the general
partner of the entities owning three of the seven apartment communities for
which we provide management services. We have previously announced that we have
entered into contracts to acquire the remaining four managed apartment
communities. In addition to our apartment communities, we own 40 restaurant
properties that we lease on a triple-net basis to a restaurant operator under a
master lease. We currently operate in the states of North Carolina, South
Carolina and Virginia.

         BNP Residential Properties, Inc. is structured as an UpREIT, or
"umbrella partnership real estate investment trust." We are the sole general
partner and own a controlling interest in BNP Residential Properties Limited
Partnership, through which we conduct all of our operations. We refer to this
partnership as the operating partnership. We refer to the limited partners of
the operating partnership as "minority common unitholders" or "minority
interest." We currently own 83% of the outstanding operating partnership common
units and 100% of the outstanding operating partnership preferred units.

         As of February 23, 2005, we have 9,101,667 shares of common stock and
909,090 shares of preferred stock outstanding. We have 1,300 shareholders of
record. We estimate that there are 4,350 beneficial owners of our common stock.
Our shares are listed on the American Stock Exchange, trading under the symbol
"BNP." The operating partnership has an additional 1,865,927 operating
partnership minority common units outstanding.

         We have 220 employees, including management, accounting, legal,
acquisitions, development, property management, leasing, maintenance and
administrative personnel. Our executive offices are located at 301 South College
Street, Suite 3850, Charlotte, North Carolina 28202-6024, and our telephone
number is 704/944-0100.

         In addition to this Annual Report, we file quarterly and special
reports, proxy statements and other information with the SEC. All documents that
we file with the SEC are available free of charge on our corporate website,
which is www.bnp-residential.com. You may also read and copy any document that
we file at the public reference facilities of the SEC at 450 Fifth Street NW,
Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further
information about the public reference facilities. These documents also may be
accessed through the SEC's electronic data gathering, analysis and retrieval
system ("EDGAR") via electronic means, including the SEC's home page on the
Internet (http://www.sec.gov). In addition, since some of our securities are
listed on the American Stock Exchange, you can read our SEC filings at the
offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006.

History and Development of BNP Residential Properties, Inc.

         The company was originally incorporated in the state of Delaware in
1987. Beginning in 1987, we elected to be taxed as a REIT under the Internal
Revenue Code. As such, we generally are not, and will not be, subject to federal
or state income taxes on net income. As a REIT, we are subject to a number of
organizational and operational requirements, including a requirement that we
currently distribute at least 90% of our REIT taxable income as dividends.

         In 1987, we purchased 47 existing restaurant properties located in
North Carolina and Virginia for an aggregate purchase price of $43.2 million.
From 1987 through 1992, our assets consisted primarily of


                                       3
<PAGE>

these 47 restaurant properties. During this period we operated as an externally
administered and externally managed REIT. We leased the restaurants on a
triple-net basis to Boddie-Noell Enterprises, Inc. ("Enterprises"), a Hardee's
franchisee, under a master lease. A master lease is a single lease that covers
multiple properties, while a triple-net lease is one where the lessee pays all
operating expenses, maintenance, property insurance and real estate taxes.

         In 1993, we began to change our focus from restaurant properties to
apartment communities, with the objective of increasing funds from operations
and enhancing shareholder value. In 1994 we acquired BT Venture Corporation, an
integrated real estate company specializing in the management, development and
acquisition of apartment properties, and began operating as a self-administered
and self-managed REIT.

         In 1997, we reincorporated in the state of Maryland and reorganized to
our present UpREIT structure. Through our UpREIT structure, we can acquire
properties in exchange for operating partnership units and trigger no immediate
tax obligation for certain sellers. We believe that our conversion to an UpREIT
enables us to acquire properties not otherwise available or at lower prices
because of the tax advantages to certain property sellers of receiving limited
partnership interests instead of cash as consideration. Minority unitholders
will generally be able to redeem their units for cash or, at our option as
general partner, for shares of common stock of the company on a one-for-one
basis. Distributions of cash from the operating partnership are allocated
between the REIT and the minority unitholders based on their respective unit
ownership.

         In December 2001, our Board of Directors authorized the issuance of
Series B Cumulative Convertible Preferred Stock. Between 2001 and 2003, we
issued a total of 909,090 shares of this preferred stock for proceeds of $10
million.

         From 1993 through 2003, we acquired 21 apartment properties through a
combination of cash purchases, assumption of long-term debt, and issuance of
operating partnership units. (We combined two of these properties to operate as
a single apartment community.)

         To date we have sold seven restaurants to Enterprises, the lessee,
under an agreement that allowed Enterprises to close up to seven restaurants and
buy them back for no less than net carrying value.

Recent Developments

         During 2004, we raised $30 million of new equity through the issuance
of 2.6 million shares of common stock to a number of institutional investors and
mutual funds.

         We continued to add to and improve our portfolio of apartment
properties with five acquisitions in 2004. Three of these acquisitions were
direct purchases (Carriage Club Apartments in Mooresville, North Carolina, the
Fairington Apartments in Charlotte, North Carolina, and Bridges at Southpoint
Apartments in Durham, North Carolina) and two were made through the issuance of
operating partnership units (Bridges at Wind River Apartments in Durham, North
Carolina, and Savannah Shores Apartments in Myrtle Beach, South Carolina). With
these acquisitions, we owned 25 apartment communities at December 31, 2004.

         In December 2004, we entered into agreements to acquire a portfolio of
four apartment communities containing a total of 1,086 apartment units. We
expect to complete these acquisitions by the end of March 2005. We currently
manage these apartment communities on a contract basis.

         In January 2005, we acquired Boddie Investment Company through a
merger. As a result of this acquisition, we have assumed the role of general
partner and acquired certain economic interests in three limited partnerships
(50% interest in Marina Shores Associates One Limited Partnership, 1% interest
in The Villages of Chapel Hill Limited Partnership, and 1% interest in The
Villages of Chapel Hill - Phase 5 Limited Partnership). Prior to this
acquisition, we managed the apartment communities owned by these partnerships on
a contract basis; we will continue to manage these properties.

                                       4
<PAGE>

Business Strategy

         Our principal investment objectives are to provide our shareholders
with current income and to increase the value of the company's common stock. We
focus on increasing long-term growth in funds from operations and funds
available for distribution per share, and on increasing the value of our
portfolio through effective management, growth, financing and investment
strategies. We expect to implement our strategies primarily through the
acquisition, operation, leasing and management of apartment communities.

         We seek to acquire apartment properties in the southeastern United
States. We focus on markets that exhibit substantial economic growth and an
expanding job base that provide opportunities for us to quickly build a
significant market presence. Through our UpREIT structure, we have the ability
to acquire apartment communities by issuing operating partnership units in
tax-deferred exchanges with owners of such properties. We expect that we will
finance future acquisitions of apartment communities with operating partnership
units as well as loans and funds from additional offerings of common stock,
preferred stock or joint venture arrangements.

         We will selectively consider opportunities to add additional units to
existing communities, to acquire and rehabilitate older apartment communities,
and to develop new apartment communities. Members of our management team have
directed over $115 million of development or redevelopment projects, including
13 apartment communities containing over 2,500 apartment units. This development
and redevelopment experience will enable us to build additional apartment
communities and to rehabilitate existing communities when economic conditions
and available capital make such opportunities attractive.

         We strongly emphasize on-site property management. We seek
opportunities and have developed internal programs to increase average occupancy
rates, reduce resident turnover, raise rents and control costs. On-site
community managers report directly to regional managers who are locally based.
This flat organization provides for efficient staffing levels, reduces overhead
expenses, and enables us to respond to the needs of residents and on-site
employees. In an effort to reduce long-term operating costs, we regularly review
each apartment community and promptly attend to maintenance and recurring
capital needs. Our employees supervise all renovation and repair activities,
which are generally completed by outside contractors.

         We continue to seek additional sources of revenue at our existing
apartment communities. These include water submetering and marketing of cable
television, high-speed Internet service and telephone services.

ITEM 2.  PROPERTIES

Apartment Communities

         Through the operating partnership, we own and operate 25 apartment
communities consisting of 6,113 apartment units. For the fourth quarter of 2004,
our average economic occupancy rate was 93.2%, and our average monthly revenue
per occupied unit was $744. The average age of the apartment communities is 11.9
years. Our apartment communities are generally wood framed, two- and three-story
buildings, with exterior entrances, individually metered gas and electric
service, submetered water service, and individual heating and cooling systems.

         Our apartment units are comprised of 38% one-bedroom units, 54%
two-bedroom units, and 8% three-bedroom units. The units average 1,007 square
feet in area and are well equipped with modern appliances and other
conveniences. Our communities generally include swimming pools, tennis courts
and clubrooms, and most have exercise facilities.

         As of December 31, 2004, our total investment, on a historical cost
basis, in our 25 apartment communities was $389.1 million, and the net carrying
value of our 25 apartment communities was $334.6

                                       5
<PAGE>

million (an average of $13.4 million per property). The apartment properties are
held subject to loans, discussed in the notes to the financial statements.

         The table on page 8 summarizes information about each of our apartment
communities.

Restaurant Properties

         We lease the restaurant properties on a triple-net basis to Enterprises
under a master lease. The master lease, as amended in 1995, has a primary term
expiring in December 2007, but grants Enterprises three five-year renewal
options. Enterprises pays annual rent equal to the greater of the specified
minimum rent or 9.875% of food sales from the restaurants. Under certain
conditions, and subject to our approval, Enterprises has the right to substitute
another restaurant property for a property covered by the lease. Assuming
renewal of the lease, after December 31, 2007, Enterprises has the right to
terminate the lease on up to five restaurant properties per year by offering to
purchase them under specified terms.

         In addition, we entered into a separate agreement that allowed
Enterprises to purchase, under specified terms, up to seven restaurant
properties deemed non-economic for no less than net carrying value. The original
lease was for 47 restaurant properties; since 1999, we have sold seven
restaurants deemed non-economic to Enterprises for total proceeds of $4,373,000,
which equaled the net carrying value of the properties.

         The minimum rent on the remaining 40 restaurants is $3.8 million per
year.

         The average acquisition cost of the original 47 restaurant properties
was $920,000 per property. The net carrying value of the 40 restaurant
properties held at December 31, 2004, was $25.5 million (an average of $637,000
per property). The restaurant properties are held subject to a line of credit
loan, discussed in the notes to the financial statements.

         The restaurant properties are operated by Enterprises, which is
responsible for all aspects of the operation, maintenance and upkeep of the
properties. In addition, Enterprises is responsible for the cost of any
improvement, expansion, remodeling or replacement required to keep the
properties competitive or in conformity with applicable codes and standards.

         Thirty-nine of the restaurant properties are operated as Hardee's
restaurants pursuant to franchise agreements with Hardee's Food Systems, Inc.
One property is operated as a "BBQ and Ribs" restaurant. Enterprises converted
this property to the BBQ and Ribs concept in 2002 and paid for the entire cost
of the conversion, approximately $500,000. There is no applicable franchise
agreement for the converted restaurant, as Enterprises owns the BBQ and Ribs
concept.

         Each of the restaurant properties consists of a one-story brick, stucco
or wood building that embodies a contemporary style with substantial plate glass
areas. The buildings average 3,400 square feet and are located on sites
averaging 1.2 acres. The buildings are suitable for conversion to a number of
uses, but the exteriors would have to be substantially modified prior to their
use as restaurants of another concept or for non-restaurant applications.

         The locations of our restaurant properties are listed on page 9 of this
Annual Report.

Property Insurance

         We carry insurance coverage on our properties of types and in amounts
that we believe are in line with coverage customarily obtained by owners of
similar properties. In addition, properties that we manage but do not own are
covered by insurance policies under which we are a named insured. Our restaurant
properties are subject to an indemnification agreement whereby Enterprises, the
lessee, is responsible for all claims, including those relating to environmental
matters, arising from a restaurant property. Enterprises is


                                       6
<PAGE>

required to provide insurance, which identifies the company as a named insured,
on each restaurant property.

         We believe all of our properties are adequately insured, including
insurance for acts of terrorism at all of our apartment properties. There are
types of losses, however, such as from wars or catastrophic acts of nature, for
which we cannot obtain insurance at all or at a reasonable cost. In the event of
an uninsured loss or a loss in excess of our insurance limits, we could lose
both the revenues generated from the affected property and the capital we have
invested in the affected property. It is possible, depending on the specific
circumstances of the affected property, that we could be liable for any mortgage
indebtedness or other obligations related to the property. Any such loss could
materially and adversely affect our business and financial condition and results
of operations.


                                       7
<PAGE>


                     INFORMATION ABOUT APARTMENT COMMUNITIES

<TABLE>
<CAPTION>

                                                                              Total       Apartment      Weighted
                                       No. of                                Rentable      Unit Type       Average
                                       Apt.    Year      Date      Total      Area      1     2     3    Apt. Size
    Community           Location       Units   Compl   Acquired   Acreage   (Sq. Ft.)   BR    BR    BR   (Sq. Ft.)
------------------- ------------------ ------ -------- ---------- --------- ---------- ----- ----- ----- ----------

<S>                <C>                  <C>      <C>      <C>       <C>      <C>       <C>   <C>    <C>     <C>
Abbington Place     Greensboro, NC       360      1997     12/97      37.4    400,728    96   216    48      1,113
Allerton Place      Greensboro, NC       228      1998      9/98      19.2    241,842    54   126    48      1,061
Barrington Place    Charlotte, NC        348      1999      5/02      29.3    386,964   132   192    24      1,112
Brookford Place     Winston-Salem, NC    108      1998      5/02       6.3    103,392    36    72     -        961
Carriage Club       Mooresville, NC      268      2000      6/04      22.5    253,114   110   136    22        944
Chason Ridge        Fayetteville, NC     252      1994      1/99      29.1    246,886    56   164    32        980
Fairington          Charlotte, NC        250      1981      8/04      32.0    267,300   108   106    36      1,069
Harrington          Charlotte, NC        288      1997      8/03      25.0    321,190   103   140    45      1,115
Harris Hill         Charlotte, NC        184      1988     12/94      18.4    167,920    67   117     -        912
Latitudes           Virginia Beach, VA   448      1989     10/94      24.9    358,700   269   159    20        800
Madison Hall        Clemmons, NC         128      1997      8/98      10.5    110,352    42    86     -        862
Marina Waterfront   Cornelius, NC        290      1994      9/02      33.6    254,356   128   126    36        877
Oak Hollow          Cary, NC             221      1983      7/98      30.0    215,960    56   165     -        982
Oak Hollow Ph 2     Cary, NC             240      1986     12/00      26.8    220,840   160    80     -        920
Oakbrook            Charlotte, NC        162      1985      6/94      16.4    178,668    32   120    10      1,100
Paces Commons       Charlotte, NC        336      1988      6/93      24.8    322,046   154   142    40        958
Paces Village       Greensboro, NC       198      1988      4/96      15.5    167,886    88   110     -        848
Pepperstone         Greensboro, NC       108      1992     12/97      10.1    113,076     -   108     -      1,047
Savannah Place      Winston-Salem, NC    172      1991     12/97      15.4    182,196    44   128     -      1,059
Savannah Shores     Myrtle Beach, SC     198      1998      7/04      13.1    215,418    84   108     6      1,088
Southpoint          Durham, NC           192      1987      9.04      14.5    176,352   132    60     -        919
Summerlyn Place     Burlington, NC       140      1998      9/98      12.1    156,756    48    84     8      1,120
The Place           Greenville, SC       144      1985      3/03      10.1    158,264    40   104     -      1,106
Waterford Place     Greensboro, NC       240      1997     12/97      20.6    277,296    72   120    48      1,155
Woods Edge          Durham, NC           264      1985      6/98      32.4    268,620    66   198     -      1,018
Wind River          Durham, NC           346     2000       5/04      29.4    391,120   128   153    65      1,130


</TABLE>
<TABLE>
<CAPTION>


                                                                     Average
                                           Average Economic      Monthly Revenue
                                          Occupancy Percent     per Occupied Unit
                                                 (1)
    Community           Location         2004    2003   2002   2004    2003   2002
------------------- ------------------ - ------ ------- ------ ------ ------- ------

<S>                <C>                   <C>     <C>    <C>    <C>     <C>    <C>
Abbington Place     Greensboro, NC        94.2    90.9   93.2   $760    $764   $770
Allerton Place      Greensboro, NC        94.8    91.4   92.6    790     745    769
Barrington Place    Charlotte, NC         94.4    94.3   91.9    756     748    782
Brookford Place     Winston-Salem, NC     97.0    95.1   93.4    679     667    690
Carriage Club       Mooresville, NC       95.3       -      -    743       -      -
Chason Ridge        Fayetteville, NC      96.4    96.6   96.1    797     753    717
Fairington          Charlotte, NC         93.7       -      -    708       -      -
Harrington          Charlotte, NC         93.8    92.0      -    747     739      -
Harris Hill         Charlotte, NC         95.0    93.3   92.1    635     663    684
Latitudes           Virginia Beach, VA    97.5    96.5   97.2    919     873    817
Madison Hall        Clemmons, NC          94.0    94.2   93.9    600     578    598
Marina Waterfront   Cornelius, NC         94.6    91.0   89.4    772     750    801
Oak Hollow          Cary, NC              93.9    90.0   89.3    616     617    650
Oak Hollow Ph 2     Cary, NC              92.0    89.1   88.2    604     599    606
Oakbrook            Charlotte, NC         94.6    91.9   90.6    698     709    763
Paces Commons       Charlotte, NC         95.2    92.2   91.0    632     660    668
Paces Village       Greensboro, NC        94.9    94.3   89.0    675     654    667
Pepperstone         Greensboro, NC        96.3    93.8   95.4    668     655    681
Savannah Place      Winston-Salem, NC     93.0    93.4   93.1    716     699    714
Savannah Shores     Myrtle Beach, SC      92.7       -      -    798       -      -
Southpoint          Durham, NC            91.3       -      -    690       -      -
Summerlyn Place     Burlington, NC        94.3    93.5   94.5    826     832    802
The Place           Greenville, SC        95.6    91.1      -    559     569      -
Waterford Place     Greensboro, NC        95.1    91.8   94.7    883     852    850
Woods Edge          Durham, NC            93.6    92.7   92.3    705     722    754
Wind River          Durham, NC            86.1       -      -    820       -      -


<FN>
(1)      Average economic occupancy is calculated as gross potential rent less vacancy, divided by gross potential
         rent.
</FN>
</TABLE>

                                       8
<PAGE>


                         RESTAURANT PROPERTIES LOCATIONS

Virginia
(27 properties)

Ashland
  106 North Washington

Blackstone
  North Main Street

Bluefield
  701 South College Street

Chester
  12401 Jefferson Davis Hwy.

Clarksville
  916 Virginia Avenue

Clintwood
U.S. Highway 83

Dublin
  208 College Avenue

Franklin
  105 North Mechanic Street

Galax
  425 Main Street

Hopewell
  East City Point Road

Lebanon
  Route 1

Lynchburg
  8411 Timberlake Road
  2231 Langhorne road

Norfolk
  3908 Princess Anne Road

Orange
  200 Madison Road

Petersburg
  1865 Crater Road, South

Richmond
  921 Myers Street
  6850 Forest Hill Avenue
  7917 Midlothian Pike

Roanoke
  4407 Abenham Avenue SW
  3401 Hollins Road

Rocky Mount
  322 Tanyard Road, NE

Smithfield
  Smithfield Shopping Center

Verona
  160 East Route 612

Virginia Beach
  4261 Holland Road
  1951 Lynnhaven Parkway

Wise
  US Highway 23, Business


North Carolina
(13 properties)

Burlington
  2712 Alamance Road

Denver
  Route 1

Eden
  202 West Kings Highway

Fayetteville
  3505 Ramsey Street
  360 North Eastern Blvd.

Hillsborough
  380 S. Churton Street

Kinston
  200 West Vernon Street
  1404 Richlands Street

Newton
  South Ashe & North "D"

Siler City*
  Chatham Shopping Center

Spring Lake
  400 South Main Street

Thomasville
  1116 East Main Street
  Randolph Street

*operated as a "BBQ & Ribs."  All other sites are operated as "Hardee's."

                                       9
<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

         We are a party to a variety of legal proceedings arising in the
ordinary course of business. We do not expect any of these matters, individually
or in aggregate, to have a material adverse impact on the company.

         In the event a claim was successful, we believe that we are adequately
covered by insurance and indemnification agreements. We have insurance coverage
on each of our apartment communities. Our restaurant properties are subject to
an indemnification agreement whereby Enterprises, the lessee, is responsible for
all claims arising from a restaurant property. In addition, Enterprises is
required to provide insurance, which identifies the company as a named insured,
on each restaurant property. Each apartment property that we manage but do not
own is covered by an insurance policy under which we are a named insured.

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

         No matters were submitted to a vote of security holders during the
fourth quarter of fiscal year 2004.

ITEM X.  EXECUTIVE OFFICERS OF THE REGISTRANT

         We have set forth below a listing and brief biography of each of the
executive officers of the company.
<TABLE>
<CAPTION>

            Name                Age                         Position                       Officer Since
------------------------------ ------- --------------------------------------------------- ------------------
<S>                             <C>       <C>                                              <C>
Philip S. Payne                  53        Chairman of the Board of Directors,              October 1994
                                             Chief Financial Officer
D. Scott Wilkerson               47        Director, President, Chief Executive Officer     October 1994
Eric S. Rohm                     35        Vice President, Secretary, General Counsel       December 2002
Pamela B. Bruno                  51        Vice President, Treasurer, Chief                 October 1994
                                             Accounting Officer, Assistant Secretary
</TABLE>

         Messrs. Payne and Wilkerson are also members of our Board of Directors.
Brief biographies of Messrs. Payne and Wilkerson are included at Part III, Item
10. Directors and Officers of the Registrant in this Annual Report. Biographical
information for our other executive officers follows.

         Eric S. Rohm - Vice President, Secretary, General Counsel. Mr. Rohm
joined the company in December 2002 as Vice President and General Counsel, and
was named Secretary in May 2004. Prior to joining the company, Mr. Rohm was a
partner in the Real Estate Department of Kennedy Covington Lobdell & Hickman,
LLP in Charlotte, North Carolina, where he practiced law from 1994 to 2002. Mr.
Rohm received an AB degree in government from Georgetown University in 1991, and
his JD degree from The Ohio State University College of Law in 1994. Mr. Rohm is
licensed to practice law in the State of North Carolina and is a member of the
North Carolina State Bar, the North Carolina Bar Association, and the
Association of Corporate Counsel.

         Pamela B. Bruno - Vice President, Treasurer, Chief Accounting Officer,
Assistant Secretary. Ms. Bruno joined BT Venture Corporation in 1993 as
Controller and became our Vice President and Chief Accounting Officer in October
1994. She was named Treasurer in May 2004. From 1984 to 1993, Ms. Bruno was with
Ernst & Young LLP, in Charlotte, North Carolina, and Anchorage, Alaska, serving
as audit manager from 1987 through 1993. She received a BS degree in accounting
from the University of North Carolina at Charlotte in 1984. She is a licensed
certified public accountant and is a member of the North Carolina Association of
Certified Public Accountants.


                                       10
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Market Information, Holders and Dividends

         Our common stock is traded on the American Stock Exchange under the
symbol "BNP." There were 1,300 common shareholders of record and one preferred
shareholder on February 23, 2005. The table below shows, for the periods
indicated, the range of high, low, and closing sale prices of our common stock
as reported by the American Stock Exchange and the dividends paid per share. As
of February 23, 2005, the closing price of the company's common stock was $16.13
per share.
<TABLE>
<CAPTION>

                                                                                               Dividends
                                                          Stock Price                             Paid
                                            High              Low              Close           Per Share
                                      ----------------- ----------------- ----------------- -----------------
<S>                                      <C>               <C>               <C>                <C>
2004:
   Fourth quarter                         $ 16.20           $ 13.62           $ 16.10            $ 0.25
   Third quarter                            13.90             12.80             13.68              0.25
   Second quarter                           13.24             12.35             13.14              0.25
   First quarter                            13.35             11.50             13.17              0.25

2003:
   Fourth quarter                           11.75             10.41             11.61              0.25
   Third quarter                            11.50             10.26             10.55              0.25
   Second quarter                           11.00              9.68             10.80              0.25
   First quarter                            10.79              9.00              9.70              0.25
</TABLE>

         We have paid regular quarterly dividends to holders of our common stock
since our inception, and we intend to continue to do so. We anticipate that we
will pay all dividends from current funds from operations. We expect
distributions to substantially exceed the 90% annual distribution requirement
for a REIT.

         We have a dividend reinvestment plan that is available to all
shareholders of record. Under this plan, as amended in February 2004, the plan
administrator, Wachovia Bank, N. A., reinvests dividends on behalf of plan
participants in our common stock. Wachovia will either issue new shares or
purchase shares on the open market, at our direction. In addition, shareholders
who participate in the plan may elect to make direct cash investments or
supplement their reinvestment program with additional cash investments of any
amount from $25 to $25,000 per quarter. Participants do not pay any commissions
on stock purchased under the plan.

Sales of Unregistered Securities

         On January 26, 2005, we acquired Boddie Investment Company ("BIC")
through a merger. Because of this merger, we succeeded BIC as the general
partner of, and acquired an economic interest in, three limited partnerships. As
consideration in the merger, we privately issued 508,578 shares of common stock
pursuant to the exemption provided by Section 4(2) of the Securities Act. We
issued those shares, which had a value on that date of $16.10 per share, to B.
Mayo Boddie and Nicholas B. Boddie. Upon closing the merger, we canceled 72,399
shares of our common stock that BIC held immediately before the merger. The
value of the transaction was $8.2 million based on the $16.10 per share value.

         We have included information regarding securities authorized for
issuance under equity compensation plans in Part III, Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters of this Annual Report.

                                       11
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         We present below selected financial information. We encourage you to
read the financial statements and the notes accompanying the financial
statements in this Annual Report. This information is not intended to be a
replacement for the financial statements.

         This financial information includes all apartment communities and
restaurant properties that we owned for each period shown.
<TABLE>
<CAPTION>

                                                              Year ended December 31
                                          2004          2003           2002          2001           2000
                                      ------------- -------------- ------------- -------------- -------------
                                                (in thousands, except per share and property data)
<S>                                  <C>           <C>            <C>           <C>            <C>
Operating data: (1)
Revenue:
  Apartment rental income             $   45,808    $   37,475     $   32,890    $   30,867     $   29,269
  Restaurant rental income                 3,830         3,908          4,021         4,053          4,162
  Other income                             1,227         1,277          1,253         1,342            427
                                      ------------- -------------- ------------- -------------- -------------
Total revenue                             50,865        42,660         38,164        36,262         33,858
Expenses:
  Apartment operations                    18,563        15,458         12,682        11,182          9,766
  Administrative costs                     4,520         3,907          3,358         2,956          2,391
  Interest                                14,608        13,000         11,452        11,100         11,151
  Depreciation                            11,660        10,040          8,794         7,828          7,156
  Amortization (1)                           375           322            256           596            579
  Write-off of unamortized loan
    costs at refinance                        85             -             95           129              -
  Costs of terminated
      equity transaction                       -             -              -             -            237
                                      ------------- -------------- ------------- -------------- -------------
Total expenses                            49,810        42,727         36,637        33,792         31,280
                                      ------------- -------------- ------------- -------------- -------------
Income (loss) before
  minority interest                        1,055           (66)         1,527         2,470          2,578
Minority interest in
  Operating Partnership                       16          (174)           279           567            595
                                      ------------- -------------- ------------- -------------- -------------
Net income                                 1,039           107          1,248         1,902          1,983
Cumulative preferred dividend              1,000           661            323             3              -
                                      ------------- -------------- ------------- -------------- -------------
Income (loss) available to
  common shareholders                 $       39    $     (553)    $      925    $    1,900     $    1,983
                                      ============= ============== ============= ============== =============
Earnings per share,
  basic and diluted -
  Income (loss) available to
  common shareholders                 $     0.01    $    (0.09)    $     0.16    $     0.33     $     0.35
                                      ============= ============== ============= ============== =============
Dividends per common share            $     1.00    $     1.00     $     1.24    $     1.24     $     1.24
                                      ============= ============== ============= ============== =============
Balance Sheet data:
Real estate assets (before
  accumulated depreciation)
  Apartment communities               $  389,119    $  299,661     $  275,713    $  221,589     $  217,818
  Restaurant properties                   37,405        37,405         39,159        39,159         39,702
Real estate assets, net                  360,071       281,014        265,423       219,997        224,705
Total assets                             367,764       287,200        271,723       225,385        230,691
Total debt                               286,425       229,714        211,585       162,330        163,612
Minority interest                         14,394        15,895         17,947        18,174         19,737
Shareholders' equity                      62,996        38,733         39,271        42,034         44,548

</TABLE>

                                       12
<PAGE>



<TABLE>
<CAPTION>

                                                              Year ended December 31
                                          2004          2003           2002          2001           2000
                                      ------------- -------------- ------------- -------------- -------------
                                                (in thousands, except per share and property data)
<S>                                  <C>           <C>            <C>           <C>            <C>
Apartment Properties data:
Apartment communities
  owned at year end                           25            20             18            15             15
Apartment units owned
  at year end                              6,113         4,859          4,427         3,681          3,680
Average apartment
  economic occupancy                       94.4%         92.8%          92.8%         93.9%          95.9%
Average monthly revenue
  per occupied unit                   $      737    $      725     $      733    $      744     $      737

Other data:
Earnings before interest, taxes,
   depreciation and
   amortization (2)                   $   27,783    $   23,295     $   22,124    $   22,123     $   21,463
Funds from operations (2)                 11,447         9,313          9,998        10,702         10,139
Funds available
  for distribution (2)                     9,988         7,904          8,865         9,696          9,243
Net cash provided by
  (used in):
  Operating activities (3)            $   12,677    $    9,594     $   10,118    $   10,729     $   10,854
  Investing activities (3)               (52,848)      (25,275)       (32,669)       (2,401)       (13,407)
  Financing activities                    40,123        15,361         22,018        (7,966)         3,177
Weighted average number of
shares and units outstanding:
    Preferred B shares                       909           601            293             2              -
    Common shares                          7,617         5,868          5,787         5,717          5,708
    Operating partnership
      minority units                       1,856         1,843          1,786         1,706          1,711
</TABLE>



(1)   We adopted Statement of Financial Accounting Standards ("FAS") No. 142,
      Goodwill and Other Intangible Assets, effective January 1, 2002. After
      December 31, 2001, we no longer amortize the intangible asset related to
      our 1994 acquisition of management operations. Amortization expense
      related to this intangible asset was $406,000 per year in 2001 and 2000.

(2)   Earnings before interest, taxes, depreciation and amortization, funds from
      operations, and funds available for distribution amounts reflect
      measurements for the operating partnership (before deduction for minority
      interest).

      Earnings before interest, taxes, depreciation and amortization is
      frequently referred to as "EBITDA." This measurement is derived directly
      from amounts included in the Statement of Operations. We consider EBITDA
      to be a useful measurement of operations performance before the impact of
      financial structure and significant non-cash charges.

      We calculated EBITDA as follows (all amounts in thousands):

                                       13
<PAGE>
<TABLE>
<CAPTION>

                                                              Year ended December 31
                                          2004          2003           2002          2001           2000
                                      ------------- -------------- ------------- -------------- -------------
     <S>                               <C>           <C>            <C>           <C>            <C>
      Income (loss) before minority
        interest                        $  1,055      $    (66)      $  1,527      $  2,470       $  2,578
      Interest                            14,608        13,000         11,452        11,100         11,151
      Depreciation                        11,660        10,040          8,794         7,828          7,156
      Amortization                           375           322            256           596            579
      Write-off of unamortized
         loan costs                           85             -             95           129              -
                                      ------------- -------------- ------------- -------------- -------------
      Earnings before interest,
        taxes, depreciation and
        amortization                    $ 27,783      $ 23,295       $ 22,124      $ 22,123       $ 21,463
                                      ============= ============== ============= ============== =============
</TABLE>

      Funds from operations is frequently referred to as "FFO." FFO is defined
      by the National Association of Real Estate Investment Trusts ("NAREIT") as
      "net income (computed in accordance with generally accepted accounting
      principles), excluding gains (losses) from sales of property, plus
      depreciation and amortization, and after adjustments for unconsolidated
      partnerships and joint ventures." Our calculation of FFO is consistent
      with FFO as defined by NAREIT. Because we hold all of our assets in and
      conduct all of our operations through the operating partnership, we
      measure FFO at the operating partnership level (i.e., before minority
      interest). Historical cost accounting for real estate assets implicitly
      assumes that the value of real estate assets diminishes predictably over
      time. In fact, real estate values have historically risen or fallen with
      market conditions. FFO is intended to be a standard supplemental measure
      of operating performance that excludes historical cost depreciation from -
      or "adds it back" to - GAAP net income. We consider FFO to be useful in
      evaluating potential property acquisitions and measuring operating
      performance.

      Funds available for distribution is frequently referred to as "FAD." We
      calculate FAD as FFO plus non-cash expense for amortization and write-off
      of unamortized loan costs, less recurring capital expenditures. We believe
      that, together with net income and cash flows from operating activities,
      FAD provides investors with an additional measure to evaluate the ability
      of the operating partnership to incur and service debt, to fund
      acquisitions and other capital expenditures, and to fund distributions to
      shareholders and minority unitholders.

      Funds from operations and funds available for distribution do not
      represent net income or cash flows from operations as defined by generally
      accepted accounting principles. You should not consider FFO or FAD to be
      alternatives to net income as reliable measures of the company's operating
      performance; nor should you consider FFO or FAD to be alternatives to cash
      flows from operating, investing or financing activities (as defined by
      generally accepted accounting principals) as measures of liquidity.

      Funds from operations and funds available for distribution do not measure
      whether cash flow is sufficient to fund all of our cash needs, including
      principal amortization, capital improvements and distributions to
      shareholders. FFO and FAD do not represent cash flows from operating,
      investing or financing activities as defined by generally accepted
      accounting principles. Further, FFO and FAD as disclosed by other REITs
      might not be comparable to our calculation of FFO or FAD.

      For a reconciliation of FFO and FAD to net (loss) income before minority
      interest, see "Management's Discussion and Analysis of Financial Condition
      and Results of Operations - Funds From Operations."

(3)   Beginning in 2004, we have presented operating activities in our
      consolidated statements of cash flows using the direct method, which
      provides cash flow amounts corresponding directly to lines in our
      statements of operations. We have adjusted the 2003 and 2002 comparative
      amounts in our

                                       14
<PAGE>

      consolidated statements of cash flows to conform to the 2004 presentation
      by reclassifying the net cash flows related to funding of lender reserves
      for apartment property replacements from operating activities to investing
      activities. This reclassification has no impact on the net change in cash
      and cash equivalents for 2003 and 2002, only in the subtotals for net cash
      provided by operating activities and net cash used in investing
      activities. The net effect on net cash provided by operating activities is
      a decrease of $213,000 in 2003, and an increase of $133,000 in 2002, from
      amounts previously reported.

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

         This Annual Report contains forward-looking statements. You can
identify such statements by the use of forward-looking terminology, such as
"may," "will," "expect," "anticipate," "estimate," "continue" or other similar
words. These statements discuss future expectations, contain projections of
results of operations or of financial condition or state other "forward-looking"
information.

         We cannot guaranty that we will achieve the plans, intentions or
expectations suggested by these forward-looking statements, even though we
believe them to be reasonable. When you consider such forward-looking
statements, you should keep in mind the following important factors that could
cause our actual results to differ materially from those contained in any
forward-looking statement:

o our markets could suffer unexpected increases in the development of apartments
or other rental or competitive housing alternatives;
o our markets could suffer unexpected declines in economic growth or an increase
in unemployment rates;
o general economic conditions could cause the financial condition of a large
number of our tenants to deteriorate;
o we may be unable to lease or re-lease apartments quickly or on as favorable
terms as under existing leases;
o revenues from our third-party apartment property management activities could
decline, or we could incur unexpected costs in performing these activities;
o we may be unable to complete anticipated acquisitions;
o we may have incorrectly assessed the environmental condition of our
properties;
o an unexpected increase in interest rates could cause our debt service costs to
exceed our expectations;
o we may be unable to meet our long-term liquidity requirements on favorable
terms; and
o we could lose key executive officers.

         Given these uncertainties, we caution you not to place undue reliance
on forward-looking statements. We undertake no obligation to revise these
forward-looking statements if future events or circumstances render them
inaccurate.

         You should read this discussion in conjunction with the financial
statements and notes thereto included in this Annual Report.

Overview

         2004 was a year of significant growth for us. During the year we
acquired five apartment communities that increased our apartment holdings by
26%, completed two equity offerings in which we raised approximately $30
million, and consummated seven financing and four refinancing transactions for
various apartment properties. As a result of these activities, we saw
significant increases in revenue, expenses, debt and equity.

                                       15
<PAGE>

         For the year, total revenue increased by $8.2 million (19.2%) over
2003. This increase was attributable to an $8.3 million (22.2%) increase in
apartment rental income in 2004. While the majority of the increase in apartment
rental income ($6.9 million) was the result of five apartment acquisitions in
2004 and two apartment acquisitions in 2003, significant improvement in
apartment occupancy and rental rates in 2004 made a meaningful contribution
($1.4 million) to the increase. On a same units basis (for the 4,427 units that
we owned throughout 2004 and 2003), apartment rental income increased by 4.0%.
Average economic occupancy for these units was 94.8% in 2004 as compared to
92.9% in 2003, and average monthly revenue per occupied unit was $739 in 2004 as
compared to $728 in 2003.

         The increase in apartment rental revenue was partially offset by a 2.0%
($0.1 million) decline in restaurant rental income due to the sale of two
restaurant properties in 2003. This decline from the sale of the two restaurant
properties actually masked continued improvement in food sales at our restaurant
properties.

         In an attempt to reverse years of declining sales, Hardee's, the
concept at 39 of our 40 restaurant properties, introduced the "Thick-Burger"
product line in 2003. Almost immediately we began to see significant sales
increases with same store sales at our restaurant properties increasing by 2.4%
in 2003. These increases continued into 2004 with same store sales for 2004
improving by 8.5% over 2003 levels. The rent we receive from the restaurants is
the greater of percentage rent (9.875% of annual food sales) or a set minimum
rent (currently $3.8 million per annum). We received the minimum rent in 2004.
For us to receive percentage rent in 2005, same store sales would have to
increase by 1.3%. Given the current state of flux in the fast food industry, we
are uncomfortable making a prediction or relying on the forecasts of others as
to future sales trends for Hardee's. For this reason, we have based our plans
and expectations on continuing to receive the minimum rent in 2005.

         The growth in the size of our apartment portfolio led to significant
growth in total expenses (16.6%) with large increases in apartment operations
(20.1%), apartment administration (29.2%), interest expense (12.4%), and
depreciation (16.1%). Interestingly, on a same units basis, apartment operating
expense for 2004 increased by only 0.3%. It is also interesting to note that as
a percentage of apartment rental income, apartment operating expense decreased
from 41.2% in 2003 to 40.5% in 2004.

         The positive impact of the new apartment communities and improving
apartment operations were reflected in positive corporate operating results. Net
income (after the minority interest in the operating partnership net income or
loss, and before deduction for cumulative preferred dividend) increased to
$1,039,000 in 2004 from $107,000 in 2003, while funds from operations in 2004
increased by 22.9% compared to 2003.

         After several difficult years, we began to see significant improvement
in our apartment operations in mid-2003. This improvement continued throughout
2004 with improving occupancies and improving rental rates. With economic
occupancy for all apartments for 2004 averaging 94.4% it will be difficult for
us to make significant gains in occupancy going forward, therefore our emphasis
will turn to increasing rental rates. While we have some concerns, we are
confident that we are in good position to enjoy continued improvement in our
apartment operations. This confidence is based on a number of factors:

o        Most important among these is our emphasis on middle market apartments.
         We believe there is an increasing need for high quality, modestly
         priced apartments that are well located, extremely well maintained and
         professionally managed. At an average base rental rate of slightly more
         than $700 per month, we provide high quality housing for firefighters,
         policemen, teachers, office workers, store clerks, young couples and an
         increasing number or retirees. Our combination of affordability with
         quality gives us a wide group of potential residents.

o        Our properties are in good markets with excellent locations within
         those markets. We operate in Virginia, North Carolina and South
         Carolina. While, like much of the country, they have displayed some
         weakness over the past few years, we are quite positive about the
         long-term economic and demographic outlook for these states and the
         markets within them in which we operate.

                                       16
<PAGE>

o        Our properties are in very good physical condition. An essential part
         of our strategy is the maintenance of our properties. We do not develop
         new properties, but believe we can deliver a higher quality product at
         a more reasonable price by maintaining existing apartment properties.
         Maintenance is very important to us; not only because we believe it is
         essential to preserving and enhancing the value of our investment, but
         also because we believe it is essential to our marketing efforts to
         attract residents. As a result, our properties are in very good
         physical condition.

o        We are well positioned to compete on price with single-family homes and
         new apartment construction. Our two biggest sources of competition for
         residents are single-family homes and new apartment construction. The
         advent of no down payment single-family home mortgages combined with
         historic low interest rates has posed a challenge for us for the past
         few years. However, significant increases in construction costs and
         rising home mortgage rates appear to be resolving this issue. The same
         is true for new apartment construction, as rising construction costs
         are making it more difficult to build new apartments of similar size,
         quality and location as ours that can be profitably rented in the $700
         per month range.

         All in all, we are optimistic about the long-term outlook for both our
apartment markets and our apartment operations. We do, however, expect early
2005 to continue to be somewhat weak, with an expectation that apartment
performance will strengthen as the year progresses. One area of concern is
interest rates. As we enter 2005, we have $286 million of debt. While we have
attempted to mitigate interest rate risk somewhat by having approximately 75% of
this amount be at fixed rates, the balance carries a floating rate. Based on the
amounts in place at 2004 year-end a 1% rise in average annual rates for the full
year would increase our interest expense by approximately $720,000. In theory,
rising interest rates correlate with improving apartment operating fundamentals,
but whether this will in fact be the case or whether it will match in timing and
amount remains to be seen. We intend to monitor the situation and may adjust the
amount of debt or the allocation of debt between fixed and variable rates as the
year progresses.

Critical Accounting Policies

         Our significant accounting policies are identified and discussed in the
notes to our financial statements included in this Annual Report. Those policies
that may be of particular interest to readers of this Annual Report are further
discussed below.

Capital expenditures and depreciation

         In general, for the 16 apartment properties acquired before 2002, we
compute depreciation using the straight-line method over composite estimated
useful lives of the related assets, generally 40 years for buildings, 20 years
for land improvements, 10 years for fixtures and equipment, and five years for
floor coverings.

         For apartment properties acquired after 2001, we performed detailed
analyses of components of the real estate assets acquired. For these properties,
we assigned estimated useful lives as follows: base building structure, 43-60
years; land improvements, 7-20 years; short-lived building components, 5-20
years; and fixtures, equipment and floor coverings, 5-10 years.

         We generally complete and capitalize acquisition improvements
(expenditures that have been identified at the time the property is acquired,
and which are intended to position the property consistent with our physical
standards) within one to two years of acquisition of the related apartment
property. We capitalize non-recurring expenditures for additions and betterments
to buildings and land improvements. In addition, we generally capitalize
recurring capital expenditures for exterior painting, roofing, and other major
maintenance projects that substantially extend the useful life of existing
assets. For financial reporting purposes, we depreciate these additions and
replacements on a straight-line basis over estimated useful lives of 5-20 years.
We retire replaced assets with a charge to depreciation for any remaining

                                       17
<PAGE>


carrying value. We capitalize all floor covering, appliance, and HVAC
replacements, and depreciate them using a straight-line, group method over
estimated useful lives of 5-10 years.

         Capital expenditures at our apartment communities during 2004 totaled
$5.2 million, including $1.1 million for acquisition improvements, $1.6 million
for additions and betterments, $0.5 million for reconstruction and replacement
of casualty losses, and $1.9 million in recurring capital expenditures.

         We expense ordinary repairs and maintenance costs at apartment
communities. Repairs and maintenance at our apartment communities during 2004
totaled $6.6 million, including $2.5 million in compensation of service staff
and $4.1 million in payments for materials and contracted services.

         Costs of repairs, maintenance, and capital replacements and
improvements at restaurant properties are borne by the lessee.

Impairment of long-lived assets

         In accordance with FAS 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," we periodically review our real estate assets to
determine whether our carrying amount will be recovered from their undiscounted
future operating cash flows. If the carrying value were to be greater than the
undiscounted future operating cash flows, we would recognize an impairment loss
to the extent the carrying amount is not recoverable. Our estimates of the
undiscounted future operating cash flows expected to be generated are based on a
number of assumptions that are subject to economic and market uncertainties,
including, among others, demand for apartment units, competition for tenants,
changes in market rental rates, and costs to operate each property. As these
factors are difficult to predict and are subject to future events that may alter
our assumptions, the undiscounted future operating cash flows that we estimate
in our impairment analyses may not be achieved, and it is possible that we could
be required to recognize impairment losses on our properties at some point in
the future.

Valuation of leases in place at property acquisitions

         We calculate an estimate of the value of leases in place at the dates
of property acquisitions to determine if we should allocate a portion of the
purchase price to an intangible asset for the value of these leases. In
preparing this calculation, we consider the estimated costs to make an apartment
unit rent ready (frequently called turnover costs), the estimated costs and lost
income associated with executing a new lease on an apartment unit, and the
remaining terms of leases in place, and we compare rental rates on leases in
place to our estimate of prevailing market rates in the neighborhood of the
acquired property.

         Based on our analyses for the seven apartment properties that we
acquired in 2004 and 2003, we determined that the net value of leases in place
at the dates of acquisition was insignificant to the acquisition costs, and we
did not record any intangible asset for leases in place. This result is
primarily due to the relatively short-term nature of apartment leases, the
regular pattern of turnover of apartment leases, and the relatively gradual
movement of prevailing rental rates in the respective neighborhoods. We plan to
prepare similar calculations in conjunction with future property acquisitions.

Revenue recognition

         We record rental and other income monthly as it is earned. We record
rental payments that we receive prior to the first of a given month as prepaid
rent. We hold tenant security deposits in trust in bank accounts separate from
operating cash (these amounts are included in other current assets on our
balance sheet), and we record a corresponding liability for security deposits on
our balance sheet.

         We amortize any cash concessions given at the inception of an apartment
lease over the approximate life of the lease, which is generally one year or
less. In general, cash concessions range from $100 to $300 and are taken by
residents during the first two months of the lease.

                                       18
<PAGE>

Results of Operations

2004 compared to 2003

Revenues

         Revenues in 2004 totaled $50.9 million, an increase of 19.2% compared
to 2003. Apartment related income (apartment rental income plus income from
apartment management and investment activities) accounted for 92.5% of our total
revenue in 2004, compared to 90.8% in 2003.

         Apartment rental income in 2004 totaled $45.8 million, an increase of
22.2%, or $8.3 million, compared to 2003. $6.9 million of this increase is
attributable to rental income at seven apartment communities that we acquired
during 2004 and 2003. On a same-units basis (for the 4,427 units that we owned
throughout all of both 2004 and 2003), apartment rental income increased by $1.4
million, or 4.0%, compared to 2003.

         On a same-units basis, average economic occupancy was 94.8% in 2004
compared to 92.9% in 2003, and average monthly revenue per occupied unit was
$739 in 2004 compared to $728 in 2003. In 2004, for all apartment units, average
economic occupancy was 94.4%, and average revenue per occupied unit was $737.

         Restaurant rental income in 2004 totaled $3.8 million, a decline of
2.0% compared to 2003. The decrease in restaurant rental income is due to the
sale of two restaurant properties in 2003. We received the minimum rent
specified in the lease agreement throughout both years. Under our master lease
with Boddie-Noell Enterprises, restaurant rental income payments are the greater
of specific minimum rent or 9.875% of food sales. Minimum rent is set at
approximately $8,000 per month, or $96,000 per year, per restaurant property. We
currently hold 40 restaurant properties under this lease, and minimum rent is
currently set at $319,000 per month, or $3.8 million per year.

         Same-store sales (for the 40 restaurants that were open throughout all
of both 2004 and 2003) increased by 8.5% in 2004 compared to 2003. For the first
time in almost nine years, during the second and third quarters of 2004, sales
at our restaurant properties exceeded the threshold for percentage rent;
however, for the full 12-month period, sales fell 1.3% short of the threshold
for rent exceeding the minimum rent.

         Management fee income in 2004 totaled $0.8 million, a decline of 12.8%
compared to 2003. This decrease is primarily attributable to our acquisitions of
two previously managed properties (one in August 2003, and one in July 2004). We
expect that management fee income will further decline significantly in 2005 as
a result of our anticipated acquisitions of managed properties.

         During 2004, we recorded casualty gains of $269,000 related to fires
that occurred at two apartment communities - in each case, one building incurred
substantial damage. We received insurance proceeds totaling $895,000, against
which we identified and wrote off $626,000 net carrying value of assets
destroyed. Generally accepted accounting principles require us to recognize this
difference as a gain. However, we intend to reinvest all of the insurance
proceeds in replacement assets. We are fully insured for the losses, including
rent continuation insurance which covers 100% of lost rental income.

Expenses

         Total expenses, including non-cash charges for depreciation,
amortization and write-off of unamortized loan costs, totaled $49.8 million in
2004, an increase of 16.6% compared to 2003.

         Apartment operations expense includes only direct costs of on-site
operations. This line item totaled $18.6 million in 2004, an increase of 20.1%,
or $3.1 million, compared to 2003. This increase is primarily attributable to
operating expenses at seven apartment communities that we acquired during 2004

                                       19
<PAGE>

and 2003. On a same-units basis, apartment operations expense increased by only
0.3% in 2004 compared to 2003, reflecting higher costs for compensation, offset
by reductions in insurance, leasing and turnover costs. As a percentage of
apartment rental income, apartment operations expense decreased from 41.2% in
2003 to 40.5% in 2004.

         We incur no operating expenses for restaurant properties because the
triple-net lease arrangement requires the lessee to pay virtually all costs and
expenses associated with the restaurant properties.

         Apartment administration expense (the costs associated with oversight,
accounting, and support of our apartment management activities for both
properties we own and properties we manage) totaled $2.2 million in 2004, an
increase of 29.2% compared to 2003. Corporate administration expense totaled
$2.3 million in 2004, an increase of 5.2% compared to 2003. These increases are
attributable to additional corporate support staff, software and insurance
costs, as well as approximately $100,000 spent in 2004 for development of
compliance documentation required by Section 404 of the Sarbanes-Oxley Act of
2002. Going forward, we expect to incur ongoing expenses for professional
services related to compliance with Section 404 of the Sarbanes-Oxley Act of
2002.

         Interest expense totaled $14.6 million in 2004, an increase of $1.6
million, or 12.4%, compared to 2003. This increase reflects the impact of a net
increase in outstanding debt of $57 million, primarily at fixed rates, in 2004,
related to apartment acquisitions. During 2004, fixed-rate debt increased by $48
million while the average rate on fixed-rate debt outstanding declined from 6.8%
to 6.4%. Variable interest rates increased by 1.3% during the last half of 2004.
Overall, weighted average interest rates were 5.7% in 2004 and 5.9% in 2003.

         Depreciation expense totaled $11.7 million in 2004, an increase of $1.6
million, or 16.1%, compared to 2003. This increase is attributable to the
addition of seven apartment communities during 2004 and 2003 and the impact of
additions and replacements at other apartment communities. We generally assign
those additions and replacements shorter lives than the composite lives we
assigned at the acquisition of the assets to which the additions and
replacements relate.

Net income

         Operating partnership earnings before non-cash charges for
depreciation, amortization and write-off of unamortized loan costs totaled $13.2
million in 2004, an increase of $2.9 million, or 28.0%, compared to 2003. After
including these non-cash charges, the operating partnership net income was
$1,055,000 in 2004, compared to a net loss of $66,000 in 2003.

         Net income (after the minority interest in the operating partnership
net income or loss, and before deduction for cumulative preferred dividend) was
$1,039,000 in 2004, compared to $107,000 in 2003.

         Because the preferred shareholder has priority over common shareholders
for receipt of dividends, we deduct the amount of net income that will be paid
to the preferred shareholder in calculating net income available to common
shareholders. In September 2003, we issued 454,545 shares of cumulative
preferred stock, which doubled the number of preferred shares outstanding. The
cumulative preferred dividend totaled $1,000,000 for 2004, compared to $661,000
for 2003. The dividend on the Series B shares is $1.10 per year per share, or
$1,000,000 for the 909,090 shares currently outstanding.

         Income available to common shareholders in 2004 was $39,000, or $0.01
on a diluted per share basis, compared to loss attributable to common
shareholders in 2003 of $553,000, or $0.09 on a diluted per share basis.

         These favorable comparisons are primarily attributable to the positive
impact of new apartment communities and improvements in apartment operating
results.

                                       20
<PAGE>

2003 compared to 2002

Revenues

         Revenues in 2003 totaled $42.7 million, an increase of 11.8% compared
to 2002. Apartment related income (apartment rental income plus income from
apartment management and investment activities) accounted for 90.8% of our total
revenue in 2003, compared to 89.5% in 2002.

         Apartment rental income in 2003 totaled $37.5 million, an increase of
13.9%, or $4.6 million, compared to 2002. This increase is attributable to
rental income at five apartment communities that we acquired during 2003 and
2002, which offsets a slight decline at other communities. On a same-units basis
(for the 3,681 units that we owned throughout all of both 2003 and 2002),
apartment rental income declined by 0.4% in 2003 compared to 2002.

         On a same-units basis, average economic occupancy was 92.9% in 2003
compared to 92.8% in 2002, and average monthly revenue per occupied unit was
$727 in 2003 compared to $730 in 2002. In 2003, average economic occupancy for
all apartments was 92.8%, and average revenue per occupied unit was $725.

         Restaurant rental income in 2003 totaled $3.9 million, a decline of
2.8% compared to 2002. The decrease in restaurant rental income was due to the
sale of two restaurant properties in 2003. We received the minimum rent
specified in the lease agreement throughout both years. Same-stores sales (for
the 40 restaurants that were open throughout all of both 2003 and 2002)
increased by 2.4% in 2003 compared to 2002.

         Management fee income in 2003 totaled $873,000, a decline of 20.3%
compared to 2002. This decrease is attributable to our acquisition of two
previously managed properties in May 2002, as well as the termination of
management contracts for several smaller properties in the first quarter of
2003.

Expenses

         Total expenses, including non-cash charges for depreciation and
amortization, in 2003 were $42.7 million, an increase of $6.l million, or 16.6%,
compared to 2002.

         Apartment operations expense totaled $15.5 million in 2003, an increase
of 21.9%, or $2.8 million, compared to 2002. This increase was primarily
attributable to the addition of five apartment communities during 2003 and 2002.
On a same-units basis, apartment operations expense increased by 4.2% in 2003
compared to 2002, reflecting higher costs for compensation, contracted services,
and turnover costs. Apartment operations expense in 2003 represented 41.2% of
related apartment rental income, compared to 38.6% in 2002.

         Apartment administration expense totaled $1.7 million in 2003, an
increase of 25.4% compared to 2002. Corporate administration expense totaled
$2.2 million in 2003, an increase of 10.1% compared to 2002. These increases
reflected the impact of additional executive and corporate support staff and
related compensation and increased corporate insurance and software costs.

         Interest expense totaled $13.0 million in 2003, an increase of 13.5%,
or $1.5 million, compared to 2002. This increase reflected the impact of $69
million in new debt related to apartment acquisitions since June 2002, offset by
the effect of lower interest rates on our variable-rate debt. Variable interest
rates declined 0.3% during 2003. Overall, weighted average interest rates were
5.9% in 2003, compared to 6.2% in 2002.

         Depreciation expense totaled $10.0 million in 2003, an increase of
14.2%, or $1.2 million, compared to 2002. This increase was attributable to the
addition of five apartment communities in 2003 and 2002, as well as the impact
of additions and replacements at other apartment communities.

                                       21
<PAGE>

Net income

         Operating partnership earnings before non-cash charges for depreciation
and amortization totaled $10.3 million, a decrease of 3.5% compared to 2002.
After including these non-cash charges, the operating partnership loss in 2003
was $66,000, compared to operating partnership net income of $1.5 million in
2002. The minority interest in operating partnership earnings absorbed $174,000
of the loss in 2003, compared to $279,000 of earnings in 2002.

         Net income (after the minority interest in the operating partnership
net income or loss, and before deduction for cumulative preferred dividend) was
$107,000 in 2003, compared to $1.2 million in 2002.

         In September 2003, we issued 454,545 shares of cumulative preferred
stock, which doubled the number of preferred shares outstanding. The cumulative
preferred dividend totaled $661,000 for 2003, compared to $323,000 for 2002.

         Loss available to common shareholders in 2003 was $553,000, or $.09 on
a diluted per share basis, compared to income available to common shareholders
in 2002 of $925,000, or $0.16 on a diluted per share basis.

         These comparisons reflected the impact of declining margins in
apartment operations in 2003 compared to 2002, and the increased cumulative
preferred dividend in 2003, offset somewhat by the favorable impact of lower
interest rates.

Reclassifications

         In January 2003, we adopted FAS 145, "Rescission of FASB Statements No.
4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections."
FAS 145 generally requires gains and losses on extinguishments of debt to be
classified as income or loss from continuing operations, rather than as
extraordinary items as previously required under FAS 4. We reclassified the
extraordinary item for loss on early extinguishment of debt in 2002 to conform
to FAS 145. While adoption of FAS 145 had no impact on net income, it increased
total expenses, reduced income before extraordinary items and eliminated the
extraordinary item as previously reported in our 2002 Annual Report.

Funds from Operations

         Funds from operations and funds available for distribution are defined
in footnote 2 on page 14. Both of these measures are made at the operating
partnership level. You should read and understand that footnote before reviewing
the following discussion.

         We calculated FFO as follows (all amounts in thousands):
<TABLE>
<CAPTION>

                                                    2004           2003           2002
                                               --------------- -------------- --------------
<S>                                             <C>             <C>           <C>
Income (loss) before minority interest           $   1,055       $     (66)    $    1,527
Less casualty gains                                   (269)              -              -
Cumulative preferred dividend                       (1,000)           (661)          (323)
Depreciation                                        11,660          10,040          8,794
                                               --------------- -------------- --------------
Funds from operations                            $  11,447       $   9,313     $    9,998
                                               =============== ============== ==============
</TABLE>

                                       22
<PAGE>

         A reconciliation of FFO to FAD follows (all amounts in thousands):
<TABLE>
<CAPTION>

                                                           2004           2003           2002
                                                      --------------- -------------- --------------
<S>                                                    <C>             <C>           <C>
Funds from operations                                   $  11,447       $   9,313     $    9,998
Amortization of loan costs                                    375             322            256
Write-off of unamortized loan costs at refinance               85               -             95
Recurring capital expenditures                             (1,918)         (1,731)        (1,484)
                                                      --------------- -------------- --------------
Funds available for distribution                        $   9,988       $   7,904     $    8,865
                                                      =============== ============== ==============
</TABLE>

         A further reconciliation of FAD to net cash provided by operating
activities follows (all amounts in thousands):
<TABLE>
<CAPTION>

                                                          2004           2003           2002
                                                     --------------- -------------- --------------
<S>                                                   <C>             <C>            <C>
Funds available for distribution                       $   9,988       $   7,904      $   8,865
Add casualty losses charged to operations                     14               -              -
Cumulative preferred dividend                              1,000             661            323
Recurring capital expenditures                             1,918           1,731          1,484
Amortization of deferred interest defeasance                (105)           (228)          (167)
Changes in operating assets and liabilities                 (138)           (472)          (388)
                                                     --------------- -------------- --------------
Net cash provided by operating activities              $  12,677       $   9,594      $  10,118
                                                     =============== ============== ==============
</TABLE>

         Other information about our historical cash flows follows (all amounts
in thousands):
<TABLE>
<CAPTION>

                                                                     2004           2003           2002
                                                                --------------- -------------- --------------
<S>                                                              <C>             <C>           <C>
Net cash provided by (used in)
   Operating activities                                           $  12,677       $   9,594     $   10,118
   Investing activities                                             (52,848)        (25,275)       (32,669)
   Financing activities                                              40,123          15,361         22,018

Dividends and distributions paid to
   Preferred shareholder                                          $   1,000       $     537     $      200
   Common shareholders                                                7,551           5,859          7,163
   Minority unitholders in operating partnership                      1,847           1,845          2,171

Scheduled debt principal payments                                 $   1,378       $   1,172     $      417

Non-recurring capital expenditures
   Acquisition improvements and replacements                      $   1,104       $   1,053     $      860
   Apartment property additions and betterments                       1,613             565            387
   Reconstruction and replacement of casualty losses                    526               -              -

Weighted average Preferred B shares outstanding                         909             601            293
Weighted average common shares outstanding                            7,617           5,868          5,787
Weighted average operating partnership
   minority units outstanding                                         1,856           1,843          1,786
</TABLE>

         Funds from operations in 2004 totaled $11.5 million, an increase of
22.9% compared to 2003. Funds from operations in 2003 totaled $9.3 million, a
decrease of 6.9% compared to $10.0 million in 2002. These comparisons reflect
the positive impact of new apartment communities and improved margins in
apartment operations in 2004, unlike the declining margins in apartment
operations in 2003 as compared to 2002.

                                       23
<PAGE>

         Funds available for distribution totaled $9.9 million in 2004, an
increase of 26.4% compared to 2003. Funds available for distribution totaled
$7.9 million in 2003, a decrease of 10.8% compared to $8.9 million in 2002. The
variance in comparison of FAD and FFO reflects the impact of recurring capital
expenditures for operating replacements and major capital replacements at our
older communities. Recurring capital expenditures averaged $354 per apartment
unit in 2004, $374 per apartment unit in 2003, and $369 per apartment unit in
2002.

Capital Resources and Liquidity

Capital Resources

         We intend to pursue our growth strategy through the utilization of our
flexible capital structure. This may include the issuance of operating
partnership units, common stock and/or preferred stock, additional debt, and
joint venture investments. We may use our lines of credit or variable- and
fixed-rate, long-term debt to acquire and refinance apartment communities.

Long-term Debt

         All of our properties are encumbered by or serve as collateral for
debt. As of December 31, 2004, total long-term debt was $286.4 million,
including $215.6 million at effective fixed interest rates ranging from 5.0% to
8.6%, and $70.8 million at variable rates indexed on 30-day LIBOR rates. The
weighted average interest rate on debt outstanding at December 31, 2004, was
5.9%, compared to 5.8% at December 31, 2003.

         During 2004, we issued $58 million in four new fixed-rate notes payable
at effective rates ranging from 5.0% to 5.7%, and retired a fixed-rate note
payable at 8.5%. As a result of these transactions, the weighted average rate on
our fixed-rate notes payable declined from 6.8% at the end of 2003 to 6.4% at
the end of 2004.

         Also during 2004, we issued $34 million in new variable-rates notes,
retired one $14 million variable-rate note, and reduced our variable-rate line
of credit by $10 million, for a net increase in variable-rate notes payable of
$10 million. The weighted average rate on our variable-rate notes payable
increased from 2.9% at the end of 2003 to 4.2% at the end of 2004, primarily as
a result of increases in variable rates during the last half of 2004. At our
level of variable-rate debt, a 1% fluctuation in variable interest rates would
increase or decrease our annual interest expense by $720,000.

         In June 2004, we modified our revolving line of credit with a bank
secured by the Latitudes Apartments to increase the maximum loan amount to $30.0
million, extend the term of the loan through November 2007, and reduce the
variable interest rate on outstanding amounts to 30-day LIBOR plus 1.65%. We
currently have $19 million available for draw under this line of credit.

         A summary of scheduled principal payments on long-term debt is included
in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, and the
notes to the financial statements in this Annual Report. Significant scheduled
balloon payments include maturities of:

o our deed of trust loan for Harris Hill Apartments, due June 2005 ($5.5 million
outstanding at December 31, 2004);
o our line of credit secured by deeds of trust and assignments of rents of our
restaurant properties, due January 2006 ($16.3 million outstanding at December
31, 2004);
o our revolving line of credit secured by a deed of trust and assignment of
rents of Latitudes Apartments, due November 2007 (up to $30.0 million, $10.2
million outstanding at December 31, 2004);
o deed of trust loans for six apartment communities due in 2007 totaling $57.8
million;

                                       24
<PAGE>

o deed of trust loans for five apartment communities due in 2008 totaling $36.5
million; and
o deed of trust loans for five apartment communities due in 2009 totaling $52.5
million.

         The deed of trust loan for Harris Hill Apartments expires in June 2005.
Based on our estimate of the underlying value of the property, we expect to
refinance this loan at a lower rate than the 8.55% loan currently in place.

Capital Stock and Operating Partnership Units

         At December 31, 2004, we had 8.7 million common shares and 0.9 million
preferred shares outstanding. In addition, there were 1.8 million operating
partnership minority common units outstanding.

         During 2004, we issued 2.6 million new common shares, through two
placements, to a number of institutional investors and mutual funds, for net
proceeds of $30.0 million. We also issued 66,000 common shares through our
Dividend Reinvestment and Stock Purchase Plan for proceeds of $0.8 million, and
60,000 common shares through our employee Stock Option and Incentive Plan for
net proceeds of $0.7 million. We applied these proceeds to acquire apartment
properties and reduce our operating line of credit. In addition, we issued
25,000 common shares in non-cash transactions to redeem a like number of
operating partnership minority units.

         In addition, during 2004 the operating partnership issued 49,000 common
units in conjunction with acquisitions of apartment properties. All of the
operating partnership units held by minority interest owners were issued in 1997
through 2004 in conjunction with acquisitions of apartment communities. Holders
of operating partnership units generally are able to redeem their units for cash
or, at our option, for shares of our common stock on a one-for-one basis after
one year from issuance.

Cash Flows and Liquidity

         Net cash flows from operating activities totaled $12.7 million in 2004,
$9.6 million in 2003, and $10.1 million in 2002. The increase in cash flows from
operating activities in 2004 is primarily attributable to the positive impact of
new apartment communities in 2003 and 2004 and improvements in apartment
operating results. Investing and financing activities focused primarily on
apartment acquisitions and capital expenditures at apartment communities, along
with payments of dividends and distributions. During the three-year period, we
acquired a total of ten apartment communities - five in 2004, two in 2003, and
three in 2002.

         We paid dividends to common shareholders of $0.25 per share per quarter
in each quarter of 2004 and 2003, and $0.31 per share per quarter in each
quarter of 2002. Our payout ratio (the ratio of common dividends plus
distributions paid, divided by operating partnership funds from operations) was
82.1% in 2004, 82.5% in 2003, and 93.4% in 2002. We intend to pay dividends
quarterly, expect that these dividends will substantially exceed the 90%
distribution requirement for REITs, and anticipate that all dividends will be
paid from current funds from operations.

         We generally expect to meet our short-term liquidity requirements
through net cash provided by operations and utilization of credit facilities. We
believe that net cash provided by operations is, and will continue to be,
adequate to meet the REIT operating requirements in both the short- and the long
term. We anticipate funding our future acquisition activities primarily by using
short-term credit facilities as an interim measure, to be replaced by funds from
equity offerings, long-term debt, or joint venture investments. We expect to
meet our long-term liquidity requirements, such as scheduled debt maturities and
repayment of short-term financing of possible property acquisitions, through
long-term secured and unsecured borrowings and the issuance of debt securities
or additional equity securities. We believe we have sufficient resources to meet
our short-term liquidity requirements.

         We received 7.5% of our revenue in 2004, 9.2% of our revenue in 2003,
and 10.5% of our revenue in 2002, from rent received from Boddie-Noell
Enterprises for the use of our restaurant properties. In

                                       25
<PAGE>

addition, Enterprises is responsible for all of the costs associated with the
maintenance and operations of these properties. Over time, we expect that
restaurant rental income will continue to represent a decreasing percentage of
our total revenue.

         Enterprises is a privately owned company with total assets exceeding
$240 million and net equity exceeding $90 million. Its principal line of
business is the operation of 317 Hardee's restaurants. In addition to its
Hardee's operations, Enterprises is the owner of Texas Steakhouse and Saloon, a
casual dining concept with 29 restaurants; Cafe Carolina, a cafe bakery/fast
casual dining concept with seven restaurants; and BBQ and Ribs, a fast-food
barbeque concept with two restaurants. Enterprises also operates four Moe's
Southwestern Grills. In addition to its restaurant operations, Enterprises
conducts extensive real estate investment and development activities through BNE
Land and Development. These activities involve a full range of property types,
including land, commercial, retail, office, apartment and single-family
properties. We have had extensive discussions with management of Enterprises and
have reviewed their financial statements, cash flow analysis, restaurant
contribution analysis, sales trend analysis and forecasts. We believe that
Enterprises will have sufficient liquidity and capital resources to meet its
obligations under the master lease as well as its general corporate operating
needs.

Contractual obligations

         In December 2004, we entered into agreements to acquire a portfolio of
four apartment communities containing a total of 1,086 apartment units. The
aggregate purchase price for the properties will be approximately $51.8 million,
and consists of the assumption or refinancing of up to $43.2 million of debt on
the properties, with the remaining amount (estimated at $8.6 million) to be paid
in operating partnership units. We expect to complete these acquisitions by the
end of March 2005. We currently manage these apartment communities on a contract
basis.

         Our other contractual obligations as of December 31, 2004, are
summarized as follows (all amounts in thousands):
<TABLE>
<CAPTION>

                                                                 Payments due by period
                                                            Less                                     More
                                                           than 1         1 - 3        3 - 5        than 5
                                              Total         year          years        years        years
                                           ------------ ------------- ------------ ------------- ------------
<S>                                         <C>            <C>          <C>         <C>            <C>
Long-term debt obligations                   $286,425       $7,869       $87,325     $102,007       $89,224
Operating lease - corporate office                630          180           360           90             -
Purchase obligation - reconstruction of
   apartment building at Latitudes                705          705             -            -             -
                                           ------------ ------------- ------------ ------------- ------------
   Total                                     $287,760       $8,754       $87,685     $102,097       $89,224
                                           ============ ============= ============ ============= ============
</TABLE>

Off balance sheet arrangements

         In January 2005, we acquired Boddie Investment Company ("BIC") through
a merger. We issued 508,578 shares of common stock, and cancelled 72,399 shares
of common stock that BIC held immediately before the merger. The value of this
transaction was $8.2 million. As a result of this acquisition, we have assumed
the role of general partner and acquired certain economic interests in three
limited partnerships (50% interest in Marina Shores Associates One Limited
Partnership, 1% interest in The Villages of Chapel Hill Limited Partnership, and
1% interest in The Villages of Chapel Hill - Phase 5 Limited Partnership). Prior
to this acquisition, we managed the apartment communities owned by these
partnerships on a contract basis; we will continue to manage these properties.

         We expect that, going forward, we will include the accounts of Marina
Shores Apartments in our consolidated financial statements, and that Marina
Shores will generate revenues, expenses and cash flows commensurate with the
properties in which we own 100% interest. We have not completed the detailed


                                       26
<PAGE>

analyses necessary to determine whether we will consolidate The Villages of
Chapel Hill and The Villages of Chapel Hill - Phase 5; however, we do not expect
that our 1% interest in these partnerships will have a significant impact on our
financial condition or operating results.

Inflation

         We do not believe that inflation poses a material risk to the company.
The leases at our apartment properties are short term in nature. None are longer
than two years. The restaurant properties are leased on a triple-net basis,
which places the risk of rising operating and maintenance costs on the lessee.

Environmental Matters

         Phase I environmental studies performed on the apartment communities
when we acquired each of them did not identify any problems that we believe
would have a material adverse effect on our results of operations, liquidity or
capital resources. Environmental transaction screens for each of the restaurant
properties in 1995 did not indicate existence of any environmental problems that
warranted further investigation. Enterprises has indemnified us under the master
lease for environmental problems associated with the restaurant properties.

Additional Information

         We provide the following information to analysts and other members of
the financial community for use in their detailed analysis. This information has
not been included in our Annual Report to Shareholders.

         A summary of capital expenditures, in aggregate and per apartment unit,
follows:
<TABLE>
<CAPTION>

                                               2004                   2003                   2002
                                        Total     Per unit      Total    Per unit      Total    Per unit
                                      ---------- ------------ --------- ------------ --------- ------------
                                       (000's)                (000's)                 (000's)
<S>                                     <C>          <C>       <C>         <C>       <C>          <C>
Recurring capital expenditures:
  Floor coverings                        $  775       $143      $  772      $167      $  593       $148
  Appliances/HVAC                           385         71         256        55         212         53
  Exterior paint                              -          -         183        39         182         45
  Computer/support equipment                  4          1          85        18         102         25
  Other                                     754        139         436        94         396         98
                                      ----------- ----------- ---------- ----------- ---------- -----------
                                         $1,918       $354      $1,731      $374      $1,484       $369
                                      =========== =========== ========== =========== ========== ===========

Non-recurring capital
  expenditures:
  Acquisition improvements               $1,104                 $1,053                $  861
  Additions and betterments               1,541                    508                   303
  Replacements of casualty losses           526                      -                     -
  Computer/support equipment                 72                     57                    84
                                      -----------             ----------             ----------
                                         $3,243                 $1,619                $1,248
                                      ===========             ==========             ==========
</TABLE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         A summary of long-term debt as of December 31, 2004 and 2003 is
included in the notes to the financial statements in this Annual Report. At
December 31, 2004, long-term debt totaled $286.4 million, including $215.6
million notes payable at fixed interest rates ranging from 5.0% to 8.6%, and
$70.8 million at variable rates indexed on 30-day LIBOR rates. The weighted
average interest rate on debt outstanding was 5.9% at December 31, 2004, 5.8% at
December 31, 2003, and 6.1% at December 31, 2002. At our

                                       27
<PAGE>

current level of variable-rate debt, a 1% change in variable interest rates
would increase or decrease our annual interest expense by $720,000.

         The table below provides information about our long-term debt
instruments and presents expected principal maturities and related weighted
average interest rates on those instruments (all amounts in thousands):
<TABLE>
<CAPTION>

                                                       Expected maturity dates
                             2005        2006        2007        2008        2009       Later       Total
                          ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S>                       <C>         <C>         <C>         <C>         <C>         <C>        <C>
Fixed rate notes           $ 6,784     $ 1,597     $49,536     $38,453     $29,996     $89,224    $215,590
  Average interest rate       8.12%       6.08%       6.93%       6.55%       5.28%       6.29%       6.40%

Variable rate notes        $ 1,085     $15,745     $20,446     $   774     $32,784     $     -     $70,835
  Average interest rate       4.27%       4.26%       4.21%       4.22%       4.22%                   4.23%
</TABLE>

         We estimate the fair value of fixed-rate and variable-rate notes using
discounted cash flow analysis, based on our current incremental borrowing rates
for similar types of borrowing arrangements. The fair value of our notes payable
at December 31, 2004, totaled $296 million.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements and supplementary data are listed under Item
15(a) and filed as part of this Annual Report on the pages indicated.

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

         None.

ITEM 9A.  CONTROLS AND PROCEDURES

Management's Conclusions Regarding the Effectiveness of Disclosure Controls and
Procedures

         We have performed a review and evaluation, under the supervision and
with the participation of management, including the Chief Executive Officer, the
Chief Financial Officer and the Chief Accounting Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures as of the
end of the period covered by this annual report on Form 10-K. Based on our
review and evaluation, the Chief Executive Officer and the Chief Financial
Officer have concluded that, as of December 31, 2004, our disclosure controls
and procedures, as designed and implemented, were effective to provide
reasonable assurance that information required to be disclosed in the reports we
file and submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported as and when required, including reasonable
assurance that information required to be disclosed by us in such reports is
accumulated and communicated to our management, including our Chief Executive
Officer and our Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosures.

Management Report on Internal Control Over Financial Reporting

         Management of the company is responsible for establishing and
maintaining adequate internal control over financial reporting. Internal control
over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated
under the Exchange Act as a process designed by, or under the supervision of,
the company's principal executive and principal financial officers and effected
by the company's Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, and includes those policies and
procedures that:

                                       28
<PAGE>

o        pertain to the maintenance of records that in reasonable detail
         accurately and fairly reflect the transactions and dispositions of
         the company's assets;

o        provide reasonable assurance that transactions are recorded as
         necessary to permit preparation of financial statements in accordance
         with generally accepted accounting principles, and that receipts and
         expenditures of the company are being made only in accordance with
         authorizations of management and Directors of the company; and

o        provide reasonable assurance regarding prevention or timely detection
         of unauthorized acquisition, use or disposition of the company's assets
         that could have a material effect on the financial statements.

         There are inherent limitations to the effectiveness of any system of
internal controls, including the possibility of human error and the
circumvention or overriding of controls and procedures. Accordingly, even
effective internal control over financial reporting may not prevent or detect
misstatements. Further, projections of any evaluation of effectiveness to future
periods are subject to the risks that controls may become inadequate because of
changes in conditions or that the degree of compliance with policies or
procedures may deteriorate.

         Management has assessed the effectiveness of our internal control over
financial reporting as of December 31, 2004. In making this assessment,
management used criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on our assessment, the company's management believes that, as of December
31, 2004, the company's internal control over financial reporting was effective
based on those criteria.

         Our independent auditors, Ernst & Young, have issued an audit report on
management's assessment of the company's internal control over financial
reporting, a copy of which is included herein.

Changes in Internal Control Over Financial Reporting

         There have been no significant changes in our internal controls or in
other factors that could significantly affect our internal controls subsequent
to the date of their evaluation. There were no material weaknesses identified in
the course of our review and evaluation.


             Report of Independent Registered Public Accounting Firm


Board of Directors and Shareholders
BNP Residential Properties, Inc.

We have audited management's assessment, included in the accompanying Management
Report on Internal Control Over Financial Reporting, that BNP Residential
Properties, Inc. maintained effective internal control over financial reporting
as of December 31, 2004, based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). BNP Residential
Properties Inc.'s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an
opinion on management's assessment and an opinion on the effectiveness of the
company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable

                                       29
<PAGE>

assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, evaluating
management's assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that BNP Residential Properties, Inc.
maintained effective internal control over financial reporting as of December
31, 2004, is fairly stated, in all material respects, based on the COSO
criteria. Also, in our opinion, BNP Residential Properties, Inc. maintained, in
all material respects, effective internal control over financial reporting as of
December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
BNP Residential Properties, Inc. as of December 31, 2004 and 2003, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 2004 of BNP
Residential Properties, Inc. and our report dated March 2, 2005 expressed an
unqualified opinion thereon.


                                            /s/ Ernst & Young LLP

Greenville, South Carolina
March 2, 2005

ITEM 9B.  OTHER INFORMATION

         None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The current directors hold office for the terms described below or
until their successors are elected and qualified. The current members of our
Board of Directors are identified in the following table, followed by
biographical information on each member.

                                       30
<PAGE>
<TABLE>
<CAPTION>

           Name              Age        Position                                           Director Since
---------------------------- ---------- ------------------------------------------------ -------------------
<S>                             <C>    <C>                                              <C>
Directors serving until the 2005 annual meeting:
D. Scott Wilkerson               47     Director, President, Chief Executive Officer     December 1997
Paul G. Chrysson                 50     Director                                         December 1997
Peter J. Weidhorn                57     Series B Director (1)                            December 2001

Directors serving until the 2006 annual meeting:
W. Michael Gilley                49     Director                                         December 1997

Directors serving until the 2007 annual meeting:
Philip S. Payne                  53     Chairman, Chief Financial Officer                December 1997
Stephen R. Blank                 59     Director                                         May 1999

<FN>
(1)  The terms of the Certificate of Designation establishing the rights and
     preferences of the Series B Convertible Preferred Stock provide that the
     holders of a majority in interest of the Series B Convertible Preferred
     Stock can elect one director, to whom we refer as the "Series B Director."
</FN>
</TABLE>

Philip S. Payne - Chairman of the Board of Directors, Chief Financial Officer.
Mr. Payne joined BT Venture Corporation, which was subsequently purchased by the
company, in 1990 as Vice President of Capital Markets Activities and became
Executive Vice President and Chief Financial Officer in January 1993. He was
named Treasurer in April 1995 and a Director in December 1997. In January 2004,
Mr. Payne was named Chairman of the Board of Directors and continues in his role
as Chief Financial Officer. From 1987 to 1990, he was a principal in Payne
Knowles Investment Group, a financial planning firm. From 1983 to 1987, he was a
registered representative with Legg Mason Wood Walker. From 1978 to 1983, Mr.
Payne practiced law, and he currently maintains his license to practice law in
Virginia. He received a BS degree from the College of William and Mary in 1973
and a JD degree in 1978 from the same institution. He is a member of the board
of directors of the National Multi Housing Council and is a member of the Urban
Land Institute (Multi Family Council - Gold). In addition, he is a member of the
board of directors of Ashford Hospitality Trust, a REIT focused on the
hospitality industry, and serves as chairman of its audit committee.

D. Scott Wilkerson - Director, President, Chief Executive Officer. Mr. Wilkerson
joined BT Venture Corporation, which was subsequently purchased by the company,
in 1987 and served in various officer-level positions, including Vice President
of Administration and Finance and Vice President for Acquisitions and
Development before becoming President in January 1994. He was named Chief
Executive Officer in April 1995 and a Director in December 1997. From 1980 to
1986, Mr. Wilkerson was with Arthur Andersen LLP in Charlotte, North Carolina,
serving as tax manager from 1985 to 1986. His specialization was in the
representation of real estate investors, developers and management companies.
Mr. Wilkerson received a BS degree in accounting from the University of North
Carolina at Charlotte in 1980. He is a certified public accountant and licensed
real estate broker. He serves on the boards of directors of the National Multi
Housing Council and the National Apartment Association. He is President of the
Apartment Association of North Carolina and is a past president of the Charlotte
Apartment Association. He is active in various professional, civic and
charitable activities.

Stephen R. Blank - Director. Mr. Blank is a Senior Fellow, Finance, with the
Urban Land Institute, and an Adjunct Professor at the Columbia University
Graduate School of Business. From 1993 to 1998, he was the Managing Director for
Real Estate Investment Banking with CIBC Oppenheimer Corp. He is an independent
trustee of Ramco-Gershenson Properties Trust and Atlantic Realty Trust, and
serves on the boards of directors of WestCoast Hospitality Corporation and MFA
Mortgage Investments, Inc. In addition, he serves as a member of the board of
advisors of Paloma, LLC, the principal investor in a private multifamily real
estate investment trust. Mr. Blank serves as the chair of the audit committees
for both Ramco-Gershenson Properties Trust and MFA Mortgage Investments, Inc. He
has over 20 years experience as a senior real estate investment banking officer,
advising and evaluating a wide array of real estate companies, including
publicly reporting companies.

                                       31
<PAGE>

Paul G. Chrysson - Director. Mr. Chrysson is President of C.B. Development
Company, Inc., a developer of single-family and multi-family residential
properties. Mr. Chrysson is a member of the Board of Advisors of Wachovia Bank
(Forsyth County). He is a former director of Triad Bank and United Carolina Bank
(North Carolina) and has served on the boards of various charitable
organizations. He has been a licensed real estate broker since 1974 and has been
actively involved in construction since 1978.

W. Michael Gilley - Director. Mr. Gilley is a private real estate investor and
developer of single-family and multi-family residential properties. From January
1995 to January 1997, he was Executive Vice President of Greenbriar Corporation.
He also served on their board of directors from September 1994 to September
1996. He has been a licensed real estate broker since 1984.

Peter J. Weidhorn - Series B Director. Mr. Weidhorn is a consultant and private
real estate investor in the multi-family housing market. From 1998 to 2000, he
was Chairman of the Board, President and Director of WNY Group, Inc., a real
estate investment trust that owned and operated 8,000 apartment units throughout
New Jersey, Pennsylvania, Delaware and Maryland prior to its sale to the Kushner
Companies. From 1981 to 1998, he was President of WNY Management Corp. Mr.
Weidhorn serves on the boards of directors of Monmouth Real Estate Investment
Corporation and The Community Development Trust, and is a past president of the
New Jersey Apartment Association. Mr. Weidhorn currently serves as the chair of
the audit committee of Monmouth Real Estate Investment Corporation and as a
member of the audit committee of The Community Development Trust. He has over 30
years of experience in the management, acquisition, and financing of commercial
real estate. Mr. Weidhorn is a certified public accountant (inactive). He is
active in various professional, civic and charitable activities.

Information about our executive officers is included in Part I, Item X.
Executive Officers of the Registrant, in this Annual Report.

Audit Committee Financial Experts

         The members of our Audit Committee are Messrs. Blank, Gilley, and
Weidhorn. Our Board of Directors has determined that Messrs. Blank and Weidhorn
qualify as "audit committee financial experts" as defined by SEC regulations.
All three members are considered "independent" as defined by SEC regulations and
rules of the American Stock Exchange, and "financially literate" under the rules
of the American Stock Exchange. Messrs. Blank's and Weidhorn's relevant
experience is described above in the biographical information for each.

Section 16(a) Beneficial Ownership Reporting Compliance

         Based solely on a review of the copies of the forms in its possession,
and on written representations from certain reporting persons, the company
believes that during 2004 all of its executive officers and directors filed the
reports required under Section 16(a) on a timely basis.

Code of Ethics

         Our Board of Directors has adopted a Code of Conduct and Business
Ethics that is applicable to all directors, officers and employees of the
company. You may view this document at our Internet website at
www.bnp-residential.com. You may obtain a copy of this document free of charge
by mailing a written request to: Investor Relations, BNP Residential Properties,
Inc., 301 South College Street, Suite 3850, Charlotte, NC 28202, or by sending
an email request to: investor.relations@bnp-residential.com.

                                       32
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION

Executive Compensation

         The following tables provide information regarding the annual and
long-term compensation of our chief executive officer, and the other most highly
paid executive officers whose total salary and bonus exceeded $100,000 in 2004.
We refer to them as the "named executive officers."
<TABLE>
<CAPTION>

                                                                           Annual Compensation
------------------------------------------------------------------------------------------------------------
           Name and Principal Position                Year        Salary        Bonus        Other (1)
-----------------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>           <C>            <C>
D. Scott Wilkerson, President,                        2004         $228,750      $11,250        $73,249
   Chief Executive Officer                            2003          225,000            -              -
                                                      2002          200,000       25,000              -

Philip S. Payne, Chairman of the Board of             2004         $228,750      $11,250        $79,956
   Directors, Chief Financial Officer                 2003          225,000            -              -
                                                      2002          200,000       25,000              -

Eric S. Rohm, Vice President, Secretary,              2004         $145,000      $15,000              -
   General Counsel                                    2003          140,000            -              -

Pamela B. Bruno, Vice President, Treasurer,           2004         $145,000      $15,000        $17,395
   Chief Accounting Officer, Assistant Secretary      2003          136,250       18,750              -
                                                      2002          125,000            -              -

<FN>
(1)  Amounts for 2004 include the value realized in exercise of stock options,
     included in the table below. No amounts have been included for 2003 and
     2002 because perquisites received by the named executive officers were less
     than 10% of the total of their annual salary and bonus amounts.
</FN>
</TABLE>

         The following table provides information regarding exercises of stock
options by named executive officers during 2004 as well as the value of
unexercised stock options held by named executive officers as of December 31,
2004. No options were granted during the year ended December 31, 2004.
<TABLE>
<CAPTION>

                                                      Number of Securities
                        Number of                    Underlying Unexercised       Value of Unexercised
                          Shares        Value              Options at           In-the-Money Options at
                       Acquired in   Realized in        Fiscal Year End             Fiscal Year End
         Name            Exercise      Exercise    Exercisable/Unexercisable   Exercisable/Unexercisable
-----------------------------------------------------------------------------------------------------------
<S>                       <C>          <C>           <C>                <C>      <C>                 <C>
D. Scott Wilkerson         43,844       $59,189       100,000             -       $341,250             -

Philip S. Payne            50,000        67,500       100,000             -        341,250             -

Pamela B. Bruno             6,000         8,100        30,000             -         98,000             -

</TABLE>

         We do not have a long-term incentive plan in place other than our Stock
Option and Incentive Plan described in Item 12 below.

Compensation of Directors

         During 2004, we paid directors' fees to each director who is not an
executive officer of the company. During the year ended December 31, 2004,
Messrs. Blank, Chrysson, Gilley, and Weidhorn were

                                       33
<PAGE>

each paid annual retainers of $12,000 plus fees totaling $5,650 each for
participation in board meetings. In addition, Messrs. Blank, Gilley and Weidhorn
each received $200 for participation in Audit Committee meetings. Messrs.
Wilkerson and Payne did not receive any compensation for their service as
directors.

Employment Contracts and Termination of Employment and Change-in-Control
Arrangements

         In July 1997, we entered into substantially identical employment
agreements with D. Scott Wilkerson (President and Chief Executive Officer) and
Philip S. Payne (Chief Financial Officer). The term of the agreements is four
years, subject to automatic annual renewal for additional one-year periods
extending the term to a maximum of ten years. The agreements provide for initial
annual base salaries of $139,920, annual discretionary bonuses as determined by
the Board of Directors and participation in an incentive compensation plan,
along with specified death and disability benefits. The agreements provide for
severance payments equal to the then current base salary for the remaining term
of the contract (excluding any unexercised renewal periods) in the event of
termination without cause. In the event of a change in control of the company,
the agreements provide for payments of three times base salary then in effect
and three times average discretionary bonus and annual bonus over the prior
three fiscal years. In addition, the agreements provide for a lump sum cash
payment of the benefit the executive would otherwise have received had all stock
options and other stock based compensation been fully vested, been exercised and
become due and payable.

         In July 1997, we entered into an employment agreement with Pamela B.
Bruno (Vice President, Treasurer, Chief Accounting Officer and Assistant
Secretary). The two-year agreement (with automatic annual renewal periods) is
substantially identical to the agreements signed by Messrs. Wilkerson and Payne,
except that this agreement provides for an initial annual base salary of $90,000
and limits severance payments to no more than the greater of the then-remaining
term of the agreement or one year's total compensation.

         In December 2002, we entered into an employment agreement with Eric S.
Rohm (Vice President, Secretary and General Counsel). The two-year agreement
(with automatic annual renewal periods) is substantially identical to the
agreement signed by Ms. Bruno, except that this agreement provides for an
initial annual base salary of $140,000.

Compensation Committee Interlocks and Insider Participation

     The members of our Compensation Committee are Messrs. Blank, Chrysson and
Weidhorn. All three members are considered "independent" as defined by SEC
regulations and rules of the American Stock Exchange. Mr. Weidhorn is identified
in Item 13. Certain Relationships and Related Transactions in our discussion of
"BNP Residential Properties, Inc. and Preferred Investment I, LLC." Mr. Chrysson
is identified in Item 13 in our discussion of "BNP Residential Properties, Inc.
and the Chrysson Parties."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Equity Compensation Plan

         We have reserved 470,000 shares of the company's common stock for
issuance under our employee Stock Option and Incentive Plan. Options have been
granted to employees at prices equal to the fair market value of the stock on
the dates the options were granted or repriced. Options are generally
exercisable in four annual installments beginning one year after the date of
grant, and expire ten years after the date of grant.

         The following table provides summary information about securities to be
issued under our equity compensation plan. More detailed information is provided
in the notes to our financial statements included in this Annual Report.

                                       34
<PAGE>
<TABLE>
<CAPTION>

                                                                                      Number of securities
                              Number of securities to       Weighted average        remaining available for
                              be issued upon exercise       exercise price of           future issuance
                              of outstanding options,     outstanding options,            under equity
       Plan category            warrants and rights        warrants and rights         compensation plans
---------------------------- -------------------------- -------------------------- --------------------------
<S>                                      <C>                         <C>                       <C>
Equity compensation plans
approved by security
holders                                   327,500                     $12.04                    142,656

Equity compensation plans
not approved by security
holders                                         -                       -                             -
                             -------------------------- -------------------------- --------------------------

         Total                            327,500                     $12.04                    142,656
                             ========================== ========================== ==========================
</TABLE>

Security Ownership of Certain Beneficial Owners and Management - Common Stock

         The following table provides certain information regarding beneficial
ownership of common stock as of February 23, 2005, by each person or group known
to be the beneficial owner of more than 5% of the company's common stock.



                                                           Common Shares
                                                         Beneficially Owned
    Name and address of beneficial owner               Number        Percent
------------------------------------------------- ------------- ---------------

B. Mayo Boddie                                         436,038        5.3%
   P. O. Box 1908, Rocky Mount, NC 27802
Kensington Investment Group, Inc.                      457,900        5.0%
   4 Orinda Way, Suite 200C, Orinda, CA 94563
Preferred Investment I, LLC (1)                        909,090        9.1%
   60 Thomas Drive, Manalapan, NJ 07726

(1)  Includes 909,090 shares of Series B Cumulative Convertible Preferred stock
     owned by Preferred Investment I, LLC which is convertible into common
     shares on a one-to-one basis.

         The following table provides certain information regarding beneficial
ownership of common stock as of February 23, 2005, by each of the directors and
named executive officers, and by all directors and officers as a group.

                                                         Common Shares
                                                       Beneficially Owned
        Directors and Officers (1)                 Number           Percent
----------------------------------------------- ---------------- --------------

Philip S. Payne (2)                                   189,570          2.1%
D. Scott Wilkerson (2)                                143,343          1.6%
Stephen R. Blank                                        1,000             *
Paul G. Chrysson (3)                                  267,612          2.9%
W. Michael Gilley (4)                                 265,991          2.8%
Peter J. Weidhorn (5)                                 917,290          9.2%
Eric S. Rohm                                              -0-             *
Pamela B. Bruno (6)                                    40,334             *


                                       35
<PAGE>

                                                         Common Shares
                                                       Beneficially Owned
        Directors and Officers (1)                 Number           Percent
----------------------------------------------- ---------------- --------------
All directors and executive officers
   as a group (8 persons) (7)                       1,825,140         17.0%

* Less than 1 percent.
(1)  Address for each person listed herein is 301 South College Street, Suite
     3850, Charlotte NC 28202.
(2)  Includes exercisable options for 100,000 shares of common stock.
(3)  Includes 250,612 shares issuable (at the company's option) in satisfaction
     of the right to redeem the same number of units owned by Mr. Chrysson in
     the operating partnership.
(4)  Includes 265,991 shares issuable (at the company's option) in satisfaction
     of the right to redeem the same number of units owned by Mr. Gilley in the
     operating partnership.
(5)  Includes 909,090 shares of Series B Cumulative Convertible Preferred stock
     owned by Preferred Investment I, LLC (of which Mr. Weidhorn is the managing
     director) which is convertible into common shares on a one-to-one basis.
(6)  Includes exercisable options for 30,000 shares of common stock.
(7)  Includes exercisable options for 230,000 shares, 909,090 shares issuable
     upon conversion of Series B Cumulative Convertible Preferred stock, and
     516,603 shares issuable (at the company's option) in satisfaction of the
     right to redeem the same number of units in the operating partnership.

Security Ownership of Certain Beneficial Owners and Management - Preferred Stock

         The following table provides certain information regarding beneficial
ownership of Series B Cumulative Convertible Preferred stock as of February 23,
2005. These shares have limited voting rights.



                                                      Series B Preferred Shares
                                                         Beneficially Owned
    Name and address of beneficial owner               Number          Percent
-------------------------------------------------- -------------- --------------

Preferred Investment I, LLC                            909,090         100.0%
      60 Thomas Drive, Manalapan, NJ 07726

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

BNP Residential Properties, Inc. and Preferred Investment I, LLC

         During 2001 through 2003, we issued a total of 909,090 shares of our
Series B Cumulative Convertible Preferred Stock to Preferred Investment I, LLC
for net proceeds of $9.6 million. We describe and discuss these transactions in
the notes to our financial statements.

         Peter J. Weidhorn, the managing member of Preferred Investment I, LLC,
serves as the Series B Director on our Board of Directors.

BNP Residential Properties, Inc. and Boddie-Noell Enterprises, Inc.

         We lease 40 restaurant properties to Boddie-Noell Enterprises, Inc.
("Enterprises") under a master lease on a triple-net basis. We describe and
discuss this relationship in the notes to our financial statements and at Part
II, Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Cash Flows and Liquidity.

                                       36
<PAGE>

         B. Mayo Boddie served on our Board of Directors from the company's
inception in 1987 until May 2004. Mr. Boddie is Chairman of the Board of
Directors and Chief Executive Officer of Enterprises. Mr. Boddie and certain of
his family members, including Nicholas B. Boddie, are the sole owners of
Enterprises.

         Douglas E. Anderson served as Vice President and Secretary of our
company from our inception in 1987 until May 2004. He has been with Enterprises
since 1977 and is currently a director, executive vice president and secretary
of Enterprises. Mr. Anderson is also president of BNE Land and Development
Company, the real estate development division of Enterprises.

BNP Residential Properties, Inc. and Boddie Investment Company

         We provided fee management for three limited partnerships, of which
Boddie Investment Company ("BIC") was the general partner, and the apartment
communities owned by those partnerships, until January 2005. We recorded fee
revenues totaling $409,000 from these limited partnerships in 2004.

         In January 2005, we acquired BIC in exchange for 508,578 shares of our
common stock, valued at $8.2 million, which we issued to Messrs. Boddie and
Boddie. As part of this acquisition, BIC surrendered, and we cancelled, 72,399
shares of our common stock valued at $1.2 million. As a result of this
acquisition, we have assumed the role of general partner and acquired the
economic interests in the three limited partnerships to which we previously
provided fee management services. We will continue to manage the properties
following this acquisition.

         In addition, we are the lender in a participating loan agreement with
The Villages of Chapel Hill Limited Partnership, one of the limited partnerships
identified above. We describe and discuss this relationship in the notes to our
financial statements.

         Messrs. Boddie and Boddie were the sole shareholders and directors of
Boddie Investment Company. Mr. Anderson was vice president and secretary of
Boddie Investment Company.

BNP Residential Properties, Inc. and the Chrysson Parties

         In July 2004, we acquired Savannah Shores Apartments and issued 7,695
operating partnership common units to members of a group that we refer to as the
Chrysson Parties. Prior to this acquisition, we managed this community on a
contract basis. In previous years during 1997 through 2002, we issued 1.5
million operating partnership common units to acquire eight apartment
communities from this group. We describe and discuss this relationship in the
notes to our financial statements.

         Messrs. Chrysson and Gilley, who serve on our Board of Directors, are
members of the Chrysson Parties.

Notes Receivable from Management

         In 1996 through 1999, Messrs. Wilkerson and Payne each borrowed $70,000
on an interest-free basis from the company. The loans are secured by shares of
the company's common stock and are payable in full six months after termination
of employment.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

         Ernst & Young LLP has served as our principal accountant and
independent auditor since October 1996.

                                       37
<PAGE>

         The Board of Directors, upon the recommendation of the Audit Committee,
engaged Ernst & Young LLP to serve as our independent auditors for the fiscal
years ending December 31, 2004 and 2003. The Audit Committee also approves in
advance all engagements of Ernst & Young LLP for audit-related, tax and other
services.

         The following table reflects fees billed by Ernst & Young LLP for
services rendered to the company and its subsidiaries in 2004 and 2003:
<TABLE>
<CAPTION>

                          Nature of Services                                   2004                      2003
----------------------------------------------------------------------- ------------------- -------------------
<S>                                                                           <C>                 <C>
Audit fees -                                                                   $224,000            $117,000
     For audit of our annual financial statements, audit of internal
     control over financial reporting (in 2004), and review of
     financial statements included in our Forms 10-Q

Audit-related fees -                                                            174,000              22,000
     For services related to business acquisitions, accounting
     consultations, SEC registration statements, and audit of the
     company's 401(k) plan

Tax fees -                                                                      115,000             108,000
     For tax compliance, tax advice, and tax planning

All other fees - (none in 2004 or 2003)                                               -                   -
</TABLE>


                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) 1. and 2. Financial Statements and Schedules

         The financial statements and schedules listed below are filed as part
of this Annual Report on the pages indicated.

                   Index to Financial Statements and Schedules
<TABLE>
<CAPTION>
                                                                                                  Page
<S>                                                                                               <C>
BNP Residential Properties, Inc. Consolidated Financial Statements
   Report of Independent Registered Public Accounting Firm                                         42
   Consolidated Balance Sheets as of December 31, 2004 and 2003                                    43
   Consolidated Statements of Operations for the Years Ended                                       44
      December 31, 2004, 2003, and 2002
   Consolidated Statements of Shareholders' Equity for the Years Ended                             45
      December 31, 2004, 2003, and 2002
   Consolidated Statements of Cash Flows for the Years Ended                                       46
      December 31, 2004, 2003, and 2002
   Notes to Consolidated Financial Statements                                                      47

Statements of Revenue and Certain Operating Expenses of Acquired Properties
   Oakwood Raleigh Apartments - For the year ended December 31, 2003, and for
     the unaudited 64 period January 1 through May 11, 2004
   Carriage Club Apartments - For the year ended December 31, 2003, and for the unaudited          67
     period January 1 through June 28, 2004
</TABLE>

                                       38
<PAGE>
<TABLE>
<CAPTION>
                                                                                                  Page
<S>                                                                                               <C>

   Savannah Shores Apartments - For the years ended December 31, 2003 and 2002, and for the        70
     period January 1 through June 30, 2004
   Fairington Apartments - For the year ended December 31, 2003, and for the unaudited             73
     period January 1 through August 4, 2004
   Sterling Park Apartments - (Unaudited) - For the year ended December 31, 2003, and for          76
     the period January 1 through September 29, 2004

Schedules:
   Schedule III - Real Estate and Accumulated Depreciation                                         78
</TABLE>

         The financial statements and schedules are filed as part of this
report. All other schedules are omitted because they are not applicable or the
required information is included in the financial statements or notes thereto.

(a) 3. Exhibits

         The Registrant agrees to furnish a copy of all agreements related to
long-term debt upon request of the Commission.

Exhibit No.

     2.1*       Master Agreement of Merger and Acquisition by and among BNP
                Residential Properties, Inc., BNP Residential Properties Limited
                Partnership, Paul G. Chrysson, James G. Chrysson, W. Michael
                Gilley, Matthew G. Gallins, James D. Yopp, and the partnerships
                and limited liability companies listed therein, dated September
                22, 1997 (filed as Exhibit 2.1 to Registration Statement No.
                333-39803 on Form S-2, December 16, 1997, and incorporated
                herein by reference)
     2.2*       Amendment to Master Agreement of Merger and Acquisition dated
                September 22, 1997, by and among BNP Residential Properties,
                Inc., BNP Residential Properties Limited Partnership, Paul G.
                Chrysson, James G. Chrysson, W. Michael Gilley, Matthew G.
                Gallins, James D. Yopp, and the partnerships and limited
                liability companies listed therein, dated November 3, 1997
                (filed as Exhibit 2.3 to BNP Residential Properties, Inc.
                Current Report on Form 8-K dated December 1, 1997, and
                incorporated herein by reference)
     3.1*       Articles of Incorporation (filed as Exhibit 3.1 to BNP
                Residential Properties, Inc., Current Report on Form 8-K dated
                March 17, 1999, and incorporated herein by reference)
     3.2*       Articles Supplementary, Classifying and Designating 909,090
                Shares of Series B Cumulative Convertible Preferred Stock, dated
                December 28, 2001 (filed as Exhibit 3.1 to BNP Residential
                Properties, Inc. Current Report on Form 8-K dated December 28,
                2001, and incorporated herein by reference)
     3.3*       Amended and Restated By-Laws adopted May 20, 2004 (filed as
                Exhibit 3.1 to BNP Residential Properties, Inc., Current Report
                on Form 8-K dated July 14, 2004, and incorporated herein by
                reference)
     4.1*       Rights Agreement, dated March 18, 1999, between the Company and
                First Union National Bank (filed as Exhibit 4 to BNP Residential
                Properties, Inc. Current Report on Form 8-K dated March 17,
                1999, and incorporated herein by reference)
     4.2*       Registration Rights Agreement By and Among BNP Residential
                Properties, Inc. and Preferred Investment I, LLC, dated December
                28, 2001 (filed as Exhibit 4 to BNP Residential Properties, Inc.
                Current Report on Form 8-K dated December 28, 2001, and
                incorporated herein by reference)
    10.1*       Second Amended and Restated Agreement of Limited Partnership of
                BNP Residential Properties Limited Partnership dated as of March
                17, 1999 (filed as Exhibit 10.1 to the


                                       39
<PAGE>

                company's Annual Report on Form 10-K for the year ended
                December 31, 1998, and incorporated herein by reference)
    10.2*       Amendment to Second Amended and Restated Agreement of Limited
                Partnership of BNP Residential Properties Limited Partnership,
                dated December 28, 2001 (filed as Exhibit 10.1 to BNP
                Residential Properties, Inc. Current Report on Form 8-K dated
                December 28, 2001, and incorporated herein by reference)
    10.3*       Investment Agreement By and Between BNP Residential Properties,
                Inc. and Preferred Investment I, LLC, dated December 28, 2001
                (filed as Exhibit 10.2 to BNP Residential Properties, Inc.
                Current Report on Form 8-K dated December 28, 2001, and
                incorporated herein by reference)
    10.4*       Amended and Restated Master Lease Agreement dated December 21,
                1995, between BNP Residential Properties, Inc. and Boddie-Noell
                Enterprises, Inc. (filed as Exhibit 10.1 to BNP Residential
                Properties, Inc. Annual Report on Form 10-K dated December 31,
                1995, and incorporated herein by reference)
    10.5*       Amended and Restated 1994 Stock Option and Incentive Plan (filed
                as Exhibit 10.8 to BNP Residential Properties, Inc. Quarterly
                Report on Form 10-Q for the quarter ended June 30, 1998, and
                incorporated by reference herein)
    10.6*       Form and description of Employment Agreements dated July 15,
                1997, and December 1, 2002, between BNP Residential Properties,
                Inc. and certain officers (filed as Exhibit 10 to BNP
                Residential Properties, Inc. Quarterly Report on Form 10-Q for
                the quarter ended September 30, 1997; and as Exhibit 10.7 to BNP
                Residential Properties, Inc. Annual Report on Form 10-K for the
                year ended December 31, 2002, and incorporated herein by
                reference)
    10.7*       Purchase Agreement by and among BNP Residential Properties, Inc.
                and Purchasers for 1,175,519 shares of common stock, dated as of
                February 17, 2004 (filed as Exhibit 10.1 to BNP Residential
                Properties, Inc. Current Report on Form 8-K dated February 23,
                2004, and incorporated herein by reference)
    10.8*       Purchase Agreement by and among BNP Residential Properties, Inc.
                and Purchasers for 1,420,000 shares of common stock, dated as of
                July 14, 2004 (filed as Exhibit 10.1 to BNP Residential
                Properties, Inc. Current Report on Form 8-K dated July 14, 2004,
                and incorporated herein by reference)
    10.9        Exchange Agreement among BNP Residential Properties, Inc., BNP
                Residential Properties Limited Partnership, and Beach Investment
                Properties, LLC and members thereof, dated as of December 7,
                2004
    10.10       Exchange Agreement among BNP Residential Properties, Inc., BNP
                Residential Properties Limited Partnership, and Timberline
                Ventures, LLC and members thereof, dated as of December 7, 2004
    10.11       Exchange Agreement among BNP Residential Properties, Inc., BNP
                Residential Properties Limited Partnership, and Laurel Springs
                II, LLC and members thereof, dated as December 7, 2004
    10.12       Exchange Agreement among BNP Residential Properties, Inc., BNP
                Residential Properties Limited Partnership, and Salem
                Ridge/Shugart, LLC and members thereof, dated as of
                December 7, 2004
    21          Subsidiaries of the Registrant
    23          Consent of Ernst & Young LLP
    31.1        Rule 13a-14(a)/15d-14(a) Certification by Chief Executive
                Officer
    31.2        Rule 13a-14(a)/15d-14(a) Certification by Chief Financial
                Officer
    32.1        Section 1350 Certification by Chief Executive Officer
    32.2        Section 1350 Certification by Chief Financial Officer

* Incorporated herein by reference


                                       40
<PAGE>


                                   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.

                                    BNP RESIDENTIAL PROPERTIES, INC.
                                    (Registrant)



Date:  March 3, 2005                  /s/ Philip S. Payne
                                    ----------------------------------------
                                    Philip S. Payne
                                    Chairman of the Board of Directors,
                                    Chief Financial Officer



Date:  March 3, 2005                  /s/ Pamela B. Bruno
                                    ----------------------------------------
                                    Pamela B. Bruno
                                    Vice President,
                                    Chief Accounting Officer


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

Signature:                          Title:                                      Date:

<S>                                <C>                                         <C>
  /s/ Philip S. Payne               Chairman of the Board of Directors,         March 3, 2005
-------------------------------
Philip S. Payne                     Chief Financial Officer

  /s/ D. Scott Wilkerson            President, Chief Executive                  March 3, 2005
-------------------------------
D. Scott Wilkerson Officer, Director

  /s/ Pamela B. Bruno               Vice President, Treasurer,                  March 3, 2005
-------------------------------
Pamela B. Bruno                     Chief Accounting Officer

  /s/ Stephen R. Blank              Director                                    March 3, 2005
-------------------------------
Stephen R. Blank

  /s/ Paul G. Chrysson              Director                                    March 3, 2005
-------------------------------
Paul G. Chrysson

 /s/ W. Michael Gilley              Director                                    March 3, 2005
-------------------------------
W. Michael Gilley

  /s/ Peter J. Weidhorn             Director                                    March 3, 2005
-------------------------------
Peter J. Weidhorn

</TABLE>

                                       41
<PAGE>


             Report of Independent Registered Public Accounting Firm


Board of Directors and Shareholders
BNP Residential Properties, Inc.

We have audited the accompanying consolidated balance sheets of BNP Residential
Properties, Inc. as of December 31, 2004 and 2003, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 2004. Our audits also included the
financial statement schedule listed in the Index at Item 15(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BNP Residential
Properties, Inc. at December 31, 2004 and 2003, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related 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.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of BNP Residential
Properties, Inc.'s internal control over financial reporting as of December 31,
2004, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 2, 2005 expressed an unqualified opinion thereon.


                                                       /s/ Ernst & Young LLP

Greenville, South Carolina
March 2, 2005


                                       42
<PAGE>



 BNP RESIDENTIAL PROPERTIES, INC.
Consolidated Balance Sheets
(all amounts in thousands except share data)
<TABLE>
<CAPTION>

                                                                                   December 31
                                                                             2004               2003
                                                                       ------------------ ------------------
<S>                                                                          <C>                <C>
Assets
Real estate investments at cost:
   Apartment properties                                                       $ 389,119          $ 299,661
   Restaurant properties                                                         37,405             37,405
                                                                       ------------------ ------------------
                                                                                426,525            337,067
   Less accumulated depreciation                                                (66,454)           (56,053)
                                                                       ------------------ ------------------
                                                                                360,071            281,014
Cash and cash equivalents                                                           517                564
Prepaid expenses and other assets                                                 4,516              3,408
Intangible assets, net of accumulated amortization:
   Intangible related to acquisition of management operations                     1,115              1,115
   Deferred financing costs                                                       1,545              1,098
                                                                       ------------------ ------------------
Total assets                                                                  $ 367,764          $ 287,200
                                                                       ================== ==================

Liabilities and Shareholders' Equity
Deed of trust and other notes payable                                         $ 286,425          $ 229,714
Accounts payable and accrued expenses                                               897                354
Accrued interest on notes payable                                                 1,264              1,055
Deferred revenue and security deposits                                            1,787              1,344
Deferred credit for interest defeasance                                               -                105
                                                                       ------------------ ------------------
                                                                                290,373            232,572

Minority interest in Operating Partnership                                       14,394             15,895
Shareholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
   909,090 shares issued and outstanding at
      December 31, 2004, and at December 31, 2003                                10,000             10,000
Common stock, $.01 par value, 100,000,000 shares authorized,
   8,652,740 shares issued and outstanding at December 31, 2004,
   5,907,133 shares issued and outstanding at December 31, 2003                      87                 59
Additional paid-in capital                                                      103,221             71,473
Dividend distributions in excess of net income                                  (50,311)           (42,800)
                                                                       ------------------ ------------------
Total shareholders' equity                                                       62,996             38,733
                                                                       ------------------ ------------------
Total liabilities and shareholders' equity                                    $ 367,764          $ 287,200
                                                                       ================== ==================
</TABLE>


See accompanying notes.

                                       43
<PAGE>


BNP RESIDENTIAL PROPERTIES, INC.
Consolidated Statements of Operations
(all amounts in thousands except per share amounts)
<TABLE>
<CAPTION>

                                                                           Years ended December 31
                                                                       2004          2003          2002
                                                                   ------------- ------------- -------------
<S>                                                                  <C>           <C>           <C>
Revenues
Apartment rental income                                               $ 45,808      $ 37,475      $ 32,890
Restaurant rental income                                                 3,830         3,908         4,021
Management fee income                                                      761           873         1,095
Casualty gains                                                             269             -             -
Interest and other income                                                  197           404           158
                                                                   ------------- ------------- -------------
                                                                        50,865        42,660        38,164

Expenses
Apartment operations                                                    18,563        15,458        12,682
Apartment administration                                                 2,210         1,711         1,364
Corporate administration                                                 2,309         2,196         1,994
Interest                                                                14,608        13,000        11,452
Depreciation                                                            11,660        10,040         8,794
Amortization of deferred loan costs                                        375           322           256
Write-off of unamortized loan costs at debt refinance                       85             -            95
                                                                   ------------- ------------- -------------
                                                                        49,810        42,727        36,637
                                                                   ------------- ------------- -------------
Income (loss) before minority interest                                   1,055           (66)        1,527
Minority interest in operating partnership                                  16          (174)          279
                                                                   ------------- ------------- -------------
Net income                                                               1,039           107         1,248
Cumulative preferred dividend                                            1,000           661           323
                                                                   ------------- ------------- -------------
Income (loss) available to common shareholders                        $     39      $   (553)     $    925
                                                                   ============= ============= =============


Weighted average common shares outstanding                               7,617         5,868         5,787


Per common share amounts:

Earnings per common share - basic
   Net income                                                          $  0.14       $  0.02       $  0.22
   Income (loss) available to common shareholders                         0.01         (0.09)         0.16
Earnings per common share - diluted
   Net income (loss)                                                      0.11         (0.01)         0.20
   Income (loss) available to common shareholders                         0.01         (0.09)         0.16

Dividends declared per common share                                       1.00          1.00          1.24


</TABLE>

See accompanying notes.

                                       44
<PAGE>


BNP RESIDENTIAL PROPERTIES, INC.
Consolidated Statements of Shareholders' Equity
(all amounts in thousands)
<TABLE>
<CAPTION>

                                                                                      Dividend
                                                                       Additional   distributions
                               Preferred Stock       Common Stock        paid-in    in excess of
                              Shares    Amount     Shares    Amount      capital     net income      Total
                             --------- ---------- --------- ---------- ------------ -------------- ----------
<S>                            <C>    <C>         <C>         <C>     <C>            <C>          <C>
Balance December 31, 2001       227    $  2,500     5,745      $ 57    $  69,873      $ (30,396)   $ 42,034
Preferred stock issued          227       2,500         -         -         (108)             -       2,392
Common stock issued               -           -        86         1          960              -         961
Dividends paid - preferred        -           -         -         -            -           (200)       (200)
Dividends paid - common           -           -         -         -            -         (7,163)     (7,163)
Net income                        -           -         -         -            -          1,248       1,248
                             --------- ---------- --------- ---------- ------------ -------------- ----------
Balance December 31, 2002       454       5,000     5,831        58       70,725        (36,512)     39,271
Preferred stock issued          455       5,000         -         -          (54)             -       4,947
Common stock issued               -           -        76         1          803              -         803
Dividends paid - preferred        -           -         -         -            -           (537)       (537)
Dividends paid - common           -           -         -         -            -         (5,859)     (5,859)
Net income                        -           -         -         -            -            107         107
                             --------- ---------- --------- ---------- ------------ -------------- ----------
Balance December 31, 2003       909      10,000     5,907        59       71,473        (42,800)     38,733
Common stock issued               -           -     2,746        27       31,747              -      31,775
Dividends paid - preferred        -           -         -         -            -         (1,000)     (1,000)
Dividends paid - common           -           -         -         -            -         (7,551)     (7,551)
Net income                        -           -         -         -            -          1,039       1,039
                             --------- ---------- --------- ---------- ------------ -------------- ----------
Balance December 31, 2004       909    $ 10,000     8,653      $ 87    $ 103,221      $ (50,311)   $ 62,996
                             ========= ========== ========= ========== ============ ============== ==========
</TABLE>


See accompanying notes.

                                       45
<PAGE>



BNP RESIDENTIAL PROPERTIES, INC.
Consolidated Statements of Cash Flows
(all amounts in thousands)
<TABLE>
<CAPTION>

                                                                           Years ended December 31
                                                                      2004           2003          2002
                                                                  -------------- ------------- --------------
<S>                                                                <C>             <C>           <C>
Operating activities
Apartment rental receipts, net                                      $ 45,717        $ 37,491      $ 32,535
Restaurant rental receipts                                             3,920           3,908         4,021
Management fee receipts                                                  762             826         1,088
Interest and other income receipts                                       185             404           184
Operating and administrative expense payments                        (23,402)        (19,843)      (16,209)
Interest payments                                                    (14,504)        (13,192)      (11,502)
                                                                  -------------- ------------- --------------
  Net cash provided by operating activities                           12,677           9,594        10,118

Investing activities
Acquisitions of apartment properties                                 (48,148)        (23,382)      (29,804)
Additions to apartment communities                                    (5,161)         (3,349)       (2,731)
Net (funding of) release from lender reserves for replacements          (457)            213          (133)
Casualty and other proceeds from apartment assets                        918               -             -
Sale of restaurant properties                                              -           1,244             -
                                                                  -------------- ------------- --------------
  Net cash used in investing activities                              (52,848)        (25,275)      (32,669)

Financing activities
Net proceeds from issuance of preferred stock                              -           4,946         2,232
Net proceeds from issuance of common stock                            31,462             770           864
Distributions to operating partnership minority unitholders           (1,847)         (1,845)       (2,171)
Payment of dividends to preferred shareholder                         (1,000)           (537)         (200)
Payment of dividends to common shareholders                           (7,551)         (5,859)       (7,163)
Proceeds from notes payable                                          111,906          25,986        43,347
Principal payments on notes payable                                  (91,941)         (7,856)      (14,425)
Payment of deferred financing costs                                     (906)           (244)         (465)
                                                                  -------------- ------------- --------------
  Net cash provided by financing activities                           40,123          15,361        22,018
                                                                  -------------- ------------- --------------

Net decrease in cash and cash equivalents                                (47)           (320)         (533)
Cash and cash equivalents at beginning of year                           564             884         1,418
                                                                  -------------- ------------- --------------
Cash and cash equivalents at end of year                            $    517        $    564      $    884
                                                                  ============== ============= ==============

Reconciliation of net income to
  net cash provided by operating activities:
Net income                                                          $  1,039        $    107      $  1,248
Casualty gains, net of losses                                           (255)              -             -
Write-off of unamortized loan costs at debt refinance                     85               -            95
Minority interest in operating partnership                                16            (174)          279
Depreciation and amortization of intangible assets                    12,035          10,361         9,050
Amortization of defeasance credit                                       (105)           (228)         (167)
Changes in operating assets and liabilities:
  Prepaid expenses and other assets                                     (336)           (297)           (2)
  Accounts payable and accrued expenses                                  119             (97)         (163)
  Deferred revenue, prepaid rent and security deposits                    79             (79)         (223)
                                                                  -------------- ------------- --------------
    Net cash provided by operating activities                       $ 12,677        $  9,594      $ 10,118
                                                                  ============== ============= ==============
</TABLE>

See accompanying notes.


                                       46
<PAGE>

BNP RESIDENTIAL PROPERTIES, INC.
Notes to Consolidated Financial Statements
December 31, 2004


Note 1.  Summary of Significant Accounting Policies

Basis of presentation
The consolidated financial statements include the accounts of BNP Residential
Properties, Inc. (the "company") and BNP Residential Properties Limited
Partnership (the "operating partnership"). All significant intercompany balances
and transactions have been eliminated in these consolidated financial
statements.

We are a self-administered and self-managed real estate investment trust
("REIT") with operations in North Carolina, South Carolina and Virginia. Our
primary activity is the ownership and operation of apartment communities. As of
December 31, 2004, we managed 32 multi-family communities containing 7,912
units. Of these, we owned 25 apartment communities, containing 6,113 units.
Third parties owned the remaining seven communities, containing 1,799 units, and
we managed them on a contract basis. In addition to our apartment communities,
at December 31, 2004, we owned 40 properties that we lease to a third party
under a master lease on a triple-net lease basis. The lessee operates these
properties as restaurants and, under the terms of the lease, is totally
responsible for the operation and maintenance of the properties.

UpREIT Structure
We are structured as an UpREIT, or umbrella partnership real estate investment
trust. The company is the general partner and owns a majority interest in the
operating partnership, through which we conduct all of our operations. At
December 31, 2004, we owned 82% of the common ownership units of the operating
partnership and 100% of the preferred ownership units of the operating
partnership. We refer to the limited partners of the operating partnership as
minority common unitholders or as the minority interest. Limited partners will
generally be able to redeem their units for cash or, at our option as general
partner, for shares of common stock of the company on a one-for-one basis.
UpREITs are generally structured so that distributions of cash from the
operating partnership are allocated between the REIT and the limited partners
based on their respective unit ownership.

Reclassifications

We have reclassified certain 2003 and 2002 amounts to conform to the current
year presentation in the accompanying financial statements.

Beginning in 2004, we have presented operating activities in our consolidated
statements of cash flows using the direct method, which provides cash flow
amounts corresponding directly to lines in our statements of operations. (In
previous years, we presented this information using the indirect method, which
reconciles net income to net cash provided by operating activities.) We have
also adjusted the 2003 and 2002 comparative amounts in our consolidated
statements of cash flows to conform to the 2004 presentation by reclassifying
the net cash flows related to funding of lender reserves for apartment property
replacements from operating activities to investing activities. This
reclassification has no impact on the net decrease in cash and cash equivalents
for 2003 and 2002, only in the subtotals for net cash provided by operating
activities and net cash used in investing activities, as follows:


                                       47
<PAGE>
<TABLE>
<CAPTION>

                                                          As Currently                       As Previously
                                                           Presented        Adjustments         Reported
                                                        ----------------- ----------------- -----------------
                                                            (000's)          (000's)             (000's)
<S>                                                       <C>                   <C>           <C>
Year ended December 31, 2003
Net cash provided by operating activities                  $   9,594             $(213)        $   9,807
Net cash used in investing activities                        (25,275)              213           (25,488)

Year ended December 31, 2002
Net cash provided by operating activities                     10,118               133             9,984
Net cash used in investing activities                        (32,669)             (133)          (32,535)
</TABLE>

We adopted Statement of Financial Accounting Standards ("FAS") No. 145,
"Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement
No. 13, and Technical Corrections," effective January, 2003. FAS 145 generally
requires gains and losses on extinguishments of debt to be classified as income
or loss from continuing operations, rather than as extraordinary items as
previously required under FAS 4. We reclassified the extraordinary item for loss
on early extinguishment of debt in 2002 to conform to FAS 145 in our 2003 Annual
Report. While adoption of FAS 145 had no impact on net income, it reduced income
before extraordinary items and eliminated the extraordinary item as previously
reported in our 2002 Annual Report, as follows:
<TABLE>
<CAPTION>

                                                                                             As Previously
                                                          As Currently                        Reported in
                                                           Presented        Adjustments          2002
                                                        ----------------- ----------------- -----------------
                                                             (000's)          (000's)           (000's)
<S>                                                         <C>                <C>              <C>
Year ended December 31, 2002
Revenues                                                     $38,164            $    -           $38,164
Expenses                                                      36,637                95            36,542
                                                        ----------------- ----------------- -----------------
Income before minority interest and
   extraordinary item                                          1,527               (95)            1,622
Minority interest in Operating Partnership                       279               (22)              300
                                                        ----------------- ----------------- -----------------
Income before extraordinary item                               1,248               (73)            1,321
Extraordinary item - loss on early
   extinguishment of debt                                          -               (73)               73
                                                        ----------------- ----------------- -----------------
Net income                                                   $ 1,248            $    -           $ 1,248
                                                        ================= ================= =================
</TABLE>

Segment Reporting
Operating segments are revenue-producing components of the company for which
separate financial information is produced internally for our management. Under
this definition, we operated, for all periods presented, as a single segment
(apartment operations). Our apartment operating activities are located within a
relatively small geographic area, and our chief operating decision maker does
not receive or utilize financial information on the basis of geographic areas.
We evaluate each community's performance individually; however, all of these
communities are garden-style construction, operate in the mid-market price
range, share similar economic characteristics, and provide similar services. We
do not conduct any operating activities with regard to restaurant rental income;
the triple-net lease arrangement for these properties requires the lessee to pay
virtually all of the costs associated with these properties.

Real Estate Investments
Real estate investments are stated at the lower of cost, less accumulated
depreciation, or fair value. In general, for properties acquired prior to 2002,
we compute depreciation using the straight-line method over composite estimated
useful lives of the related assets, generally 40 years for buildings, 20 years
for land improvements, 10 years for fixtures and equipment, and five years for
floor coverings. For properties acquired after 2001, we performed detailed
analyses of components of the real estate assets acquired. For

                                       48
<PAGE>

these properties, we assigned estimated useful lives as follows: base building
structure, 43-60 years; land improvements, 7-20 years; short-lived building
components, 5-20 years; and fixtures, equipment and floor coverings, 5-10 years.

We generally complete and capitalize acquisition improvements (expenditures that
have been identified at the time the property is acquired, and which are
intended to position the property consistent with our physical standards) within
one to two years of acquisition of the related apartment property. We capitalize
non-recurring expenditures for additions and betterments to buildings and land
improvements. In addition, we generally capitalize recurring capital
expenditures for exterior painting, roofing, and other major maintenance
projects that substantially extend the useful life of existing assets. For
financial reporting purposes, we depreciate these additions and replacements on
a straight-line basis over estimated useful lives of 5-20 years. We capitalize
all floor covering, appliance and HVAC replacements, and depreciate them using a
straight-line, group method over estimated useful lives of 5-10 years. We
expense ordinary repairs and maintenance costs at apartment communities. Costs
of repairs and maintenance and capital improvements at restaurant properties are
borne by the lessee.

We evaluate our real estate assets from time to time, or upon occurrence of
significant adverse changes in operations, to assess whether any impairment
indicators are present that affect the recovery of the recorded values. If we
considered any real estate assets to be impaired, we would record a loss to
reduce the carrying value of the property to its estimated fair value. At
December 31, 2004 and 2003, none of our assets were considered impaired.

Cash and Cash Equivalents
We consider all highly liquid investments with maturities of three months or
less when purchased to be cash equivalents.

Deferred Costs
We adopted FAS 142, Goodwill and Other Intangible Assets, effective January 1,
2002. Goodwill and intangible assets deemed to have indefinite lives are no
longer amortized after December 31, 2001, but are subject to annual impairment
tests in accordance with the Statement. We perform these annual tests as of
October 1 of each year. Based on our tests through October 1, 2004, we
determined that the intangible related to our 1994 acquisition of management
operations, net of accumulated amortization, is not impaired. The historical
cost of this asset is $3.7 million, with accumulated amortization of $2.6
million at December 31, 2004 and 2003.

We defer financing costs and amortize them using the straight-line method over
the terms of the related notes. If we pay down or pay off notes prior to their
maturity, we write off the related unamortized financing costs, reflected as a
charge to operations. Accumulated amortization on these assets was $1,210,000 at
December 31, 2004, and $870,000 at December 31, 2003.

As of December 31, 2004, we estimate future amortization of deferred financing
costs will be as follows:

    2005          $380,000                   2008               $152,000
    2006           359,000                   2009                110,000
    2007           308,000                   Thereafter          236,000

We defer costs incurred in connection with proposed investing and financing
transactions until the proposed transactions are consummated. We include such
costs in prepaid expenses and other assets on our balance sheet. If we determine
that a proposed transaction is not probable, we charge these costs to expense.
At December 31, 2004, deferred costs related to proposed transactions totaled
$130,000.

Fair Values of Financial Instruments
The carrying amount reported on the balance sheet for cash and cash equivalents
approximates fair value. We estimate the fair value of fixed-rate notes and
variable-rate notes payable using discounted cash flow analysis, based on our
current incremental borrowing rates for similar types of borrowing arrangements.

                                       49
<PAGE>


The aggregate fair value of our deed of trust and other notes payable was $296
million at December 31, 2004, and $242 million at December 31, 2003.

Use of Estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Depreciation
amounts included in these financial statements reflect our estimate of the life
and related depreciation rates for rental properties. In addition, the carrying
amount of the intangible asset related to acquisition of management operations
reflects our assessment of the continuing value of this asset. Actual results
could differ from these estimates.

Revenue Recognition
We record rental and other revenue as it is earned, net of our provision for
estimated uncollectible revenues. We amortize any cash concessions given at the
inception of an apartment lease over the approximate life of the lease, which is
generally one year or less. We record rental payments received prior to the
first of a given month as prepaid rent. We hold tenant security deposits in
trust in bank accounts separate from operating cash; related trust account
balances are included in the balance sheet in other current assets.

In December 2000, we received an $800,000 advance payment under a contract for
use of our cable equipment at five apartment communities. This receipt, net of
$20,000 of related costs, was recorded as deferred revenue, and we are
recognizing this rental revenue over the ten-year contract term beginning in
2001.

Deferred revenue and security deposits include the following amounts:
<TABLE>
<CAPTION>

                                                                                     December 31
                                                                                2004              2003
                                                                          ----------------- -----------------
                                                                               (000's)           (000's)
<S>                                                                          <C>               <C>
Liability for tenant security deposits                                        $    556          $    393
Insurance proceeds held pending reconstruction of apartment building               186                 -
Prepaid apartment rents                                                            494               410
Prepaid restaurant rents                                                            91                 -
Deferred cable revenue                                                             460               540
                                                                          ----------------- -----------------
                                                                              $  1,787          $  1,344
                                                                          ================= =================
</TABLE>

Advertising Costs
We expense advertising costs as they are incurred. Advertising expense totaled
$530,000 in 2004, $500,000 in 2003, and $420,000 in 2002.

Earnings Per Share
We calculate earnings per share based on the weighted average number of shares
outstanding during each year.

Comprehensive Income
Comprehensive income is defined as changes in shareholders' equity exclusive of
transactions with owners (such as capital contributions and dividends). We did
not have any comprehensive income items in 2004, 2003, or 2002, other than net
income as reported.

Stock-Based Compensation
The company has one employee Stock Option and Incentive Plan in place, which is
described more fully in Note 4. As allowed by FAS 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," and FAS 123, "Accounting
for Stock-Based Compensation," we account for this plan using the intrinsic
value method under the recognition and measurement principles of Accounting
Principles Board

                                       50
<PAGE>

Opinion 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost is reflected in net
income, as all options granted under this plan had an exercise price equal to
the market value of the underlying common stock on the date of grant. If we had
applied the fair value recognition provisions of FAS 123 to stock-based employee
compensation, the effect would have been to reduce net income as reported by
$200 in 2004, $200 in 2003, and $5,000 in 2002, with no impact on basic and
diluted earnings per share amounts as reported.

Recently Issued Accounting Standards
In December 2004 the Financial Accounting Standards Board issued Financial
Accounting Statement No. 123 (revised 2004), Share Based Payment, ("FAS 123(R)")
which is a revision of FAS 123, Accounting for Stock-Based Compensation. FAS
123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees,
and amends FAS 95, Statement of Cash Flows. Generally, the approach in FAS
123(R) is similar to the approach described in FAS 123. However, FAS 123(R)
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the statement of operations based on their
fair values. Pro forma disclosure is no longer an alternative. FAS 123(R) must
be adopted no later than July 1, 2005, and we expect to adopt FAS 123(R) as of
that date.

FAS 123(R) permits public companies to adopt its requirements using one of two
methods: a "modified prospective" method, in which compensation cost is
recognized beginning with the effective date based on the requirements of FAS
123(R) for all share-based payments granted after the effective date, and based
on the requirements of FAS 123 for all awards granted to employees prior to the
effective date that remain unvested on the effective date; or a "modified
retrospective" method, which includes the requirements of the modified
prospective method described above, but also permits entities to restate based
on the amounts previously recognized under FAS 123 for purposes of pro forma
disclosures. We plan to adopt FAS 123(R) using the "modified prospective" method
described above.

As permitted by FAS 123 and discussed above under the caption "Stock Based
Compensation," we currently account for share-based payments to employees using
Opinion 25's intrinsic value method and, as such, generally recognize no
compensation cost for employee stock options. As of December 31, 2004, all
outstanding grants of employee stock options are fully vested. The adoption of
FAS 123(R)'s fair value method could have a significant impact on our results of
operations, although it will have no impact on our overall financial position.
The impact of adoption of FAS 123(R) cannot be predicted at this time because it
will depend on levels of share-based payments granted in the future. However,
had we adopted FAS 123 (R) in prior periods, the impact of that standard would
have approximated the impact of FAS 123 as described in the disclosure of pro
forma amounts above.

Note 2.  Real Estate Investments

Real estate investments consist of the following:

                                                      December 31
                                                 2004              2003
                                           ----------------- -----------------
                                                (000's)           (000's)

Apartment properties
   Land                                        $  43,684         $  30,780
   Buildings and improvements                    344,395           267,901
   Computer and support equipment                  1,041               980
   Less accumulated depreciation                 (54,514)          (44,789)
                                           ----------------- -----------------
                                                 334,605           254,872


                                       51
<PAGE>


                                                      December 31
                                                 2004              2003
                                           ----------------- -----------------
                                                (000's)           (000's)

Restaurant properties
   Land                                           10,445            10,445
   Buildings and improvements                     26,961            26,961
   Less accumulated depreciation                 (11,940)          (11,263)
                                           ----------------- -----------------
                                                  25,466            26,142
                                           ----------------- -----------------
                                                $360,071          $281,014
                                           ================= =================

During the three years ended December 31, 2004, we acquired the apartment
communities listed below. The results of operations of these apartment
communities are included in the financial statements from the dates of
acquisition.

2004 acquisitions:
o    Bridges at Southpoint Apartments, acquired September 2004, for a total
     cost of $10.2 million, paid in cash.

o    The Fairington Apartments, acquired August 2004, for a total cost of $18.6
     million, paid in cash.

o    Savannah Shores Apartments, acquired July 2004, for an initial purchase
     cost of $12.5 million, including assumption of $12.2 million in debt
     obligations and $0.2 million net operating liabilities in excess of
     operating assets acquired, and issuance of 7,695 operating partnership
     units with an imputed value of $0.1 million. The acquisition agreement
     provides for potential earn-out of additional purchase price of up to $1.7
     million within a three-year period upon attainment of certain performance
     standards; this would be funded through the issuance of operating
     partnership units with an imputed value of $13.00 per unit to the
     contributors. Prior to this acquisition, we managed this community on a
     contract basis.

o    Carriage Club Apartments, acquired June 2004, for a total cost of $19.7
     million, paid in cash.

o    Bridges at Wind River Apartments, acquired May 2004, for a total cost of
     $25.1 million, including assumption of $24.6 million in debt obligations
     and issuance of 41,752 operating partnership units with an imputed value of
     $0.5 million. We received $0.2 million in net operating assets, consisting
     primarily of cash.

2003 acquisitions:
o    The Harrington Apartments, acquired August 2003, for a total cost of $17.9
     million, paid in cash.

o    The Place Apartments, acquired March 2003, for a total cost of $5.6
     million, paid in cash.

2002 acquisitions:
o    Marina Shores Waterfront Apartments, acquired September 2002, for a total
     cost of $19.2 million, paid in cash.

o    Barrington Place Apartments and Brookford Place Apartments, acquired May
     2002, for a total cost of $32.2 million, including assumption of debt
     obligations totaling $20.3 million, assumption and retirement of existing
     liabilities of the former owners totaling $10.0 million, and issuance of
     146,964 operating partnership units with an imputed value of $1.8 million.

We present the following unaudited pro forma summary information as if we had
owned the five properties acquired in 2004 and the two properties acquired in
2003 throughout all of both 2004 and 2003. These pro

                                       52
<PAGE>

forma amounts may not represent how we would have performed if these
acquisitions had really occurred prior to 2003. In addition, they do not purport
to project our results of operations for any future period.
<TABLE>
<CAPTION>


                                                                2004              2003
                                                          ---------------- -----------------
                                                              (000's)           (000's)

<S>                                                         <C>               <C>
Total revenue                                                $ 55,880          $ 54,592
Net income (loss)                                                 303              (674)
Loss attributable to common shareholders                         (697)           (1,334)
Basic earnings per share:
   Net income (loss)                                         $   0.04          $  (0.11)
   Loss attributable to common shareholders                     (0.09)            (0.23)
Diluted earnings per share:
   Net income (loss)                                             0.01             (0.14)
   Loss income attributable to common shareholders              (0.09)            (0.23)
</TABLE>

During 2003, we sold two restaurant properties to the lessee for their net
carrying values, totaling $1,244,000. We applied the proceeds from these sales
to improvements at apartment communities and to reduce our line of credit
secured by the restaurant properties.

Note 3.  Notes Payable

Notes payable consist of the following:
<TABLE>
<CAPTION>

                                                                                    December 31
                                                                              2004               2003
                                                                       ------------------ ------------------
                                                                             (000's)            (000's)
<S>                                                                       <C>                <C>
Lines of credit with a bank:

Revolving line of credit for principal sum of up to $30.0
million, due November 2007 (as modified July 2004), secured
by a deed of trust and assignment of rents of Latitudes
Apartments. Interest-only payments on the outstanding
balance due monthly at a variable interest rate of 30-day
LIBOR plus 1.65 % (4.11% at December 31, 2004).                            $   10,166         $   19,975

Principal sum of up to $16.3 million through January 2005,
then $15.5 million, due January 2006 (as modified December
2003), secured by deeds of trust and assignments of rents of
40 restaurant properties. Interest-only payments on the
outstanding balance due monthly at a variable interest rate
of 30-day LIBOR plus 1.80% (4.26% at December 31, 2004).                       16,316             16,316

Variable rate notes payable:

Notes payable to a bank, secured by deeds of trust and
assignments of rents of three apartment properties.
Interest-only payments on the outstanding principal balances
due monthly at interest rates of 30-day LIBOR plus 1.75% to
1.80% (4.21% to 4.26% at December 31, 2004) through
mid-2007, then monthly installments of principal and
interest estimated at $165,000. Maturities in mid-2009, with
estimated balloon payments totaling $32.3 million.                             33,900                  -

</TABLE>

                             53
<PAGE>
<TABLE>
<CAPTION>

                                                                                    December 31
                                                                              2004               2003
                                                                       ------------------ ------------------
                                                                             (000's)            (000's)
<S>                                                                       <C>                <C>
Note payable to a bank in the principal amount of $10.5
million (as modified December 2004), secured by a deed of
trust and assignment of rents of Oak Hollow Apartments Phase
2. Payable in monthly installments of $56,000 including
principal and interest at 30-day LIBOR plus 1.85% (4.31% at
December 31, 2004). Maturity in December 2007, with an
estimated balloon payment of $9.7 million.                                     10,453             10,745

Note payable to a bank, secured by a deed of trust and
assignment of rents of The Harrington Apartments.
Interest-only payments on the outstanding principal balance
due monthly at a variable interest rate of 30-day LIBOR plus
1.75%; retired July 2004.                                                           -             14,400

Fixed rate notes payable:

Notes payable comprised of 11 loans (eight loans in 2003),
payable in monthly installments totaling $813,000 including
principal and interest at rates ranging from 5.13% to 8.55%,
with maturities in 2005 through 2014. Secured by deeds of
trust and assignments of rents of 11 apartment communities.                   131,225             83,852

Notes payable comprised of ten loans, interest rates ranging
from 6.35% to 6.97%, payable in interest-only monthly
installments totaling $478,000, with maturities in 2007 and
2008. Secured by deeds of trust and assignments of rents of
ten apartment communities.                                                     84,366             84,366

Notes payable, comprised of 11 loans, payable in monthly
installments totaling $2,700 including principal and
interest at 7.90% to 7.99%, secured by 11 vehicles; retired
in 2004.                                                                            -                 61
                                                                        ------------------ ------------------
                                                                             $286,425           $229,714
                                                                        ================== ==================
</TABLE>

During the three years ended December 31, 2004, we executed the following notes
payable in conjunction with acquisitions of apartment communities:

o    $8.2 million fixed-rate note payable, September 2004, secured by a deed of
     trust and assignment of rents of Bridges at Southpoint Apartments. This
     loan provides for interest at 4.93% (5.00% effective rate), payable in
     monthly installments of $34,000 through October 2007, then principal and
     interest payable in monthly installments of $44,000 through September 2014,
     with a balloon payment of $7.3 million at maturity in October 2014. We paid
     and recorded deferred loan costs of $61,000 related to this loan.

o    $13.4 million variable-rate note payable, August 2004, secured by a deed of
     trust and assignment of rents of Fairington Apartments. This loan provides
     for interest at 30-day LIBOR plus 1.75%, payable monthly, with principal
     due August 2007, subject to an optional 24-month extension. If the loan is
     extended, principal payments of $31,000 will be payable monthly beginning
     September 2007, with the remaining principal balance of $12.7 million due
     August 2009. We paid and recorded deferred loan costs of $76,000 related to
     this loan.

                             54
<PAGE>

o    $9.0 million variable-rate note payable, July 2004, secured by a deed of
     trust and assignment of rents of Savannah Shores Apartments. This loan
     provides for interest at 30-day LIBOR plus 1.8%, payable monthly, with
     principal due July 2007, subject to an optional 24-month extension. If the
     loan is extended, principal payments of $16,000 will be payable monthly
     beginning August 2007, with the remaining principal balance of $8.6 million
     due July 2009. We applied proceeds of this loan, along with additional
     funds drawn on our revolving line of credit, to retire the existing $12.2
     million loan obligation related to Savannah Shores. We paid and recorded
     deferred loan costs of $56,000 related to this loan.

o    $14.9 million fixed-rate note payable, June 2004, secured by a deed of
     trust and assignment of rents of Carriage Club Apartments. This loan
     provides for interest at 5.15% (5.22% effective rate), payable in monthly
     installments of $65,000 through July 2005, then principal and interest
     payable in monthly installments of $81,000 through June 2009, with a
     balloon payment of $14.0 million at maturity in July 2009. We paid and
     recorded deferred loan costs of $90,000 related to this loan.

o    $19.7 million fixed-rate note payable, May 2004, secured by a deed of trust
     and assignment of rents of Bridges at Wind River Apartments. This loan
     provides for interest at 5.57% (5.65% effective rate) and monthly payments
     of principal and interest of $113,000, with a balloon payment of $16.5
     million at maturity in June 2014, subject to an optional extension for one
     year with interest at a variable rate. We applied the proceeds of this
     note, along with additional funds drawn on our revolving line of credit, to
     retire the existing $24.6 million loan obligations related to Bridges at
     Wind River. We paid and recorded deferred loan costs of $157,000 related to
     this loan.

o    $14.4 million variable-rate note payable, August 2003, secured by a deed of
     trust and assignment of rents of Harrington Apartments. This loan provided
     for interest at 30-day LIBOR plus 1.75%, payable monthly. In conjunction
     with this transaction, we paid and recorded deferred loan costs of
     $118,000. We subsequently retired this loan in July 2004 (see refinancing
     transactions below).

o    $4.6 million fixed-rate note payable, March 2003, secured by a deed of
     trust and assignment of rents of The Place Apartments. This loan provides
     for interest at 5.06% (5.13% effective rate) and monthly payments including
     principal and interest of $25,000, with a balloon payment of $3.8 million
     at maturity in March 2013. We paid and recorded deferred loan costs of
     $63,000 related to this loan.

o    $15.9 million fixed-rate note payable, September 2002, secured by a deed of
     trust and assignment of rents of Marina Shores Waterfront Apartments. This
     loan provides for interest at 5.85% (5.93% effective rate) and monthly
     payments including principal and interest of $94,000, with a balloon
     payment of $13.5 million in October 2012. We paid and recorded deferred
     loan costs of $149,000 related to this loan.

o    $20.3 million fixed-rate note payable, assumed May 2002, secured by a deed
     of trust and assignment of rents of Barrington Place Apartments. This loan
     provides for interest at 6.91% (7.01% effective rate) and monthly payments
     including principal and interest of $136,000, with a balloon payment of
     $18.0 million in November 2010. We paid and recorded deferred loan costs of
     $161,000 related to this loan assumption.

o    $4.9 million fixed-rate note payable, June 2002, secured by a deed of trust
     and assignment of rents of Brookford Place Apartments. This loan provides
     for interest at 6.97% (7.07% effective rate) and monthly payments including
     principal and interest of $32,000, with a balloon payment of $4.2 million
     in June 2012. We applied the proceeds of this loan to retire existing loan
     obligations of the former owners of Barrington Place and Brookford Place
     Apartments. We paid and recorded deferred loan costs of $65,000 related to
     this loan.

During this three-year period, we executed the following notes payable in
refinancing transactions:

                             55
<PAGE>

o    $15.0 million fixed-rate note payable, July 2004, secured by a deed of
     trust and assignment of rents of Harrington Apartments. This loan provides
     for interest at 5.15% (5.22% effective rate), payable in monthly
     installments of $65,000 through August 2005, then principal and interest
     payable in monthly installments of $82,000, with a balloon payment of $14.1
     million at maturity in August 2009. We applied the proceeds to retire a
     $14.4 million variable-rate note payable. We paid and recorded deferred
     loan costs of $92,000 related to this loan. In addition, we wrote off
     unamortized loan costs of $85,000 related to the debt retired.

o    $11.5 million variable-rate note payable, April 2004, secured by a deed of
     trust and assignment of rents of Chason Ridge Apartments. This loan
     provides for interest at 30-day LIBOR plus 1.75%, payable monthly, and
     principal due May 2007, subject to an optional 24-month extension. If the
     loan is extended, principal payments of $27,000 will be payable monthly
     beginning June 2007, with the remaining principal balance of $10.9 million
     due April 2009. We applied $9.4 million of these proceeds to retire an
     existing 8.5% deed of trust note related to Chason Ridge. We paid and
     recorded deferred loan costs of $98,000 related to this loan.

o    $7.9 million fixed-rate note payable, February 2002, secured by a deed of
     trust and assignment of rents of Oakbrook Apartments. This loan provides
     for interest at 6.99% (7.09% effective rate) and monthly payments including
     principal and interest of $52,000, with a balloon payment of $6.9 million
     in February 2012. We paid and recorded deferred loan costs of $94,000
     related to this loan.

     We applied the proceeds of the Oakbrook note to reduce our Latitudes line
     of credit. In January 2002, we applied a $6.0 million draw on this line of
     credit to retire a note payable in the amount of $6.1 million related to
     Oakbrook. We wrote off unamortized loan costs of $95,000 related to the
     debt retired.

In June 2004, we modified our revolving line of credit with a bank secured by
Latitudes Apartments to increase our maximum loan amount to $30.0 million,
extend the term of the loan through November 2007, and reduce the variable
interest rate on outstanding amounts to 30-day LIBOR plus 1.65% (previously
1.75%). In conjunction with this modification, we paid and recorded deferred
loan costs of $184,000. We also paid and recorded $32,000 in deferred loan costs
related to this loan in conjunction with a previous modification in January
2003. As of December 31, 2004, $19.8 million was available for draw under our
Latitudes line of credit.

In December 2003, we modified and extended our line of credit with a bank
secured by our restaurant properties to extend the maturity date of this loan to
January 2006. In conjunction with this modification, we paid and recorded
$41,000 in deferred loan costs in January 2004.

Interest payments totaled $14.5 million in 2004, $13.2 million in 2003, and
$11.5 million in 2002.

The loan agreements related to the lines of credit include covenants and
restrictions relating to, among other things, specified levels of debt service
coverage, leverage and net worth. To date, we have met all applicable
requirements.

As of December 31, 2004, we estimate future scheduled principal payments will be
as follows:

     2005         $    7,900,000            2008             $  39,200,000
     2006             17,300,000            2009                62,800,000
     2007             70,000,000            Thereafter          89,200,000

                                       56
<PAGE>

Note 4.  Shareholders' Equity

Authorized Capital Stock
Our bylaws and certificate of incorporation allow the Board of Directors to
authorize the issuance of up to 100 million shares of common stock and 10
million shares of preferred stock, issuable in series whose characteristics
would be set by the Board of Directors.

We have issued 909,090 shares of the Company's Series B Cumulative Convertible
Preferred stock to a single accredited investor, as follows:

           Date               Number of Shares              Net Proceeds
  ------------------------ -------------------------- --------------------------

      September 2003                 454,545              $4,946,091
      September 2002                 227,272              2,391,905
      December 2001                  227,273              2,274,594

These preferred shares have a purchase price and liquidation preference of
$11.00 per share. The agreement for these shares provides for an initial
dividend yield of 10% through December 2009, then 12% for two years, and
thereafter the greater of 14% or 900 basis points over the 5-year Treasury rate.
The investor has the right to convert each Series B share into one share of the
company's common stock beginning in December 2004 or in certain circumstances,
such as a change of control or if the company calls the Series B stock for
redemption. The holders of preferred shares are generally not entitled to vote
on matters submitted to shareholders. Dividends on preferred shares are subject
to declaration by the Board of Directors.

Approximately 4.2 million authorized shares of common stock are reserved for
future issuance under the company's Stock Option and Incentive Plan, Dividend
Reinvestment and Stock Purchase Plan, and for conversion of Series B Preferred
shares and Operating Partnership units.

Dividend Reinvestment and Stock Purchase Plan
Our Dividend Reinvestment and Stock Purchase Plan ("DRIP Plan") allows the
company, at its option, to issue shares directly to Plan participants. We issued
65,697 shares in 2004, 72,890 shares in 2003, and 77,607 shares in 2002 through
the Plan.

Redemption of Operating Partnership Units
We redeemed operating partnership units from former minority unitholders by
issuing shares of the company's common stock on a one-for-one basis in the
following amounts: 24,618 shares in 2004, 3,166 shares in 2003, and 8,597 shares
in 2002.

Earnings per Common Share
We calculated basic and diluted earnings per share using the following amounts:
<TABLE>
<CAPTION>

                                                              2004              2003              2002
                                                        ----------------- ----------------- -----------------
                                                             (000's)           (000's)           (000's)
<S>                                                       <C>               <C>                <C>
Numerators:
Numerator for basic earnings per share -
   Net income                                              $   1,039         $     107          $  1,248
   Cumulative preferred dividend                              (1,000)             (661)             (323)
                                                        ----------------- ----------------- -----------------
   Income (loss) available to common shareholders          $      39         $    (553)         $    925
                                                        ================= ================= =================
Numerator for diluted earnings per share (1) -
   Income (loss) before minority interest                  $   1,055         $     (66)         $  1,527
   Cumulative preferred dividend                              (1,000)             (661)             (323)
                                                        ----------------- ----------------- -----------------
   Income (loss) available to common shareholders          $      55         $    (727)         $  1,204
                                                        ================= ================= =================

</TABLE>

                                       57
<PAGE>
<TABLE>
<CAPTION>

                                                              2004              2003              2002
                                                        ----------------- ----------------- -----------------
                                                             (000's)           (000's)           (000's)
<S>                                                       <C>               <C>                <C>
Denominators:
Denominator for basic earnings per share -
   Weighted average common shares outstanding                  7,617             5,868             5,787
Effect of dilutive securities:
   Convertible operating partnership units                     1,856             1,843             1,786
   Stock options (2)                                              31                 6                 8
                                                        ----------------- ----------------- -----------------
   Dilutive potential common stock                             1,887             1,849             1,794
                                                        ----------------- ----------------- -----------------
Denominator for diluted earnings per share -
   Adjusted weighted average common shares and
   assumed conversions                                         9,504             7,717             7,581
                                                        ================= ================= =================
</TABLE>

(1) Assumes conversion of operating partnership units to common shares.
Preferred B Shares are not dilutive.
(2) We excluded options to purchase 140,000 shares of common stock at $12.50,
110,000 shares at $12.25, 120,000 shares at $13.125, and 60,000 shares at $11.25
from the calculation of diluted earnings per share for 2003 and 2002. The
exercise price of these options was greater than the average market price of the
common shares for these periods, and the effect would be anti-dilutive.

Stock Option and Incentive Plan
We have reserved 470,000 shares of the company's common stock for issuance under
our employee Stock Option and Incentive Plan. Options have been granted to
employees at prices equal to the fair market value of the stock on the dates the
options were granted or repriced. We calculated the fair value of each option
grant on the date of grant using the Black-Scholes option-pricing model. Options
are generally exercisable in four annual installments beginning one year after
the date of grant, and expire ten years after the date of grant.

The following table summarizes information about stock options outstanding at
December 31, 2004.
<TABLE>
<CAPTION>


                                               Weighted
                                                Average
                                               Remaining         Number of         Number of
                                              Contractual         Options           Options
                                              Life (Years)      Outstanding       Exercisable
                                             --------------- ----------------- -----------------
<S>                                                <C>            <C>                <C>
Exercise price $9.25 per share                       5.15            37,500            37,500
Exercise price $11.25 per share                      3.83            60,000            60,000
Exercise price $13.125 per share                     3.50           120,000           120,000
Exercise price $12.25 per share                      2.33           110,000           110,000
                                                              ----------------- -----------------
   All options outstanding                           3.36           327,500           327,500
                                                              ================= =================
</TABLE>

There were no grants of options during 2004, 2003 or 2002. As of December 31,
2004, all outstanding options were fully vested. Changes in outstanding stock
options were as follows:
<TABLE>
<CAPTION>

                                       2004                       2003                       2002
                             -------------------------- -------------------------- --------------------------
                                            Weighted                   Weighted                   Weighted
                                             Average                    Average                    Average
                                            Exercise                   Exercise                   Exercise
                                Shares        Price        Shares        Price        Shares        Price
                             ------------ ------------- ------------ ------------- ------------ -------------
<S>                            <C>            <C>         <C>            <C>         <C>            <C>
Beginning balance               477,500        $12.12      477,500        $12.12      477,500        $12.12
Granted                               -             -            -             -            -             -

</TABLE>



                                       58
<PAGE>

<TABLE>
<CAPTION>

                                       2004                       2003                       2002
                             -------------------------- -------------------------- --------------------------
                                            Weighted                   Weighted                   Weighted
                                             Average                    Average                    Average
                                            Exercise                   Exercise                   Exercise
                                Shares        Price        Shares        Price        Shares        Price
                             ------------ ------------- ------------ ------------- ------------ -------------
<S>                            <C>            <C>         <C>            <C>         <C>            <C>
Exercised                       (99,844)        12.50            -             -            -             -
Repurchased                           -             -            -             -            -             -
Forfeited                       (50,156)        11.85            -             -            -             -
                             ------------- ------------ ------------- ------------ ------------- ------------
Ending balance                  327,500        $12.04      477,500        $12.12      477,500        $12.12
                             ============= ============ ============= ============ ============= ============
Exercisable at the end of
the year                        327,500        $12.04      465,625        $12.19      453,750         12.27
                             ============= ============ ============= ============ ============= ============
</TABLE>

During 2004, we issued 99,844 shares of our common stock, net of 40,071 shares
exchanged, upon exercise of options by three management employees, for cash
proceeds of $700,000.

Note 5.  Rental Operations

Apartment Properties
We lease our residential apartments under operating leases with monthly payments
due in advance. Terms of the apartment leases are generally one year or less,
with none longer than two years.

Restaurant Properties - Master Lease Agreement
The lease agreement with Boddie-Noell Enterprises ("Enterprises") has a primary
term expiring in December 2007, but grants Enterprises three five-year renewal
options. Enterprises pays annual rent equal to the greater of the specified
minimum rent or 9.875% of food sales from the restaurants. Under certain
conditions as defined in the agreement, both Enterprises and the company have
the right to substitute another restaurant property for a property covered by
the lease. Assuming renewal of the lease, after December 31, 2007, Enterprises
has the right to terminate the lease on up to five restaurant properties per
year by offering to purchase them under specified terms.

In addition, we entered into a separate agreement with Enterprises that, after
December 31, 1997, allowed Enterprises to purchase, under specified terms, up to
seven restaurant properties deemed non-economic. During 2003 we sold two
restaurants to Enterprises, the lessee, under this agreement. We sold five
restaurants in previous years to Enterprises under this clause.

The lease requires Enterprises to pay monthly installments of minimum rent and
quarterly payments calculated based on the percentage rent, subject to an annual
calculation of the greater of minimum or percentage rent. We received the
minimum rent in 2004, 2003, and 2002. We expect annual minimum rent will be $3.8
million in years 2005 through 2007.

Casualty Gains
During 2004, we recorded casualty gains totaling $269,000 related to fires that
resulted in substantial damage to one building each at two of our apartment
communities. We received insurance proceeds totaling $895,000, against which we
identified and wrote off $626,000 net carrying value of assets destroyed.

We are fully insured for these losses, including rent continuation insurance
covering 100% of lost rental income. Through December 31, 2004, we recorded
$131,000 in recovery of lost rents, included in apartment rental income in our
statement of operations.

                                       59
<PAGE>

Note 6.  Income Taxes

We operate as, and elect to be taxed as, a REIT under the Internal Revenue Code.
To qualify as a REIT, we must meet a number of organizational and operational
requirements, including a requirement that we currently distribute at least 90%
of our adjusted taxable income to our common shareholders. We intend to adhere
to these requirements and maintain the company's REIT status. As a REIT, we
generally will not be subject to corporate level federal or state income tax on
taxable income we distribute currently to our shareholders. If we fail to
qualify as a REIT in any taxable year, we will be subject to federal and state
income taxes at regular corporate rates (including any applicable alternative
minimum tax) and may not be able to qualify as a REIT for four subsequent
taxable years. Even if we qualify for taxation as a REIT, we may be subject to
certain state and local taxes on income and property, and to federal income and
excise taxes on undistributed taxable income. In addition, taxable income from
non-REIT activities managed through taxable REIT subsidiaries would be subject
to federal, state and local income taxes.

The following table reconciles our income as reflected in our financial
statements to REIT taxable income. Taxable income differs from income for
financial statement purposes, primarily due to differences for tax purposes in
the estimated useful lives and methods used to compute depreciation and the
carrying value (basis) of the investment in properties. For federal and state
income tax purposes, we will report real estate investments with a total cost
basis of $390 million and accumulated depreciation of $88 million as of December
31, 2004.

<TABLE>
<CAPTION>
                                                              2004              2003              2002
                                                            Estimate           Actual            Actual
                                                        ----------------- ----------------- -----------------
                                                            (000's)            (000's)           (000's)
<S>                                                       <C>                <C>               <C>
Income (loss) subject to income tax -
   Operating Partnership                                   $   1,050          $    (66)         $  1,527
Reconciling items:
Add differences in deductions for depreciation
   and disposals of real estate assets                           400               129               683
Less one-time deduction allocated to
   Wind River Apartments contributor                          (1,750)                -                 -
Other book/tax differences, net                                   60              (163)             (314)
                                                        ----------------- ----------------- -----------------
Adjusted taxable (loss) income -
   Operating Partnership                                        (240)             (100)            1,896
Minority share of taxable income                               1,650               124              (367)
                                                        ----------------- ----------------- -----------------
Taxable income subject to dividend requirement             $   1,410          $     24          $  1,529
                                                        ================= ================= =================
Minimum dividend required (90% of
   taxable income)                                         $   1,270          $     21          $  1,376
                                                        ================= ================= =================
</TABLE>

The actual tax deduction for dividends that we take, and the taxability of
dividends to shareholders, is based on a measurement of "earnings and profits"
as defined by the Internal Revenue Code. Earnings and profits differ from
regular taxable income, primarily due to further differences in the estimated
useful lives and methods used to compute depreciation. The following table
reconciles the dividends paid deduction taken by the company (the portion of
dividends paid that are taxable as ordinary income to shareholders) on its tax
returns to cash dividends paid.


                                       60
<PAGE>
<TABLE>
<CAPTION>

                                                     2004              2003              2002
                                                   Estimate           Actual            Actual
                                               ----------------- ----------------- -----------------
                                                   (000's)           (000's)           (000's)
<S>                                               <C>                <C>                <C>
Dividends paid deduction for
   Preferred dividends paid                        $  1,000           $   537            $  200
   Common dividends paid                                920                 -             1,898
                                               ----------------- ----------------- -----------------
                                                      1,920               537             2,098
Portion of common dividends
   designated return of capital                       6,630             5,858             5,265
                                               ----------------- ----------------- -----------------
Total dividends paid                               $  8,550           $ 6,395            $7,363
                                               ================= ================= =================
</TABLE>

We paid dividend distributions totaling $1.00 per share to common shareholders
in 2004 and 2003, and $1.24 per share to common shareholders in 2002. In early
January following each year end, we must make an estimate of earnings and
profits, and publish an allocation between ordinary dividend income and
non-taxable return of capital to common shareholders. The allocation between
ordinary dividend income and non-taxable return of capital to common
shareholders was as follows:
<TABLE>
<CAPTION>

                                              2004                     2003                    2002
                                         $            %           $           %           $           %
                                     ----------- ------------ ----------- ----------- ----------- -----------
<S>                                     <C>        <C>           <C>        <C>          <C>        <C>
Ordinary income                          $0.12       12.0%        $0.17       17.0%       $0.24       19.4%
Return of capital                         0.88       88.0%         0.83       83.0%        1.00       80.6%
                                     ----------- ------------ ----------- ----------- ----------- -----------
                                         $1.00      100.0%        $1.00      100.0%       $1.24      100.0%
                                     =========== ============ =========== =========== =========== ===========
</TABLE>

Note 7.  Related Party Transactions

In July 2004, we issued 7,695 operating partnership units to acquire Savannah
Shores Apartments from a group of investors to whom we refer as the "Chrysson
Parties." Previously, between 1997 and 2002, we issued 1,496,918 operating
partnership units to acquire eight apartment communities from this group.
Certain current directors of the company were shareholders and officers in the
Chrysson Parties.

In February 1997, we signed a participating loan agreement with The Villages of
Chapel Hill Limited Partnership, the owner of an apartment community that we
manage. We made a loan to The Villages of $2.5 million to fund a substantial
rehabilitation of its apartment community and guaranteed a $1.5 million bank
loan. In exchange, we receive minimum interest on our loan at the greater of
12.5% or the 30-day LIBOR rate plus 6.125% and an annual loan guarantee fee. We
also receive 25% participation in increased rental revenue and 25% participation
in the increase in value of the property. The Villages subsequently reduced the
outstanding principal balance of its note payable to us to $100,000, which has
been outstanding since February 2000. In July 2001, we modified the
participating loan agreement to establish a $950,000 "fixed portion" of our
participation in the increase in value of the property and extend the period for
our 25% participation in increased rental revenue and increase in value of the
property to the earlier of July 2011 or sale or refinance of the property.
Required payment of the fixed portion is subject to cash flow from The Villages
property, as defined in the agreement. Interest on the outstanding fixed portion
accrues at the greater of a prime rate or 8%, payable monthly.

We received interest and participation income of $59,000 in 2004, $59,000 in
2003, and $60,000 in 2002. In addition, we received guarantee fees of $12,000 in
2004, 2003 and 2002. We received $383,000 of the fixed portion during 2002 and
2001. Because the collectibility of the remaining fixed portion is subject to
cash flow and therefore uncertain, we have provided a reserve for collection of
this receivable. At December 31, 2004 and 2003, we have reflected the principal
portion of notes receivable from The Villages of Chapel Hill Limited Partnership
as follows, included in our balance sheets in other assets.

                                       61
<PAGE>

Advances receivable                                        $ 100,000
Fixed portion of shared appreciation                         567,434
   Less reserve for collection of fixed portion             (567,434)
                                                        ----------------
                                                           $ 100,000
                                                        ================

In 1996 through 1999, we made loans totaling $180,000 to certain officers of the
company. These loans are included in our balance sheets in other assets.

Note 8.  Profit Sharing Plan

The employees of the company are participants in a profit sharing plan pursuant
to Section 401 of the Internal Revenue Code. We make limited matching
contributions based on the level of employee participation as defined in the
plan. We made contributions to the plan totaling $82,000 in 2004, $57,000 in
2003, and $59,000 in 2002.

Note 9.  Commitments and Contingencies

In December 2004, we entered into agreements to acquire a portfolio of four
apartment communities containing a total of 1,086 apartment units. The aggregate
purchase price will be $51.8 million and consists of the assumption or
refinancing of up to $43.2 million of debt on the properties, with the remaining
$8.6 million to be paid in operating partnership units with an imputed value of
$13.50 per unit. We expect to complete these acquisitions by the end of March
2005. We currently manage these apartment communities on a contract basis.

Through December 2004, we spent $385,000, with $705,000 remaining, under a
contract for reconstruction of an apartment building at Latitudes Apartments
that had been significantly damaged by fire. We expect to complete this
reconstruction project by the end of April 2005.

We currently lease 7,800 square feet of office space in downtown Charlotte,
North Carolina, for our corporate and administrative offices. Rent expense
totaled $163,000 in 2004, $163,000 in 2003, and $169,000 in 2002. The lease
provides for monthly rental of $15,000 and expires June 2008.

We have agreements with four of our executive officers that provide for cash
compensation and other benefits if we terminate them without cause or if a
change in control of the company occurs.

The company is a party to a variety of legal proceedings arising in the ordinary
course of its business. We believe that such matters will not have a material
effect on the financial position or results of operations of the company.

Note 10.  Quarterly Financial Data (Unaudited)

We present below selected financial data (unaudited) for the years ended
December 31, 2004 and 2003.

<TABLE>
<CAPTION>


                                                        Net Income (Loss)                Income (Loss)
                                               -------------------------------------      Available to
                                                                   Per Share                 Common
                                                             -----------------------     Shareholders-
                               Revenues           Total        Basic      Diluted      Per Share, Diluted
                          -------------------- ------------- ----------- ----------- -----------------------
                               (000's)           (000's)
<S>                           <C>              <C>            <C>         <C>              <C>
2004
First quarter                  $ 11,231         $    373       $  0.06     $  0.05          $  0.02
Second quarter                   11,858              217          0.03        0.02            (0.01)
</TABLE>

                                       62
<PAGE>


<TABLE>
<CAPTION>


                                                        Net Income (Loss)                Income (Loss)
                                               -------------------------------------      Available to
                                                                   Per Share                 Common
                                                             -----------------------     Shareholders-
                               Revenues           Total        Basic      Diluted      Per Share, Diluted
                          -------------------- ------------- ----------- ----------- -----------------------
                               (000's)           (000's)
<S>                           <C>              <C>            <C>         <C>              <C>
Third quarter                    13,726              299          0.03        0.03             0.01
Fourth quarter                   14,050              150          0.02        0.01            (0.01)
                          -------------------- ------------- ----------- ----------- -----------------------
                               $ 50,865         $  1,039       $  0.14     $  0.11          $  0.01
                          ==================== ============= =========== =========== =======================

2003
First quarter                  $ 10,243         $    146       $  0.02     $  0.02          $  0.00
Second quarter                   10,180             (393)        (0.06)      (0.07)           (0.08)
Third quarter                    10,876              137          0.02        0.01            (0.01)
Fourth quarter                   11,361              217          0.04        0.03             0.00
                          -------------------- ------------- ----------- ----------- -----------------------
                               $ 42,660         $    107       $  0.02     $ (0.01)         $ (0.09)
                          ==================== ============= =========== =========== =======================
</TABLE>

Note 11.  Subsequent Events

The Board of Directors declared a regular quarterly dividend of $0.25 per common
share on January 20, 2005, payable on February 15, 2005, to shareholders of
record on February 1, 2005. The Board of Directors also authorized the payment
of dividends totaling $250,000 to the Series B Preferred shareholder.

Effective January 26, 2005, we acquired Boddie Investment Company ("BIC") in
exchange for 508,578 shares of our common stock valued at $8.2 million. As part
of the acquisition, BIC surrendered, and we cancelled, 72,399 shares of our
common stock valued at $1.2 million. As a result of this acquisition, we have
assumed the role of general partner and acquired certain economic interests in
the following limited partnerships: Marina Shores Associates One Limited
Partnership (50% economic interest), The Villages of Chapel Hill Limited
Partnership (1% economic interest) and The Villages of Chapel Hill - Phase 5,
Limited Partnership (1% economic interest). Prior to this acquisition, we
managed, on a fee basis, the properties owned by these partnerships. We will
continue to manage these properties following our acquisition of BIC. We have
not completed our evaluation of this acquisition as to whether consolidation of
these partnerships will be required.

                                       63
<PAGE>


                         Report of Independent Auditors





Board of Directors and Stockholders
BNP Residential Properties, Inc.




We have audited the accompanying statement of revenue and certain operating
expenses of Oakwood Raleigh Apartments for the year ended December 31, 2003.
This statement is the responsibility of Oakwood Raleigh Apartments' management.
Our responsibility is to express an opinion on this statement based on our
audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Apartments' internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

The accompanying statement of revenue and certain operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of Oakwood Raleigh Apartments' revenue and
expenses.

In our opinion, the statement of revenue and certain operating expenses referred
to above presents fairly, in all material respects, the revenues and certain
operating expenses described in Note 1 of Oakwood Raleigh Apartments for the
year ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States.


                                                  /s/    Ernst & Young LLP

Greenville, South Carolina
October 23, 2004


                                       64
<PAGE>

Oakwood Raleigh Apartments
Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2003 and
For the unaudited period January 1 through May 11, 2004
<TABLE>
<CAPTION>


                                                                                                 January 1
                                                                        Year ended                through
                                                                       December 31,                May 11,
                                                                           2003                    2004
                                                                   ---------------------    ---------------------
                                                                                                (Unaudited)
<S>                                                                      <C>                     <C>
Rental income                                                             $3,195,385              $1,057,413

Certain operating expenses:
   Property operations expense                                             1,076,443                 433,416
   Property insurance                                                        141,580                  42,737
   Property taxes                                                            377,517                 142,627
                                                                   ---------------------    ---------------------
                                                                           1,595,540                 618,780
                                                                   ---------------------    ---------------------

Revenue in excess of certain operating expenses                           $1,599,845              $  438,633
                                                                   =====================    =====================
</TABLE>

See accompanying notes.



                                       65
<PAGE>


Oakwood Raleigh Apartments
Notes to Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2003, and
For the unaudited period January 1 through May 11, 2004

1.   Summary of Significant Accounting Policies

Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in Durham, North Carolina. Oakwood
Raleigh Apartments is not a legal entity; it is an apartment property acquired
by BNP Residential Properties, Inc. in May, 2004, and subsequently renamed
Bridges at Wind River Apartments. The 346-unit apartment property was built in
1998 and 1999, with construction of these units substantially completed in
January 2000.

We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.

Revenue recognition
Oakwood Raleigh Apartments leased its residential apartments under operating
leases with monthly payments due in advance. The majority of the apartment
leases were for terms of one year or less. Rental and other revenues were
recorded as earned.

Advertising expense
Oakwood Raleigh Apartments charged advertising costs to property operations
expense as incurred. Advertising expense included in property operations expense
totaled approximately $82,000 for the year ended December 31, 2003, and
approximately $44,000 for the interim period in 2004.

Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.

Interim financial data
The unaudited financial statements for the period January 1 through May 11,
2004, include all adjustments that are, in management's opinion, necessary for a
fair presentation of the revenues and certain operating expenses for this
interim period. Operating results for the period January 1 through May 11, 2004,
are not necessarily indicative of the results to be expected for the entire year
ending December 31, 2004.

2.   Environmental Matters

Bridges at Wind River Apartments, formerly named Oakwood Raleigh Apartments, has
been subjected to Phase I environmental reviews. These reviews did not reveal,
nor is management aware of, any environmental liability that management believes
would have a material adverse effect on the accompanying financial statements.

                                       66
<PAGE>




                         Report of Independent Auditors





Board of Directors and Stockholders
BNP Residential Properties, Inc.




We have audited the accompanying statement of revenue and certain operating
expenses of Carriage Club Apartments for the year ended December 31, 2003. This
statement is the responsibility of Carriage Club Apartments' management. Our
responsibility is to express an opinion on this statement based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Apartments' internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

The accompanying statement of revenue and certain operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of Carriage Club Apartments' revenue and expenses.

In our opinion, the statement of revenue and certain operating expenses referred
to above presents fairly, in all material respects, the revenues and certain
operating expenses described in Note 1 of Carriage Club Apartments for the year
ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States.


                                                     /s/    Ernst & Young LLP

Greenville, South Carolina
October 23, 2004

                                       67
<PAGE>



Carriage Club Apartments
Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2003, and
For the unaudited period January 1 through June 28, 2004
<TABLE>
<CAPTION>


                                                                                   January 1
                                                          Year ended                through
                                                         December 31,               June 28,
                                                             2003                     2004
                                                     ---------------------    ---------------------
                                                                                  (Unaudited)
<S>                                                        <C>                     <C>
Rental income                                               $2,087,597              $1,058,213

Certain operating expenses:
   Property operations expense                                 555,708                 282,555
   Property insurance                                           32,594                  17,871
   Property taxes                                              131,771                  64,806
                                                     ---------------------    ---------------------
                                                               720,073                 365,232
                                                     ---------------------    ---------------------

Revenue in excess of certain operating expenses             $1,367,524              $  692,981
                                                     =====================    =====================
</TABLE>

See accompanying notes.


                                       68
<PAGE>



Carriage Club Apartments
Notes to Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2003, and
For the unaudited period January 1 through June 28, 2004

1.   Summary of Significant Accounting Policies

Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in Mooresville, North Carolina.
Carriage Club Apartments is not a legal entity; it is an apartment property
acquired by BNP Residential Properties, Inc. in June 2004. The 268-unit
apartment property was built in 2000.

We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.

Revenue recognition
Carriage Club Apartments leased its residential apartments under operating
leases with monthly payments due in advance. The majority of the apartment
leases were for terms of one year or less. Rental and other revenues were
recorded as earned.

Advertising expense
Carriage Club Apartments charged advertising costs to property operations
expense as incurred. Advertising expense included in property operations expense
totaled approximately $39,000 for the year ended December 31, 2003, and
approximately $19,000 for the interim period in 2004.

Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.

Interim financial data
The unaudited financial statements for the period January 1 through June 28,
2004, include all adjustments that are, in management's opinion, necessary for a
fair presentation of the revenues and certain operating expenses for this
interim period. Operating results for the period January 1 through June 28,
2004, are not necessarily indicative of the results to be expected for the
entire year ending December 31, 2004.

2.  Environmental matters

Carriage Club Apartments has been subjected to Phase I environmental reviews.
These reviews did not reveal, nor is management aware of, any environmental
liability that management believes would have a material adverse effect on the
accompanying financial statements.



                                       69
<PAGE>

                         Report of Independent Auditors



Board of Directors and Stockholders
BNP Residential Properties, Inc.


We have audited the accompanying statements of revenue and certain operating
expenses of Savannah Shores Apartments for the years ended December 31, 2003 and
2002, and for the six-month period ended June 30, 2004. These statements are the
responsibility of Savannah Shores Apartments' management. Our responsibility is
to express an opinion on these statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Apartments' internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

The accompanying statements of revenue and certain operating expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and are not intended
to be a complete presentation of Savannah Shores Apartments' revenues and
expenses.

In our opinion, the statements of revenue and certain operating expenses
referred to above presents fairly, in all material respects, the revenue and
certain operating expenses described in Note 1 for Savannah Shores Apartments
for the years ended December 31, 2003 and 2002 and for the six-month period
ended June 30, 2004 in conformity with accounting principles generally accepted
in the United States.



                                               /s/ Ernst & Young, LLP


Greenville, South Carolina
February 23, 2005



                                       70
<PAGE>

Savannah Shores Apartments
Statements of Revenue and Certain Operating Expenses
<TABLE>
<CAPTION>


                                                                                                   Six Months
                                                    Year ended              Year ended               ended
                                                   December 31,            December 31,             June 30,
                                                       2002                    2003                   2004
                                                --------------------    --------------------    -----------------

<S>                                                   <C>                     <C>                    <C>
Rental income                                          $1,728,847              $1,637,696             $748,787

Certain operating expenses:
   Property operations expense                            638,702                 503,495              330,244
   Property insurance                                     125,658                 183,566               62,906
   Property taxes                                         147,739                 152,127               91,430
                                                --------------------    --------------------    -----------------
                                                          912,099                 839,188              484,580
                                                --------------------    --------------------    -----------------

Revenue in excess of certain
   operating expenses                                  $  816,748              $  798,508             $264,207
                                                ====================    ====================    =================
</TABLE>

See accompanying notes.

                                       71
<PAGE>



Savannah Shores Apartments
Notes to Statements of Revenue and Certain Operating Expenses
Years ended December 31, 2002 and 2003, and
Six months ended June 30, 2004

1.   Summary of Significant Accounting Policies

Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in Myrtle Beach, South Carolina.
Savannah Shores Apartments is not a legal entity; it is an apartment property
acquired by BNP Residential Properties, Inc. in July 2004. The 198-unit
apartment property was built in 1998.

We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.

Revenue recognition
Savannah Shores Apartments leases its residential apartments under operating
leases with monthly payments due in advance. The majority of the apartment
leases are for terms of one year or less. Rental and other revenues are recorded
as earned.

Advertising expense
Savannah Shores Apartments charged advertising costs to property operations
expense as incurred. Advertising expense included in property operations expense
totaled approximately $29,000 in 2002, $23,000 in 2003, and $9,000 during the
six months ended June 30, 2004.

Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.

2.  Environmental matters

Savannah Shores Apartments has been subjected to Phase I environmental reviews.
These reviews did not reveal, nor is management aware of, any environmental
liability that management believes would have a material adverse effect on the
accompanying financial statements.


                                       72
<PAGE>


                         Report of Independent Auditors





Board of Directors and Stockholders
BNP Residential Properties, Inc.




We have audited the accompanying statement of revenue and certain operating
expenses of Fairington Apartments for the year ended December 31, 2003. This
statement is the responsibility of Fairington Apartments' management. Our
responsibility is to express an opinion on this statement based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Apartments' internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

The accompanying statement of revenue and certain operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of Fairington Apartments' revenue and expenses.

In our opinion, the statement of revenue and certain operating expenses referred
to above presents fairly, in all material respects, the revenues and certain
operating expenses described in Note 1 of Fairington Apartments for the year
ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States.


                                                  /s/    Ernst & Young LLP

Greenville, South Carolina
December 10, 2004


                                       73
<PAGE>



Fairington Apartments
Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2003, and
For the unaudited period January 1 through August 4, 2004
<TABLE>
<CAPTION>


                                                                                     January 1
                                                            Year ended                through
                                                           December 31,              August 4,
                                                               2003                     2004
                                                       ---------------------    ---------------------
                                                                                    (Unaudited)
<S>                                                          <C>                     <C>
Rental income                                                 $1,917,104              $1,091,523

Certain operating expenses:
   Property operations expense                                   676,204                 429,099
   Property insurance                                             62,233                  42,125
   Property taxes                                                209,488                 120,848
                                                       ---------------------    ---------------------
                                                                  947,925                 592,072
                                                       ---------------------    ---------------------

Revenue in excess of certain operating expenses               $  969,179              $  499,451
                                                       =====================    =====================
</TABLE>

See accompanying notes.

                                       74
<PAGE>




Fairington Apartments
Notes to Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2003, and
For the unaudited period January 1 through August 4, 2004

1.   Summary of Significant Accounting Policies

Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in Charlotte, North Carolina.
Fairington Apartments is not a legal entity; it is an apartment property
acquired by BNP Residential Properties, Inc. in August 2004. The 250-unit
apartment property was built in 1981.

We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.

Revenue recognition
Fairington Apartments leased its residential apartments under operating leases
with monthly payments due in advance. The majority of the apartment leases were
for terms of one year or less. Rental and other revenues were recorded as
earned.

Advertising expense
Fairington Apartments charged advertising costs to property operations expense
as incurred. Advertising expense included in property operations expense totaled
approximately $27,000 for the year ended December 31, 2003, and approximately
$14,000 for the interim period in 2004.

Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.

Interim financial data
The unaudited financial statements for the period January 1 through August 4,
2004, include all adjustments that are, in management's opinion, necessary for a
fair presentation of the revenues and certain operating expenses for this
interim period. Operating results for the period January 1 through August 4,
2004, are not necessarily indicative of the results to be expected for the
entire year ending December 31, 2004.

2.   Environmental matters

Fairington Apartments has been subjected to Phase I environmental reviews. These
reviews did not reveal, nor is management aware of, any environmental liability
that management believes would have a material adverse effect on the
accompanying financial statements.


                                       75
<PAGE>


Sterling Park Apartments
Statements of Revenue and Certain Operating Expenses (Unaudited)
<TABLE>
<CAPTION>

                                                                                                 January 1
                                                                        Year ended                through
                                                                       December 31,            September 29,
                                                                           2003                     2004
                                                                   ---------------------    ---------------------
<S>                                                                      <C>                     <C>
Rental income                                                             $1,446,958              $1,059,860

Certain operating expenses:
   Property operations expense                                               538,914                 420,814
   Property insurance                                                         41,362                  28,928
   Property taxes                                                            113,748                  89,239
                                                                   ---------------------    ---------------------
                                                                             694,024                 538,981
                                                                   ---------------------    ---------------------

Revenue in excess of certain operating expenses                           $  752,934              $  520,879
                                                                   =====================    =====================
</TABLE>

See accompanying notes.

                                       76
<PAGE>




Sterling Park Apartments
Notes to Statements of Revenue and Certain Operating Expenses (Unaudited)
For the year ended December 31, 2003, and
For the period January 1 through September 29, 2004

1.   Summary of Significant Accounting Policies

Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in Durham, North Carolina. Sterling
Park Apartments is not a legal entity; it is an apartment property acquired by
BNP Residential Properties, Inc. in September 2004, and subsequently renamed
Bridges at Southpoint Apartments. The 192-unit apartment property was built in
1987.

We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.

Revenue recognition
Sterling Park Apartments leased its residential apartments under operating
leases with monthly payments due in advance. The majority of the apartment
leases were for terms of one year or less. Rental and other revenues were
recorded as earned.

Advertising expense
Sterling Park Apartments charged advertising costs to property operations
expense as incurred. Advertising expense included in property operations expense
totaled approximately $42,000 for the year ended December 31, 2003, and
approximately $34,000 for the interim period in 2004.

Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.

Interim financial data
The financial statements for the period January 1 through September 29, 2004,
include all adjustments that are, in management's opinion, necessary for a fair
presentation of the revenues and certain operating expenses for this interim
period. Operating results for the period January 1 through September 29, 2004,
are not necessarily indicative of the results to be expected for the entire year
ending December 31, 2004.

2.   Environmental Matters

Bridges at Southpoint Apartments, formerly named Sterling Park Apartments, has
been subjected to Phase I environmental reviews. These reviews did not reveal,
nor is management aware of, any environmental liability that management believes
would have a material adverse effect on the accompanying financial statements.

                                       77
<PAGE>


BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
Schedule III - Real Estate and Accumulated Depreciation
Year ended December 31, 2004
<TABLE>
<CAPTION>
                                                                                            Gross Amount at Which
        Description           Encumb.         Initial Costs            Costs           Carried at Close of Period (2)
        -----------           -------         -------------         Capitalized        ------------------------------
                                                      Buildings &   Subsequent                  Buildings &
                                             Land     Improvem'ts  to Acquisition    Land       Improvem'ts      Total
<S>                        <C>           <C>         <C>            <C>          <C>          <C>           <C>
Apartment Properties:
North Carolina:
Abbington Place, Greensboro $ 15,785,250  $ 2,302,000 $23,598,676     $ 350,728   $ 2,302,000  $ 23,949,404  $ 26,251,404
Allerton Place, Greensboro    10,270,000    1,384,000  14,650,428       234,756     1,384,000    14,885,184    16,269,184
Barrington Place, Charlotte   19,763,051    2,604,000  24,002,687       280,484     2,604,000    24,283,171    26,887,171
Brookford Place, Greensboro    4,743,245      465,000   5,157,507        85,392       465,000     5,242,899     5,707,899
Carriage Club, Mooresville    14,900,000    1,984,000  17,714,261        44,494     1,984,000    17,758,755    19,742,755
Chason Ridge, Fayetteville    11,500,000      624,000  11,790,472       954,828       994,606    12,374,694    13,369,300
Fairington, Charlotte         13,400,000    4,257,200  14,322,231       196,129     4,257,200    14,518,360    18,775,560
Harrington, Charlotte         15,000,000    1,790,000  16,113,942       416,233     1,790,000    16,530,175    18,320,175
Harris Hill, Charlotte         5,527,259    1,003,298   7,867,857     1,252,325     1,003,298     9,120,182    10,123,480
Madison Hall, Clemmons         4,245,000      303,000   6,054,307       258,653       303,000     6,312,959     6,615,959
Marina Sh. Waterfront, Corneli15,485,060    4,144,000  15,062,322     1,003,097     4,144,000    16,065,419    20,209,419
Oak Hollow, Cary               8,385,000    1,480,000  10,808,689     1,732,090     1,480,000    12,540,779    14,020,779
Oak Hollow - Phase 2, Cary    10,453,470    1,914,000  10,485,239     2,070,839     1,914,000    12,556,078    14,470,078
Oakbrook, Charlotte            7,650,608      848,835   8,523,384     1,148,120       848,835     9,671,504    10,520,339
Paces Commons, Charlotte      15,906,778    1,430,158  12,871,424     1,688,557     1,448,184    14,541,955    15,990,139
Paces Village, Greensboro      7,000,000    1,250,000   9,416,580       663,255     1,250,000    10,079,835    11,329,835
Pepperstone, Greensboro        3,883,750      552,000   5,015,153       333,135       552,000     5,348,288     5,900,288
Savannah Place, Winston-Salem  7,312,500      790,000  10,032,721       436,376       790,000    10,469,097    11,259,097
Southpoint, Durham             8,200,000    1,610,500   8,620,734        68,990     1,610,500     8,689,724    10,300,224
Summerlyn Place, Burlington    6,645,000      837,000   9,559,115       170,729       837,000     9,729,845    10,566,845
Waterford Place, Greensboro   11,089,000    1,686,000  16,745,972        13,973     1,686,000    16,759,945    18,445,945
Wind River, Morrisville       19,594,972    3,170,000  21,922,771       380,079     3,170,000    22,302,850    25,472,850
Woods Edge, Durham             9,750,000      994,000  13,061,195     1,712,553       994,000    14,773,748    15,767,748
Computer and support equipment         -            -           -     1,040,593             -     1,040,593     1,040,593
                            ----------------------------------------------------------------------------------------------
                             246,489,943   37,422,991 293,397,666    16,536,409    37,811,623   309,545,443   347,357,066

South Carolina:
The Place, Greenville          4,453,780      630,000   4,991,397       295,446       630,000     5,286,843     5,916,843
Savannah Shores, Myrtle Beach  9,000,000    1,881,890  10,664,750       114,865     1,881,890    10,779,615    12,661,505
                            ----------------------------------------------------------------------------------------------
                              13,453,780    2,511,890  15,656,147       410,311     2,511,890    16,066,458    18,578,348

Virginia:
Latitudes, Virginia Beach     10,165,870    3,360,000  18,606,667     1,217,059     3,360,000    19,823,726    23,183,726

                            ----------------------------------------------------------------------------------------------
Total Apartment Properties   270,109,593   43,294,881 327,660,480    18,163,778    43,683,513   345,435,627   389,119,140
</TABLE>


<TABLE>
<CAPTION>

        Description
        -----------
                               Accumulated  Date of  Date    Life
                              Depreciation  Constr. Acquired (Years)
<S>                           <C>           <C>    <C>       <C>
Apartment Properties:
North Carolina:
Abbington Place, Greensboro    $ 5,997,264   1997   Dec-97    40
Allerton Place, Greensboro       3,134,690   1998   Sep-98    40
Barrington Place, Charlotte      1,811,678   1999   May-02    60
Brookford Place, Greensboro        461,459   1998   May-02    60
Carriage Club, Mooresville         308,753   2000   Jun-04    60
Chason Ridge, Fayetteville       2,319,737   1994   Jan-99    40
Fairington, Charlotte              250,688   1981   Aug-04    40
Harrington, Charlotte              595,516   1997   Aug-03    60
Harris Hill, Charlotte           2,615,565   1988   Dec-94    40
Madison Hall, Clemmons           1,269,153   1997   Aug-98    40
Marina Sh. Waterfront, Corne     1,167,862   1994   Sep-02    60
Oak Hollow, Cary                 2,273,262   1983   Jul-98    40
Oak Hollow - Phase 2, Cary       1,876,129   1986   Dec-00    40
Oakbrook, Charlotte              2,792,681   1985   Jun-94    40
Paces Commons, Charlotte         4,628,879   1988   Jun-93    40
Paces Village, Greensboro        2,664,117   1988   Apr-96    40
Pepperstone, Greensboro          1,302,933   1992   Dec-97    40
Savannah Place, Winston-Sale     2,526,716   1991   Dec-97    40
Southpoint, Durham                  91,885   1987   Sep-04    43
Summerlyn Place, Burlington      1,856,284   1998   Sep-98    40
Waterford Place, Greensboro      4,133,178   1997   Dec-97    40
Wind River, Morrisville            468,707   2000   May-04    60
Woods Edge, Durham               2,973,137   1985   Jun-98    40
Computer and support equipment     665,681
                            ---------------
                                48,185,953

South Carolina:
The Place, Greenville              404,954   1985   Mar-03    45
Savannah Shores, Myrtle Beach      169,562   1998   Jul-04    60
                            ---------------
                                   574,516

Virginia:
Latitudes, Virginia Beach        5,753,482   1989   Oct-94    38

                            ---------------
Total Apartment Properties      54,513,951
</TABLE>



                                       78
<PAGE>

<TABLE>
<CAPTION>
                                                                                             Gross Amount at Which
        Description           Encumb.         Initial Costs            Costs            Carried at Close of Period (2)
        -----------           -------         -------------         Capitalized         ------------------------------
                                                      Buildings &   Subsequent                  Buildings &
                                             Land     Improvem'ts  to Acquisition    Land       Improvem'ts      Total
<S>                        <C>           <C>         <C>            <C>          <C>          <C>           <C>
Restaurant Properties:
North Carolina:
Burlington                      (1)           162,411     417,629             -       162,411       417,629       580,040
Denver                          (1)           275,484     708,387             -       275,484       708,387       983,871
Eden                            (1)           253,282     651,296             -       253,282       651,296       904,578
Fayetteville (Ramsey)           (1)           260,135     668,919             -       260,135       668,919       929,054
Fayetteville (N.Eastern)        (1)           308,271     792,696             -       308,271       792,696     1,100,967
Hillsborough                    (1)           290,868     747,948             -       290,868       747,948     1,038,816
Kinston (W. Vernon)             (1)           237,135     609,777             -       237,135       609,777       846,912
Kinston (Richlands)             (1)           231,678     595,743             -       231,678       595,743       827,421
Newton                          (1)           223,453     574,594             -       223,453       574,594       798,047
Siler City                      (1)           268,312     689,945             -       268,312       689,945       958,257
Spring Lake                     (1)           218,925     562,949             -       218,925       562,949       781,874
Thomasville (E. Main)           (1)           253,716     652,411             -       253,716       652,411       906,127
Thomasville (Randolph)          (1)           327,727     842,726             -       327,727       842,726     1,170,453
                                         ---------------------------------------------------------------------------------
                                            3,311,397   8,515,020             -     3,311,397     8,515,020    11,826,417

Virginia:
Ashland                         (1)           296,509     762,452             -       296,509       762,452     1,058,961
Blackstone                      (1)           275,565     708,596             -       275,565       708,596       984,161
Bluefield                       (1)           205,700     528,947             -       205,700       528,947       734,647
Chester                         (1)           300,165     771,852             -       300,165       771,852     1,072,017
Clarksville                     (1)           211,545     543,972             -       211,545       543,972       755,517
Clintwood                       (1)           222,673     572,588             -       222,673       572,588       795,261
Dublin                          (1)           364,065     936,168             -       364,065       936,168     1,300,233
Franklin                        (1)           287,867     740,230             -       287,867       740,230     1,028,097
Galax                           (1)           309,578     796,057             -       309,578       796,057     1,105,635
Hopewell                        (1)           263,939     678,701             -       263,939       678,701       942,640
Lebanon                         (1)           266,340     684,876             -       266,340       684,876       951,216
Lynchburg (Langhorne)           (1)           249,865     642,509             -       249,865       642,509       892,374
Lynchburg (Timberlake)          (1)           276,153     710,107             -       276,153       710,107       986,260
Norfolk                         (1)           325,822     837,829             -       325,822       837,829     1,163,651
Orange                          (1)           244,883     629,699             -       244,883       629,699       874,582
Petersburg                      (1)           357,984     920,531             -       357,984       920,531     1,278,515
Richmond (Forest Hill)          (1)           196,084     504,216             -       196,084       504,216       700,300
Richmond (Midlothian)           (1)           270,736     696,179             -       270,736       696,179       966,915
Richmond (Myers)                (1)           321,946     827,861             -       321,946       827,861     1,149,807
</TABLE>

<TABLE>
<CAPTION>

        Description
        -----------
                             Accumulated  Date of  Date    Life
                            Depreciation  Constr. Acquired (Years)
<S>                         <C>          <C>    <C>       <C>
Restaurant Properties:
North Carolina:
Burlington                       184,951 Oct-85   Apr-87    40
Denver                           313,717 Jul-83   Apr-87    40
Eden                             288,433 Jun-73   Apr-87    40
Fayetteville (Ramsey)            296,239 Oct-73   Apr-87    40
Fayetteville (N.Eastern)         351,054 Sep-83   Apr-87    40
Hillsborough                     331,237 Mar-78   Apr-87    40
Kinston (W. Vernon)              270,046 Jul-62   Apr-87    40
Kinston (Richlands)              263,831 Dec-81   Apr-87    40
Newton                           254,466 Mar-76   Apr-87    40
Siler City                       305,550 May-79   Apr-87    40
Spring Lake                      249,308 Mar-76   Apr-87    40
Thomasville (E. Main)            288,928 Feb-66   Apr-87    40
Thomasville (Randolph)           373,210 Apr-74   Apr-87    40
                          ---------------
                               3,770,971

Virginia:
Ashland                          337,661 Apr-87   Apr-87    40
Blackstone                       313,810 Sep-79   Apr-87    40
Bluefield                        234,250 Feb-85   Apr-87    40
Chester                          341,823 May-73   Apr-87    40
Clarksville                      240,904 Oct-85   Apr-87    40
Clintwood                        253,577 Jan-81   Apr-87    40
Dublin                           414,593 Jul-83   Apr-87    40
Franklin                         327,819 Feb-75   Apr-87    40
Galax                            352,542 Jun-74   Apr-87    40
Hopewell                         300,571 Jun-78   Apr-87    40
Lebanon                          303,305 Jun-83   Apr-87    40
Lynchburg (Langhorne)            284,542 Sep-82   Apr-87    40
Lynchburg (Timberlake)           314,479 Aug-83   Apr-87    40
Norfolk                          371,042 Aug-84   Apr-87    40
Orange                           278,869 Aug-74   Apr-87    40
Petersburg                       407,668 Mar-74   Apr-87    40
Richmond (Forest Hill)           223,298 Nov-74   Apr-87    40
Richmond (Midlothian)            308,310 Jan-74   Apr-87    40
Richmond (Myers)                 366,628 Apr-83   Apr-87    40
</TABLE>




                                       79
<PAGE>


<TABLE>
<CAPTION>
                                                                                            Gross Amount at Which
        Description           Encumb.         Initial Costs            Costs           Carried at Close of Period (2)
        -----------           -------         -------------         Capitalized        ------------------------------
                                                      Buildings &   Subsequent                  Buildings &
                                             Land     Improvem'ts  to Acquisition    Land       Improvem'ts      Total
<S>                        <C>           <C>         <C>            <C>          <C>          <C>           <C>
Roanoke (Hollins)               (1)           257,863     663,076             -       257,863       663,076       920,939
Roanoke (Abenham)               (1)           235,864     606,507             -       235,864       606,507       842,371
Rocky Mount                     (1)           248,434     638,829             -       248,434       638,829       887,263
Smithfield                      (1)           223,070     573,608             -       223,070       573,608       796,678
Verona                          (1)           191,631     492,765             -       191,631       492,765       684,396
Virginia Beach (Lynnhaven)      (1)           271,570     698,322             -       231,731       698,322       930,053
Virginia Beach (Holland)        (1)           277,943     714,710             -       277,943       714,710       992,653
Wise                            (1)           219,471     564,355             -       219,471       564,355       783,826
                            -----------------------------------------------------------------------------------------------
                                            7,173,265  18,445,542             -     7,133,426    18,445,542    25,578,968

                            -----------------------------------------------------------------------------------------------
Total Restaurant Properties   16,315,857   10,484,662  26,960,562             -    10,444,823    26,960,562    37,405,385
                            -----------------------------------------------------------------------------------------------

 Total Real Estate          $ 286,425,450 $53,779,543 $ 354,621,042 $18,163,778  $ 54,128,336 $ 372,396,189 $ 426,524,525
                            ===============================================================================================
</TABLE>


<TABLE>
<CAPTION>

        Description
        -----------
                             Accumulated  Date of  Date    Life
                            Depreciation  Constr. Acquired (Years)
<S>                         <C>          <C>    <C>       <C>
Roanoke (Hollins)                293,651 Feb-73   Apr-87    40
Roanoke (Abenham)                268,599 Nov-82   Apr-87    40
Rocky Mount                      282,912 May-80   Apr-87    40
Smithfield                       254,029 Apr-77   Apr-87    40
Verona                           218,226 Jan-85   Apr-87    40
Virginia Beach (Lynnhaven)       309,260 Jun-80   Apr-87    40
Virginia Beach (Holland)         316,517 Aug-83   Apr-87    40
Wise                             249,930 Jun-80   Apr-87    40
                           --------------
                               8,168,810

                           --------------
Total Restaurant Properties   11,939,781
                           --------------

 Total Real Estate          $ 66,453,731
                           ==============
</TABLE>



(1) Indicates the restaurants encumbered by a line of credit with a bank for up
to $16,315,857 outstanding at 12/31/04.

(2) Aggregate cost basis at December 31, 2004, for federal income tax purposes
was approximately $390 million.


                                       80
<PAGE>
 BNP RESIDENTIAL PROPERTIES, INC.
-------------------------------------------------------------------------------
 Schedule III - Real Estate and Accumulated Depreciation

<TABLE>
<CAPTION>



                                                  2004                  2003                  2002
                                           -------------------   -------------------  --------------------
<S>                                            <C>                   <C>                   <C>
 Real estate investments:
      Balance at beginning of year              $ 337,066,609         $ 314,871,784         $ 260,748,391
      Additions during year
         Acquisitions                              86,148,336            23,525,339            51,435,516
         Improvements, etc.                         5,231,775             3,350,919             2,785,303
      Deductions during year                       (1,922,195)           (4,681,433)              (97,426)
                                           -------------------   -------------------  --------------------
      Balance at close of year                  $ 426,524,525         $ 337,066,609         $ 314,871,784
                                           ===================   ===================  ====================


 Accumulated depreciation:
      Balance at beginning of year              $  56,052,569         $  49,448,825         $  40,751,890
      Provision for depreciation                   11,660,219            10,039,615             8,794,361
      Deductions during year                       (1,259,057)           (3,435,871)              (97,426)
                                           -------------------   -------------------  --------------------
      Balance at close of year                  $  66,453,731         $  56,052,569         $  49,448,825
                                           ===================   ===================  ====================

</TABLE>




                                       81
<PAGE>


                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>

Exhibit No.
                                                                                                     Page
  <S>        <C>                                                                                    <C>
     2.1*     Master Agreement of Merger and Acquisition by and among BNP Residential Properties,        -
              Inc., BNP Residential Properties Limited Partnership, Paul G. Chrysson, James G.
              Chrysson, W. Michael Gilley, Matthew G. Gallins, James D. Yopp, and the partnerships
              and limited liability companies listed therein, dated September 22, 1997 (filed as
              Exhibit 2.1 to Registration Statement No. 333-39803 on Form S-2, December 16, 1997,
              and incorporated herein by reference)
     2.2*     Amendment to Master Agreement of Merger and Acquisition dated September 22, 1997, by       -
              and among BNP Residential Properties, Inc., BNP Residential Properties Limited
              Partnership, Paul G. Chrysson, James G. Chrysson, W. Michael Gilley, Matthew G.
              Gallins, James D. Yopp, and the partnerships and limited liability companies listed
              therein, dated November 3, 1997 (filed as Exhibit 2.3 to BNP Residential Properties,
              Inc. Current Report on Form 8-K dated December 1, 1997, and incorporated herein by
              reference)
     3.1*     Articles of Incorporation (filed as Exhibit 3.1 to BNP Residential Properties, Inc.,       -
              Current Report on Form 8-K dated March 17, 1999, and incorporated herein by
              reference)
     3.2*     Articles Supplementary, Classifying and Designating 909,090 Shares of Series B             -
              Cumulative Convertible Preferred Stock, dated December 28, 2001 (filed as Exhibit
              3.1 to BNP Residential Properties, Inc. Current Report on Form 8-K dated December
              28, 2001, and incorporated herein by reference)
     3.3*     Amended and Restated By-Laws adopted May 20, 2004 (filed as Exhibit 3.1 to BNP             -
              Residential Properties, Inc., Current Report on Form 8-K dated July 14, 2004, and
              incorporated herein by reference)
     4.1*     Rights Agreement, dated March 18, 1999, between the Company and First Union National       -
              Bank (filed as Exhibit 4 to BNP Residential Properties, Inc. Current Report on Form
              8-K dated March 17, 1999, and incorporated herein by reference)
     4.2*     Registration Rights Agreement By and Among BNP Residential Properties, Inc. and            -
              Preferred Investment I, LLC, dated December 28, 2001 (filed as Exhibit 4 to BNP
              Residential Properties, Inc. Current Report on Form 8-K dated December 28, 2001, and
              incorporated herein by reference)
    10.1*     Second Amended and Restated Agreement of Limited Partnership of BNP Residential            -
              Properties Limited Partnership dated as of March 17, 1999 (filed as Exhibit 10.1 to
              the company's Annual Report on Form 10-K for the year ended December 31, 1998, and
              incorporated herein by reference)
    10.2*     Amendment to Second Amended and Restated Agreement of Limited Partnership of BNP           -
              Residential Properties Limited Partnership, dated December 28, 2001 (filed as
              Exhibit 10.1 to BNP Residential Properties, Inc. Current Report on Form 8-K dated
              December 28, 2001, and incorporated herein by reference)
    10.3*     Investment Agreement By and Between BNP Residential Properties, Inc. and Preferred         -
              Investment I, LLC, dated December 28, 2001 (filed as Exhibit 10.2 to BNP Residential
              Properties, Inc. Current Report on Form 8-K dated December 28, 2001, and
              incorporated herein by reference)
    10.4*     Amended and Restated Master Lease Agreement dated December 21, 1995, between BNP           -
              Residential Properties, Inc. and Boddie-Noell Enterprises, Inc. (filed as Exhibit
              10.1 to BNP Residential Properties, Inc. Annual Report on Form 10-K dated December
              31, 1995, and incorporated herein by reference)
    10.5*     Amended and Restated 1994 Stock Option and Incentive Plan (filed as Exhibit 10.8 to        -
              BNP Residential Properties, Inc. Quarterly Report on Form 10-Q for the quarter ended
              June 30, 1998, and incorporated by reference herein)

</TABLE>

                                       82
<PAGE>

<TABLE>
<CAPTION>

Exhibit No.
                                                                                                     Page
  <S>        <C>                                                                                    <C>
    10.6*     Form and description of Employment Agreements dated July 15, 1997, and December 1,         -
              2002, between BNP Residential Properties, Inc. and certain officers (filed as
              Exhibit 10 to BNP Residential Properties, Inc. Quarterly Report on Form 10-Q for the
              quarter ended September 30, 1997; and as Exhibit 10.7 to BNP Residential Properties,
              Inc. Annual Report on Form 10-K for the year ended December 31, 2002, and
              incorporated herein by reference)
    10.7*     Purchase Agreement by and among BNP Residential Properties, Inc. and Purchasers for        -
              1,175,519 shares of common stock, dated as of February 17, 2004 (filed as Exhibit
              10.1 to BNP Residential Properties, Inc. Current Report on Form 8-K dated February
              23, 2004, and incorporated herein by reference)
    10.8*     Purchase Agreement by and among BNP Residential Properties, Inc. and Purchasers for        -
              1,420,000 shares of common stock, dated as of July 14, 2004 (filed as Exhibit 10.1
              to BNP Residential Properties, Inc. Current Report on Form 8-K dated July 14, 2004,
              and incorporated herein by reference)
    10.9      Exchange Agreement among BNP Residential Properties, Inc., BNP Residential                84
              Properties Limited Partnership, and Beach Investment Properties, LLC and members
              thereof, dated as of December 7, 2004
    10.10     Exchange Agreement among BNP Residential Properties, Inc., BNP Residential               125
              Properties Limited Partnership, and Timberline Ventures, LLC and members thereof,
              dated as of December 7, 2004
    10.11     Exchange Agreement among BNP Residential Properties, Inc., BNP Residential               167
              Properties Limited Partnership, and Laurel Springs II, LLC and members thereof,
              dated as December 7, 2004
    10.12     Exchange Agreement among BNP Residential Properties, Inc., BNP Residential               206
              Properties Limited Partnership, and Salem Ridge/Shugart, LLC and members thereof,
              dated as of December 7, 2004
    21        Subsidiaries of the Registrant                                                           243
    23        Consent of Ernst & Young LLP                                                             244
    31.1      Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer                        245
    31.2      Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer                        246
    32.1      Section 1350 Certification by Chief Executive Officer                                    247
    32.2      Section 1350 Certification by Chief Financial Officer                                    248
</TABLE>

* Incorporated herein by reference

                                       83
<PAGE>