Washington, D.C. 20549
                United States Securities and Exchange Commission

                                   FORM 10-K/A

            (X) Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
                   For the fiscal year ended December 31, 2000
                                       or
            ( ) Transition Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                         Commission File Number 1-11998

                          KONOVER PROPERTY TRUST, INC.
             (Exact name of Registrant as specified in its charter)


             Maryland                                     56-1819372
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification No.)


  3434 Kildaire Farm Road, Suite 200
       Raleigh, North Carolina                                 27606
(Address of principal executive offices)                     (Zip Code)

                                 (919) 372-3000
              (Registrant's telephone number, including area code)


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

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

Common Stock, $.01 par value                      New York Stock Exchange

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

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

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

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, at March 20, 2001, was approximately $44 million.

At March 20, 2001, there were 31,289,923 shares of the Registrant's Common
Stock, $.01 par value, outstanding.

                      Documents Incorporated by Reference
The Registrant's definitive Proxy Statement relating to its 2001 Annual Meeting
is incorporated by reference into Part III of this report.

                                       1
<PAGE>

                          Konover Property Trust, Inc.
                               Index to Form 10-K
                      For the Year Ended December 31, 2000
<TABLE>
<CAPTION>

                                                                                                          Page
--------------------------------------------------------------------------------------------------------------
                                     PART I
<S>                                                                                                       <C>
Item 1 - Business.........................................................................................3

Item 2 - Properties.......................................................................................6

Item 3 - Legal Proceedings................................................................................15

Item 4 - Submission of Matters to a Vote of Security Holders..............................................15

Item X - Executive Officers of the Registrant.............................................................15

                                     PART II

Item 5 - Market for the Registrant's Common Equity and Related Stockholder Matters........................17

Item 6 - Selected Financial Data..........................................................................18

Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation.............21

Item 7 A - Quantitative and Qualitative Disclosures About Market .........................................33

Item 8 - Financial Statements and Supplementary Data......................................................33

Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............33

                                    PART III

Item 10 - Directors and Executive Officers of the Registrant..............................................33

Item 11 - Executive Compensation..........................................................................33

Item 12 - Security Ownership of Certain Beneficial Owners and Management..................................34

Item 13 - Certain Relationships and Related Transactions..................................................34

                                     PART IV

Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................35
</TABLE>


                                       2
<PAGE>

                                     PART I

Item 1 - Business

General

         Konover Property Trust, Inc. (the "Company"), formerly FAC Realty
Trust, Inc., was incorporated on March 31, 1993 as a self-advised and
self-managed real estate investment trust (REIT). The Company is principally
engaged in the acquisition, development, ownership and operation of retail
shopping centers. The Company's revenues are primarily derived under real estate
leases with national, regional and local retailing companies.

         On December 31, 2000, the Company's owned properties ("Properties")
consisted of:

1.       39 community shopping centers in nine states aggregating approximately
         5.5 million square feet;

2.       Nine outlet centers in nine states aggregating approximately 2.0
         million square feet;

3.       16 Vanity Fair (VF) anchored centers located in 12 states aggregating
         approximately 1.4 million square feet;

4.       One center under development and scheduled for completion in the Fall
         of 2001; and

5.       Two centers in two states aggregating approximately 0.5 million square
         feet that are held for sale.

         In addition, the Company had investments in:

         o four joint-venture community centers/developments which will consist
           of 404,000 square feet;

         o a land-development joint venture consisting of 2,100 acres; and

         o third-party management company with 7.9 million square feet under
           management or leasing contracts.

         Joint venture interests are discussed further in "Management Discussion
and Analysis of Financial Condition and Results of Operations".

Business Strategy

         Over the last three years, the Company's strategy has been to
transition from an outlet center company to a community center company focused
on the Southeastern United States. As disclosed in November of 2000, the Company
engaged Credit Suisse First Boston ("CSFB") to assist in the analysis and
possible disposition of the outlet portfolio. More recently, the Company has
expanded CSFB's engagement to include advice with respect to the Company's
long-term strategic direction.

For the short term, the Company's focus will be on:

1.       Reorganizing to emphasize property operations to enhance overall
         property NOI and thus the overall value of the Company; and
2.       Working with CSFB in evaluating the Company's strategic alternatives,
         which may include the sale of the outlets, the sale of the Company,
         privatization, a merger or other business combination or continuing to
         operate the portfolio as a whole.

         These short-term goals will require senior management's full attention.
The Company does not intend to begin any new development or acquisition projects
in the short term. The Company will, however, continue the development of two
significant ongoing projects, Millpond Village and Falls Pointe. In addition,
the Company has ceased investments in ImageTwin, a subsidiary formed to
commercialize apparel-sizing technology. ImageTwin, Millpond Village and Falls
Pointe are each discussed below under "Significant 2000 Transactions."

         The Company intends to continue selective expansion and redevelopment
of its existing centers. The Company's philosophy is to expand or redevelop its
existing centers in response to tenant demand. Prior to commencement of any type
of development, the Company conducts a complete analysis to determine the
overall shareholder benefit and requires significant tenant commitment as well.
The Company intends to fund future expansions and redevelopments primarily
through internally generated cash flow and additional borrowings.

         The Company's asset management team, which includes leasing, marketing,
finance, and property management and development personnel, continually
evaluates potential opportunities at its existing centers for

                                       3
<PAGE>

further expansion, remerchandising, capital improvements and renovation, all in
an effort to increase overall property value. The Company monitors each center's
sales, occupancy and overall performance to determine its potential. Properties
that may be underperforming are considered for re-tenanting, change of use or,
in some cases, sale. In addition, the Company has an ongoing program of regular
maintenance, periodic renovation and capital improvement of existing facilities
in an effort to increase property values and tenants' sales.

Significant 2000 Transactions and Acquisitions

         Millpond Village. The Company continues the development of a
207,000-square foot office/retail community center in Raleigh, North Carolina.
The Company moved its headquarters into this center in January 2001.
Stabilization of this project, to be anchored by Lowes Foods, is expected in
Fall 2001.

         Falls Pointe. The Company also continues its strategic venture with a
local Raleigh developer to develop a 98,000-square foot retail community center
located in Raleigh, North Carolina. Completion of this center, which will be
anchored by Harris Teeter, is expected in Fall 2001.

         Acquisition. On December 19, 2000, the Company acquired the
non-controlling interest of its joint venture partner in the Towne Centre
shopping center located in Mt. Pleasant, South Carolina. The Company paid $2.3
million in cash and transferred ownership in land and certain development costs
of approximately $1.2 million. In connection with this transaction, the Company
obtained a $46.4 million loan, which replaced the construction loan previously
in place.

         Dispositions. During 2000, the Company sold a 142,000-square foot
center in Lake Park, Georgia and a 25,000-square foot property held for sale
located in Conway, New Hampshire. The combined sales price of both properties
was approximately $3.6 million.

         Technology Venture. In the fourth quarter of 2000, the Company ceased
additional investments in ImageTwin, a technology venture launched in 1999. For
the year ended December 31, 2000, the Company incurred a loss of $5.5 million
related to this venture.

Financial Information about Segments

         For financial information about segments, refer to footnote 16 of the
attached "Audited Consolidated Financial Statements."

Competition

         The commercial real estate development, management and investment
industry is subject to competition for desirable sites, tenants and financing.
The industry is fragmented, and we compete with local and national developers
and owners of retail property. Many of our national competitors have greater
assets and resources than the Company. The principal competitive factors in
attracting tenants in our market areas are location, price, anchor tenants,
sales volume potential and property maintenance.

Environmental Matters

         Phase I environmental site assessments and when applicable, Phase II
assessments (which generally did not include environmental sampling, monitoring
or laboratory analysis) have been completed by the Company with respect to all
of its properties either as required by a lender or upon
acquisition/development. No studies are dated prior to 1995.

         None of these environmental assessments or subsequent updates revealed
any environmental liability that management believes would have a material
adverse effect on the Company. No assurances can be given that (i) the
environmental assessments detected all environmental hazards, (ii) future laws,
ordinances or regulations will not impose any material environmental liability,
or (iii) current environmental conditions of the Properties will not be affected
by tenants, by properties in the vicinity of the Properties, or by third persons
unrelated to the Company.

         The Company's policy going forward is to obtain new environmental site
assessments on all acquisition or development properties prior to purchase.

                                       4
<PAGE>

Insurance

         Management believes that each of the Properties is covered by adequate
fire, flood, property and, in the case of the Vacaville and Towne Center
properties, earthquake insurance provided by reputable companies and with
commercially reasonable deductibles and limits.

Employees

         As of March 20, 2001, the Company and its affiliates employed 282
persons, 108 of whom are located at the Company's headquarters in Raleigh, North
Carolina. The remaining 174 employees are property management, marketing and
maintenance personnel located at the Properties, including 55 employees located
in the Company's Tampa, Florida office. The Company believes that it has
positive relations with its employees.

                                       5
<PAGE>


Item 2 - Properties

         The following tables set forth the location of, and certain information
relating to, the Company's owned properties as of December 31, 2000:
<TABLE>
<CAPTION>
                                                                 Gross
                                   Total                        Leasable
                                   Number       Land Area         Area         Percentage of     Economic
State                            of Centers     (Acres)           (GLA)          Total GLA       Occupancy
-----------------------------------------------------------------------------------------------------------
<S>                                <C>           <C>            <C>                <C>          <C>
Community Centers

Alabama                            1             53.5           525,505            5.6%         84.2%
Florida                            7            107.1           957,837           10.2%         87.0%
Georgia                            2             13.9           229,781            2.4%         98.8%
Kentucky                           1             16.7           176,615            1.9%         93.6%
North Carolina                    13            225.6         1,689,740           18.0%         90.8%
South Carolina                     6             87.9           811,045            8.6%         95.8%
Tennessee                          1             23.3           132,908            1.4%         85.7%
Texas                              1             19.2           176,071            1.9%         68.7%
Virginia                           7             91.2           783,555            8.3%         95.4%
                              -----------------------------------------------------------------------------

Subtotal Community Centers        39            638.4         5,483,057           58.3%         90.5%
                              -----------------------------------------------------------------------------

Outlet Centers (*)

Arizona                            1             26.9           170,683            1.8%         97.5%
California                         1             50.9           447,719            4.8%         95.5%
Maine                              1              4.1            24,550            0.3%         83.7%
Missouri                           1             29.4           287,522            3.1%         83.2%
New York                           1              4.5            43,650            0.5%         67.6%
North Carolina                     1             53.1           443,070            4.7%         95.5%
Tennessee                          1             16.5           151,256            1.6%         87.5%
Utah                               1             27.5           185,280            2.0%         94.1%
Washington                         1             26.0           223,383            2.4%         96.3%
                              -----------------------------------------------------------------------------

Subtotal Outlet Centers            9            238.9         1,977,113           21.2%         92.4%
                              -----------------------------------------------------------------------------

</TABLE>
                                       6

<PAGE>

<TABLE>
<CAPTION>


VF - Anchored Centers (**)

<S>                                <C>          <C>                <C>                <C>          <C>
Alabama                            1            Lease           104,630            1.1%         87.1%
Arizona                            1             14.2           127,575            1.4%         79.4%
Florida                            1             27.6            83,962            0.9%         85.8%
Illinois                           1             20.0            91,063            1.0%         88.9%
Iowa                               1             20.0           112,405            1.2%         97.7%
Kentucky                           1             21.3            63,891            0.7%         97.5%
Louisiana                          2             28.7           220,281            2.3%         96.9%
Mississippi                        1             16.8           129,412            1.4%         98.8%
Missouri                           1             23.7            86,249            0.9%         98.2%
Nebraska                           1             21.4            89,646            1.0%         91.1%
Tennessee                          1             23.3            60,229            0.6%         97.4%
Texas                              4             61.1           254,424            2.7%         98.2%
                              -----------------------------------------------------------------------------

Subtotal VF-Anchored Centers      16            278.1         1,423,767           15.1%         91.2%


Other (***)

Nevada                             1             25.7           229,959            2.4%         26.4%
Tennessee                          1             33.3           285,808            3.0%         37.5%
                              -----------------------------------------------------------------------------

Subtotal  Other                    2             59.0           515,767            5.5%         32.5%
                              -----------------------------------------------------------------------------

Total All Properties              66          1,214.4         9,399,704          100.0%         87.8%
                              =============================================================================
</TABLE>

(*) Properties that generate a majority of their revenue from traditional outlet
manufacturers and are destination oriented.
(**) A VF - anchored center is determined as follows: (i) has less than $1.5
million in total revenue (ii) generates at least 20% of its revenue from VF and
(iii) is less than 150,000 square feet.
(***) Properties held for sale.
<TABLE>
<CAPTION>
                                                                  Land                  Gross
                                                                   Area                Leasable                            Economic
State           Center                        City               (Acres)  Year Built     Area         Key Tenants          Occupancy
------------------------------------------------------------------------------------------------------------------------------------
Community Centers:

<S>             <C>                           <C>                   <C>      <C>         <C>      <C>                        <C>
Alabama         Mobile Festival               Mobile                53.5     1986        525,505  Circuit City,              84.2%
                                                                                                  Marshall's,
                                                                                                  Office Max,
                                                                                                  PharMor, Walmart
Florida         Crossroads at Mandarin        Jacksonville          10.6     1987         72,136  Food Lion                  88.9%
                Eastgate Plaza                Pensacola             19.9     1981        181,910  Winn Dixie                 90.1%
                Hollywood Festival            Hollywood             14.1     1968        135,056  Winn-Dixie                 75.7%
                Lake Point Centre             West Palm Beach       13.6     1997        119,570  Winn-Dixie, Walgreens      82.6%
                Lake Washington               Melbourne             13.3     1987        119,208  Publix                     91.5%
                Oakland Park                  Oakland               14.5     1966        132,226  Winn-Dixie, Eckerd         81.6%
                Square One                    Stuart                21.1     1989        197,731  Home Depot, Petsmart       94.8%
Georgia         Merchant's Festival (1)       Marietta              13.9     1984        151,820  Pier 1 Imports             98.1%
                South Cobb Festival (2)       Smyrna               Lease     1967         77,961  Cub Foods                 100.0%
Kentucky        Georgetown                    Georgetown            16.7     1991        176,615  Carolina Pottery,          93.6%
                                                                                                  ShoPro Theaters
North Carolina  Bolling Creek                 Roanoke Rapids         5.9     1992         41,090  Food Lion                 100.0%
                Celebration at Six Forks      Raleigh               11.1     1979        125,937  CVS, Pulse Athletic Club   83.9%
                Dare Center (3)               Kill Devil Hills     Lease     1988        115,288  Food Lion, Belk            93.8%
                Durham Festival               Durham                11.8     1968        131,825  Kroger                    100.0%
                Eastgate                      Raleigh                6.0     1966         52,575  Books a Million           100.0%
                Gateway                       Wilson                21.4     1992        167,207  Kmart                     100.0%
                Lenoir Festival               Lenoir                42.2     1968        144,239  Kmart, Bi-Lo              100.0%
                MacGregor                     Cary                  21.1     1986        142,372  Spa Health Club            82.0%
                Northridge                    Raleigh               19.5     1980        165,309  Winn-Dixie, Kerr Drug      98.4%
                Shoreside                     Kitty Hawk            26.4     1993        144,389  Walmart, Seamark Grocery  100.0%
                Stanton Square                Greenville            13.6     1985        125,094  Food Lion                  83.6%
                Tower                         Raleigh               19.3     1976        153,077  Food Lion, Kerr Drug       90.0%
                Waverly Place                 Cary                  27.3     1987        181,338  Eckerd, Wellspring         64.8%
                                                                                                  Grocery
South Carolina  Braves Village (4)            Myrtle Beach           6.8     1985         59,762  Food Lion                  94.5%
                Grove Park                    Orangeburg             9.6     1991        106,617  Bi-Lo                      98.4%
                Patriots Plaza                Mt. Pleasant          13.6     1997        115,632  Bi-Lo, Staples             95.1%
                Robertson Corners             Walterboro             5.1     1998         47,640  Food Lion                 100.0%

</TABLE>

                                       7
<PAGE>
<TABLE>
<CAPTION>

<S>             <C>                           <C>                   <C>      <C>         <C>      <C>                        <C>
                Towne Centre (5)              Mt. Pleasant          43.7     1999        427,270  Gap, Belk, Barnes &        94.5%
                                                                                                  Noble, Bed Bath &
                                                                                                  Beyond, Consolidated
                                                                                                  Theaters
                University Shoppes            Conway                 9.1     1997         54,124  Food Lion, Revco          100.0%
Tennessee       Tri-Cities                    Tri-Cities            23.3     1990        132,908  Carolina Pottery,          85.7%
                                                                                                  Tri-Cities Cinema
Texas           LaMarque                      LaMarque              19.2     1990        176,071  Westpoint Pepperell        68.7%
Virginia        Brookneal                     Brookneal              5.4     1993         28,161  Food Lion                 100.0%
                Dukes Plaza                   Harrisonburg          17.5     1997        139,956  Farmer Jack (A&P)          91.0%
                Food Lion Plaza               Petersburg             5.4     1984         50,280  Food Lion                  87.1%
                Keysville                     Keysville              3.7     1993         40,227  Food Lion, Rite-Aid       100.0%
                Market Square                 Danville               9.8     1989         55,909  Food Lion, CVS             95.7%
                Towne Square                  Roanoke               35.7     1987        301,561  Office Max, Phar-Mor,      95.2%
                                                                                                  Micahel's
                University Mall               Blacksburg            13.7     1973        167,461  Virginia Tech Math        100.0%
                                                                                                  Emporium
                                                                --------------------------------------------------------------------
                Subtotal Community Centers                         638.4               5,483,057                             90.5%
                                                                --------------------------------------------------------------------

Outlet Centers:

Arizona         Mesa                          Mesa                  26.9     1987        170,683  Vanity Fair                97.5%
California      Vacaville                     Vacaville             50.9     1988        447,719  Gap, Nike,Vanity Fair      95.5%
Maine           Kittery                       Kittery                4.1     1987         24,550  Paper Factory              83.7%
Missouri        Branson                       Branson               29.4     1995        287,522  Vanity Fair, Spiegel       83.2%
New York        Lake George                   Lake George            4.5     1987         43,650  Designs/Levis              67.6%
North Carolina  Smithfield (6)                Smithfield            53.1  1988/1999      443,070  Gap, Nike, Polo            95.3%
Tennessee       Crossville                    Crossville            16.5     1988        151,256  Vanity Fair                87.5%
Utah            Draper                        Draper                27.5     1986        185,280  Vanity Fair                94.1%
Washington      North Bend                    North Bend            26.0     1990        223,383  Vanity Fair, Nike          96.3%
                                                                --------------------------------------------------------------------
                Subtotal Outlet Centers                            238.9               1,977,113                             92.4%
                                                                --------------------------------------------------------------------


VF-Anchored Centers:

Alabama         Boaz (7)                      Boaz                  Lease    1982        104,630  Vanity Fair                87.1%
Arizona         Tucson                        Tucson                14.2     1987        127,575  Vanity Fair                79.4%
Florida         Graceville                    Graceville            27.6     1985         83,962  Vanity Fair                85.8%
Illinois        West Frankfort                West Frankfort        20.0     1990         91,063  Vanity Fair                85.3%
Iowa            Story City                    Story City            20.0     1990        112,405  Vanity Fair                88.1%
Kentucky        Hanson                        Hanson                21.3     1989         63,891  Vanity Fair                97.5%
Louisiana       Arcadia                       Arcadia               28.7     1989         89,528  Vanity Fair                95.1%
                Iowa (8)                      Iowa                  Lease    1989        130,753  Vanity Fair                93.8%
Mississippi     Tupelo                        Tupelo                16.8     1987        129,412  Vanity Fair                87.9%
Missouri        Lebanon                       Lebanon               23.7     1985         86,249  Vanity Fair                93.9%
Nebraska        Nebraska City                 Nebraska City         21.4     1985         89,646  Vanity Fair                89.3%
Tennessee       Union City                    Union City            23.3     1988         60,229  Vanity Fair                97.4%
Texas           Corsicana                     Corsicana             20.0     1989         63,605  Vanity Fair               100.0%
                Hempstead                     Hempstead             10.6     1989         63,605  Vanity Fair               100.0%
                Livingston                    Livingston            15.0     1989         63,605  Vanity Fair               100.0%
                Mineral Wells                 Mineral Wells         15.5     1989         63,609  Vanity Fair               100.0%
                                                                --------------------------------------------------------------------
                Subtotal VF Anchored Centers                       278.1               1,423,767                             91.2%
                                                                --------------------------------------------------------------------
                                                                --------------------------------------------------------------------
                Total Operating Properties                       1,155.4               8,883,937                             91.0%
                                                                --------------------------------------------------------------------


Other:

Nevada          Las Vegas (9)                 Las Vegas             25.7     1992        229,959                             26.4%
Tennessee       Nashville (9)                 Nashville             33.3     1993        285,808                             37.5%
                                                                --------------------------------------------------------------------
                Subtotal Other                                      59.0                 515,767                             32.5%
                                                                --------------------------------------------------------------------

 Total All Properties                                            1,214.4               9,399,704                             87.8%
                                                                ====================================================================

</TABLE>
                                       8

<PAGE>


1.   The Company holds a ground lease on an additional 0.71 acres at Merchants
     Festival at a monthly rate of $672 ($8,064 annually) plus 12% of the base
     rental every 10 years and matures March 31, 2048.
2.   The Company holds a ground lease on 9.1 acres at Smyrna, Georgia at an
     annual payment of approximately $27,000 and matures in 2026.
3.   The Company holds a ground lease on 13.31 acres of the total 13.44 acres at
     Dare Center in Kill Devil Hills, North Carolina at an annual payment of
     $161,600 plus 25% of all rent increases at center and matures 2058. The
     Company has the option to purchase the land on 10/1/09. The remaining 0.13
     acres are owned by the Company.
4.   In addition to the owned 6.75 acres at Braves Village, the Company leases
     the adjacent tract of 7.91 acres of land under two ground leases at an
     annual combined cost of $14,242 through May 31, 2005 and December 31, 2004.
     Each ground lease contains nine 5-year renewal options.
5.   The Company holds two ground leases associated with the Towne Center
     property. The first ground lease, which covers 1.21 acres, requires monthly
     payments of $1,833 ($22,000 annually) and matures April 30, 2018. This
     ground lease contains six 5-year options. The second ground lease, which
     covers 1.41 acres, requires monthly payments of $6,955 ($83,820 annually)
     and matures June 10, 2015. This ground lease contains four 5-year options
     and one 10-year option.
6.   The Company holds a ground lease associated with 8 acres of the Carolina
     Outlet expansion of the Smithfield center. The lease requires monthly
     payments of $18,750 ($225,000 annually) and matures January 10, 2029. This
     ground lease contains one 30-year option.
7.   The Company holds this property pursuant to a lease, which has renewal
     options through 2027. The Company has the right to purchase the land and
     building during any term for a total of $25,000 plus the present value of
     any future rental payments due during the remaining term. The Company's
     monthly rental payments during the current term are $750 through and
     including January 31, 2002; and $1,000 throughout the remainder of the term
     and any renewal terms. The current term expires January 31, 2007.
8.   The Company holds a ground lease at its Iowa, Louisiana center, which
     totals 22.0 acres and which has renewal options through 2087.
9.   Held for sale

Properties Held for Sale

         As part of the Company's ongoing strategic evaluation of its portfolio
of assets, management has been authorized to pursue the sale of certain
properties that currently are not fully consistent with or essential to the
Company's long-term strategies. Management evaluates all properties on a regular
basis in accordance with its long-term strategy and in the future may identify
other properties for disposition or may decide to defer the pending disposition
of the asset now held for sale. In accordance with SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," assets held for sale are valued at the lower of carrying value or fair
value less selling costs. Accordingly, in the fourth quarter of 2000, the
Company recorded a non-cash $19.3 million adjustment to the carrying value of
the Nashville and Las Vegas properties held for sale. The Company continues to
operate the properties held for sale as of December 31, 2000 and is actively
marketing these properties.

         In May 2000, the Company sold the remaining property held for sale at
December 31, 1999, in Conway, New Hampshire, for its approximate net book value
of $0.6 million.

         The net carrying value of assets marketed for sale at December 31, 2000
and 1999 were $18.9 million and $0.6 million, respectively. The held-for-sale
properties are encumbered by $15.1 million of indebtedness at December 31, 2000.
Additional principal and prepayment expenses are associated with the prepayment
of this indebtedness.

         The following summary financial information pertains to the properties
held for sale for the year ended December 31:


                                           2000       1999        1998
                                           ----       ----        ----
Revenues                               $  1,897    $  4,751   $  6,537
Net (loss) income after operating
  and interest expenses                $ (1,326)   $    142   $  1,224

Planned Expansions/Redevelopments and Development Projects

         The Company entered into a strategic venture, known as Mount Pleasant
KPT LLC, with a Charleston, South Carolina developer, AJS Group. The venture
developed a 427,000-square foot retail/entertainment shopping center in Mt.
Pleasant, South Carolina named Mt. Pleasant Towne Centre. Due to the attainment
of certain operational milestones during 1999, the Company was deemed to have
control of the Mount Pleasant KPT LLC venture. Accordingly, Mount Pleasant KPT
LLC was consolidated in the Company's consolidated financial statements for
1999. On December 19, 2000, the Company acquired the remaining interest from AJS
Group. The total cost was $2.3 million in cash and the transfer of ownership in
land and certain development costs of approximately $1.2 million. At December
31, 2000 the center was 94.5% occupied.

                                       9
<PAGE>

         The Company continues the development of Millpond Village. Located in
Raleigh, North Carolina, this center will be a 207,000 square foot retail/office
center anchored by Lowes Foods and is the Company's headquarters. The Company
occupied its space of 37,000 square feet in January 2001.

         In undertaking developments and expansions, the Company will incur
certain risks, including the expenditure of funds on, and the devotion of
management's time to, projects which may not come to fruition. In addition,
completion of planned developments and expansions will be subject to the
availability of adequate debt or equity financing. Other risks inherent in
development and expansion activities include possible cost-overruns, work
stoppages and delays beyond the reasonable control of the Company. Accordingly,
there can be no assurance if or when any or all of the Company's planned
expansions or any other development or expansion project will be completed or,
if completed, that the costs of construction will not exceed, by a material
amount, estimated costs.

Abandoned Transaction Costs

         The Company defers certain due diligence and other related costs in
connection with the possible acquisition of income-producing properties,
developments and venture projects. The Company evaluates the realization of the
costs on an ongoing basis. Upon determining the Company is not going to proceed
with the transaction, the Company charges these costs to abandoned transaction
costs in the consolidated statement of operations of the Company's financial
statements. The Company recorded $1.3 million of abandoned transaction costs in
2000 and $3.9 million in 1999.

Additional Information about Certain Centers

         As of December 31, 2000, the Company's center at Vacaville, California,
had total assets that represent 10.1% of the total assets of the Company. With
respect to total revenue, in 2000, this center generated 10.3% of the Company's
total revenue. No other existing center accounts for greater than 10% of either
the Company's 2000 revenue or the Company's total assets at December 31, 2000.

         The 448,000-square foot Vacaville center, which the Company holds in
fee simple, is one of 23 centers that secures $86.4 million of Collaterialized
Mortgage Notes. The Class B and C Mortgage Notes are payable in monthly payments
of interest only at 7.87% and 8.40%, respectively. The Class A Mortgage Note is
payable in a monthly principal payment ranging from $140,000 to $173,000 plus
monthly interest at 7.51%. Unpaid principal and accrued interest will be due in
June 2002.

         The Vacaville, California center, which opened its first phase in 1988,
is located on 53 acres, 60 miles east of San Francisco and 30 miles west of
Sacramento, the state capital. The Company has added various tenants over the
last several years as part of its overall strategy of remerchandising key
centers. The center's major tenants include: The Gap, Nike, Vanity Fair, Levi's,
Reebok, Nine West and Eddie Bauer, but no one tenant represents more than 10% of
the center's total GLA.

         The Company currently has no plans to further expand or renovate the
property. The realty tax rate on the property is $18.40 per $1,000 of assessed
value, and in 2000, the annual property taxes on the Vacaville center were $1.3
million.

         The following table discloses the occupancy rate and average effective
annual rental revenue per square foot with respect to the Vacaville center for
each of the last five years ending December 31, 2000:

                                       10
<PAGE>

                                                         Annual Rental Revenue
    Year ended December 31,        Occupancy Rate            per Sq. Ft.(1)
    -----------------------        --------------            --------------

           2000                          96%                     $21.48

           1999                          98%                     $20.45

           1998                          92%                     $21.75

           1997                          92%                     $22.12

           1996                          89%                     $22.58

(1) Annual Rental Revenue consists of base and percentage rents plus recoveries
    from tenants.

         The following table shows the lease expirations for tenants in
occupancy at the Vacaville Center as of December 31, 2000:
<TABLE>
<CAPTION>
                                                Pro Forma                     Average
                                               Annualized       % of          Annual
                Leases to      Leased GLA        Rental         Total          Rent
     Year       Expire (1)   (Sq. Ft.) (2)       Revenue       Revenue    Per Sq. Ft. (3)
-------------------------------------------------------------------------------------------
     <S>            <C>         <C>             <C>              <C>           <C>
     2001           43          118,452         2,459,188        25.3%         20.76
     2002           12           42,582         1,122,745        11.5%         26.37
     2003           24          121,376         2,796,966        28.7%         23.04
     2004           20           57,382         1,405,447        14.4%         24.49
     2005           20           54,206         1,284,274        13.2%         23.69
     2006           5            16,023           384,669         4.0%         24.01
     2007           -                 -                 -           -              -
     2008           -                 -                 -           -              -
     2009           1            13,900           191,959         2.0%         13.81
     2010           1             3,651            91,604         0.9%         25.09
               ----------------------------------------------------------------------------
    Totals         126          427,572      $  9,736,852       100.0%     $   22.77
               ============================================================================

</TABLE>

(1)   Expirations assume no renewals or re-leasing for tenants in occupancy as
      of December 31, 2000.
(2)   Total leased GLA is not equal to leasable GLA due to vacancies.
(3)   Annual rental revenue in place at December 31, 2000.

         Management believes that all of its properties, including the Vacaville
center, are adequately insured. For a description of the Vacaville center's
Federal tax basis, rate, method and life claimed with respect to the property.
See "Exhibit Schedule III-Real Estate and Accumulated Depreciation."

Tenants

         General. Management believes the Properties offer tenants a diverse
tenant mix, which includes many well-known brand retailers. A large portion of
the Company's tenants are also large, publicly traded companies. The Company's
brand tenant mix at its properties and developments feature retailers such as
Barnes & Noble, Belk, Circuit City, Food Lion, Home Depot, Kmart, Kroger,
L'eggs/ Hanes/Bali, Liz Claiborne, Mikasa, Nike, Old Navy, Polo, Publix,
Staples, The Gap, Tommy Hilfiger, Vanity Fair, Wal-Mart, Winn Dixie and 9 West.

         Tenant Leases. The majority of the leases with the Company's tenants
have terms of between five and ten years. While many of these leases are
triple-net leases, which require tenants to pay their pro rata share of
utilities, real estate taxes, insurance and operating expenses, as of December
31, 2000, 12.3% of the aggregate GLA of its shopping centers was leased to
tenants under gross leases, pursuant to which the Company is obligated to pay
all utilities and other operating expenses of the applicable center.

                                       11
<PAGE>

Tenant Concentration

         The following table provides certain information regarding the ten
largest tenants (based upon total rental revenue) and other tenants for the year
ended December 31, 2000:
<TABLE>
<CAPTION>

                                                             Percentage      Number         Actual            % of
                                              Total GLA     of Total GLA       of        Total Rental     Total Rental
                 Tenant                       Leased(1)        Leased        Stores        Revenue           Revenue
------------------------------------------ ---------------- -------------- ----------- ----------------- ----------------
<S>                                          <C>                <C>            <C>        <C>                  <C>
VF Factory Outlet, Inc.                      1,058,292          12.8%          22         $6,511,926           7.3%
Food Lion, Inc.                                420,489           5.1%          12          3,872,613           4.4%
Winn-Dixie Stores, Inc.                        287,576           3.5%           6          2,250,794           2.5%
Phillips-Van Heusen Corporation                187,440           2.3%          41          2,233,290           2.5%
The Dress Barn, Inc.                           106,318           1.3%          17          1,806,633           2.0%
Brown Group                                     91,098           1.1%          18          1,590,338           1.8%
Paper Factory                                   91,339           1.1%          22          1,381,347           1.6%
Mt. Pleasant Consolidated Theatre               61,396           0.7%           1          1,335,363           1.5%
Carolina Pottery Retail Group, Inc.(2)         229,081           2.8%           3          1,329,973           1.5%
Nine West                                      104,177           1.3%          21          1,251,196           1.4%
                                           ---------------- -------------- ----------- ----------------- ----------------
Subtotal                                     2,637,206          32.0%         163         23,563,473          26.5%

Others                                       5,615,734          68.0%       1,191         65,356,418          73.5%
                                           ---------------- -------------- ----------- ----------------- ----------------
Total                                        8,252,940         100.0%       1,354        $88,919,891         100.0%
                                           ================ ============== =========== ================= ================
</TABLE>

(1)      Total leased GLA is not equal to leasable GLA due to vacancies.

(2)      Carolina Pottery filed for bankruptcy and in March of 2001, the court
         approved going out of business sales for all locations except
         Smithfield. Smithfield represents 40% or $526,839 of total rental
         revenue of $1,329,973.
                                       12
<PAGE>



Lease Expiration

         The following table shows tenant lease expirations for tenants in
occupancy as of December 31, 2000 for the next ten years:

<TABLE>
<CAPTION>


                                   Leased                                     % of          Average (3)
                 Leases to           GLA                  Rental              Total           Rent Per
     Year       Expire (1)       (sq. ft.)(2)            Revenue          Rental Revenue      Sq. Ft.
--------------- ------------ -------------------- ----------------------- --------------- -----------------
     <S>             <C>         <C>              <C>                           <C>       <C>
     2001            410         1,487,719        $       14,729,928            17.7%     $       9.90
     2002            228           789,314                 9,768,114            11.8%            12.38
     2003            233         1,404,899                13,238,921            16.0%             9.42
     2004            218         1,020,106                12,803,594            15.5%            12.55
     2005            144           707,395                 8,545,683            10.3%            12.08
     2006             41           572,076                 6,325,781             7.6%            11.06
     2007             16           268,008                 2,124,314             2.6%             7.93
     2008             12           121,025                 1,019,398             1.2%             8.42
     2009             15           107,156                 1,301,820             1.6%            12.15
     2010             11            76,474                 1,050,077             1.3%            13.73
    2011+             26         1,698,768                11,934,812            14.4%             7.03
                ============ ==================== ======================= =============== =================
    Total          1,354         8,252,940        $       82,842,442            100.0%    $      10.04
                ============ ==================== ======================= =============== =================
</TABLE>

(1)    Expirations assume no renewals or re-leasing for tenants in occupancy as
       of December 31, 2000.
(2)    Total leased GLA is not equal to leasable GLA due to vacancies.
(3)    Annual base rents in place at December 31, 2000.

                                       13
<PAGE>
<TABLE>
<CAPTION>

Summary of Debt on Income Properties
                                                                          Outstanding Balance
                                                                             (in thousands)
          Description                 Maturity    Interest Rate      12/31/00            12/31/99             Notes
----------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>        <C>         <C>                 <C>                 <C>
      Fixed Rate
Class A Mortgage Notes                 Jun-02         7.51%       $    49,393         $   51,106          23 Properties
Class B Mortgage Notes                 Jun-02         7.87%            20,000             20,000          23 Properties
Class C Mortgage Notes                 Jun-02         8.40%            17,000             17,000          23 Properties
Permanent Debt Facility                Mar-13          7.73% (1)       66,139             66,544          11 Properties
Mortgage                               Dec-10         7.58%            46,400                  -           Towne Centre
Mortgage                               May-17         10.13%            1,439              1,467          Bolling Creek
Mortgage                               Jul-18         9.75%             2,541              2,590           Shoreside #1
Mortgage                               Jul-15         8.75%             2,965              3,062           Shoreside #2
Mortgage                               Jul-15         9.13%             1,035              1,067            Brookneal
Mortgage                               Jul-15         9.13%             1,420              1,465            Keysville
Mortgage                               Nov-07         7.37%            14,779             14,924           Towne Square
Mortgage                               Nov-07         7.37%             7,000              7,069         University Mall
Mortgage                               Dec-02         8.48%             5,414              5,586           Celebration
Mortgage                               Jan-15         8.37%             2,122              2,199             Danville
Mortgage                               Nov-05         7.88%             6,443              6,524         Durham Festival
Mortgage                               May-14         7.63%             3,271              3,350        Lenoir Festival #1
Mortgage                               Oct-01         8.50%             4,452              4,525        Hollywood Festival
Mortgage                               Nov-07         7.39%            10,866             10,986            Lake Point
Mortgage                               Dec-03         8.37%             9,156              9,251            Square One
Mortgage                               Oct-05         8.55%            10,376             10,525          Waverly Place
Mortgage                               Oct-08         9.22%            19,352             19,528         Mobile Festival
Mortgage                               Oct-17         8.38%             3,047              3,129        University Shoppes
Mortgage                               Jan-07         8.70%             3,975              4,039           Dukes Plaza
                                                 ------------------------------------------------------
                 Total Fixed Rate Debt and            7.92%           308,585            265,936
                 Weighted Average Interest Rate                                          265,936
Variable Rate
Term Loan                              May-02    LIBOR + 3.25%         58,925             54,260           9 Properties
Construction Loan                      Dec-02    LIBOR + 1.50%         11,533                  -         Millpond Village
Construction Loan                      Oct-01    LIBOR + 1.50%          7,678              6,734       Carolina Outlet Ctr.
Line of Credit                         May-01    LIBOR + 2.00%          6,700                  -       Merchant's Festival
Construction Loan                      Sept-01   LIBOR + 1.50%              -             28,199           Towne Centre
                                                                  ---------------    ------------------

                 Total Variable Rate Debt and
                 Weighted Average Interest Rate       7.79%            84,836             89,193
                                                                  ---------------    ------------------

                 Subtotal Debt                        7.93%           393,421            355,129
Unamortized Premium on Permanent Debt Facility         (1)              6,391              6,912
                                                                  ---------------    ------------------
                 Total Debt                                       $   399,812        $   362,041
                                                                  ===============    ==================

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

Percent of Total Debt
Fixed                                                                   78.4%              74.9%
Variable                                                                21.6%              25.1%
                                                                  ---------------    ------------------
                                                                       100.0%             100.0%
Weighted Average Interest Rate at end of
periods:
Fixed                                                                   7.92%              7.98%
Variable                                                                9.32%              7.79%
                                                                  -------------------------------------
Total                                                                   8.21%              7.93%
</TABLE>

                                       14
<PAGE>
--------------------------------------------------------------------------------
Schedule of Maturities by Year
      Year           Balance         Percentage
---------------------------------    ------------
      2001          $    23,364           5.9%

      2002              162,729          41.4%

      2003               11,651           3.0%

      2004                2,935           0.7%

      2005               11,664           3.0%

   Thereafter           181,078          46.0%
                 ----------------    ------------
Total               $   393,421         100.0%
                 ================    ============

(1)   Exclusive of unamortized premium, the interest rate on this facility is
      9.1%.

Executive Offices

         The Company's headquarters are in 37,000 square feet of the
Company-owned Millpond Village in Raleigh, North Carolina. In addition, the
Company leases a 10,200-square foot Florida regional office in Tampa, Florida
and a 4,000-square foot property management office centrally located in Sunrise,
Florida.

Item 3 - Legal Proceedings

         On June 11, 1999, WHE Associates, Inc., purportedly a licensed real
estate broker, filed a lawsuit claiming that the Company is liable to the
plaintiff for a "finder's fee" in the amount of $2 million to $4 million.
Plaintiff sought its purported fee pursuant to both breach of contract and
equitable claims. At a hearing held on January 5, 2000, the plaintiff's motion
for summary judgment was denied as to its contractual claims and granted as to
liability with respect to its equitable claims. The case was tried before a jury
during November 2000. As the trial began, the plaintiff dismissed its contract
claims and proceeded to try only the issue of damages with respect to its
equitable claims. The jury returned a verdict in favor of the plaintiff as to
damages with respect to those claims, and on November 27, 2000, a judgment was
entered by the court in favor of the plaintiff in the amount of $2,756,550. The
Company has appealed this judgment to the appellate courts of the State of
Maryland and intends to vigorously pursue its appeal of the judgment entered.

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

None

Item X - Executive Officers of the Registrant

         The following table sets forth certain information with respect to the
current executive officers of the Company.

       Name                   Age              Position
 J. Michael Maloney            54     Interim President and Chief Executive
                                      Officer
 Daniel J. Kelly               49     Executive Vice President, Chief Financial
                                      Officer
 Christopher G. Gavrelis       47     Executive Vice President, Chief
                                      Administration Officer
 Robin W. Malphrus             40     Senior Vice President, General Counsel
                                      and Secretary
 Suzanne L. Rice               34     Senior Vice President and President
                                      RMC/Konover
 Linda M. Swearingen           36     Senior Vice President, Finance/Investor
                                      Relations

         J. Michael Maloney was appointed interim President and Chief Executive
Officer on March 6, 2001. Mr. Maloney is currently President of Highland Capital
Group, Inc., which he founded in 1998. Highland is involved principally in
investing and consulting services. Mr. Maloney, a real estate veteran and a
Director of Konover, has over 30 years of industry and financial experience.
Prior to the formation of Highland Capital Group, Mr. Maloney was a Senior Vice
President with Corporate Property Investors (CPI) for 17 years. CPI owned and
managed some of the most successful regional malls in the country, including
Roosevelt Field, Long Island, NY, Lenox Square

                                       15
<PAGE>

Mall, Atlanta, GA and Town Center, Boca Raton, FL. CPI merged with Simon
DeBartolo in September 1998, forming Simon Property Group, the largest retail
REIT in the United States. At CPI, Mr. Maloney was responsible for property
finance, development, acquisitions and dispositions, and had significant
responsibility for leasing, property management and marketing. His experience
also includes an extensive financial background as a Vice President and Senior
Credit Officer with Citibank where his primary responsibility was the management
of all national real estate loans including all retail property as well as
homebuilders and retail land development.

         Daniel J. Kelly joined the Company as Senior Vice President, Chief
Accounting Officer in November 1999 and was promoted to Executive Vice President
and Chief Financial Officer in June 2000. Prior to joining the Company, he was
with Arthur Andersen LLP for 16 of the last 20 years. From 1993 to 1999, Mr.
Kelly served as an audit partner in Arthur Andersen LLP's Raleigh, North
Carolina office where he worked primarily with real estate, emerging growth,
high-tech and middle-market companies, providing accounting and financial
consulting services. Mr. Kelly served as Chief Financial Officer for a real
estate development company from 1982 to 1986.

         Christopher G. Gavrelis joined the Company in December 1995. Mr.
Gavrelis was named Senior Vice President in January 1996 and promoted to
Executive Vice President in January 1998. Prior to his affiliation with the
Company, Mr. Gavrelis was Vice President - Property Management of the Charter
Oak Group for approximately four years. From 1989 to 1991, Mr. Gavrelis served
as regional property manager for McArthur/Glen Realty Corp. (now HGI Realty,
Inc.), a company engaged in the development and operation of factory outlet
centers. Mr. Gavrelis is responsible for the Company's management and
administration activities.

         Robin W. Malphrus was promoted from Vice President, Secretary and
General Counsel to Senior Vice President, Secretary and General Counsel in
January 1999. Prior to being named Vice President, Secretary and General Counsel
in August 1998, Ms. Malphrus was Vice President and Secretary, a position she
held since June 1996. Ms. Malphrus joined the Company in August 1994 as
Corporate Counsel, and prior to joining the Company, Ms. Malphrus was Corporate
Counsel for North Hills, Inc. for five years.

         Suzanne L. Rice was named Senior Vice President on April 1, 1999 upon
the Company's acquisition of RMC. Ms. Rice was general partner and principal at
RMC, where she had worked since 1989. Prior to joining RMC, she worked for the
Federal Reserve Bank of New York as a commercial bank examiner.

         Linda M. Swearingen was promoted from Vice President to Senior Vice
President of Finance/Investor Relations in January 1998. Prior to being named
Vice President in May 1996, Ms. Swearingen was Director of Leasing for the
Company, a position she had held since July 1993. From 1990 to 1993, Ms.
Swearingen served as Assistant Vice President - Commercial Real Estate for Bank
One Dayton.

                                       16
<PAGE>

                                     PART II

Item 5 - Market for the Registrant's Common Equity and Related Stockholder
Matters

         The Company's Common Stock began trading on the NYSE under the symbol
"FAC", and subsequently changed its symbol to "KPT" on August 10, 1998 following
a shareholder vote approving of the Company's name change in August 1998. As of
March 20, 2001, there were approximately 403 stockholders of record.

         The following table sets forth the quarterly high and low sales prices
of the Common Stock and dividends declared per share for 2000 and 1999:
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------
                                         2000                                           1999
---------------------------------------------------------------------------------------------------------------
<S>                  <C>               <C>            <C>              <C>             <C>             <C>
                         High            Low          Dividends          High            Low          Dividends
First Quarter        $    6 3/16       $  4 3/4       $  0.125         $   7 1/16      $  5 1/4        $ 0.125
Second Quarter            6 1/16          4              0.125             9              5 3/8          0.125
Third Quarter             4 15/16         4              0.125             8 1/2          6 1/16         0.125
Fourth Quarter            4 1/2           3 1/2          0.125             6 5/8          5 1/2          0.125
                     -------------- --------------- --------------- --------------- --------------- --------------
</TABLE>

Distributions

         During 2000, the Company declared an annual dividend of $0.50 per
common share, preferred share, and minority interest OP units outstanding,
at the rate of $0.125 per quarter, which totaled $18.6 million, and represented
a return of capital. The dividend represented a payout ratio of nearly 90% of
the Company's funds from operations.

         The Company will make determinations regarding its dividend
distributions quarterly following review of the Company's financial results,
capital availability, strategic objectives and REIT requirements. The Company's
policy is to declare dividends in amounts at least equal to 95% (90% in 2001) of
the Company's taxable income, which is the minimum dividend required to maintain
REIT status. Based upon previous losses, the Company will have approximately
$10.6 million of net operating loss carry forwards for income tax reporting
purposes, which could result in no dividend payment requirement to maintain its
REIT status in 2001. Given the Company's desire to maintain a reasonable funds
from operations payout ratio, a reduction in dividend payments is possible. See
"Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity."

         The Company provides a Dividend Reinvestment Plan for stockholders of
record. Information on the Plan can be obtained from the Company's transfer
agent and registrar, First Union National Bank at (800) 829-8432.

                                       17
<PAGE>


Item 6 - Selected Financial Data

         The following information should be read in conjunction with the
consolidated financial statements and notes thereto included in Item 8 of this
report and "Management's Discussion and Analysis of Results of Operations and
Financial Condition" included in Item 7 of this report.

         Other data that management believes is important in understanding
trends in its business and properties are also included in the following table
(in thousands, except per share data).
<TABLE>
<CAPTION>


                                               ----------------------------------------------------------------------------------
                                                    2000            1999              1998             1997            1996
                                               ----------------------------------------------------------------------------------
<S>                                            <C>             <C>                  <C>              <C>            <C>
 Operating Data:
    Rental revenues                            $    88,920     $    82,449          $  70,666        $  54,940      $   47,170
    Property operating costs                        29,215          27,057             21,749           16,885          13,975
                                               ----------------------------------------------------------------------------------
                                                    59,705          55,392             48,917           38,055          33,195
    Depreciation and amortization                   28,479          25,541             20,453           16,395          15,121
    General and administrative                       6,669           6,317              5,066            4,404           4,880
    Interest                                        27,806          16,801             19,772           16,436          14,175
    Loss on sale of real estate                      1,946           3,810                512                -               -
    Abandoned transaction costs                      1,257           3,883                  -            1,250               -
    E-commerce start-up costs                            -           2,847                  -                -               -
    Equity in losses of unconsolidated
     entities                                       10,416             915                  -                -               -
    Minority interest in Operating
     Partnership                                    (1,157)            (78)                86                -               -
    Adjustment to carrying value of assets          19,338           2,400                  -                -           5,000
    Extraordinary loss on early
     extinguishment of debt                              -               -                  -              986             103
                                               ----------------------------------------------------------------------------------
    Net (loss) income                           $  (35,049)    $    (7,044)         $   3,028        $  (1,416)     $   (6,084)
                                               ==================================================================================

    (Loss) income before extraordinary item    $   (35,049)    $    (7,044)         $   3,028        $    (430)     $   (5,981)
       Preferred stock dividends                    (1,084)         (1,089)                 -                -            (368)
                                               ----------------------------------------------------------------------------------
    (Loss) income before extraordinary item
     applicable to common stockholders             (36,133)         (8,133)             3,028             (430)         (6,349)
       Extraordinary loss on early
        extinguishment of debt                           -               -                  -             (986)           (103)
                                               ----------------------------------------------------------------------------------
    (Loss) income applicable to common
     stockholders                              $   (36,133)    $    (8,133)         $   3,028        $  (1,416)     $   (6,452)
                                               ==================================================================================
    Basic (loss) income per common share:
    (Loss) income before extraordinary item
     applicable to common stockholders         $     (1.17)    $     (0.26)         $    0.16        $   (0.04)     $    (0.54)
    Extraordinary item                                   -               -                  -            (0.08)          (0.01)
                                               ----------------------------------------------------------------------------------
    Net (loss) income applicable to common
     stockholders                              $     (1.17)    $     (0.26)         $    0.16        $   (0.12)     $    (0.55)
                                               ==================================================================================
    Weighted average common shares
     outstanding                                    30,954          30,847             18,693           11,824          11,817
                                               ==================================================================================

 Diluted (loss) income per common share:
    (Loss) income before extraordinary item
     applicable to common stockholders         $     (1.17)    $     (0.26)         $    0.14        $   (0.04)     $    (0.54)
    Extraordinary item                                   -               -                  -            (0.08)          (0.01)
                                               ----------------------------------------------------------------------------------
    Net (loss) income applicable to common
     stockholders                              $     (1.17)    $     (0.26)         $    0.14        $   (0.12)     $    (0.55)
                                               ==================================================================================
    Weighted average common shares
     outstanding - diluted (a)                      30,954          30,847             21,878           11,824          11,817
                                               ==================================================================================
</TABLE>

                                       18

<PAGE>
<TABLE>
<CAPTION>


                                                    2000            1999              1998             1997            1996
----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>                  <C>              <C>            <C>
    Other Data:
     EBITDA:
     Net (loss) income                         $   (35,049)    $    (7,044)         $   3,028        $  (1,416)     $   (6,084)
       Adjustments:
            Interest                                27,806          16,801             19,772           16,436          14,175
            Depreciation and amortization           28,479          25,541             20,453           16,395          15,121
            Loss (gain) on sale of assets            1,946           3,810                512                -            (37)
            Minority interest                       (1,157)            (78)                86                -               -
            Equity in losses of unconsolidated
             ventures                               10,416             915                  -                -               -
            Abandoned transaction costs              1,257           3,883                  -            1,250               -
            E-commerce start-up costs                    -           2,847                  -                -               -
            Adjustment to fair value of assets      19,338           2,400                  -                -           5,000
            Extraordinary loss on early
             extinguishment of debt                      -               -                  -              986             103
                                               ==================================================================================
                                               $    53,036     $    49,075          $  43,851        $  33,651      $   28,278
                                               ==================================================================================
</TABLE>
<TABLE>
<CAPTION>

                                                          2000          1999          1998        1997        1996
                                                    ---------------------------------------------------------------------
         <S>                                          <C>           <C>            <C>         <C>         <C>
         Funds from Operations:
         Net (loss) income                            $ (35,049)    $ (7,044)      $  3,028    $ (1,416)   $  (6,084)
         Adjustments:
              Real estate depreciation and
               amortization                              24,147       21,854         18,333      15,504       14,440
              Loss (gain) on sale of assets               1,946        3,810            512           -         (37)
              Stock based compensation amortization       2,865        1,979          1,419         537          392
              Minority interest in Operating
               Partnership                                 (953)        (281)            86           -            -
              E-commerce start-up costs                       -        2,847              -           -            -
              Technology venture operations               5,525            -              -           -            -
              Share of depreciation in
               unconsolidated ventures                    2,654          229              -           -            -
              Adjustment to carrying value of
               assets                                    19,338        2,400              -           -        5,000
              Extraordinary loss on early
               extinguishment of debt                         -            -              -         986          103
                                                    ---------------------------------------------------------------------
                                                      $  20,473    $  25,794      $  23,378    $ 15,611    $  13,814
                                                    =====================================================================
       Weighted average shares outstanding-diluted
       (a)                                               34,621       34,472         21,878      14,158       13,399
                                                    =====================================================================

       Funds Available for
       Distribution/Reinvestment:
         Funds from Operations                        $  20,473    $  25,794       $ 23,378    $ 15,611    $  13,814
         Adjustments:
                 Capitalized tenant allowances           (1,685)      (2,652)        (4,259)     (1,418)        (316)
                 Capitalized leasing costs               (2,035)      (1,656)        (2,258)     (1,054)        (549)
                 Recurring capital expenditures          (1,341)      (1,103)          (599)       (845)        (312)
                                                    ---------------------------------------------------------------------
                                                      $  15,412    $  20,383       $ 16,262    $ 12,294    $  12,637
                                                    =====================================================================
       Dividends declared on annual earnings          $  18,556    $  18,107       $      -    $      -    $  10,142
                                                    =====================================================================
       Dividends declared on annual earnings per
        share                                          $   0.50    $    0.50       $   0.00    $   0.00    $    0.75
                                                    =====================================================================
       Cash Flows:
         Cash flows from operating activities        $   19,242   $   33,782       $ 18,540   $  12,283    $   7,495
         Cash flows used in investing activities        (33,256)    (129,992)       (72,115)    (62,251)     (17,958)
         Cash flows from financing activities            19,308       31,317        121,749      47,061       15,018
                                                    ---------------------------------------------------------------------
         Net (decrease) increase in cash and cash
          equivalents                               $     5,294    $ (64,893)     $  68,174   $  (2,907)    $  4,555
                                                    =====================================================================
</TABLE>
                                       19
<PAGE>

<TABLE>
<CAPTION>

<S>                                                  <C>           <C>            <C>         <C>          <C>
       Balance Sheet Data:
         Income-producing properties (before
              depreciation and amortization)         $  691,168   $  671,544     $  575,471   $ 393,624    $ 352,992
         Total assets                                   703,271      719,457        682,449     403,626      358,612
         Debt on income properties                      399,812      362,041        304,783     232,575      173,695
         Total liabilities                              426,700      385,400        320,862     240,699      194,020
         Minority interests                               8,356       12,999         12,246           -            -
         Total stockholders' equity                     268,215      321,058        349,341     162,927      164,592
       Portfolio Property Data:
         Total GLA (at end of period)                     9,400        9,519          8,148       5,503        4,865
         Weighted average GLA                             9,477        8,978          7,390       5,341        4,674
         Number of properties (at end of period)             66           68             59          41           36
         Occupancy (at end of year):
              Operating                                    91.0%         93.2%          92.0%       93.4%         91.4%
              Held for sale/redevelopment/development      32.5%         66.4%          56.4%       50.4%         55.8%
</TABLE>

(a)  The following table sets forth the computation of the denominator to be
     used in calculating the weighted-average shares outstanding based on
     Statement of Financial Accounting Standard No. 128, "Earnings Per Share":
     See also "Significant Transactions and Acquisitions -- Lazard Freres
     Transaction."
<TABLE>
<CAPTION>

<S>                                                      <C>          <C>            <C>         <C>          <C>
   Denominator:
     Denominator- weighted average shares                30,954       30,847         18,693      11,824       11,817
     Effect of dilutive securities:
         Preferred stock                                  2,169        2,189          2,222       2,222        1,582
         Employee stock options                               -            -             33          69            -
         Restricted stock                                   459          328            328          43            -
         Operating Partnership Units                      1,039        1,108            602           -            -
                                                  --------------------------------------------------------------------
    Dilutive potential common shares                      3,667        3,625          3,185       2,334        1,582
                                                  --------------------------------------------------------------------
    Denominator- adjusted weighted average
     shares and assumed conversions                      34,621       34,472         21,878      14,158       13,399
                                                  ====================================================================
</TABLE>

         Industry analysts generally consider Funds from Operations ("FFO") an
appropriate measure of performance for an equity REIT. Beginning in 2000, the
Company adopted a change in the definition of FFO as promulgated by the National
Association of Real Estate Investment Trusts (NAREIT). Under the new definition,
FFO means net income before extraordinary items (computed in accordance with
accounting principles generally accepted in the United States) excluding gains
or losses on sale of real estate plus depreciation and amortization. All prior
periods have been restated.

         "EBITDA" is defined as revenues less operating costs, including general
and administrative expenses, before interest, depreciation and amortization and
unusual items. As a REIT, the Company is generally not subject to Federal income
taxes. Management believes that EBITDA provides a meaningful indicator of
operating performance for the following reasons: (i) it is industry practice to
evaluate the performance of real estate properties based on net operating income
("NOI"), which is generally equivalent to EBITDA; and (ii) both NOI and EBITDA
are unaffected by the debt and equity structure of the property owner.

         FFO and EBITDA (i) do not represent cash flow from operations as
defined by generally accepted accounting principles, (ii) are not necessarily
indicative of cash available to fund all cash flow needs and (iii) should not be
considered as an alternative to net income for purposes of evaluating the
Company's operating performance or as an alternative to cash flow as a measure
of liquidity.

                                       20
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition
         and Results of Operations

         The following discussion should be read in conjunction with the
selected financial data included in Item 6 of this report, and the consolidated
financial statements and notes thereto included in Item 8 of this report.
Certain comparisons between the periods have been made on a percentage basis and
on a weighted average square foot basis, which adjusts for square footage added
at different times during the year.

         Certain statements under this caption, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," constitute
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. See "Forward-Looking Statements" included under this section.

General Development of Business

         The Company, formerly FAC Realty Trust, Inc., was incorporated on March
31, 1993 as a self-advised and self-managed real estate investment trust (REIT).
The Company is principally engaged in the acquisition, development, ownership
and operation of retail shopping centers. The Company's revenues are primarily
derived under real estate leases with national, regional and local retailing
companies.

         On December 31, 2000, the Company's owned properties consisted of:

1.       39 community shopping centers in nine states aggregating approximately
         5.5 million square feet;

2.       Nine outlet centers in nine states aggregating approximately 2.0
         million square feet;

3.       16 Vanity Fair (VF) anchored centers located in 12 states aggregating
         approximately 1.4 million square feet;

4.       One center under development and scheduled for completion in the
         Fall of 2001; and

5.       Two centers in two states aggregating approximately 0.5 million square
         feet that are held for sale.

         In addition, the Company had investments in:
         o four joint-venture community centers/developments, which will consist
           of 404,000 square feet;
         o a land development joint venture consisting of 2,100 acres; and
         o third party management company with 7.9 million square feet under
           management or leasing contracts.

Significant Transactions and Acquisitions

     UPREIT Conversion

         On December 17, 1997, following shareholder approval, the Company
changed its domicile from the State of Delaware to the State of Maryland. The
reincorporation was accomplished through the merger of FAC Realty, Inc. into its
Maryland subsidiary, Konover Property Trust, Inc. (formerly FAC Realty Trust,
Inc.). Following the reincorporation on December 18, 1997, the Company
reorganized as an umbrella partnership real estate investment trust (an
"UPREIT"). The Company then contributed to KPT Properties, L.P. (formerly FAC
Properties, L.P.), a Delaware limited partnership (the "Operating Partnership"),
all of its assets and liabilities. In exchange for the Company's assets, the
Company received limited partnership interests ("OP Units") in the Operating
Partnership in an amount and designation that corresponded to the number and
designation of outstanding shares of capital stock of the Company at the time.
The Company is the sole general partner of the Operating Partnership and owned a
97% interest as of December 31, 2000. As additional limited partners are
admitted to the Operating Partnership in exchange for the contribution of
properties, the Company's percentage ownership in the Operating Partnership will
decline. As the Company issues additional shares of capital stock, it will
contribute the proceeds for that capital stock to the Operating Partnership in
exchange for a number of OP Units equal to the number of shares that the Company
issues. The Company conducts all of its business and owns all of its assets
through the Operating Partnership (either directly or through subsidiaries) such
that an OP Unit is economically equivalent to a share of the Company's common
stock.

         An UPREIT may allow the Company to offer Units in the Operating
Partnership in exchange for ownership interests from tax-motivated sellers.
Under certain circumstances, the exchange of Units for a seller's

                                       21
<PAGE>

ownership interest will enable the Operating Partnership to acquire assets while
allowing the seller to defer the tax liability associated with the sale of such
assets. Effectively, this allows the Company to use Units instead of stock to
acquire properties, which provides an advantage over non-UPREIT entities.


     Rodwell/Kane Transaction

         On March 30, March 31, and May 14, 1998, the Company concluded the
acquisition of eight community shopping centers located in North Carolina and
Virginia from Roy O. Rodwell and John N. Kane. The acquired centers encompass
approximately 950,000 square feet.

         The aggregate purchase price for the acquired shopping centers was
$57.1 million, consisting of the assumption of $44.3 million of fixed-rate
indebtedness, the payment of $3.5 million in cash and the issuance of 974,347
limited partnership Units of the Operating Partnership. Of the purchase price,
292,447 Units and $0.8 million in cash would be issued on a delayed or
contingent basis. At December 31, 2000, 176,321 of the contingent units had been
issued and 40,117 were cancelled and will not be issued. The remaining
contingencies include the attainment of certain property performance thresholds
and the sale, lease or development of certain outparcels. The purchase price for
the acquisition was determined as a result of arms-length negotiation between
the Company and the sellers, with the Units being valued at $9.50 per share.

     Konover & Associates South Transaction

         On February 24, 1998, the Company entered into definitive agreements
with affiliates of Konover & Associates South ("Konover"), a privately held real
estate development firm based in Boca Raton, Florida, to acquire eleven
community shopping centers. The Company ultimately acquired nine of the Konover
& Associates South community shopping centers for a total purchase price of
$85.4 million consisting of $55.2 million in debt assumption, $26.8 million in
cash and 369,000 of Operating Partnership Units, valued at $9.50 per share.

         For financial reporting purposes, the nine Konover properties were
recorded effective April 1, 1998, since the risks and rewards of ownership had
passed to the Company and there were no significant conditions outstanding. All
of the acquired properties are held directly or indirectly, by KPT Properties,
L.P.

     Lazard Freres Transaction

         On August 5, 1998, the stockholders approved a Stock Purchase Agreement
between Prometheus Southeast Retail, LLC (including its assignee, "PSR"), a real
estate investment affiliate of Lazard Freres Real Estate Investors, LLC,
("Lazard") and the Company pursuant to which PSR made a $200 million purchase of
shares of Common Stock of the Company at a purchase price of $9.50 per share
(the "Transaction"). Upon completion of funding, PSR owned an equity interest in
the Company of approximately 58%, on a diluted basis. As a result of subsequent
stock repurchases by the Company, PSR's current ownership interest in the
Company is 61%, assuming conversion of outstanding preferred stock and units
into shares. Under the terms of the Lazard transaction agreements, for as long
as PSR's investment in the Company is $50 million or more, PSR has the right to
participate in future equity issuances to preserve its ownership interest.

         Pursuant to a Contingent Value Rights Agreement between the parties, if
PSR has not doubled its investment (through stock appreciation and dividends) by
January 1, 2004, the Company will pay PSR, in cash or stock at its discretion,
an amount necessary to achieve such a return, subject to a maximum payment of
4,500,000 shares or the cash value thereof.

                                       22
<PAGE>



     Investments In and Advances to Unconsolidated Entities

         A summary of the Company's investments in and advances to
unconsolidated entities at December 31, 2000 and 1999, is as follows: (all
investments are accounted for under the equity method, in thousands):
<TABLE>
<CAPTION>

                                                                                             December 31,
Entity                                                  Location           Ownership         2000        1999
----------------------------------------------------------------------------------------------------------------
<S>                                               <C>                         <C>       <C>          <C>
Community Center Ventures:
Atlantic Realty LLC (2 community centers)         North Carolina              50%       $   2,571    $   2,440
Park Place KPT LLC (1 community center)           Morrisville, NC             50%           6,594        6,245
Falls Pointe KPT LLC (1 community center)         Raleigh, NC                 50%           5,991        7,059

Taxable Subsidiaries:

Sunset KPT Investment, Inc.                                                   85%           9,981        9,888
truefinds.com, Inc. (d/b/a ImageTwin, Inc.)                                   95%             (17)         511
                                                                                        ------------------------

                                                                                        $  25,120    $  26,143
                                                                                        ========================
</TABLE>


         Falls Pointe KPT LLC, a strategic venture with a local Raleigh, North
Carolina developer, is developing land located in Raleigh into a 98,000-square
foot community center to be anchored by Harris Teeter. In 2000, Kohls department
store purchased an adjacent parcel of land and is opening a 88,000-square foot
store in Spring 2001.

         In the third quarter of 1999, Sunset KPT Investments, Inc. sold its
interest in Wakefield Commercial LLC for approximately $9.2 million resulting in
a gain of $1 million, which is a component of the Company's equity in losses of
unconsolidated entities. Distributions from Sunset KPT Investments, Inc. in 1999
to the Company totaled $1.4 million. Sunset KPT Investments has a joint venture
interest in approximately 2,100 acres of undeveloped land in eastern North
Carolina, which could be developed as a multi-use development.

         The Company's e-commerce business operations commenced in the fourth
quarter of 1999 resulting in start-up costs of $2.8 million, primarily
consisting of web-site development and consulting costs, included in the
accompanying consolidated statement of operations. Effective December 31, 1999,
the e-commerce business and related capitalizable costs were transferred to
truefinds.com, Inc. (a taxable subsidiary d/b/a ImageTwin, Inc.). In the fourth
quarter of 2000, the Company ceased funding of the operations of its technology
venture. The Company incurred a loss of $5.5 million in 2000 related to this
venture.

         The acquisition and development of the venture properties are subject
to, among other things, completion of due diligence and various contingencies,
including those inherent in development projects, such as zoning, leasing and
financing. All debt incurred by unconsolidated ventures is secured by their
respective properties as well as various guarantees of the Company and by the
Company's respective venture partners.

                                       23
<PAGE>

       Acquisition Summary

         A summary of the Company's acquisition activity since 1998 follows (in
thousands):
<TABLE>
<CAPTION>
                               State                                                  Debt                      No. of
                             Location         Date     Square Feet Purchase Price    Assumed        Cash       OP Units
                         ----------------- ----------- ----------- -------------- ------------- ------------- ----------
<S>                            <C>          <C>              <C>      <C>              <C>        <C>              <C>
2000 (2)
1999
Merchants Festival              GA          11/30/99         152   $    16,750              -   $   16,750           -
Lake Washington                 FL           9/17/99         119         9,700              -        9,700           -
Patriots Plaza                  SC           9/1/99          115         8,700              -        8,700           -
Grove Park                      SC           5/13/99          94         5,700              -        5,700           -
Crossroads at Mandarin          FL           4/14/99          72         4,500              -        4,500           -
Dare Center                     NC           3/31/99         113         5,000              -        5,000           -
Braves Village                  SC           3/31/99          60         4,500              -        4,500           -
Eastgate Plaza                  FL           3/30/99         182        10,400              -       10,400           -
Dukes Plaza                     VA           3/1/99          140         6,500          4,100        2,400           -
Robertson Corners               SC           1/6/99           48         3,900              -        3,900           -
                                           ----------- ----------- -------------- ------------- ------------- ----------

                   TOTAL                                   1,095        75,650          4,100       71,550           -


1998
Waverly Place                   NC           12/14/98        181        12,800        10,700         2,100          -
University Shoppes              SC            8/31/98         54         4,700         3,200         1,500          -
Konover (portfolio)       FL, NC, VA, AL       4/1/98      1,515        85,400        55,200        26,700        369

Rodwell/Kane (portfolio)      NC, VA          3/31/98        955        57,100        44,300         3,500        934 (1)
Market Square                   VA             1/7/98         56         3,100         2,300           800          -
                         ----------------- ----------- ----------- -------------- ------------- ------------- ----------
                   TOTAL                                   2,761       163,100       115,700        34,600      1,303

                                                       ----------- -------------- ------------- ------------- ----------
                   TOTAL                                   4,462   $   271,050    $  119,800    $  138,450      1,303
                                                       =========== ============== ============= ============= ==========
</TABLE>

(1)      Includes 57 contingent OP Units issuable upon realization of certain
         contingencies.

(2)      On December 19, 2000, the Company acquired the non-controlling interest
         of its joint venture partner in the Towne Centre shopping center
         located in Mt. Pleasant, South Carolina. The Company paid $2.3 million
         in cash and transferred ownership in land and certain development costs
         of approximately $1.2 million. In connection with this transaction, the
         Company obtained a $46.4 million loan which replaced the construction
         loan previously in place.

         Acquisition of Property Management and Leasing Business

         The Company entered into an agreement on March 18, 1999 to acquire the
operations of RMC Realty Companies, Inc., in Tampa, Florida. The acquisition,
which was effective on April 1, 1999, was part of the Company's growth strategy
in the Southeast and involved the acquisition of management and leasing
contracts in excess of 7.2 million square feet in the state of Florida. The
operation, named RMC/Konover Property Trust, LLC, operates as a separate
business unit under Sunset KPT Investments, Inc. (a taxable subsidiary).

Results Of Operations

Year Ended December 31, 2000 compared to the Year Ended December 31, 1999.

Net Loss

         The Company reported a net loss applicable to common stockholders of
$36.1 million, or $1.17 per common share, for the year ended December 31, 2000.
The same period in 1999 reported net loss applicable to common stockholders of
$8.1 million, or $0.26 per common share. The elements having a material impact
on the change are discussed below:

>>   The Company's NOI, exclusive of straight-line rent, increased by $2.7
     million, or 4.7%, to $59.7 million from $57.0 million for the same period
     in 2000. Including the effect of straight-line rent adjustment ($1.6
     million), NOI increased by $4.3 million. A breakdown of NOI, exclusive of
     straight-line rent, by segment is detailed below (in thousands):

                             Year Ended December 31,

                                       24
<PAGE>

                             2000               1999             Change
                       ----------------- ------------------- ----------------
Community (1) (3)            36,146      $     26,239        $     9,907
Outlet (2)                   19,194            21,889             (2,695)
VF Anchored                   3,574             5,476             (1,902)
Other (1) (2) (3)               481             3,216             (2,735)
Corporate                       310               123                187
                       ----------------- ------------------- ----------------
                       $     59,705      $     56,943        $     2,762
                       ================= =================== ================

(1)      Town Centre was classified as a development project in 1999 and has
         moved to Community in 2000.
(2)      Nashville classified as an outlet center in 1999, was moved into Other
         (held for sale).
(3)      Waverly, a redevelopment project in 1999, was moved from Other
         category to Community.

The primary contribution to the increase in NOI in the community segment has
been the completion of the Towne Centre community center project in Mt.
Pleasant, South Carolina and the full-year operations of acquisitions made in
1999.

                                           Change in NOI from
                                              1999 to 2000
                                             (in thousands)
                                          ----------------------
     Towne Centre                           $       3,358
     1999 Acquisitions                              3,818
                                          ----------------------
                                            $       7,176
                                          ======================

For the year ended December 31, 2000, the following events contributed to the
change in net loss applicable to common stockholders:

>>   The Company incurred losses from unconsolidated entities in 2000 consisting
     of $5.5 million related the technology venture and $4.9 million related to
     real estate operations compared to $0.9 million in 1999.
>>   Net interest expense increased by $11.0 million or 65.5% to $27.8 million
     in 2000 from $16.8 million in 1999. The increase is due primarily to a
     combination of the following factors: (a) increase in borrowings ($37.8
     million), (b) the completion of Towne Centre in early 2000 at which time
     interest capitalization ceased, and (c) the increase in variable rates by
     19.2% to an average of 9.3% in 2000 from 7.8% in 1999.
>>   As a result of 1999 acquisitions and completion of development projects in
     2000, depreciation and amortization increased by $2.9 million.
>>   General and  administrative  expenses  increased $0.4 million related
     primarily to $0.3 million in costs associated with the Company's corporate
     office move.
>>   The Company sold two properties, one in Georgia and one in New Hampshire,
     which generated a loss of $1.9 million.
>>   Abandoned transaction costs decreased to $1.3 million compared to $3.9
     million in 1999.

                                       25
<PAGE>


Tenant Income

         Base rent, including straight-line rent, increased $6.3 million or
10.1% to $68.9 million for the year ended December 31, 2000 from $62.6 million
for the same period in 1999. Base rent before the adjustment for straight-line
rent increased $4.7 million, or 7.3%, to $68.9 million for the year ended
December 31, 2000 when compared to $64.2 million in 1999. The increase in base
rent for the year ended December 31, 2000 is attributable primarily to the
following community center acquisitions:

                                              Change in
                                            Base Rent (*)
                                          from 1999 to 2000
                                            (in thousands)
                                         ---------------------
    Towne Centre                               $    3,596
    1999 Acquisitions                          $    4,025
                                         ---------------------
                                               $    7,621
                                         =====================

(*) Base rent excludes straight-line rent

         The above increases were partially offset by a $1.5 million decrease in
base rent related to the properties held for sale and $0.2 million related to
the two properties sold during the year.

         During this same period, the Company's weighted-average square feet of
gross leasable area in operation increased 5.5% due primarily to the full year
of ownership of 1999 acquisitions and completion of the Towne Centre shopping
center. Gross leasable area in operation at period-end decreased by 0.1 million
square feet, primarily because of the sales of properties in Georgia and New
Hampshire totaling 0.2 million in gross leasable area partially offset by the
recertification of square footage at certain centers.

         Recoveries from tenants increased 3.7% for the year ended December 31,
2000 to $16.8 million compared to $16.2 million in the same period of 1999.
These recoveries represent reimbursements from tenants of certain common area
maintenance, real estate taxes and insurance costs. On a weighted-average
square-foot basis, recoveries decreased 1.7% to $1.77 for the year ended
December 31, 2000 when compared to $1.80 for the same period in 1999. The
average recovery of property operating expenses, exclusive of marketing and
other non-recoverable operating costs, decreased to 72.3% in 2000 as compared to
74.7% in 1999.

Other Income

         Other income decreased $0.6 million to $1.9 million in 2000 compared to
$2.5 million in 1999 primarily as a result of decreased management fee income of
$0.3 million and decreased lease termination fee income of $0.1 million.

Property Operating Expenses

         Property operating costs increased $2.1 million, or 7.7%, to $29.2
million for the year ended December 31, 2000 from $27.1 million in the same
period of 1999. The increase in operating costs was principally due to the
increase in the weighted-average square feet in operation in 2000, which rose
5.5% to 9.5 million square feet in 2000 from 9.0 million square feet in 1999. On
a weighted-average square-foot basis, operating expenses increased 2.3% to $3.08
per weighted average square foot for the year ended December 31, 2000 from $3.01
per weighted average square foot for the same period in 1999.

General and Administrative Expenses

         General and administrative expenses for the year ended December 31,
2000 increased $0.4 million, or 6.3%, to $6.7 million in 2000 from $6.3 million
in 1999. The increase in these expenses was due primarily to $0.3 million in
costs related to the Company's corporate office move. General and administrative
expenses as a percent of total revenue decreased to 7.5% in 2000 from 7.7% in
1999.

                                       26
<PAGE>


Depreciation and Amortization

         Depreciation increased to $19.1 million for the year ended December 31,
2000 compared to $18.1 million in the same period of 1999. The increase is due
primarily to the full year of operations of 1999 acquisitions and the completion
of the Towne Centre community center in Mt. Pleasant, South Carolina.
Amortization of deferred leasing and other charges and stock-based compensation
amortization increased $2.0 million to $9.4 million. On a weighted-average
square-foot basis, depreciation and amortization increased to $3.01 in 2000 from
$2.84 in 1999.

Interest Expense

         Interest expense for the year ended December 31, 2000, net of interest
income of $4.1 million, increased by $11.0 million, or 65.5%, to $27.8 million
compared to $16.8 million, net of interest income of $4.7 million, for the year
ended December 31, 1999. This increase in net interest expense resulted
primarily from: (a) the increased borrowings ($37.8 million); (b) the completion
of the Towne Centre development project in early 2000 at which time
capitalization ceased; and (c) a 19.2% increase in the Company's variable
borrowing rate. On a weighted-average basis, for the year ended December 31,
2000, debt outstanding was $378.1 million, and the average interest rate was
8.2%. This compares to $327.1 million of average outstanding debt and a 7.9%
average interest rate in 1999. The Company capitalized $2.1 million and $1.5
million of interest costs associated with its development projects for the years
ended December 31, 2000 and 1999, respectively.

Properties Held for Sale

         During 2000, the Company sold the remaining property held for sale at
December 31, 1999 for its approximate book value. In addition, the Company added
two outlet center properties into the held-for-sale category. These properties
are located in Nashville, Tennessee and Las Vegas, Nevada. An adjustment to the
fair value of these properties was recorded in fourth quarter 2000 for $19.3
million. The net book value of these properties at December 31, 2000 was $18.9
million.

         The following summary financial information pertains to the properties
held for sale for the year ended December 31:

                                                      2000       1999
                                                      ----       ----
                Revenues                           $  1,897    $  4,751
                Net (loss) income after operating
                  and interest expenses             $(1,326)   $    142

Earnings Before Interest, Taxes, Depreciation and Amortization and Funds from
Operations

         EBITDA, as defined, was $53.0 million for the year ended December 31,
2000, an increase of $3.9 million or 7.9%, from $49.1 million for the same
period in 1999. The increase was due primarily to increased NOI of $4.3 million
over 1999, including adjustment for straight-line rent (as described above),
offset by an increase in general and administrative expenses of $0.4 million.

         FFO, as defined, for the year ended December 31, 2000 decreased $5.3
million or 20.5% to $20.5 million. The Company's FFO for the same period in 1999
was $25.8 million. FFO increased primarily as a result of the $4.3 million
increase in NOI, inclusive of straight-line rent, offset by an increase in net
interest expense of $11.0 million.

Results of Operations

Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998.

Net (Loss) Income

         The Company reported a net loss applicable to common shareholders of
$8.1 million, or $0.26 per common share, for the year ended December 31, 1999.
The same period in 1998 reported net income applicable to common shareholders of
$3.0 million, or $0.16 per common share. The elements having a material impact
on the change are discussed below:

>>   The Company's NOI, exclusive of straight-line rent, increased by $7.5
     million, or 15%, to $56.9 million from $49.4 million for the same period in
     1998. Including the effect of straight-line rent change ($1.0 million),

                                       27
<PAGE>

     NOI increased by $6.5 million. A breakdown of NOI, exclusive of
     straight-line rent, by segment is detailed below (in thousands):

                          Year Ended December 31,
                          1999               1998             Change
                    ----------------- ------------------- ----------------
Community           $     26,239      $     19,984        $     6,255
Outlet                    21,889            23,862            (1,973)
VF Anchored                5,476             5,584              (108)
Other                      3,216               964              2,252
Corporate                    123              (965)             1,088
                    ----------------- ------------------- ----------------
                    $     56,943      $     49,429        $     7,514
                    ================= =================== ================

        The primary contribution to the increase in NOI has been community
acquisitions made during 1998 and 1999 as follows:

                                                       Change in NOI from
                                                          1998 to 1999
                                                         (in thousands)
                                                      ----------------------
                  1999 Acquisitions                     $       3,791
                  University Shoppes (8/98)                       271
                  Konover (portfolio) (4/98)                      999
                  Rodwell/Kane (portfolio) (4/98)               1,450
                                                      ----------------------
                                                        $       6,511
                                                      ======================

         For the year ended December 31, 1999, the following events contributed
to the change in net (loss) income applicable to common stockholders:

>>       The Company recognized losses from unconsolidated entities of $0.9
         million. There were no earnings (losses) from unconsolidated entities
         in 1998.
>>       The proceeds from the 1998 sale of common stock enabled the Company to
         reduce interest expense by $7.8 million to $21.6 million in 1999 from
         $29.4 in 1998 and resulted in increased interest income of $4.8 million
         over 1998.
>>       As a result of acquisitions, depreciation and amortization increased by
         $5.1 million and general and administrative expenses increased by $1.3
         million.
>>       The Company paid a $1.1 million dividend in 1999 to its convertible
         preferred stockholders, who receive dividends equal to that of common
         stockholders on an as-converted basis.
>>       The Company sold two properties, one in Arizona and one in Texas, which
         generated a loss of $3.0 million.
>>       The Company incurred start-up costs of $2.8 million in connection with
         its technology venture.
>>       The Company adjusted the carrying value of a center in Las Vegas,
         Nevada by $2.4 million.
>>       The Company incurred abandoned transaction costs of $3.9 million in
         1999. Fourth quarter 1999 charges of $3.7 million of abandoned project
         costs include $1.4 million of costs related in 1999 the evaluation and
         negotiation associated with the sale of a group of assets into a joint
         venture, $1.3 million related to a terminated community shopping center
         portfolio acquisition and $1 million of abandoned development and
         acquisition costs.

                                       28
<PAGE>


Tenant Income

         Base rent, including straight-line rent, increased $10.8 million or
20.8% to $62.6 million for the year ended December 31, 1999 from $51.8 million
for the same period in 1998. Base rent before the adjustment for straight-line
rent increased $11.9 million, or 22.8%, to $64.2 million for the year ended
December 31, 1999 when compared to $52.3 million in 1998. The increase in base
rent for the year ended December 31, 1999 is attributable primarily to the
following community center acquisitions:

                                              Change in
                                            Base Rent (*)
                                          from 1998 to 1999
                                            (in thousands)
                                         ---------------------
    1999 Acquisitions                             $ 6,267
    University Shoppes (8/98)                         334
    Konover (portfolio) (4/98)                      2,227
    Rodwell/Kane (portfolio) (4/98)                   492
                                         ---------------------
                                                   $9,320
                                         =====================
(*) Base rent excludes straight-line rent

         During this same period, the Company's weighted-average square feet of
gross leasable area in operation increased 21.6%. In addition, gross leasable
area in operation at period-end increased by 1.4 million square feet, primarily
because of the ten properties acquired in 1999 totaling 1.1 million in gross
leasable area as well as the Mt. Pleasant project in Mt. Pleasant, South
Carolina, which delivered 0.4 million square feet. These described increases
were partially offset by the sales of properties in Arizona and Texas totaling
0.2 million in gross leasable area.

         Recoveries from tenants increased 9.5% for the year ended December 31,
1999 to $16.2 million compared to $14.8 million in the same period of 1998.
These recoveries represent contractual reimbursements from tenants of certain
common area maintenance, real estate taxes and insurance costs. On a
weighted-average square-foot basis, recoveries decreased 10.4% to $1.80 for the
year ended December 31, 1999 when compared to $2.01 for the same period in 1998.
The average recovery of property operating expenses, exclusive of marketing and
other non-recoverable operating costs, decreased to 75% in 1999 as compared to
79% in 1998.

Other Income

         Other income decreased $0.7 million to $2.5 million in 1999 compared to
$3.2 million in 1998, primarily as a result of decreased lease termination fee
income of $0.5 million.

Property Operating Expenses

         Property operating costs increased $5.4 million, or 24.9%, to $27.1
million for the year ended December 31, 1999 from $21.7 million in the same
period of 1998. The increase in operating costs was principally due to the
increase in the weighted-average square feet in operation in 1999, which rose
21.6% to 9.0 million square feet in 1999 from 7.4 million square feet in 1998.
On a weighted-average square-foot basis, operating expenses increased 2.4% to
$3.01 per weighted average square foot for the year ended December 31, 1999 from
$2.94 per weighted average square foot for the same period in 1998.

General and Administrative Expenses

         General and administrative expenses for the year ended December 31,
1999 increased $1.2 million, or 23.5%, to $6.3 million in 1999 from $5.1 million
in 1998. General and administrative expenses as a percent of total revenue
increased to 7.7% in 1999 from 7.2%.

Depreciation and Amortization

         Depreciation increased to $18.1 million for the year ended December 31,
1999 compared to $15.1 million in the same period of 1998. The increase is due
primarily to the 1999 acquisitions and those made during the course of 1998.
Amortization of deferred leasing and other charges and stock-based compensation
amortization increased $2.0 million to $7.4 million. On a weighted-average
square-foot basis, depreciation and amortization increased to $2.84 in 1999 from
$2.77 in 1998.

                                       29
<PAGE>


Interest Expense

         Interest expense for the year ended December 31, 1999, net of interest
income of $4.8 million, decreased by $3.0 million, or 15%, to $16.8 million
compared to $19.8 million, net of interest income of $9.7 million, for the year
ended December 31, 1998. This decrease in net interest expense resulted
primarily from the interest income generated from the proceeds from the sale of
common stock in 1998. On a weighted-average basis, for the year ended December
31, 1999, debt outstanding was $327.1 million, and the average interest rate was
7.9%. This compares to $299.0 million of average outstanding debt and a 7.9%
average interest rate in 1998. The Company capitalized $1.5 million and $1.0
million of interest costs associated with its development projects for the years
ended December 31, 1999 and 1998, respectively.

Properties Held for Sale

         The properties held for sale, as defined as of December 31, 1999,
contributed approximately $0.4 million of revenue. After deducting related
interest expense on the debt associated with those properties, the properties
held for sale generated a loss of $0.4 million. For the year ended December 31,
1998, the properties held for sale contributed approximately $0.4 million of
revenue and incurred a net loss of $0.9 million. During 1999, a property held
for sale in Arizona was sold which generated a loss of $1.7 million. During
1998, a property held for sale in California, was sold and generated a loss of
$0.4 million. At December 31, 1999, the Company had one remaining property held
for sale with a book value of $0.6 million.

Earnings Before Interest, Taxes, Depreciation, and Amortization and Funds from
Operations

         EBITDA, as defined, was $49.1 million for the year ended December 31,
1999, an increase of $5.2 million or 11.8%, from $43.9 million for the same
period in 1998. The increase was due primarily to increased NOI of $6.5 million
over 1998, including adjustment for straight-line rent (as described above),
offset by an increase in general and administrative expenses of $1.3 million.

         FFO, as defined, for the year ended December 31, 1999 increased $2.1
million or 8.6% to $25.8 million. The Company's FFO for the same period in 1998
was $23.4 million. FFO increased primarily as a result of the $6.5 million
increase in NOI, inclusive of straight-line rent, and a decrease in net interest
expense of $3.0 million. These increases to FFO were offset by abandoned
projects of $3.9 million, increase in general and administrative expenses of
$1.3 million, a $0.9 million loss from unconsolidated joint ventures and an
increase in non-real estate depreciation of $1.0 million.

Liquidity and Capital Resources

Cash Flows

         The Company's cash and cash equivalents balance at December 31, 2000
was $10.7 million. Restricted cash, as reported in the financial statements, as
of such date, was $11.5 million. The restricted cash is an amount the Company
was required to escrow in connection with various loans. The escrows include
amounts to fund such items as taxes, environmental and engineering work,
recurring replacement costs, potential tenant allowances, insurance and
occupancy earnout.

         Net cash provided by operating activities was $19.2 million for the
year ended December 31, 2000. Net cash used in investing activities was $33.3
million in that same period. The primary use of these funds included:

>>       $36.8 million invested in the Company's income-producing properties,
         primarily invested in the development of Millpond Village ($21.3
         million) and completion of Towne Centre ($5.7 million) and;
>>       $4.5 million of net advances to unconsolidated entities.

         These cash uses were offset by repayments received on certain notes
receivables of $4.6 million and $3.6 million of proceeds from the sale of two
properties.

                                       30
<PAGE>


         Net cash provided by financing activities was $19.3 million for the
year ended December 31, 2000. The primary use of these funds included:

>>       $13.9 million for dividends paid.
>>       $36.6 million for debt repayments.
>>       $0.7 million of fees related to the 1998 Lazard transaction.
>>       $4.0 million of deferred financing fees.

These cash uses were offset by proceeds from debt borrowings of $74.9 million.

Current and Future Cash Needs

         The Company's management anticipates that cash generated from
operations as well as access to capital resources, including additional
borrowings, will provide the necessary funds for operating expenses, interest
expense and principal on outstanding indebtedness, current and future severance
payments, dividends and distributions as required to meet REIT federal income
tax requirements, re-tenanting and lease renewal tenant improvement costs,
capital expenditures to maintain the quality of its existing centers as well as
development projects.

Lazard Transaction

         On August 5, 1998, stockholders approved the Lazard transaction
involving PSR's $200 million purchase of the Company's Common Stock at $9.50 per
share. All funds were used in 1999 and 1998 to fund acquisitions,
debt retirement, investments in ventures, common stock repurchases and
development.

         As part of the Lazard transaction, the Company signed a Contingent
Value Rights Agreement with PSR. Under this agreement, if PSR has not
essentially doubled its investment (through stock appreciation and dividends) by
January 1, 2004, the Company will be required to pay PSR, in cash or stock at
its discretion, an amount necessary to achieve such a return, subject to a
maximum payment of 4,500,000 shares or the cash value thereof.

Financing Activities

         The Company's policy is to finance its activities with the source of
capital believed by management to be most appropriate and provide the proper
balance of equity and fixed and floating rate debt. Sources may include
undistributed cash flow, borrowings from institutional lenders, equity
issuances, and the issuance of debt securities on a secured or unsecured basis.
The Company's philosophy is to use its Funds Available for Distribution as a key
source of financing.

         In December 1998, the Company completed a substitution and
recollateralization of its REMIC facility. This $95 million facility was
originally issued in May 1995 and secured by 18 properties. The substitution was
the first step in an effort by the Company to gain greater flexibility in the
sale of assets that may no longer meet the Company's ongoing strategy. The REMIC
balance as of December 31, 2000 was $86.4 million and is secured by 23
properties and matures June 2002.

         An acquisition line of credit was put in place in early 1997 for $150
million. The availability under this line is based upon a predetermined formula
on the net operating income of the properties that secure the facility. The $150
million line was converted into a $60 million term loan in June 2000 and is
currently secured by nine properties plus an assignment of the excess cashflow
of the REMIC facility referenced above. The loan expires the earlier of December
2002 or the termination of the REMIC facility.

         On March 11, 1998, the Company closed on a $75 million, 15-year
permanent credit facility. The loan has an effective rate of 7.73% and is
amortized on a 338-month basis. Eleven properties secure this facility. The
proceeds were used to pay down borrowings outstanding on the $150 million credit
facility. The credit facility balance as of December 31, 2000, was $66.1 million
excluding a $6.4 million unamoritized interest premium.

         During 1998, the Company issued 21,052,632 shares of its common stock
to Prometheus Southeast Retail, LLC, ("PSR"), a real estate investment affiliate
of Lazard Freres Real Estate Investors discussed. The total consideration was
$200 million, of which $31 million was used to pay down the line of credit
facility.

                                       31
<PAGE>


         The Company closed on a $46.4 million 10-year mortgage loan on Mt.
Pleasant's Towne Centre in conjunction with its purchase of its partner's
interest in December 2000. The 30-year amortized loan bears interest at 7.58%.
Certain escrows totaling approximately $2.1 million are in place for leasing,
earnout or tenant allowance. $1.0 million of the cash held in escrow may be
replaced with a letter of credit.

         The Company may enter into additional mortgage indebtedness related to
certain joint venture development projects. The Company's policy is to extend
loans to unconsolidated entities only upon terms similar to those that would be
made by third parties.

         Any additional debt financing, including additional lines of credit,
may be secured by mortgages on the Properties. Such mortgages may be recourse or
non-recourse or cross-collateralized or may contain cross-default provisions.
The Company does not have a policy limiting the number of mortgages that may be
placed on, or the amount of indebtedness that may be secured by, any particular
property, however; current mortgage financing instruments do limit additional
indebtedness on such properties.

Severance Payments

         On March 7, 2001, the Company announced the resignation of C. Cammack
Morton as an officer and director of the Company and the termination of Patrick
M. Miniutti as Chief Operating Officer. Under the terms of a separation
agreement, the Company has agreed to pay Mr. Morton $3.5 million. In addition,
on March 30, 2001, Mr. Miniutti entered into a separation agreement pursuant to
which he resigned as a director and officer effective as of March 6, 2001. Under
the agreement (which shall become binding if Mr. Miniutti does not revoke the
agreement before April 6, 2001), the Company will (i) pay Mr. Miniutti
approximately $1.5 million in cash, (ii) forgive a $125,000 loan to Mr. Miniutti
and (iii) issue 259,545 shares of common stock to Mr. Miniutti in full
satisfaction of all rights to restricted stock under the Company's 1996
Restricted Stock Plan. Although the obligations to Mr. Miniutti are not yet
binding, the combined severance payments are likely to materially affect the
Company's liquidity.

Dividends

         During 2000, the Company declared an annual dividend of $0.50 per
common share, preferred share, and minority interest OP units outstanding,
at the rate of $0.125 per quarter, which totaled $18.6 million, and represented
a return of capital. The dividend represented a payout ratio of nearly 90% of
the Company's funds from operations.

         The Company will make determinations regarding its dividend
distributions quarterly following review of the Company's financial results,
capital availability, strategic objectives and REIT requirements. The Company's
policy is to declare dividends in amounts at least equal to 95% (90% in 2001) of
the Company's taxable income, which is the minimum dividend required to maintain
REIT status. Based upon previous losses, the Company will have approximately
$10.6 million of net operating loss carry forwards for income tax reporting
purposes, which could result in no dividend payment requirement to maintain its
REIT status in 2001. Given the Company's desire to maintain a reasonable funds
from operations payout ratio, a reduction in dividend payments is possible.

Economic Conditions

         Inflation has remained relatively low during the past three years with
certain segments of the economy experiencing disinflation, such as apparel
sales. Disinflation in this market segment has slowed the growth of tenant
sales, which adversely affects the Company's revenue due to lower percentage and
overage rents on some properties. Any weakness in the overall retail environment
as it relates to tenant sales volumes may have an impact on the Company's
ability to renew leases at current rental rates or to re-lease space to other
tenants. A decline in sales can effect renewal of tenant leases as well as the
viability of the tenant, which could result in reduced revenue. Percentage and
overage rent are directly impacted by sales volumes and represented 4% of the
Company's total revenue for the years ended December 31, 2000 and 1999.
Continuation of this trend may affect the Company's operating centers' occupancy
rate, rental rates, and concessions, if any, granted on new leases or re-leases
of space. This in turn may cause fluctuations in the cash flow from the
operation and performance of the operating centers.

Disclosure Regarding Forward Looking Statements

         Some of the information in this Annual Report on Form 10-K may contain
forward-looking statements. Such statements include, in particular, statements
about our plans, strategies and prospects under the headings "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." You can identify forward-looking statements by our use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue," or other similar words. Although we believe that our
plans, projections and expectations reflected in or suggested by such
forward-looking statements are reasonable, we cannot assure you that our plans,
projections or expectations will be achieved. When considering such
forward-looking

                                       32
<PAGE>

statements, you should keep in mind the following important
factors that could cause our actual results to differ materially from those
contained in any forward-looking statement:
>>       our markets could suffer unexpected increases in development of retail
         properties;
>>       the financial condition of our tenants could deteriorate;
>>       the costs of our development projects could exceed our original
         estimates;
>>       we may not be able to complete development or joint venture projects as
         quickly or on as favorable terms as anticipated;
>>       we may not be able to lease or re-lease space quickly or on as
         favorable terms as old leases;
>>       we may have incorrectly assessed the environmental condition of our
         properties;
>>       an increase in interest rates would increase our debt service costs;
>>       we could lose key executive officers; and
>>       our markets may suffer decline in economic growth or increase in
         unemployment rates.

         Given these uncertainties, we caution you not to place undue reliance
on forward-looking statements. We undertake no obligation to release publicly
the results of any revisions to these forward-looking statements that may be
made to reflect any future events or circumstances or to reflect the occurrence
of unanticipated events.

Item 7A - Quantitative and Qualitative Disclosures about Market Risk

         The effects of potential changes in interest rates are discussed below.
Our market risk discussion includes "forward-looking statements" and represents
an estimate of possible changes in future earnings that would occur assuming
hypothetical future movements in interest rates. These disclosures are not
precise indicators of expected future results, but only indicators of reasonably
possible results. As a result, actual future may differ materially from those
presented. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" and the notes to the
consolidated financial statements for a description of our accounting policies
and other information related to these financial instruments.

         To meet in part long-term liquidity requirements, the Company borrows
funds at a combination of fixed and variable rates. In addition, the Company has
assumed fixed rate debt in connection with acquiring properties. The Company's
interest rate risk management objective is to limit the impact of interest rate
changes on earnings and cash flows and to lower our overall borrowing costs.
Currently, the Company is party to any interest rate agreement which limits the
interest to a maximum of 10.66% on $58.9 million of variable rate debt. As of
December 31, 2000, the Company had approximately $84.8 million of variable rate
debt outstanding. If the weighted average interest rate on this variable rate
debt is 100 basis points higher or lower in 2000, interest expense would be
increased or decreased approximately $0.8 million for the year ended December
31, 2000.

Item 8 -  Financial Statements and Supplementary Data

          The response to this Item is submitted in a separate section of this
report.

Item 9 -  Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure

          None.

                                    Part III

Item 10 - Directors and Executive Officers of the Registrant

         The section under the heading "Election of Directors" of the Proxy
Statement relating to its 2001 Annual Meeting is incorporated herein by
reference. See ITEM X in Part I hereof for information regarding executive
officers of the Company.

Item 11 - Executive Compensation

          The section under the heading "Election of Directors" entitled
"Compensation of Directors" of the Proxy Statement and the section titled
"Executive Compensation" of the Proxy Statement are incorporated herein by
reference.

                                       33
<PAGE>

Item 12 - Security Ownership of Certain Beneficial Owners and Management


         The section under the heading "Security Ownership of Certain Beneficial
Owners and Management" of the Proxy Statement is incorporated herein by
reference.

Item 13 - Certain Relationships and Related Transactions

         The section under the heading "Certain Relationships and Related
Transactions" of the Proxy Statement is incorporated herein by reference.

                                       34
<PAGE>

                                     Part IV

Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1)   The following consolidated financial statements are filed as part of
the report:

                                                                           Page
                                                                           ----

     Report of independent public accountants                              F-2

     Consolidated balance sheets as of December 31, 2000 and 1999          F-3

     Consolidated statements of operations for the years ended
     December 31, 2000, 1999 and 1998                                      F-4

     Consolidated statements of stockholders' equity for years
     ended December 31, 2000, 1999 and 1998                                F-5

     Consolidated statements of cash flows for the years
     ended December 31, 2000, 1999 and 1998                                F-6

     Notes to consolidated financial statements                            F-7


(a)(2)   Included with this report is the following consolidated financial
statement schedule:

             Schedule III - Real Estate and Accumulated Depreciation

The Financial Statements of the Company's Non-Qualified Employee Stock Purchase
Plan listed below are filed herewith pursuant to Form 10-K, General Instruction
F.

                  Report of Independent Public Accountants

                  Financial Statements:

                         Statements of Net Assets Available for Plan Benefits
                            as of December 31, 2000 and 1999

                         Statements of Changes in Net Assets Available for Plan
                            Benefits for the Years Ended December 31, 2000, 1999
                            and 1998

                         Notes to Financial Statements

                  All other schedules for which provision is made in the
                  applicable accounting regulations of the SEC are not required
                  under the related instructions or are inapplicable and,
                  therefore, have been omitted.

(a)(3)   Included with this report are the following exhibits:

                                  Exhibit List

Exhibit #                            Title
--------------------------------------------------------------------------------

 3.1          Amended and Restated Articles of Incorporation (1)

 3.2          Amended and Restated Bylaws of the Company (8)

 4.1          Specimen Common Stock Certificate (10)

                                       35
<PAGE>

 4.2          Warrant Agreement between the Company and Blackacre (2)

 4.3          Warrant Agreement between the Company and Blackacre (2)

 4.4          Warrant Agreement between the Company and National Union Fire
              Insurance Company of Pittsburgh (2)

*4.5          Warrant Agreement between the Company and Network Fund III,
              Ltd. (2)

 4.5          Indenture by and between FSA Finance, Inc., as issuer, Bank One,
              Columbus, National Association, as trustee, and Fleet Management
              and Recovery Corporation, as master servicer (3)

4.6           Master Servicing Agreement by and between FSA Finance, Inc., as
              issuer, Bank One, Columbus, National Association, as trustee (4)
              and Fleet Management and Recovery Corporation, as master
              servicer (3)

4.7           Specimen copies of the various types of Class A, B, C and R
              Notes (3)

4.8           Mortgage Note given by FSA Properties, Inc., as maker, in favor of
              the Travelers Insurance Company, as payee (3)

4.9           Deed of Trust, Mortgage, Security Agreement, Fixture Filing,
              Financing Statement and Assignment of Leases and Rents by and
              between FSA Properties, Inc., as mortgagor, and the Travelers
              Insurance Company as mortgagee (3)

4.10          First Amendment to Master Servicing Agreement between FSA Finance,
              Inc., as Issuer, Mellon Mortgage Company, as Master Services, and
              First Union National Bank, as Trustee

4.12          Supplement to the Indenture dated as of December 22, 1998 between
              FSA Finance, Inc., as Issuer, Mellon Mortgage Company, as Master
              Servicer, and First Union National Bank as Trustee

4.13          Gap Note given by FSA Properties, Inc., as maker, in favor of The
              Travelers Insurance Company, as payee (3)

4.14          Mortgage Loan Purchase Agreement by and between The Travelers
              Insurance Company, as seller, and FSA Finance, Inc., as
              purchaser (5)

4.15          Loan Agreement between FAC Mortgage LLC as Borrower and Nomura
              Asset Capital Corporation as Lender (6)

4.16          Agreement to Furnish Certain Instruments Defining the Rights of
              Long-Term Debt Holders (10)

4.17          Line of Credit Agreement between FAC Realty, Inc. and Capital
              America Corporation (fka Nomura Asset Capital Corporation), dated
              February 19, 1997 (6)

4.18          First Amendment to Loan Agreement between KPT Properties, L.P. and
              LaSalle Bank National Association, as Trustee for CDC Depositor
              Trust ST-I (formerly known as Nomura Depositor Trust ST-I), dated
              as of June 14, 2000 (extension and modification of the
              $150,000,000 credit line with Nomura Asset Capital Corporation
              dated February 19, 1997). (11)

4.19          Promissory noted dated December 21, 2000 for $46.4 million
              between Mount Pleasant KPT LLC (Borrower) and GMAC Commercial
              Mortgage Corporation (Lender)

4.20          Fee and Leasehold Mortgage and Security agreement between Mount
              Pleasant KPT LLC (Borrower) and GMAC Commercial Mortgage
              Corporation (Lender) effective December 20, 2000.

*10.1         Employment Agreement between the Company and C. Cammack Morton (6)

*10.2         First Amendment to Employment Agreement between the Company and C.
              Cammack Morton (10)

*10.3         Employment Agreement between the Company and Patrick M.
              Miniutti (6)

*10.4         First Amendment to Employment Agreement between the Company and
              Patrick M. Miniutti (10)

*10.5         Separation Agreement and General Release between the Company and
              C. Cammack Morton (12)

*10.6         Severance Agreement between the Company and Fred P. Steinmark

*10.7         Employment Agreement between the Company and Christopher G.
              Gavrelis (7) (10)

                                       36
<PAGE>

*10.8         Second Amendment to Employment Agreement between the Company and
              Christopher G. Gavrelis

*10.9         Severance Agreement between the Company and Connell L. Radcliff

*10.10        Severance Agreement between Konover Property Trust Inc. and
              William H. Neville, dated as of May 18, 2000 (11)

*10.11        Employment Agreement between the Company and Daniel J. Kelly
              effective December 29, 2000.

*10.12        Separation and Settlement Agreement between the Company and
              Patrick M. Miniutti dated March 30, 2001.

*10.13        Amended and Restated 1993 Employee Stock Option Plan (5) (10)

*10.14        1996 Restricted Stock Plan (5)

*10.15        Amended and Restated 1995 Outside Directors Stock Award Plan

 10.16        Amended and Restated Agreement of Limited Partnership of the
              Operating Partnership (6)

 10.17        First Amendment to the Master and Exchange Option Agreement, dated
              as of March 16, 1998 by and among the Company, FAC Realty, L.P.
              and the Contributors listed therein (7)

 10.18        Assignment of Interest in Master Agreement and Exchange Option
              Agreement, and Consent of Limited Partners dated December 22,
              1997 (7)

 10.19        Exchange Option Agreement dated as of October 1, 1997, by and
              among Carolina FAC, Limited Partnership, FAC Realty, Inc. and the
              Owners of the Properties and Interests listed therein (7)

 10.20        Master Agreement, dated as of October 1, 1997, by and among FAC
              Realty, Inc., Carolina FAC, Limited Partnership, and the other
              signatories listed therein (7)

*10.21        Amended and Restated Stock Purchase Agreement, dated as of March
              23, 1998, between the Company and Prometheus Southeast Retail,
              LLC (7)

*10.22        Stockholders Agreement, dated February 24, 1998, among the Company
              and Prometheus Southeast Retail, LLC (7)

*10.23        Registration Rights Agreement, dated February 24, 1998 between the
              Company and Prometheus Southeast Retail, LLC (7)

*10.24        Contingent Value Right Agreement, dated February 24, 1998, among
              the Company and the Prometheus Southeast Retail, LLC (7)

*10.25        Asset Purchase Agreement between KPT Properties, L.P. and
              truefinds.com, Inc. (formerly kpt.com, Inc.) dated as of December
              29, 1999

*10.26        Guarantee by C. Cammack Morton to truefinds.com, Inc. (formerly
              kpt.com, Inc.) dated December 29, 1999

*10.27        Letter to Simon Konover, Chairman of the Board of Directors, dated
              June 7, 1999 (9)

 10.28        Agreement between AJS Group, LLC and Mount Pleasant KPT LLC for
              redemption and complete liquidation of AJS Group by Mount Pleasant
              KPT LLC.

 21.1         Subsidiaries of the Registrant

 23.1         Consent of Arthur Andersen LLP

* Contract with management or affiliates of management or a compensatory plan.
--------------------------------
(1)      Incorporated herein by reference to Exhibit 3.1 to the Company's
         Registration Statement on Form S-4 (File No. 333-39491)

                                       37
<PAGE>

(2)      Incorporated herein by reference to the Company's annual report on Form
         10-K for the year ended December 31, 1995
(3)      Incorporated herein by reference to the Company's Current Report on
         Form 8-K dated May 23, 1995
(4)      Bank One, Columbus, resigned as trustee effective December 10, 1997,
         and the issuer has appointed First Union Bank as the successor trustee
         effective December 10, 1997.
(5)      Incorporated herein by reference to the Company's annual report on Form
         10-K for the year ended December 31, 1996
(6)      Incorporated herein by reference to the Company's annual report on Form
         10-K for the year ended December 31, 1997
(7)      Incorporated herein by reference to the Company's Current Report on
         Form 8-K dated March 23, 1998, as amended on June 3, 1998
(8)      Incorporated herein by reference to the Company's quarterly report on
         Form 10-Q for the quarter ended March 31, 1999
(9)      Incorporated herein by reference to the Company's quarterly report of
         Form 10-Q for the quarter ended September 30, 1999
(10)     Incorporated herein by reference to the Company's annual report on Form
         10-K for the year ended December 31, 1998
(11)     Incorporated herein by reference to the Company's quarterly report on
         Form 10-Q for the quarter ended June 30, 2000.

(b)      Reports on Form 8K

         On March 6, 2001, the Company filed a current report on Form 8-K dated
         March 6, 2001, reporting under Item 5 of the Form that (a) the Company
         and C. Cammack Morton had entered into a Separation Agreement and
         General Release regarding the resignation of C. Cammack Morton as an
         officer and director of the Company and (b) the Company issued a press
         release regarding the appointment of J. Michael Maloney as Interim
         President and Chief Executive Officer following the resignation of C.
         Cammack Morton and termination of Patrick M. Miniutti..



         The Exhibits described above and the Financial Statements of the
Company's Employee Stock Purchase Plan have been filed separately with the
Securities and Exchange Commission and are available upon written request to:
Investor Relations, Konover Property Trust, Inc., 3434 Kildaire Farm Road, Suite
200, Raleigh, North Carolina, 27606.

                                       38

<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.

Dated: April 2, 2001                          Konover Property Trust, Inc.

                                              By /s/ J. Michael Maloney
                                                -------------------------------
                                              J. Michael Maloney
                                              Interim President and
                                              Chief Executive Officer, Director

                                              By /s/ Daniel J. Kelly
                                                -------------------------------
                                              Daniel J. Kelly
                                              Executive Vice President and
                                              Chief Financial Officer
                                              (Principal Accounting Officer)

                                              By /s/ Simon Konover
                                                -------------------------------
                                              Simon Konover
                                              Chairman of the Board of Directors

                                              By /s/ William D. Eberle
                                                -------------------------------
                                              William D. Eberle
                                              Director

                                              By /s/ J. Richard Futrell, Jr.
                                                -------------------------------
                                              J. Richard Futrell, Jr.
                                              Director

                                              By /s/ John W. Gildea
                                                -------------------------------
                                              John W. Gildea
                                              Director

                                              By /s/ Mark S. Ticotin
                                                -------------------------------
                                              Mark S. Ticotin
                                              Director

                                              By /s/ Andrew E. Zobler
                                                -------------------------------
                                              Andrew E. Zobler
                                              Director

                                       39

<PAGE>




                          Konover Property Trust, Inc.
                        Consolidated Financial Statements
                  Years ended December 31, 2000, 1999 and 1998


                   Index to Consolidated Financial Statements





Report of Independent Public Accountants...................................F-2

Consolidated Balance Sheets as of December 31, 2000 and 1999...............F-3

Consolidated Statements of Operations for the years ended
    December 31, 2000, 1999 and 1998.......................................F-4

Consolidated Statements of Stockholders' Equity for the years ended
    December 31, 2000, 1999 and 1998.......................................F-5

Consolidated Statements of Cash Flows for the years ended
    December 31, 2000, 1999 and 1998.......................................F-6

Notes to Consolidated Financial Statements.................................F-7


                                      F-1
<PAGE>


Report of Independent Public Accountants

To Konover Property Trust, Inc.:


We have audited the accompanying consolidated balance sheets of Konover Property
Trust, Inc. (a Maryland corporation) and subsidiaries and partnership as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 2000. These consolidated financial statements and
the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Konover Property
Trust, Inc. and subsidiaries and partnership as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.

Our audit of Konover Property Trust, Inc. and subsidiaries and partnership was
made for the purpose of forming an opinion on the consolidated financial
statements taken as a whole. Schedule III included with consolidated financial
statements is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the consolidated financial
statements. This schedule as of, and for the year ended December 31, 2000, has
been subjected to the auditing procedures applied in the audits of the
consolidated financial statements and, in our opinion, is fairly stated in all
material respects in relation to the consolidated financial statements taken as
a whole.



ARTHUR ANDERSEN LLP

    /s/ Arthur Andersen LLP

Raleigh, North Carolina
February 23, 2001 (except with respect to the matter discussed in Note 18, as to
which the date is March 7, 2001).

                                      F-2

<PAGE>


          KONOVER PROPERTY TRUST, INC AND SUBSIDIARIES AND PARTNERSHIP
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                            2000                   1999
                                                                                   ---------------------------------------------
                                                                                                  (in thousands)
<S>                                                                                   <C>                     <C>
                                                       Assets
Properties:
   Land                                                                               $       122,165         $    119,360
   Buildings and improvements                                                                 525,699              516,579
   Deferred leasing and other charges                                                          43,304               35,605
                                                                                   ---------------------------------------------
                                                                                              691,168              671,544
   Accumulated depreciation and amortization                                                  (97,957)            (89,019)
                                                                                   ---------------------------------------------
                                                                                              593,211              582,525
   Properties under development                                                                22,576               65,924
   Properties held for sale                                                                    18,900                  611
 Other assets:
   Cash and cash equivalents                                                                   10,660                5,366
   Restricted cash                                                                             11,540               11,432
   Tenant and other receivables, net of allowance of $2,069 and $1,588 at
    December 31, 2000 and 1999, respectively                                                    6,980                9,974
   Notes receivable from unrelated parties                                                        663                5,285
   Investment in and advances to unconsolidated entities                                       25,120               26,143
   Deferred charges and other assets                                                           13,621               12,197
                                                                                   ---------------------------------------------
                                                                                      $       703,271         $    719,457
                                                                                   =============================================

               Liabilities and Stockholders' Equity
Liabilities:
   Debt on income properties                                                          $       399,812         $    362,041
   Capital lease obligations                                                                      437                  698
   Accounts payable and other liabilities                                                      26,451               22,661
                                                                                   ---------------------------------------------
                                                                                              426,700              385,400
                                                                                   ---------------------------------------------
Commitments and contingencies

Minority interests                                                                              8,356               12,999
                                                                                   ---------------------------------------------

Stockholders' equity:
   Convertible preferred stock, Series A, 5,000,000 shares authorized,
     780,680 shares issued and outstanding at December 31, 2000 and 1999.                      18,679               18,679
   Stock purchase warrants                                                                          9                    9
   Common stock, $0.01 par value, 100,000,000 shares authorized and 31,274,845
     and 30,868,630 shares issued and outstanding at December 31, 2000 and 1999,
     respectively                                                                                 313                  309
   Additional paid-in capital                                                                 290,059              307,871
   Accumulated deficit                                                                        (40,481)              (5,432)
   Deferred compensation - Restricted Stock Plan                                                 (364)                (378)
                                                                                   ---------------------------------------------
                                                                                              268,215              321,058
                                                                                   ---------------------------------------------
                                                                                      $       703,271         $    719,457
                                                                                   =============================================
</TABLE>

       The accompanying Notes to Consolidated Financial Statements are an
                       integral part of these statements.

                                      F-3
<PAGE>

          KONOVER PROPERTY TRUST, INC. AND SUBSIDIARIES AND PARTNERSHIP
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                  Year ended December 31,
                                                                          2000               1999              1998
                                                                   -------------------------------------------------------
                                                                           (in thousands, except per share data)
<S>                                                                   <C>                <C>                <C>
Rental operations:
   Revenues:
      Base rents                                                      $   68,854         $   62,603         $   51,783
      Percentage rents                                                     1,418              1,164                886
      Property operating cost recoveries                                  16,758             16,183             14,829
      Other income                                                         1,890              2,499              3,168
                                                                   -------------------------------------------------------
                                                                          88,920             82,449             70,666
                                                                   -------------------------------------------------------
   Property operating costs:
      Common area maintenance                                             10,606              9,696              8,050
      Utilities                                                            2,865              2,807              2,577
      Real estate taxes                                                    8,526              8,140              7,035
      Insurance                                                            1,173              1,011              1,001
      Marketing                                                              652                574              1,054
      Other                                                                5,393              4,829              2,032
                                                                   -------------------------------------------------------
                                                                          29,215             27,057             21,749
   Depreciation and amortization                                          28,479             25,541             20,453
                                                                   -------------------------------------------------------
                                                                          57,694             52,598             42,202
                                                                   -------------------------------------------------------
                                                                          31,226             29,851             28,464
                                                                   -------------------------------------------------------
Other expenses:
   General and administrative                                              6,669              6,317              5,066
   Interest, net                                                          27,806             16,801             19,772
   Loss on sale of real estate                                             1,946              3,810                512
   Adjustment to carrying value of property                               19,338              2,400                  -
   Abandoned transaction costs                                             1,257              3,883                  -
   E-commerce start-up costs                                                   -              2,847                  -
   Equity in losses of unconsolidated entities:
      Technology venture                                                   5,525                  -                  -
      Real estate operations                                               4,891                915                  -
                                                                   -------------------------------------------------------
                                                                          67,432             36,973             25,350
                                                                   -------------------------------------------------------
(Loss) income before minority interest                                   (36,206)            (7,122)             3,114
   Minority interest                                                       1,157                 78                (86)
                                                                   -------------------------------------------------------
Net (loss) income                                                     $  (35,049)        $   (7,044)        $    3,028
                                                                   =======================================================

Net (loss) income                                                     $  (35,049)        $   (7,044)        $    3,028
   Preferred stock dividends                                              (1,084)            (1,089)                 -
                                                                   -------------------------------------------------------
Net (loss) income applicable to common stockholders                   $  (36,133)        $   (8,133)        $    3,028
                                                                   =======================================================

Basic (loss) income applicable to common stockholders per share       $    (1.17)        $    (0.26)        $     0.16
                                                                   =======================================================
Weighted average number of  common shares outstanding                     30,954             30,847             18,693
                                                                   =======================================================

Diluted (loss) income applicable to common stockholders per share     $    (1.17)        $    (0.26)        $     0.14
                                                                   =======================================================
Weighted average number of diluted shares outstanding                     30,954             30,847             21,878
                                                                   =======================================================
</TABLE>


       The accompanying Notes to Consolidated Financial Statements are an
                       integral part of these statements.

                                      F-4
<PAGE>

          KONOVER PROPERTY TRUST, INC. AND SUBSIDIARIES AND PARTNERSHIP
                 Consolidated Statements of Stockholders' Equity
                  Years ended December 31, 2000, 1999 and 1998
                      (in thousands except per share data)



<TABLE>
<CAPTION>
                                                                Convertible  Stock Purchase                    Additional
                                                              Preferred Stock   Warrants      Common Stock   Paid in Capital
                                                              ---------------------------------------------------------------
<S>                                                           <C>            <C>             <C>             <C>
Balance at December 31, 1997                                  $   19,162     $       9       $       119     $   145,332
  Issuance of 17,360 employee stock purchase plan shares               -             -                -               83
  Issuance of 35,339 shares of restricted stock                        -             -                1              275
  Issuance of 21,052,631 shares of common stock at $9.50 per
share, net of  expenses                                                -             -               211         195,179
  Repurchase of 1,755,093 shares of common stock                       -             -              (18)        (12,297)
  Exercise of 7,000 stock options                                      -             -                -               39
  Cancellation of 13,184 shares of restricted stock                    -             -                -            (106)
  Compensation under stock plans                                       -             -                -                -
  Conversion of 8,000 shares of preferred stock into 22,222
common shares                                                      (200)             -                -              200
  Net income                                                           -             -                -                -
                                                              ---------------------------------------------------------------
Balance at December 31, 1998                                      18,962             9               313         328,705
  Issuance of 15,968 employee stock purchase plan shares               -             -                -               88
  Issuance of 64,389 shares of restricted stock                        -             -                -              415
  Repurchase of 493,200 shares of common stock                         -             -               (5)         (2,962)
  Expenses related to sale of common stock to Lazard                   -             -                -            (299)
  Cancellation of 13,891 shares of restricted stock                    -             -                -             (89)
  Compensation under stock plans                                       -             -                -                -
  Conversion of 11,320 shares of preferred stock into 31,444
common shares                                                      (283)             -                1              282
  Repurchase of restricted stock                                       -             -                -              (8)
  Adjustment to value of minority interest in Operating
Partnership                                                            -             -                -            (736)
  Preferred stock dividends ($.50 per share)                           -             -                -          (1,089)
  Common stock dividends ($.50 per share)                              -             -                -         (16,436)
  Net loss                                                             -             -                -                -
                                                              ---------------------------------------------------------------
Balance at December 31, 1999                                      18,679             9               309         307,871
  Issuance of 22,512 employee stock purchase plan shares               -             -                -               98
  Issuance of 107,025 shares of restricted stock                       -             -                1              584
  Stock options issued for services                                    -             -                -               61
  Exercise of stock purchase rights for 94,600 shares of
restricted stock                                                       -             -                1              591
  OP units converted into 260,876 shares of common stock               -             -                3            2,476
  Repurchase of 55,602 shares of common stock                          -             -               (1)           (236)
  Expenses related to sale of common stock to Lazard                   -             -                -          (3,697)
  Cancellation of 23,196 shares of restricted stock                    -             -                -            (140)
  Compensation under stock plans                                       -             -                -                -
  Adjustment to value of minority interest in Operating
Partnership                                                            -             -                -              510
  Preferred stock dividends ($.50 per share)                           -             -                -          (1,084)
  Common stock dividends ($.50 per share)                              -             -                -         (16,975)
  Net loss                                                             -             -                -                -
                                                              ---------------------------------------------------------------
Balance at December 31, 2000                                  $   18,679     $       9       $       313     $   290,059
                                                              ===============================================================


<CAPTION>
                                                                                 Deferred
                                                                 Accumulated    Compensation
                                                                  (Deficit)      Restricted
                                                                  Earnings      Stock Plan        Total
                                                             -------------------------------------------------
<S>                                                            <C>             <C>             <C>
Balance at December 31, 1997                                   $    (1,416)    $      (279)    $  162,927
  Issuance of 17,360 employee stock purchase plan shares               -                 -             83
  Issuance of 35,339 shares of restricted stock                        -              (276)             -
  Issuance of 21,052,631 shares of common stock at $9.50 per
share, net of  expenses                                                -                 -        195,390
  Repurchase of 1,755,093 shares of common stock                       -                 -        (12,315)
  Exercise of 7,000 stock options                                      -                 -             39
  Cancellation of 13,184 shares of restricted stock                    -               106              -
  Compensation under stock plans                                       -               189            189
  Conversion of 8,000 shares of preferred stock into 22,222
common shares                                                          -                 -              -
  Net income                                                         3,028               -          3,028
                                                             -------------------------------------------------
Balance at December 31, 1998                                         1,612            (260)       349,341
  Issuance of 15,968 employee stock purchase plan shares               -                 -             88
  Issuance of 64,389 shares of restricted stock                        -              (415)             -
  Repurchase of 493,200 shares of common stock                         -                 -         (2,967)
  Expenses related to sale of common stock to Lazard                   -                 -           (299)
  Cancellation of 13,891 shares of restricted stock                    -                89              -
  Compensation under stock plans                                       -               200            200
  Conversion of 11,320 shares of preferred stock into 31,444
common shares                                                          -                 -              -
  Repurchase of restricted stock                                       -                 8              -
  Adjustment to value of minority interest in Operating
Partnership                                                            -                 -           (736)
  Preferred stock dividends ($.50 per share)                           -                 -         (1,089)
  Common stock dividends ($.50 per share)                              -                 -        (16,436)
  Net loss                                                          (7,044)              -         (7,044)
                                                             -------------------------------------------------
Balance at December 31, 1999                                        (5,432)           (378)       321,058
  Issuance of 22,512 employee stock purchase plan shares               -                 -             98
  Issuance of 107,025 shares of restricted stock                       -              (422)           163
  Stock options issued for services                                    -                 -             61
  Exercise of stock purchase rights for 94,600 shares of
restricted stock                                                       -                 -            592
  OP units converted into 260,876 shares of common stock               -                 -          2,479
  Repurchase of 55,602 shares of common stock                          -                 -           (237)
  Expenses related to sale of common stock to Lazard                   -                 -         (3,697)
  Cancellation of 23,196 shares of restricted stock                    -               140              -
  Compensation under stock plans                                       -               296            296
  Adjustment to value of minority interest in Operating
Partnership                                                            -                 -            510
  Preferred stock dividends ($.50 per share)                           -                 -         (1,084)
  Common stock dividends ($.50 per share)                              -                 -        (16,975)
  Net loss                                                         (35,049)              -        (35,049)
                                                             -------------------------------------------------
Balance at December 31, 2000                                   $   (40,481)    $      (364)    $  268,215
                                                             =================================================
</TABLE>

       The accompanying Notes to Consolidated Financial Statements are an
                       integral part of these statements.

                                      F-5

<PAGE>

          KONOVER PROPERTY TRUST, INC. AND SUBSIDIARIES AND PARTNERSHIP
                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                                    Year ended December 31,
                                                                            2000              1999             1998
                                                                      ----------------------------------------------------
                                                                                        (in thousands)
<S>                                                                   <C>                 <C>            <C>
Cash flows from operating activities:
    Net (loss) income                                                 $    (35,049)       $    (7,044)   $       3,028
    Adjustments to reconcile net (loss) income to net cash provided
       by operating activities:
         Amortization of debt premium                                         (521)              (913)               -
         Minority interest                                                  (1,157)               (78)              86
         Depreciation and amortization                                       28,479            25,541           20,453
         Loss on sale of real estate                                          1,946             3,810              512
         Adjustment to carrying value of property                            19,338             2,400                -
         Abandoned transaction costs                                          1,257             3,883                -
         Amortization of deferred financing costs                             2,344             2,144              820
         Technology venture operations                                        5,525                 -                -
         Net changes in:
            Tenant and other receivables                                      2,229                48           (2,855)
            Deferred charges and other assets                               (1,343)            (1,441)          (2,747)
            Accounts payable and other liabilities                          (3,806)             5,432             (757)
                                                                      ----------------------------------------------------
         Net cash provided by operating activities                           19,242            33,782           18,540
                                                                      ----------------------------------------------------

Cash flows from investing activities:
    Investment in income-producing properties                              (36,821)           (68,564)         (13,705)
    Net proceeds from sale of real estate                                     3,553             4,900            7,967
    Acquisition of income-producing properties, net                               -           (71,532)         (19,824)
    Investment in and advances to unconsolidated entities                   (4,502)               127          (41,887)
    Payments received (advances) on notes receivable, net                     4,622             8,414           (3,241)
    Change in restricted cash                                                 (108)            (3,337)          (1,425)
                                                                      ----------------------------------------------------
         Net cash used in  investing activities                            (33,256)          (129,992)         (72,115)
                                                                      ----------------------------------------------------

Cash flows from financing activities:
    Proceeds from debt on income-producing properties                       74,861             58,148           82,721
    Repayment of debt on income-producing properties                       (36,569)             (4,070)        (142,466)
    Deferred financing charges                                              (4,000)             (1,271)          (1,221)
    Other debt repayments                                                     (261)               (232)            (482)
    Net proceeds (expenses) from sale of common stock to Lazard               (685)               (299)         195,390
    Exercise of stock options                                                     -                 -                39
    Issuances of shares under employee stock purchase plan                       98                 88               83
    Repurchase of common stock                                                (237)             (2,967)         (12,315)
    Distributions to stockholders                                          (13,899)            (18,080)               -
                                                                      ----------------------------------------------------
         Net cash provided by financing activities                           19,308             31,317          121,749
                                                                      ----------------------------------------------------

Net increase (decrease)  in cash and cash equivalents                         5,294            (64,893)          68,174
Cash and cash equivalents at beginning of year                                5,366             70,259            2,085
                                                                      ----------------------------------------------------
Cash and cash equivalents at end of year                                $    10,660       $      5,366   $       70,259
                                                                      ====================================================

Supplemental disclosures of cash flow information
      Cash paid during the year for interest (net of interest
      capitalized of $2,147 in 2000, $1,509 in 1999 and $987 in
      1998)                                                             $    30,984       $     25,374   $       19,884
                                                                      ====================================================
</TABLE>


       The accompanying Notes to Consolidated Financial Statements are an
                       integral part of these statements.

                                      F-6
<PAGE>

          KONOVER PROPERTY TRUST, INC. AND SUBSIDIARIES AND PARTNERSHIP
                   Notes to Consolidated Financial Statements
                                December 31, 2000
                     (All square footage numbers unaudited)


1.   Organization and Basis of Presentation

Organization

     Konover Property Trust, Inc. (the "Company"), formerly FAC Realty Trust,
Inc., was incorporated on March 31, 1993 as a self-advised and self-managed real
estate investment trust (REIT). The Company is principally engaged in the
acquisition, development, ownership, and operation of retail shopping centers.
The Company's revenues are primarily derived under real estate leases with
national, regional and local retailing companies.

     On December 31, 2000, the Company's owned properties consisted of:

1.   39 community shopping centers in nine states aggregating approximately
     5,483,000 square feet;

2.   Nine outlet centers in nine states aggregating approximately 1,977,000
     square feet;

3.   16 Vanity Fair (VF) anchored centers in 12 states aggregating approximately
     1,424,000 square feet;

4.   Two centers with approximately 516,000 square feet that are held for sale;
     and

5.   One center under development which is scheduled for completion in Fall
     2001.

The weighted-average square feet of gross leasable area for owned and
consolidated properties were 9.5 million square feet for the year ended December
31, 2000 and 9.0 million square feet for the same period in 1999.

     On December 17, 1997, following shareholder approval, the Company changed
its domicile from the State of Delaware to the State of Maryland. The
reincorporation was accomplished through the merger of FAC Realty, Inc. into its
Maryland subsidiary, Konover Property Trust, Inc. (formerly FAC Realty Trust,
Inc.). Following the reincorporation on December 18, 1997, the Company
reorganized as an umbrella partnership real estate investment trust (an
"UPREIT"). The Company then contributed to KPT Properties, L.P. (formerly FAC
Properties, L.P.), a Delaware limited partnership, (the "Operating Partnership")
all of its assets and liabilities. In exchange for the Company's assets, the
Company received limited partnership interests ("Units") in the Operating
Partnership in an amount and designation that corresponded to the number and
designation of outstanding shares of capital stock of the Company at the time.
The Company is the sole general partner of the Operating Partnership and owns a
97% interest as of December 31, 2000. As additional limited partners are
admitted to the Operating Partnership in exchange for the contribution of
properties, the Company's percentage ownership in the Operating Partnership will
decline. As the Company issues additional shares of capital stock, it will
contribute the proceeds for that capital stock to the Operating Partnership in
exchange for a number of Units equal to the number of shares that the Company
issues. The Company conducts all of its business and owns all of its assets
through the Operating Partnership (either directly or through subsidiaries) such
that a Unit is economically equivalent to a share of the Company's common stock.

     An UPREIT may allow the Company to offer Units in the Operating Partnership
in exchange for ownership interests from tax-motivated sellers. Under certain
circumstances, the exchange of Units for a seller's ownership interest will
enable the Operating Partnership to acquire assets while allowing the seller to
defer the tax liability associated with the sale of such assets. Effectively,
this allows the Company to use Units instead of stock to acquire properties,
which provides an advantage over non-UPREIT entities.

     The Company has a majority interest in two taxable subsidiaries, Sunset KPT
Investment, Inc. and truefinds.com, Inc. under the laws of Delaware. Sunset KPT
Investment, Inc. has the ability to develop properties, buy and sell properties,
provide equity to developers and perform third-party management, leasing and
brokerage services. truefinds.com, Inc. attempted to commercialize an
apparel-sizing technology. The operations of truefinds.com, Inc. have been
suspended. The Company holds substantially all of the non-voting common stock of
these taxable subsidiaries. Substantially all of the voting common stock is held
by certain officers of the Company. Accordingly, these entities are accounted
for under the equity method for investments. Additionally, these taxable
subsidiaries are taxed as regular corporations.

Basis of Presentation

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

     Properties which are owned or owned less than 100% and are controlled by
the Operating Partnership have been consolidated. Control is demonstrated by the
ability of the general partner to manage day-to-day operations, refinance debt
and sell the assets of the partnership without the consent of the limited
partner and the inability of the limited partner to replace the general partner.
Investments in ventures which represent noncontrolling ownership interests or
where control is deemed temporary are accounted for using the equity method of
accounting. These investments are recorded initially at cost and subsequently
adjusted for net equity in income (loss) and cash contributions and
distributions.

                                      F-7
<PAGE>

1.   Organization and Basis of Presentation (continued)

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.

2.    Significant Accounting Policies

Income-Producing Properties

     Income-producing properties are recorded at cost less accumulated
depreciation. Included in such costs are acquisition, development, construction
and tenant improvement expenditures, interest incurred during construction,
certain capitalized improvements and replacements and certain allocated
overhead. Allocated overhead is computed primarily on the basis of time spent by
certain departments in various operations and represents costs of the
development department which meet the definition of "indirect costs" in
Statement of Financial Accounting Standards (SFAS) No. 67, "Accounting for Costs
and Initial Rental Operations of Real Estate Projects."

     Leasing charges, including tenant construction allowances and direct costs
incurred by the Company to obtain a lease, are deferred and amortized over the
related leases or terms appropriate to the expenditure.

     Depreciation is provided utilizing the straight-line method over the
estimated useful life of up to 39 years for buildings and improvements, and 5 to
15 years for land improvements.

     Certain improvements and replacements are capitalized when they extend the
useful life, increase capacity, or improve the efficiency of the asset. All
other repair and maintenance items are expensed as incurred.

     Substantially all of the income-producing properties have been pledged to
secure the Company's debt.

     Properties under development include costs related to new development and
expansions in process totaling approximately $22.6 million and $65.9 million at
December 31, 2000 and 1999, respectively. The pre-construction stage of project
development involves certain costs to secure land and zoning and to complete
other initial tasks which are essential to the development of the project. These
costs are transferred to developments under construction when the
pre-construction tasks are completed. The Company charges the consolidated
statements of operations for the costs of unsuccessful development projects.

     In accordance with the SFAS No. 121, "Accounting for the Impairment of Long
Lived Assets and for Long Lived Assets to be Disposed of," if events or
circumstances indicate that the carrying value of an operating property to be
held and used may be impaired, a recoverability analysis is performed based on
estimated nondiscounted future cash flows to be generated from the property. If
the analysis indicates that the carrying value is not recoverable from future
cash flows, the property is written down to estimated fair value and an
impairment loss is recognized.

Properties Held for Sale

     As part of the Company's ongoing strategic evaluation of its portfolio of
assets, management has been authorized to pursue the sale of certain properties
that currently are not fully consistent with or essential to the Company's
long-term strategies. Management evaluates all properties on a regular basis in
accordance with its long-term strategy and in the future may identify other
properties for disposition or may decide to defer the pending disposition of the
assets now held for sale. Assets held for sale are valued at the lower of
carrying value or fair value less selling costs. As part of the Company's
ongoing strategic evaluation of its portfolio of assets, the Company intends to
sell two non-strategic outlet centers. An adjustment to the carrying value of
these two properties of $19.3 million was recorded in 2000. The Company
continues to operate properties held for sale as of December 31, 2000 and is
actively marketing the properties. The one property previously held for sale at
December 31, 1999 was sold in May 2000 for its approximate net book value.

     The net carrying value of assets currently being marketed for sale at
December 31, 2000 and 1999 are $18.9 million and $0.6 million, respectively. The
held-for-sale properties are encumbered by $15.1 million of indebtedness at
December 31, 2000. Additional principal and prepayment expenses are associated
with the prepayment of this indebtedness.

     The following summary financial information pertains to the properties held
for sale at December 31, 2000 and for the years ended December 31 (in
thousands):

                                                 2000          1999       1998
                                                 ----          ----       ----
Revenues                                      $   1,897     $ 4,751      $6,537
Net (loss) income after operating
and interest expenses                          $ (1,326)    $   142      $1,224

Abandoned Transaction Costs

      The Company defers certain due diligence and other related costs in
connection with the possible acquisition of income-producing properties,
developments and venture projects. The Company evaluates the realization of the
costs on an ongoing basis. Upon determining that the Company is not going to
proceed with the transaction, the Company charges these costs to abandoned
transaction costs in the accompanying consolidated statements of operations. The
Company recorded $1.3 million and $3.9 million of abandoned transaction costs in
2000 and 1999, respectively.

                                      F-8
<PAGE>

2. Significant Accounting Policies (continued)

Interest Costs

     Interest costs are capitalized to income-producing properties under
construction, to the extent such assets qualify for capitalization. Total
interest capitalized was $2.1 million, $1.5 million and $1.0 million for the
years ended December 31, 2000, 1999 and 1998, respectively. Interest expense
includes amortization of deferred financing costs (see Note 4) and is net of
interest income on cash and escrow deposit balances and amortization of debt
premium.

Cash and Cash Equivalents

     The Company considers highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Restricted Cash

     In 1998, in connection with the substitution and recollateralization of the
$95 million debt securitization, $2.0 million was placed in a collateral escrow.
In addition, the net proceeds of $2.8 million on the sale of a property held for
sale in 1999 were placed into a restricted escrow due to certain loan covenants.
A collateral escrow of $2 million was also required in connection with obtaining
permanent financing on the Company's Towne Centre shopping center located in
Mount Pleasant, South Carolina. Such holdbacks and additional restricted
amounts, including real estate tax, insurance and capital improvement escrows,
were approximately $11.5 and $11.4 million at December 31, 2000 and 1999,
respectively.

Revenue Recognition

     The Company, as a lessor, has retained substantially all of the risks and
benefits of ownership and accounts for its leases as operating leases. Minimum
rental income is recognized on a straight-line basis over the term of the lease
and unpaid rents are included in tenant and other receivables in the
accompanying balance sheets. Certain lease agreements contain provisions which
provide for rents based on a percentage of sales that are recognized as earned
throughout the year. In addition, certain leases provide for additional rents
based on a percentage of sales volume above a specified breakpoint, which are
recognized as percentage rents. Also, most leases provide for the reimbursement
of real estate taxes, insurance, advertising, utilities and certain common area
maintenance (CAM) costs, which are recognized as property operating cost
recoveries. The property operating cost recoveries are reflected on the accrual
basis. In lease agreements where the tenant is not required to reimburse the
Company for real estate taxes, insurance and CAM costs, the Company has
allocated a portion of base rents to property operating cost recoveries. Amounts
allocated to property operating cost recoveries from base rent were $2.4
million, $1.6 million and $4.1 million in 2000, 1999 and 1998, respectively.

     The Company's principal financial instruments subject to potential
concentration of credit risk are tenant account receivables that are unsecured.
Although the tenants are primarily in the retail industry, the properties are
geographically diverse. The Company's exposure to credit loss in the event that
payment is not received for revenue recognized equals the outstanding accounts
receivable balance. The Company provides an allowance for estimated
uncollectible amounts.

 (Loss)/Income Per Common Share

     The Company has adopted the provisions of SFAS No. 128, "Earnings Per
Share". Under SFAS No. 128, basic earnings per share is calculated by dividing
the income available to common stockholders by the weighted-average number of
shares outstanding. Diluted earnings per share reflects the potential dilution
that could occur if options or warrants to purchase common shares were exercised
and preferred stock was converted into common shares ("potential common
shares").

     For the year ended December 31, 1998, the denominator for diluted earnings
per share is calculated as follows, (in thousands):

Denominator for basic weighted-average shares outstanding            18,693
  Effect of dilutive securities:
        Preferred stock                                               2,222
        Employee stock option                                            33
        Restricted stock                                                328
        Operating partnership units                                     602
                                                                     ------
        Dilutive potential shares                                     3,185
                                                                     ------
Denominator-adjusted-weighted average shares
  and assumed conversions                                            21,878
                                                                     ======

     For the years ended December 31, 2000 and 1999, basic and diluted earnings
per share are computed based on a weighted-average number of shares outstanding
of 30,954,000 and 30,847,000, respectively. Potential common shares have been
excluded from diluted earnings per share for 2000 and 1999 because their
inclusion would be antidilutive.

Income Taxes

     The Company is taxed as a REIT under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended, commencing with the tax year ending
December 31, 1993. As a REIT, the Company generally is not subject to federal
income tax. To maintain qualification as a REIT, the Company must distribute at
least 95% (90% in 2001) of its REIT taxable income to its stockholders and meet
certain other requirements. If the Company fails to qualify as a REIT in any
taxable year, the Company will be subject to federal income tax on its taxable
income at regular corporate rates. The Company may also be subject to certain
state and local taxes on its income and property and federal income and excise
taxes on its undistributed taxable income.

                                      F-9
<PAGE>

2. Significant Accounting Policies (continued)


Reclassifications

     Certain amounts from prior years were reclassified to conform with current
year presentation. These reclassifications had no effect on net (loss) income or
stockholders' equity as previously reported.

Recent Accounting Pronouncements

      In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
("SAB 101") that provides guidance for revenue recognition under certain
circumstances. The Company adopted the provisions of SAB 101 in 2000. The
adoption of SAB 101 did not have a material impact on the Company's financial
position or results of operations.

     As required by SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", as amended by SFAS No. 138, on January 1, 2001, the Company
will recognize derivative instruments in the balance sheet at fair value with
changes in fair values recognized in earnings unless specific hedging criteria
are met. Changes in the values of derivatives that meet these hedging criteria
will ultimately offset related effects of the hedged items; effects of certain
changes in fair value are recorded in other comprehensive income pending
recognition in earnings. Because of the limited use of derivatives, the Company
does not expect to have a significant impact on its financial position or
results of operations from these recently issued accounting standards.

3.    Investment in and Advances to Unconsolidated Entities

      A summary of the Company's investments in and advances to unconsolidated
entities at December 31, 2000 and 1999, is as follows (all investments in
unconsolidated entities are accounted for under the equity method):

<TABLE>
<CAPTION>
                                                                                        December 31,
Entity                                           Location             Ownership       2000         1999
---------------------------------------------------------------------------------------------------------
Community Center Ventures:                                                          (in thousands)
<S>                                           <C>                       <C>      <C>           <C>
   Atlantic Realty LLC (2 community centers)  Apex and Pembroke, NC      50%      $   2,571     $   2,440
   Park Place KPT LLC                         Morrisville, NC            50%          6,594         6,245
   Falls Pointe KPT LLC                       Raleigh, NC                50%          5,991         7,059

Taxable Subsidiaries (see Note 1):
   Sunset KPT Investment, Inc.                                           85%          9,981         9,888
   truefinds.com, Inc.                                                   95%           (17)           511
                                                                                 ------------- -------------
                                                                                 $  25,120     $  26,143
                                                                                 ============= =============
</TABLE>

       In the third quarter of 1999, Sunset KPT Investments, Inc., sold its
interest in Wakefield Commercial LLC for approximately $9.2 million resulting in
a gain of $1 million which is a component of the Company's equity in losses of
unconsolidated entities. Distributions made in 1999 from Sunset KPT Investments,
Inc. to the Company totaled $1.4 million. On November 10, 1999, the Company sold
an additional 10% in Sunset KPT Investment, Inc. to certain officers of the
Company.

       The Company's e-commerce business operations commenced in the fourth
quarter of 1999 resulting in start-up costs of $2.8 million, primarily
consisting of web-site development and consulting costs, included in the
accompanying consolidated statement of operations. Effective December 31, 1999,
the e-commerce business and related capitalizable costs were transferred to
truefinds.com, Inc. (a taxable subsidiary) for an equity interest and a note
receivable. During 2000, truefinds.com, Inc. pursued certain technology ventures
including body scanning measurement technology. The Company has suspended the
operations of truefinds.com, Inc.

       The acquisition and development of the venture properties are subject to,
among other things, completion of due diligence and various contingencies,
including those inherent in development projects, such as zoning, leasing and
financing. There can be no assurance that such transactions will be consummated.
All debt incurred by unconsolidated ventures is secured by their respective
properties as well as various guarantees of the Company and by the Company's
respective venture partners.

                                      F-10
<PAGE>

3.    Investment in and Advances to Unconsolidated Entities (continued)

     Summary unaudited financial information of ventures accounted for using the
equity method is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                       December 31,
         Balance Sheets                                          2000              1999
                                                         --------------------------------------
<S>                                                           <C>               <C>
         Assets:
             Investment properties at cost, net               $  46,045         $  40,931
             Cash and cash equivalents                            1,993               687
             Other assets                                         1,507             4,997
                                                         --------------------------------------
         Total Assets                                         $  49,545         $  46,615
                                                         ======================================

         Liabilities and Venturers' Equity:
             Mortgages and other notes payable                $  20,224         $  18,411
             Notes payable and other payables to Konover         25,439            15,802
             Accounts payable and other liabilities               2,531             1,639
                                                         --------------------------------------
             Total liabilities                                   48,194            35,852
             Venturers' equity                                    1,351            10,763
                                                         --------------------------------------
         Total liabilities and venturers' equity              $  49,545         $  46,615
                                                         ======================================
             Total Revenue                                    $   6,242         $   2,100
                                                         ======================================
             Total Net Loss                                   $(10,390)         $ (2,885)
                                                         ======================================
</TABLE>

4.   Deferred Charges and Other Assets

     Deferred charges and other assets as of December 31, net of accumulated
amortization of $11,347 and $9,798 at December 31, 2000 and 1999, respectively,
are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                     2000             1999
                                             -----------------------------------
<S>                                             <C>              <C>
     Deferred financing costs, net              $    6,648       $    5,214
     Furniture,  fixtures and equipment, net         2,596            3,197
     Intangible lease rights, net                    1,763            2,111
     Prepaid expenses                                  721              773
     Other assets, net                               1,893              902
                                             -----------------------------------
                                                $   13,621       $   12,197
                                             ===================================
</TABLE>

     Deferred financing costs, including fees and costs incurred to obtain
financing, are being amortized over the terms of the respective agreements.
Unamortized deferred financing costs are charged to expense when the associated
debt is retired before the maturity date.

     During 1993, as part of the Company's initial public offering, the Company
acquired a favorable lease agreement for land and buildings, which has been
capitalized as an intangible asset. This asset is being amortized over the
remaining life of the lease. The carrying value of the intangible asset,
approximating $1.8 and $2.1 million at December 31, 2000 and 1999, respectively,
is reviewed if the facts and circumstances suggest that it may be impaired. If
such a review indicates that the carrying amount of the asset may not be
recoverable, the Company will reduce the carrying value by the amount of the
impairment.

                                      F-11
<PAGE>


5.   Debt on Income Properties

     Debt on income properties consists of the following at December 31 (in
thousands):

<TABLE>
<CAPTION>
                                                                                                 2000             1999
                                                                                           -----------------------------------
<S>                                                                                        <C>               <C>
Mortgage notes secured by 18 properties, interest rates ranging from 7.37% to
     10.13 %. Unpaid principal and accrued interest due from October 2001 to July 2018.    $   156,053       $   111,286

$60,000 term loan, interest at a rate of LIBOR  plus 3.25% (9.82% at December 31, 2000)(a)      58,925            54,260

$75,000 credit facility secured by 11 properties, monthly principal payments range from
     approximately $19 to $146 with entire balance due March 2013 and effective interest
     rate of 7.73%                                                                              66,139            66,544

Class A Mortgage Notes - payable in 85 monthly principal payments ranging from
     approximately $140 to $173 determined using various parameters plus weighted average
     monthly interest payments at 7.51%.  Unpaid principal and accrued interest due June,
     2002 (b)                                                                                   49,393            51,106

Class B Mortgage Notes - monthly interest payments at 7.87% with entire balance due June,
     2002 (b)                                                                                   20,000            20,000

Class C Mortgage Notes - monthly interest payments at 8.40% with entire balance due June,
     2002 (b)                                                                                   17,000            17,000

Construction loans on development properties and expansions, interest at a rate of LIBOR
     plus 1.5% (8.07% at December 31, 2000)                                                     19,211            34,933

$10,000 line of credit secured by 1 property - monthly interest  payments at LIBOR plus 2%
     (8.57% at December 31, 2000)                                                                6,700                 -

$2,500 line of credit secured by 1 property -monthly interest payments at prime plus 1/2             -                 -
                                                                                           -----------------------------------
                                                                                               393,421           355,129
Unamortized premium on $75,000 credit facility                                                   6,391             6,912
                                                                                           -----------------------------------
                                                                                           $   399,812         $ 362,041
                                                                                           ===================================
</TABLE>

(a)  An acquisition line of credit was put in place in early 1997 for $150
     million. The availability under this line was based upon a predetermined
     formula on the net operating income of the properties that secure the
     facility. The $150 million line was converted into a $60 million term loan
     in June 2000. The term loan is secured by nine properties plus an
     assignment of the excess cashflow of the KPT Remic Loan LLC referenced
     below. The loan expires the earlier of December 2002 or upon the
     termination of the Mortgage Notes.

(b)  In 1995, the Company closed a $95 million rated debt securitization (the
     "Mortgage Notes"). The total offering of $95 million consisted of $58
     million of Class A Mortgage Notes rated "AA"; $20 million of Class B
     Mortgage Notes rated "A"; and $17 million of Class C Mortgage Notes rated
     "BBB". The Mortgage Notes were originally secured by a cross-collateralized
     mortgage, which covered 18 centers owned by KPT REMIC Loan LLC. As of June
     1, 1998, the Mortgage Notes are subject to Optional Redemption (as defined)
     in whole or in part. Any Optional Redemption occurring on or prior to
     December 1, 2001 is subject to the payment of a yield maintenance premium.
     In December 1998, the Company completed a substitution and
     recollateralization of the securitization, which then secured 24
     properties. One of these properties was sold in 1999 (see Note 12).

      Combined aggregate principal maturities of debt on income properties are
as follows (in thousands):

        2001                                    $   23,364
        2002                                       162,729
        2003                                        11,651
        2004                                         2,935
        2005                                        11,664
        Thereafter                                 181,078
                                              -----------------
                                                $  393,421
                                              =================

     The Company estimates that the fair value of debt on income properties
approximates the carrying value based upon its effective current borrowing rate
for debt with similar terms and remaining maturities. Disclosure about fair
value of financial instruments is based upon information available to management
as of December 31, 2000. Although management is not aware of any factors that
would significantly affect the fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since
December 31, 2000.

6.    Leases

     The Company leases certain signage and equipment under capital lease
agreements which expire 2001 through 2004. Amortization of assets acquired
through capital leases is included with depreciation and amortization expense in
the accompanying statements of operations. Rent expense for the years ended
December 31, 2000, 1999 and 1998 was $1.2 million, $0.9 million and $0.7
million, respectively.

                                      F-12
<PAGE>

6.    Leases (continued)

     Aggregate future minimum lease payments under capital and operating leases
having remaining terms in excess of one year as of December 31, 2000, are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                           Capital       Operating
                                                           Leases          Leases
                                                       ---------------------------------
<S>                                                       <C>             <C>
    2001                                                  $  255          $   779
    2002                                                     167              504
    2003                                                      34              185
    2004                                                      12              185
    2005                                                       3              185
    Thereafter                                                 -              655
                                                       ---------------------------------
                                                             471          $ 2,493
                                                                      ==================
    Less amount representing interest                         34
                                                       ---------------
    Present value of minimum lease payments               $  437
                                                       ===============
</TABLE>

7.    Stockholders' Equity

     Dividends declared on Preferred Stock and Common Stock were $0.50 per share
for the years ended December 31, 2000 and 1999. No distributions were paid in
1998.

     For federal income tax purposes, the following table summarizes the
estimated taxability of distributions paid (unaudited):

                                        2000       1999
                                   ------------------------
       Per Share:
          Ordinary income           $   -        $  0.16

          Return of capital            0.50         0.34
                                   ------------------------
             Total                  $  0.50      $  0.50
                                   ========================

     The Company's tax returns for the year ended December 31, 2000, have not
been filed, and the taxability information for 2000 is based upon the best
available data. The Company's tax returns have not been examined by the Internal
Revenue Service, and therefore the taxability of distributions is subject to
change.

     On August 5, 1998, the stockholders approved a Stock Purchase Agreement
between Prometheus Southeast Retail, LLC (including its assignee, "PSR"), a real
estate investment affiliate of Lazard Freres Real Estate Investors, LLC,
("Lazard") and the Company pursuant to which PSR made a $200 million purchase of
shares of Common Stock of the Company at a purchase price of $9.50 per share
(the "Transaction"). Upon completion of funding, PSR owned an equity interest in
the Company of approximately 58%, on a diluted basis. As a result of subsequent
stock repurchases by the Company, PSR's ownership interest in the Company is
61%, assuming conversion of outstanding preferred stock and units into shares.
Under the terms of the Transaction agreements, for as long as PSR's investment
in the Company is $50 million or more, PSR has the right to participate in
future equity issuances to preserve its ownership interest.

     Pursuant to a Contingent Value Rights Agreement with PSR, if PSR has not
doubled its investment (through stock appreciation and dividends) by January 1,
2004, the Company will pay PSR, in cash or stock at its discretion, an amount
necessary to achieve such a return, subject to a maximum payment of 4,500,000
shares or the cash value thereof.

8.    Minority Interest

     Minority interest in the accompanying consolidated financial statements
relates to limited partnership interests of the Operating Partnership issued in
connection with the 1998 Konover and Rodwell/Kane portfolio acquisitions.
1,064,344 OP units were issued in 1998 related to these portfolio acquisitions.
In connection with the Rodwell/Kane portfolio acquisition, an additional 292,447
OP units were to be issued upon completion of certain contingencies. For the
years ended 2000 and 1999, the Company issued 1,689 and 175,232 units,
respectively, as certain of the contingencies were met. 40,117 OP units were
cancelled and will not be issued. During 2000, 260,876 OP units were converted
into common stock. The limited partnership interests outstanding as of December
31, 2000 have the same economic characteristics as would 980,389 common shares,
inasmuch as they share proportionately in the net income or loss and in any
distributions of the Operating Partnership and such interests are exchangeable
into the same number of common shares of the Company.

9.    Convertible Preferred Stock

     On April 2, 1996, the Company executed a Note Purchase Agreement and other
related documents (collectively the "Agreements") with Gildea Management Company
("Gildea") and Blackacre Bridge Capital, L.L.C. ("Blackacre"), whereby Gildea
and Blackacre agreed to purchase in a private placement up to $25.0 million of
the Company's Exchangeable Notes (the "Exchangeable Notes"), and $5 million of
its Senior Notes, both of which were unsecured. On April 3 and 29, 1996,
Exchangeable Notes with an aggregate principal amount of $10.0 million each were
sold pursuant to the Agreements.

     Holders of the Exchangeable Notes, subject to certain conditions, were
required to exchange them for shares of the Company's Series A Convertible
Preferred Stock (the "Series A Preferred") at the rate of one share of Series A
Preferred for each $25 in principal amount of Exchangeable Notes (800,000 shares
of Series A Preferred), upon stockholder approval of necessary amendments to the
Company's Certificate of Incorporation and authorization of the Series A
Preferred. Each share of Series A Preferred is convertible into shares of the
Company's Common Stock at a conversion price of $9 per share at the option of
the holder.

                                      F-13
<PAGE>

9.    Convertible Preferred Stock (continued)


     Dividends on the Series A Preferred will be paid quarterly on each Common
Stock dividend payment date in an amount equal to the dividends that would have
been paid on the Common Stock then issuable upon conversion of the Series A
Preferred. $1.1 million of dividends were declared to holders of the Series A
Preferred Stock during 2000 and 1999. No dividends were accrued or paid in 1998.

     On April 29, 1996, $5 million of the Senior Notes were placed at 97% of
their face amount. On November 12, 1996, $2.5 million of the Senior Notes were
placed at 100% of their face amount. In March 1997, the Company repaid the
Senior Notes at their face amounts from the proceeds of the credit facility.

     In connection with the issuance of the Exchangeable Notes and the initial
$5 million of Senior Notes, on April 3, 1996 the Company issued the holder
detachable warrants for the purchase of 200,000 shares of Common Stock of the
Company. Each warrant entitles the holder, subject to certain conditions, to
purchase on or before April 3, 2003 one share of Common Stock of the Company at
a price equal to $9.50 per share, subject to adjustment under certain
conditions. The warrants were valued using the Black-Scholes pricing model at an
aggregate value of $6,000 at the issuance date. The $2.5 million of Senior Notes
have detachable warrants for the purchase of 100,000 shares of Common Stock of
the Company that were issued with terms and conditions similar to the existing
Senior Notes, except that each warrant entitles the holder to purchase one share
of Common Stock at a price equal to $8.375 per share. These warrants were valued
at an aggregate value of $3,000 at the issuance date.

     On both July 22, 1999 and August 24, 1999, 5,660 shares of the Company's
Series A Preferred were exchanged by the holders into 15,722 shares of common
stock. On November 23, 1998, 8,000 shares of the Company's Series A Preferred
were exchanged by the holders into 22,222 shares of common stock.

10.  Stock Option and Compensation Plans

Employee Stock Incentive Plan

     The Company has established a stock option plan which provides for the
issuance of up to 2,800,000 shares through the grant of qualified and
nonqualified options to officers and employees at exercise prices not less than
market value on the date of grant. Generally, options vest over a period of four
to five years from the date of grant and are exercisable for 10 years from the
date of grant. Since 1997, the Company has allowed executive management to
exchange vested incentive options for stock purchase rights. The stock purchase
rights have no voting rights, but are entitled to receive a dividend equivalent
to any cash dividends paid to common stockholders. See Note 18 for subsequent
events related to changes in the Company's management and related stock
agreements.

     A summary of changes in outstanding options and stock purchase rights is as
follows:

<TABLE>
<CAPTION>
                                                       2000                  1999                   1998
                                             ----------------------------------------------------------------------
                                                Shares   Avg. Price    Shares    Avg. Price   Shares   Avg. Price
                                             ----------------------------------------------------------------------
<S>                                           <C>         <C>           <C>     <C>            <C>     <C>
      Balance, beginning of year              2,410,207   $   9.25      886,250 $    8.81      743,250 $     9.29
         Options granted, at market                   -          -    1,525,000      9.50      150,000       7.63
         Cancelled                            (270,000)       8.98            -         -            -          -
         Exercised                                    -          -      (1,043)      5.63      (7,000)       5.63
                                             ----------------------------------------------------------------------
      Balance, end of year                    2,140,207  $    9.30    2,410,207 $    9.25      886,250 $     8.81
                                             ======================================================================

      Exercisable, end of year                1,222,207  $    9.48      822,707 $   10.25      331,400 $    13.07
                                             ======================================================================
      Weighted Average Fair Value of
         Options Granted During the Year                 $       -              $    0.36              $     2.19
                                             ======================================================================
</TABLE>

     At December 31, 2000, 945,000 stock purchase rights were eligible for a
dividend equivalent.

     The following table summarizes information about stock options outstanding
at December 31, 2000:



                                                                     Options
                                       Options Outstanding          Exercisable
                         -------------------------------------------------------
                                            Weighted Average
                                                Remaining
                                           Contractual Life in
       Exercise Prices        Shares              Years              Shares
    ----------------------------------------------------------------------------
        $    23.00           123,250             2.41               123,250
        $    21.50            18,000             4.00                18,000
        $    9.50          1,325,000             8.50               530,000
        $    7.88             50,000             6.66                30,000
        $    7.75             15,000             8.00                 9,000
        $    7.50             80,000             7.36                80,000
        $    5.63            528,957             6.25               431,957
                         ---------------                       -----------------
                           2,140,207                              1,222,207
                         ===============                       =================


                                      F-14
<PAGE>

10.  Stock Option and Compensation Plans (continued)


     The fair value of each option granted in 2000, 1999 and 1998 is estimated
using the Black-Scholes option pricing model with the following assumptions:

                                             2000          1999         1998
                                         ---------------------------------------
             Dividend yield                   7.14%         7.14%        0.00%
             Expected volatility              10.4%         10.4%        10.4%
             Risk-free interest rate          6.11%         6.11%        6.80%
             Expected life in years            10            10            4

Restricted Stock Plan

     The Company adopted a restricted stock plan in 1996 whereby the Company can
award up to 2,250,000 shares of common stock to employees. Generally, awards
under the plan vest at the end of the restriction period, which is typically
three years. The awards are recorded at market value on the date of grant as
unearned compensation expense and amortized over the restriction periods.
Generally, recipients are eligible to receive dividends on restricted stock
issued. Restricted stock and annual expense information is as follows:

<TABLE>
<CAPTION>
                                                                                 2000           1999            1998
        ----------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>             <C>
        Restricted shares issued and outstanding at January 1                   141,183         95,669          79,207
        Restricted shares awarded                                               107,025         64,389          35,339
        Repurchase rights exercised and converted to restricted stock            94,600              -              -
        Restricted shares repurchased or cancelled                              (78,798)       (18,875)        (18,877)
                                                                              -------------------------------------------
        Restricted shares issued and outstanding at December 31                 264,010        141,183          95,669
                                                                              ===========================================
        Annual expense, net                                                 $   296,000    $   200,000      $  189,000
        Award date - average fair value per share                           $      5.30    $      6.01      $     8.10
</TABLE>

        At December 31, 2000, 153,376 of the restricted shares issued are
vested.

     Since 1997, the Company has allowed executive management to exchange
restricted stock previously issued for the right to repurchase such shares.
Holders of these repurchase rights have no voting rights, but are entitled to
receive a dividend equivalent to any cash dividends paid to common stockholders.
Recipients of the repurchase rights may exercise their rights at any time from
the date the restricted stock subject to the repurchase right becomes vested to
15 years from the date of vesting. The exercise price is generally 10% of the
fair market value of the restricted stock subject to the repurchase right
determined on the date of grant of the repurchase right. There is no effect on
the amount of compensation to be recorded as a result of the exchange as the
effective value of the restricted stock granted is the same as the value of the
discounted repurchase right. See Note 18 for subsequent events related to
changes in the Company's management and related stock agreements.

     Repurchase rights and annual expense information is as follows:

<TABLE>
<CAPTION>
                                                                      2000           1999            1998
        ----------------------------------------------------------------------------------------------------
<S>                                                                 <C>              <C>             <C>
        Repurchase rights outstanding at January 1                  1,272,555        693,597         390,884
        Repurchase rights awarded                                     550,995        578,958         302,713
        Repurchase rights converted to restricted stock               (94,600)            -              -
        Repurchase rights cancelled                                   (27,368)            -              -
                                                                 --------------------------------------------
        Repurchase rights outstanding at December 31                1,701,582      1,272,555         693,597
                                                                 ============================================
        Exercisable, end of year                                      362,796        242,983         144,695
        Annual expense, net                                       $ 2,569,000    $ 1,779,000      $1,230,000
        Award date - average fair value per share                 $      4.63    $      6.11      $     7.72
</TABLE>


Employee Stock Purchase Plan

     During 1997, the Company adopted an Employee Stock Purchase Plan (ESPP) to
provide all full-time employees an opportunity to purchase shares of its common
stock through payroll deductions over a six-month subscription period. A total
of 100,000 shares are available for purchase under this plan. The purchase price
is equal to 85% of the fair market value on either the first or last day of the
subscription period, whichever is lower. Stock issuances in connection with this
plan are as follows:

<TABLE>
<CAPTION>
                                              2000                             1999                           1998
                              ----------------------------------------------------------------------------------------------
                                       Subscription period              Subscription period            Subscription period
                              ----------------------------------------------------------------------------------------------
                                January 1 -        July 1 -       January 1 -      July 1 -     January 1 -      July 1 -
                                 June 30       December 31 (1)     June 30       December 31     June 30     December 31 (1)
                                                                                     (1)
                              ----------------------------------------------------------------------------------------------
<S>                                <C>               <C>               <C>           <C>              <C>          <C>
     Number shares                 12,066            7,573             5,138         10,446           7,899        10,830
     Price per share                $4.05            $3.72             $5.79          $4.68           $6.59         $6.00
</TABLE>

 (1) These shares were issued by the Company in the subsequent year.

                                      F-15
<PAGE>

10.  Stock Option and Compensation Plans (continued)

Pro Forma Information

     The Company has elected to adopt the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). In accordance with the provisions of SFAS No. 123,
the Company has elected to apply APB Opinion No. 25 and related Interpretations
in accounting for its stock option, restricted stock, and employee stock
purchase plan. Had the Company elected to recognize compensation cost for these
plans based on the fair value of each grant, as prescribed by SFAS No. 123, net
(loss) income and net (loss) income per share would have changed by the pro
forma amounts indicated in the table below (in thousands, except per share
data):

<TABLE>
<CAPTION>
                                                          2000                        1999                        1998
                                                ----------------------------------------------------------------------------------
                                                  Reported      Proforma      Reported      Proforma      Reported      Proforma
                                                ----------------------------------------------------------------------------------
<S>                                               <C>           <C>           <C>           <C>           <C>           <C>
     Net (loss) income applicable to common
       stockholders                               $(36,133)     $(36,271)     $ (8,133)     $ (8,242)     $   3,028     $   3,077
     Net (loss) income applicable to common
       stockholders per share - basic             $  (1.17)     $  (1.17)     $  (0.26)     $  (0.27)     $    0.16     $    0.16
     Net (loss) income applicable to common
       stockholders per share - diluted           $  (1.17)     $  (1.17)     $  (0.26)     $  (0.27)     $    0.14     $    0.14
</TABLE>

Other Plans

     The Company offers the Konover Property Trust, Inc. 401(k) and Profit
Sharing Plan (the "Plan"), a tax-qualified defined contribution plan to its
employees. The Plan covers substantially all employees of the Company who have
attained 21 years of age and completed at least one year of service. Eligible
employees may elect to contribute 1% to 15% of their compensation to the Plan.
The Company may elect to match a certain percentage of each employee's
contribution and may also elect to make a profit-sharing contribution. For the
years ended December 31, 2000, 1999 and 1998, the Company contributed
approximately $314,000, $213,000 and $137,000, respectively, as a matching
contribution, and there was no profit sharing contribution made by the Company.

     The Company has established a stock plan which provides for the issuance of
up to 150,000 shares through the grant of options or stock to members of the
Board of Directors who are not officers or employees of the Company. As of
December 31, 2000, options to purchase 89,229 shares of common stock have been
issued under this plan.

11.  Tenant Lease Agreements

     The Company is the lessor of retail stores under operating leases with
initial terms that expire from 2001 to 2020. Many leases are renewable at the
lessee's option. Expected future minimum rental revenue to be received from
tenants, excluding renewal options and contingent rentals, under operating
leases in effect at December 31, 2000, are as follows (in thousands):

        2001                                    $     64,323
        2002                                          56,365
        2003                                          46,912
        2004                                          36,223
        2005                                          25,729
        Thereafter                                   139,489
                                            --------------------
                                                $    369,041
                                            ====================

     For the years ended December 31, 2000, 1999 and 1998 rental revenue from a
single major tenant, VF Corporation, comprised approximately 7.3%, 7.3% and
7.7%, respectively, of total rental revenue.

12.  Acquisitions and Disposals

      In May 2000, the Company sold a center that was held for sale for its
approximate net book value of $0.6 million. In September 2000, the Company sold
a retail shopping center in Georgia for approximately $3 million, resulting in a
loss of $1.1 million. The centers did not conform to the Company's long-term
strategic plan.

      In December 2000, the Company became the sole member in Mount Pleasant KPT
LLC through a transaction including a cash payment of $2.3 million and the
transfer of ownership in land and certain development costs of approximately
$1.2 million.

      In 1999, the Company acquired 10 individual community shopping centers
aggregating 1.1 million square feet for a total purchase price of $75.7 million
consisting of $71.5 million in cash and $4.2 million in debt assumption.

      In December 1999, the Company sold two centers for $4.9 million, net of
closing costs of $0.5 million, resulting in a loss of $3 million. One of these
properties was previously held for sale. In addition, the Company recorded a
$0.6 million adjustment to the net carrying value of the remaining property held
for sale in December 1999. These transactions are reported in loss on sale of
real estate in the accompanying consolidated statement of operations in 1999.
The Company incurred additional costs of $0.2 million related to the sale of a
property in 1998.

                                      F-16
<PAGE>


12.  Acquisitions and Disposals (continued)


     On February 24, 1998, the Company entered into definitive agreements with
affiliates of Konover & Associates South ("Konover"), a privately held real
estate development firm based in Boca Raton, Florida, to acquire eleven
community shopping centers. The Company ultimately acquired nine of the Konover
community shopping centers for a total purchase price of $85.4 million,
consisting of $55.2 million in debt assumption, $26.8 million in cash and
369,000 Operating Partnership Units, valued at $9.50 per share. For financial
reporting purposes, the nine Konover properties were recorded effective April 1,
1998, since the risks and rewards of ownership had passed to the Company and
there were no significant conditions outstanding. All of the acquired properties
are held directly or indirectly, by KPT Properties, L.P.

     On March 30, March 31, and May 14, 1998, the Company concluded the
acquisition of eight community shopping centers located in North Carolina and
Virginia from Roy O. Rodwell and John N. Kane, ("Rodwell/Kane"). The acquired
centers encompass approximately 950,000 square feet. The aggregate purchase
price for the acquired shopping centers was $57.1 million, consisting of the
assumption of $44.3 million of fixed-rate indebtedness, the payment of $3.5
million in cash and the issuance of 974,347 limited partnership Units of the
Operating Partnership. Of the purchase price, 292,447 Units and $0.8 million in
cash will be issued or paid on a delayed or contingent basis. As of December 31,
2000, 176,921 of the contingent units had been issued and 40,117 had been
cancelled and will not be issued. The remaining contingencies include the
attainment of certain property performance thresholds and the sale, lease or
development of certain outparcels. The purchase price for the acquisition was
determined as a result of arms-length negotiation between the Company and the
sellers, with the Units being valued at $9.50 per share.

13.   Pro Forma Information (Unaudited)

     Pro forma results of operations for the year ended December 31, 1998 are
set forth below and assume the Konover and Rodwell/Kane acquisitions discussed
in Note 12 had been completed as of January 1, 1998. The Company acquired ten
community centers in 1999, all in separate transactions. The pro forma impact of
these acquisitions is not significant to the results of operations for the years
ended December 31, 1999 and 1998. The pro forma condensed statements of
operations are not necessarily indicative of actual results of operations of the
Company assuming such transactions had been completed as of the beginning of the
period, nor do they purport to represent results of operations of future periods
(in thousands, except for per share data).

<TABLE>
<CAPTION>
                                                                           Adjustment
                                                    Actual         ---------------------------       Pro forma
                                                     1998           Konover        Rodwell/Kane         1998
                                                     ----           -------        ------------         ----
<S>                                              <C>              <C>              <C>              <C>
Revenues                                         $    70,666      $    2,537       $    1,580       $   74,783
Property operating costs                              21,749             600              302           22,651
Depreciation and amortization                         20,453             438              305           21,196
General and administrative                             5,066              80               10            5,156
Interest                                              19,772           1,155              666           21,593
Loss on sale of real estate                              512               -                -              512
                                                --------------- ---------------- ---------------- ----------------
Income before minority interest                  $     3,114      $      264       $      297       $    3,675
                                                =============== ================ ================ ================
Basic income before minority interest per
    common share                                 $      0.16      $     0.01       $     0.02       $     0.20
                                                =============== ================ ================ ================
Diluted income before minority interest per
    common share                                $       0.14      $     0.01       $     0.01       $     0.17
                                                =============== ================ ================ ================
</TABLE>

14.  Commitments and Contingencies

      On June 11, 1999, a lawsuit was filed claiming that the Company is liable
for a finders fee ranging from of $2 million to $4 million related to the 1998
Stock Purchase Agreement between PSR and the Company. On November 27, 2000, a
judgement was entered in favor of the plaintiff in the amount of $2.8 million.
This judgment together with the associated legal fees incur in connection with
this transaction have been recorded in the accompanying consolidated financial
statements. The Company has appealed this judgement and will vigorously pursue
its appeal. Additionally, the Company is a party to certain legal proceedings
relating to its ownership, management and leasing of the properties, arising in
the ordinary course of business. Management does not expect the resolution of
these matters to have a significant impact on the Company's financial position
or results of operations. However, the ultimate resolution of these claims is
not reasonably estimable.

15.  Related-Party Transactions

      In 1998, the Company entered into an agreement with Konover to take over
the management and leasing of certain properties. In consideration of the
assignment of the management and leasing agreements to the Company, the Company
agreed to pay $1.1 million in 1999, $1.4 million in 2000 and $1.3 million in
2001. At December 31, 2000, the unpaid amount of $1.4 million is reported in
accounts payable and other liabilities in the accompanying consolidated balance
sheet. The final $1.4 million payment was made in January 2001. The chairman of
the Board of Directors of the Company is an affiliate of Konover.

                                      F-17
<PAGE>
16.      Reportable Segments

     As a result of certain changes in the Company's internal reporting of
operating properties in 1999, management determined under SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," it has
four reportable segments: community centers, outlet centers, VF-anchored
centers, and centers held for sale/redevelopment/development (HRD). The outlet
segment includes properties that generate a majority of their revenue from
traditional outlet manufacturers and are destination oriented. The VF-anchored
segment includes properties that have less than $1.5 million in total revenue,
generate at least 20% of their revenue from VF and have less than 150,000 square
feet. The Company evaluates performance and allocates resources based on the net
operating income (NOI) of the Company's investment portfolio. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies. The Company's reportable segments
are business units that offer retail space to varied tenants and in varied
geographical areas.

(All data in thousands and excludes straight line rent)

<TABLE>
<CAPTION>
                          Community      Outlet
                       Centers (1)(3) Centers (2)  VF Centers   HRD (1)(2)(3)    All others     Total
                       ----------------------------------------------------------------------------------
      <S>                <C>           <C>          <C>           <C>            <C>           <C>
      2000:
      NOI                $  36,146     $  19,194    $  3,574      $    481       $     310     $   59,705
      Total Assets       $ 363,675     $ 185,412    $ 42,836      $ 46,968       $  64,380     $  703,271

      1999:
      NOI                $  26,239     $  21,889    $  5,476      $  3,216       $     123     $   56,943
      Total Assets       $ 298,065     $ 210,477    $ 45,862      $ 91,067       $  73,986     $  719,457

      1998:
      NOI                $  19,984     $  23,862    $  5,584      $    965       $   (966)     $   49,429
      Total Assets       $ 224,601     $ 204,340    $ 51,279      $ 62,367       $ 139,862     $  682,449
</TABLE>

      (1) Towne Centre was under development during 1999 and was
          stabilized in 2000. Accordingly, the NOI and total assets
          for Towne Centre are included in the HRD segment in 1999
          and the community center segment in 2000.
      (2) The Company's Nashville outlet center was included under
          the outlet segment for 1999 and 1998. The Company intends
          to sell this center and is therefore included in the HRD
          segment in 2000.
      (3) The Company's Waverly Place shopping center was included
          under the HRD segment in 1999 and 1998 while plans for a
          redevelopment were underway. The center is included under
          the community center segment for 2000.

17.  Quarterly Information (Unaudited)

     Selected quarterly financial data for the four quarters in 2000 and 1999 is
as follows (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                   Quarter ended
                                                        --------------------------------------------------------------------
                                                           March 31        June 30       September 30       December 31
                                                        --------------------------------------------------------------------
<S>                                                       <C>            <C>              <C>                <C>
2000:
    Total revenue                                         $ 22,132       $  23,096        $    21,684        $    22,008
                                                        ====================================================================


    Net loss applicable
       to common stockholders                             $ (3,120)      $  (2,076)       $    (4,711)       $   (26,226)
                                                        ====================================================================

    Basic loss per common share:
      Net loss applicable to common
     stockholders                                         $  (0.10)      $   (0.07)       $     (0.15)       $    (0.85)
                                                        ====================================================================

    Diluted loss per common share:
      Net loss applicable to common
        stockholders                                      $  (0.10)      $   (0.07)       $     (0.15)       $    (0.85)
                                                        ====================================================================

1999:
    Total revenue                                         $ 19,163       $  21,153        $    20,779        $    21,354
                                                        ====================================================================

    Net (loss) income applicable
       to common stockholders                             $   2,281      $   2,277        $       2,240      $   (14,931)
                                                        ====================================================================

    Basic earnings (loss) per common share:
      Net (loss) income applicable to common
     stockholders                                         $    0.07      $    0.07        $      0.07        $    (0.49)
                                                        ====================================================================

    Diluted earnings (loss) per common share:
      Net (loss) income applicable to common
        stockholders                                      $    0.07      $    0.07        $      0.07        $    (0.49)
                                                        ====================================================================
</TABLE>

18.  Subsequent Events

      On March 7, 2001, the Company appointed J. Michael Maloney as interim
President and Chief Executive Officer. This appointment followed the resignation
of C. Cammack Morton, as President, Chief Executive Officer and Director, and
the termination of Patrick M. Miniutti, as Chief Operating Officer. Mr. Morton
will receive $2.5 million in settlement of his employment contract and
approximately $1.0 million in settlement of certain stock agreements. The total
$3.5 million settlement will be paid $3.0 million in March 2001 and $0.5 million
in January 2002. The approximate $1.0 million settlement of stock agreements
included the cancellation of 391,299 repurchase rights with an average exercise
price of $0.60 per share and 350,000 stock options with an average exercise
price of $9.50 per share. In addition, Mr. Morton will retain 225,851 repurchase
rights with an average exercise price of $0.73 per share and 300,000 stock
options with an average exercise price of $5.625 per share. All of the stock
options and repurchase rights retained are entitled to dividend equivalents
until April 2002, at which time if they have not been exercised they will
automatically be cancelled. Negotiations are still underway with Mr. Miniutti.

                                      F-18

<PAGE>
<TABLE>
<CAPTION>
            Schedule III - Real Estate and Accumulated Depreciation

                                                                                 Cost Capitalized                Sale Of
                                                Initial Cost to Company      Subsequent to Acquisition
                               -----------------------------------------------------------------------------------------------------
                                                             Bldg. And                   Bldg. And         Land        Bldg. And
  Property                      Encumbrances     Land         Imprvmts.        Land       Imprvmts.                     Imprvmts.
--------------                 -----------------------------------------------------------------------------------------------------
<S>                               <C>             <C>          <C>              <C>         <C>           <C>         <C>
Arcadia, LA                       1,852,730       404,864      1,856,173        3,492       1,563,369     (209,716)
Boaz, AL                          3,186,783        34,998         42,004        4,232       1,402,927
Bolling Creek, VA                 1,438,555       261,971      1,484,505        5,464          53,335
Branson, MO                      10,895,457     5,702,365     24,600,479       34,600       2,700,488
Braves Village, SC                2,650,000       693,398      3,928,356          965         508,567
Brookneal, VA                     1,034,491       221,968      1,257,819        5,802          32,876
Casa Grande, AZ                           -     2,220,397     10,557,446            -         390,153     (858,207)     (4,909,789)
Celebration, NC                   5,413,962     1,436,628      8,140,890        4,582          43,344
Conway, NH                                -       324,652      2,277,122            -         116,768     (172,655)       (757,803)
Conway, SC                        3,047,232       708,784      4,030,308        7,822          33,886
Corsicana, TX                       686,977       336,335      1,533,169            -          63,979
Crossroads at Mandarin, FL        2,500,000       689,016      3,904,424          155             880
Crossville, TN                    4,900,038       519,239      2,415,619       11,389       4,201,657     (149,542)
Danville, VA                      2,122,459       465,505      2,642,090        6,019          52,033
Dare Center, NC                   1,954,400        51,215      5,034,374           78             440
Draper, UT                        5,651,058       718,188      4,294,019       56,513       4,432,611
Dukes Plaza, VA                   3,974,910     1,013,411      5,750,521       (5,702)         67,285
Durham Festival, NC               6,443,364     1,296,071      7,697,319       91,831         235,447
Eastgate Plaza, FL                7,150,000     1,578,177      8,947,744            -         130,662
Eastgate, NC                              -       688,256      3,153,235     (416,226)          8,479
Food Lion Plaza, VA               1,021,500       314,504      1,947,925       23,959          54,988
Gateway, NC                       7,150,000       816,566      3,246,925        8,628       4,610,206
Georgetown, KY                    7,551,412       937,490      6,510,116            -          59,508
Graceville, FL                    2,244,760       556,765      2,544,654            -         231,068
Grove Park, SC                    4,050,000       857,300      4,858,036           42             234
Hanson, KY                          784,089       308,876      1,408,641            -          26,605      (61,421)
Hempstead, TX                       400,000       375,487      1,711,282      (99,997)         20,000
Hollywood Festival, FL            4,452,288       843,578      5,040,436       65,015         217,847
Iowa, LA                          3,349,266       627,061      2,860,591     (470,942)      2,859,317     (156,119)        (34,194)
Keysville, VA                     1,420,259       321,001      1,819,008        6,600          37,399
Kittery, ME                       1,286,224       355,080      2,485,826            -         118,941
Lake George, NY                   1,853,945       975,466      4,441,445            -         331,667
Lake Park, GA                             -     1,128,056      4,801,250            -          39,827   (1,128,056)     (4,841,077)
Lake Point Centre, FL            10,865,826     2,196,485     13,013,873      160,124         403,703
Lake Washington, FL                       -     1,468,320      8,320,483          457          55,160
LaMarque, TX                      3,523,185     4,066,414     11,864,248            -          63,018     (199,075)
Las Vegas, NV                     5,301,926     7,158,719     18,761,605            -         175,639
Lebanon, MO                       1,887,141       403,915      1,889,710            -          70,086
Lenoir Festival, NC               4,233,408     1,175,381      6,963,471       86,933         224,252
Livingston, TX                      823,528       354,381      1,615,979            -          41,962
MacGregor, NC                     7,846,253     1,428,513      7,694,110       15,847         204,783
Merchants Festival, GA                    -     2,525,209     14,309,516        8,022          45,348
Mesa, AZ                          4,298,290     1,399,858      7,060,705      524,004       3,492,989                   (1,421,115)
Millpond Village, NC                      -     6,523,413                           -               -
Mineral Wells, TX                   842,285       315,944      1,441,675            -          17,822
Mobile Festival, AL              19,352,049     4,520,765     27,128,125      332,647       1,175,178
Mount Pleasant, SC               46,400,000     9,748,721     46,613,081            -               -
Nashville, TN                     9,700,000     5,947,579     10,078,170    1,330,263       5,058,719
Nebraska City, NE                 1,767,765       400,684      1,813,050       15,400       1,779,153
North Bend, WA                   11,664,312     8,428,229     12,052,296       44,941      13,841,627
Northridge, NC                    9,583,727     1,428,493      8,872,975       14,775         310,496
Oakland Park, FL                  2,378,049       823,112      4,934,822       60,923         217,788
Patriots Plaza, SC                        -     1,326,300      7,515,700          200           8,703
Robertson Corners, SC             2,900,000       595,711      3,375,694            -           4,815
Shoreside, NC                     5,505,580     1,050,653      5,953,703        9,645          54,651
Smithfield, NC                   31,100,275        77,667      9,064,651    1,428,125      18,129,075
South Cobb, FL                            -        74,406        473,390        7,303          70,540
Square One, FL                    9,156,007     1,692,011     10,043,077      128,288         495,946
Stanton Square, NC                2,056,731     1,401,330      7,994,573       14,225         272,568
Story City, IA                    2,190,224       601,802      2,737,481       22,653       2,059,158
Sulphur Springs, TX                       -       512,898      2,326,326          131         153,955     (513,029)     (2,480,281)
Tower, NC                         2,853,106       659,677      4,459,411        7,087          98,033
Towne Square, VA                 14,778,527     2,951,412     15,374,453     (225,637)         67,725
Tri-Cities, TN                            -       353,983      5,648,812      656,818          26,479
Tucson, AZ                        1,178,465       772,231      3,572,837       20,215         161,036
Tupelo, MS                          600,000       430,765      1,956,158       11,484       1,336,166
Union City, TN                      932,412       296,580      1,343,859        2,983         111,557     (157,649)
University Mall, VA               7,000,355     1,232,027      6,398,674      (86,724)        288,900
Vacaville, CA                    27,571,440    30,008,142     49,464,506            -       1,281,047      (41,484)
Waverly Place, NC                10,376,249     1,944,220     11,017,247    2,270,735      (2,117,632)
West Frankfort, IL                  620,263       471,041      2,130,358            -          12,134     (137,327)
Undeveloped Land                          -     1,144,552              -            -               -
                               -----------------------------------------------------------------------------------------------------
                                359,753,536   135,694,211    502,502,555    6,206,188      74,339,372   (3,784,280)    (14,444,259)
                               =====================================================================================================



<CAPTION>
                                  Adjustment to Net Realizable        Gross Amount at Which
                                             Value                 Carried at Close of Period
                               -------------------------------------------------------------------------------------------------
                                                 Bldg. And                       Bldg. And                     Accumulated
  Property                           Land         Imprvmts.          Land         Imprvmts.        Total       Depreciation
--------------                 -------------------------------------------------------------------------------------------------
<S>                               <C>             <C>            <C>             <C>           <C>             <C>
Arcadia, LA                                                           198,640       3,419,542      3,618,182       941,322
Boaz, AL                                                               39,230       1,444,931      1,484,161       419,704
Bolling Creek, VA                                                     267,435       1,537,840      1,805,275       108,258
Branson, MO                                                         5,736,965      27,300,967     33,037,932     4,779,465
Braves Village, SC                                                    694,363       4,436,923      5,131,286       344,753
Brookneal, VA                                                         227,770       1,290,695      1,518,465        91,739
Casa Grande, AZ                   (1,362,190)     (6,037,810)               -               -              -             -
Celebration, NC                                                     1,441,210       8,184,234      9,625,444       561,654
Conway, NH                          (151,997)     (1,636,087)               -               -              -             -
Conway, SC                                                            716,606       4,064,194      4,780,800       268,308
Corsicana, TX                                                         336,335       1,597,148      1,933,483       385,901
Crossroads at Mandarin, FL                                            689,171       3,905,304      4,594,475       340,226
Crossville, TN                                                        381,086       6,617,276      6,998,362     1,554,873
Danville, VA                                                          471,524       2,694,123      3,165,647       211,720
Dare Center, NC                                                        51,293       5,034,814      5,086,107       434,218
Draper, UT                                                            774,701       8,726,630      9,501,331     2,259,198
Dukes Plaza, VA                                                     1,007,709       5,817,806      6,825,515       524,547
Durham Festival, NC                                                 1,387,902       7,932,766      9,320,668       559,881
Eastgate Plaza, FL                                                  1,578,177       9,078,406     10,656,583       780,299
Eastgate, NC                                                          272,030       3,161,714      3,433,744       366,380
Food Lion Plaza, VA                                                   338,463       2,002,913      2,341,376       145,320
Gateway, NC                                                           825,194       7,857,131      8,682,325       682,234
Georgetown, KY                                                        937,490       6,569,624      7,507,114     2,117,862
Graceville, FL                                                        556,765       2,775,722      3,332,487       649,622
Grove Park, SC                                                        857,342       4,858,270      5,715,612       403,780
Hanson, KY                                                            247,455       1,435,246      1,682,701       330,684
Hempstead, TX                                                         275,490       1,731,282      2,006,772       408,158
Hollywood Festival, FL                                                908,593       5,258,283      6,166,876       371,548
Iowa, LA                                                                    -       5,685,714      5,685,714     1,422,760
Keysville, VA                                                         327,601       1,856,407      2,184,008       132,081
Kittery, ME                                                           355,080       2,604,767      2,959,847       542,783
Lake George, NY                                                       975,466       4,773,112      5,748,578       912,494
Lake Park, GA                                                               -               -              -             -
Lake Point Centre, FL                                               2,356,609      13,417,576     15,774,185       942,878
Lake Washington, FL                                                 1,468,777       8,375,643      9,844,420       519,223
LaMarque, TX                                                        3,867,339      11,927,266     15,794,605     2,784,018
Las Vegas, NV                                     (6,338,275)       7,158,719      12,598,969     19,757,688     6,569,589
Lebanon, MO                                                           403,915       1,959,796      2,363,711       467,082
Lenoir Festival, NC                                                 1,262,314       7,187,723      8,450,037       504,932
Livingston, TX                                                        354,381       1,657,941      2,012,322       391,235
MacGregor, NC                                                       1,444,360       7,898,893      9,343,253       943,938
Merchants Festival, GA                                              2,533,231      14,354,864     16,888,095       775,365
Mesa, AZ                                                            1,923,862       9,132,579     11,056,441     2,421,337
Millpond Village, NC                                                6,523,413               -      6,523,413             -
Mineral Wells, TX                                                     315,944       1,459,497      1,775,441       344,950
Mobile Festival, AL                                                 4,853,412      28,303,303     33,156,715     2,004,176
Mount Pleasant, SC                                                  9,748,721      46,613,081     56,361,802     1,599,435
Nashville, TN                                    (13,000,197)       7,277,842       2,136,692      9,414,534     4,137,713
Nebraska City, NE                                                     416,084       3,592,203      4,008,287       892,960
North Bend, WA                                                      8,473,170      25,893,923     34,367,093     6,290,385
Northridge, NC                                                      1,443,268       9,183,471     10,626,739     1,068,476
Oakland Park, FL                                                      884,035       5,152,610      6,036,645       358,741
Patriots Plaza, SC                                                  1,326,500       7,524,403      8,850,903       499,953
Robertson Corners, SC                                                 595,711       3,380,509      3,976,220       336,907
Shoreside, NC                                                       1,060,298       6,008,354      7,068,652       428,353
Smithfield, NC                                                      1,505,792      27,193,726     28,699,518     6,678,694
South Cobb, FL                                                         81,709         543,930        625,639        37,475
Square One, FL                                                      1,820,299      10,539,023     12,359,322       732,518
Stanton Square, NC                                                  1,415,555       8,267,141      9,682,696       583,187
Story City, IA                                                        624,455       4,796,639      5,421,094     1,155,723
Sulphur Springs, TX                                                         -               -              -             -
Tower, NC                                                             666,764       4,557,444      5,224,208       520,870
Towne Square, VA                                                    2,725,775      15,442,178     18,167,953     1,107,195
Tri-Cities, TN                                                      1,010,801       5,675,291      6,686,092     2,029,305
Tucson, AZ                                                            792,446       3,733,873      4,526,319       891,030
Tupelo, MS                                                            442,249       3,292,324      3,734,573       760,309
Union City, TN                                                        141,914       1,455,416      1,597,330       339,663
University Mall, VA                                                 1,145,303       6,687,574      7,832,877       471,011
Vacaville, CA                                                      29,966,658      50,745,553     80,712,211    11,877,422
Waverly Place, NC                                                   4,214,955       8,899,615     13,114,570       480,284
West Frankfort, IL                                                    333,714       2,142,492      2,476,206       497,092
Undeveloped Land                                                    1,144,552               -      1,144,552             -
                               --------------------------------------------------------------------------------------------
                                  (1,514,187)    (27,012,369)     136,601,932     535,385,299    671,987,231    85,495,196
                               ============================================================================================


<CAPTION>
                                                                   Life on which
                                                                    Depreciation
                                   Date of          Date         in latest Income
  Property                        Construction     Acquired     Statement if Computed
--------------                -----------------------------------------------------
<S>                                <C>              <C>                <C>
Arcadia, LA                                           1993               5-39 yrs.
Boaz, AL                                              1993               5-39 yrs.
Bolling Creek, VA                                     1998               5-39 yrs.
Branson, MO                            1995                              5-39 yrs.
Braves Village, SC                                    1999               5-39 yrs.
Brookneal, VA                                         1998               5-39 yrs.
Casa Grande, AZ                                       1994
Celebration, NC                                       1998               5-39 yrs.
Conway, NH                                            1993               5-39 yrs.
Conway, SC                                            1998               5-39 yrs.
Corsicana, TX                                         1993               5-39 yrs.
Crossroads at Mandarin, FL                            1999               5-39 yrs.
Crossville, TN                                        1993               5-39 yrs.
Danville, VA                                          1998               5-39 yrs.
Dare Center, NC                                       1999               5-39 yrs.
Draper, UT                                            1993               5-39 yrs.
Dukes Plaza, VA                                       1999               5-39 yrs.
Durham Festival, NC                                   1998               5-39 yrs.
Eastgate Plaza, FL                                    1999               5-39 yrs.
Eastgate, NC                                          1997               5-39 yrs.
Food Lion Plaza, VA                                   1998               5-39 yrs.
Gateway, NC                                           1997               5-39 yrs.
Georgetown, KY                                        1993               5-39 yrs.
Graceville, FL                                        1993               5-39 yrs.
Grove Park, SC                                        1999               5-39 yrs.
Hanson, KY                                            1993               5-39 yrs.
Hempstead, TX                                         1993               5-39 yrs.
Hollywood Festival, FL                                1998               5-39 yrs.
Iowa, LA                                              1993               5-39 yrs.
Keysville, VA                                         1998               5-39 yrs.
Kittery, ME                                           1993               5-39 yrs.
Lake George, NY                                       1993               5-39 yrs.
Lake Park, GA                                         1993               5-39 yrs.
Lake Point Centre, FL                                 1998               5-39 yrs.
Lake Washington, FL                                   1999               5-39 yrs.
LaMarque, TX                                          1994               5-39 yrs.
Las Vegas, NV                                         1993               5-39 yrs.
Lebanon, MO                                           1993               5-39 yrs.
Lenoir Festival, NC                                   1998               5-39 yrs.
Livingston, TX                                        1993               5-39 yrs.
MacGregor, NC                                         1997               5-39 yrs.
Merchants Festival, GA                                1999               5-39 yrs.
Mesa, AZ                                              1993               5-39 yrs.
Millpond Village, NC                                  2000               5-39 yrs.
Mineral Wells, TX                                     1993               5-39 yrs.
Mobile Festival, AL                                   1998               5-39 yrs.
Mount Pleasant, SC                                    2000               5-39 yrs.
Nashville, TN                                         1993               5-39 yrs.
Nebraska City, NE                                     1993               5-39 yrs.
North Bend, WA                                        1993               5-39 yrs.
Northridge, NC                                        1997               5-39 yrs.
Oakland Park, FL                                      1998               5-39 yrs.
Patriots Plaza, SC                                    1999               5-39 yrs.
Robertson Corners, SC                                 1999               5-39 yrs.
Shoreside, NC                                         1998               5-39 yrs.
Smithfield, NC                                        1993               5-39 yrs.
South Cobb, FL                                        1998               5-39 yrs.
Square One, FL                                        1998               5-39 yrs.
Stanton Square, NC                                    1998               5-39 yrs.
Story City, IA                                        1993               5-39 yrs.
Sulphur Springs, TX                                   1993
Tower, NC                                             1997               5-39 yrs.
Towne Square, VA                                      1998               5-39 yrs.
Tri-Cities, TN                                        1993               5-39 yrs.
Tucson, AZ                                            1993               5-39 yrs.
Tupelo, MS                                            1993               5-39 yrs.
Union City, TN                                        1993               5-39 yrs.
University Mall, VA                                   1998               5-39 yrs.
Vacaville, CA                                         1993               5-39 yrs.
Waverly Place, NC                                     1998               5-39 yrs.
West Frankfort, IL                                    1993               5-39 yrs.
Undeveloped Land                                   Various
</TABLE>

(1)  Buildings and improvements are depreciated based on a 15-39 year life.
     Tenant improvements are depreciated over the estimated terms of the leases,
     which range from 5 to 10 years.

(2)  Aggregate cost of the real estate property for federal income tax purposes
     is approximately $681,806,926.

<PAGE>

The changes in total real estate for the years ended December 31, 2000, 1999 and
1998 are as follows:

<TABLE>
<CAPTION>
                                               2000          1999          1998
                                           -----------   -----------   -----------
<S>                                        <C>           <C>           <C>
Balance, beginning of period               630,036,944   552,663,047   380,798,184
Developed or acquired properties            64,029,767    85,768,668   168,287,524
Improvements                                 4,200,067       954,619    14,526,918
Adjustments to net realizable value        (19,338,472)     (588,084)            -
Sales                                       (6,941,075)   (8,761,306)  (10,949,579)
                                           -----------   -----------   -----------
Balance end of period                      671,987,231   630,036,944   552,663,047
                                           ===========   ===========   ===========
</TABLE>

The changes in accumulated depreciation for the years ended December 31, 2000,
1999 and 1998 are as follows:


<TABLE>
<CAPTION>
                                               2000          1999          1998
                                           -----------   -----------   -----------
<S>                                         <C>           <C>           <C>
Balance, beginning of period                70,451,689    55,970,612    42,099,057
Depreciation                                17,636,493    16,702,617    14,782,192
Sales                                       (2,592,986)   (2,221,540)     (910,637)
                                           -----------   -----------   -----------
Balance, end of period                      85,495,196    70,451,689    55,970,612
                                           ===========   ===========   ===========
</TABLE>
<PAGE>

Report of Independent Public Accountants



To Konover Property Trust, Inc.:

We have audited the accompanying statements of net assets available for plan
benefits of Konover Property Trust, Inc.'s Non-Qualified Employee Stock Purchase
Plan as of December 31, 2000 and 1999, and the related statements of changes in
net assets available for plan benefits for each of the three years ended
December 31, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the 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 provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of Konover
Property Trust, Inc.'s Non-Qualified Employee Stock Purchase Plan at December
31, 2000 and 1999, and the changes in net assets available for plan benefits for
each of the three years ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.


Arthur Andersen LLP


Raleigh, North Carolina
February 16, 2001
<PAGE>

                          Konover Property Trust, Inc.
                   Non-Qualified Employee Stock Purchase Plan

              Statements of Net Assets Available for Plan Benefits




                                                        At December 31,
                                                      2000             1999
                                                  -------------    ------------
Receivable from Konover Property Trust, Inc.      $    28,819      $   49,608
                                                  =============    ============
Net assets available for plan benefits            $    28,819      $   49,608
                                                  =============    ============


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


<PAGE>

                          Konover Property Trust, Inc.
                   Non-Qualified Employee Stock Purchase Plan

         Statements of Changes in Net Assets Available for Plan Benefits



                                                    Years Ended December 31,
                                                      2000           1999
                                                   -----------     -------------
Employee contributions                             $   93,062      $     90,870
Deductions:
         Purchases of Common Stock                     97,702            94,729
         Withdrawals                                   16,149            12,190
                                                   -----------     -------------
                                                      113,851           106,919
                                                   -----------     -------------

Net decrease                                          (20,789)          (16,049)
Net assets available for Plan benefits at
   beginning of period                                 49,608            65,657
                                                   -----------     -------------
Net assets available for Plan benefits at end of
     period                                        $   28,819      $     49,608
                                                   ===========     =============

Shares of Common Stock purchased during year           22,512            16,046
                                                   ===========     =============

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


<PAGE>

                          Konover Property Trust, Inc.

                   Non-Qualified Employee Stock Purchase Plan


                          Notes to Financial Statements
                                December 31, 2000



1.       Basis of Presentation

The accompanying financial statements of the Konover Property Trust, Inc.
Non-Qualified Employee Stock Purchase Plan (the Plan) have been prepared on the
accrual basis.

2.       Plan Description and Summary of Significant Plan Provisions

The Board of Directors of Konover Property Trust, Inc. (the "Company") adopted
the Plan on May 29, 1997. The Plan became effective as of July 1, 1997. The
maximum number of shares available under the Plan is 100,000 and 50,000 on
December 31, 2000 and December 31, 1999, respectively. The number of shares
available is subject to certain adjustments, as defined.

The purpose of this Plan is to provide the Company's employees with an
additional opportunity to share in the ownership of the Company. Under terms of
the Plan, all regular full-time employees of the Company may make voluntary
payroll contributions thereby enabling them to purchase Common Stock of the
Company at 85% of the lower of the fair market value as of the beginning or end
of the six-month offering periods, which commence on January 1 and July 1.

Contributions to the Plan are maintained by the Company in a non-interest
bearing account until such time as the participant exercises the option to
purchase shares of Common Stock from his or her available contributions or
withdraws from the account. Employee contributions, which represent all net Plan
assets, are considered general assets of the Company and may be subject to the
claims of creditors.

The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA) and is not qualified under Section 401 (a) of the
Internal Revenue Code of 1986, as amended which relates to qualification of
certain pension, profit-sharing and stock bonus plans.

All costs to administer the Plan are paid by the Company.

3.       Subsequent Event

On January 18, 2001 7,573 shares of common stock of the Company were purchased
by the Plan and such shares were transferred to an independent broker that holds
the shares in the name of the respective employees.