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                                                                   Exhibit 10.20

                              EMPLOYMENT AGREEMENT
                                     BETWEEN
                              NICHOLAS S. SCHORSCH
                                       AND
                            FIRST STATES GROUP, L.P.

         This Employment Agreement (the "Agreement"), dated as of May 15, 2003
("Effective Date"), between First States Group, L.P., a Delaware limited
partnership (the "Company"), and Nicholas S. Schorsch (the "Executive"):

         WHEREAS, American Financial Realty Trust, a Maryland real estate
investment trust (the "REIT"), is a limited partner and the sole owner of the
general partner of the REIT;

         WHEREAS, this Agreement amends and restates the Employment Agreement
between the REIT (which was assigned to the Company) and the Executive, dated
September 10, 2002 (the "Original Agreement");

         WHEREAS, the Executive has extensive experience in owning and operating
real estate companies which own commercial real estate and, prior to entering
into the Original Agreement, had been the owner of certain businesses that, in
connection with the formation of the REIT and the private placement of common
shares ("Common Shares") of beneficial ownership, par value $.001 per share of
the REIT (referred to herein as the "144A Offering"), were acquired by the REIT
or the Company; and

         WHEREAS, the Company wishes to continue to employ the Executive in the
capacities and on the terms and conditions set out below, and the Executive has
agreed to continue such employment, in the capacities and on the terms and
conditions set forth below; and

         NOW, THEREFORE, the Company and the Executive, in consideration of the
respective covenants set out below, hereby agree as follows:

     1. EMPLOYMENT.

               (a) POSITIONS. The Executive shall be employed by the Company as
its President and Chief Executive Officer. The Executive shall also be an
officer of the REIT as its Vice Chairman of the Board of Trustees ("Board"),
President and Chief Executive Officer.

               (b) DUTIES. The Executive's principal employment duties and
responsibilities shall be those duties and responsibilities customary for the
positions of President and Chief Executive Officer and such other executive
duties and responsibilities as the Board shall from time to time reasonably
assign to the Executive. The Executive shall be responsible for and have
authority over the day-to-day operational management of the Company and the
REIT. The Executive shall report directly to the Board. All other officers of
the Company and the REIT shall report to the Executive or such person(s) as the
Executive may designate from time to time.

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               (c) EXTENT OF SERVICES. Except for illnesses and vacation
periods, the Executive shall devote a substantial majority of his business time
and attention and his best efforts to the performance of his duties and
responsibilities under this Agreement. Notwithstanding the foregoing, Executive
(i) shall be permitted to continue to manage, operate and devote time and
attention to those properties and businesses he owned, operated or controlled at
the time of the 144A Offering that were not transferred to or purchased by the
Company or the REIT in connection with the 144A Offering or any properties and
businesses that were transferred to the Company and that Executive subsequently
reacquires pursuant to the terms of the Contribution Agreement dated September
4, 2002 (collectively referred to herein as the "Excluded Businesses"), (ii) may
make any passive investment where he is not obligated or required to, and shall
not in fact, devote any managerial efforts, (iii) may participate in charitable,
academic or community activities, and in trade or professional organizations, or
(iv) may hold directorships in other companies consistent with the Company's
conflict of interest policies and corporate governance guidelines as in effect
from time to time.

     2. TERM. This Agreement shall become effective as of the Effective Date and
shall continue in full force and effect thereafter for a term of five (5) years
and shall be automatically extended for an additional one-year period on each
one-year anniversary of the Effective Date, including an anniversary that occurs
within the initial five (5) year term (referred to herein as a "Term Date"),
unless either party terminates this Agreement not later than sixty (60) days
prior to a Term Date by providing written notice to the other party of such
party's intent not to renew, or it is sooner terminated pursuant to Section 7.
For purposes of this Agreement, "Term" shall mean the actual duration of the
Executive's employment hereunder, taking into account any extensions pursuant to
this Section 2 or early termination of employment pursuant to Section 7.

     3. BASE SALARY. The Company shall pay the Executive a base salary annually
(the "Base Salary"), which shall be payable in periodic installments according
to the Company's normal payroll practices. The initial Base Salary shall be
$400,000. The Board or the Compensation and Human Resources Committee of the
REIT (the "Compensation Committee") shall review the Base Salary at least once a
year to determine whether the Base Salary should be increased effective January
1 of each year during the Term; provided, however, that on January 1, 2004, the
initial Base Salary shall be increased to $424,000, and on each January 1
thereafter during the Term, the Base Salary shall be increased by a minimum
positive amount equal to the Base Salary in effect on January 1 of the prior
year multiplied by the increase in the Consumer Price Index for such year. The
amount of the increase shall be determined before March 31 of each year and
shall be retroactive to January 1. The Base Salary, including any increases,
shall not be decreased during the Term. For purposes of this Agreement, the term
"Base Salary" shall mean the amount established and adjusted from time to time
pursuant to this Section 3.

     4. ANNUAL CASH INCENTIVE AWARDS.

         (a) ANNUAL INCENTIVE BONUS. The Executive shall be entitled to receive
an annual cash incentive bonus for each fiscal year during the Term of this
Agreement consistent with a bonus policy adopted by the Compensation Committee
("Bonus Policy"). If the Executive or the Company, as the case may be, satisfies
the performance criteria contained in such Bonus Policy for a fiscal year, he
shall receive an annual incentive bonus in an amount determined by the
Compensation Committee and subject to ratification by the Board, if required.

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If the Executive or the Company, as the case may be, fails to satisfy the
performance criteria contained in such Bonus Policy for a fiscal year, the
Compensation Committee may determine whether any incentive bonus shall be
payable to Executive for that year, subject to ratification by the Board, if
required. Beginning January 1, 2004, the Bonus Policy shall contain both
individual and group goals established by the Compensation Committee.
Notwithstanding the foregoing, in no event shall the annual incentive bonus
payable to Executive be less than a guaranteed bonus amount, irrespective of
whether the Executive satisfies the performance criteria contained in the Bonus
Policy as in effect for such fiscal year (the "Guaranteed Bonus"). The initial
Guaranteed Bonus shall be $31,250 per month. The Board or the Compensation
Committee shall review the Guaranteed Bonus at least once a year to determine
whether the Guaranteed Bonus should be increased effective January 1 of each
year during the Term; provided, however, that on January 1, 2004, the Guaranteed
Bonus shall be increased to $33,125 per month. The Guaranteed Bonus portion of
the annual incentive bonus shall be paid during the fiscal year pursuant to the
Company's normal payroll practices. The balance of the annual incentive bonus
(the incremental portion of the annual incentive bonus in excess of the
Guaranteed Bonus amount, if any) shall be paid to the Executive no later than
thirty (30) days after the date the Compensation Committee determines whether
the criteria in the Bonus Policy for such fiscal year were satisfied. For
purposes of this Agreement, the term "Incentive Bonus" shall mean the amount
established pursuant to this Section 4(a).

         (b) OUTPERFORMANCE PLAN BONUS. The REIT has established the 2003
Outperformance Plan (the "OPP") as an incentive compensation plan for key
employees with awards determined based on the annual and the three-year total
return to shareholders of the REIT. The Executive shall be eligible to
participate in the OPP in an amount as determined by the Compensation Committee.
The Compensation Committee has established that, during the Term of this
Agreement, the Executive will receive a minimum allocation of at least 40.0% of
the aggregate outperformance reward under the OPP or under any outperformance
plan that replaces the OPP before the end of the three-year term of the OPP; and
the Executive will receive economically consistent results appropriate in
respect of his position as Chief Executive Officer for any outperformance plan
for executives that the Company or the REIT puts into effect after the OPP. The
Executive, as Chief Executive Officer, will have the right to make
recommendations to the Compensation Committee as to which Company employees are
eligible to receive an allocation under the OPP and the amount of that
allocation, subject to Compensation Committee review and approval.

     5. STOCK BASED AWARDS.

         (a) 2002 EQUITY INCENTIVE PLAN OPTION GRANTS. The REIT has established
the 2002 Equity Incentive Plan ("Equity Incentive Plan"). Under the Original
Agreement, on the closing of the 144A Offering, the REIT granted the Executive
an initial grant of options to purchase 1,515,625 Common Shares (the "Initial
Grant Options"). The Initial Grant Options have an exercise price of $10.00 per
share and a term of ten (10) years and will vest and become exercisable with
respect to 25% of the underlying Common Shares on the one-year anniversary of
the date of grant and 6.25% of the underlying Common Shares on the last day of
each fiscal quarter thereafter until fully vested; provided, however, that the
Executive will be 100% vested in the Initial Grant Options upon (i) a Change in
Control (as defined herein), (ii) a termination by the Company without Cause (as
defined herein), (iii) a termination by the

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Executive for Good Reason (as defined herein), (iv) his death, or (v) his
becoming Permanently Disabled (as defined herein), and that Executive will
forfeit all unvested Initial Grant Options if he is terminated for Cause or he
terminates his employment hereunder for other than Good Reason. Executive shall
be eligible to receive future option grants as determined by the Compensation
Committee.

         (b) 2002 EQUITY INCENTIVE PLAN RESTRICTED SHARE AWARDS. The Equity
Incentive Plan provides for the issuance of Common Shares as restricted Common
Shares ("Restricted Share Grants") to the extent that such Common Shares are
available thereunder. The Executive shall be eligible to receive Restricted
Share Grants as approved by the Compensation Committee, and if the Compensation
Committee approves Restricted Share Grants to executives of the Company, then,
as appropriate in the context, the Executive will receive Restricted Share
Grants consistent with, and appropriate in respect of, his position as Chief
Executive Officer. Restricted Share Grants awarded to the Executive shall be
subject to vesting at the rate of 33.33% of the underlying Common Shares on the
one-year anniversary of the effective date of the issuance of Common Shares as
Restricted Share Grants and 8.33% of the underlying Common Shares on the last
day of each fiscal quarter thereafter until fully vested; provided, however,
that the Executive will be 100% vested and all restrictions will lapse upon (i)
a Change in Control (as defined herein), (ii) a termination by the Company
without Cause (as defined herein), (iii) a termination by the Executive for Good
Reason (as defined herein), (iv) his death, (v) his becoming Permanently
Disabled (as defined herein), or (vi) the Company's failure to renew this
Agreement, and that Executive will forfeit all unvested Restricted Share Grants
if he is terminated for Cause or he terminates for other than Good Reason. The
Common Shares issued as Restricted Share Grants will have voting and dividend
rights.

6. BENEFITS.

         (a) VACATION. The Executive shall be entitled to eight (8) weeks of
vacation per full calendar year. The Executive shall be entitled to cash in lieu
of any unused vacation time.

         (b) SICK AND PERSONAL DAYS. The Executive shall be entitled to sick and
personal days on an as needed basis.

         (c) EMPLOYEE BENEFITS.

               (i)  PARTICIPATION IN EMPLOYEE BENEFIT PLANS. The Executive and
his spouse and eligible dependents, if any, and their respective designated
beneficiaries where applicable, will be eligible for and entitled to participate
in any Company sponsored employee benefit plans, including but not limited to
benefits such as group health, dental, accident, disability insurance, group
life insurance, and a 401(k) plan, as such benefits may be offered from time to
time, on a basis no less favorable than that applicable to other executives of
the Company.

               (ii) SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Company shall
provide to the Executive a supplemental executive retirement plan ("SERP")
benefit on the terms and conditions set forth in Appendix A to this Agreement.

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               (iii) DISABILITY INSURANCE. The Company shall maintain, at its
cost, supplemental renewable long-term disability insurance as agreed to by the
Company and the Executive.

         (d) OTHER BENEFITS.

               (i)   ANNUAL PHYSICAL. The Company shall provide, at its cost, a
medical examination for the Executive on an annual basis by a licensed physician
in the Philadelphia, Pennsylvania area selected by the Executive.

               (ii)  CAR ALLOWANCE. The Company shall pay Executive a monthly
car allowance of $2,000.

               (iii) TAX PREPARATION AND FINANCIAL PLANNING. The Company shall
pay or promptly reimburse the Executive for costs incurred by him in connection
with tax preparation and financial planning assistance, to be furnished by such
advisors as chosen by the Executive, up to a maximum aggregate of $30,000
annually.

               (iv)  DIRECTORS AND OFFICERS INSURANCE. During the Term and the
Severance Period, the Executive shall be entitled to director and officer
insurance coverage for his acts and omissions while an officer and director of
the Company and the REIT on a basis no less favorable to him than the coverage
provided to current officers and directors.

               (v)   LIFE INSURANCE. The Company may purchase on the life of the
Executive $15 million of key man life insurance with the Company as the
beneficiary of the death benefit. The Company shall purchase on the life of the
Executive a 30 year vanishing premium, whole life insurance policy with a death
benefit of $15 million with the Executive as the owner of the policy and the
beneficiary of the death benefit, which payments will be compensation to the
Executive, and the Company will pay to the Executive such additional amount as
necessary to have no tax effect on the Executive (the "Executive Life Insurance
Program"). The Executive Life Insurance Program shall be issued by a AA or
better rated (by AM Best) insurer. The Company will obtain bids for this program
and review the final program with the Executive and the Chairman of Compensation
Committee for approval. The program will be structured to comply with all
requirements of the Sarbanes-Oxley Act or similar requirements.

               (vi)  EXPENSES, OFFICE AND SECRETARIAL SUPPORT. The Executive
shall be entitled to reimbursement of all reasonable expenses, in accordance
with the Company's policy as in effect from time to time and on a basis no less
favorable than that applicable to other executives of the Company, including,
without limitation, telephone, reasonable travel and reasonable entertainment
expenses incurred by the Executive in connection with the business of the
Company, promptly upon the presentation by the Executive of appropriate
documentation. The Executive shall also be entitled to appropriate office space,
administrative support, and such other facilities and services as are suitable
to the Executive's positions and adequate for the performance of the Executive's
duties.

               (vi)  FINANCIAL ASSISTANT. The Company shall pay or promptly
reimburse the Executive for costs incurred by him in connection with the
employment by the

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Executive of an assistant to manage the Executive's financial affairs, plus such
additional amount as necessary to have no tax effect on the Executive.

     7. TERMINATION. The employment of the Executive by the Company pursuant to
this Agreement shall terminate upon the occurrence of any of the following:

         (a) DEATH OR PERMANENT DISABILITY. Immediately upon Death or Permanent
Disability of the Executive. As used in this Agreement, "Permanent Disability"
shall mean an inability due to a physical or mental impairment to perform the
material services contemplated under this Agreement for a period of six (6)
months, whether or not consecutive, during any 365-day period. A determination
of Permanent Disability shall be made by a physician satisfactory to both the
Executive and the Company, provided that if the Executive and the Company do not
agree on a physician, the Executive and the Company shall each select a
physician and these two together shall select a third physician, whose
determination as to Permanent Disability shall be binding on all parties. The
appointment of one or more individuals to carry out the offices or duties of the
Executive during a period of the Executive's inability to perform such duties
and pending a determination of Permanent Disability shall not be considered a
breach of this Agreement by the Company.

         (b) FOR CAUSE. At the election of the Company and subject to the
provisions of this Section 7(b), immediately upon written notice by the Company
to the Executive of his termination for Cause. For purposes of this Agreement,
"Cause" for termination shall be deemed to exist solely in the event of (i) the
conviction of the Executive of, or the entry of a plea of guilty or nolo
contendere by the Executive to, a felony (exclusive of any felony relating to
negligent operation of a motor vehicle and not including a conviction, plea of
guilty or nolo contendere arising solely under a statutory provision imposing
criminal liability upon the Executive on a per se basis due to the Company
offices held by the Executive, so long as any act or omission of the Executive
with respect to such matter was not taken or omitted in contravention of any
applicable policy or directive of the Board), (ii) a willful breach of his duty
of loyalty which is materially detrimental to the Company, (iii) a willful
failure to perform or adhere to explicitly stated duties that are consistent
with the terms of this Agreement, or the Company's reasonable and customary
guidelines of employment or reasonable and customary corporate governance
guidelines or policies, including without limitation any business code of ethics
adopted by the Board, or to follow the lawful directives of the Board (provided
such directives are consistent with the terms of this Agreement), which, in any
such case, continues for thirty (30) days after written notice from the Board to
the Executive, or (iv) gross negligence or willful misconduct in the performance
of the Executive's duties. For purposes of this Section 7(b), no act, or failure
to act, on the Executive's part will be deemed "gross negligence" or "willful
misconduct" unless done, or omitted to be done, by the Executive not in good
faith and without a reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company. The parties agree that in order to
terminate the Executive pursuant to Subsections (ii) and (iv) hereof, the
Company shall first be required to prove to the reasonable satisfaction of the
Executive that he engaged in improper conduct under these Subsections, and if
the Executive shall not agree with the Company's assessment of his conduct, then
the Executive shall not be terminated until an arbitrator, as provided for in
Section 13(b), has determined that the Executive's conduct constituted improper
conduct under the applicable Subsection.

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         (c) WITHOUT CAUSE; WITHOUT GOOD REASONS. At the election of the
Company, without Cause, and at the election of the Executive, without Good
Reason, in either case upon thirty (30) days prior written notice to the
Executive or the Company, as the case may be.

         (d) FOR GOOD REASON. At the election of the Executive, for Good Reason.
For purposes of this Agreement, "Good Reason" shall mean any of the following
actions or omissions, provided the Executive notifies the Company of his
determination that Good Reason exists within 60 days of the action or omission
on which such determination is based:

               (i)    removal from the Board,

               (ii)   failure to renew this Agreement at any Term Date,

               (iii)  a material reduction of the Executive's duties,
responsibilities or reporting requirements, or the assignment to the Executive
of any duties, responsibilities, or reporting requirements that are inconsistent
with his positions as President, Chief Executive Officer, and Vice Chairman of
the Board, as the case may be,

               (iv)   a reduction by the Company in the Executive's annual Base
Salary,

               (v)    the Company's failure to continue in effect the Equity
Incentive Plan or the OPP, unless comparable alternative compensation
arrangements (embodied in ongoing substitute or alternative plans) have been
provided to the reasonable satisfaction of the Executive,

               (vi)   a reduction or loss of employee benefits or material
fringe benefits, both in terms of the amount of the benefit and the level of the
Executive's participation therein, enjoyed by the Executive under the employee
benefit and welfare plans of the Company, including without limitation such
benefits as group health, dental, 401(k), accident, disability insurance, or
group life insurance, that is caused by the Company except as is required by
applicable law,

               (vii)  absent the Executive's prior written consent, the
requirement by the Company that the principal place of business at which the
Executive performs his duties be changed to a location that is outside of a 50
mile radius of Jenkintown, Pennsylvania. The parties acknowledge that for these
purposes, Executive's principal place of business will be Jenkintown,
Pennsylvania for approximately 36 to 38 weeks per calendar year, and the
remainder, as the Executive decides, will be in Richmond, Virginia and Avalon,
New Jersey, or

               (viii) a breach by the Company of any provision of this Agreement
that continues for a period of thirty (30) days after Executive provides written
notice to the Company of such breach.

     8. EFFECTS OF TERMINATION.

         (a) TERMINATION ON PERMANENT DISABILITY; BY THE COMPANY WITHOUT CAUSE;
BY THE EXECUTIVE FOR GOOD REASON. If the employment of the

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Executive should terminate by reason of his becoming Permanently Disabled, a
termination by the Company for any reason other than Cause, or by the Executive
for Good Reason, then the Company shall pay all compensation and benefits for
the Executive as follows:

               (i)    any Base Salary, Incentive Bonus, expense reimbursements
and all other compensation related payments that are payable as of his
termination of employment date that are related to his period of employment
preceding his termination date, and

               (ii)   any Incentive Bonus that has been allocated, awarded or
otherwise determined but unpaid as of the effective date of his termination, and

               (iii)  the amount equal to his (A) Base Salary, plus (B) his
Guaranteed Bonus, at the rates in effect on the effective date of his
termination of employment, that would have been paid or payable during the five
(5) year period immediately following the effective date of his termination (the
"Severance Period").

         The sum of the amount payable under subsections (ii) and (iii) hereof
is referred to herein as his "Severance Payment".

               (iv)   The Severance Payment shall be made in a single, lump sum
cash payment no later than thirty (30) days after the effective date of the
Executive's termination of employment. With respect to any Severance Payment
attributable to a period after the expiration of the Noncompete Period (as
defined herein), such payment shall be reduced for compensation earned from
other employment or self-employment after that date, and the Executive shall
refund to the Company any amount due as a result of such reduction; provided,
however, that there shall be no reduction for any amounts earned or paid to him
with respect to the Excluded Businesses.

               (v)    The Company shall allow the Executive to continue to
participate during the Severance Period in any and all of the employee benefit
and welfare plans and programs of the Company, excluding any 401(k) plan, in
which the Executive was entitled to participate immediately prior to his
termination, to the same extent and upon the same terms as the Executive
participated in such plans prior to his termination, provided that the
Executive's continued participation is permissible or otherwise practicable
under the general terms and provisions of such benefit plans and programs.
During the Severance Period, the Company shall pay for the Executive's continued
participation in said employee benefit and welfare plans, including but not
limited to premiums for group health, dental, accident, disability insurance,
directors and officers insurance, group life insurance, and his car allowance,
but excluding any 401(k) plan. To the extent that continued participation is
neither permissible nor practicable, the Company shall take such actions as may
be necessary to provide the Executive with substantially comparable benefits
(without additional cost to the Executive) outside the scope of such plans
including, without limitation, reimbursing the Executive for his costs in
obtaining such coverage, such as COBRA premiums paid by the Executive and/or his
eligible dependents. If the Executive engages in regular employment after his
termination of employment (whether as an executive or as a self-employed person
but excluding his management or operation of the Excluded Businesses), any
employee benefit and welfare benefits received by the Executive in consideration
of such employment which are similar in nature to the employee benefit and

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welfare benefits provided by the Company will relieve the Company of its
obligation under this Section 8(a) to provide comparable benefits to the extent
of the benefits so received.

               (vi)   The Executive's stock options awarded under the Equity
Incentive Plan (or any other or successor plan) shall immediately become 100%
vested and he shall have the period specified in the option grant in which to
exercise his vested stock options, including those stock options that vested
upon his Termination of Employment.

               (vii)  The Executive's restricted Common Shares awarded under the
Equity Incentive Plan (or any other or successor plan) shall immediately become
100% vested and all restrictions shall lapse.

               (viii) The Executive's SERP benefit shall immediately become 100%
vested.

               (ix)   The Executive Life Insurance Program would be fully funded
by the Company.

               (x)    Prior to January 1, 2004, the Executive would be entitled
to receive 75% of his OPP allocation, and thereafter, the Executive would be
entitled to receive 100% of his OPP allocation; provided, however that this
subsection (ix) shall not apply for any termination by the Executive for a Good
Reason other than a Good Reason in Section 7(d)(i) and in Section 7(d)(iii).
This OPP allocation would be paid to the Executive after the OPP reward is
determined at the end of the OPP plan term, and will be reduced by a minimum
amount paid as severance at the time of his termination of employment. This
minimum amount paid at the time of his termination of employment would be equal
to the OPP reward for the Executive determined at the date of his termination of
employment (applying the 75% allocation during the for a termination prior to
January 1, 2004, if applicable), and the Compensation Committee would have the
discretion to pay the minimum amount to the Executive in cash or Common Shares
or a combination of cash and Common Shares.

         (b) TERMINATION ON DEATH. Upon a termination of employment due to the
Executive's death, the Executive shall become 100% vested in his stock options
and restricted Common Shares awarded under the Equity Incentive Plan. The
Executive's personal representative shall have the period specified in the
option grant in which to exercise his vested stock options, including those
stock options that vested on death. The Company shall pay to the Executive's
personal representative any Base Salary, Incentive Bonus, expense reimbursements
and all other compensation related payments that are payable as of his date of
death and that are related to his period of employment preceding his date of
death. Executive's surviving spouse or beneficiary shall receive his vested SERP
benefit, determined on the date of his death, payable pursuant to the terms of
the SERP as in effect on the date of his death.

         (c) BY THE COMPANY FOR CAUSE OR BY THE EXECUTIVE WITHOUT GOOD REASON.
In the event that the Executive's employment is terminated by the Company for
Cause or by the Executive without Good Reason, the Company shall pay the
Executive his Base Salary, Incentive Bonus, expense reimbursements and all other
compensation related payments that are payable as of his termination of
employment date and that are related to his

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period of employment preceding his termination date. Executive shall be entitled
to exercise his vested stock options, determined as of his termination date,
pursuant to the terms of the option grant. All unvested options and unvested
restricted Common Shares shall be forfeited on his termination date.

         (d) TERMINATION OF AUTHORITY. Immediately upon the Executive
terminating or being terminated from his employment with the Company for any
reason, notwithstanding anything else appearing in this Agreement or otherwise,
the Executive will stop serving the functions of his terminated or expired
positions, and shall be without any of the authority or responsibility for such
positions. On request of the Board at any time following his termination of
employment for any reason, the Executive shall resign from the Board if then a
member.

     9. CHANGE OF CONTROL.

         (a) CHANGE OF CONTROL. For purposes of this Agreement, a "Change of
Control" will be deemed to have taken place upon the occurrence of any of the
following events:

               (i)   any person, entity or affiliated group, excluding the
Company or any employee benefit plan of the Company, acquiring more than 50% of
the then outstanding voting shares of the REIT,

               (ii)  the consummation of any merger or consolidation of the REIT
into another company, such that the holders of the voting shares of the REIT
immediately prior to such merger or consolidation is less than 50% of the voting
power of the securities of the surviving company or the parent of such surviving
company,

               (iii) the complete liquidation of the REIT or the sale or
disposition of all or substantially all of the REIT's assets, such that after
the transaction, the holders of the voting shares of the REIT immediately prior
to the transaction is less than 50% of the voting securities of the acquiror or
the parent of the acquiror, or

               (iv)  a majority of the Board votes in favor of a decision that a
Change of Control has occurred.

         (b) CERTAIN BENEFITS UPON A CHANGE OF CONTROL. In the event of a Change
of Control, the Executive shall become 100% vested in the stock options and
restricted Common Shares awarded under the Equity Incentive Plan (or any other
or successor plan) and in his SERP benefit.

         (c) EXCISE TAX.

               (i)   In the event that any payment or benefit received or to be
received by the Executive in connection with a change in control or a
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a change in control or any person affiliated with
the Company or such person) (all such payments and benefits being hereinafter
called "Total Payments"), such that the Executive will be subject (in whole or
in part)

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to the excise tax imposed under Code Section 4999 ("Excise Tax") on such
payments and benefits, then the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of the Excise Tax and any federal, state and local
income tax on the Gross-Up Payment, will be equal to the total amount of
payments required to be paid pursuant to this Agreement. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Executive's residence on such date, net of the maximum deduction
in federal income taxes which could be obtained from deduction of such state and
local taxes.

               (ii)  The Executive or the Company may request, prior to the time
any payments under this Agreement are made, a determination of whether any or
all of the Total Payments will be subject to the Excise Tax and, if so, the
amount of such Excise Tax and the federal, state and local income tax imposed on
the Gross-Up Payment. If such a determination is requested, it shall be made
promptly, at the Company's expense, by tax counsel selected by the Executive and
approved by the Company (with such approval not being unreasonably withheld),
and such determination shall be conclusive and binding on both parties. The
Company agrees to provide any information reasonably requested by such tax
counsel. Tax counsel may engage accountants or other experts, at the Company's
expense, to the extent deemed necessary or advisable for them to reach a
determination. For these purposes, the term "tax counsel" shall mean a law firm
with expertise in federal income tax matters.

               (iii) In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder, the Executive will
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction plus that portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment, without any interest thereon. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder, the Company will
make an additional Gross-Up Payment in respect of such excess and in respect of
any portion of the Excise Tax with respect to which the Company had not
previously made a Gross-Up Payment (plus any interest, penalties or additions
payable by the Executive with respect to such excess and such portion) at the
time that the amount of such excess is finally determined, without any interest
thereon.

               (iv)  Each party agrees to notify the other party, in writing, of
any claim that, if successful, would require the payment by the Company of a
Gross-Up Payment or might entitle the Company to a refund of all or part of any
previous Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive or
Company is informed in writing of such claim or otherwise becomes aware of such
claim. If notice of the claim arose as a result of a claim made against the
Executive by a taxing authority, Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which he gives
notice to the Company. If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall: (A) give the Company any information reasonably requested by
the Company relating to such claim, (B) take such action in connection with
contesting such claim as

                                       11

<PAGE>

the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney selected by the Executive and approved by the Company (with such
approval not being unreasonably withheld), (C) cooperate with the Company in
good faith in order to effectively contest such claim, and (D) permit the
Company to reasonably participate in any proceedings relating to such claim. The
Company shall bear and pay directly all costs and expenses (including legal fees
and additional interest and penalties) incurred in connection with such contest
and shall indemnify and hold the Executive harmless, on an after-tax basis, for
any Excise Tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses.

               (v)   Notwithstanding the foregoing, the Company shall control
all audits and proceedings taken in connection with any claim, audit or
proceeding involving Excise Taxes or Gross-Up Payments and, at its sole option,
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of any such claim, audit or
proceeding and may, at its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the tax in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such tax and sue for a refund, the Company
shall advance the amount of such payment to the Executive, on an interest-free
basis (including interest or penalties with respect thereto) and shall indemnify
and hold the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance. The Company shall be required to consult with and keep the
Executive fully apprised of developments and actions being considered or taken
with respect to such claim, audit or proceeding. The Company's control of the
contest shall be limited to issues with respect to which such a Gross-Up Payment
would be payable or refundable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue. Each party agrees to
keep the other party fully apprised of developments concerning such claim, audit
or proceeding and to cooperate with the other in good faith in order to
effectively resolve such claim, audit or proceeding.

               (vi)  For purposes of this Subsection (c), a determination of
whether a payment is subject to Excise Taxes, including but not limited to, a
determination of change in control, shall be made pursuant to Code Section 280G.

         10. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that certain assets of the Company constitute Confidential Information. The term
"Confidential Information" as used in this Agreement shall mean all information
which is known only to the Executive or the Company, other employees of the
Company, or others in a confidential relationship with the Company, and relating
to the Company's business including, without limitation, information regarding
clients, customers, pricing policies, methods of operation, proprietary Company
programs, sales products, profits, costs, markets, key personnel, formulae,
product applications, technical processes, and trade secrets, as such
information may exist from time to time, which the Executive acquired or
obtained by virtue of work performed for the Company, or which the Executive may
acquire or may have acquired knowledge of during the

                                       12

<PAGE>

performance of said work. The Executive shall not, during or after the Term,
disclose all or any part of the Confidential Information to any person, firm,
corporation, association, or any other entity for any reason or purpose
whatsoever, directly or indirectly, except as may be required pursuant to his
employment hereunder, unless and until such Confidential Information becomes
publicly available other than as a consequence of the breach by the Executive of
his confidentiality obligations hereunder. In the event of the termination of
his employment, whether voluntary or involuntary and whether by the Company or
the Executive, the Executive shall deliver to the Company all documents and data
pertaining to the Confidential Information and shall not take with him any
documents or data of any kind or any reproductions (in whole or in part) or
extracts of any items relating to the Confidential Information. The Company
acknowledges that prior to his employment with the Company, the Executive has
lawfully acquired extensive knowledge of the industries and businesses in which
the Company engages in business, and that the provisions of this Section 10 are
not intended to restrict the Executive's use of such previously acquired
knowledge.

         In the event that the Executive receives a request or is required (by
deposition, interrogatory, request for documents, subpoena, civil investigative
demand or similar process) to disclose all or any part of the Confidential
Information, the Executive agrees to (a) promptly notify the Company in writing
of the existence, terms and circumstances surrounding such request or
requirement, (b) consult with the Company on the advisability of taking legally
available steps to resist or narrow such request or requirement, and (c) assist
the Company in seeking a protective order or other appropriate remedy. In the
event that such protective order or other remedy is not obtained or that the
Company waives compliance with the provisions hereof, the Executive shall not be
liable for such disclosure unless disclosure to any such tribunal was caused by
or resulted from a previous disclosure by the Executive not permitted by this
Agreement.

     11. NON-COMPETITION AND NONSOLICITATION. During the Term and for a period
of 18 calendar months after the termination of the Executive's employment (the
"Noncompete Period"), the Executive shall not, directly or indirectly, either as
a principal, agent, employee, employer, stockholder, partner or in any other
capacity whatsoever: (a) engage or assist others engaged, in whole or in part,
in any business which is engaged in a business or enterprise that is
substantially similar to the business of the Company that the Company was
engaged in during the period of the Executive's employment with the Company, or
(b) without the prior consent of the Board, employ or solicit the employment of,
or assist others in employing or soliciting the employment of, any individual
employed by the Company at any time while the Executive was also so employed.
Notwithstanding anything else herein to the contrary, the provisions of this
Section 11 shall not apply in the event the Executive's employment is terminated
for any reason other than a termination by the Company for Cause or a
termination by the Executive without Good Reason.

         Nothing in this Section 11 shall impede, restrict or otherwise
interfere with the Executive's management and operation of the Excluded
Businesses. Further, nothing in this Section 11 shall prohibit Executive from
making any passive investment in a public company, or where he is the owner of
five percent (5%) or less of the issued and outstanding voting securities of any
entity, provided such ownership does not result in his being obligated or
required to devote any managerial efforts.

                                       13

<PAGE>

         The Executive agrees that the restraints imposed upon him pursuant to
this Section 11 are necessary for the reasonable and proper protection of the
Company and its subsidiaries and affiliates, and that each and every one of the
restraints is reasonable in respect to subject matter, length of time and
geographic area. The parties further agree that, in the event that any provision
of this Section 11 shall be determined by any court of competent jurisdiction to
be unenforceable by reason of its being extended over too great a time, too
large a geographic area or too great a range of activities, such provision shall
be deemed to be modified to permit its enforcement to the maximum extent
permitted by law.

     12. INTELLECTUAL PROPERTY. During the Term, the Executive shall promptly
disclose to the Company or any successor or assign, and grant to the Company and
its successors and assigns without any separate remuneration or compensation
other than that received by him in the course of his employment, his entire
right, title and interest in and to any and all inventions, developments,
discoveries, models, or any other intellectual property of any type or nature
whatsoever ("Intellectual Property"), whether developed by him during or after
business hours, or alone or in connection with others, that is in any way
related to the business of the Company, its successors or assigns. This
provision shall not apply to books or articles authored by the Executive during
non-work hours, consistent with his obligations under this Agreement, so long as
such books or articles (a) are not funded in whole or in part by the Company,
and (b) do not contain any Confidential Information or Intellectual Property of
the Company. The Executive agrees, at the Company's expense, to take all steps
necessary or proper to vest title to all such Intellectual Property in the
Company, and cooperate fully and assist the Company in any litigation or other
proceedings involving any such Intellectual Property.

     13. DISPUTES.

         (a) EQUITABLE RELIEF. The Executive acknowledges and agrees that upon
any breach by the Executive of his obligations under Sections 10, 11, or 12
hereof, the Company will have no adequate remedy at law, and accordingly will be
entitled to specific performance and other appropriate injunctive and equitable
relief.

         (b) ARBITRATION. Excluding only requests for equitable relief by the
Company under Section 13(a), in the event that there is any claim or dispute
arising out of or relating to this Agreement or the breach hereof, and the
parties hereto shall not have resolved such claim or dispute within 60 days
after written notice from one party to the other setting forth the nature of
such claim or dispute, then such claim or dispute shall be settled exclusively
by binding arbitration in Montgomery county, Pennsylvania, in accordance with
the Employment Dispute Resolution Rules of the American Arbitration Association
("Rules"), by an arbitrator mutually agreed upon by the parties hereto or, in
the absence of such agreement, by an arbitrator selected according to such
Rules. Notwithstanding the foregoing, if either the Company or the Executive
shall request, such arbitration shall be conducted by a panel of three (3)
arbitrators, one selected by the Company, one selected by the Executive and the
third selected by agreement of the first two arbitrators, or, in the absence of
such agreement, in accordance with such Rules. Judgment upon the award rendered
by such arbitrator(s) shall be entered in any Court having jurisdiction thereof
upon the application of either party. The parties agree to use their reasonable
best efforts to have such arbitration completed as soon as is reasonably
practicable. Notwithstanding anything herein to the contrary, the losing party
shall pay the reasonable costs

                                       14

<PAGE>

and expenses (including reasonable attorney fees and expenses) of the prevailing
party with respect to such arbitration, except the Executive, if he is the
losing party, shall not be required to pay such expenses and costs if the claim
relates to statutory discrimination claims that he would not otherwise be
required to pay if such claim had been brought in a court of competent
jurisdiction.

         (c) LEGAL FEES. The Company shall pay or promptly reimburse the
Executive for the reasonable legal fees and expenses incurred by the Executive
   in successfully enforcing or defending any right of the Executive pursuant to
this Agreement.

     14. INDEMNIFICATION. The Company shall indemnify the Executive, to the
maximum extent permitted by applicable law, against all costs, charges and
expenses incurred or sustained by the Executive, including the cost of legal
counsel selected and retained by the Executive in connection with any action,
suit or proceeding to which the Executive may be made a party by reason of the
Executive being or having been an officer, director, or employee of the Company.

     15. COOPERATION IN FUTURE MATTERS. The Executive hereby agrees that for a
period of 18 months following his termination of employment he shall cooperate
with the Company's reasonable requests relating to matters that pertain to the
Executive's employment by the Company, including, without limitation, providing
information or limited consultation as to such matters, participating in legal
proceedings, investigations or audits on behalf of the Company, or otherwise
making himself reasonably available to the Company for other related purposes.
Any such cooperation shall be performed at scheduled times taking into
consideration the Executive's other commitments, and the Executive shall be
compensated at a reasonable hourly or per diem rate to be agreed upon by the
parties to the extent such cooperation is required on more than an occasional
and limited basis. The Executive shall not be required to perform such
cooperation to the extent it conflicts with any requirements of exclusivity of
services for another employer or otherwise, nor in any manner that in the good
faith belief of the Executive would conflict with his rights under or ability to
enforce this Agreement.

     16. GENERAL.

         (a) NOTICES. All notices and other communications hereunder shall be in
writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if sent by overnight courier or by certified
mail, return receipt requested, postage prepaid or sent by written
telecommunication or telecopy, to the relevant address set forth below, or to
such other address as the recipient of such notice or communication shall have
specified in writing to the other party hereto, in accordance with this Section
16(a).

     If to the Company, to:    First States Group, L.P.
                               c/o American Financial Realty Group
                               1725 The Fairway
                               Jenkintown, PA 19046
                               Attn: Chairman of the Board of Trustees
                               Facsimile: 215-887-2585

                                       15

<PAGE>

     If to Executive, at his last residence shown on the records of the Company.

Any such notice shall be effective (i) if delivered personally, when received,
(ii) if sent by overnight courier, when receipted for, (iii) if mailed, five (5)
days after being mailed, and (iv) on confirmed receipt if sent by written
telecommunication or telecopy, provided a copy of such communication is sent by
regular mail, as described above.

         (b) SEVERABILITY. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.

         (c) WAIVERS. No delay or omission by either party hereto in exercising
any right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power or
privilege preclude any further exercise thereof or the exercise of any other
right, power or privilege.

         (d) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. In making proof of this
Agreement, it shall not be necessary to produce or account for more than one
such counterpart.

         (e) ASSIGNS. This Agreement shall be binding upon and inure to the
benefit of the Company's successors and the Executive's personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees. This Agreement shall not be assignable by the Executive, it being
understood and agreed that this is a contract for the Executive's personal
services. Otherwise, this Agreement shall not be assignable by the Company
except that the Company may assign it in connection with a transaction involving
the succession by a third party to all or substantially all of the Company's
business and/or assets (whether direct or indirect and whether by purchase,
merger, consolidation, liquidation or otherwise). When assigned to a successor,
the assignee shall assume this Agreement and expressly agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform it in the absence of such an assignment. For all purposes
under this Agreement, the term "Company" shall include any successor to the
Company's business and/or assets that executes and delivers the assumption
agreement described in the immediately preceding sentence or that becomes bound
by this Agreement by operation of law.

         (f) ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties, supersedes all prior agreements and understandings, including
the Original Agreement, whether written or oral, relating to the subject matter
hereof and may not be amended except by a written instrument hereafter signed by
the Executive and a duly authorized representative of the Board (other than the
Executive).

         (g) GOVERNING LAW. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to principles of conflicts of law.

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<PAGE>

         (h) CONSTRUCTION. The language used in this Agreement shall be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party. The headings of
sections of this Agreement are for convenience of reference only and shall not
affect its meaning or construction. Whenever any word is used herein in one
gender, it shall be construed to include the other gender, and any word used in
the singular shall be construed to include the plural in any case in which it
would apply and vice versa.

         (i) PAYMENTS AND EXERCISE OF RIGHTS AFTER DEATH. Any amounts payable
hereunder after the Executive's death shall be paid to the Executive's
designated beneficiary or beneficiaries, whether received as a designated
beneficiary or by will or the laws of descent and distribution. The Executive
may designate a beneficiary or beneficiaries for all purposes of this Agreement,
and may change at any time such designation, by notice to the Company making
specific reference to this Agreement. If no designated beneficiary survives the
Executive or the Executive fails to designate a beneficiary for purposes of this
Agreement prior to his death, all amounts thereafter due hereunder shall be
paid, as and when payable, to his spouse, if she survives the Executive, and
otherwise to his estate.

         (j) CONSULTATION WITH COUNSEL. The Executive acknowledges that he has
had a full and complete opportunity to consult with counsel or other advisers of
his own choosing concerning the terms, enforceability and implications of this
Agreement, and that the Company has not made any representations or warranties
to the Executive concerning the terms, enforceability and implications of this
Agreement other than as are reflected in this Agreement.

         (k) WITHHOLDING. Any payments provided for in this Agreement shall be
paid net of any applicable income tax withholding required under federal, state
or local law.

         (l) CONSUMER PRICE INDEX. For purposes of this Agreement, the term
"CPI" refers to the Consumer Price Index as published by the Bureau of Labor
Statistics of the United States Department of Labor, U.S. City Average, All
Items for Urban Wage Earners and Clerical Workers (1982-1984=100). If the CPI is
hereafter converted to a different standard reference base or otherwise revised,
the determination of the CPI adjustment shall be made with the use of such
conversion factor, formula or table for converting the CPI, as may be published
by the Bureau of Labor Statistics, or, if the bureau shall no longer publish the
same, then with the use of such conversion factor, formula or table as may be
published by an agency of the United States, or failing such publication, by a
nationally recognized publisher of similar statistical information.

         (m) SURVIVAL. The provisions of Sections 10, 11, 12, 13, 14 and 15
shall survive the termination of this Agreement.

                                       17

<PAGE>

       IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date first above
written.

FIRST STATES GROUP, L.P.                 NICHOLAS S. SCHORSCH
By:    First States Group, LLC
       Its general partner

    By:___________________________       ______________________________
       Name:
       Title:

Dated: May __, 2003                      Dated: May __, 2003



GUARANTEE:

The obligations of First States Group, L.P. under this Employment Agreement,
dated May 15, 2003, with Nicholas S. Schorsch, shall be guaranteed by American
Financial Realty Trust.


AMERICAN FINANCIAL REALTY TRUST


By:    ______________________________
       Name:
       Title:

Dated: May __, 2003

                                       18

<PAGE>

                                   APPENDIX A

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

         The Company shall maintain for the benefit of the Executive a
non-qualified supplemental executive retirement plan ("SERP") which shall
provide to the Executive a minimum annual pension, commencing at the Executive's
attaining age 60 and payable as a single life annuity, equal to 50% of the
Executive's average annual compensation (including Base Salary, Incentive Bonus
and payments under the OPP) for the three (3) calendar years of the last ten
(10) years of his employment by the Company which produce the highest average
amount (or the annualized average of such compensation for his actual period of
employment if less than three (3) calendar years) with a maximum annual benefit
of $475,000. The Executive shall vest in his SERP benefit over a 5-year period,
pursuant to the following vesting schedule:

         Year 1    22%

         Year 2    43%

         Year 3    63%

         Year 4    82%

         Year 5    100%

         A year of vesting service under the SERP is the 12-month period ending
on each anniversary of his commencement of his employment with the Company,
provided he is an employee of the Company on that vesting date. Executive also
shall become 100% vested in his SERP benefit upon (a) the effective date of a
Change of Control, (b) his termination date if the Company terminates him
without Cause, (c) his termination date if he terminates for Good Reason, (d)
the date he dies, or (e) the date he becomes Permanently Disabled.

         The Executive's annual SERP benefit shall be paid to the Executive in
annual payments commencing on the first day of the month immediately following
his 60th birthday, or if later, his termination of employment with the Company
after age 60 (referred to herein as his "Retirement Date") and continuing
annually thereafter until the year in which the Executive dies. The Executive
may elect, at least 30 days prior to the date on which SERP benefit payments are
scheduled to begin, to receive monthly installment payments. The Executive shall
receive his annual SERP benefit for a minimum of ten (10) years. The Executive
may elect, within 30 days of his termination of employment date, that payment of
his vested SERP benefit shall commence at any time selected by the Executive
after he shall have terminated employment from the Company, provided that if
payment begins prior to the Executive's 60th birthday, such payment shall be
actuarially reduced to account for the commencement of such payments prior to
age 60. Payment of such SERP benefits shall continue until the date of the
Executive's death if he has received at least ten (10) annual payments. In the
event Executive dies prior to receiving ten (10) annual SERP payments, his
surviving spouse (or his designated beneficiary) shall receive the actuarial
equivalence of the balance due him in a single, lump sum cash payment. If
Executive dies prior to the time benefit payments are scheduled to begin, his
surviving spouse (or designated beneficiary) shall receive the actuarial
equivalence of his vested SERP benefit,

                                       19

<PAGE>

determined as of the date of his death, in a single, lump sum cash payment. For
purposes of determining actuarial equivalence, the 1983 GAM Mortality Table and
interest at the average rate on 30 year Treasury Securities shall be used.

         The SERP is an unfunded plan and the Executive is an unsecured general
creditor of the Company. The Company shall establish a "rabbi trust" to be used
in connection with the SERP.

                                       20