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                                                                   Exhibit 10.26

                              EMPLOYMENT AGREEMENT
                                     BETWEEN
                                  JEFFREY KAHN
                                       AND
                         AMERICAN FINANCIAL REALTY TRUST

        This Employment Agreement (the "Agreement"), dated January __, 2003, but
effective as of September 10, 2002 ("Effective Date"), between American
Financial Realty Trust, a Maryland real estate investment trust (the "Company"),
and Jeffrey Kahn, an individual currently residing at 1341 Revelation Road,
Meadowbrook, Pennsylvania (the "Executive"):

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

        WHEREAS, in connection with the establishment and operation of the
Company (referred to herein as the "144A Offering"), the Company intends to
assign this Employment Agreement to First States Group, L.P. ("FS OP"), of which
the Company is a limited partner and the sole owner of the general partner, and
Executive consents to such assignment.

        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 Senior Vice President -- Brokerage.

                (b)     DUTIES. The Executive shall report to the President and
Chief Executive Officer of the Company (the "President") and his principal
employment duties and responsibilities shall be to manage the Brokerage Group of
the Company and such other duties and responsibilities as is customary for the
position of Senior Vice President -- Brokerage.

                (c)     EXTENT OF SERVICES. Except for illnesses and vacation
periods, the Executive shall devote all of his working time to and perform to
the best of his abilities, his duties and responsibilities under this Agreement.
Notwithstanding the foregoing, the Executive may (i) make any passive investment
where he is not obligated or required to, and shall not in fact, devote any
managerial efforts, (ii) participate in charitable, academic or community
activities, and in trade or professional organizations, or (iii) 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.

                (d)     RELOCATION REIMBURSEMENT. In the event the Company
changes the principal place of business at which the Executive performs his
duties to a location that is outside of a 50 mile radius of Jenkintown,
Pennsylvania, the Company shall reimburse the Executive for all reasonable
relocation expenses, including but not limited to, temporary housing for the
Executive and his family.

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        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 three
(3) years. At the expiration of the three (3) year term, this Agreement shall be
automatically extended for an additional one (1) year term, and on each one-year
anniversary of the extended one (1) year term thereafter, unless either party
terminates this Agreement not later than sixty (60) days prior to the expiration
of the current term providing written notice to the other party of such party's
intent not to renew, unless it is earlier 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
of $200,000 annually, which shall be payable in periodic installments according
to the Company's normal payroll practices and shall be subject to an annual
adjustment tied to the Consumer Price Index, as defined herein ("CPI"). Base
Salary shall be increased, effective on each annual anniversary date of the
effective date of this Agreement, by a positive amount equal to the effective
Base Salary multiplied by the CPI for such year. The Base Salary, including any
increases, shall not be decreased during the Term of this Agreement. The
President may review the Executive's Base Salary annually to determine whether
and to what extent the Executive's salary may be increased in an amount greater
than the CPI. 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.      CASH INCENTIVE AWARDS. The Executive shall be entitled to
receive a cash incentive bonus for each fiscal year during the Term of this
Agreement determined and paid in accordance with the terms set forth on Exhibit
B attached hereto up to a maximum bonus of $400,000 per fiscal year. For
purposes of this Agreement, the term "Incentive Bonus" shall mean the amount
established pursuant to this Section 4.

        5.      STOCK BASED AWARDS.

                (a)     2002 EQUITY INCENTIVE PLAN OPTION GRANTS. The Company
shall establish and maintain the 2002 Equity Incentive Plan ("Equity Incentive
Plan"). The Company agrees that, on the closing of the 144A Offering, Executive
will receive an initial grant of options (the "Initial Grant Options") to
purchase 120,000 common shares of beneficial ownership of the Company, par value
$.001 ("Common Shares"). The Initial Grant Options will have 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) his death,
(iv) his becoming Permanently Disabled (as defined herein), or (v) subject to
Compensation Committee approval, the Company's failure to renew this Agreement.
Executive will forfeit all vested and unvested Initial Grant Options if he is
terminated at any time for Cause, and will forfeit all unvested Initial Grant
Options if he voluntarily terminates his employment with the Company for any
reason. The exercise price of the Initial Grant Options shall be $10 per share,
except to the extent otherwise required for the Initial Grant Options to be
treated as ISO's (as defined below). Executive shall be eligible to

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receive future option grants as determined by the President, subject to review
and approval by the Compensation Committee.

        The Initial Grant Options will meet the qualifications of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code" and "ISO"
respectively) to the fullest extent possible and thereafter, they will be
treated as stock options that do not meet the terms of Code Section 422
("NQSO").

                (b)     2002 EQUITY INCENTIVE PLAN RESTRICTED SHARE AWARDS. The
Company agrees that it will reserve under the Equity Incentive Plan 1,500,000
Common Shares for issuance as restricted Common Shares ("Restricted Share
Grants"), as described in the Offering Memorandum of the Company dated September
4, 2002. Executive shall be eligible to receive Restricted Share Grants as
determined by the President, subject to Compensation Committee review and
approval. Awards of Restricted Share Grants shall be on the following terms:
vesting at the rate of 25% of the underlying Common Shares on the one-year
anniversary of the date of the award 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 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) his death, (iv) his becoming
Permanently Disabled (as defined herein), or (v) subject to Compensation
Committee approval, the Company's failure to renew this Agreement. Executive
will forfeit all vested and unvested Restricted Share Grants if he is terminated
for Cause and will forfeit all unvested Restricted Share Grants if he
voluntarily terminates his employment with the Company for any reason. The
parties agree that the Equity Incentive Plan will provide that all restricted
Common Shares will have voting and dividend rights.

        6.      BENEFITS.

                (a)     VACATION. The Executive shall be entitled to four (4)
weeks paid vacation per calendar year, with a pro rata allocation for the period
beginning on the Effective Date and ending on December 31, 2002. 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 pursuant to Company policy.

                (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. The Company agrees to maintain a group health
plan and to evaluate the merits of implementing additional employee benefit
plans, and if implementation is

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determined to be warranted based on such review, the Company agrees to implement
all such employee benefit plans no later than January 1, 2003.

                        (ii)  DISABILITY INSURANCE. The Company shall maintain,
at its cost, supplemental renewable long-term disability insurance as agreed to
by the Company and the Executive and which is consistent with long-term
disability insurance provided to similarly situated executives of the Company.

                (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 as determined by the President provided such allowance is
consistent with amounts paid to other similarly situated executives of the
Company and is not less than $750.00 per month.

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

                        (iv)  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.

        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

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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 or the President), (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 President 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.

                (c)     WITHOUT CAUSE; VOLUNTARY RESIGNATION. At the election of
the Company without Cause, and at the election of the Executive for any reason,
in either case upon thirty (30) days prior written notice to the Executive or
the Company, as the case may be.

        8.      EFFECTS OF TERMINATION.

                (a)     TERMINATION ON PERMANENT DISABILITY OR BY THE COMPANY
WITHOUT CAUSE. If the employment of the Executive should terminate by reason of
his becoming Permanently Disabled or a termination by the Company for any reason
other than Cause, then the Company shall pay all compensation and benefits for
the Executive as follows:

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

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are related to his period of employment preceding his termination date payable
no later than thirty (30) days after the effective date of the Executive's
termination of employment, and

                        (ii)  any Incentive Bonus that is earned but unpaid as
of the effective date of his termination, and

                        (iii) the amount equal to his Base Salary at the rate in
effect on the effective date of his termination of employment, that would have
been paid or payable for the duration of the Term of this Agreement, or if
greater, for 12 months (the "Severance Period").

        The amount payable under subsection (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.

                        (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 the 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 the 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), 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 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.

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                        (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) All Severance Payments are contingent on
Executive signing a release of claims, substantially in the form attached hereto
as Exhibit A.

                (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.

                (c)     BY THE COMPANY FOR CAUSE OR VOLUNTARILY BY THE
EXECUTIVE. In the event that the Executive's employment is terminated by the
Company for Cause or voluntarily by the Executive, 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 period of employment preceding his
termination date. Executive shall forfeit all vested and unvested options and
restricted Common Shares if he is terminated by the Company for Cause, and he
shall forfeit only his unvested options and restricted Common Shares if he
voluntarily terminates his employment with the Company.

                (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
position(s) and shall be without any of the authority or responsibility for such
position(s). On request of the Board of Trustees of the Company (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 IN CONTROL.

                (a)     CHANGE OF CONTROL. For purposes of this Agreement, a
"Change in 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 Company,

                        (ii)  the consummation of any merger or consolidation of
the Company into another company, such that the holders of the voting shares of
the Company 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,

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                        (iii) the complete liquidation of the Company or the
sale or disposition of all or substantially all of the Company's assets, such
that after the transaction, the holders of the voting shares of the Company
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 in Control has occurred.

(b) CERTAIN BENEFITS UPON A CHANGE IN CONTROL. In the event of a Change in
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).

                (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) 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

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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 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

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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
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.

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        11.     NON-COMPETITION AND NONSOLICITATION. During the Term and for a
period of 24 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
by the Company for any reason other than a termination by the Company for Cause.
The Company recognizes that Executive was in the real estate brokerage business
prior to Executive's employment with the Company and, accordingly,
notwithstanding the foregoing restrictions, Executive shall be permitted to
engage in the real estate brokerage business provided such activities are not
directly or indirectly with existing relationships of the Company or with any
banks or any other financial institutions.

                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.

                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.

                                      -11-

<PAGE>

        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
may 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 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
reasonably 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

                                      -12-

<PAGE>

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:      American Financial Realty Trust
                                    1725 The Fairway
                                    Jenkintown, PA 19046
                                    Attn:   Nicholas S. Schorsch, President and
                                            Chief Executive Officer
                                    Facsimile:  215-887-2585

        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,

                                      -13-

<PAGE>

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. Executive acknowledges and
consents to this Agreement being assigned by the Company to FS OP. 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 FS OP or 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, 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 the President or 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.

                (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.

                                      -14-

<PAGE>

                (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 8, 9, 10, 11, 12,
13, 14 and 15 shall survive the termination of this Agreement.

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

AMERICAN FINANCIAL REALTY                         JEFFREY KAHN
TRUST

By:
   ----------------------------                   --------------------------
    Name: Nicholas S. Schorsch
    Title:   President and Chief
             Executive Officer

Date:  January __, 2003                              Date:  January __, 2003

                                      -15-

<PAGE>

                                    EXHIBIT A

                               RELEASE AND WAIVER

        This release and waiver (the "Termination Release") is made as of the
___ day of __________, 200__by ______________________ (the "Executive").

        WHEREAS, the Executive and American Financial Realty Trust (the
"Company") have entered into an Employment Agreement (the "Agreement") dated as
of ________, 2002 that provides for certain compensation and severance amounts
upon his termination of employment; and

        WHEREAS, the Executive has agreed, pursuant to the terms of the
Agreement, to execute a release and waiver in the form set forth in this Release
and Waiver ("Termination Release") in consideration of the Company's agreement
to provide the compensation and severance amounts upon his termination of
employment set out in the Agreement; and

        WHEREAS, the Executive has incurred a termination of employment
effective as of _________, 20__; and

        WHEREAS, the Company and the Executive desire to settle all rights,
duties and obligations between them, including without limitation all such
rights, duties, and obligations arising under the Agreement or otherwise out of
the Executive's employment by the Company.

        NOW THEREFORE, intending to be legally bound and for good and valid
consideration the sufficiency of which is hereby acknowledged, the Executive
agrees as follows:

        1. RELEASE. In consideration for the payments to be made pursuant to the
Agreement:

        (a) Executive knowingly and voluntarily releases, acquits and forever
discharges the Company, and its respective owners, parents, stockholders,
predecessors, successors, assigns, agents, directors, officers, employees,
representatives, divisions and subsidiaries (collectively, the "Releasees") from
any and all charges, complaints, claims, liabilities, obligations, promises,
agreements, damages, causes of action, suits, rights, costs, losses, debts and
expenses of any nature whatsoever, known or unknown, suspected or unsuspected,
foreseen or unforeseen, matured or unmatured, against them which the Executive
or any of his heirs, executors, administrators, successors and assigns
("Executive Persons") ever had, now has or at any time hereafter may have, own
or hold by reason of any matter, fact, or cause whatsoever from the beginning of
time up to and including the date of this Termination Release, including without
limitation all claims for salary, bonuses, severance pay, vacation pay or any
benefits arising under the Employee Retirement Income Security Act of 1974, as
amended; any claims of sexual harassment, or discrimination based upon race,
color, national origin, ancestry, religion, marital status, sexual orientation,
citizenship status, medical condition or disability under Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the American with Disabilities
Act, Section 1981 of the Civil Rights Acts of 1866 and 1871, the Equal Pay Act,
The Rehabilitation Act, The Consolidated Omnibus Budget Reconciliation Act, as
amended, The Fair Labor Standards Act, as amended, and any other federal, state
or local law prohibiting discrimination in

                                      -16-

<PAGE>

employment; any claims of age discrimination under the Age Discrimination in
Employment Act, as amended by the Older Workers Benefit Protection Act, or under
any other federal, state or local law prohibiting age discrimination; claims of
breach of implied or express contract, breach of promise, misrepresentation,
negligence, fraud, estoppel, defamation, infliction of emotional distress,
violation of public policy, wrongful or constructive discharge, or any other
employment-related tort; any claim for costs, fees, or other expenses, including
attorneys fees; and all claims under any other federal, state or local laws
relating to employment, except in any case to the extent such release is
prohibited by applicable federal, state and/or local law.

        (b) Executive represents that he has not filed or permitted to be filed
against the Releasees, any complaints, charges or lawsuits and covenants and
agrees that he will not seek or be entitled to any personal recovery in any
court or before any governmental agency, arbitrator or self-regulatory body
against any of the Releasees arising out of any matters set forth in Section
1(a) hereof. If Executive has filed a complaint, charge, grievance, lawsuit or
similar action, he agrees to remove, dismiss or take similar action to eliminate
such complaint, charge, grievance, lawsuit or similar action within five (5)
days of signing this Termination Release.

        (c) Notwithstanding the foregoing, this Termination Release is not
intended to interfere with Executive's right to file a charge with the Equal
Employment Opportunity Commission (hereinafter referred to as the "EEOC") in
connection with any claim he believes he may have against the Company. However,
Executive hereby agrees to waive the right to recover money damages in any
proceeding he may bring before the EEOC or any other similar body or in any
proceeding brought by the EEOC or any other similar body on his behalf. This
Termination Release does not release, waive or give up any claim for workers'
compensation benefits, vested retirement or welfare benefits he is entitled to
under the terms of the Company's retirement and welfare benefit plans, as in
effect from time to time, any right to unemployment compensation that Executive
may have, or his right to enforce his rights under the Agreement.

        2. CONFIRMATION OF OBLIGATIONS. Executive hereby confirms and agrees to
his continuing obligation under the Agreement after termination of employment
not to directly or indirectly disclose to third parties or use any Confidential
Information (as defined in the Agreement) that he may have acquired, learned,
developed, or created by reason of his employment with the Company.

        3. NO COMPETITION; NONSOLICITATION. Executive hereby confirms and agrees
to his nonsolicitation and non-competition obligations under the Agreement,
which include an obligation not to engage in a business or activity that is
substantially similar to the business of the Company or, generally, without the
prior consent of the Company, employ or solicit any individual employed by the
Company during the time he was employed by the Company for a period of 24 months
after his termination of employment date, as provided for in the Agreement.

        4. NO DISPARAGEMENT. Each of the Executive and the Company agree not to
disparage the other, including making any statement or comments or engaging in
any conduct that is disparaging or derogatory toward the Executive or the
Company, as the case may be, whether directly or indirectly, by name or
innuendo; provided, however, that nothing in this Termination Release shall
restrict communications protected as privileged under federal or state

                                      -17-

<PAGE>

law to testimony or communications ordered and required by a court or an
administrative agency of competent jurisdiction.

        5. CONFIDENTIALITY. Each of the Executive and the Company agree to keep
the terms of this Termination Release confidential and shall not disclose the
fact or terms to third parties, except as required by applicable law or
regulation or by court order; provided, however, that Executive may disclose the
terms of this Termination Release to members of his immediate family, his
attorney or counselor, and persons assisting him in financial planning or tax
preparation, provided these people agree to keep such information confidential;
provided, further, however, that the Company may disclose the terms of this
Termination Release to its certified public accounts, outside counsel or others
on a need to know basis, provided these people agree to keep such information
confidential.

        6. ACKNOWLEDGMENT. The Company has advised the Executive to consult with
an attorney of his choosing prior to signing this Termination Release and the
Executive hereby represents to the Company that he has been offered an
opportunity to consult with an attorney prior to signing this Termination
Release. The Executive shall have twenty-one (21) days to consider the waiver of
his rights in this Termination Release, although he may sign this Termination
Release sooner if he chooses. Once he has signed this Termination Release, the
Executive shall have seven (7) additional days from the date of execution to
revoke his consent to the waiver of his rights. If no such revocation occurs,
the Executive's waiver of rights in this Termination Release shall become
effective seven (7) days from the date of execution by the Executive. In the
event that the Executive revokes his waiver of rights in this Termination
Release, this Termination Release will have no force and effect and no Severance
Payments (as defined in the Agreement) shall be due or payable.

        7. GOVERNING LAW. This Termination Release shall be governed and
construed in accordance with the laws of Commonwealth of Pennsylvania, without
giving effect to principles of conflicts law.

        IN WITNESS WHEREOF, the Executive has executed this Termination Release
as of the day and year first above written.

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

                                      -18-

<PAGE>


                                    EXHIBIT B

Incentive Bonus for any fiscal year of the Company shall be equal to 50% of the
Brokerage Group Net Profit for such fiscal year, up to a maximum amount of
$400,000 for each fiscal year.

Brokerage Group Net Profit shall equal the positive difference between (i) the
gross commission income of the brokerage group determined in accordance with the
brokerage group compensation policy adopted by the Board of Trustees of the
Company from time to time and (ii) expenses incurred by the brokerage group,
including without limitation, personnel, overhead, allocated support,
advertising, travel and third party co-broker commissions, determined in
accordance with generally accepted accounting principles. Brokerage Group Net
Profit shall be determined on a monthly basis.

The Incentive Bonus shall be payable within 30 days after the end of each fiscal
quarter of the Company as follows: 50% of the Brokerage Group Net Profit for the
applicable quarter up to a maximum amount of (i) $75,000 for the first quarter,
(ii) $100,000 for the second quarter, (iii) $125,000 for the third quarter and
(iv) $100,000 for the fourth quarter. In addition, in the event the sum of the
amounts paid to the Executive for each fiscal quarter in a fiscal year is less
than 50% of the annual Brokerage Group Net Profit for such fiscal year, the
Company will pay to the Executive the difference within 30 days after the end of
the fiscal year.

                                      -19-