Form 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarter ended: March 31, 1995

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

Commission File number: 0-16785

VANGUARD REAL ESTATE FUND I,
A SALES-COMMISSION-FREE INCOME PROPERTIES FUND

(Exact name of Registrant as specified in its charter)

Massachusetts 23-6861048
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Vanguard Financial Center
Malvern, PA 19355
(Address of principal executive (Zip Code)
offices)

Registrant's telephone number (610)669-1000

Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities and 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
---- ----

11,019,978 shares of beneficial interest outstanding as of April 28, 1995.

INDEX

Page
ITEM No. No.

Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements

Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations. . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Changes in Shareholders' Equity . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 5-6

ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . .7-10

PART II OTHER INFORMATION

ITEM 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . .11
ITEM 2. Changes in Securities. . . . . . . . . . . . . . . . . . .11
ITEM 3. Defaults Upon Senior Securities. . . . . . . . . . . . . .11
ITEM 4. Submission of Matters to a Vote of Security Holders. . . .11
ITEM 5. Other Information. . . . . . . . . . . . . . . . . . . . .11
ITEM 6. Exhibits and reports on Form 8-K 11

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

BALANCE SHEETS

March 31, 1995
($ in 000 s) December 31, 1994
ASSETS (unaudited) ($ in 000 s)
_____________ _____________
Investments in Real Estate:
Direct Ownership Investments:
Land $ 6,477 $ 6,570
Buildings and Improvements 21,414 21,717
_____________ _____________
27,891 28,287
Less Accumulated Depreciation 2,069 2,069
_____________ _____________
25,822 26,218
Mortgage Loan Receivable 10,646 10,646
_____________ _____________
Net Investment Portfolio 36,468 36,864
Marketable Securities REMICs 1,933 1,992
Short-Term Investments:
Vanguard Money Market Reserves
Prime Portfolio (1,608,047 and
1,478,147 shares, respectively) 1,608 1,478
Temporary Cash Investments 2,997 2,000
Other Assets 662 945
_____________ _____________
TOTAL ASSETS $43,668 $43,279
_____________ _____________
_____________ _____________

LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage Loans (including current
portion of $105 and $102, respectively) $2,358 $2,383
Due to Affiliates 137 98
Dividend Payable 551 --
Other Liabilities 339 297
_____________ _____________
TOTAL LIABILITIES 3,385 2,778
_____________ _____________
Shares of Beneficial Interest, without
par value, unlimited shares authorized 35,496 36,047
Undistributed Net Income 4,787 4,454
_____________ _____________
TOTAL SHAREHOLDERS' EQUITY 40,283 40,501
_____________ _____________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $43,668 $43,279
_____________ _____________
_____________ _____________

The accompanying notes are an integral part of these statements.

STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended March 31,
1995 1994
REAL ESTATE INCOME (000) (000)
_____________ _____________
Rental Income $1,025 $1,622
Mortgage Interest Income 306 299
Net Income from In-Substance Foreclosed Asset -- 341
_____________ _____________
1,331 2,262
_____________ _____________
REAL ESTATE EXPENSES
Mortgage Interest Expense 59 62
Real Estate Taxes 102 169
Property Operating Expenses 294 169
Depreciation and Amortization -- 277
Provision for Possible Losses 400 --
_____________ _____________
855 677
_____________ _____________
INCOME FROM REAL ESTATE 476 1,585
INVESTMENT INCOME FROM SHORT-TERM
INVESTMENTS 56 71
_____________ _____________
532 1,656
_____________ _____________
ADMINISTRATIVE EXPENSES
Investment Advisory Fee 47 87
Administrative Fee 43 75
Other Administrative Expenses 109 74
_____________ _____________
199 236
_____________ _____________
NET INCOME $333 $1,420
_____________ _____________
Net Income Per Share $ .03 $ .13
_____________ _____________
_____________ _____________
Weighted Average Number of Shares
Outstanding 11,019,978 11,019,978
_____________ _____________
_____________ _____________

The accompanying notes are an integral part of these statements.

STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended March 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES (000) (000)
_____________ _____________
Net Income $ 333 $ 1,420
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Possible Losses 400 --
Depreciation and Amortization -- 277
Changes in Other Assets and Liabilities 368 60
_____________ _____________
Net Cash Provided by Operating
Activities 1,101 1,757
_____________ _____________
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in Real Estate:
Building Improvements (4) --
Principal Repayments on Marketable
Securities REMICs 55 72
_____________ _____________
Net Cash Provided by Investing
Activities 51 72
_____________ _____________
CASH FLOWS FROM FINANCING ACTIVITIES
Mortgage Principal Payments (25) (23)
_____________ _____________
Net Cash Used In Financing Activities (25) (23)
_____________ _____________
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,127 1,806
CASH AND CASH EQUIVALENTS--Beginning of
Period 3,478 8,483
_____________ _____________
CASH AND CASH EQUIVALENTS End of Period $4,605 $10,289
_____________ _____________
_____________ _____________

STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(unaudited)

Shares of
Beneficial Interest Undistributed Total Shareholders'
Number Amount Net Income Equity
(000) (000) (000)
____________________________________________________________________

Balance: January 1, 1995 11,019,978 $36,047 $4,454 $40,501
Net Income for the Period 333 333
Liquidating Distributions (551) (551)
____________________________________________________________________
Balance: March 31, 1995 11,019,978 $35,496 $4,787 $40,283
____________________________________________________________________
____________________________________________________________________

The accompanying notes are an integral part of these statements.

NOTES TO FINANCIAL STATEMENTS
(unaudited)

1. These financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Fund's Annual
Report to Shareholders for the year ended December 31, 1994. The results of
operations for the three months ended March 31, 1995, are not necessarily
indicative of the results for the entire year ending December 31, 1995.

2. On December 12, 1994, the Fund's Board of Trustees adopted a Plan of
Liquidation and Termination (the "Liquidation Plan"). The Fund's Declaration
of Trust initially contemplated the liquidation of all of the Fund's
investments after a period of approximately seven to twelve years following
completion of its initial public offering, or between June 30, 1994, and
1999, respectively. The Trustees' decision to adopt the Liquidation Plan at
this point in the Fund's initially contemplated liquidation period was
driven by several factors, including real estate market conditions
affecting each investment in the Fund's portfolio, and tax considerations
affecting real estate investment trusts. The Liquidation Plan provides that
the Fund will dispose of all of its assets, wind up its affairs, pay or
adequately provide for the payment of all of its liabilities, and
distribute for the benefit of its shareholders all of the Fund's assets
over 24 months, in complete cancellation and redemption of all issued and
outstanding shares of beneficial interest. Under the Liquidation Plan, the
Fund's Adviser (Aldrich, Eastman and Waltch, L.P.), Trustees and officers
are authorized and directed to take any and all actions as may be necessary
or convenient to market the assets of the Fund and convert them into a form
that may be distributed to shareholders. The Liquidation Plan provides that
the Fund's assets may be sold, conveyed, transferred or otherwise disposed
of when and on such terms and conditions as are deemed by the Trustees to
be in the best interests of the Fund and the shareholders.
The Fund is currently in the process of liquidating its real estate
investments and distributing the net proceeds to its shareholders in
accordance with the Liquidation Plan. At March 31, 1995, the Fund held
investments in four income-producing properties or portfolios, including
three commercial properties (consisting of one office complex located
outside of Minneapolis, Minnesota, and shopping centers located in
Torrance, California, and Durham, North Carolina) and one residential
apartment complex located in Montgomery County, Maryland. It is
contemplated that the Fund will be completely liquidated and dissolved by
December 12, 1996. To the extent that the Fund has not disposed of all of
its assets or made provision for all of its liabilities on December 12,
1996, the Fund intends to form a liquidating trust, the beneficiaries of
which will be the shareholders of the Fund. All assets and liabilities of
the Fund not previously disposed of and discharged will be transferred to
the liquidating trust. Shares of the Fund would no longer be traded and the
beneficial interests in the liquidating trust would not be readily
transferable.

3. The Fund's financial statements have been prepared on the basis of a
going concern using historical cost. In December 1994, upon adoption of the
Liquidation Plan, the Fund considered all of its remaining investments as
held for sale and reduced the carrying value of such investments to the
extent that each investment s then-current carrying value exceeded its
estimated net realizable value, defined as estimated fair market value less
selling costs. Prior to the adoption of the Liquidation Plan, depreciation
on real estate owned was computed using the straight-line method over 40
years for buildings and costs incurred in conjunction with the acquisition
of real estate investments were deferred and amortized on a straight-line
basis over the life of the loan for mortgage loan investments and the life
of the property for equity investments. Subsequent to adoption of the
Liquidation Plan, no depreciation or amortization expense related to the
Fund's owned real estate and acquisition costs is recognized since the
Fund's real estate investments are considered to be held-for-sale assets.

NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)

4. In late September 1994, the Fund exercised its call right with
respect to its Plaza del Amo mortgage loan investment. As a result, the
entire balance of the loan, less the unpaid balance of the senior mortgage
on the Plaza property, was due and payable in late March 1995. The borrower
failed to tender payment of the outstanding loan balance on the due date,
resulting in a default under the terms of the loan. The Fund and the
borrower are currently negotiating in an effort to seek a resolution of the
default, which resolution may include satisfaction of the loan by means of
a transfer of title of the property to the Fund in lieu of foreclosure.
Since, as of the exercise of the call right and as of March 31, 1995, the
appraised value of the Plaza property securing the loan was in excess of
the mortgage loan's current carrying value, no loss is currently expected
to be incurred by the Fund as a result of the default and, accordingly, no
provision for possible losses has been recorded. The borrower is also
expected to continue to pay all interest due pursuant to the original terms
of the loan agreement until transfer of the property to the Fund.

5. During the quarter ended March 31, 1995, $400,000 was charged to the
provision for possible losses to write down the carrying value of the
Minnesota Portfolio to its estimated fair market value less selling costs.

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

BUSINESS

Vanguard Real Estate Fund I, A Sales-Commission-Free Income Properties Fund
(the "Fund"), a Massachusetts business trust established in 1987, is a
qualified finite-life real estate investment trust ("REIT") under the
Internal Revenue Code of 1986. The Fund's current real estate investments
include both direct ownership properties and a shared appreciation mortgage
and consist of three commercial properties (comprised of one office
building and two shopping centers) and one residential apartment complex.
Geographically, the Fund's investments are located in each of the North
Central, Pacific Southwest and Mideast regions. The Fund's Declaration of
Trust precludes the Fund from reinvesting net proceeds from the sale or
repayment of its real estate investments in additional real estate
investments after December 31, 1993 and contemplates the liquidation of all
of the Fund's investments after a period of approximately seven to twelve
years following completion of its initial public offering or between June
30, 1994 and 1999, respectively.

On December 12, 1994, the Fund's Board of Trustees approved a Plan of
Liquidation and Termination (the "Liquidation Plan"). The Trustee's
decision to adopt the Liquidation Plan at this point in the Fund's
initially contemplated liquidation period was driven by several factors,
including real estate market conditions affecting each investment in the
Fund's portfolio and tax considerations affecting real estate investment
trusts. The Liquidation Plan provides that the Fund will dispose of all of
its assets, wind up its affairs, pay or adequately provide for the payment
of all of its liabilities and distribute for the benefit of its
shareholders all of the Fund's assets over 24 months, in complete
cancellation and redemption of all issued and outstanding shares of
beneficial interest. Under the Liquidation Plan, the Fund's Adviser
(Aldrich, Eastman and Waltch, L.P.), Trustees and officers are authorized
and directed to take any and all actions as may be necessary or convenient
to market the assets of the Fund and convert them into a form that may be
distributed to shareholders. The Liquidation Plan provides that the Fund's
assets may be sold, conveyed, transferred or otherwise disposed of when and
on such terms and conditions as are deemed by the Trustees to be in the
best interests of the Fund and the shareholders.

The Fund is currently in the process of liquidating its real estate
investments and distributing the net proceeds to its shareholders in
accordance with the Liquidation Plan. It is contemplated that the Fund
will be completely liquidated and dissolved by December 12, 1996. To the
extent that the Fund has not disposed of all of its assets or made
provision for all of its liabilities on December 12, 1996, the Fund intends
to form a liquidating trust, the beneficiaries of which will be the
shareholders of the Fund. All assets and liabilities of the Fund not
previously disposed of and discharged will be transferred to the
liquidating trust.

RESULTS OF OPERATIONS

Three Months Ended March 31, 1995 vs. Three Months Ended March 31, 1994

The Fund had net income of $333,000, or $.03 per share, for the three
months ended March 31, 1995, as compared to net income of $1,420,000, or
$.13 per share for the three months ended March 31, 1994. Included in
1995's net income was a $400,000 provision for possible losses to write
down the carrying value of the Minnesota Portfolio to its estimated fair
market value less selling costs. Excluding the provision, net income
decreased by $687,000 for the three-month period ended March 31, 1995, as
compared to the same period in 1994. This decrease, as more fully
described below, reflects a smaller real estate asset base and
corresponding decreases in net rental income, net income from in-substance
foreclosed assets, and income from short-term investments, partially offset
by decreases in administrative expenses and depreciation and amortization
expense, in each case as compared to such items in 1994.

Net rental income (rental income less real estate taxes and property
operating expenses) decreased by $655,000, or 51%, from $1,284,000 for the
three months ended March 31, 1994 to $629,000 for the three months ended
March 31, 1995. This decrease was primarily due to the disposition of the
Seattle Industrial Portfolio and the Deluxe Check Building (part of the
Minnesota Portfolio) in 1994, which generated for the Fund net rental
income of $801,000 and $183,000, respectively, for the three months ended
March 31, 1994. This decline was partially offset by $338,000 of net
rental income generated for the Fund in the three months ended March 31,
1995 by the Sheffield Forest Apartment Complex, to which the Fund obtained
title in April 1994. As more fully described below, for the three months
ended March 31, 1994, this investment was classified as an in-substance
foreclosed asset.

In late September 1994, the Fund exercised its call right with respect to
its Plaza del Amo mortgage loan investment. As a result, the entire
balance of the loan, less the unpaid balance of the senior mortgage on the
Plaza property, was due and payable in late March 1995. The borrower
failed to tender payment of the outstanding loan balance on the due date,
resulting in default under the terms of the loan. The Fund and the
borrower are currently negotiating in an effort to seek a resolution of the
default, which resolution may include satisfaction of the loan by means of
a transfer of title of the property to the Fund in lieu of foreclosure.
Since, as of the exercise of the call right and as of March 31, 1995, the
appraised value of the the Plaza property securing the loan was in excess
of the mortgage loan's current carrying value, no loss is currently
expected to be incurred by the Fund as a result of the default and,
accordingly, no provision for possible losses has been recorded. The
borrower is also expected to continue to pay all interest due pursuant to
the original terms of the loan agreement until any transfer of title to the
property to the Fund.

At each of March 31, 1995 and March 31, 1994, the overall occupancy rate of
the Fund's direct real estate investments, excluding Sheffield Forest, was
99%. The occupancy rate of Sheffield Forest was 92% and 97% at March 31,
1995 and March 31, 1994, respectively. The occupancy rate of the property
underlying the Fund's Plaza del Amo mortgage loan investment was 99% at
both March 31, 1995 and March 31, 1994. Leases for 3% of the rentable
space of the properties directly owned by the Fund, excluding Sheffield,
and for 6% of the rentable space at the property underlying the Plaza del
Amo mortgage investment expire over the remainder of 1995, respectively.
Leases for units at Sheffield Forest are generally for one-year terms as is
customary for apartment leases. The Fund's Adviser is currently working to
renew leases and to identify new tenants for space covered by leases that
have expired or are expiring. However, there can be no assurance that the
Fund will be able to maintain its current occupancy and level of income.

For the three months ended March 31, 1995, net income from in-substance
foreclosed asset decreased by $341,000, as compared to such net income for
the same period in 1994. In January 1994, the borrower under the Sheffield
mortgage loan investment (a limited partnership whose sole asset was the
Sheffield property) defaulted on the loan by making only a partial payment
on the then-due interest installment. The Fund and the borrower remedied
the default on April 13, 1994, at which time the Fund received title to the
underlying property via transfer of all of the partnership interests of the
borrower in full satisfaction of the mortgage loan outstanding. During the
period of default, the borrower remitted the net cash flow generated by the
property to the Fund.

Investment income from short-term investments decreased by $15,000, or 21%,
from $71,000 for the three months ended March 31, 1994 to $56,000 for the
three months ended March 31, 1995. This decrease was primarily due to a
decrease in the average short-term investment balance for the three months
ended March 31, 1995, as compared to the same period of 1994, which
decrease was offset by an increase in prevailing short-term interest rates
in 1995 as compared to 1994.

With respect to depreciation expense, the Fund's financial statements have
been prepared on the basis of a going concern using historical cost. In
December 1994, upon adoption of the Liquidation Plan, the Fund classified
all of its remaining investments as "held for sale" and reduced the
carrying value of such investments to the extent that each investment's
then-current carrying value exceeded its estimated "net

realizable value", defined as estimated fair market value less selling costs.
Prior to the adoption of the Liquidation Plan, depreciation on real
estate owned was computed using the straight-line method over 40 years
for buildings, and costs incurred in conjunction with the acquisition of real
estate investments were deferred and amortized on a straight-line
basis over the life of the loan for mortgage loan investments and the life of
the property for equity investments. Subsequent to adoption of the
Liquidation Plan, no depreciation or amortization expense related to the Fund's
owned real estate and acquisition costs is recognized, since the Fund's real
estate investments are considered to be "held-for-sale" assets.

Administrative expenses decreased by $37,000, or 16%, from $236,000 for the
three months ended March 31, 1994 to $199,000 for the three months ended
March 31, 1995. This decrease was primarily due to lower advisory and
administrative fees payable in the 1995 period, which fees are based on
average invested real estate assets. The Fund's average assets invested in
real estate decreased during 1995 due to the sale of the Deluxe Check and
Seattle investments in the latter half of 1994.

On March 14, 1995, the Fund declared a first quarter liquidating
distribution of $.05 per share, payable on April 28, 1995 to shareholders
of record as of March 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES

During the Fund's liquidation period, its ability to make quarterly
distributions will be dependent upon its financial condition, earnings and
cash flow, cash position and future working capital requirements. As a
result of 1994 property sales, and the subsequent year-end liquidating
distribution of the proceeds from such sales, the book value of the Fund's
shares has been significantly reduced. Accordingly, the amount of future
income the Fund may be expected to generate will also be reduced. Further,
as a result of the adoption of the Liquidation Plan, the Fund's remaining
investments are being held for sale, rather than the production of income,
and, accordingly income from real estate can be expected to continue to
decline throughout the Fund's liquidation period as the Fund's remaining
properties are sold.

Future quarterly liquidating distributions to shareholders, excluding any
amounts distributed from net proceeds from property sales, will be largely
dependent upon the amount of funds from operations generated by the the
Fund during its liquidation period. For the three months ended March 31,
1995, funds from operations (defined as net income plus depreciation and
amortization, and provision for possible losses) in the amount of $733,000,
or $.07 per share, exceeded by $182,000 the amount of distributions to
shareholders ($.05 per share) for the period. Funds from operations are
generated from the ongoing operations of the Fund's direct real estate
investments and interest income on short-term investments and mortgage
loans. Accordingly, unfavorable economic conditions, vacancies,
environmental requirements, reductions in prevailing short-term interest
rates or increases in major expenses such as energy, insurance, and real
estate taxes during the liquidation period could have an adverse impact
upon the Fund's future funds from operations and distributions to
shareholders.

As a matter of policy the Fund seeks to maintain working capital reserves
in an amount not less than $2,300,000, which amount constitutes 2% of the
gross proceeds of the Fund's initial offering. Working capital reserves
are defined as cash and cash equivalents, including the Fund's investment
in marketable securities, and other assets expected to be realized over the
next year, less liabilities expected to be paid over the next year.
Working capital reserves at March 31, 1995 aggregated approximately $5.8
million, representing 5.12% of the initial public offering proceeds,
compared to working capital reserves of $5.7 million at December 31, 1994,
which represented 5.0% of the Fund's initial offering proceeds.

During the fourth quarter of 1990, the Fund instituted a share repurchase
program. Under the program, the Fund is authorized to repurchase in the
open market from time to time up to 500,000 of the Fund's outstanding
shares. As of March 31, 1995, 413,725 shares have been repurchased at an
aggregate cost of

$3,134,000. No shares have been repurchased since September 1993 and the Fund's
management, in light of adoption of the Liquidation Plan, does not expect the
Fund to repurchase any additional shares.

The Fund intends to continue to qualify as a real estate investment trust
under the Internal Revenue Code and distribute all of its taxable income,
if any. The Fund's management considers the Fund's liquidity, as well as
its ability to generate cash, as adequate to meet its presently foreseeable
operating and shareholder distribution requirements and to fund its capital
improvements.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 2. Changes in Securities.

None

Item 3. Defaults Upon Senior Securities.

None

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

Not Applicable

Item 5. Other Information.

None

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

27. Financial Data Schedule
A Financial Data Schedule for the three months ended March
31, 1995, was submitted in electronic format only.

(b) Reports on Form 8-K

The Fund filed no reports on Form 8-K during the first quarter
ended March 31, 1995.

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

Vanguard Real Estate Fund I,
A Sales-Commission-Free Income Properties Fund

DATE 5/8/95 John J. Brennan
President

DATE 5/8/95 Ralph K. Packard
Vice President & Controller