<PAGE>

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

                                  FORM 10-K

/ / Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934 (Fee Required)

For the fiscal year ended December 31, 1997      Commission file number  1-9524

                           BURNHAM PACIFIC PROPERTIES, INC.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)

             Maryland                                    33-0204162
  -------------------------------            ---------------------------------
  (State or other jurisdiction of            (IRS Employer Identification No.)
   incorporation or organization)
 
610 West Ash Street, San Diego, California               92101
------------------------------------------            ----------
(Address of principal executive offices)              (Zip Code)

                                  (619) 652-4700
                                  --------------
              Registrant's telephone number, including area code

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

                                                Name of Each Exchange
Title of Each Class                             On Which Registered
-------------------                             -------------------
Common Stock, $.01 Par Value                    New York Stock Exchange  

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

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

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     At March 18, 1998 the aggregate market value of the Registrant's shares 
of common stock, $.01 par value, held by non-affiliates of the Registrant was 
$ 332,893,400
-------------------------------------------------------------------------------
     There were 23,463,852 shares of common stock outstanding at March 18, 
1998.

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     Part III and Item 5 incorporate certain provisions of the Registrant's 
Proxy Statement for its 1998 Annual Meeting to be filed subsequently.

                                       1
<PAGE>

FORWARD LOOKING STATEMENTS

     The information contained and incorporated by reference in this Form 
10-K contains forward-looking statements within the meaning of Section 27A of 
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended (the "1934 Act").  A 
number of factors could cause results to differ materially from those 
anticipated by such forward-looking statements.  These factors include, but 
are not limited to, the competitive environment in the retail industry in 
general and in the Company's specific market areas, changes in prevailing 
interest rates and the availability of financing, inflation, economic 
conditions in general and in the Company's specific market areas, labor 
disturbances, demands placed on management by the recent substantial increase 
in the number of properties owned by the Company (the "Properties"), changes 
in the Company's acquisition plans and certain other factors described under 
"Risk Factors" in Item 1 below.  In addition, such forward-looking statements 
are necessarily dependent upon assumptions, estimates and data that may be 
incorrect or imprecise.  Accordingly, any forward-looking statements included 
or incorporated by reference in this Form 10-K do not purport to be 
predictions of future events or circumstances and may not be realized.  
Forward-looking statements can be identified by, among other things, the use 
of forward-looking terminology such as "believes," "expects," "may," "will," 
"should," "seeks," "pro forma," or "anticipates," or the negative thereof, or 
other variations thereon or comparable terminology, or by discussions of 
strategy or intentions.

                                       PART I

ITEM 1.  BUSINESS

GENERAL

     Burnham Pacific Properties, Inc. (the "Company") is a fully-integrated 
real estate operating company which acquires, rehabilitates, develops and 
manages retail shopping centers on the West Coast.  As of December 31, 1997, 
the Company owned interests in 61 retail shopping centers, 59 of which were 
fully operational, and two of which were in various stages of development.  
Fifty-four of the properties were located in California, six in Washington 
and 1 in New Mexico.  At December 31, 1997, the Company also owned four 
office/industrial properties located in Southern California, which are 
considered non-strategic. Total Company owned-gross leasable area ("GLA") was 
approximately 8.5 million square feet.

     The Company was originally incorporated as a California corporation in 
1986 and in 1987 became the successor to a publicly-traded real estate 
limited partnership which was organized in 1963.  The Company reorganized as 
a Maryland corporation in May 1997. The Company has elected to qualify as a 
REIT for federal income tax purposes.

OPERATING PARTNERSHIP FORMATION

     The Company formed Burnham Pacific Operating Partnership, L.P. (the 
"Operating Partnership") under the Delaware Revised Uniform Limited 
Partnership Act in November 1997, and by year end had transferred to the 
Operating Partnership or subsidiaries of the Operating Partnership legal or 
beneficial ownership of substantially all of the real property and related 
personal property owned by the Company and its subsidiaries and of the 
beneficial 

                                       2
<PAGE>

interest owned by the Company and its subsidiaries in any partnership or 
limited liability company that owns a direct or indirect interest in real 
property and related personal property.  The Company intends that the 
Operating Partnership (including subsidiaries of the Operating Partnership) 
will be the vehicle through which the Company will own its current assets, 
will make its future acquisitions and generally conduct its business.  
Effective January 1, 1998, the Operating Partnership has become the employer 
and paymaster of all of the Company's employees.  The Company's operating 
partnership structure (frequently called an "UPREIT Structure") provides 
sellers the opportunity to contribute properties to the Company (through the 
Operating Partnership) on a tax-deferred basis in exchange for limited 
partner units of the Operating Partnership.  The Company believes that its 
ability to offer tax-deferred transactions to sellers will enhance its 
attractiveness to local owners and developers.  References in this report to 
the "Company" include the Operating Partnership and other consolidated 
subsidiaries unless the context otherwise requires.

1995-1996 RESTRUCTURING

     In October 1995, the Company appointed J. David Martin as its Chief 
Executive Officer and President and as a member of its Board of Directors.  
The Company simultaneously appointed Daniel B. Platt as its Chief Financial 
Officer and Chief Administrative Officer and James M. Kessler as Director of 
Development.  Concurrently with these appointments, the Company acquired 
interests in certain retail development projects from Mr. Martin and certain 
affiliates ("The Martin Properties").  (For additional information regarding 
these projects, see "Properties - Development Properties" and "Real Estate - 
Development Properties" in Note 2 to the Financial Statements accompanying 
this report.)

     In November 1995, new management developed, and the Board of Directors 
approved, a business plan for repositioning the Company which was executed in 
late 1995 and in 1996.  The focus of this plan was to position the Company 
for future growth.  The principal features of the plan included those 
discussed below.

     The Company increased its financial flexibility by reducing its 
quarterly dividend, negotiating a new credit facility with increased 
borrowing capacity, negotiating a joint venture relationship with a major 
pension fund and developing a "DownReit" structure to pay for acquisitions 
with limited partnership units which are exchangeable for common stock.

     The Company concluded that it should focus exclusively on the 
acquisition, rehabilitation, development and management of market/drug and 
promotional retail centers and diversify its geographic focus throughout 
California.  Consistent with the new retail orientation, the Company disposed 
of five of its non-strategic office and industrial properties in 1996 and 
used the proceeds to pay down borrowings under its previous lines of credit.

     The Company also increased its internal capabilities by internalizing 
the management of the majority of its portfolio, investing in new property 
management information systems, creating an acquisitions and dispositions 
group, internalizing the leasing of a significant portion of its portfolio, 
adding an experienced rehabilitations and development group and opening 
regional offices in Los Angeles and San Francisco.

                                       3
<PAGE>

      During 1996, the Company engaged in development activities with respect 
to two of the Martin Projects.  It substantially completed construction of 
Phase I of Hilltop Plaza in Richmond, California and began construction on 
1000 Van Ness, a multi-use project in downtown San Francisco.  See 
"Properties - Development Properties."

1997 ACTIVITIES

     In 1997, the Company built on the same guiding principles that formed 
its October 1995 Business Plan while concentrating its efforts on the growth 
of its retail portfolio by acquiring 42 properties totaling 5.6 million 
square feet of Company-owned GLA for approximately $598.1 million. The 
acquisition activity was notable, particularly in the fourth quarter, with 
the acquisition of the six properties in the Pacific Northwest and the 
acquisition on December 31, 1997 of a portfolio of 20 California shopping 
centers (the "Golden State Properties") containing approximately 2.6 million 
square feet of Company-owned GLA.  In addition, the Company sold its Pacific 
West Outlet Center which was considered to be non-strategic and sold 75% 
interests in Ladera Center and Margarita Plaza to California Urban Investment 
Partners, retaining a 25% interest in each center.

     The Company continued its geographic diversification by expanding into 
the Pacific Northwest through the opening of offices in Portland and Seattle. 
The Company also strengthened its management team with the addition of two 
senior executives with a combined total of 64 years experience in retail real 
estate, much of it working for the type of retail companies that are the 
Company's anchor tenants.

     The Company financed its acquisition activities through a variety of 
sources including the public issuance of common stock, the private issuance 
of preferred stock and Operating Partnership units, mortgage indebtedness, 
proceeds from the sale of non-strategic assets, the sale of interests in 
certain properties to third parties, and borrowings under credit facilities.

     The Company's development and rehabilitations group completed one 
rehabilitation project, substantially completed the construction and leasing 
of the 1000 Van Ness project, and obtained final approval from its Board of 
Directors for the commencement of construction of the retail portion of the 
Downtown Pleasant Hill project.  See "Properties - Development Properties."

     Throughout 1997, the Company engaged in discussions concerning 
acquisitions and developments of retail properties that might be consistent 
with its business plan.  Some of these discussions have resulted in an 
additional acquisition subsequent to year-end.  See Note 18 - "Subsequent 
Events" to the accompanying Financial Statements.  As a part of its ongoing 
business, the Company regularly engages in discussions with public and 
private real estate entities regarding possible portfolio or asset 
acquisitions or business combinations.  See Item 7 "Management's Discussion 
and Analysis of Financial Condition and Results of Operations" for further 
discussions of various of the Company's activities during the year.

                                       4
<PAGE>

Golden State Properties Acquisition

     Pursuant to the terms of the acquisition agreement (the "Contribution 
Agreement"), the then owners of the Golden State Properties (the "Golden 
State Contributors") contributed 20 shopping centers to the Operating 
Partnership in exchange for initial consideration of approximately $302.4 
million.  This initial consideration was comprised of approximately $50 
million of Preferred Limited Partner Units ("Preferred Units") of the 
Operating Partnership and approximately $252.4 million in cash.  The Company 
financed the cash portion of the purchase price through the privately 
negotiated sale of $70 million of Series 1997-A Convertible Preferred Stock 
("Series A Preferred Stock") and the borrowing by a bankruptcy-remote 
subsidiary of the Operating Partnership of $150 million in first mortgage 
debt collateralized by 19 of the Golden State Properties and $32.4 million of 
additional borrowings under the Company's existing credit facility with 
Nomura Asset Capital Corporation.  The mortgage debt bears interest at 6.76% 
annually (representing a spread of 95 basis points over the treasury bond 
rates of comparable maturities) and is fixed for the ten year term.  The 
preferences and other economic terms of the Preferred Units are substantially 
identical to those of the Series A Preferred Stock.  A description of certain 
terms of the Series A Preferred Stock, the Preferred units and the common 
units of the Operating Partnership (the "Common Units") is contained in Item 
5 ("Market for Registrant's Common Equity and Related Stockholder Matters - 
Recent Issues of Unregistered Securities") of this report.

     In addition, the Golden State Contributors have the right to receive 
additional consideration of up to $41.6 million for additional income 
resulting from the lease-up of certain specified portions of the Golden State 
Properties and construction and lease-up of certain additional space.  The 
additional consideration, if any, will be paid out over an eighteen-month 
period.  The Golden State Contributors have the option of taking the 
additional consideration in Common Units with the number of such Common Units 
to be the amount of such additional value divided by the then fair market 
value (as determined at the respective times of payment) of the Common Stock, 
subject to certain conditions.  The Golden State Contributors will have the 
option of having the Company or the Operating Partnership immediately redeem 
such Common Units for cash.  Any leases for the unleased and unbuilt space 
must adhere to certain standards as to use, creditworthiness and lease terms, 
with the Contributors responsible for all leasing costs and the Company 
retaining certain approval rights.

EMPLOYEES

     At December 31, 1997, the Company had 72 employees.

PROPERTIES

     Market/Drug centers comprise approximately 65% of the Company's retail 
portfolio.  The Company defines Market/Drug centers as those that serve a 
fairly localized trade area and that offer an assortment of goods and 
services, such as groceries and drugs, designed to meet the day-to-day needs 
of consumers. Management believes that such centers are less susceptible to 
economic downturns because purchases from supermarkets and drug stores tend 

                                       5
<PAGE>

to be less discretionary in nature, and further believes that supermarkets 
and drugstores are strong anchor tenants because of the regular, recurring 
nature of the shopping trips they generate.  Because many supermarket and 
drug chains continue to adjust the average size of their stores, many of 
these centers also lend themselves to the Company's rehabilitation strategy.

     Promotional centers comprise approximately 31% of the Company's retail 
portfolio.  The Company defines promotional centers as those centers with 
multiple retailers as anchor tenants. The Company defines promotional 
retailers as retailers which typically offer convenience, a broad selection 
and low pricing on a fairly discrete category of retail merchandise, and 
limited amounts of non-anchor space.  Such retailers are sometimes referred 
to as "category killers." Management believes that promotional retailers 
provide a broad base of potential tenants for 15,000 to 45,000 square-foot 
stores, typical of the Company's Promotional Centers, thereby mitigating its 
releasing risk.

     In addition, the Company looks for Market/Drug and Promotional centers 
with an entertainment component (such as a multiscreen cinema), because the 
entertainment component typically brings additional traffic to the center 
during the evenings, extending the center's hours of operation.

     The Company believes the characteristic common to these three retail 
property types is the ability to attract tenants that can offer value-priced 
products and services to a broad base of consumers.  The Company defines 
value pricing as a combination of price, quality, convenience and service.

RETAIL PROPERTIES - At December 31, 1997, the Company's operating retail 
properties consisted of 45 Market/Drug centers, 10 promotional centers, one 
entertainment center, two convenience centers and one factory outlet center. 
These Properties range in size from approximately 9,000 square feet to 
approximately 517,000 square feet, which contained in the aggregate 
approximately 7,861,700 million square feet of Company-owned GLA.  The 
majority of these Properties are located in California, including 14 in the 
San Diego region, 15 in the Los Angeles region and 21 in the San 
Francisco/Sacramento region.  In addition, six Properties are located in the 
Pacific Northwest and one Property in New Mexico. The Company also owns 
interests in two Market/Drug Centers in unconsolidated subsidiaries.

     Fifty-three of these operating retail Properties are owned by the 
Company (primarily through the Operating Partnership and subsidiaries) in 
fee, and 5 are held  under long-term ground leases with expiration dates 
ranging from 2023 to 2089.  In addition, the Company held a leasehold 
interest in a 44,300 square foot free-standing building.  The Company leased 
these properties to approximately 1,148 different tenants and overall 
occupancy at year-end 1997 was approximately 91%.  No single tenant accounted 
for as much as 10% of the Company's revenues for 1997.

                                       6
<PAGE>

OFFICE/INDUSTRIAL PROPERTIES - At December 31, 1997, the Company also owned 
four office properties located in Southern California, which are considered 
non-strategic.  These Properties range in size from approximately 29,000 
square feet to approximately 338,000 square feet and aggregated approximately 
591,000 square feet of GLA.  At December 31, 1997, all of the buildings were 
100% leased.

DEVELOPMENT PROPERTIES - The Company also holds interests in two development 
properties as follows:

     1000 VAN NESS, SAN FRANCISCO.  Redevelopment of the historic 1000 Van 
Ness building and adjacent new construction in downtown San Francisco.  At 
completion, the 209,000 square foot mixed-use facility will contain a 131,500 
square foot entertainment component anchored by AMC Theaters and owned by the 
Company, and a residential component owned by a residential developer.  Total 
project cost after the sale of a portion of the building to the residential 
developer is estimated to be $53.5 million.  Completion is scheduled for the 
third quarter of 1998.

     DOWNTOWN PLEASANT HILL, PLEASANT HILL.  The Company has development 
rights to purchase various parcels of land and construct a market, 
promotional and entertainment anchored center containing approximately 
360,000 square feet of GLA as part of the City of Pleasant Hill Downtown 
Pleasant Hill Redevelopment project.  The Company estimates the total 
investment required to develop this project after the sale of various land 
parcels to other developers for residential development to be approximately 
$65 million.  The Company began purchasing individual land parcels in late 
1997 and anticipates that the project will be completed in late 1999.

                                       7
<PAGE>

     The following table sets forth the completed, operating properties owned 
by the Company at December 31, 1997.

<TABLE>
<CAPTION>
                                                                    12/31/97
                                    Year   Percent   Company-        Percent    Principal Tenants
RETAIL PROPERTIES               Acquired     Owned  Owned GLA         Leased    (Lease Expiration Date)
-----------------               --------   -------  ---------       --------    -----------------------
<S>                             <C>        <C>      <C>             <C>         <C>
SAN DIEGO REGION
Point Loma Plaza                    1989      100%    213,229          98.5%    Vons (12/31/08)
SAN DIEGO (POINT LOMA)                                                          Sport Chalet (11/21/07)
                                                                                Miller's Outpost (1/31/98)
                                                                                Family Fitness (5/31/04)

Mesa Shopping Center                1984      100%    142,532         100.0%    Lucky's (11/30/09)
SAN DIEGO (MIRA MESA)                                                           Thrifty Drugs (5/31/99)

Navajo Shopping Center              1983      100%    110,420          86.8%    Thrifty Drugs (12/31/16)
SAN DIEGO (LAKE MURRAY)             1993                                        Albertson's (8/12/22)
                                    1995

Menifee Town Center                 1997      100%     79,128          97.6%    Ralph's (3/31/07)
MENIFEE                                                        

Poway Plaza                         1988      100%     74,060          95.8%    Thrifty Drugs (5/31/07)
POWAY

Olympiad Plaza                      1997      100%     45,600         100.0%    Sav-On Drugs (9/30/00)
MISSION VIEJO

San Marcos Lucky Plaza              1997      100%     36,151          93.7%    Blockbuster Video (5/31/02)
SAN MARCOS                                                     

Silver Plaza                        1997      100%      8,545         100.0%    Video Stop (6/30/01)
SILVER CITY, NM

Wiegand Plaza II                    1986      100%    110,843          94.5%   AMC Theaters (12/31/02)
ENCINITAS                           1988                                       TJ Maxx (5/21/05)
                                    1990                                       Beverages & More (10/31/06)

K-Mart                              1993      100%     98,194         100.0%   K-Mart (8/31/06)
SAN YSIDRO                              

Independence Square                 1983      100%     92,684          97.4%   Ethan-Allen Interiors (11/30/14)
SAN DIEGO (KEARNEY MESA)                                                       Saddleback (11/30/05)

Santee Village Square               1985      100%     80,995          77.8%   AMC Theaters (12/31/98)
SANTEE

San Diego Factory Outlet            1992      100%    156,980          96.3%   Nike (5/31/04)
SAN YSIDRO                                                                     Levi's (1/31/01)
                                                                               Mikasa (12/27/98)
</TABLE>


                                       8
<PAGE>
<TABLE>
<CAPTION>
                                                                    12/31/97
                                    Year   Percent  Company-         Percent    Principal Tenants
RETAIL PROPERTIES               Acquired     Owned  Owned GLA         Leased    (Lease Expiration Date)
-----------------               --------   -------  ---------       --------    -----------------------
<S>                             <C>        <C>      <C>             <C>         <C>
Ruffin Village                      1985      100%     44,594          88.2%    Carl's Jr. (10/23/99)
SAN DIEGO (KEARNEY MESA)                                                        Subway (3/31/04)

Plaza Rancho Carmel                 1988      100%     26,978         100.0%    Graziano's Pizza (9/30/00)
SAN DIEGO (CARMEL MTN RANCH)                           ------         ------    ABC Daycare (12/31/02)
SUBTOTAL - SAN DIEGO REGION                         1,320,933          95.3%


LOS ANGELES REGION
Westminster Center                  1997      100%    365,699          92.0%    Lucky (5/31/17)
WESTMINSTER                                                                     Thrifty Drugs (5/31/16)
                                                                                Home Depot (1/31/12)
                                                                                Edwards Theatres (2/28/12)

Mountaingate Plaza                  1997      100%    282,163          91.8%    Michael's (2/28/99)
SIMI VALLEY                                                                     Thrifty (5/31/04)
                                                                                Edwards Theatres (5/31/11)

Bell Gardens Marketplace            1997      100%    159,838          87.2%    Food 4 Less (8/1/15)
BELL GARDENS                                                                    Thrifty Drugs (5/31/10)

Santa Fe Springs                    1997      100%    163,630          89.6%    Ralphs (9/30/07)
SANTA FE SPRINGS

Crenshaw Imperial                   1997      100%    151,151          87.3%    Ralphs (4/30/06)
INGLEWOOD                                                                       Thrifty (5/31/09)

La Mancha Shopping Center           1988      100%    103,904          96.6%    Ralphs (4/30/99)
FULLERTON                                                                       Thrifty (5/31/99)

Buena Vista Marketplace             1997      100%     90,995          89.9%    Ralphs (7/31/05)
DUARTE                                                             

Ralph's Center                      1997      100%     66,700         100.0%    Ralphs (12/31/06)
REDONDO BEACH                                                      

Centerwood Plaza                    1997      100%     63,144          94.5%    32nd St Market (5/31/08)
BELLFLOWER                                                                      Basically A Buck (5/31/08)

Central Shopping Center             1997      100%     62,314          84.8%    Ralphs (8/31/02)
VENTURA

Ontario Village                     1997       99%     39,954          84.6%    One Price Clothing (7/31/99)
ONTARIO

West Lancaster Plaza                1997       99%     29,318          57.5%    Blockbuster Video (6/30/98)
LANCASTER

Plaza at Puente Hills               1993      100%    516,538          91.6%    IKEA (10/31/07)
CITY OF INDUSTRY                                                                Circuit City (1/31/08)
                                                                                AMC Theaters (11/30/07)
                                                                                Smart & Final (11/30/11)
</TABLE>


                                       9
<PAGE>
<TABLE>
<CAPTION>
                                                                    12/31/97
                                    Year   Percent   Company-        Percent    Principal Tenants
RETAIL PROPERTIES               Acquired     Owned  Owned GLA         Leased    (Lease Expiration Date)
-----------------               --------   -------  ---------       --------    -----------------------
<S>                             <C>        <C>      <C>             <C>         <C>
Valley Central Shopping Center      1997    99%       480,092          97.0%    Wal-Mart (7/27/10)
LANCASTER                                                                       Staples (3/31/03)
                                                                                HomeBase (8/31/08)

Simi Valley Plaza                   1997   100%       209,747          97.5%    Edward's Theaters (6/30/19)
SIMI VALLEY                                           -------         ------    HomeBase (1/31/11)
SUBTOTAL - L.A. REGION                              2,785,187          92.2%
                            

SAN FRANCISCO REGION
Prospector's Plaza                  1997   100%       219,112          93.8%    Lucky (11/30/06)
PLACERVILLE                                                                     Longs Drugs (2/28/07)
                                                                                K-Mart (10/31/06)

Santa Rosa Value Center             1997   100%       198,528          93.4%    Food 4 Less (8/31/05)
SANTA ROSA                                                                      Thrifty (5/31/09)
                                                                                HomeBase (2/29/80)
                                                     
Fremont Gateway Plaza               1997   100%       195,092          93.2%    Raley's (12/31/20)
FREMONT                                                                         Family Fitness (7/31/13)

Gateway Center                      1997   100%       184,954          92.2%    FoodsCo (9/30/21)
MARIN CITY                                                                      Ross (1/31/07)
                                                     
Southhampton Center                 1997   100%       162,390          90.5%    Raley's (11/30/13)
BENECIA                                                                

Silver Creek Plaza                  1997   100%       134,018          88.8%    Safeway (12/21/98)
SAN JOSE                                                                        Walgreens (12/31/11)
                                                     
Auburn Village                      1997   100%       133,956          86.1%    Bel Aire Markets (1/2/15)
AUBURN                                               
                                                     
Summerhills Shopping Center         1997   100%       133,614          83.2%    Raley's (11/30/05)
SACRAMENTO                                                             

Shasta Crossroads                   1997   100%       121,376          88.0%    Food 4 Less (2/28/10)
REDDING                                                                
                                                     
Creekside Shopping Center           1997   100%       116,215          83.0%    Raley's (11/30/13)
VACAVILLE                                                              

580 Marketplace                     1997   100%       101,153          96.1%    PW Foods (6/30/05)
CASTRO VALLEY                                                                   24 Hr. Nautilus (12/31/02)
                                                     
Cameron Park                        1997    99%        97,434          73.8%    Safeway (11/30/00)
CAMERON PARK                                         
                                                     
Discovery Plaza                     1997   100%        93,398          94.5%    Bel Aire Market (3/31/14)
SACRAMENTO                                                             

</TABLE>


                                       10
<PAGE>
<TABLE>
<CAPTION>
                                                                    12/31/97
                                    Year   Percent   Company-        Percent    Principal Tenants
RETAIL PROPERTIES               Acquired     Owned  Owned GLA         Leased    (Lease Expiration Date)
-----------------               --------   -------  ---------       --------    -----------------------
<S>                             <C>        <C>      <C>             <C>         <C>
Stanford Ranch                      1997      100%     89,875          84.2%    Bel Aire Market (7/23/15)
ROCKLIN

Sunset Center                       1997      100%     85,268          95.9%    Lucky (5/31/06)
SUISUN CITY                                                                     Thrifty Drug (5/31/05)

Hallmark Town Center                1997      100%     85,066          87.9%    Food 4 Less (8/6/06)
MADERA                                                             
                                                   
Arcade Square                       1997      100%     76,701          86.6%    Raley's (4/1/98)
SACRAMENTO                                                         
                                                   
Richmond Shopping Center            1995       98%     76,670          96.6%    FoodsCo (9/30/13)
RICHMOND                                                                        Walgreens (11/30/33)
                                                   
Foothill Plaza                      1997      100%     52,315          86.0%    Payless Drugs (1/31/19)
LOS ALTOS                                          
                                                   
Fremont Hub                         1997      100%    489,778          78.1%    Safeway (10/31/04)
FREMONT                                                                         General Cinema (12/31/07)
                                                                                Ross (1/31/00)
                                                   
Hilltop Plaza                       1996      100%    183,549          93.6%    Circuit City (1/31/17)
RICHMOND                                                                        Barnes & Noble (5/20/07)
                                                    ---------          -----
SUBTOTAL - S.F. REGION                              3,030,462          88.1%
                                                   
PACIFIC NORTHWEST REGION                           
Chambers Creek                      1997      100%     58,179         100.0%    Albertsons (6/15/18)
TACOMA                                             
                                                   
Fairwood Square                     1997      100%     32,910          78.1%    Coldwell Banker (7/31/98)
RENTON                                             
                                                   
Ernst - Redmond                     1997      100%     44,324         100.0%    Linens N Things (6/30/16)
REDMOND                                            
                                                   
Puget Park                          1997      100%     40,988         100.0%    Pay-Star Cleaners (1/1/99)
SOUTH EVERETT                                                                   Craft Outlet (2/28/00)
                                                   
Meridian Village                    1997      100%    196,825         100.0%    Home Depot (8/31/12)
BELLINGHAM                                                                      Circuit City (10/31/04)
                                                   
Design Market                       1997      100%     88,487         100.0%   Schoenfeld Interiors
BELLEVUE                                              -------         ------   (9/30/99)
SUBTOTAL - PACIFIC N.W. REGION                        461,713          98.4%
                                                   
TOTAL RETAIL PROPERTIES                             7,598,295          91.5%

</TABLE>


                                       11
<PAGE>
<TABLE>
<CAPTION>
                                                                    12/31/97
                                    Year   Percent   Company-        Percent    Principal Tenants
OFFICE PROPERTIES               Acquired     Owned  Owned GLA         Leased    (Lease Expiration Date)
-----------------               --------   -------  ---------       --------    -----------------------
<S>                             <C>        <C>      <C>             <C>         <C>
Anacomp Building                    1992      100%    338,485         100.0%    Anacomp (12/31/07)
POWAY

Bergen Brunswig Building            1992      100%    175,000         100.0%    Bergen Brunswig Corp.
ORANGE                                                                          (3/31/00)

Scripps Ranch Buildings             1987      100%     49,284         100.0%    Edge Semiconductor
San Diego (Scripps Ranch)           1988                                        (3/31/04)

Marcoa Building                     1989      100%     28,600         100.0%    Marcoa Publishing Co.
SAN DIEGO (SORRENTO MESA)                             -------         ------    (9/30/99)
TOTAL OFFICE PROPERTIES                               591,369         100.0%

GRAND TOTAL (1)                                     8,189,664          92.1%

</TABLE>

(1) Does not include two properties held through unconsolidated subsidiaries 
    in which the Company holds 25% joint venture interests.

                                       12
<PAGE>

BANKRUPTCY REMOTE PROPERTIES

     Twenty-six of the Company's Properties (listed in the table below), 
having a net book value of approximately $466,033,000 at December 31, 1997, 
(collectively, the "Bankruptcy Remote Properties" and, each a "Bankruptcy 
Remote Property") are wholly-owned by various "Bankruptcy Remote Entities"  
which are indirect subsidiaries of the Company.  The assets of each 
Bankruptcy Remote Entity, including the respective Bankruptcy Remote Property 
or Properties owned by each, are owned by that Bankruptcy Remote Entity alone 
and are not available to satisfy claims that any creditor may have against 
the Company, its affiliates, or any other person or entity.  No Bankruptcy 
Remote Entity has agreed to pay or make its assets available to pay creditors 
of the Company, any of its affiliates or any other person or entity.  
Neither the Company nor any of its affiliates has agreed to pay or make its 
assets available to pay creditors of any Bankruptcy Remote Entity (other than 
any agreement by a Bankruptcy Remote Entity to pay its own creditors).  No 
affiliate of any Bankruptcy Remote Entity has agreed to pay or make its 
assets available to pay creditors of any Bankruptcy Remote Entity.

<TABLE>
<CAPTION>
Owner                                      Property
-----                                      --------
<S>                                        <C>
BPP/Valley Central, L.P.                   Valley Central Shopping Center, Lancaster, CA
BPP/Puente Hills, L.L.C.                   The Plaza at Puente Hills, Industry, CA
BPP/Crenshaw-Imperial, L.P.                Crenshaw-Imperial Shopping Center, Inglewood, CA
BPP/Mountaingate, L.P.                     Mountaingate Plaza, Simi Valley, CA
BPP/Simi Valley, L.P.                      Simi Valley Plaza, Simi Valley, CA
BPP/Northwest Acquisitions, L.L.C.         Design Market, Bellevue, WA
                                           Fairwood Square, Renton, WA
BPP/Golden  State  Acquisitions, L.L.C.    Creekside Shopping Center, Vacaville, CA
                                           Sunset Center, Suisun City, CA
                                           Discovery Plaza, Sacramento, CA
                                           Summer Hills Shopping Center, Sacramento, CA
                                           Arcade Square, Sacramento, CA
                                           Prospector's Plaza, Placerville, CA
                                           Santa Rosa Value Center, Santa Rosa, CA
                                           580 Marketplace, Castro Valley, CA
                                           Gateway Plaza, Fremont, CA
                                           Southhampton Shopping Center, Benicia, CA
                                           Silver Creek Plaza, San Jose, CA
                                           Shasta Crossroads, Redding, CA
                                           Centerwood Plaza, Bellflower, CA
                                           Ralphs Center, Redondo Beach, CA
                                           Westminster Center, Westminster, CA
                                           Buena Vista Shopping Center, Duarte, CA
                                           San Marcos Plaza, San Marcos, CA
                                           Hallmark Town Center, Madera, CA
                                           Menifee Town Center, Menifee, CA
</TABLE>

                                       13
<PAGE>

LEASE EXPIRATIONS OF THE COMPANY'S PORTFOLIO

     The following table sets forth scheduled lease expirations for leases in 
effect as of December 31, 1997, for each of the next ten years for all of the 
Company's Properties.  The tables assume that none of the tenants exercises 
renewal options or termination rights.

<TABLE>
<CAPTION>
                        Total           Gross          Annualized Base Rent
                      Number of       Leasable            
Leases                 Leases            Area                      Percent of
Expiring in:          Expiring        (sq. ft.)        Amount           Total
------------         ----------------------------------------------------------
<S>                  <C>             <C>            <C>          <C>
1998                       246           598,476    $ 7,608,187         8.6%
1999                       197           575,584      8,110,469         9.2
2000                       198           722,027     11,732,276        13.3
2001                       171           487,906      7,235,138         8.2
2002                       188           531,348      8,041,294         9.1
2003                        64           186,938      2,530,313         2.9
2004                        46           358,751      3,295,489         3.7
2005                        33           339,614      3,369,298         3.8
2006                        25           453,095      3,624,466         4.1
2007                        37           942,915      8,809,295        10.0
After 2007                 124         2,350,410     23,993,317        27.2
</TABLE>

                                       14
<PAGE>

INDEBTEDNESS

     The Company's total outstanding consolidated mortgage debt secured by
interests in its properties (other than those properties secured under the
Credit Facility) was $350,758,180 at December 31, 1997.  The following table
sets forth certain information regarding this debt.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                               Principal
                                               Balance
                                               Outstanding                                  Interest            Annual
Property                                       12/31/97             Maturity Date             Rate              Payment
--------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                  <C>                      <C>               <C>
Golden State Prop. (19 properties) (1)        $150,000,000           January 2008 (3)          6.76%          $11,686,139
Plaza at Puente Hills (1)                       32,814,955             March 2004 (3)          7.98%            3,060,656
Valley Central Shopping Center (1)              25,181,265             March 2004 (3)          7.98%            2,348,661
Mountaingate Plaza (1)                          23,562,407             March 2006 (3)          8.05%            2,241,680
Gateway Center                                  16,947,459           October 2004 (3)          7.39%            1,492,976
Simi Valley Plaza (1)                           16,241,806              June 2026              8.98%            1,579,268
Point Loma Plaza                                15,343,655          December 1999 (3)          8.13%            1,772,896
Bergen Brunswig Building                         9,529,315           October 1999 (3)          8.38%              912,096
Mesa Shopping Center                             8,002,569           January 2002 (3)         10.00%              911,980
Wiegand Plaza                                    7,095,407           January 2002 (3)         10.00%              977,334
Richmond Shopping Center                         6,953,694           January 2005 (3)          9.50%              755,280
Design Market (1)                                6,600,000          December 2007 (3)          7.47%              552,152
Stanford Ranch                                   6,440,860         September 2005 (3)          7.88%              676,212
Olympiad                                         6,185,798           October 2007 (3)          7.49%              549,326
Crenshaw-Imperial Shopping Ctr. (1)              5,233,593              July 2020              8.80%              534,948
Ontario Village                                  3,643,633              July 1998 (3)          9.75%              411,461
San Diego Factory Outlet Center                  2,772,312         September 2006              8.67%              453,138
Puget Park                                       2,565,502              July 2007 (3)          8.38%              267,384
Fairwood Square (1)                              2,526,000          December 2007 (3)          7.47%              211,324
Chambers Creek                                   1,617,951          February 2017 (2)          8.75%              174,372
Mountaingate Plaza                               1,200,000           October 1999 (3)          0.00%                    -
Silver City                                        300,000         September 2001 (3)          4.28%                    -
                                              ------------                                                    -----------
Total                                         $350,758,181                                                    $31,569,283
                                              ------------                                                    -----------
                                              ------------                                                    -----------
</TABLE>

__________________
(1)  "Bankruptcy Remote Property"
(2)  Adjusted annually at February 1.
(3)  Balloon payment at maturity.

     Additionally, at December 31, 1997, the Company had $105,887,700 and 
$74,981,500 outstanding under the secured and unsecured portions of its 
Credit Facility, respectively.  The following properties secured the secured 
portion of the Credit Facility: San Diego Factory Outlet Center, Navajo 
Shopping Center, Santee Village Square, Poway Plaza, Meridian Village, Auburn 
Village, La Mancha Shopping Center, Independence Square, Santa Fe Springs, 
Central Shopping Center, Foothill Plaza and Fremont Hub.  For a discussion 
concerning the Company's Credit Facility, see Item 7, "Management's 
Discussion and Analysis of Financial Condition and Results of Operations - 
Liquidity and Capital Resources."

     In addition, the Company has a construction loan which matures in June 
1998, which is secured by Hilltop Plaza. At December 31, 1997, $18,753,000 
was outstanding under this loan at a rate of approximately 8.50%.

                                       15
<PAGE>

     For additional information concerning debt secured by the Company's 
Properties, reference is made to Notes 2, 3, 4 and 5 to the Consolidated 
Financial Statements.

SIGNIFICANT PROPERTIES

     Only one Property, The Plaza at Puente Hills, accounted for 10 percent 
or more of the Company's total revenues in 1997.  No property accounted for 
10 percent or more of the total assets of the Company at December 31, 1997.

     THE PLAZA AT PUENTE HILLS represented 6% of the Company's total assets 
at December 31, 1997 and 13% of the Company's total 1997 revenues.  As of 
December 31, 1997, annual base rentals ranged from $7.80 to $31.08 per square 
foot.  At December 31, 1997, one tenant, IKEA Furniture, occupied more than 
10% of the rentable square footage (150,000 square feet) at a base rental as 
of December 31, 1997 of $2 million per annum, for a term ending in 2007, with 
four five-year renewal options.  The 1997 property tax rate was 1.83% 
resulting in a tax of approximately $1,300,000 (including special 
assessments), substantially all of which was reimbursed by tenants under 
their leases.  Management believes that the Property is adequately covered by 
insurance. During the period 1993 to 1997, this Property has experienced the 
following average rental per square foot and occupancy percentage:

<TABLE>
<CAPTION>
                              Average Base Rental
          Year-End              Per Square Foot              Occupancy %
          --------              ---------------              -----------
<S>                           <C>                            <C>
            1993                     $12.40                       94%
            1994                      12.70                       93
            1995                      12.77                       92
            1996                      12.29                       92
            1997                      12.99                       92
</TABLE>

                                       16
<PAGE>

     The following tabulation shows the expiration schedule of leases at the 
Plaza at Puente Hills as of December 31, 1997.

<TABLE>
<CAPTION>
                                 Approximate
                 Total Number   Gross Leasable         Annualized Base Rent
Leases             of Leases         Area              --------------------
Expiring In        Expiring       Square Feet    (in Thousands)   Percent of Total
-----------      ------------   --------------   --------------   ----------------
<S>              <C>            <C>              <C>              <C>
1998                   11           28,707         $      464             8%
1999                    4           18,250                216             4
2000                   11           35,915                660            11
2001                    8           34,030                550             9
2002                    4           22,595                341             6
2003                    4           24,968                384             6
2004                    2            9,200                239             4
2005                    0                0                  0             0
2006                    0                0                  0             0
2007                    2          191,141              1,978            32
Thereafter              6          108,127              1,310            21
</TABLE>

RISK FACTORS

     This report contains forward-looking statements within the meaning of 
Section 27A of the Securities Act and Section 21E of the Exchange Act.  
Actual events, developments and results could differ materially from those 
anticipated or projected in the forward-looking statements as a result of a 
number of factors, including those listed below and elsewhere in this 
document.  However, because the Company operates in a rapidly changing 
environment, there can be no assurance that the following factors include all 
material risks to the Company at any given time.  See "Forward-Looking 
Statements" at the beginning of this report.

GENERAL REAL ESTATE INVESTMENT RISKS

     Real property investments are subject to a variety of risks. The yields 
available from equity investments in real estate depend on the amount of 
income generated and expenses incurred. If the Properties do not generate 
sufficient income to meet operating expenses, including debt service and 
capital expenditures, the Company's results of operations and ability to make 
distributions to its shareholders will be adversely affected. The performance 
of the economy in each of the areas in which the Company's Properties are 
located affects occupancy, market rental and vacancy rates and expenses, and, 
consequently, has an impact on the revenues from the Properties and their 
underlying values. The financial results of major local employers may have an 
impact on the revenues and value of certain of the Properties.

     Revenues from the Company's Properties may be further adversely affected
by, among other things, the general economic climate, local economic conditions
in which the Properties are located, such as oversupply of space or a reduction
in demand for rental space, the attractiveness of the Properties to tenants,
competition from other available space, the ability of the Company to provide
for adequate maintenance and insurance and increased operating expenses
(including real estate taxes and utilities) which may not be passed through to
tenants; and the expense of periodically renovating, repairing and re-leasing
space. There is also the risk that as leases on the Properties expire, tenants
will enter into new leases on terms that are less favorable to the

                                       17
<PAGE>

Company. Revenues and real estate values may also be adversely affected by 
such factors as applicable laws (e.g., the Americans With Disabilities Act of 
1990 and tax laws), interest rate levels and the availability and terms of 
financing. In addition, real estate investments are relatively illiquid and, 
therefore, will tend to limit the ability of the Company to vary its 
portfolio promptly in response to changes in economic or other conditions.

     Most of the leases of the Company's retail Properties, as is common with 
many multi-tenant shopping centers, provide for tenants to reimburse the 
Company for a portion (frequently based upon the portion of total retail 
space in the Property that is occupied by the tenant) of the common area 
maintenance, real estate taxes, insurance and other operating expenses of the 
Property. To the extent that a Property has vacant rentable space, not only 
will the Company be deprived of the base rent that it would receive if the 
vacant space were occupied, but the Company itself will have to bear the 
unreimbursed expense applicable to such vacant space. Likewise, such expenses 
are generally not reduced when circumstances cause a reduction in rental 
revenues from the Property. If a Property is mortgaged to secure the payment 
of indebtedness and if the Company is unable to meet its mortgage payments, a 
loss could be sustained as a result of foreclosure on the Property or the 
exercise of other remedies by the mortgagee. Likewise, if a Property suffers 
sustained reductions in revenues, the Company may sustain a writedown of the 
asset value and a related charge to earnings.

GEOGRAPHIC CONCENTRATION

     The Company's Properties are all located on the West Coast with 
substantial concentration in  the State of California, and within such state 
primarily in the San Diego County, greater Los Angeles and San Francisco Bay 
areas. This concentration of Properties subjects the Company to the strengths 
or weaknesses of the California economy and the aforementioned local 
economies in a number of ways. The performance of the economy in each 
locality affects occupancy, market rental rates and expenses and, 
consequently, has an impact on the revenues from the Company's Properties and 
their underlying values. The financial results of major local employers may 
have an impact on the revenues and value of certain of the Properties. A 
downturn in the economy of California in general or of any of these local 
economies could adversely affect the Company's results of operations and 
ability to make distributions to its shareholders. In that regard, certain 
areas of California (particularly the greater Los Angeles area) have in the 
past been adversely affected by reductions in defense spending, and certain 
other areas of California (particularly the San Francisco Bay area) may be 
substantially influenced by conditions in the high technology industries. 
Additionally, certain areas in California have been and remain subject to 
various natural disasters, including earthquakes and floods.

INVESTMENT IN SINGLE INDUSTRY

     The Company's current strategy is to acquire interests only in retail 
shopping centers and related properties. As a result, the Company will be 
subject to risks inherent in investments in a single industry. The effects on 
cash available for distribution to the Company's shareholders resulting from 
a downturn in the retail industry might be more pronounced than if the 
Company's portfolio were more diversified as to property types.

     Among the risks that the Company as an owner of Properties leased 
primarily to retail tenants may face are the volatile nature of the retail 
business and changes in consumer preferences, which may result in tenant 
failures or changes in the physical requirements of retailers that the 
Company may be required to accommodate in order to retain or attract tenants. 

                                       18
<PAGE>

Retail chains may overexpand in the same general market area, thereby 
creating competition with their own stores that may be in one or more of the 
Company's Properties. Because many anchor tenants frequently have negotiating 
power to demand the exclusive or sole right to sell certain types of products 
in a shopping center, the existence of such rights may adversely limit the 
Company's ability to lease space in the center to retailers of potentially 
competing products. The foregoing and similar factors may affect the 
revenues, and resulting value, of the Company's Properties.

COMPETITION

     Numerous retail properties compete with the Company's Properties in 
attracting tenants to lease space. Some of these competing properties are 
newer and better located or designed and may offer lower expenses or be 
better capitalized than the Company's Properties. The number of competitive 
commercial properties in a particular area could have a material adverse 
effect on the Company's ability to lease space in its Properties or at newly 
developed or acquired properties and on the rents charged.

     Additionally, the Company may be competing for investment opportunities 
with entities which have substantially greater financial resources than the 
Company. These entities may generally be able to accept more risk than the 
Company can prudently manage. Competition may generally reduce the number of 
suitable investment opportunities offered to the Company and increase the 
bargaining power of property owners seeking to sell.

BANKRUPTCY AND FINANCIAL CONDITION OF TENANTS

     At any time, a tenant of the Properties may seek the protection of the 
bankruptcy laws, which could result in the rejection and termination of such 
tenant's lease and thereby adversely affect the Company's results of 
operations and ability to make distributions to its shareholders. Although 
the Company has not experienced material losses from tenant bankruptcies, no 
assurance can be given that tenants will not file for bankruptcy protection 
in the future, or if any tenants file, that they will affirm their leases and 
continue to make rental payments in a timely manner. In addition, a tenant 
from time to time may experience a downturn in its business which may weaken 
its financial condition and result in the failure to make rental payments 
when due. If tenant leases are not affirmed following bankruptcy or if a 
tenant's financial condition weakens, the Company's results of operations and 
ability to make distributions to its shareholders may be adversely affected.

ACQUISITION AND DEVELOPMENT ACTIVITIES

     The Company intends to acquire existing retail commercial properties to 
the extent that they can be acquired on acceptable terms and meet the 
Company's investment criteria, including the availability of suitable 
financing. Acquisitions of retail commercial properties entail general 
investment risks associated with any real estate investment, including the 
risk that investments will fail to perform as expected or that estimates of 
the cost of improvements to bring an acquired property up to standards 
established for the intended market position may prove inaccurate.  The 
Company also faces the risk that its pre-acquisition investigation of the 
physical and legal attributes of properties that it acquires (e.g. concerning 
such matters as engineering and environmental condition, compliance with 
zoning and building codes, existence of easements,

                                       19
<PAGE>

nature of tenancies, lease terms, creditworthiness of tenants) will not 
reveal matters that the Company would expect to be aware of with respect to 
properties that it has owned and operated for a significant period of time.

     The Company is pursuing certain commercial property development projects 
and expects to develop other projects. As a general matter, property 
development projects typically carry a higher, and sometimes substantially 
higher, level of risk than the acquisition of existing properties. For 
example, development projects generally require various governmental and 
other approvals, the receipt of which cannot be assured. Approvals frequently 
require undertakings for public infrastructure improvements or other 
activities to mitigate the effects of the proposed development, whose costs 
also cannot be assured. The Company's development activities will entail a 
variety of other risks, including the risk that funds will be expended and 
management time will be devoted to projects which may not come to fruition; 
the risk that construction costs of a project may exceed original estimates, 
possibly making the project economically unfavorable to operate or requiring 
a writedown of the carrying amount of the project; the risk that occupancy 
rates and rents at a completed project will be less than anticipated; and the 
risk that expenses at a completed development will be higher than 
anticipated. These risks may adversely affect the Company's results of 
operations and ability to make distributions to its shareholders.

     The integration of a large number of acquisition and development 
properties into the systems and procedures of the Company presents a 
management challenge, and the failure to integrate such properties into the 
Company's operating structures could have a material adverse effect on the 
Company's results of operations and ability to make distributions to its 
shareholders.

DEPENDENCE ON KEY PERSONNEL

     The Company is dependent on the efforts of its executive officers, J. 
David Martin, President and Chief Executive Officer of the Company, and 
Daniel B. Platt, Executive Vice President, Chief Financial Officer and Chief 
Administrative Officer of the Company, and the loss of their services could 
have an adverse affect on the operations of the Company.  The Company has an 
employment agreement with Mr. Martin, which is terminable by either party at 
will.

CONFLICTS OF INTEREST

     The Company currently has various development projects which it acquired 
from its President and Chief Executive Officer, J. David Martin, concurrently 
with Mr. Martin's appointment as President and Chief Executive Officer in 
1995. While the Company has adopted procedures for decision-making with 
respect to such projects (including Mr. Martin's absence from Board of 
Directors meeting discussions involving such projects), nevertheless the 
arrangement could result in conflicts of interest in one or more of the 
projects.

CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT

     The Company has elected to qualify as a REIT under the Code. Although the
Company believes that it has operated in a manner which satisfies the REIT
qualification requirements since 1987, no assurance can be given that the
Company's qualification as a REIT will not be challenged by the Internal Revenue
Service for taxable years still subject to audit or that the

                                       20
<PAGE>

Company will continue to qualify as a REIT in future years. A REIT generally 
is not taxed on distributed income so long as it distributes to its 
shareholders at least 95% of its real estate investment trust taxable income 
currently. Qualification as a REIT involves the satisfaction of numerous 
requirements (some on an annual or quarterly basis) established under highly 
technical and complex Code provisions for which there are only limited 
judicial or administrative interpretations and involves the determination of 
various factual matters and circumstances not entirely within the Company's 
control. If in any taxable year the Company were to fail to qualify as a 
REIT, the Company would not be allowed a deduction for distributions to 
shareholders in computing taxable income and would be subject to federal 
income tax on its taxable income at regular corporate rates. Unless entitled 
to relief under certain statutory provisions, the Company would also be 
disqualified from treatment as a REIT for the four taxable years following 
the year during which qualification was lost. As a result, the funds 
available for distribution to the Company's shareholders would be reduced for 
each of the years involved. Although the Company currently intends to operate 
in a manner designed to qualify as a REIT, it is possible that future 
economic, market, legal, tax or other considerations may cause the Company to 
fail to qualify as a REIT or may cause the Company's Board of Directors to 
revoke the REIT election.

ENVIRONMENTAL MATTERS

     Under various federal, state and local laws, ordinances and regulations, 
an owner or operator of real estate is liable for the costs of removal or 
remediation of certain hazardous or toxic substances on or in such property. 
Such laws often impose such liability without regard to whether the owner or 
operator knew of, or was responsible for, the presence of such hazardous or 
toxic substances. The presence of such substances, or the failure to properly 
remediate such substances, may adversely affect the owner's or operator's 
ability to sell or rent such property or to borrow using such property as 
collateral. Persons who arrange for the disposal or treatment of such 
hazardous or toxic substances may also be liable for the costs of removal or 
remediation of such substances at a disposal or treatment facility, whether 
or not such facility is owned or operated by such person. In connection with 
the ownership (direct or indirect), operation, management and development of 
real properties, the Company may be considered an owner or operator of such 
properties or as having arranged for the disposal or treatment of hazardous 
or toxic substances and, therefore, may be potentially liable for removal or 
remediation costs. Certain environmental laws impose liability for release of 
asbestos-containing materials into the air, and third parties may seek 
recovery from owners or operators of real properties for personal injuries 
associated with asbestos-containing materials. The Company may be potentially 
liable for removal or remediation costs, as well as certain other costs, 
including governmental fines and costs related to injuries to persons and 
property, resulting from the environmental condition of its Properties, 
regardless of whether the Company itself actually contributed to such 
condition.

RISKS OF LEVERAGE

     Like many owners of real estate, the Company relies on borrowings to 
assist it in acquiring, developing and holding its properties.  The Company 
currently has a line of credit facility (the "Credit Facility") that has 
secured and unsecured portions and also owns various Properties that are 
encumbered by deeds of trust or mortgages to various lenders.  Neither the 
Charter nor the Bylaws of the Company limit the amount of indebtedness the 
Company may incur. Although financial covenants contained in the Credit 
Facility limit the amount of additional indebtedness the Company may incur, 
those covenants currently would permit the Company to incur substantial 
additional indebtedness. Currently, the maximum committed

                                       21
<PAGE>

amount available under the Company's Credit Facility is $205 million. The 
Company has utilized the Credit Facility to finance certain recent 
acquisitions and may use the Credit Facility to fund the acquisition of 
additional properties and for other general corporate purposes.  A portion of 
the Credit Facility is currently secured by certain Properties owned by the 
Company and the Credit Facility requires that the Company comply with a 
number of financial covenants. The Company is also obligated by other 
indebtedness secured by individual Properties. There can be no assurances 
that the Company will be able to meet its debt service obligations or to 
comply with the financial covenants in its debt instruments and, to the 
extent that it cannot, the lenders typically would be entitled to demand 
immediate repayment of the related indebtedness and to commence foreclosure 
proceedings against the property securing such indebtedness, thereby 
subjecting the Company to the risk of loss of some or all of its assets, 
including certain of its Properties. Adverse economic conditions could cause 
the terms on which borrowings become available to be unfavorable. In such 
circumstances, if the Company is in need of capital to repay indebtedness in 
accordance with its terms or otherwise, it could be required to liquidate one 
or more investments in Properties at unfavorable prices. The Company will be 
subject to the risks normally associated with debt financing, including the 
risk that the Company's cash flow will be insufficient to meet required 
payments of principal and interest, the risk of increases in interest rates 
on indebtedness (such as borrowings under the Credit Facility) which bears 
interest at floating rates, the risk that existing indebtedness cannot be 
refinanced or that the terms of such refinancing will not be as favorable as 
the terms of existing indebtedness. The Company's mortgage indebtedness 
(other than indebtedness under the Credit Facility) is generally nonrecourse 
to the Company. However, even with respect to nonrecourse mortgage 
indebtedness, the lenders may have the right to recover deficiencies from the 
Company in certain circumstances, including fraud, misapplication of funds 
and environmental liabilities.

     A significant portion of the Company's mortgage debt is represented by 
mortgages or deeds of trust on properties ("Bankruptcy Remote Properties") 
for which title is held by separate subsidiaries of the Company ("Bankruptcy 
Remote Entities") whose sole purpose is to own and operate the specific 
Property or Properties and to make the borrowing secured by the specific 
mortgage or deed of trust.  The mortgage notes secured by the Bankruptcy 
Remote Properties are typically purchased and sold by the lender as a part of 
what are commonly known as a Collateralized Mortgage Obligations ("CMO") or 
Collateralized Mortgage-Backed Securities ("CMBS") pool or program serviced 
by an independent servicing agent.  The assets of each Bankruptcy Remote 
Entity, including the respective Bankruptcy Remote Property or Properties 
owned by each, are owned by that Bankruptcy Remote Entity alone and are not 
available to satisfy claims that any creditor may have against the Company, 
any of its affiliates, or any other person or entity.  Neither the Company 
nor any of its affiliates has agreed to pay or make its assets available to 
pay creditors of any Bankruptcy Remote Entity (other than any agreement by a 
Bankruptcy Remote Entity to pay its own creditors).  No affiliate of any 
Bankruptcy Remote Entity has agreed to pay or make its assets available to 
pay creditors of any Bankruptcy Remote entity.

                                       22
<PAGE>

INVESTMENTS IN JOINT VENTURES

     The Company has two investments with an institutional investor, 
California Urban Investment Partners ("CUIP"), represented by a 25% managing 
member interest (with CUIP owning the remaining 75% managing member interest) 
in two separate limited liability companies.  Each of the properties 
involved, Ladera Center and Margarita Plaza, was originally purchased by the 
Company, with CUIP acquiring its interest in the property during 1997 by 
reimbursing the Company for 75% of its original investment.

     The Company may in the future acquire interests in limited and general 
partnerships, limited liability companies, joint ventures and other 
enterprises (collectively, "Joint Ventures") formed to own or develop real 
property or interests in real property. The Company may acquire minority 
interests in certain such Joint Ventures and also may acquire interests as a 
passive investor without rights to actively participate in management of the 
Joint Ventures. Investments in Joint Ventures involve additional risks, 
including the possibility that the other participants may become bankrupt or 
have economic or other business interests or goals which are inconsistent 
with those of the Company, that the Company will not have the right or power 
to direct the management and policies of the Joint Ventures and that such 
other participants may take action contrary to the instructions or requests 
of the Company and its policies and objectives or which could jeopardize the 
Company's ability to maintain its qualification as a REIT. Such investments 
may also have the potential risk of impasse on decisions, such as a sale, 
because neither the Company nor any of the other participants have full 
control over the Joint Ventures. The Company will, however, seek to maintain 
sufficient control of such Joint Ventures to permit the Company's business 
objectives to be achieved and its status as a REIT preserved, although there 
can be no assurance that it will be successful in doing so, which could have 
a material adverse effect on the Company and its ability to make 
distributions to shareholders. There is no limitation under the Company's 
organizational documents as to the amount of available funds that may be 
invested in Joint Ventures.

INSURANCE COVERAGE LIMITATIONS

     The Company carries comprehensive general liability coverage and 
umbrella liability coverage on all of its Properties and with limits of 
liability which the Company deems adequate (subject to deductibles and 
subject to the limitations described below as insurance for losses caused by 
earthquake or flood) to insure against liability claims and provide for the 
cost of defense. Similarly, the Company is insured against the risk of direct 
physical damage in amounts the Company estimates to be adequate (subject to 
deductibles) to reimburse the Company on a replacement cost basis for costs 
incurred to repair or rebuild each Property, including loss of rental income 
during the reconstruction period. There are, however, certain types of 
extraordinary losses which may be either uninsurable, or not economically 
insurable. Should any uninsured loss occur, the Company could lose its 
investment in, and anticipated revenues from, a Property, which could have a 
material adverse effect on the Company and its ability to make distributions 
to shareholders. Currently the Company also insures certain of its Properties 
for loss caused by earthquakes in the aggregate amount of $50 million 
(subject to deductibles) and one of its Properties for loss caused by flood. 
Because of the high cost of this type of insurance coverage and the wide 
fluctuations in price and availability, the Company has made the 
determination that the risk of loss due to earthquake and flood does not 
justify the cost to increase this coverage any further under current market 
conditions. However, there can be no assurance that the occurrence of an 
earthquake, flood or other natural disaster will not adversely

                                       23
<PAGE>

affect the Company.

EFFECT OF VARIOUS MARKET FACTORS ON PRICE OF COMMON STOCK

     A variety of factors may influence the price of the Company's Common 
Stock in public trading markets. The Company believes that investors 
generally perceive REITs as yield-driven investments and compare the annual 
yield from distributions by REITs with yields on various other types of 
financial instruments. Thus an increase in market interest rates generally 
could adversely affect the market price of the Company's Common Stock. 
Similarly, to the extent that the investing public has a negative perception 
of companies in the retail business or REITs that own and operate retail 
shopping centers and other properties catering to retail tenants, the value 
of the Company's Common Stock may be negatively impacted in comparison to 
shares of other REITs owning other types of properties and catering to 
different types of tenants.

     The market price for the Common Stock may be affected by factors such as 
the announcement of new acquisitions or development projects by the Company 
or its competitors, quarterly variations in the Company's operating results 
or the operating results of the Company's competitors, changes in earnings 
(losses) or other estimates by analysts or reported results that vary from 
such estimates. In addition, the stock market may experience significant 
price fluctuations which could affect the market price of the Company's 
Common Stock which may be unrelated to the operating performance of the 
Company. Following periods of volatility in the market price of the Company's 
Common Stock, securities class action litigation could be initiated against 
the Company which could result in substantial costs and a diversion of 
management's attention and resources, which would have a material adverse 
effect on the Company and its ability to make distributions to shareholders.

ITEM 2.  PROPERTIES

     The Properties of the Company owned at December 31, 1997 are described 
under Item 1 "Business" and in Notes 2 and 3 to the Consolidated Financial 
Statements.  The Company has entered into leases with third party landlords 
for the office space that it occupies for its regional offices.  Such leases 
are generally on commercially standard terms and do not involve any 
commitments which management believes are material to its operations or 
financial condition.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is not presently involved in any material litigation nor, to 
its knowledge, is any material litigation threatened against the Company or 
its properties, other than routine litigation arising in the ordinary course 
of business.

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

     No matter was submitted to a vote of security holders during the fourth 
quarter of the fiscal year covered by this report.

                                       24
<PAGE>

                                       PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET DATA

     Common Stock of the Company is listed on the New York Stock Exchange 
under the symbol "BPP".  The following table sets forth the high and low sale 
prices of the Common Stock, as reported by the New York Stock Exchange 
Composite Tape, and the per share dividends paid by the Company for each 
calendar quarter during 1997 and 1996.

<TABLE>
<CAPTION>
                                                                 Dividends
     Quarter Ended                   High            Low            Paid
     -------------                   ----            ---            ----
     <S>                            <C>            <C>           <C>
     March 31, 1997                 $15.50         $12.75          $.25
     June 30, 1997                   13.88          11.75           .25
     September 30, 1997              14.81          13.50           .25
     December 31, 1997               15.56          12.75           .25

     March 31, 1996                  11.13           9.75           .25
     June 30, 1996                   11.88          10.25           .25
     September 30, 1996              13.00          11.00           .25
     December 31, 1996               15.00          11.88           .25
</TABLE>

     At December 31, 1997, there were approximately 2,626 holders of record 
of the Company's Common Stock.

RECENT ISSUES OF UNREGISTERED SECURITIES

     The following unregistered securities were issued by the Company (or by 
the Operating Partnership) during the fourth quarter of the fiscal year ended 
December 31, 1997.  No registration statement for any of such issuances was 
required in connection with the issuances, because the transactions did not 
involve a public offering and were exempt under Section 4(2) of the 
Securities Act.  Each of the following transactions occurred as of December 31,
1997.

     (i)  The Company issued 2,800,0000 shares of Series 1997-A Convertible 
Preferred Stock ("Series A Preferred Stock") at a cash price of $25 per share 
pursuant to the Stock Purchase Agreement dated as of December 5, 1997 ("Stock 
Purchase Agreement") among the Company, the Operating Partnership, Westbrook 
Burnham Holdings, L.L.C. and Westbrook Burnham Co-Holdings, L.L.C. (the 
latter two parties, collectively, the "Buyer").  The Series A Preferred Stock 
has a dividend yield of 8% and is convertible after a period of approximately 

                                       25
<PAGE>

one year into Common Stock at a conversion price per share initially equal to 
$15.375, which price represents 107% of the $14.375 base price per share of 
the Common Stock at the time that the principal terms of the Series A 
Preferred Stock were negotiated.  The Company used the proceeds of the sale 
to finance, in part, $70,000,000 of the cash portion of the initial 
consideration paid for the Golden State Properties.

     (ii)  The Operating Partnership issued an aggregate of 4,800,000 Series 
1997-A Preferred Limited Partner Units ("Preferred Units"). 2,000,000 of such 
Preferred Units were issued at an agreed-upon price of $25 per Preferred Unit 
upon the contribution to the Operating Partnership of the Golden State 
Properties by investment funds affiliated with Blackacre Capital Group, L.P. 
and Highridge Partners (the "Contributors"), representing $50,000,000 of the 
initial consideration paid for the Golden State Properties. Each Preferred 
Unit has a distribution priority of 8% and each Preferred Unit issued to the 
Contributors is exchangeable after a specified period of time for a share of 
Series A Preferred Stock of the Company on a 1-for-1 basis.  The distribution 
and liquidation preferences of the Preferred Units are substantially 
identical to the preferences of the Series A Preferred Stock. Concurrently, 
the Operating Partnership issued 2,800,000 Preferred Units to the Company, in 
order that distributions paid by the Operating Partnership with respect to 
its Preferred Units will provide the funds for the Company to pay 
distributions with respect to the Series A Preferred Stock.

     (iii)  The Operating Partnership issued 574,483 common limited partner 
units ("Common Units") to Simi Valley, LLC upon the contribution by Simi 
Valley, LLC to the Operating Partnership of Simi Valley Plaza.  The issuance 
of such Common Units, which after a period of time and subject to various 
conditions may be put to the Operating Partnership on a 1-for-1 basis for 
shares of Common Stock of the Company or the cash value of such shares (such 
consideration to be at the election of the Company), represented 
approximately $8.3 million of the acquisition price of Simi Valley Plaza.

     Incorporated herein by reference to the discussion under the indicated 
captions of the Company's Proxy Statement for its 1998 Annual Meeting of 
Stockholders is a description of the "Series A Preferred Stock of the 
Corporation", "Common Units of the Operating Partnership", "Preferred Units 
of the Operating Partnership", and "Other Provisions" of the Golden State 
Contribution Agreement and of the Stock Purchase Agreement with the Buyer, 
which descriptions are qualified in their entirety by reference to the terms 
of the specific securities, of the Golden State Contribution Agreement and of 
the Stock Purchase Agreement filed as exhibits listed in Item 14 of this 
Report.

                                       26
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The following selected financial data should be read with Management's 
Discussion and Analysis of Financial Condition and Results of Operations, 
which is included in Item 7. (in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                  Year Ended December 31,
OPERATING STATEMENT DATA              1997       1996        1995        1994        1993
                                      ----       ----        ----        ----        ----
<S>                                <C>        <C>         <C>         <C>         <C>
TOTAL REVENUES                     $ 68,174   $ 47,314    $ 48,669    $ 51,387    $ 41,179
                                   --------   --------    --------    --------    --------
                                   --------   --------    --------    --------    --------

Income (Loss) From Operations      $ 12,676   $  9,892    $(14,951)   $ 13,164    $  9,846
Gain on Sales of Real Estate          5,896      2,298       2,233          --          --
Distribution to Minority
 Interest Holders                       (45)       (35)         --          --          --
Income from unconsolidated 
 subsidiaries                           223        --           --          --          --
                                   --------   --------    --------    --------    --------

Net Income (Loss) Before
 Extraordinary Item                $ 18,750   $ 12,155    $(12,718)   $ 13,164    $  9,846
Loss from Early
 Extinguishment of Debt                 (52)      (884)         --          --          --
                                   --------   --------    --------    --------    --------
NET INCOME (LOSS)                  $ 18,698   $ 11,271    $(12,718)   $ 13,164    $  9,846
                                   --------   --------    --------    --------    --------
                                   --------   --------    --------    --------    --------

Earnings Per Share (Basic):
Income (Loss) Before
 Extraordinary Item                $   0.88   $   0.71    $  (0.75)   $   0.84    $   0.77
Extraordinary Item                       --      (0.05)         --          --          --
                                   --------   --------    --------    --------    --------
Net Income (Loss)                  $   0.88   $   0.66    $  (0.75)   $   0.84    $   0.77
                                   --------   --------    --------    --------    --------
                                   --------   --------    --------    --------    --------

Earnings Per Share (Diluted):
Income (Loss) Before 
 Extraordinary Item                $   0.87   $   0.71    $  (0.75)   $   0.84    $   0.77

Extraordinary Item                       --      (0.05)         --          --          --
                                   --------   --------    --------    --------    --------
Net Income (Loss)                  $   0.87   $   0.66    $  (0.75)   $   0.84    $   0.77
                                   --------   --------    --------    --------    --------
                                   --------   --------    --------    --------    --------

DIVIDENDS PAID                     $ 21,856   $ 17,113    $ 22,564    $ 22,723    $ 18,324
                                   --------   --------    --------    --------    --------
                                   --------   --------    --------    --------    --------

DIVIDENDS PAID PER SHARE           $   1.00   $   1.00    $   1.33    $   1.42    $   1.39
                                   --------   --------    --------    --------    --------
                                   --------   --------    --------    --------    --------

TAXABLE INCOME PER SHARE--
 ORDINARY                          $    .93   $     --    $    .59    $    .95    $    .88
                                   --------   --------    --------    --------    --------
                                   --------   --------    --------    --------    --------
 
TAXABLE INCOME PER SHARE--
 CAPITAL GAIN                      $     --   $     --    $    .17    $     --    $     --
                                   --------   --------    --------    --------    --------
                                   --------   --------    --------    --------    --------

BALANCE SHEET DATA
Total Assets                       $943,795   $356,195    $327,770    $358,022    $360,262
Total Indebtedness                 $550,380   $178,452    $142,806    $141,499    $162,607
Minority Interest                  $ 58,759   $    434    $    434          --          --
Preferred Stock                    $ 28,160
Total Stockholders' Equity         $284,804   $173,725    $179,160    $212,771    $193,089
Number of Common Shares
 Outstanding at Year End             23,449     17,096      17,082      16,905      14,987
Weighted Average Number of 
 Shares-Basic                        21,335     17,084      17,016      15,732      12,768
Weighted Average Number of 
 Shares-Diluted                      21,521     17,129      17,020      15,732      12,768
</TABLE>

                                       27
<PAGE>

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

OVERVIEW

     The following discussion should be read in conjunction with the 
consolidated financial statements and notes thereto appearing elsewhere in 
this Annual Report on Form 10-K.  Historical results set forth in the 
consolidated statements of income contained in the consolidated financial 
statements, including trends which might appear, should not be taken as 
indicative of future operations.  References herein to the Company include 
Burnham Pacific Operating Partnership L.P. (the "Operating Partnership") and 
the other directly and indirectly owned subsidiaries of the Company unless 
the context otherwise requires.  Effective in the fourth quarter of 1997, the 
Company formed the Operating Partnership and transferred the fee or 
beneficial interest in substantially all of its assets to the Operating 
Partnership or subsidiaries of the Operating Partnership, thereby becoming 
what is commonly referred to as an "UPREIT."

     The Company's strategic focus is the development, acquisition, 
rehabilitation, and operation of retail shopping centers on the West Coast.  
At December 31, 1997, the Company owned interests in 61 retail shopping 
centers, 59 of which were fully operational, and two of which were in various 
stages of development.  Fifty-four of the properties are located in 
California, six in Washington, and one in New Mexico.  As of December 31, 
1997, the Company also owned four office/industrial properties located in 
Southern California, which are considered non-strategic.
 
     As part of its ongoing business, the Company regularly engages in 
discussions with public and private real estate entities regarding possible 
portfolio or asset acquisitions or business combinations.

RESULTS OF OPERATIONS

     COMPARISON OF 1997 TO 1996.  NET INCOME increased $7,427,000 to 
$18,698,000 in 1997 from $11,271,000 in 1996.  The increase in net income is 
primarily attributable to increased net operating income (total revenues less 
rental operating expenses and provision for bad debt) aggregating 
$15,157,000, resulting from new leasing and higher levels of expense 
reimbursement of core portfolio properties, the 42 shopping centers acquired 
or developed in 1997, an increase in income from unconsolidated subsidiaries 
of $223,000, and an increase in gain on sales of real estate of $3,598,000.  
The aforementioned increases to net income were partially offset by increases 
in depreciation and amortization, general and administrative expenses and 
interest expense of $4,025,000, $620,000, and $7,728,000, respectively.

     Total REVENUES increased $20,860,000 to $68,174,000 in 1997 from 
$47,314,000 in 1996.  This increase is primarily attributable to the 
acquisition activity in 1997.

     RENTAL OPERATING EXPENSES increased $5,617,000 to $18,220,000 in 1997 
from $12,603,000 in 1996.  This increase is primarily attributable to the 
addition of new properties in 1997.

                                       28
<PAGE>

     THE PROVISION FOR BAD DEBT increased $86,000 to $496,000 in 1997 from 
$410,000 in 1996.  This increase is primarily attributable to the increased 
number of tenants resulting from the 1997 acquisitions.

     INTEREST EXPENSE increased $7,728,000 to $18,472,000 in 1997 from 
$10,744,000 in 1996.  The overall increase in interest expense is primarily 
related to the 1997 acquisitions.  The debt outstanding (exclusive of 
$15,035,000 of fixed rate mortgage debt in unconsolidated subsidiaries) on 
December 31, 1997 and related weighted average interest rate was $550,380,000 
and 7.56% respectively, compared to $178,452,000 and 8.0%, respectively on 
December 31, 1996.  Interest capitalized in conjunction with development and 
expansion projects was $3,242,000 for 1997, as compared to $1,658,000 in 1996.

     DEPRECIATION AND AMORTIZATION EXPENSES increased $4,025,000 to 
$15,275,000 in 1997 from $11,250,000 in 1996.  The increase is primarily 
attributable to the growth related to the shopping centers acquired in 1997.

     GENERAL AND ADMINISTRATIVE EXPENSES increased $620,000 to $3,035,000 in 
1997 from $2,415,000 in 1996.  The increase is attributable to the growth of 
the Company primarily related to the 1997 acquisitions and developments.

     In February 1997, the Company disposed of a portion of its Plaza Rancho 
Carmel Shopping Center for $735,000.  On June 11, 1997, title to the 
Company's Village Station Shopping Center was conveyed to the holder of the 
$3,900,000 non-recourse mortgage secured by the property.  No gain or loss 
resulted from either of these events.

     In December 1997, the Company disposed of its Pacific West Outlet Center 
for approximately $38,500,000, resulting in a gain of $5,896,000.

     COMPARISON OF 1996 TO 1995.  In the fourth quarter of 1995, the Company 
announced that its Board of Directors had approved a plan to dispose of a 
portion of the Company's non-strategic properties and to redeploy the 
proceeds from disposition into retail properties.  As a result of the 
decision to dispose of these properties, the Company took a one-time non-cash 
charge of $21,373,000 in 1995 to write those assets down to their fair market 
value.  During 1996, all five of the written-down properties were sold, 
resulting in a net gain on sale of $2,298,000.  In 1995, the Company took 
additional one-time charges of $1,047,000 to write down goodwill, outdated 
computer equipment and a discontinued investment in a real estate advisor, 
and $2,500,000 related to the implementation of the Company's new strategic 
plan.  There were no additional charges taken in 1996 related to the 
implementation of the plan.  The $2,500,000 charge included a non-cash 
reduction in revenues of $1,278,000, primarily as a result of a change in the 
formula used to estimate common area maintenance reimbursements and 
percentage rents; and $975,000 in one-time general and administrative 
expenses related to the transition to the new management team, studies by new 
management of various organizational and operating policies of the Company, 
and organizational and strategic changes resulting from those studies, 
including the internalization of property management and the installation of 
a new property management operating system.

     Including these charges, NET INCOME increased $23,989,000 from a net 
loss of $12,718,000 in 1995 to net income of $11,271,000 in 1996.  If the 
one-time charges in 1995 were excluded, net income before gain on sales of 
real estate, minority interest, and 

                                       29
<PAGE>

extraordinary item would have decreased $77,000 from $9,969,000 in 1995 to 
$9,892,000 in 1996.  This decrease was net of several effects, but was 
primarily attributable to the expiration of the McDonnell Douglas lease and 
the subsequent sale of the building in June of 1996, the sale of the Beverly 
Garland Hotel in December of 1995, lower rents received on the Anacomp 
Building following the renegotiation of the Anacomp lease during the first 
quarter of 1996, and higher expenses related to the opening of regional 
offices in Los Angeles and San Francisco.

     TOTAL REVENUES decreased $1,355,000 to $47,314,000 in 1996 from 
$48,669,000 in 1995.  Excluding the one-time charges in 1995, the decrease 
was $2,633,000 from $49,947,000 in 1995 to $47,314,000 in 1996.  This 
decrease is primarily attributable to the sales of the McDonnell Douglas 
Building and the Beverly Garland Hotel, and the renegotiation of the Anacomp 
lease.

     RENTAL OPERATING EXPENSE increased $536,000 to $12,603,000 in 1996 from 
$12,067,000 in 1995.  This increase is primarily attributable to the addition 
of new properties, the expense associated with carrying the vacancy in the 
Anacomp Building, and the opening of offices in Los Angeles and San Francisco.

     THE PROVISION FOR BAD DEBT decreased $562,000 to $410,000 in 1996 from 
$972,000 in 1995.  This decrease is primarily attributable to fewer credit 
problems amongst smaller tenants.

     INTEREST EXPENSE decreased $1,216,000 to $10,744,000 in 1996 from 
$11,960,000 in 1995.  This decrease is primarily attributable to a lower 
short-term interest rate environment in 1996 and slightly lower average 
outstanding borrowings under the Company's lines of credit.

     DEPRECIATION AND AMORTIZATION EXPENSES decreased $1,867,000 to 
$11,250,000 in 1996 from $13,117,000 in 1995.  This decrease reflects the 
elimination of depreciation and amortization charges on the properties sold 
in 1995 and 1996.

     GENERAL AND ADMINISTRATIVE EXPENSES decreased $669,000 to $2,415,000 in 
1996 from $3,084,000 in 1995.  Exclusive of the one-time charges in 1995, 
general and administrative expenses would have increased $306,000 in 1996.  
This increase reflects the costs associated with the opening of offices in 
Los Angeles and San Francisco as well as other increases commensurate with 
the increasing level of operations in the Company.

     In June 1996, the Company disposed of the McDonnell Douglas Building. 
Proceeds from the disposition totaled $9,301,000, resulting in a gain of 
$9,000. In July, 1996, the Company disposed of the Fireman's Fund and 
Highlands Plaza Buildings.  Proceeds from the dispositions totaled 
$22,701,000, resulting in a gain of $291,000.  In September, 1996, the 
Company disposed of its 11.85% interest in the building in which its 
corporate headquarters are located. Proceeds from the disposition totaled 
$1,939,000, resulting in a gain of $1,981,000.  In October, 1996, the Company 
disposed of the Miramar Business Center.  Proceeds from the disposition 
totaled $6,934,000, resulting in a gain of $17,000.  Proceeds from these 
sales were used to reduce outstanding borrowings under the Company's lines of 
credit.

     In November 1996, the Company redeemed all of its outstanding 8-1/2% 
convertible debentures due 2002, which aggregated $25,700,000 in principal 
amount, incurring an extraordinary loss from the early extinguishment of debt 
of $884,000.

                                       30
<PAGE>

FUNDS FROM OPERATIONS

     The Company considers FUNDS FROM OPERATIONS (FFO) to be a relevant 
supplemental measure of the performance of an equity REIT since such measure 
does not recognize depreciation and certain amortization expenses as 
operating expenses.  Management believes that reductions for these charges 
are not meaningful in evaluating income-producing real estate, which 
historically has not depreciated.  FFO means net income (loss) (computed in 
accordance with generally accepted accounting principles), before gains (or 
losses) from debt restructuring and sales of property, plus depreciation of 
real property.   FFO does not represent cash generated from operating 
activities in accordance with generally accepted accounting principles and is 
not necessarily indicative of cash available to fund cash needs and should 
not be considered as an alternative to net income as an indicator of the 
Company's operating performance or as an alternative to cash flow as a 
measure of liquidity.  In 1997, FFO increased $6,543,000 to $27,009,000 as 
compared to $20,466,000 in 1996.  The increase was net of several effects, 
but was primarily attributable to the increase in revenues from core 
portfolio properties, acquisitions, and developments.  In 1996, FFO increased 
$552,000 to $20,466,000 from $19,914,000 in 1995. If the one-time charges in 
1995 were excluded, the Company would have reported a decrease in FFO in 1996 
of $1,948,000.  This decrease was net of several effects, but was primarily 
attributable to the expiration of the McDonnell Douglas lease and the 
subsequent sale of the building in June of 1996, the sale of the Beverly 
Garland Hotel in December of 1995, lower rents received on the Anacomp 
Building following the renegotiation of the Anacomp lease during the first 
quarter of 1996, and higher expenses related to the opening of regional 
offices in Los Angeles and San Francisco. FFO as presented here may not be 
comparable to similarly titled measures used by other companies.

     The Company's calculation of FFO is as follows (in thousands):

<TABLE>
<CAPTION>
                                                    1997     1996       1995
                                                    ----     ----       ----
<S>                                               <C>       <C>       <C>
Net Income (Loss)                                 $18,698   $11,271   $(12,718)
Adjustments:
    Gain on Sales of Real Estate                   (5,896)   (2,298)    (2,233)
    Impairments/Writedowns of Assets                                    22,420
    Depreciation of Real Estate and Tenant
     Improvements                                  13,586     9,841     11,980
    Amortization of Leasing Costs                     569       768        465
    Early Extinguishment of Debt                       52       884          -
                                                  -------   -------   --------
Funds From Operations                             $27,009   $20,466   $ 19,914
                                                  -------   -------   --------
                                                  -------   -------   --------
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     The Company anticipates that cash flow from operating activities will
continue to provide adequate capital for all payments on notes payable,
recurring tenant improvements, and dividend payments in accordance with REIT
requirements through the end of 1998.  However, the Company will require
additional sources of capital to finance the acquisition and development of
additional properties.  Sources of this additional capital may include cash on
hand, borrowings under credit facilities and mortgage indebtedness, proceeds
from sales of non-strategic assets, the sale of interests in certain properties
to third parties, the issuance of Operating Partnership Units to sellers of
properties and, to the extent market conditions permit, the issuance of debt or
equity securities.  However, there can be no assurances that capital necessary
to finance future acquisitions and developments will be available on acceptable
terms or at all.  Cash flow from

                                       31
<PAGE>

operating activities for 1997 increased to $26,835,000 as compared to 
$17,521,000 in 1996.  The increase is primarily attributable to the 
acquisitions and developments completed in 1997 and 1996 and new leasing of 
the core portfolio properties.

     The Company satisfied its REIT requirement under the Internal Revenue 
Code of 1986 of distributing at least 95% of ordinary taxable income with 
distributions to shareholders of $21,856,000 in 1997.  Accordingly, Federal 
income taxes were not incurred at the corporate level.

ACQUISITIONS AND DEVELOPMENTS

     During 1997, the Company acquired interests in 42 shopping centers 
aggregating 5.6 million square feet of Company-owned GLA (gross leasable 
area) at an aggregate initial purchase price of approximately $598,100,000.  
Twenty of these properties (the "Golden State Properties") aggregating 
approximately 2.6 million square feet were acquired as a portfolio on 
December 31, 1997.  The initial purchase price was $302,400,000 which was 
funded through $150,000,000 of secured indebtedness, $50,000,000 of Preferred 
Limited Partner Units of the Operating Partnership, $70,000,000 of Preferred 
Stock of the Company, and $32,400,000 of cash drawn principally from the 
Company's credit facility.  The Company is obligated to pay up to $41,600,000 
of additional consideration for additional value resulting from the lease-up 
of certain specified portions of the Golden State Properties and construction 
and lease-up of certain additional space.  The additional consideration, if 
any, will be based upon incremental income and will be determined monthly 
until $11,600,000 has been paid and thereafter as of December 31, 1998 and 
June 30, 1999.

     During 1997, the Company completed the first phase of a shopping center 
development in Richmond, California, totaling 183,500 square feet, at an 
aggregate cost of approximately $28,684,000.  Construction also commenced on 
the development of a 131,500 square foot entertainment complex in San 
Francisco, California with a projected net cost of approximately $54,100,000. 
Completion is scheduled for mid-1998.

     In December 1996, the Company purchased a 76,744 square foot shopping 
center in Huntington Park, California, for a purchase price of approximately 
$9,568,000.  In February 1997, the Company entered into a joint venture 
agreement with California Urban Investment Partners, L.P. ("CUIP"), an 
investment entity of CalPers, wherein the Company contributed this property 
to an entity in which CUIP purchased a 75% interest in the venture and 
reimbursed the Company for 75% of its acquisition cost.  The Company retained 
a 25% interest in the venture and continues to manage the property pursuant 
to a management agreement.

     In July 1996, the Company entered into a joint venture agreement with 
CUIP into which the Company made an initial contribution of approximately 
$20,125,000 to fund the acquisition of a 184,684 square foot shopping center 
in Los Angeles, California.  On August 1, 1997, CUIP funded its 75% interest 
in the venture which was in turn distributed to the Company.  In addition to 
owning a 25% interest in the joint venture, the Company continues to manage 
the property pursuant to a management agreement.

                                       32
<PAGE>

FINANCING ACTIVITIES

     The above acquisitions and developments were financed through cash 
provided from operating activities, revolving credit facilities, new 
mortgages, mortgages assumed, construction loans, issuance of Operating 
Partnership units, and issuance of Preferred and Common Stock of the Company. 
Total debt outstanding at December 31, 1997 was $550,380,000 compared to 
$178,452,000 at December 31, 1996.  In 1997, the Company increased total debt 
by $371,928,000 primarily to fund acquisitions and developments.

     During the third quarter of 1997, the Company obtained an increase in 
the borrowing capacity under its revolving credit facility from $135,000,000 
to $205,000,000 of which $135,000,000 is to be secured by various mortgages 
and $70,000,000 is unsecured.  At December 31, 1997, borrowings of 
approximately $180,869,000 were outstanding of which $105,888,000 and 
$74,981,000 (with the lender's consent) were outstanding under the secured 
and unsecured portions, respectively.  The Company also negotiated a 
reduction of 25 basis points in the current interest rate to LIBOR plus 1.40% 
and LIBOR plus 1.50% on the secured and unsecured portions, respectively.  In 
connection with the Company's transfer of substantially all of its assets to 
the Operating Partnership in December 1997, the Operating Partnership became 
the principal obligor under the credit facility which is now guaranteed by 
the Company.  The credit facility is scheduled to mature in November 1998, 
with a one year extension option available.

     At December 31, 1997, the Company had $18,753,000 outstanding under a 
construction loan agreement with Comerica Bank, secured by one of the 
Company's development properties.  Borrowings under this loan bear interest 
at the Bank's Eurodollar base rate plus 2.00% or at its Prime rate.  The loan 
is scheduled to mature in June 1998.

     In May 1997, the Company issued 6,325,000 shares of Common Stock and 
received net proceeds of approximately $73,175,000 which it used to retire 
debt.

     On December 31, 1997, the Company issued 2,800,000 shares of Series 
1997-A Convertible Preferred Stock to affiliates of Westbrook Real Estate 
Partnership II, L.P., and Westbrook Real Estate Co-Investment Partnership II, 
L.P. and received $70,000,000 of proceeds.  The Company used the proceeds to 
finance, in part, the acquisition of the Golden State Properties portfolio.  
The Series A Preferred Stock has a cumulative dividend yield of 8% and is 
convertible into Common Stock in 25% increments between the first and second 
anniversaries of the date of issuance at a conversion price per share 
initially equal to $15.375, subject to anti-dilution adjustments.  At the 
same time, the Company issued 2,000,000 Series 1997-A Preferred Limited 
Partner Units (the "Preferred Units") of the Operating Partnership to 
Blackacre Capital Group, L.P. and Highridge Partners representing $50,000,000 
of the initial consideration for the acquisition of the Golden State 
Properties portfolio. The Preferred Units were issued on terms comparable to 
the Company's Series A Preferred Stock and, after the passage of time and the 
satisfaction of other conditions, are exchangeable on a 1-for-1 basis for 
shares of Series A Preferred Stock.  Although the acquisition of the Golden 
State Properties portfolio and the issuance of the Series A Preferred Stock 
and the Preferred Units (collectively "Preferred Securities") did not require 
approval by the Company's stockholders, the issuance upon the exchange or 
conversion of Preferred Securities of a number of shares of Common Stock 
equal to or exceeding 20% of the number of shares of Common Stock outstanding 
at the time of the acquisition does require such approval pursuant to NYSE 
regulations.  Accordingly, if the Company's stockholders do not approve the 
issuance of such greater amount of Common Stock at a meeting to be held not 
later than June 30, 1998, the Company will be required to redeem for cash by 
that date an aggregate of 

                                       33
<PAGE>

approximately 2,000,000 shares of Series A Preferred Stock and Preferred 
Units together having an aggregate stated value of approximately $50,000,000.

     Portions of the consideration for six other shopping centers acquired 
during 1997 consisted of an aggregate of 576,100 Common Units of the 
Operating Partnership (or of other limited partnership subsidiaries of the 
Operating Partnership).  Subject to the passage of time and the satisfaction 
of other conditions, each such Common Unit is exchangeable on a 1-for-1 basis 
for a share of Common Stock of the Company.

     At December 31, 1997, the Company's capitalization consisted of 
$550,380,000 of debt (excluding the Company's proportionate share of joint 
venture mortgage debt which is approximately 25% of $15,035,000), 
$120,000,000 of Preferred Stock and Preferred Operating Partnership units, 
and $368,569,000 of market equity (market equity is defined as outstanding 
shares of Common Stock of the Company and Common Units of the Operating 
Partnership, held by partners of the Operating Partnership other than the 
Company, multiplied by the closing price of the shares of Common Stock on the 
New York Stock Exchange at December 31, 1997 of $15.3125) resulting in a debt 
to total market capitalization ratio of .53 to 1.0 compared to the ratios of 
 .41 to 1.0 and .46 to 1.0 at December 31, 1996 and 1995, respectively.  At 
December 31, 1997, the Company's total debt consisted of $349,140,000 of 
fixed rate debt, and $201,240,000 of variable rate debt.

     It is management's intention that the Company have access to the capital 
resources necessary to expand and develop its business.  Accordingly, the 
Company may seek to obtain funds through additional borrowings and public 
offerings and private placements of debt and equity securities.  At December 
31, 1997, the Company had effective shelf registration statements on file 
with the Securities and Exchange Commission relating to an aggregate of 
$321,728,000 registered and unissued debt and equity securities.

YEAR 2000 ISSUES

     In the operation of its business the Company uses commercial computer 
software primarily purchased from or provided by independent software 
vendors. After an analysis of the Company's exposure to the impact of "year 
2000 issues" (i.e. issues that may arise resulting from computer programs 
that use only the last two, rather than all four, digits of the year), 
management has determined that such commercial software is already 
substantially year 2000 compliant, and that completion of year 2000 
compliance should not have a material impact on the Company's business, 
operations or financial condition.  Management is not in a position to 
evaluate the extent (if any) to which any year 2000 issues that may affect 
the economy generally, or any tenants, suppliers or others with whom the 
Company does business, in particular would also be likely to affect the 
Company.

                                       34
<PAGE>

EFFECTS OF INFLATION

     Substantially all of the Company's leases contain provisions designed to 
mitigate the adverse impact of inflation.  Such provisions include clauses 
enabling the Company to receive percentage rentals based on tenants' gross 
sales, which generally increase as prices rise, and/or escalation clauses, 
which generally increase rental rates during the terms of the leases.  Such 
escalation clauses are often related to increases in the consumer price index 
or similar inflation indices.  Most of the Company's leases require the 
tenant to pay its share of operating expenses, including common area 
maintenance, real estate taxes and insurance, thereby reducing the Company's 
exposure to increases in these operating expenses resulting from inflation to 
the extent that its properties are occupied.  The Company periodically 
evaluates its exposure to short-term interest rates and may, from time to 
time, enter into interest rate protection agreements which mitigate, but do 
not eliminate, the effect of changes in interest rates on its floating-rate 
loans.

CERTAIN CAUTIONARY STATEMENTS

     Certain statements in this Annual Report on Form 10-K may be deemed to 
be "forward-looking statements" within the meaning of Section 27A of the 
Securities Act of 1933, as amended, and Section 21 E of the Securities 
Exchange Act of 1934, as amended.  Such forward-looking statements involve 
known and unknown risks, uncertainties and other factors which may cause the 
actual results of the Company to be materially different from historical 
results or from any results expressed or implied by such forward-looking 
statements.  Such risks, uncertainties and other factors include, but are not 
limited to, the competitive environment in the retail industry, national and 
local economic conditions, changes in prevailing interest rates and in the 
availability of financing, the illiquidity of real estate investment in 
general, bankruptcy and financial condition of tenants, and environmental 
risks.  Reference is made to RISK FACTORS contained elsewhere in this Annual 
Report on Form 10-K for a further discussion of these and other factors that 
might cause actual results to differ materially from those set forth in the 
forward-looking statements.

                                       35
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK


Not applicable.



















                                      36

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


INDEPENDENT AUDITORS' REPORT

We have audited the accompanying consolidated balance sheets of Burnham 
Pacific Properties, Inc. as of December 31, 1997 and 1996, and the related 
consolidated statements of income, stockholders' equity, and cash flows for 
each of the three years in the period ended December 31, 1997.  Our audits 
also included the financial statement schedule listed in Item 14(a). These 
consolidated financial statements and financial statement schedule are the 
responsibility of the Company's management.  Our responsibility is to express 
an opinion on the consolidated financial statements and financial statement 
schedule based on our audits.

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

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

//Deloitte & Touche LLP//
San Diego, California

February 12, 1998

                                       37
<PAGE>

                          BURNHAM PACIFIC PROPERTIES, INC.
                            CONSOLIDATED BALANCE SHEETS
                             DECEMBER 31, 1997 AND 1996
                        (in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                           1997          1996
                                                         --------      --------
 <S>                                                     <C>           <C>
 ASSETS
 Real Estate                                             $964,755      $389,634
 Less Accumulated Depreciation                            (55,823)      (48,978)
                                                         --------      --------
 Real Estate-Net                                          908,932       340,656
 Cash and Cash Equivalents                                  6,841         4,095
 Restricted Cash                                            5,242
 Receivables-Net                                            7,456         4,860
 Investment in Unconsolidated Subsidiaries                  3,683
 Other Assets                                              11,641         6,584
                                                         --------      --------
   Total                                                 $943,795      $356,195
                                                         --------      --------
                                                         --------      --------
 LIABILITIES AND STOCKHOLDERS' EQUITY
 Liabilities:
 Accounts Payable and Other Liabilities                   $19,296      $  2,655
 Tenant Security Deposits                                   2,396           929
 Notes Payable                                            369,511       105,552
 Line of Credit Advances                                  180,869        72,900
                                                         --------      --------
 Total Liabilities                                        572,072       182,036
                                                         --------      --------
 Commitments and Contingencies

 Minority Interest                                         58,759           434
                                                         --------      --------
 Preferred Stock                                           28,160
                                                         --------
 Stockholders' Equity:
 Preferred Stock, Par Value $.01/share, 5,000,000
 Shares Authorized, 4,800,000 Shares Designated as
 Series 1997-A Convertible Preferred, 2,800,000
 Shares Outstanding at December 31, 1997; and No
 Par Value, 5,000,000 Shares Authorized, No
 Shares Issued or Outstanding at December 31, 1996             17

 Common Stock, Par Value $.01/share, 95,000,000
 Shares Authorized, 23,448,852 Shares Outstanding
 at December 31, 1997; and No Par Value, 40,000,000
 Shares Authorized, 17,096,452 Shares Outstanding
 at December 31, 1996                                         234       262,340

 Paid in Capital in Excess of Par                         376,326

 Dividends Paid in Excess of Net Income                   (91,773)      (88,615)
                                                         --------      --------
    Total Stockholders' Equity                            284,804       173,725
                                                         --------      --------
 Total                                                   $943,795      $356,195
                                                         --------      --------
                                                         --------      --------
</TABLE>

See the Accompanying Notes

                                       38
<PAGE>

                        BURNHAM PACIFIC PROPERTIES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
               FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                 (in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                              1997         1996          1995
                                            -------     --------      --------
<S>                                         <C>         <C>           <C>
REVENUES
Rents                                       $67,413     $ 46,864      $ 48,188
Interest                                        761          450           481
                                            -------     --------      --------
Total Revenues                               68,174       47,314        48,669
                                            -------     --------      --------
COSTS AND EXPENSES

Interest                                     18,472       10,744        11,960
Rental Operating                             18,220       12,603        12,067
Provision for Bad Debt                          496          410           972
General and Administrative                    3,035        2,415         3,084
Depreciation and Amortization                15,275       11,250        13,117
Impairments/Writedowns of Assets                                        22,420
                                            -------     --------      --------
Total Costs and Expenses                     55,498       37,422        63,620
                                            -------     --------      --------
Income (Loss) from Operations Before
 Gain on Sales of Real Estate, 
 Distribution to Minority Interest
 Holders, Income from Unconsolidated 
 Subsidiaries and Extraordinary Item         12,676        9,892       (14,951)
Gain on Sales of Real Estate                  5,896        2,298         2,233
Distribution to Minority Interest
  Holders                                       (45)         (35)
Income from Unconsolidated Subsidiaries         223
                                            -------     --------      --------
Income (Loss) Before Extraordinary Item      18,750       12,155       (12,718)
Extraordinary Loss From Early
  Extinguishment of Debt                        (52)        (884)
                                            -------     --------      --------
Net Income (Loss)                           $18,698     $ 11,271      $(12,718)
                                            -------     --------      --------
Earnings Per Common Share (Basic):
Income (Loss) Before Extraordinary Item     $  0.88     $   0.71      $  (0.75)
Extraordinary Item                                         (0.05)
                                            -------     --------      --------
Net Income (Loss)                           $  0.88     $   0.66      $  (0.75)
                                            -------     --------      --------
                                            -------     --------      --------
Earnings Per Common Share (Diluted):
Income (Loss) Before Extraordinary Item      $ 0.87     $   0.71      $  (0.75)                                               
Extraordinary Item                                         (0.05)   
                                            -------     --------      --------
Net Income (Loss)                            $ 0.87     $   0.66       $ (0.75)
                                            -------     --------      --------
                                            -------     --------      --------
</TABLE>

See the Accompanying Notes

                                       39
<PAGE>

                          BURNHAM PACIFIC PROPERTIES, INC.
                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                For the Years Ended December 31, 1997, 1996 and 1995
                        (in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                       Series      Paid in    Notes
                                                                       1997-A      Capital    Receivable    Dividends
                                                                    Convertible    in         Directors'    Paid in
                                             Common Stock            Preferred     Excess     Stock         Excess of
                                        Shares         Amount          Stock       of Par     Purchase      Net Income     Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>             <C>            <C>           <C>        <C>           <C>           <C>
Balance, January 1, 1995              16,905,276      $ 260,262                                             $(47,491)     $212,771

Issuance of Common Stock:
 Dividend Reinvestment                   222,894          2,546                                                              2,546
Open Market Repurchase of
 Common Stock                            (94,500)        (1,279)                                                            (1,279)
Directors' Stock Purchase                 48,000            601                                $ (197)                         404
Net Loss                                                                                                     (12,718)      (12,718)
Dividends Paid                                                                                               (22,564)      (22,564)
                                      ----------       --------                                -------      --------      --------
Balance, December 31, 1995            17,081,670        262,130                                  (197)       (82,773)      179,160

Directors' Fees                           15,000            210                                                                210
Dividend Reinvestment --
 Fractional Shares Retired                  (218)
Payment of Notes Receivable -
 Stock Purchase Plan                                                                              197                          197
Net Income                                                                                                    11,271        11,271
Dividends Paid                                                                                               (17,113)      (17,113)
                                      ----------       --------                                -------      --------      --------
Balance, December 31, 1996            17,096,452        262,340                                     0        (88,615)      173,725

Issuance of Common Stock:
  Public Offering                      6,325,000         73,125                                                             73,125
  Directors' Fees                         23,400             76                         252                                    328
  Exercised Options                        4,000                                         50                                     50
Change in Common Stock
 Par Value                                             (335,307)                    335,307
Issuance of 2,800,000
 Shares, Series 1997-A
 Convertible Preferred Stock                                               17        40,717                                 40,734
Net Income                                                                                                    18,698        18,698
Dividends Paid                                                                                               (21,856)      (21,856)
                                      ----------       --------        ------      --------    -------      --------      --------
Balance, December 31, 1997            23,448,852      $     234        $   17      $376,326    $   -0-      $(91,773)     $284,804
                                      ----------       --------        ------      --------    -------      --------      --------
                                      ----------       --------        ------      --------    -------      --------      --------
</TABLE>

See the Accompanying Notes

                                       40
<PAGE>

                          BURNHAM PACIFIC PROPERTIES, INC.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                   (in thousands)

<TABLE>
<CAPTION>
                                                                      1997             1996             1995
                                                                   ---------        ---------        ---------
<S>                                                                <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)                                                  $  18,698        $  11,271        $ (12,718)
Adjustments to Reconcile Net Income (Loss)
 to Net Cash Provided by Operating Activities:
 Depreciation and Amortization                                        15,275           11,250           13,117
 Gain on Sales of Real Estate                                         (5,896)          (2,298)          (2,233)
 Extraordinary Loss from Early Extinguishment of Debt                     52              884
 Provision for Bad Debt                                                  496              410              972
 Compensation Expense-Directors' Fees                                    328              210
 Impairments/Writedowns of Assets                                                                       22,420
Changes in Other Assets and Liabilities:
  Receivables and Other Assets                                        (9,430)          (2,300)             902
  Accounts Payable and Other Liabilities                               5,845           (1,667)           1,581
  Tenant Security Deposits                                             1,467             (239)              37
                                                                   ---------        ---------        ---------
Net Cash Provided by Operating Activities                             26,835           17,521           24,078
                                                                   ---------        ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for Acquisitions of Real Estate and
 Capital Improvements                                               (451,887)         (75,111)         (10,380)
Proceeds from Sales of Real Estate                                    65,496           40,875           12,619
Principal Payments on Notes Receivable                                    43              837              280
                                                                   ---------        ---------        ---------
Net Cash (Used) Provided by Investing Activities                    (386,348)         (33,399)           2,519
                                                                   ---------        ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings Under Line of Credit Agreements                           254,320          128,918           27,025
Repayments Under Line of Credit Agreements                          (146,351)         (80,951)         (28,092)
Principal Payments of Notes Payable                                  (37,540)          (1,896)          (4,758)
Proceeds From Issuance of Notes Payable                              245,753           15,275
Restricted Cash                                                       (5,242)
Dividends Paid                                                       (21,856)         (17,113)         (22,564)
Dividend Reinvestment                                                                                    2,546
Issuance of Stock, Net                                                73,175
Redemption of Convertible Debentures                                                  (26,000)
Open Market Repurchase of Stock                                                                         (1,279)
Repayments on Notes Receivable-
  Directors' Stock Purchase                                                               197              404
                                                                   ---------        ---------        ---------
Net Cash Provided (Used) by Financing Activities                     362,259           18,430          (26,718)
                                                                   ---------        ---------        ---------

Net Increase (Decrease) in Cash and Cash Equivalents                   2,746            2,552             (121)
Cash and Cash Equivalents at Beginning of Year                         4,095            1,543            1,664
                                                                   ---------        ---------        ---------
Cash and Cash Equivalents at End of Year                           $   6,841        $   4,095        $   1,543
                                                                   ---------        ---------        ---------
                                                                   ---------        ---------        ---------

                                                                                                   (Continued)
</TABLE>

                                       41
<PAGE>


                         BURNHAM PACIFIC PROPERTIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                                  (in thousands)
                                   (continued)

<TABLE>
<CAPTION>
                                                                      1997             1996             1995
                                                                   ---------        ---------        ---------
<S>                                                                <C>              <C>              <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash Paid During the Year for Interest,
 net of capitalized amounts                                        $  17,803        $  11,390        $  11,929
                                                                   ---------        ---------        ---------
                                                                   ---------        ---------        ---------
SUPPLEMENTAL DISCLOSURES OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:

Notes Payable and Obligations Assumed                                $61,008                         $   7,132
Operating Partnership Units Issued
 in Connection with Real Estate Acquisitions                          58,325                               434
Proceeds from Notes Payable                                          176,900
Cash Paid for Real Estate                                            104,533
Issuance of Convertible Preferred Stock                               70,000
Other                                                                  3,107                             1,838
                                                                   ---------        ---------        ---------

Fair Value of Real Estate Acquired                                 $ 473,873        $     -0-        $   9,404
                                                                   ---------        ---------        ---------
                                                                   ---------        ---------        ---------

Notes Receivable-Directors' Stock Purchase                         $     -0-        $     -0-        $     601
                                                                   ---------        ---------        ---------
                                                                   ---------        ---------        ---------
                               
                                                                                                   (Concluded)
</TABLE>

See the Accompanying Notes

                                      42
<PAGE>

                          BURNHAM PACIFIC PROPERTIES, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1997, 1996 and 1995

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

     Burnham Pacific Properties, Inc. (the "Company") is a fully integrated, 
self-managed real estate company which acquires, rehabilitates, develops and 
manages retail properties on the West Coast.  On November 14, 1997, the 
Company formed Burnham Pacific Operating Partnership, L.P. (the "Operating 
Partnership") under the Delaware Revised Uniform Limited Partnership Act, and 
subsequently transferred to the Operating Partnership legal or beneficial 
ownership of substantially all of the real property and related personal 
property owned by the Company and its subsidiaries and of the beneficial 
interest owned by the Company and its subsidiaries in any partnership or 
limited liability company that owns a direct or indirect interest in real 
property and related personal property.  The Operating Partnership is the 
vehicle through which the Company will own its current assets, will make its 
future acquisitions, and generally conduct its business. 

     As of December 31, 1997, the Company owns an approximately 84% economic 
interest in the Operating Partnership and is its sole general partner. 

     The Company, primarily through the Operating Partnership and 
subsidiaries of the Operating Partnership, owns interests in 59 retail 
operating properties located in California, Washington and New Mexico as of 
December 31, 1997.  The Company also owns interests in two retail projects in 
various stages of development, as well as four industrial and office 
properties located in Southern California.  The Company has elected to 
qualify as a real estate investment trust ("REIT") for Federal income tax 
purposes.

Basis of Presentation

     The accompanying consolidated financial statements include the accounts 
of the Company and the Operating Partnership and subsidiaries of the 
Operating Partnership.  All significant intercompany balances and 
transactions have been eliminated in consolidation.

     The 16% limited partner interest in the Operating Partnership not owned 
by the Company is reflected in these financial statements as minority 
interest.  

Use of Estimates

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

                                       43
<PAGE>

Real Estate

     Real Estate is stated at cost or, in the case of real estate which 
management believes is impaired, at the lower fair value of such properties. 
Additions, renovations and improvements are capitalized.  Maintenance and 
repairs which do not extend asset lives are expensed as incurred.  
Depreciation is computed using the straight-line method over estimated useful 
lives ranging from 14 to 30 years for buildings, 2 to 17 years for 
improvements, and 3 to 10 years for furniture, fixtures and equipment.

Amortization

     Deferred loan fees, direct lease costs and certain other costs are 
amortized using the straight-line method over the related estimated life.

Straight-Line Rent

     As of December 31, 1997 and 1996, approximately $2,463,000 and 
$1,793,000, respectively, of straight-line rent is included in Other Assets.

Income Taxes

     Income taxes have not been provided as the Company believes that it has 
met all requirements in 1997, 1996 and 1995 to qualify as a REIT under 
Internal Revenue Code Sections 856-860 including the distribution of at least 
95% of ordinary taxable income to stockholders.  Taxable income differs from 
net income for financial reporting purposes principally because of 
differences in the timing of recognition of interest, depreciation, rental 
revenue, and sales of assets.  The reported amounts of the Company's net 
assets at December 31, 1997 was greater than their tax basis for Federal 
purposes by approximately $32,143,000.

Net Income (Loss) Per Share

     Net income (loss) per share is calculated using the weighted average 
number of shares outstanding during each year.  In February of 1997, the 
Financial Accounting Standards Boards (FASB) issued Statement of Financial 
Accounting Standards (SFAS) No. 128, Earnings Per Share (EPS).  This 
statement requires the presentation of earnings per share to reflect both 
"Basic EPS" and "Diluted EPS" on the face of the income statement.

     In general, Basic EPS excludes dilution created by stock equivalents and 
is a function of the weighted average number of common shares outstanding for 
the period.  Diluted EPS does reflect the potential dilution created by stock 
equivalents as if such equivalents were converted into common stock and is 
calculated in substantially the same manner as fully Diluted EPS illustrated 
in APB Opinion Number 15, "Earnings Per Share."

                                       44
<PAGE>

     The following tables are the reconciliations from the basic to the 
diluted EPS computations for "net income (loss) before extraordinary item" 
for 1997, 1996 and 1995 (dollars except per share amounts in thousands):

<TABLE>
<CAPTION>
                                               For the Year Ended 12/31/97
                                         -------------------------------------
                                           Income        Shares      Per-Share
BASIC EPS                                (Numerator)  (Denominator)     Amount
                                         -----------  -------------  ---------
<S>                                      <C>          <C>            <C>
Net Income Before Extraordinary Item         $18,750    21,334,794      $0.88
                                                                        -----
                                                                        -----
Effect of Dilutive Securities:

Operating Partnership Units                       45        55,044
Convertible Preferred Stock                       15        12,474
Stock Options                                              118,944

DILUTED EPS
                                             -------    ----------
Net Income Before Extraordinary Item,
  after assumed conversion of common
  share equivalents                          $18,810    21,521,256      $0.87
                                             -------    ----------      -----
                                             -------    ----------      -----
</TABLE>

     Options to purchase 230,877 shares at price ranges of $15.20 to $18.88 
per share were outstanding as of December 31, 1997, but were not included in 
the computation of diluted EPS because the options' exercise price was 
greater than the market price of the common stock of the Company.

     Subsequent to December 31, 1997, the Company's Board of Directors 
granted options for 669,500 shares at exercise prices of $12.50 to $14.50 per 
share (See Note 18).

<TABLE>
<CAPTION>
                                              For the Year Ended 12/31/96
                                         -------------------------------------
                                             Income        Shares    Per-Share
BASIC EPS                                (Numerator)  (Denominator)   Amount
                                         -----------  -------------  ---------
<S>                                      <C>          <C>            <C>
Net Income Before Extraordinary Item         $12,155    17,084,498      $0.71
                                                                        -----
                                                                        -----
Effect of Dilutive Securities:

Operating Partnership Units                       35        41,878
Stock Options                                                2,214

DILUTED EPS
                                             -------    ----------
Net Income Before Extraordinary Item,
 after assumed conversion of common
 share equivalents                           $12,190    17,128,590      $0.71
                                             -------    ----------      -----
                                             -------    ----------      -----
</TABLE>

                                       45
<PAGE>

<TABLE>
<CAPTION>
                                               For the Year Ended 12/31/95
                                         -------------------------------------
                                             Loss         Shares     Per-Share
BASIC EPS                                (Numerator)  (Denominator)    Amount
                                         -----------  -------------  ---------
<S>                                      <C>          <C>            <C>
Net Loss Before Extraordinary Item         ($12,718)    17,016,354     ($0.75)
                                                                       -------
                                                                       -------

Effect of Dilutive Securities:

Operating Partnership Units                                  3,442

DILUTED EPS
                                           ---------    ----------
Net Loss Before Extraordinary Item,
 After assumed Conversion of common
 Share equivalents                         ($12,718)    17,019,796     ($0.75)
                                           ---------    ----------     -------
                                           ---------    ----------     -------
</TABLE>

Cash and Cash Equivalents

     For purposes of reporting cash flows, cash and cash equivalents include 
cash and certificates of deposit with original maturities of less than 90 
days.

Restricted Cash

     Restricted cash is required to be held in escrow accounts as specified 
by the terms of certain of the Company's Notes Payable at December 31, 1997.  
The restricted cash is to be used to pay for insurance, taxes and capital 
expenditures pertaining to the related real estate that collateralize the 
notes payable.

Financial Instruments

     The carrying values reflected in the consolidated balance sheets at 
December 31, 1997 and 1996 reasonably approximate the fair values for cash 
and cash equivalents, receivables, accounts payable, and line of credit 
advances. In making such assessment, the Company has utilized discounted cash 
flow analyses, estimates, and quoted market prices as appropriate.  At 
December 31, 1997, the Company estimated that the fair value of notes payable 
was lower than their carrying value by approximately $9,736,000 and at 
December 31, 1996 the Company estimated that the fair value of notes payable 
was higher than their carrying value by approximately $2,100,000.

Accounting for Impairments

     In the fourth quarter of 1995, the Company adopted Statement of 
Accounting Standards Number 121 (FAS 121), "Accounting for the Impairment of 
Long-Lived Assets and for Long-Lived Assets to be Disposed of."  FAS 121 
requires that assets to be held and used be reviewed for impairment whenever 
events or changes in circumstances indicate that the carrying amount of the 
asset in question may not be recoverable (see Note 8).

                                       46
<PAGE>

Redeemable Securities

     Because the Company has a contingent obligation (see Note 10) to redeem 
1,126,386 shares of its 2,800,000 shares of Series 1997-A Convertible 
Preferred Stock outstanding, the value of such potentially redeemable shares 
of approximately $28,160,000 is not included in Stockholders' Equity.

Reclassifications

     Certain of the 1996 and 1995 amounts have been reclassified to conform 
to the 1997 presentation.

2.   REAL ESTATE

SUMMARY:  Real Estate is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                December 31,
                                                               1997       1996
                                                               ----       ----
<S>                                                        <C>        <C>
Retail Centers                                             $845,536   $287,675
Office/Industrial Buildings                                  57,846     57,740
Retail Centers Under Development                             56,443     41,297
Other                                                         4,930      2,922
                                                           --------   --------
  Total Real Estate                                         964,755    389,634
Accumulated Depreciation                                    (55,823)   (48,978)
                                                           --------   --------
Real Estate - net                                          $908,932   $340,656
                                                           --------   --------
                                                           --------   --------
</TABLE>

     The real estate is leased to tenants under leases expiring at various 
dates through 2047.  Certain of these leases contain provisions for rent 
increases based on cost-of-living indices and certain leases contain renewal 
options of up to 55 years.  Future minimum rental income to be received by 
the Company under the terms of these operating leases is as follows as of 
December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
Year Ending December 31, 
<S>                                            <C>
        1998                                   $ 88,177
        1999                                     81,493
        2000                                     69,773
        2001                                     61,459
        2002                                     53,908
        Later Years                             352,755
                                               --------
        Total                                  $707,565
                                               --------
                                               --------
</TABLE>

     Forty-nine properties, including the 26 Bankruptcy Remote Properties 
described in the following paragraph, having a net book value of 
approximately $758,693,000 at December 31, 1997, are pledged as collateral 
for notes payable described in Notes 4 and 5.  In addition, the notes are 
secured by assignments of rents on such real estate.  Certain real estate is 
located on land which is subject to noncancelable ground leases expiring at 
various dates through 2089 with minimum annual lease payments of 
approximately $1,520,000.

                                       47
<PAGE>

BANKRUPTCY REMOTE PROPERTIES:  Twenty-six properties having a net book value 
of approximately $466,033,000 at December 31, 1997, (collectively the 
"Bankruptcy Remote Properties," and each a "Bankruptcy Remote Property") are 
wholly-owned by various "Bankruptcy Remote Entities."  Each Bankruptcy Remote 
Entity is an indirect subsidiary of the Company.  The assets of each 
Bankruptcy Remote Entity, including the respective Bankruptcy Remote Property 
or Properties owned by each, are owned by that Bankruptcy Remote Entity alone 
and are not available to satisfy claims that any creditor may have against 
the Company, its affiliates, or any other person or entity.  No Bankruptcy 
Remote Entity has agreed to pay or make its assets available to pay creditors 
of the Company, any of its affiliates, or any other person or entity.  
Neither the Company nor any of its affiliates has agreed to pay or make its 
assets available to pay creditors of any Bankruptcy Remote Entity (other than 
any agreement by a Bankruptcy Remote Entity to pay its own creditors).  No 
affiliate of any Bankruptcy Remote Entity has agreed to pay or make its 
assets available to pay creditors of any Bankruptcy Remote Entity.

DEVELOPMENT PROPERTIES:  On September 28, 1995, the Company and various 
persons affiliated with The Martin Group of Companies, Inc., a San 
Francisco-based real estate development firm owned by J. David Martin, 
executed definitive documents relating to the Company's acquisition of 
interests in six retail properties in the San Francisco Bay area (the "Martin 
Properties").  Each of the Martin Properties is currently owned by a separate 
limited partnership of which the Company is general partner and Mr. Martin 
and various other persons affiliated with The Martin Group (collectively, 
including Mr. Martin, the "Martin Group Affiliates") are the limited 
partners.  Each of the partnership agreements contemplates that the Company 
will acquire or develop a specified Martin Property through the relevant 
partnership and that upon completion and stabilization of rental revenues 
from the property, the limited partners will receive a number of limited 
partnership units determined as follows: (i) the annualized net operating 
income of the Property will be multiplied by 10 in order to arrive at a 
hypothetical value of the completed property, (ii) the cost of construction 
and other project costs will be deducted from such hypothetical value in 
order to "value" the equity interests of the limited partners in the 
Property, and (iii) such equity interest will be stated as a number of 
limited partnership units determined by dividing such limited partners' 
equity by $16. Each holder of limited partnership units will have the right 
to "put" such units to the partnership at a price equal to the then market 
value of an equivalent number of shares of the Company's Common Stock.  As a 
result, the actual value which a holder of limited partnership units would be 
entitled to receive upon exercise of such "put" option will depend upon the 
market value of the Common Stock at the time, which may be more or less than 
$16 per limited partnership unit.  If such "put" is exercised, the Company 
has the option of either purchasing the limited partnership units for cash or 
delivering one share of Common Stock for each limited partnership unit.

     Each partnership agreement specifies the maximum number of limited 
partnership units that may be issued to the limited partners of that 
partnership.  If the hypothetical equity value of any such partnership is 
determined to be less than originally estimated (either because project costs 
are higher than estimated or because stabilized net operating income is less 
than estimated or both), then the number of limited partnership units and the 
corresponding number of shares of Common Stock of the Company which may be 
exchanged for such units will be reduced.  Other than to reflect a stock 
split or other capital adjustment of the shares of Common Stock, under no 
circumstances can the number of units be increased above the number specified 
in the applicable partnership agreement.  Limited partnership units 
exchangeable for 44,848 shares of Common Stock have been issued to the Martin 
Group Affiliates as of December 31, 1997, and the Company had agreed to issue 
limited partnership units exchangeable for an additional 90,000 shares of 
Common Stock on January 1, 1998 (See Note 18 - Subsequent Events).  At 
December 

                                       48
<PAGE>

31, 1997 and 1996, these partnership units had a cost basis of $477,000 and 
$434,000, respectively and are reflected as minority interest in the 
accompanying consolidated financial statements.  A maximum of 1,642,000  
shares of Common Stock have been reserved for issuance upon exchange of the 
maximum number of 1,642,000 limited partnership units that may be issued with 
respect to the remaining four Martin Properties.  In connection with each of 
the Martin Properties, the Company entered into a registration rights 
agreement with the limited partners of each limited partnership pursuant to 
which such limited partners will have the right to require the Company to 
register under the Securities Act the shares of Common Stock which are issued 
upon the exchange of limited partnership units for offer and sale to the 
public and to join in certain registrations of securities of the Company.  
The total project costs (exclusive of partnership units representing the 
equity interest of the limited partners) for the four remaining Martin 
Properties are estimated at approximately $175,000,000 of which approximately 
$73,000,000 has been expended through December 31, 1997.

3.   ACQUISITIONS

     During the year ended December 31, 1997, the Company and certain of its 
subsidiaries completed the acquisition of 42 retail shopping centers 
totalling approximately 5.6 million square feet of Company-owned GLA for an 
aggregate purchase price of approximately $598,100,000. Included in this 
acquisition activity was the acquisition on December 31, 1997, of a portfolio 
of twenty shopping centers (the "Golden State Properties") containing 
approximately 2.6 million square feet of gross leasable area, all of which 
are located in California, and the related financing thereof.  Pursuant to 
the terms of the agreement to contribute dated as of December 5, 1997 (the 
"Contribution Agreement") by and among the Company and certain investment 
funds (the "Contributors"), on December 31, 1997, the Contributors 
contributed the Golden State Properties to the Company's Operating 
Partnership in exchange for initial consideration of approximately 
$302,400,000.  Of this consideration $50,000,000 was in the form of 2,000,000 
preferred limited partner units of the Operating Partnership ("Preferred 
Units") (see Note 10).  The Company financed the cash portion of the 
acquisition price of the Golden State Properties through the privately 
negotiated sale of $70,000,000 of the Company's newly-designated and issued 
Series 1997-A Convertible Preferred Stock (see Note 10), the borrowing of 
first mortgage debt collateralized by nineteen of the Golden State Properties 
(see Note 4) and additional borrowings under its existing credit facility 
(see Note 5).

     The Contributors have the right to receive additional consideration of 
up to $41,600,000 for additional value resulting from the lease-up of certain 
specified portions of the Golden State Properties and construction and 
lease-up of certain additional space.  The additional consideration, if any, 
will be based upon incremental income and will be paid out over an 
eighteen-month period.  The Contributors have the option of taking the 
additional consideration in common limited partner units of the Operating 
Partnership ("Common Units") with the number of such Common Units to be equal 
to the amount of such additional value divided by the then fair market value 
(as determined at the respective times of payment) of the common stock, of 
the Company (the "Common Stock"), except that $14.375 shall be deemed to be 
the fair market value for shares issued for the first $11,600,000 of such 
additional consideration.  The Contributors will also have the option of 
having the Company or the Operating Partnership immediately redeem such 
Common Units for cash.  Any leases for the unleased and unbuilt space must 
adhere to certain standards as to use, creditworthiness and lease terms, with 
the Contributors responsible for all leasing costs and the Company retaining 
certain approval rights.

                                       49
<PAGE>

     During the year ended December 31, 1996, the Company acquired two retail 
shopping centers totalling approximately 261,400 square feet for a total 
purchase price of approximately $29,700,000.

4.   NOTES PAYABLE

     Notes payable are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                            December 31,
                                                           1997         1996
                                                           ----         ----
<S>                                                      <C>          <C>
Notes payable at rates of up to 10.00%
Payable in monthly installments to 2026:
  Collateralized Mortgage-Backed Securities              $262,160       
  Banks and Savings and Loan Associations                  18,753     $ 50,691
  Insurance Companies                                      48,099       32,376
  Pension Funds                                            22,052       22,485
  Other                                                    18,447     
                                                         --------     --------
Total Notes Payable                                      $369,511     $105,552
                                                         --------     --------
                                                         --------     --------
</TABLE>

     Interest expense for the years ended December 31, 1997, 1996 and 1995 is 
reported net of capitalized interest totaling approximately $3,242,000, 
$1,658,000 and $97,000, respectively.

     Principal maturities on the notes payable are summarized as follows (in 
thousands):

<TABLE>
<CAPTION>
Year Ending December 31, 
<S>                                            <C>
        1998                                   $ 27,917
        1999                                     29,100
        2000                                      5,059
        2001                                      5,196
        2002                                     18,271
        Later Years                             283,968
                                               --------
        Total                                  $369,511
                                               --------
                                               --------
</TABLE>

     At December 31, 1997, the Company had $18,753,000 outstanding under a 
construction loan agreement, secured by one of the Company's development 
properties.  Borrowings under this loan bear interest at the Bank's 
Eurodollar base rate plus 2.00% or at its prime rate (approximately 8.50% at 
December 31, 1997).  The loan is scheduled to mature in June 1998, and 
borrowings are included in notes payable.

     During February 1997, the Company paid off mortgage loans secured by one 
of its shopping centers with borrowings under the Company's credit 
facilities.  In addition, the Company refinanced a variable rate mortgage 
loan secured by another property with a fixed rate mortgage loan.  In 
connection with these extinguishments of debt, the Company recorded an 
extraordinary loss of $52,000.

     On December 31, 1997, the Company, through a Bankruptcy Remote Entity 
(see Note 2), sold to Nomura Asset Capital Corporation a 8.33%, $135,040,000 
mortgage promissory note due December 31, 2007 for $150,000,000, being the 
equivalent of a 6.76%, $150,000,000 mortgage promissory note with the same 
maturity.  The Company has accounted for the sale of the mortgage note and 
the payment of principal and interest thereon as if the note were a 6.76% 
$150,000,000 mortgage promissory note.  The first mortgage debt is 
collateralized by nineteen of the twenty Golden State Properties.  The 
proceeds of this mortgage financing were used to finance, in part, the 
acquisitions of the Golden State Properties pursuant to the Contribution 
Agreement (see Note 3).

                                       50
<PAGE>

5.   LINE OF CREDIT ADVANCES

     In November 1996, the Company obtained a $90,000,000 revolving credit 
facility secured by certain real estate on which outstanding borrowings 
accrued interest at LIBOR (London Interbank Offer Rate) plus 1.65% and a 
$45,000,000 unsecured credit facility under which outstanding borrowings 
accrued interest at LIBOR plus 1.75%.  During the third quarter of 1997, the 
Company obtained an increase in the borrowing capacity under its revolving 
credit facility from $135,000,000 to $205,000,000 of which $135,000,000 is to 
be secured by various mortgages and $70,000,000 is unsecured. The Company 
also negotiated a reduction of .25% in the interest rate to LIBOR plus 1.40% 
and LIBOR plus 1.50% on the secured and unsecured portions, respectively.  At 
December 31, 1997, borrowings of approximately $180,869,000 were outstanding 
of which $105,888,000 and $74,981,000 (with the lender's consent) were 
outstanding under the secured and unsecured portions, respectively. The 
credit facility is scheduled to mature in November 1998, with a one year 
extension option available and is subject to various borrowing base and debt 
service coverage limitations.

6.   CONVERTIBLE DEBENTURES

     On March 6, 1992, the Company issued $75,000,000 of 8-1/2% Convertible 
Debentures due 2002 at $1,000 per Debenture.  During November 1996, the 
Company redeemed the remaining balance of these Convertible Debentures at par 
($25,700,000).  Proceeds for the redemption were obtained from borrowings 
under the Company's credit facilities.  In connection with this 
extinguishment of debt, the Company recorded an extraordinary loss of 
$884,000.  Through December 31, 1995, 3,081,000 shares had been issued as a 
result of the conversion of $49,309,000 of these Debentures; there were no 
conversions during 1996.

7.   GAIN ON SALES OF REAL ESTATE

     At December 30, 1997, the Company sold the Pacific West Outlet Center. 
Proceeds from the disposition totaled approximately $38,500,000, resulting in 
a gain of approximately $5,896,000.  Two other properties were disposed of 
without realization of gain or loss during 1997.  During 1996, the Company 
disposed of the McDonnell Douglas Building, Highlands Plaza, the Fireman's 
Fund Building, the Miramar Business Plaza and its interest in the building 
which contains its corporate headquarters.  Proceeds from the dispositions 
totaled approximately $40,874,000, resulting in a gain of approximately 
$2,298,000.  During 1995, the Company disposed of A-Storage Place and the 
Beverly Garland Hotel. Proceeds from the dispositions totaled approximately 
$12,619,000, resulting in a gain of approximately $2,233,000.  All such 
proceeds were used to reduce borrowings under the Company's credit facilities.

8.   IMPAIRMENTS/WRITEDOWNS OF ASSETS

     During the fourth quarter 1995, the Company announced that its Board of 
Directors had approved a plan to dispose of a portion of the Company's office 
portfolio and to redeploy the proceeds from disposition into target retail 
properties.  As a result of the decision to dispose of these properties, the 
Company took a one-time non-cash charge of $21,373,000.  Fair market value 
was based on estimated sales proceeds and discounted cash flows for the 
related properties.  In addition, the Company took additional one-time 
charges of $1,047,000 to write down goodwill, outdated computer equipment, a 
discontinued investment in a real estate advisor, and $2,500,000 related to 
the implementation of the Company's new strategic plan.  The $2,500,000

                                       51
<PAGE>

charge included a non-cash reduction in revenues of $1,278,000 primarily as a 
result of a change in the formula used to estimate common area maintenance 
reimbursements and percentage rents; and $975,000 in one-time general and 
administrative expenses related to the transition to a new management team, 
studies by new management of various organizational and operating policies of 
the Company, and organizational and strategic changes resulting from those 
studies including the internalization of property management and the 
installation of a new property management operating system.

9.   DIVIDEND DISTRIBUTIONS

     Based on information provided by the Company's regular tax advisor, the 
status of the dividends distributed for 1997, 1996 and 1995 for Federal 
income tax purposes is as follows:

<TABLE>
<CAPTION>
                                       1997        1996         1995
                                       ----        ----         ----
<S>                                   <C>         <C>          <C>
     Taxable Portion:              
     Ordinary                          93.3%          0%        44.4%
     Capital Gain                         0%          0%        12.4%
                                      ------      ------       ------
                                       93.3%          0%        56.8%
     Return of Capital                  6.7%      100.0%        43.2%
                                      ------      ------       ------
     Total                            100.0%      100.0%       100.0%
                                      ------      ------       ------
                                      ------      ------       ------
</TABLE>

10.  ISSUANCE OF SECURITIES

SERIES 1997-A CONVERTIBLE PREFERRED STOCK:   On December 31, 1997, the 
Company issued 2,800,000 shares of Series 1997-A Convertible Preferred Stock, 
par value $.01 per share (the "Series A Preferred Stock") in a 
privately-negotiated sale at a price of $25.00 per share.  The Series A 
Preferred Stock has a cumulative dividend yield of 8%.  On and after December 
31, 1998, March 31, 1999, June 30, 1999, and September 30, 1999 (or earlier 
in the event of certain defined events), each holder of shares of Series A 
Preferred Stock will have the right to convert 25% of the shares of Series A 
Preferred Stock held of record by the holder into a number of shares of 
Common Stock equal to (i) the stated value plus the amount, if any, of the 
per share amount of outstanding dividends as of the effective time of the 
conversion, divided by (ii) the conversion price, initially equal to $15.375. 
 After the fifth anniversary of the date of the first issuance of shares of 
Series A Preferred Stock, the Company may give notice of mandatory conversion 
of all of the outstanding Series A Preferred Stock if the value of the 
Common Stock (both on the day prior to the notice of conversion and on a 
value weighted basis over a period of time prior to such date) is greater 
than the initial conversion price; and after such notice all such outstanding 
shares shall be mandatorily converted into Common Stock, except that each 
holder of Series A Preferred Stock shall have the right, prior to the date 
established for such mandatory conversion, instead to cause the Company to 
redeem such holder's Series A Preferred Stock at its stated value plus 
accrued dividends to the redemption date multiplied by a percentage equal to 
105% if the redemption date is prior to December 31, 2003, decreasing by 1% 
each year thereafter (but not less than 100% after December 31, 2007).   The 
Company used the proceeds of the sale to finance, in part, the acquisition of 
the Golden State Properties (see Note 3).

COMMON STOCK:  On May 2, 1997, the Company issued 6,325,000 shares of Common 
Stock at a public offering price of $12.375 per share.  The shares were sold 
pursuant to a previously filed $200 million shelf registration statement. The 
net proceeds of the offering were used to reduce borrowings under the 
Company's credit facilities.  

                                       52
<PAGE>

PREFERRED OPERATING PARTNERSHIP UNITS:  On December 31, 1997, 2,000,000 
Series 1997-A Preferred Limited Partner Units of the Operating Partnership 
(the "Preferred Units") were issued at a price of $25.00 per unit.  After 
approximately a year and subject to certain conditions, Preferred Units are 
exchangeable at the option of the holder for Series A Preferred Stock on a 
1-for-1 basis.  Each Preferred Unit has substantially identical distribution 
and liquidation rights as each share of Series A Preferred Stock.  Such 
Preferred Units are classified as minority interest at December 31, 1997.  
The Company used the proceeds of the sale to finance, in part, the 
acquisition of the Golden State Properties (see Note 3).
 
REDEMPTION CONTINGENCY:  Under the rules of the New York Stock Exchange (on 
which the Company's Common Stock is listed), the number of shares of Common 
Stock which the Company may issue in connection with the conversion of Series 
A Preferred Stock (including shares of Series A Preferred Stock issuable upon 
the exchange of Preferred Units for such Series A Preferred Stock) is limited 
to a number that is less than 20% of the outstanding shares of Common Stock 
at December 31, 1997, unless the stockholders of the Company approve the 
issuance of Common Stock upon the conversion of all such Preferred 
securities.  The Company intends to ask the holders of its Common Stock to 
approve, at the Company's 1998 Annual Meeting or a special meeting to be held 
not later than June 30, 1998, the issuance of Common Stock upon the 
conversion of all $120,000,000 of such Preferred securities.  In the event 
that the stockholders do not approve such issuance, the Company will be 
obligated to redeem 1,126,386 shares of Series A Preferred Stock and 804,561 
Preferred Units having an aggregate stated value of approximately $48,274,000 
not later than June 30, 1998, in order to reduce the number of shares of 
Common Stock issuable upon conversion of the remaining unredeemed Preferred 
securities to less than 20% of the outstanding shares of Common Stock at 
December 31, 1997. Of this amount, $28,160,000 is classified as Preferred 
Stock, and the remainder is classified as Minority Interest.

ISSUANCE OF PARTNERSHIP UNITS; "PUT" RIGHTS OF COMMON UNITS:  Under the 
partnership agreement of the Operating Partnership, whenever the Company 
issues any shares of Common Stock or Preferred Stock, the Company must 
contribute the proceeds of such issuance to the Operating Partnership and the 
Operating Partnership will issue the same number of Common Units or Preferred 
Units to the Company, so that the Company will at all times own the same 
number of Common Units (including units held by the Company as general 
partner as well as limited partner units owned by the Company) and Preferred 
Units as there are outstanding shares of Common Stock or Preferred Stock of 
the Company.  Distributions by the Operating Partnership with respect to 
Preferred Units and Common Units provide the funds to enable the Company to 
make distributions to the holders of its Series A Preferred Stock and Common 
Stock.  The partnership agreement also provides that, approximately one year 
after the issuance of Common Units (or earlier in the event of certain 
extraordinary transactions), the holder of each Common Unit other than the 
Company will have the right to require the Operating Partnership to redeem 
each Common Unit at a redemption price equal to the then market value of a 
share of Common Stock.  Such redemption will be in cash, except that the 
Company may assume the redemption obligation and pay the redemption in form 
of shares of its Common Stock.

UNISSUED REGISTERED SECURITIES:  As of December 31, 1997, the Company has 
registered an aggregate of $321,728,125 of unissued securities under various 
shelf registration statements.

                                       53
<PAGE>

11.  PRICE RANGE OF COMMON STOCK

<TABLE>
<CAPTION>
                                             Market Quotations
                                                                     Dividends
Quarter Ended                          High                   Low         Paid
------------------------------------------------------------------------------
<S>                                  <C>                   <C>       <C>
March 31, 1995                       $13.38                $11.88         $.36
June 30, 1995                         13.50                 11.63          .36
September 30, 1995                    14.50                 11.38          .36
December 31, 1995                     11.88                  9.50          .25

March 31, 1996                        11.13                  9.75          .25
June 30, 1996                         11.88                 10.25          .25
September 30, 1996                    13.00                 11.00          .25
December 31, 1996                     15.00                 11.88          .25

March 31, 1997                        15.50                 12.75          .25
June 30, 1997                         13.88                 11.75          .25
September 30, 1997                    14.81                 13.50          .25
December 31, 1997                     15.56                 12.75          .25
</TABLE>

     Market quotations are from the New York Stock Exchange Index.  As of 
December 31, 1997, there were approximately 2,626 holders of record of the 
Company's shares.

12.  STOCK OPTIONS

     The Company has a stock option and incentive plan which expires in 2006 
and is administered by the Compensation Committee of the Board of Directors.  
A maximum of 1,800,000 shares of Common Stock are reserved for issuance upon 
the exercise of options or other stock-based awards that may be granted under 
the plan.  Options granted expire 10 years from the date of grant.  The plan 
as revised in 1996 also provides for grants from such reserved shares to each 
non-employee director of the Company of restricted shares of the Company's 
Common Stock in lieu of cash compensation.  Restricted stock vests evenly 
over a three year period or earlier upon such person's termination of service 
as director. At December 31, 1997, 174,659 shares had been purchased pursuant 
to the exercise of options or restricted stock granted under the plan, 
unexercised options for 1,361,377 shares are outstanding (of which 316,833 
are subject to future vesting requirements), and options or other awards for 
263,964 shares are available for future awards under the plan (see Note 18).

                                       54
<PAGE>

     Activity under the stock option plan is summarized below:

<TABLE>
<CAPTION>
                                                                   Exercise
                                                  Number              Price
                                                  of Shares       Per Share
                                                ---------------------------
<S>                                              <C>         <C>
Outstanding, January 1, 1995                        399,537   $15.20-$18.88
Granted                                             683,000   $12.09-$12.88
Exercised                                           (48,000)  $12.50
                                                  ---------   -------------
Outstanding, December 31, 1995                    1,034,537   $12.09-$18.88
Granted                                             501,500   $12.50
Canceled                                            (13,850)  $15.20-$18.63
                                                  ---------   -------------
Outstanding, December 31, 1996                    1,522,187   $12.09-$18.88
Expired                                             (19,250)  $16.19
Repurchased                                        (135,560)  $16.19-$18.88
Exercised                                            (4,000)  $12.50
Canceled                                             (2,000)  $12.50    
                                                  ---------   -------------
Outstanding, December 31, 1997                    1,361,377   $12.09-$18.88
                                                  ---------   -------------
                                                  ---------   -------------
</TABLE>

     During 1997, the Company repurchased 135,560 options for an average 
price of approximately $0.49 per option.

     The following table summarizes information concerning options 
outstanding and exercisable at December 31, 1997:

<TABLE>
<CAPTION>
                       Options Outstanding                 Options Exercisable
                --------------------------------  ------------------------------------
                                     Remaining
                                    Contractual    Exercise                  Weighted
   Range of        Outstanding at       Life        Price -    Number at      Average
   Exercise         December 31,      Weighted    Weighted    December 31,   Exercise
    Prices             1997           Average      Average       1997          Price 
--------------------------------------------------------------------------------------
<S>                <C>              <C>           <C>         <C>            <C>
 $12.09-$12.88        1,130,500       8 years      $12.65        813,667       $12.71
 $15.20-$16.97           50,250       4 years       16.04         50,250        16.04
 $17.59-$18.88          180,627       3 years       18.48        180,627        18.48
                      ---------                                ---------
                      1,361,377                                1,044,544
                      ---------                                ---------
                      ---------                                ---------
</TABLE>

     Financial Accounting Standards Number 123, "Accounting for Stock-Based 
Compensation" ("FAS No. 123") was effective in 1996.  FAS No. 123 requires 
either the recording or disclosure of compensation cost for stock-based 
employee compensation plans at fair value.  The Company has adopted the 
disclosure-only provisions of FAS No. 123.  Accordingly, no compensation 
costs have been recognized in 1997, 1996 or 1995.  Had compensation cost for 
the Company's Stock Option Plan been recognized based on the fair value at 
the grant date for awards consistent with the provisions of FAS No. 123, the 
Company's net income (loss) and basic earnings (loss) per share would have 
been reflected as the pro forma amounts below:

<TABLE>
<CAPTION>
                                                 1997      1996      1995
                                                 ----      ----      ----
<S>                                            <C>       <C>       <C>
Net Income (Loss) - pro forma                  $18,463   $11,251   $(13,664)
Basic Earnings (Loss) per share - pro forma        .87       .66       (.80)
</TABLE>

                                       55
<PAGE>


     The pro forma effect on net income for 1997, 1996 and 1995 is not 
representative of the pro forma effect on net income in future years because 
it does not take into consideration pro forma compensation expense related to 
grants made prior to 1995.  No options were granted during 1997.  The 
estimated fair value of options granted under the Company's stock option plan 
during 1996 and 1995 were $705,000 and $946,000, respectively, on the date of 
grant using the Black-Scholes option-pricing model with the following 
weighted-average assumptions:  8.0% dividend yield, volatility of 25%, risk 
free rate of return of 6.00% and expected lives of 5 years. The estimated 
fair value of options granted are subject to the assumptions made and if the 
assumptions changed, the estimated fair value amounts could be significantly 
different.  The above weighted-average assumptions are an approximation of 
historical information and are not intended to represent future events or 
trends.

13.  DIVIDEND REINVESTMENT PLAN

     During 1995, the Company had a Dividend Reinvestment Plan which enabled 
stockholders to invest their dividends in newly issued shares at a 5% 
discount from "fair market value" (as defined in the Plan).  For 1995, 
222,894 shares were issued through the Plan.  The Company suspended the 
direct discounted reinvestment portion of the Plan effective January 1, 1996.

14.  REPURCHASE OF STOCK

     During the second quarter of 1995, the Company purchased 94,500 shares 
of stock on the open market at an average price of $13.28.

15.  TRANSACTIONS WITH RELATED PARTIES

     The Company acquired two retail centers in July and December 1996, 
having a net book value of $30,221,000 at December 31, 1996, with the 
expectation that an institutional investor would ultimately acquire 75% 
interests in such centers by paying the Company 75% of its acquisition costs 
for these properties. On February 20, 1997 and August 1, 1997, the 
institutional investor funded $7,173,000 and $15,254,000, respectively, to 
acquire a 75% interest in each of the two retail centers.  The Company is 
advised that an entity controlled by a former director of the Company holds 
an approximately 1.5% interest in, and is an advisor to, the institutional 
investor.
 
     In April 1995, the Company entered into an agreement to contribute up to 
$650,000 as an investor in a real estate advisor organized to provide 
advisory services to investment vehicles acquiring real property located in 
the Republic of Mexico.  The Company's chairman and two other unrelated 
individuals were the managers of, and individually owned interests in, the 
advisor.  In November 1995, following the investment of $350,000 in the 
advisor, and in conjunction with the Board of Directors' determination to 
concentrate the Company's future activities on retail properties, the Company 
terminated the contribution agreement and wrote off its investment in the 
advisor.

     The Company temporarily advanced the $200,000 purchase price for 16,000 
shares of its Common Stock purchased during 1995 by each of three Company 
directors, at the then fair market value of such stock.  The note of one 
director, for $197,000 bearing interest at the Company's cost of borrowing, 
remained outstanding at December 31, 1995, and, was fully repaid early in 
1996. The sales to the directors were a part of a stock purchase program 
offered

                                       56
<PAGE>

to all Company employees which, except for the purchases by the three 
directors, was rescinded prior to the 1995 year-end.

     For a description of transactions in which the Company's current 
president and chief executive officer was an interested party prior to his 
election to such positions and as a director, see "Development Properties" in 
Note 2.
 
16.  RETIREMENT SAVINGS PLAN

     The Company has a contributory Retirement Savings Plan.  The maximum 
contribution is 15% of annual salaries of which up to 3% is matched by the 
Company up to 75% of employee contributions.  The Company's contributions to 
this Plan for 1997, 1996 and 1995 were approximately $48,000, $33,000, and 
$29,000, respectively.

17.  QUARTERLY FINANCIAL DATA (Unaudited)

     Summarized quarterly financial data for 1997 and 1996 is as follows (in 
thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                         Net Income Per Share
                                                         --------------------
1997:                 Total Revenues      Net Income     Basic        Diluted
                      --------------      ----------     -----        -------
<S>                   <C>                 <C>            <C>          <C>
First                       $ 12,977        $  1,584      $ 0.09       $ 0.09
Second                        16,987           3,444        0.16         0.16
Third                         18,117           4,111        0.18         0.17
Fourth                        20,093           9,559        0.45         0.45
                            --------        --------      ------       ------
Total                       $ 68,174        $ 18,698      $ 0.88       $ 0.87
                            --------        --------      ------       ------
                            --------        --------      ------       ------

1996:
First                       $ 12,245        $  3,044      $ 0.18       $ 0.18
Second                        12,167           2,785        0.16         0.16
Third                         11,611           4,423        0.26         0.26
Fourth                        11,291           1,019        0.06         0.06
                            --------        --------      ------       ------
Total                       $ 47,314        $ 11,271      $ 0.66       $ 0.66
                            --------        --------      ------       ------
                            --------        --------      ------       ------
</TABLE>
                                       57
<PAGE>

18.  SUBSEQUENT EVENTS

     On January 1, 1998, 90,000 limited partnership units exchangeable for 
90,000 shares of Common Stock were issued to the Martin Group Affiliates in 
connection with the Company's acquisition of another Martin Property (see 
Note 2).  The partnership units had a cost basis of approximately $1,440,000 
and were included in accounts payable and other liabilities at December 31, 
1997.

     In January 1998, the Company obtained a $44,457,000 construction loan, 
secured by one of the Company's development properties. Borrowings under this 
loan bear interest at LIBOR plus 1.90% or at the lender's prime rate plus 
 .50%. The loan is scheduled to mature in January 1999. The initial draw on 
January 9, 1998 was approximately $10,222,000.

     On February 2, 1998, the Company purchased a retail shopping center for 
$14,825,000.  The acquisition was financed with borrowings under a new 
$7,000,000, 7.45%, 7-year mortgage loan secured by the retail shopping 
center, with the balance coming from borrowings under the Company's credit 
facility.

     On January 14, 1998, the Company's Board of Directors, subject to 
stockholder approval at the 1998 Annual Meeting, voted to increase the number 
of shares of Common Stock for which awards may be granted under the stock 
option and incentive plan (see Note 12) by 1,150,000 shares.  Subject to the 
approval of such increase, the Compensation Committee concurrently granted 
options for an aggregate of 525,000 shares of Common Stock to certain key 
executives, exercisable at $12.50 per share, the current value of the 
Corporation's stock on the New York Stock Exchange at the time such options 
were approved in December, 1996. On January 14, 1998, the Compensation 
Committee also granted options for an aggregate of 144,500 shares of Common 
Stock to other employees of the Company at an exercise price of $14.50 per 
share, the closing price of the Corporation's stock on that day.

19.  PRO FORMA FINANCIAL INFORMATION

     As discussed in Notes 3 and 7, the Company and certain of its 
subsidiaries acquired and disposed of interests in certain properties during 
1997 and 1996.  The acquisitions have been accounted for as a purchase.  The 
operating results of the acquisitions and disposals have been included in the 
consolidated statements of income from the date of acquisition and disposal.

     The following unaudited supplemental pro forma operating data is 
presented for the years ended December 31, 1997 and 1996 as if each of the 
following transactions had occurred as of the beginning of the respective 
periods:  (i) the acquisitions and dispositions by the Company of all 
properties in 1997 and 1996, (ii) the completion of the sale by the Company 
of 6,325,000 shares of Common Stock in May 1997 (see Note 10) and (iii) the 
redemption of $25,700,000 aggregate principal amount of 8.5% Convertible 
Debentures (See Note 6).

     The unaudited pro forma financial information is presented for 
informational purposes only and may not be indicative of what actual results 
of operations would have been had the transaction occurred as of 
January 1, 1997 or 1996, nor does it purport to represent the results of future 
operations.  (Amounts in thousands, except per share amounts.)

<TABLE>
<CAPTION>

                                             For the Year Ended
                                                December 31,
                                              1997         1996
                                            --------     --------
<S>                                         <C>          <C>
Revenues from rental property               $111,813     $104,180
  Net Income Before Extraordinary 
   Item                                       15,972       16,564
  Net Income                                  15,920       15,680
  Net Income Before Extraordinary 
   Item Per Common Share                        0.68         0.71
  Net Income per Common Share                   0.68         0.67
</TABLE>

                                    PART III

ITEMS 10 THROUGH 13.

     Incorporated by reference to the following sections of the Company's 
Proxy Statement for its 1998 Annual Meeting: "Nominees for Directors," 
"Executive Officers," "Beneficial Ownership of Management," "Beneficial 
Ownership of Non-Management," and "Executive Compensation" under "PROPOSAL 
I-ELECTION OF DIRECTORS" and "CERTAIN TRANSACTIONS WITH MANAGEMENT."

                                     PART IV

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

     (a) The following financial statements and Independent Auditors' Report 
are included under Item 8.

     Independent Auditors' Report.

     Consolidated Balance sheets as of December 31, 1997 and 1996.

     Consolidated Statements of Income for each of the three years in the 
     period ended December 31, 1997.

                                       58
<PAGE>

     Consolidated Statements of Stockholders' Equity for each of the three 
     years in the period ended December 31, 1997.

     Consolidated Statements of Cash Flows for each of the three years in the 
     period ended December 31, 1997.

     Notes to Consolidated Financial Statements, December 31, 1997, 1996, and 
     1995.

The following Supplemental Financial Schedules are included herein:

     III -  Real Estate and Accumulated Depreciation.

All other schedules are omitted because of the absence of the conditions 
under which they are required or because the required information is included 
in the financial statements and notes.

     (b) REPORTS ON FORM 8-K

     (i)    Form 8-K Report filed November 17, 1997 (earliest event reported 
            August 15, 1997): Item 5, regarding acquisitions of Gateway 
            Retail Center, Mountaingate Plaza and the first acquisitions 
            under the Powell Portfolio and the letter of intent relating to 
            the Golden State Acquisition; and Item 7, exhibit relating to the 
            Golden State Acquisition.

     (ii)   Form 8-K Report filed December 16, 1997 (earliest event reported 
            November 7, 1997): Item 5, regarding Golden State Properties 
            Portfolio Transactions, Powell Portfolio Acquisition, 
            Mountaingate Plaza, Ernst Leasehold Portfolio Acquisition, Simi 
            Valley Plaza Acquisition, Meridian Village Shopping Center 
            Acquisition, Disposition of Pacific West Outlet Center, Operating 
            Partnership Formation, Designation of Series A Preferred Stock 
            and Description of Operating Partnership Units; and Item 7, 
            regarding Financial Statements, Pro Forma financial information, 
            and exhibits.

     (iii)  Form 8-K Report filed January 14, 1998 (earliest event reported 
            December 31, 1997): Item 2, regarding Golden State Properties 
            Acquisition and financing; Item 5, regarding substantial 
            completion of transfer of assets to Burnham Pacific Operating 
            Partnership, L.P. and admission of limited partners, and 
            acquisition of Simi Valley Plaza, and disposition of Pacific West 
            Outlet Center; Item 7 regarding Financial Statements and exhibits.

     (c) EXHIBITS


 3.1.1   Charter of the Company, as Amended and Restated May 6, 1997, 
         incorporated by reference to pages B-1 through B-13 of the Company's 
         Proxy Statement for its 1997 Annual Meeting, filed March 31, 1997.

 3.1.2   Articles Supplementary relating to Series 1997-A Convertible 
         Preferred Stock, incorporated by reference to Exhibit 3.1.2 of the 
         Company's Form 8-K Report (earliest event reported December 31, 
         1997), filed January 14, 1998 (the "January 14, 1998 Form 8-K").

                                       59
<PAGE>

  3.2    Bylaws of the Company, as amended dated November 19, 1997, 
         incorporated by reference to the Company's report on Form 8-K  
         (earliest event reported November 7, 1997), filed December 16, 1997 
         (the "December 16, 1997 Form 8-K Report").

  4.1    Form of stock certificate for common stock of the Company, 
         incorporated by reference to Exhibit 4.0 to Registration Statement 
         No. 33-20489 and subsequently overprinted to state "THE CORPORATION 
         IS NOW INCORPORATED IN THE STATE OF MARYLAND WITH $0.01 PAR VALUE 
         PER SHARE."

  4.2    Stock Purchase Agreement dated as of December 5, 1997 by and among 
         Burnham Pacific Properties, Inc., Burnham Pacific Operating 
         Partnership, L.P., Westbrook Burnham Holdings, L.L.C. and Westbrook 
         Burnham Co-Holdings, L.L.C., incorporated by reference to Exhibit 
         4.1 of the January 14, 1998 Form 10-K.

  4.3    Registration Rights Agreement dated as of December 31, 1997 by and 
         among Burnham Pacific Properties, Inc.,  Westbrook Burnham Holdings, 
         L.L.C. and Westbrook Burnham Co-Holdings, L.L.C., incorporated by 
         reference to Exhibit 4.2.1 of the January 14, 1998 Form 8-K.

  4.4    Registration Rights Agreement dated as of December 31, 1997 by and 
         among Burnham Pacific Properties, Inc. and the Existing Partners (of 
         Golden State Properties) listed on Exhibit A-1 thereto, incorporated 
         by reference to Exhibit 4.2.2 of the January 14, 1998 Form 8-K.

 10.1.1  Agreement of Limited Partnership of Burnham Pacific Operating 
         Partnership, L.P. dated as of November 14, 1997, incorporated by  
         reference to Exhibit 10.1.1 of the December 16, 1997 Form 8-K.

 10.1.2  First Amendment to Agreement of Limited Partnership of Burnham 
         Pacific Operating Partnership, L.P., dated as of December 31, 1997 
         (the "First Amendment"), incorporated by reference to Exhibit 10.1 
         of the January 14, 1998 Form 8-K.

*10.1.3  Exhibit C to the First Amendment (defining the rights of Preferred 
         Units and Common Units of Burnham Pacific Operating Partnership, 
         L.P.)

 10.2    Agreement to Contribute among Burnham Pacific Properties, Inc., and 
         Burnham Pacific Operating Partnership, L.P. and the Contributors and 
         Existing Partners of the Golden State Properties party thereto, 
         dated as of December 5, 1997, incorporated by reference to Exhibit 
         10.2 to the December 16, 1997 Form 8-K.

 10.3    Loan Agreement dated as of December 31, 1997 between  BPP/Golden 
         State Acquisitions, Inc., L.L.C. and Nomura Asset Capital 
         Corporation, incorporated by reference to Exhibit 10.2 of the 
         January 14, 1998 Form 8-K.

 10.4    Amended and Restated Revolving Loan Agreement dated as of December 
         31, 1997 by and between Burnham Pacific Operating Partnership, L.P. 
         and

                                       60
<PAGE>

         Nomura Asset Capital Corporation, incorporated by reference to 
         Exhibit 10.3 of the January 14, 1998 Form 8-K.

 10.5    Stock Option and Incentive Plan of the Company as amended and 
         restated as of May 6, 1997, incorporated by reference to Appendix D 
         to the Company's Proxy Statement for its 1997 Annual Meeting.

 10.6    Employment Agreement between the Company and J. David Martin dated 
         as of October 1, 1995, incorporated by reference to Exhibit 10.1 to 
         the Company's report on Form 10-Q for the quarter ended September 
         30, 1995.

 10.7    Form of Indemnification Agreement entered into with each of the 
         Company's Directors and Officers, incorporated by reference to 
         Exhibit 10.6 filed with the Company's 1995 report on Form 10-K.

*21.1    List of subsidiaries of the Company.

*23.1    Consent of Deloitte & Touche LLP.

*27.1    Financial Data Schedule

*27.2    Financial Data Schedule

*27.3    Financial Data Schedule

*Filed herewith.

                                       61
<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.

                                       Burnham Pacific Properties, Inc.

                                       By: /s/ J. DAVID MARTIN
                                           ----------------------------------
                                           J. David Martin, President

                                       Dated:     March 18, 1998
                                              -------------------------------

                                      SIGNATURES

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

   Signature                      Title                          Date
   ---------                      -----                          ----

/s/ MALIN BURNHAM            Chairman of the Board          March 18, 1998
------------------------                                ----------------------
Malin Burnham         

/s/ J. DAVID MARTIN          President, Director            March 18, 1998
------------------------                                ----------------------
J. David Martin       

/s/ DANIEL B. PLATT          Chief Financial Officer        March 18, 1998
------------------------                                ----------------------
Daniel B. Platt       

/s/ DONNE P. MOEN            Director                       March 18, 1998
------------------------                                ----------------------
Donne P. Moen         

/s/ RICHARD R. TARTRE        Director                       March 18, 1998
------------------------                                ----------------------
Richard R. Tartre     

/s/ THOMAS A. PAGE           Director                       March 18, 1998
------------------------                                ----------------------
Thomas A. Page        

/s/ PHILLIP S. SCHLEIN       Director                       March 18, 1998
------------------------                                ----------------------
Phillip S. Schlein    

                             Director                       
------------------------                                ----------------------
James D. Klingbeil    

/s/ ROBIN WOLANER            Director                       March 18, 1998
------------------------                                ----------------------
Robin Wolaner

                             Director                       
------------------------                                ----------------------
James D. Harper, Jr.

                                       62
<PAGE>

BURNHAM PACIFIC PROPERTIES, INC.   
REAL ESTATE AND ACCUMULATED DEPRECIATION     
FORM 10-K SCHEDULE III   
DECEMBER 31, 1997   
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                              INITIAL COST TO COMPANY:     COSTS CAPITALIZED      
                                                                        SUBSEQUENT TO ACQUISITION:
        PROPERTY              ENCUMBRANCES     LAND     BLDGS & IMPS      LAND      BLDGS & IMPS  
                                                                                                  
--------------------------------------------------------------------------------------------------
<S>                           <C>            <C>        <C>             <C>          <C>          
SAN DIEGO REGION    
     
ANACOMP BUILDING                       -     7,467,253   14,934,506       6,747         15,637    
  Poway, California                                                                               
BERGEN BRUNSWIG BUILDING       9,529,315     7,878,067   15,756,135      10,754        148,645    
  Orange, California                                                                              
INDEPENDENCE SQUARE                    -             -    4,213,782           -      3,783,709    
  San Diego, California                 
K-MART                         2,772,312     1,933,333    3,866,667           -              -    
  San Diego, California                                                                           
MARCOA BUILDING                        -     1,432,434    3,342,347         247            576    
  San Diego, California                                                                           
MENIFEE TOWN CENTER                    -     3,952,698    7,905,397           -              -    
  Menifee, California                   
MESA SHOPPING CENTER           8,002,569     2,962,405    5,924,810      18,169      2,675,034    
  San Diego, California                                                                           
NAVAJO SHOPPING CENTER                 -       571,588      961,731   1,197,679      8,227,861    
  San Diego, California                                                                           
OLYMPIAD PLAZA                 6,185,798     3,413,703    6,871,283           -              -    
  Mission Viejo, California             
PLAZA RANCHO CARMEL                    -     1,837,304    3,848,014           -              -    
  San Diego, California                                                                           
POINT LOMA PLAZA              15,343,655    11,942,554   23,885,108      23,408      1,524,356    
  San Diego, California                                                                           
POWAY PLAZA                            -     2,747,538    6,413,725           -        265,587    
  Poway, California                     
RUFFIN VILLAGE                         -             -    3,779,139           -        250,054    
  San Diego, California                                                                           
SAN DIEGO FACTORY OUTLET                                                                          
  CENTER                               -     4,533,576    9,067,910   2,156,882      6,720,890    
  San Diego, California                                                                           
SAN MARCOS LUCKY PLAZA                 -     2,457,807    4,915,613           -              -    
  San Diego, California                                                                           
SANTEE VILLAGE                         -     3,019,122    4,528,684           -        950,085    
  San Diego, California                                                                           
SCRIPPS RANCH                          -     2,085,891    2,081,981           -      2,684,505    
  San Diego, California                 
SILVER PLAZA                           -       318,364      675,644           -              -    
  Silver City, New Mexico                                                                         
WIEGAND PLAZA II               7,095,407     4,986,224    9,279,037     414,463      3,927,514    
  Encinitas, California                                                                           

<CAPTION>

                                 AMOUNTS AT WHICH CARRIED                                        
                                     AT CLOSE OF PERIOD:                                         
                               LAND     BLDGS & IMPS   CARRYING   ACCUMULATED     DATE      LIFE 
                                                        COSTS     DEPRECIATION  ACQUIRED         
                           --------------------------------------------------------------------- 
<S>                        <C>          <C>           <C>         <C>           <C>        <C>   
SAN DIEGO REGION            

ANACOMP BUILDING             7,474,000   14,950,143   22,424,143  2,491,484     Dec 1992     30
  Poway, California                                                                            
BERGEN BRUNSWIG BUILDING     7,888,821   15,904,780   23,793,601  2,775,997     Oct 1992     30
  Orange, California                                                                           
INDEPENDENCE SQUARE                  -    7,997,491    7,997,491  3,307,468     Sep 1983   3-25
  San Diego, California                                                                        
K-MART                       1,933,333    3,866,667    5,800,000    537,037     Oct 1993     30
  San Diego, California                                                                        
MARCOA BUILDING              1,432,681    3,342,923    4,775,604    916,689     Sep 1989     30
  San Diego, California                                                                        
MENIFEE TOWN CENTER          3,952,698    7,905,397   11,858,095          -     Dec 1997     30
  Menifee, California                                                                          
MESA SHOPPING CENTER         2,980,574    8,599,844   11,580,418  4,282,680     Jun 1984     25
  San Diego, California                                                                        
NAVAJO SHOPPING CENTER       1,769,267    9,189,592   10,958,859  1,777,589     Sep 1983   3-15
  San Diego, California                                                                        
OLYMPIAD PLAZA               3,413,703    6,871,283   10,284,986    114,808     Jun 1997     30
  Mission Viejo, California                                                                    
PLAZA RANCHO CARMEL          1,837,304    3,848,014    5,685,318  1,384,529     Jul 1988     30
  San Diego, California                                                                        
POINT LOMA PLAZA            11,965,962   25,409,464   37,375,426  7,242,491     Dec 1989     30
  San Diego, California                                                                        
POWAY PLAZA                  2,747,538    6,679,312    9,426,850  2,150,035     Oct 1988     30
  Poway, California                                                                            
RUFFIN VILLAGE                       -    4,029,193    4,029,193  1,997,584     Dec 1985     25
  San Diego, California                                                                        
SAN DIEGO FACTORY OUTLET                                                                       
  CENTER                     6,690,458   15,788,800   22,479,258  2,958,999     Jan 1992     30
  San Diego, California                                                                        
SAN MARCOS LUCKY PLAZA       2,457,807    4,915,613    7,373,420          -     Dec 1997     30
  San Diego, California                                                                        
SANTEE VILLAGE               3,019,122    5,478,769    8,497,891  2,426,960     Jan 1985     30 
  San Diego, California                                                                         
SCRIPPS RANCH                2,085,891    4,766,486    6,852,377  1,583,658       May-87     30 
  San Diego, California                                                                         
SILVER PLAZA                   318,364      675,644      994,008      5,284     Oct 1997     30 
  Silver City, New Mexico                                                                       
WIEGAND PLAZA II             5,400,687   13,206,551   18,607,238  4,368,713     Sep 1986     30 
  Encinitas, California     

</TABLE>
<PAGE>

BURNHAM PACIFIC PROPERTIES, INC.                                              
REAL ESTATE AND ACCUMULATED DEPRECIATION                                      
FORM 10-K SCHEDULE III                                                        
DECEMBER 31, 1997                                                             
-------------------------------------------------------------------------------
                                                                              
<TABLE>                                                                      
<CAPTION>                                                                    
                                                                             
                                              INITIAL COST TO COMPANY:     COSTS CAPITALIZED       
                                                                        SUBSEQUENT TO ACQUISITION: 
        PROPERTY              ENCUMBRANCES     LAND     BLDGS & IMPS      LAND      BLDGS & IMPS   
                                                                                                   
-------------------------------------------------------------------------------------------------- 
<S>                           <C>            <C>        <C>             <C>          <C>           

                                                                                                   
LOS ANGELES REGION                      
   
BELL GARDEN MARKETPLACE                -             -   11,854,933           -              -     
  Bell Gardens, California                                                                         
BUENA VISTA MARKETPLACE                -     4,216,270    8,432,541           -              -     
  Duarte, California                                                                               
CENTERWOOD PLAZA                       -     2,108,031    4,216,062           -              -     
  Bellflower, California                
CENTRAL SHOPPING CENTER                -     1,886,518    3,795,868           -              -     
  Ventura, California                                                                              
CRENSHAW-IMPERIAL              5,233,593     3,019,923    6,159,881           -              -     
  Inglewood, California                                                                            
LA MANCHA SHOPPING CENTER              -     2,202,830    5,981,355     159,703        632,272     
  Fullerton, California                 
MOUNTAINGATE PLAZA            24,762,407     9,587,636   19,419,490           -              -     
  Simi Valley, California                                                                          
ONTARIO VILLAGE                3,643,633     1,582,802    3,195,733           -              -     
  Ontario, California                                                                              
THE PLAZA AT PUENTE HILLS     32,814,955    19,333,333   38,666,667      48,744      1,478,834     
  City of Industry, 
  California       
RALPH'S CENTER                         -     3,686,051    7,372,102           -              -     
  Redondo Beach, California                                                                        
SANTA FE SPRINGS                       -     5,682,205   11,403,070           -              -     
  Whitier, California                                                                              
SIMI VALLEY PLAZA             16,241,806     8,219,957   16,439,914           -              -     
  Simi Valley, California               
VALLEY CENTRAL                25,181,265    13,291,904   26,680,586           -              -     
  Lancaster, California                                                                            
WEST LANCASTER                         -       635,257    1,274,663           -              -     
  Lancaster, California                                                                            
WESTMINSTER CENTER                     -    18,604,973   37,209,946           -              -     
  Westminster, California               

<CAPTION>

                                 AMOUNTS AT WHICH CARRIED                                         
                                     AT CLOSE OF PERIOD:                                          
                               LAND     BLDGS & IMPS   CARRYING   ACCUMULATED     DATE      LIFE  
                                                        COSTS     DEPRECIATION  ACQUIRED          
                           ---------------------------------------------------------------------  
<S>                        <C>          <C>           <C>         <C>           <C>        <C>    

LOS ANGELES REGION         

BELL GARDEN MARKETPLACE              -   11,854,933   11,854,933          -     Dec 1997     30 
  Bell Gardens, California                                                                    
BUENA VISTA MARKETPLACE      4,216,270    8,432,541   12,648,811          -     Dec 1997     30 
  Duarte, California                                                                          
CENTERWOOD PLAZA             2,108,031    4,216,062    6,324,093          -     Dec 1997     30 
  Bellflower, California                                                                      
CENTRAL SHOPPING CENTER      1,886,518    3,795,868    5,682,386     95,800     Apr 1997     30 
  Ventura, California                                                                         
CRENSHAW-IMPERIAL            3,019,923    6,159,881    9,179,804    163,661     Apr 1997     30 
  Inglewood, California                                                                       
LA MANCHA SHOPPING CENTER    2,362,533    6,613,627    8,976,160  4,441,407     Dec 1988     30 
  Fullerton, California                                                                       
MOUNTAINGATE PLAZA           9,587,636   19,419,490   29,007,126    159,794     Oct 1997     30 
  Simi Valley, California
ONTARIO VILLAGE              1,582,802    3,195,733    4,778,535    100,053     Jan 1997     30 
  Ontario, California                                                                         
THE PLAZA AT PUENTE HILLS   19,382,077   40,145,501   59,527,578  5,782,905     Oct 1993     30 
  City of Industry,                                                                           
  California                                                                                  
RALPH'S CENTER               3,686,051    7,372,102   11,058,153          -     Dec 1997     30 
  Redondo Beach, 
  California                                                                         
SANTA FE SPRINGS             5,682,205   11,403,070   17,085,275    284,036     Apr 1997     30 
  Whitier, California                                                                         
SIMI VALLEY PLAZA            8,219,957   16,439,914   24,659,871          -     Dec 1997     30 
  Simi Valley, California                                                                     
VALLEY CENTRAL              13,291,904   26,680,586   39,972,490    813,385     Jan 1997     30 
  Lancaster, California                                                                       
WEST LANCASTER                 635,257    1,274,663    1,909,920     38,765     Jan 1997     30 
  Lancaster, California                                                                       
WESTMINSTER CENTER          18,604,973   37,209,946   55,814,919          -     Dec 1997     30 
  Westminster, California  
</TABLE>

<PAGE>

BURNHAM PACIFIC PROPERTIES, INC.                                              
REAL ESTATE AND ACCUMULATED DEPRECIATION                                      
FORM 10-K SCHEDULE III                                                        
DECEMBER 31, 1997                                                             
-------------------------------------------------------------------------------
                                                                              
<TABLE>                                                                       
<CAPTION>                                                                     
                                                                              
                                              INITIAL COST TO COMPANY:     COSTS CAPITALIZED       
                                                                        SUBSEQUENT TO ACQUISITION: 
        PROPERTY              ENCUMBRANCES     LAND     BLDGS & IMPS      LAND      BLDGS & IMPS   
                                                                                                   
-------------------------------------------------------------------------------------------------- 
<S>                           <C>           <C>         <C>            <C>           <C>           
SAN FRANCISCO REGION                                                                               
   
580 MARKETPLACE                        -     5,575,805   11,151,611           -              -     
  Castro Valley, California                                                                        
ARCADE SQUARE                          -     2,779,626    5,559,253           -              -     
  Sacramento, California                                                                           
AUBURN VILLAGE                         -     4,828,725    9,773,678           -              -     
  Auburn, California                    
CAMERON PARK                           -     1,898,032    3,810,110           -              -     
  Cameron Park, California                                                                         
CREEKSIDE SHOPPING CENTER              -     2,883,083    5,766,165           -              -     
  Vacaville, California                                                                            
DISCOVERY PLAZA                        -             -    9,216,732           -              -     
  Sacramento, California                
FOOTHILL PLAZA                         -     2,082,995    4,373,836           -              -     
  Los Altos, California                                                                            
FREMONT GATEWAY PLAZA                  -     9,898,097   19,796,193           -              -     
  Fremont, California                                                                              
FREMONT HUB                            -    15,750,424   33,274,814           -              -     
  Fremont, California                   
HALLMARK TOWN CENTER                   -     2,797,702    5,595,405           -              -     
  Madera, California                                                                               
HILLTOP PLAZA                 18,753,018     1,923,807    3,847,815   3,798,993     19,113,581     
  Richmond, California                                                                             
MARIN/GATEWAY                 16,947,459             -   23,041,102           -              -     
  Richmond, California                  
PROSPECTOR'S PLAZA                     -     6,762,001   13,524,001           -              -     
  Placerville, California                                                                          
RICHMOND SHOPPING CENTER       6,953,694     3,139,965    6,264,175      71,473        261,199     
  Richmond, California                                                                             
SANTA ROSA                             -     5,964,704   11,929,409           -              -     
  Santa Rosa, California                
SHASTA CROSSROADS                      -     4,554,787    9,109,575           -              -     
  Redding, California                                                                              
SILVER CREEK PLAZA               300,000     5,793,858   11,587,715           -              -     
  San Jose, California                                                                             
SOUTHAMPTON CENTER                     -     6,964,868   13,929,736           -              -     
  Benicia, California                   
STANFORD RANCH                 6,440,860     3,669,386    7,449,220           -              -     
  Rocklin, California                                                                              
SUMMERHILLS SHOPPING CENTER            -     3,463,199    6,926,397           -              -     
  Sacramento, California                                                                           
SUNSET CENTER                          -     2,396,340    4,792,681           -              -     
  Suisin City, California               

<CAPTION>

                                 AMOUNTS AT WHICH CARRIED                                          
                                     AT CLOSE OF PERIOD:                                           
                               LAND     BLDGS & IMPS   CARRYING   ACCUMULATED     DATE      LIFE   
                                                        COSTS     DEPRECIATION  ACQUIRED           
                           ---------------------------------------------------------------------   
<S>                        <C>          <C>          <C>          <C>          <C>         <C>     
SAN FRANCISCO REGION                                                                             
                                                                                                 
580 MARKETPLACE             5,575,805   11,151,611   16,727,416          -     Dec 1997      30  
  Castro Valley, 
  California
ARCADE SQUARE               2,779,626    5,559,253    8,338,879          -     Dec 1997      30  
  Sacramento, California                                                                          
AUBURN VILLAGE              4,828,725    9,773,678   14,602,403    188,194     May 1997      30  
  Auburn, California                                                                              
CAMERON PARK                1,898,032    3,810,110    5,708,142    115,865     Jan 1997      30  
  Cameron Park, 
  California
CREEKSIDE SHOPPING CENTER   2,883,083    5,766,165    8,649,248          -     Dec 1997      30  
  Vacaville, California                                                                           
DISCOVERY PLAZA                     -    9,216,732    9,216,732          -     Dec 1997      30  
  Sacramento, California                                                                          
FOOTHILL PLAZA              2,082,995    4,373,836    6,456,831    141,424     Feb 1997      30  
  Los Altos, California                                                                          
FREMONT GATEWAY PLAZA       9,898,097   19,796,193   29,694,290          -     Dec 1997      30  
  Fremont, California                                                                             
FREMONT HUB                15,750,424   33,274,814   49,025,238    799,709     Apr 1997      30  
  Fremont, California                                                                             
HALLMARK TOWN CENTER        2,797,702    5,595,405    8,393,107          -     Dec 1997      30  
  Madera, California                                                                              
HILLTOP PLAZA               5,722,800   22,961,396   28,684,196    300,690     Dec 1996      30  
  Richmond, California                                                                            
MARIN/GATEWAY                       -   23,041,102   23,041,102    317,482     Aug 1997      30  
  Richmond, California                                                                            
PROSPECTOR'S PLAZA          6,762,001   13,524,001   20,286,002          -     Dec 1997      30  
  Placerville, California                                                                         
RICHMOND SHOPPING CENTER    3,211,438    6,525,374    9,736,812    460,857     Dec 1995      30  
  Richmond, California                                                                            
SANTA ROSA                  5,964,704   11,929,409   17,894,113          -     Dec 1997      30  
  Santa Rosa, California                                                                          
SHASTA CROSSROADS           4,554,787    9,109,575   13,664,362          -     Dec 1997      30  
  Redding, California                                                                             
SILVER CREEK PLAZA          5,793,858   11,587,715   17,381,573          -     Dec 1997      30  
  San Jose, California                                                                            
SOUTHAMPTON CENTER          6,964,868   13,929,736   20,894,604          -     Dec 1997      30  
  Benicia, California                                                                             
STANFORD RANCH              3,669,386    7,449,220   11,118,606    143,674     May 1997      30  
  Rocklin, California                                                                             
SUMMERHILLS SHOPPING 
  CENTER                    3,463,199    6,926,397   10,389,596          -     Dec 1997      30  
  Sacramento, California                                                                          
SUNSET CENTER               2,396,340    4,792,681    7,189,021          -     Dec 1997      30  
  Suisin City, California
</TABLE>
<PAGE>

BURNHAM PACIFIC PROPERTIES, INC.                                              
REAL ESTATE AND ACCUMULATED DEPRECIATION                                      
FORM 10-K SCHEDULE III                                                        
DECEMBER 31, 1997                                                             
-------------------------------------------------------------------------------
                                                                              
<TABLE>                                                                       
<CAPTION>                                                                     
                                                                              
                                              INITIAL COST TO COMPANY:     COSTS CAPITALIZED       
                                                                        SUBSEQUENT TO ACQUISITION: 
        PROPERTY              ENCUMBRANCES     LAND     BLDGS & IMPS      LAND      BLDGS & IMPS   
                                                                                                   
-------------------------------------------------------------------------------------------------- 
<S>                          <C>            <C>         <C>            <C>          <C>           
PACIFIC NORTHWEST REGION                                                                           
   
CHAMBERS CREEK                 1,617,951       887,118    1,856,899           -              -     
  Tacoma, Washington                                                                               
DESIGN MARKET                  6,600,000     3,765,179    7,892,149           -              -     
  Bellevue, Washington                                                                             
ERNST                                  -             -    3,474,379           -              -     
  Redmond, Washington                   
FAIRWOOD SQUARE                2,526,000     1,684,060    3,568,011           -              -     
  Renton, Washington                                                                               
MERIDIAN VILLAGE                       -     7,001,009   14,002,019           -              -     
  Bellingham, Washington                                                                           
PUGET PARK                     2,565,502     1,477,327    3,103,651           -              -     
  Everett, Washington                   

                             219,511,199   265,539,648  588,971,055   7,907,263     52,660,339    
                             -----------------------------------------------------------------
                             -----------------------------------------------------------------

<CAPTION>

                                 AMOUNTS AT WHICH CARRIED                                          
                                     AT CLOSE OF PERIOD:                                           
                               LAND     BLDGS & IMPS   CARRYING   ACCUMULATED     DATE      LIFE   
                                                        COSTS     DEPRECIATION  ACQUIRED           
                           ---------------------------------------------------------------------   
<S>                        <C>         <C>           <C>          <C>           <C>        <C>     

PACIFIC NORTHWEST REGION                                                                            
                                                                                                    
CHAMBERS CREEK                887,118    1,856,899     2,744,017      14,725     Oct 1997      30 
  Tacoma, Washington                                                                              
DESIGN MARKET               3,765,179    7,892,149    11,657,328      62,489     Oct 1997      30 
  Bellevue, Washington                                                                            
ERNST                               -    3,474,379     3,474,379           -     Dec 1997      30 
  Redmond, Washington                                                                             
FAIRWOOD SQUARE             1,684,060    3,568,011     5,252,071      27,955     Oct 1997      30 
  Renton, Washington                                                                              
MERIDIAN VILLAGE            7,001,009   14,002,019    21,003,028           -     Dec 1997      30 
  Bellingham, Washington                                                                          
PUGET PARK                  1,477,327    3,103,651     4,580,978      24,519     Oct 1997      30 
  Everett, Washington      

                          273,446,912  641,631,394  $915,078,306  54,799,394
                          --------------------------------------------------
                          --------------------------------------------------
</TABLE>

<PAGE>


REAL ESTATE AND ACCUMULATED DEPRECIATION
FORM 10-K SCHEDULE III NOTES
DECEMBER 31, 1997


Note 1:  
    San Diego Factory Outlet Center, Navajo Shopping Center, Meridian Village,
    Auburn Village Poway Shopping Center, Santee Village, Independence 
    Square, La Mancha Shopping Center, Santa Fe Springs, Central Shopping 
    Center, Foothill Plaza and Freemont Hub are jointly encumbered under 
    the Company's secured line of credit, under which $74,981,538 was 
    outstanding at at December 31, 1997, which was not included in the 
    above schedule.
 
Note 2:
    Menifee Town Center, San Marcos Lucky Plaza, 580 Marketplace, Arcade 
    Square,Creekside Shopping Center Discovery Plaza, Fremont Gateway, 
    Hallmark Town Center, Prospector's Plaza, Santa Rosa, Shasta 
    Crossroads, Silver Creek Plaza, Southampton Ceenter, Summerhills Shopping 
    Center, Sunset Center Buena Vista Market Place, Centerwood Plaza, 
    Ralph's Center and Westminster Center are jointly encumbered under a 
    $150,000,000 Mortgage Loan.

Note 3:  The amounts above do not include:
    $4,931,353 of furniture fixtures and equipment and acquisitions in 
    progress and $1,023,805 of related accumulated depreciation, and 
    $44,745,761 of costs incurred to date on development of five retail   
    centers which are also classified with property in the financial 
    statements.

Note 4:  The aggregate cost for federal income tax purposes for buildings and 
    improvements December 31, 1997 was approximately $624,634,000.

<TABLE>
<CAPTION>
                                                   Land        Accumulated 
                                               Buildings &     Depreciation 
                                               Improvements 
                                              -------------    -------------
<S>                                           <C>              <C>
Balance at December 31, 1995                  $ 362,914,846     $ 54,055,694 
Additions during period                          40,239,162        9,425,669 
Cost of Real Estate sold                        (52,389,119)     (15,158,685)
                                              -------------     ------------
Balance at December 31, 1996                    350,764,889       48,322,678 
Additions during period                         636,986,047       13,107,995 
Cost of Real Estate sold                        (72,672,630)      (6,631,279)
                                              -------------     ------------
Balance at December 31, 1997                  $ 915,078,306     $ 54,799,394 
                                              -------------     ------------
                                              -------------     ------------
</TABLE>

(A)  Additions during the period are broken down as follows:

<TABLE>
<CAPTION>
                                                    1997
                                              -------------
<S>                                           <C>
Cash Expenditures                             $ 447,653,868 
Assumption of Debt                               61,008,444 
Operating Partnership Units Issued               58,323,735 
Issuance of Convertible Preferred Stock          70,000,000 
                                              -------------
                                              $ 636,986,047 
                                              -------------
                                              -------------

<CAPTION>
                                                    1996
                                              -------------
 <S>                                          <C>
 Cash Expenditures                            $  40,239,162 
 Assumption of Debt                                       - 
 Operating Partnership Units Issued                       - 
                                              -------------
                                              $  40,239,162 
                                              -------------
                                              -------------
</TABLE>