FORM 10-K
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

(Mark One)

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996

                                      OR

[  ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 For the transition period from______________to
        ___________


                             Commission File No._____________

                     METROPOLITAN REALTY COMPANY, L.L.C.
            (Exact name of registrant as specified in its charter)

        Delaware                                      38-3260057
(State of incorporation)                 (I.R.S. Employer Identification No.)


                           535 Griswold, Suite 748
                           Detroit, Michigan 48226
                   (Address of principal executive offices)

             Registrant's Telephone Number, including area code:
                                (313) 961-5552

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                               YES__X ___ NO_____

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

                               YES_____ NO__X___

The aggregate market value of the Registrant's membership interests held by
non-affiliates as of December 6, 1996 was $4,713,206, of which $4,608,206 was
attributable to Class A Membership Interests and $105,000 was attributable to
Class B Membership Interests.






<TABLE>
<CAPTION>


                     METROPOLITAN REALTY COMPANY, L.L.C.

                     INDEX TO ANNUAL REPORT ON FORM 10-K
                (For the Fiscal Year Ended December 31, 1996)


                                                                                Page
                                                                                ----
<S>               <C>                                                           <C>
PART I
        ITEM 1.   BUSINESS.........................................................1
        ITEM 2.   PROPERTIES.......................................................2
        ITEM 3.   LEGAL PROCEEDINGS................................................3
        ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............3

PART II
        ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND
                  RELATED STOCKHOLDER MATTERS......................................3
        ITEM 6.   SELECTED FINANCIAL DATA..........................................5
        ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS..............................6
        ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA*....................11
        ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE.............................12

PART III
        ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..............13
        ITEM 11.  EXECUTIVE COMPENSATION..........................................19
        ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT..................................................20
        ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................22

PART IV
        ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
                  ON FORM 8-K.....................................................24


<FN>

*       The Company's financial statements are set forth in the separate
        financial section which follows page 27 of this Form 10-K and begins
        on page F-1.
</TABLE>








                                    PART I
                                    ------

ITEM 1.        BUSINESS.


        Metropolitan Realty Company, L.L.C., a Delaware limited liability
company (the "Company"), is the successor in interest to Metropolitan Realty
Corporation (the "Corporation"), a Michigan corporation. The Corporation had
operated since 1988 as a qualified real estate investment trust ("REIT")
under the Internal Revenue Code of 1986, as amended (the "Code"), and
invested in commercial real estate mortgages in southeastern Michigan and
other investments. The Company was organized as a Delaware limited liability
company on October 23, 1995 for the purpose of implementing the Restructuring
described below. Prior to the consummation of the Restructuring, the Company
had never conducted any business and had no assets.

Restructuring

        At a special meeting of the shareholders of the Corporation held on
December 6, 1996, the shareholders of the Corporation approved and adopted
the Agreement and Plan of Dissolution and Restructuring, dated as of
September 24, 1996 (the "Restructuring Agreement"), between the Company and
the Corporation. Pursuant to the terms of the Restructuring Agreement,
effective December 6, 1996, the Corporation transferred all of its assets
(the "Class A Assets") to, and the liabilities of the Corporation were
assumed by, the Company in exchange for Class A limited liability company
membership interests (the "Class A Membership Interests") of the Company. The
Corporation was then dissolved, and the Class A Membership Interests were
distributed pro rata to the Corporation's shareholders who owned 50,000
shares or more of the Corporation's common stock beneficially or of record on
October 9, 1996 (the "Record Date") (the "Majority Shareholders") in
liquidation (the "Restructuring"). Holders, beneficially or of record, of
fewer than 50,000 shares of the Corporation's common stock (the "Minority
Shareholders") as of the Record Date will receive, upon surrender of their
shares, a cash payment equal to the book value of their shares as of
September 30, 1995 ($9.03 per share) in lieu of the distribution of Class A
Membership Interests in the Company. These cash payments will be made
exclusively from the Class A Assets.

        Concurrently with the consummation of the Restructuring, the Company
offered its Class B Membership Interests in a separate offering to create a
new investment pool which is segregated on the books of the Company from the
Class A Assets. The total proceeds of the offering of Class B Membership
Interests were $22,500,000. The net proceeds of the offering of Class B
Membership Interests (the "Class B Assets") will be invested in short-term
investments until such time as the proceeds are invested in real estate
loans.

Class A Assets

        The Company's Class A mortgage loans include financing for industrial
and mixed-use facilities, office buildings, and retail and residential
centers. In making such loans, the Corporation favored investments that will
provide a competitive return and permanent financing for projects which
create construction jobs and stimulate the southeastern Michigan economy. All
Class A mortgage loans to date are collateralized by a first lien on real
property. At December 31, 1996,

                                      1




the Company's largest Class A loan approximates 9.5% of the Class A Assets,
and the carrying value of all Class A mortgage loans approximates 64% of the
Class A Assets.

        Class A Assets that have not yet been invested in mortgage loans are
primarily invested in marketable mortgage-backed securities and U.S. Treasury
Notes until needed for the Company's operations or investments in mortgage
loans. As of December 31, 1996, approximately 33% of the Company's Class A
Assets remained invested in marketable securities.

Class B Assets

        As of December 31, 1996, the Company has approximately $22,569,000 in
net Class B Assets, the majority of which is invested in money market funds.
The Company intends to invest the Class B Assets in commercial real estate
mortgages in southeastern Michigan and other investments. The Class B
mortgage loan investments are to be chosen on the basis of economic merit,
including availability, risk and potential return. The Class B Assets will be
invested in short-term investments until such time as the assets are invested
in mortgage loan investments.

        The Company believes that its mortgage loans and marketable
securities will provide a competitive economic return to its members while
protecting their capital.

        The Company continues to evaluate real estate projects and intends to
liquidate its remaining marketable securities and short-term investments to
make additional mortgage loans to qualified projects located in southeastern
Michigan. Although the Company has competed and is competing with financial
institutions such as banks, insurance companies, savings and loan
associations, mortgage bankers, pension funds and other real estate
investment vehicles with investment objectives similar to those of the
Company, the Company believes it has targeted a market niche which is
underserved.

        During 1996, the Corporation had one full-time administrative
employee. The day-to-day operations of the Corporation were administered by
its Executive Vice President, who serves on a part-time basis under the
direction of the President and the Executive Committee of the Corporation.
Effective upon the consummation of the Restructuring, the day-to-day
operations of the Company are administered by its President, who serves
part-time, on a per diem basis, under the direction of the Executive
Committee. (See Item 11 - Executive Compensation). Other members of the
Managing Board serve without pay as officers and committee members and devote
a considerable amount of time to the administration and operations of the
Company.

ITEM 2.        PROPERTIES.

        The Company's executive offices are located at Suite 748, 535
Griswold, Detroit, Michigan, 48226. The Company rents this office space under
a month-to-month lease which provides for a monthly rental of approximately
$1,513, which is comparable to prevailing rentals for similar facilities. The
Company's offices are suitable and adequate for the current operations of the
Company.

                                      2



ITEM 3.        LEGAL PROCEEDINGS.

        There are no material legal proceedings pending, or, to the knowledge
of the Company, threatened, to which the Company is a party or by which its
property may be bound.

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

        No matters were submitted to a vote of the Company's members since
the consummation of the Restructuring on December 6, 1996.

                                   PART II

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

        There is no established public trading market for the Company's Class
A Membership Interests and Class B Membership Interests. As of March 25,
1997, there were 118 holders of the Company's Class A Membership Interests
and 110 holders of the Company's Class B Membership Interests.

        The Company has not declared or paid any cash distributions on its
Class A Membership Interests and Class B Membership Interests since the
consummation of the Restructuring on December 6, 1996.

        The Company's Operating Agreement provides that Class A Members will
receive pro rata quarterly distributions of 100% of the Class A cash income,
less expenses. Distributions of principal will be returned as follows to the
Class A Members:

               (i) prior to 2001, the Company may, at its sole option,
reinvest any principal returned with respect to real estate investments which
are part of the Class A Assets; and

               (ii) beginning in 2001, a Class A Member may elect each year
to receive its pro rata share of (x) principal returned with respect to real
estate investments which are part of the Class A Assets, and (y) any cash or
cash equivalents which are part of the Class A Assets. Any part of the Class
A Assets which is not distributed pursuant to the foregoing may, at the
option of the Company, be reinvested in real estate investments. Any such
election must be made by a Member in writing and must be received by the
Company by the November first preceding the fiscal year for which such
election is to be effective.

        The Company's Operating Agreement provides that Class B Members will
receive pro rata quarterly distributions of 100% of the Class B cash income,
less expenses. The Class B Membership Interests have been structured so that
payments, beginning in 2000, of principal in the Class B investment pool will
be passed through to the Class B Members on an annual basis (or more
frequently as determined by the Company's Managing Board). In addition, any
cash and cash equivalents, which are part of the Class B Assets, which have
not been invested in real estate investments by December 31, 1999 will be
passed through to the Class B Members.

                                      3



        All distributions are subject to a determination by the Managing
Board that the Company will have sufficient cash on hand to meet its current
and anticipated needs to fulfill its business purpose.

                                      4





ITEM 6.        SELECTED FINANCIAL DATA.

        The following table sets forth selected financial data as of December
31, 1996, 1995, 1994, 1993 and 1992 and for the years then ended:

<TABLE>
<CAPTION>

                                                          1996                    1995(3)     1994(4)     1993(5)      1992(5)
                                          ------------------------------------  ---------   ---------   ---------    ---------
                                           Class A(1)  Class B(2)    Total
                                          -----------  ----------    --------
<S>                                        <C>          <C>         <C>          <C>         <C>         <C>          <C>
Total income............................. $3,925,400   $74,178     $3,999,578   $3,764,059  $3,858,028  $3,715,985   $3,828,950
Net investment income....................  3,373,259    68,593      3,441,852    1,990,203   2,587,550   2,700,898    2,112,662
Net investment income per share..........  *            *           *            .44         .57         .60          .47
Total assets.............................  44,084,538   22,977,946  67,062,484   41,760,901  41,025,168  41,626,490   41,235,710
Members'/Shareholders' equity............  42,168,811   22,568,593  64,737,404   41,333,327  40,479,424  41,104,089   40,850,562
Cash dividend per share..................  .11          -           .11          .34         .63         .54          .70
Return on assets.........................  7.66%        4.44%       6.55%        4.77%       6.31%       6.49%        5.12%
Return on equity.........................  8.00%        4.52%       6.79%        4.82%       6.39%       6.57%        5.18%
Dividend payout ratio....................  *            *           *            100%        100%        100%         100%
Equity to assets ratio...................  95.65%       98.22%      96.53%       98.98%      98.67%      98.75%       99.07%
<FN>

        (1) On December 6, 1996, pursuant to the terms of a restructuring
agreement, the assets and liabilities of Metropolitan Realty Corporation (the
"Corporation") were transferred to Metropolitan Realty Company, L.L.C. (the
"Company") in exchange for Class A Membership Interests in the Company.
Holders of fewer than 50,000 shares of the Corporation's common stock as of
October 9, 1996, the Record Date, will receive, upon surrender of their
shares, a cash payment in lieu of the distribution of Class A Membership
Interests in the Company. This amount totaled $1,940,980 and was recorded as
a payable of the Corporation. The Corporation was then dissolved and the
Class A Membership interests were distributed pro rata to the Corporation's
shareholders who owned 50,000 shares or more of the Corporation's common
stock.

        Net investment income increased by approximately 69% to $3,373,259 in
1996 from $1,990,203 in 1995. The increase in net investment income from 1995
to 1996 is due primarily to a $600,000 decrease in the change in the
provision for loan losses, a $332,000 decrease in the net loss from
foreclosed property held for sale, a $225,000 decrease in general and
administrative expenses for costs associated with the Company's restructuring
into a limited liability company and a $65,000 decrease in other general and
administrative expenses, primarily for loan advisory and professional service
fees.



* Not relevant under the new structure (Note 1).

                                      5



        (2) Concurrently with the consummation of the Restructuring, the
Company offered Class B Membership Interests in a separate offering to create
a new investment pool. The proceeds from the offering of Class B Membership
Interests totaled $22,500,000 and are invested in money market funds at
December 31, 1996. The net proceeds from the offering of Class B membership
interests will be invested in short-term investments until such time as the
proceeds are invested in real estate loans. Investment income and net
investment income earned by Class B Assets totaled $74,178 and $68,593,
respectively, for the period December 6, 1996 to December 31, 1996.

        (3) Net investment income decreased by approximately 23% from
$2,587,550, or $.57 per share, for 1994 to $1,990,203, or $.44 per share for
1995. The decrease in net investment income from 1994 to 1995 is due
primarily to a $1,061,500 increase in the change in the provision for loan
losses and a $405,000 increase in general and administrative expenses, of
which $313,000 is for costs associated with the Company's planned
restructuring into a limited liability company, offset by a $963,000 decrease
in net loss from foreclosed property held for sale. Of the cash dividend of
$.34 per share paid in 1995, $.06 was paid from taxable income earned in 1994
and $.28 was paid from taxable income in 1995. All dividends paid have been
ordinary income to shareholders.

        (4) Net investment income decreased by approximately 4% from
$2,700,898, or $.60 per share, for 1993 to $2,587,550, or $.57 per share, for
1994. The decrease in net investment income from 1993 to 1994 is due
principally to a $994,000 increase in the valuation provision for foreclosed
property held for sale, offset by a $462,000 decrease in the allowance for
loan losses, a $278,000 decrease in other operating expenses and $114,000 of
income from a loan prepayment penalty. Of the cash dividend of $.63 per share
paid in 1994, $.08 was paid from taxable income earned in 1993 and $.55 was
paid from taxable income earned in 1994.

        (5) Net investment income increased by approximately 28% from
$2,112,662, or $.47 per share, for 1992 to $2,700,898, or $.60 per share, for
1993. The increase in net investment income from 1992 to 1993 is due
principally to a $900,000 decrease in allowance for loan losses expense,
offset by the net loss from operations of foreclosed property held for sale
of approximately $338,000. Of the cash dividend of $.54 per share paid in
1993, $.03 was paid from taxable income earned in 1992 and $.51 was paid from
taxable income earned in 1993.
</TABLE>

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

        As a result of the restructuring discussed above, the following
presents the 1996 results of operations individually for the Class A and
Class B Membership Interests.

Results of Operations, Class B Membership Interests

        Proceeds of $22,500,000 from the offering of Class B Membership
Interests were received by the Company on December 6, 1996. At December 31,
1996, the net assets of the Class B investment pool totaled $22,977,946 and
were primarily invested in money market funds. Certain organization costs of
the Class B investment pool have been capitalized at cost and will be
amortized over five years. Net organization costs at December 31, 1996
totaled $403,768. The net proceeds from the offering of Class B Membership
Interests will be invested in short-term

                                      6



investments until such time as the proceeds are invested in real estate
loans. Investment income and net investment income earned by Class B Assets
totaled $74,178 and $68,593, respectively, for the period December 6, 1996 to
December 31, 1996.

Results of Operations, Class A Membership Interests

        The Company's net investment in mortgage loans to real estate
projects represented 64% of its assets, or $28,281,266, at December 31, 1996
and 61% of its assets, or $25,364,328, at December 31, 1995. The yields on
the Company's outstanding mortgage loans range from 6.75% to 12.25%. The
weighted average yield of earning mortgage loans is 10.05% at December 31,
1996, as compared to 10.27% at December 31, 1995. The weighted average term
of outstanding mortgage loans is 8.1 years. At December 31, 1996, the Company
had outstanding loan commitments for additional mortgage loans aggregating
$415,570. The amount of marketable securities (which consisted primarily of
Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation mortgage-backed, pass-through securities and U.S. Treasury Notes)
held by the Company during 1996 averaged $14,929,830 and earned an average
yield of 6.2%, as compared to average marketable security holdings of
$11,992,000 which earned an average yield of 5.6% during 1995. The average
yield on all interest earning assets was 8.75% for the year ended December
31, 1996 and 8.71% for the year ended December 31, 1995.

        Investment income from marketable securities increased $264,020 to
$930,713 for the year ended December 31, 1996 from $666,693 for the year
ended December 31, 1995. Of the increase, $163,318 was the result of an
increase in the average amount invested in marketable securities and $100,702
was the result of an increase in the average yield earned.

        Investment income from money market securities decreased $108,243 to
$86,188 for the year ended December 31, 1996 from $194,431 for the year ended
December 31, 1995. Of the decrease, $89,205 was the result of a decrease in
the average amount invested in money market securities and $19,038 was the
result of a decrease in average yield.

        Investment income from mortgage loans increased $41,991 to $2,796,966
for the year ended December 31, 1996 from $2,754,975 for the year ended
December 31, 1995. Of the increase, $101,427 was the result of an increase in
the average amount invested in mortgage loans offset by a $59,436 decrease in
the average yield.

        Miscellaneous income decreased $35,245 to $107,671 for the year ended
December 31, 1996 from $142,916 for the year ended December 31, 1995. The
decrease primarily results from a $24,600 decrease in income from guarantor
settlements.

        Operating expenses decreased 69% to $552,141 for the year ended
December 31, 1996 from $1,773,856 for the year ended December 31, 1995. This
decrease is due primarily to a $600,000 decrease in the change in the
provision for loan losses, a $332,000 decrease in net loss from foreclosed
property held for sale, a $225,000 decrease in general and administrative
expenses for costs associated with the Company's restructuring into a limited
liability company, and a $65,000 decrease in other general and administrative
expenses, primarily for loan advisory and professional service fees.

                                      7



        Net investment income increased by 69% to $3,373,259 for the year
ended December 31, 1996 from $1,990,203 for the year ended December 31, 1995
as a result of the items discussed above.

        Management reviews, on a regular basis, factors which may adversely
affect its mortgage loans, including occupancy levels, rental rates and
property values. It is possible that economic conditions in southeastern
Michigan, and the nation in general, may adversely affect certain of the
Company's other loans.

        The Company had maintained an allowance for doubtful accounts of
$1,461,500 from December 31, 1992 through the third quarter of 1994 to
reflect the expected recoverable cash flows from three troubled loans.

        During 1994, the cash flows generated by one of the above loans which
had previously been in default, collateralized by a shopping center,
increased significantly. As this increase was supported by an improvement in
tenant base, the Company determined at December 31, 1994 that this loan no
longer required a loss reserve. The loan loss reserve was reduced,
accordingly, by $461,500 during the fourth quarter of 1994 to $1,000,000. The
other loan with an affiliated borrower, which was also formerly in default,
had not exhibited the same magnitude of improvement in cash flows and tenants
during 1994. The loan loss reserve, however, was further reduced by $250,000
in the second quarter of 1995, based on the Company's determination that the
continued assignment of rents reduced the risk of loss associated with this
loan.

        In 1994, only one loan was operating under a loan modification
agreement. The borrower was current with the modified debt service
requirements during 1994, although the underlying apartment collateral
continued to experience high tenant turnover and poor cash flow, and monthly
debt service payments were occasionally late. During 1995, the borrower tried
unsuccessfully to find a buyer for this property. The physical property
collateralizing the loan began to deteriorate as the year progressed. An
independent analysis of the loan portfolio performed in the third quarter of
1995, confirmed the deterioration of the property compared to similar
properties in the surrounding geographic location. The independent valuation
also identified a loan, collateralized by a shopping center which has begun
to experience limited market rent potential based on recent commercial
developments in its surrounding market area. Based on the results of this
independent market valuation, the allowance relating to these loans was
increased by $850,000 during the third quarter of 1995. The Company believes
that the allowance for loan losses of $1,600,000 at December 31, 1996 and
1995 is adequate to reflect mortgage loans at their estimated net realizable
value.

        On December 23, 1992, the Company obtained an apartment building
located in Detroit, Michigan, through a foreclosure sale. This property was
the collateral for a construction loan under which the borrower defaulted
during 1992. The carrying value of the property was written down to its
estimated fair value at the time of foreclosure of $2,100,000, based upon a
July 1992 independent appraisal, net of a $140,000 valuation allowance for
the estimated costs to sell the property. At December 31, 1994 the carrying
value of the property was reduced to $900,000 to reflect an updated property
valuation based on the results of the Company's marketing efforts to locate a
buyer for the property. The carrying value of the property was further
written down to $555,000 during the quarter ended June 30, 1995 as the result
of an offer to purchase the property.

                                      8



        On August 1, 1995, the sale of this property was consummated. In
accordance with the terms of the purchase agreement, the Company received
$100,000 of the purchase price at the August 1, 1995 settlement date. The
remaining $455,000 of the purchase price will be paid, pursuant to the terms
of a mortgage note bearing interest at 10% per annum, in monthly installments
of principal and interest of $4,889 commencing in September 1995 until
maturity in August 2000, at which time the remaining unpaid principal of
approximately $375,000 is due. The mortgage note is guaranteed by the
borrower and may be prepaid in whole or in part at any time.

        During 1994, the Company reached settlements with the guarantors of
the foreclosed loan aggregating $320,000. These settlements are payable over
four to eight years, with interest rates ranging from noninterest-bearing to
7.5%. Income from settlements is recorded as miscellaneous income when
received and totaled $37,000, $62,000 and $43,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. The property's operating
income and expenses, from the date of foreclosure through the date of sale,
are reflected in the statement of operations as net loss from foreclosed
property held for sale and total $331,953 and $1,295,416 for the years ended
December 31, 1995, and 1994, respectively.

        Investment income from marketable securities increased $295,969 to
$666,693 for the year ended December 31, 1995 from $370,724 for the year
ended December 31, 1994. Of the increase, $178,051 was the result of an
increase in the average amount invested in marketable securities and $117,918
was the result of an increase in the average yield earned.

        Investment income from money market securities increased $9,444 to
$194,431 for the year ended December 31, 1995 from $184,987 for the year
ended December 31, 1994. Of the increase, $56,106 was the result of an
increase in average yield offset by a $46,662 decrease in the average amount
invested in money market securities.

        Investment income from mortgage loans decreased $318,255 to
$2,754,975 for the year ended December 31, 1995 from $3,073,230 for the year
ended December 31, 1994. Of the decrease, $233,321 was the result of a
decrease in average amount invested in mortgage loans and $84,934 was the
result of a decrease in the average yield.

        Miscellaneous income decreased $86,033 to $142,916 for the year ended
December 31, 1995 from $228,949 for the year ended December 31, 1994. The
increase primarily resulted from $114,000 in prepayment penalties received in
1994 offset by a $19,000 increase in income from guarantor settlements from
1994 to 1995.

        Operating expenses increased 40% to $1,773,856 for the year ended
December 31, 1995 from $1,270,478 for the year ended December 31, 1994. This
increase is due to a $1,061,500 increase in the change in the provision for
loan losses, a $312,944 increase in general and administrative expenses for
costs associated with the Company's planned restructuring into a limited
liability company, and a $92,397 increase in other general and administrative
expenses, due primarily to increased loan advisory and professional service
fees, offset by a $963,463 decrease in net loss from foreclosed property held
for sale.

                                      9



        Net investment income decreased by 23% to $1,990,203, or $.44 per
share, for the year ended December 31, 1995 from $2,587,550, or $.57 per
share for the year ended December 31, 1994 as a result of the items discussed
above.

        The Company intends to continue to invest its available funds at
competitive market rates in mortgage loans to real estate projects located in
southeastern Michigan. Cycles in the local and national economy have affected
and could continue to affect the Company's ability to invest its remaining
funds in mortgage loans and the yields attainable on such investments.
Decreases in market interest rates may result in lower returns on future
mortgage loans than on the mortgage loans closed to date. Although the
Company expects to have the balance of its available assets fully invested in
mortgage loans by the end of 1998, management will continue its prudent
approach of approving funding only of those loans which meet appropriate
underwriting criteria.

Liquidity and Capital Resources

        Funds that have not yet been invested in mortgage loans are primarily
invested in marketable securities until needed for the Company's operations
or investments in mortgage loans. Income and principal received with respect
to the Company's investments in mortgage loans are also invested in
marketable securities pending distribution to members in the form of
dividends or reinvestment in mortgage loans.

        At December 31, 1996, the Class A investment pool had $28,281,266
invested in mortgage loans, $8,185,704 invested in marketable mortgage-backed
securities, $6,526,289 invested in U.S. Treasury Notes and $638,742 invested
in money market funds. The Company does not invest in high risk,
mortgage-backed securities such as interest only strips or residual
traunches. However, there can be no assurance that cash flows will
materialize as scheduled as a result of prepayments of the underlying
mortgages or that the proceeds can be invested in securities that will
provide comparable yields. At December 31, 1996, the Company had outstanding
loan commitments aggregating $415,570. The source of funds to satisfy these
commitments will be the Company's marketable securities. The Company
anticipates that its sources of cash are more than adequate to meet its
liquidity needs.

        Proceeds of $22,500,000 from the offering of Class B Membership
Interests were received by the Company on December 6, 1996. At December 31,
1996, the net assets of the Class B investment pool totaled $22,977,946 and
were primarily invested in money market funds. Certain organization costs of
the Class B investment pool have been capitalized at cost and will be
amortized over five years. Net organization costs at December 31, 1996
totaled $403,768. The net proceeds from the offering of Class B Membership
Interests will be invested in short-term investments until such time as the
proceeds are invested in real estate loans. Investment income and net
investment income earned by Class B Assets totaled $74,178 and $68,593,
respectively, for the period December 6 to December 31, 1996.

        Net cash generated by operating activities during 1996 aggregated
$3,231,473, including $3,394,771 in net investment income adjusted for
noncash depreciation and amortization expense, and amortization of net loan
origination fees.

                                      10



        Net cash used in investing activities during 1996 aggregated
$4,317,476 and consisted primarily of purchases of marketable securities and
loan disbursements offset by collections of principal from marketable
securities and loan repayments. The Company purchased $8,039,531 of
marketable securities and disbursed $3,355,137 in loans. The Company
collected $6,573,374 of principal from marketable mortgage-backed securities
and $436,818 of loan repayments.

        Net cash provided by financing activities during 1996 aggregated
$22,001,461. Financing activities in 1996 consisted of proceeds from the
offering of Class B Membership Interests of $22,500,000 and dividend payments
to shareholders of $498,539 which represented $.11 per outstanding share.

        The Company's policy is to declare and pay cash dividends on a
quarterly basis. The Company declared and paid dividends aggregating $.11 per
share during the year ended December 31, 1996, compared to $.34 per share
during the year ended December 31, 1995 and $.63 per share during the year
ended December 31, 1994. For the quarters ending June 30 and September 30,
1996, no cash divided was declared by the Company in anticipation of a
liquidating dividend upon the consummation of the restructuring of the
Company from a real estate investment trust to a limited liability company.
In accordance with the terms of the Operating Agreement, Class A and Class B
members will receive quarterly distributions of cash income, less expenses,
from their respective class of net assets. The Operating Agreement also
provides for the pass through to Class A members (commencing in the year
2001, if elected) and Class B members (commencing in the year 2000) of
principal returned with respect to real estate investments and any cash
and cash equivalents which have not been invested in real estate
investments.

        The Company adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan" (SFAS 114), as
amended by SFAS 118, on January 1, 1995. Under these new standards, a loan is
considered impaired, based on current information and events, if it is
probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. The measurement of impaired loans is based on the discounted cash
flows of the underlying collateral. The cumulative effect of adopting the
provisions of SFAS No. 114 was not significant.

        The Company adopted SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments," at December 31, 1995; SFAS 107 requires disclosure of
fair value information about financial instruments along with the valuation
method and significant assumptions used.

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        The financial statements of the Company, consisting of balance sheet,
statement of operations, statement of members'/shareholders' equity,
statement of cash flows and the notes to financial statements, are set
forth in the separate financial section which begins on page F-1 and is
incorporated herein by reference.

                                      11



ITEM 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
               AND FINANCIAL DISCLOSURE.

        There have been no changes in the Company's independent public
accountants during the past two fiscal years, and the Company does not
disagree with such accountants on any matter of accounting principles,
practices or financial statement disclosure.



                                      12




                                   PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Managing Board Members

        Pursuant to the terms of the Company's Operating Agreement, the
Company's Managing Board Members are appointed from time to time by the
Company's Member-Managers. The Company's Member-Managers are (a) those
Members with a Total Percentage Interest (as defined in the Operating
Agreement) at least equal to the Minimum Percentage (defined as a Total
Percentage Interest which represents a positive Adjusted Capital Account
Balance of $2,500,000) and (b) to the extent not previously taken into
account, those Class A Members (but excluding their assignees) which held
sufficient shares of Metropolitan Realty Corporation's common stock
immediately prior to the initial capital contribution of the Class A Members
to elect at least one director at an annual meeting of the shareholders of
Metropolitan Realty Corporation, and in either case which have not declined
in writing to serve as Member-Managers.

        Each Member-Manager is entitled, but is not required, to appoint the
greater of one (1) Managing Board Member to the Managing Board or that number
obtained by dividing such Member-Manager's Total Percentage Interest by the
Minimum Percentage, rounded down to the nearest whole number. The Managing
Board will consist of that number of Managing Board Members appointed from
time to time by the Member-Managers of the Company, but in no event will the
number of Managing Board Members be fewer than three (3) or greater than
forty (40). The Company's Operating Agreement also permits the appointment by
the Managing Board of a limited number of at-large Managing Board Members. A
Managing Board Member may resign by written notice to the Company. A
Member-Manager may at any time upon written notice to the Managing Board
replace one of its appointees to the Managing Board, or fill an opening on
the Managing Board (i) which exists because it did not appoint the full
number of Managing Board Members to which it is entitled, (ii) which was
created by the death, resignation or removal by such Member-Manager of a
Managing Board Member which it had previously appointed or (iii) which was
created by an increase in such Member-Manager's Total Percentage Interest.



                                      13






        The following table sets forth those Member-Managers of the Company
which have not declined to appoint Managing Board Members, and the Managing
Board Members which have been appointed by them.
<TABLE>
<CAPTION>

===============================================================================
                                                      Appointee(s) to the
     Member-Manager                                   Managing Board
------------------------------------------------------------------------------
<S>                                              <C>
Chrysler Corporation Master Retirement           Russell P. Flynn
Trust                                            F. Thomas Lewand
                                                 Kenneth L. Hollowell
                                                 Marc Stepp
                                                 Ernest Lofton

Ford Motor Company                               Wayne S. Doran
                                                 Robert G. Jackson
                                                 Joel A. Schwartz

Operating Engineers Local 324 Pension            Daniel L. Boone
Fund                                             Jeffrey A. Heldt
                                                 David B. Hanson

State of Michigan, Public School                 R. Douglas Trezise
Employees

Policemen & Firemen Retirement System            Michael Nevin
of the City of Detroit                           Nicholas H. Degel
                                                 Thomas Zdrodowski

General Retirement System of the City of         Harold Smith
Detroit

Macomb County Employees Retirement               David M. Diegel
System


Wayne County Retirement System                   Ronald C. Yee


Michigan National Corporation                    Douglas E. Ebert
                                                 Richard C. Webb

Blue Cross and Blue Shield of Michigan           Robert H. Naftaly
                                                 Mark R. Bartlett

At Large                                         Robert J. Lee
                                                 Richard P. Kughn
                                                 Frank D. Stella
==============================================================================
</TABLE>

        The following table sets forth certain information regarding each
Managing Board Member, including name, age, principal occupation for the past
five years, other directorships with publicly-

                                      14





owned companies or with public institutions and term of service as a Managing
Board Member of the Company. The information set forth in the table was
provided to the Company by each Managing Board Member.
<TABLE>
<CAPTION>

========================================================================================================
                                                                                         Has Served
                                                                                            as a
                                                                                          Managing
                                                                                            Board
                                                                                           Member
       Name and Age                         Principal Occupation                           Since*
--------------------------------------------------------------------------------------------------------
<S>                        <C>                                                            <C>
Mark R. Bartlett, 36       Vice President-Chief Financial Officer,                         1996(2)(4)
                           1996 to present,Vice President-Controller,
                           1994 to 1996, Director-Financial Accounting, 1989 to
                           1994, Blue Cross and Blue Shield of Michigan.

Daniel L. Boone, 48        Business Representative, International Union of                 1991(2)(4)
                           Operating Engineers Local 324, a labor organization,
                           since 1987. Has been with the Apprenticeship Program
                           since 1989. Previously worked as an Operating Engineer
                           since 1967.

Nicholas H. Degel, 48      Assistant Administrative Supervisor, Detroit Police &           1996(3)(4)
                           Fire Retirement System, a public retirement system.

David M. Diegel, 51        Finance Director, Macomb County, Michigan, serving as           1993(2)
                           its Chief Financial Officer since 1984. Previously served
                           as Assistant Finance Director, Audit Officer, and Chief
                           Accountant for the County of Macomb from 1973 to 1984.
                           Currently serves as Secretary to the Macomb County
                           Employees Retirement Commission and as an ex-officio
                           Member of the Macomb County Criminal Justice Building
                           Authority.

Wayne S. Doran, 62         Chairman of the Board of Ford Motor Land Development Corp.,     1988(1)
                           a real estate development company, since 1978.

Douglas E. Ebert, 51       Chief Executive Officer, 1995 to Present, and President         1996
                           and Chief Operating Officer, 1993 to 1995, Michigan
                           National Corporation, a bank holding company. Chief
                           Executive Officer and President, Lincoln Financial
                           Corporation, a bank holding company, 1992 to 1993.

Russell P. Flynn, 64       Treasurer of the Company since 1994; Director, Pension          1988(1)(3)
                           Fund Investments for Chrysler Corporation, where he has
                           been responsible for investment of the pension assets of
                           Chrysler Corporation since 1981.

David B. Hanson, 50        Senior Vice President, Walbridge Aldinger, a construction       1994(2)
                           management and general contractor, since 1995.
                           Vice President and General Manager of Turner
                           Construction Co., a construction management company and
                           general contractor, from 1984 to 1995. Serves on the
                           Boards of Directors of Greater Detroit Chamber of
                           Commerce, African American Association of Businesses
                           and Contractors, and Boys Hope-Detroit.

Jeffrey A. Heldt, 48       Self-employed as an attorney since 1988.                        1996(1)

                                      15



Kenneth L. Hollowell, 52   Secretary-Treasurer, Teamsters Local Union #247,                1992(2)
                           since March 1988, and a staff member and/or officer
                           since May 1971. Served as Member, Policy Committee
                           of the Central Conference of Teamsters from 1992 to
                           1994. Michigan Teamsters Joint Council #43,
                           Executive Board member since 1989 currently its
                           Recording Secretary. Board member Economic Alliance
                           of Michigan. Member of Police Commissioners, City of
                           Detroit, since May 1994.

Robert G. Jackson, 65      President, since 1985, and Executive Vice President,            1988
                           from 1977 to 1985, of Ford Motor Land Development
                           Corp., a real estate development company.

Richard P. Kughn, 67       Chairman of the Board of the Company since July 1989.           1987(1)
                           In addition, Chairman and President of Kughn
                           Enterprises, a real estate development and asset
                           management company, since 1979. Chairman Emeritus
                           and minority owner of Lionel L.L.C. Other ventures
                           include: The Upper Deck Company, a sports card
                           manufacturer; The Whitney Restaurant, Detroit;
                           Longbow Productions, a film and television production
                           company. Serves on the Board of Trustees of the
                           University of Detroit Mercy. Serves on the Board of
                           Directors of AAA Michigan, Core Industries, Detroit
                           Chamber of Commerce and Michigan Historical
                           Foundation.

Robert J. Lee, 50          Secretary-Treasurer, Michigan State Building and                1996
                           Construction Trades Council. Previously served as a
                           Field Representative for the Council from 1985 to
                           October 1996. Pipe fitter by trade.

F. Thomas Lewand, 50       Partner, Bodman, Longley & Dahling LLP since 1992,              1988(1)
                           a Detroit, Michigan-based law firm; practicing
                           attorney with and shareholder of Jaffe, Raitt,
                           Heuer & Weiss, Professional Corporation from 1970
                           to 1992. Serves as a Trustee of the University of
                           Detroit Mercy. Chair of Partners in Service, an
                           interfaith volunteer organization. Also served as
                           Chairman of the Michigan Democratic Party from
                           1989-1990 and Chief of Staff to Michigan Governor
                           Blanchard in 1983.

Ernest Lofton, 65          Vice President, UAW International Union, Director of            1991
                           the UAW National Ford Department and Director of the
                           UAW Michigan Community Action Program Department,
                           since 1989.  Served as a member of the UAW
                           International Executive Board since May 1983 when
                           elected Director of UAW Region 1A. Serves on the
                           Board of the NAACP; Blue Cross & Blue Shield of
                           Michigan; New Detroit, Inc.; Detroit Economic Growth
                           Corporation; and Economic Alliance of Michigan;
                           National Secretary of the Coalition of Black Trade
                           Unionists and a member of the Economic Policy
                           Council of the UNA.

                                      16



Robert H. Naftaly, 59      Executive Vice President and Chief Operating Officer            1989(1)(3)
                           of Blue Cross and Blue Shield of Michigan, since
                           1988. Previously served as Vice President and General
                           Auditor of Detroit Edison Company, an electric
                           utility, since July 1987; Director - Michigan
                           Department of Management and Budget from 1983 to
                           July 1987; and managing partner and founder of
                           Geller, Naftaly & Shapero, C.P.A.s from 1960 to
                           October 1983. Also serves on numerous national and
                           community associations.

Michael Nevin, 32          Treasurer, Firefighter's Union Local #344, since                1996(2)
                           January, 1996.Firefighter, City of Detroit, and
                           representative of Firefighter's Union Local #344
                           since 1991.

Joel A. Schwartz, 35       Project Manager, Ford Motor Land Services Corporation,          1995(4)
                           a real estate developer, since 1990. Adjunct Professor
                           of Corporate Finance, Wayne State University,
                           School of Business Administration, since 1993.
                           Associate, Plante & Moran Certified Public Accountants
                           & Management Consultants, 1983 to 1990.

Harold Smith, 56           Retired. Former Chief City Planner, City of Detroit             1995(2)
                           Planning Department, for 31 years.

Frank D. Stella, 77        Founder (in 1946) and Chairman and Chief Executive              1987(4)
                           Officer of the F.D. Stella Products Company and
                           Chairman of F.D. Stella International New York,
                           engaged in design and distribution of food service
                           and dining equipment. Former chairman of the Finance
                           Committee of the Michigan State Republican Committee,
                           trustee of the University of Detroit Mercy, director
                           of the Economic Club of Detroit, director of
                           Complete Business Solutions, Inc. (CBSI), past
                           member of the Executive Committee of the
                           Republican National Committee, past chairman of the
                           National Republican Heritage Groups Council, past
                           director of the Michigan Chamber of Commerce, past
                           Chairman of the Greater Detroit Chamber of
                           Commerce, past chairman of the Concerned Citizens
                           for the Arts of Michigan, Director and Member of
                           Executive Committee of the Detroit Symphony
                           Orchestra Hall, Chairman of the Board of Merrill
                           Palmer Institute of Wayne State University and
                           Director and Vice President of Michigan Opera Theatre.

Marc Stepp, 74             Executive Director, Institute for Urban and Community           1987
                           Affairs,University of Detroit Mercy. Previously
                           served as Vice President of the International United
                           Auto Workers (`UAW') since 1974. Served as director
                           of the UAW's Chrysler Department, General Dynamics
                           Department, Foundry Department and Job Development
                           and Training Department.

                                      17



R. Douglas Trezise, 72     Retired. Previously served as Deputy State Treasurer,           1991(3)
                           Michigan Department of Treasury, from 1975 to 1990.
                           Was a member of the Michigan House of
                           Representatives from 1971 to 1974. Was employed by
                           General Telephone Company of Michigan (now GTE) from
                           1950 to 1970. From 1967 to 1975, served as a director
                           of the First Federal Savings and Loan Association of
                           Owosso. Member of Owosso Advisory Committee to First
                           Federal of Detroit (now First Federal of Michigan)
                           from 1975 to 1989. Chairman of State Employees'
                           Retirement Board.

Richard C. Webb, 57        Head of Commercial Financial Services, Michigan                 1996(1)
                           National Bank, a banking corporation. Previously
                           held the positions of Senior Executive Vice
                           President of Michigan National Bank; Executive
                           Vice President of Michigan National Bank; Southeast
                           Region Chairman; Group Vice President Michigan
                           National Bank of Detroit National Division;
                           President of Michigan National Bank of Detroit
                           Retail Banking Division; President of Michigan
                           Corporation Electronic Services and Products
                           Division; and Region Chairman Michigan National
                           Corporation-East Region.

Ronald C. Yee, 44          Director of Risk Management, Wayne County, and                  1991(2)(3)
                           since 1990.  Assistant Executive Secretary to Wayne
                           County Employees Retirement System. Served as Chief
                           Labor Relations Analyst for Wayne County Labor
                           Relations from 1986 to 1990.

Thomas Zdrodowski, 56      Administrative Supervisor, Policemen & Firemen                  1996
                           Retirement System of the City of Detroit, since 1988.
========================================================================================================
<FN>

*       Service as a Managing Board Member prior to December 6, 1996 was as a
        director of Metropolitan Realty Corporation, the Company's
        predecessor in interest.

(1)     Member of the Executive Committee
(2)     Member of the Loan Committee
(3)     Member of the Audit Committee
(4)     Member of the Nominating Committee
</TABLE>

                                      18





Executive Officers

        The table below sets forth certain information concerning the
Company's executive officers.
<TABLE>
<CAPTION>

==============================================================================
       Name        Age                  Office                 Time in Office
       ----        ---                  ------                 --------------
<S>                 <C>     <C>                           <C>
Richard P. Kughn*   67      Chairman of the Board         Since July 1989**

Harold Smith*       56      Vice Chairman of the Board    Since December 1996

Robert G. Jackson*  65      President                     Since December 1996

Robert J. Lee       50      Secretary                     Since December 1996

Russell P. Flynn*   64      Treasurer                     Since March 1994**
==============================================================================
<FN>

*For a discussion of the officers' principal occupation and business
experience during the past five (5) years, see the information provided under
"Board of Directors", above.

**Service in such office prior to December 1996 was with Metropolitan Realty
Corporation.
</TABLE>

ITEM 11.       EXECUTIVE COMPENSATION.

        The Company's predecessor, Metropolitan Realty Corporation, entered
into an Agency and Consulting Agreement dated as of February 4, 1993 with
Mattar Consulting Services, Inc. ("MCS"), pursuant to which MCS provides
certain financial and business consulting and other services to the Company.
Nancy A. Mattar is President of MCS and was Metropolitan Realty Corporation's
Executive Vice President from the date of such Agreement until the
consummation of the Restructuring. The Agreement provided for annual
compensation of $46,746, $44,520 and $42,400, respectively, for 1996, 1995
and 1994. The Agreement has been extended by the Company through March 31,
1997 and provides for monthly compensation in the amount of $3,896.

        Robert G. Jackson became the President and Chief Executive Officer of
the Company on December 6, 1996 concurrently with the consummation of the
restructuring of the Company. Mr. Jackson has waived compensation for
services rendered to the Company in 1996. No cash or other compensation was
paid to any other executive officer of the Company for services performed
during 1996, except to the extent any such individual may have been
reimbursed for out-of-pocket expenses incurred in connection with his duties
as a member of the Managing Board or a committee thereof.

        The Operating Agreement of the Company provides that no Managing
Board Member is entitled to compensation for serving as a Managing Board
Member in connection with regular or special meetings of the Managing Board.
The Managing Board Members may, by the affirmative vote of a majority of the
Managing Board Members in office, reimburse Managing Board Members and
committee members for their reasonable out-of-pocket expenses incurred in
connection with their duties and may establish reasonable compensation of
Managing Board Members for serving as a member of any committee established
by the Managing Board. To date, the Company has not paid any compensation
to any Managing Board Member for serving as a member of any committee.

                                      19




ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Certain Beneficial Owners of Class A Membership Interests

        The following table sets forth certain information regarding the
entities which, to the Company's knowledge and belief, were the beneficial
owners of more than five percent (5%) of the Company's outstanding Class A
Membership Interests as of December 31, 1996.

<TABLE>
<CAPTION>

=====================================================================================================
                                   CLASS A MEMBERSHIP INTERESTS
-----------------------------------------------------------------------------------------------------

                                                                  Nature of
                                                                 Beneficial            Percent
           Name and Address of Beneficial Owner                   Ownership          of Class(2)
-----------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>
Chrysler Corporation Master Retirement Trust...............          (1)               18.24%
12000 Oakland Ave.
Highland Park, MI 48203

Ford Motor Company.........................................          (1)               17.67%
Ford Motor Company World Headquarters
The American Road
Dearborn, MI 48121

Operating Engineers Local 324 Pension Fund.................          (1)               11.55%
37450 Schoolcraft, Suite 110
Livonia, MI 48150

Board of Trustees..........................................          (1)                5.24%
General Retirement Systems of Detroit

Board of Trustees..........................................          (1)                5.24%
Policemen & Firemen Retirement System of the City of Detroit

State Treasurer of the State of Michigan,
State Employees Retirement System..........................          (1)                5.02%

State Treasurer of the State of Michigan,
Public School Employees Retirement System..................          (1)               10.03%

Macomb County Employees Retirement System..................          (1)                5.24%

Wayne County Retirement System.............................          (1)                5.24%

NBD Bancorp, Inc...........................................          (1)                5.20%
=====================================================================================================
<FN>

(1)     Reflects Class A Membership Interests held of record or beneficially
        as to which the named beneficial owner exercises sole voting and
        investment power.

(2)     Based on the assumption that 214,948 in minority shares will be
        surrendered.
</TABLE>

                                      20



Certain Beneficial Owners of Class B Membership Interests

        The following table sets forth certain information regarding the
entities which, to the Company's knowledge and belief, were the beneficial
owners of more than five percent (5%) of the Company's outstanding Class B
Membership Interests as of December 31, 1996.

<TABLE>
<CAPTION>

=====================================================================================================
                                   CLASS B MEMBERSHIP INTERESTS
-----------------------------------------------------------------------------------------------------

                                                                  Nature of
                                                                 Beneficial            Percent
           Name and Address of Beneficial Owner                   Ownership           of Class
-----------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>
Chrysler Corporation Master Retirement Trust...............          (1)               22.12%
12000 Oakland Ave.
Highland Park, MI 48203

Michigan National Corporation..............................          (1)               22.12%
27777 Inkster Road
Farmington Hills, MI 48333-9065

Blue Cross and Blue Shield of Michigan.....................          (1)               22.12%
600 East Lafayette #2105
Detroit, MI 48226

Policemen and Firemen Retirement System
  of the City of Detroit...................................          (1)               22.12%
908 City County Building
Detroit, MI 48226

Operating Engineers Local 324 Pension Fund.................          (1)               11.06%
37450 Schoolcraft, Suite 110
Livonia, MI 48150
=====================================================================================================
<FN>

(1)     Reflects Class B Membership Interests held of record or beneficially
        as to which the named beneficial owner exercises sole voting and
        investment power.
</TABLE>

                                      21



Management

        The Company's Managing Board Members and Executive Officers are not
the record holders of any of the Company's Class A Membership Interests or
Class B Membership Interests.

        Richard C. Webb, a Managing Board Member, is an executive officer of
Michigan National Corporation, the Member-Manager which appointed him, and,
in such capacity, may be deemed to be the beneficial owner of the 22% Class B
Membership Interest owned of record by Michigan National Corporation, in that
he may have or share voting power or investment power over such membership
interest. Mr. Webb disclaims any beneficial interest in the Class B
Membership Interest owned of record by Michigan National Corporation.

        Robert H. Naftaly, a Managing Board Member, is an executive officer
of Blue Cross and Blue Shield of Michigan, the Member-Manager which appointed
him, and, in such capacity, may be deemed to be the beneficial owner of the
22% Class B Membership Interest owned of record by Blue Cross and Blue Shield
of Michigan, in that he may have or share voting power or investment power
over such membership interest. Mr. Naftaly disclaims any beneficial interest
in the Class B Membership Interests owned of record by Blue Cross and Blue
Shield of Michigan.


ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        The Company's predecessor, Metropolitan Realty Corporation, entered
into an Agency and Consulting Agreement dated as of February 4, 1993 with
Mattar Consulting Services, Inc. ("MCS"), pursuant to which MCS provides
certain financial and business consulting and other services to the Company.
Nancy A. Mattar is President of MCS, and was Executive Vice President of
Metropolitan Realty Corporation from 1993 until the consummation of the
Restructuring. The Agreement has been extended by the Company through March
31, 1997 and provides for monthly compensation in the amount of $3,896.

        Robert G. Jackson became the President and Chief Executive Officer of
the Company on December 6, 1996, concurrently with the consummation of the
restructuring of the Company. Mr. Jackson has waived compensation for
services rendered to the Company in 1996. No cash or other compensation was
paid to any other executive officer of the Company for services performed
during 1996, except to the extent any such individual may have been
reimbursed for out-of-pocket expenses incurred in connection with his duties
as a member of the Managing Board or a committee thereof.

        NBD Bancorp, Inc. ("NBD") is the record holder of a 5.2% Class A
Membership Interest of the Company. The Company and NBD Bank, N.A. (formerly
National Bank of Detroit) (the "Bank"), a wholly owned subsidiary of NBD,
entered into an Investment Management Service Agreement (the "Investment
Agreement") dated February 15, 1989, pursuant to which the Bank manages
certain of the Company's short-term investments. The Investment Agreement may
be terminated by either the Company or the Bank upon thirty (30) days'
written notice. The Bank is compensated by the Company for its services at
the rate of .15 of 1% per annum on the average daily market value of the
Company's portfolio, with a minimum annual charge of $5,000. Fees aggregating
$22,951

                                      22



were earned by the Bank in 1996 for services provided under the Investment
Agreement, as well as other services.

        The Company made a $4,376,000 mortgage loan in 1989 to Walbridge
Aldinger, a construction management company and general contractor of which
Mr. Hanson, a managing board member since 1994, became senior vice president
in January 1995. The carrying amount of the mortgage loan, reduced for
unamortized loan origination fees received in excess of loan origination
costs paid, was $4,177,441 at December 31, 1996. The mortgage note bears
interest at 9.09% and is due in December, 2000.

        Bodman, Longley & Dahling LLP provides legal services to the Company.
Mr. Lewand, a managing board member, is a partner in Bodman, Longley &
Dahling LLP. Fees for legal services amounted to $95,277 for the year ended
December 31, 1996.

                                      23



                                   PART IV

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

        a.     Documents Filed as part of Report. The following documents are
               filed as part of this Report.

               1.     A list of the financial statements required to be filed
                      as part of this Form 10-K are shown in the "Index to
                      the Financial Statements and Schedule" filed herewith.

               2.     The financial statement schedule required to be filed
                      as a part of this Form 10- K is shown in the "Index to
                      the Financial Statements and Schedule" filed herewith.

               3.     A list of the exhibits required by Item 601 of the
                      Regulation S-K to be filed as a part of this Form 10-K
                      are shown in the "Index to Exhibits" filed herewith.

        b.     Reports on Form 8-K. The Company filed a report on Form 8-K
               dated December 9, 1996 to report the consummation of the
               Restructuring described in Item 1 of this report on Form 10-K.
               No financial statements were filed with such report.

                                      24



                                  SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

Dated: March 27, 1997            METROPOLITAN REALTY COMPANY,
                                 L.L.C.



                                 By:      /s/ Robert G. Jackson
                                        ----------------------------
                                        Robert G. Jackson, President
                                        (Principal Executive Officer and
                                        Principal Financial Officer)

                            And By:       /s/ Russell P. Flynn
                                        ---------------------------
                                        Russell P. Flynn, Treasurer

                                      25





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

==============================================================================
               Signature                  Title                  Date
------------------------------------------------------------------------------
 /s/Robert G. Jackson               Attorney-In-Fact        March 27, 1997
*
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Mark R. Bartlett                         Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Daniel L. Boone                          Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Nicholas H. Degel                        Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
David M. Diegel                          Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Wayne S. Doran                           Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Douglas E. Ebert                         Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Russell P. Flynn                         Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
David B. Hanson                          Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Jeffrey A. Heldt                         Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Kenneth L. Hollowell                     Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Robert G. Jackson                        Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Richard P. Kughn                         Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Robert J. Lee                            Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
F. Thomas Lewand                         Member
------------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Ernest Lofton                            Member

                                      26



-----------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
-------------------------
Robert H. Naftaly                        Member
-----------------------------------------------------------------------------
                                     Managing Board         March 27, 1997
Michael Nevin                            Member
-----------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Joel A. Schwartz                         Member
-----------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
---------------------------
Harold Smith                             Member
-----------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Frank D. Stella                          Member
-----------------------------------------------------------------------------
                                     Managing Board         March 27, 1997
Marc Stepp                               Member
-----------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
R. Douglas Trezise                       Member
-----------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Richard C. Webb                          Member
-----------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Ronald C. Yee                            Member
-----------------------------------------------------------------------------
                 *                   Managing Board         March 27, 1997
--------------------------
Thomas Zdrodowski                        Member
=============================================================================

                                      27


                INDEX TO THE FINANCIAL STATEMENTS AND SCHEDULE

                                  ---------

                                                                     PAGES
                                                                     -----

REPORT OF INDEPENDENT ACCOUNTANTS                                     F-2

BALANCE SHEET, DECEMBER 31, 1996 AND 1995                             F-3

STATEMENT OF OPERATIONS FOR THE YEARS ENDED
        DECEMBER 31, 1996, 1995 AND 1994                              F-4

STATEMENT OF MEMBERS'/SHAREHOLDERS' EQUITY FOR THE YEARS
        ENDED DECEMBER 31, 1996, 1995 AND 1994                     F-5 - F-6

STATEMENT OF CASH FLOWS FOR THE YEARS ENDED
        DECEMBER 31, 1996, 1995 AND 1994                              F-7

NOTES TO FINANCIAL STATEMENTS                                     F-8  -  F-31

FINANCIAL STATEMENT SCHEDULE:

        Schedule II - Valuation and Qualifying Accounts               F-32


                                     F-1






                      REPORT OF INDEPENDENT ACCOUNTANTS

To the Managing Board and Member Managers of Metropolitan Realty Company,
L.L.C.:

We have audited the financial statements and the financial statement schedule
of Metropolitan Realty Company, L.L.C. listed on page F-1 of this Form 10-K.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial statement schedule
based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Metropolitan Realty Company,
L.L.C. as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information required to
be included therein.


/s/ Coopers & Lybrand

Detroit, Michigan
March 24, 1997



                                     F-2





<TABLE>
<CAPTION>

                     METROPOLITAN REALTY COMPANY, L.L.C.

                  BALANCE SHEET, December 31, 1996 and 1995

                                  ---------

                                                                               1996                           1995
                                                           -------------------------------------------        ----
                                                              Class A         Class B
ASSETS                                                         Member         Member
                                                              Interest        Interest        Total
                                                              --------        --------        -----
<S>                                                        <C>             <C>            <C>             <C>
Cash and cash equivalents ..............................   $    787,501    $ 22,574,178   $ 23,361,679    $  2,446,221
Marketable securities ..................................     14,661,426                     14,661,426      13,326,733
Mortgage notes receivable:
   Notes, unaffiliated .................................     25,703,825                     25,703,825      22,757,998
   Notes, affiliated ...................................      4,177,441                      4,177,441       4,206,330
   Allowance for loan losses ...........................     (1,600,000)                    (1,600,000)     (1,600,000)
                                                           ------------                   ------------    ------------
                                                             28,281,266                     28,281,266      25,364,328

Accrued interest and other receivables .................        330,555                        330,555         282,620
Other assets ...........................................         23,790                         23,790          26,780
Organization costs, net of accumulated
  amortization of $5,585 at December 31,
  1996 .................................................                        403,768        403,768         314,219
                                                           ------------    ------------   ------------    ------------

               Total assets ............................   $ 44,084,538    $ 22,977,946   $ 67,062,484    $ 41,760,901
                                                           ============    ============   ============    ============


LIABILITIES AND MEMBERS'/SHAREHOLDERS' EQUITY

Liabilities:
  Accounts payable .....................................   $  2,046,201                   $  2,046,201    $    125,532
  Due to (from) ........................................       (409,353)   $    409,353             --              --
  Deferred income ......................................        134,552                        134,552         153,952
  Deposits from borrowers for property taxes ...........        140,682                        140,682         146,385
  Other ................................................          3,645                          3,645           1,705
                                                           ------------    ------------   ------------    ------------

               Total liabilities .......................      1,915,727         409,353      2,325,080         427,574
                                                           ------------    ------------   ------------    ------------


Commitments ............................................           --              --             --              --
Members' equity:
  Class A Members' Equity ..............................     42,208,569                     42,208,569
  Class B Members' Equity ..............................                     22,568,593     22,568,593
  Unrealized holding losses on marketable securities
    available for sale .................................        (39,758)                       (39,758)
Shareholders' equity:
  Preferred stock, $.01 par value; 5,000,000 shares
    authorized; no shares issued and outstanding .......                                                          --
  Common stock, $.01 par value; 25,000,000 shares
    authorized; 4,532,169 shares issued and
    outstanding at December 31, 1995 ...................                                                        45,322
  Additional paid-in-capital ...........................                                                    43,355,529
  Unrealized holding gains on marketable
     securities available for sale .....................                                                        47,690
  Distributions of net investment income ...............                                                    (2,115,214)
                                                           ------------    ------------   ------------    ------------

        Total members'/shareholders' equity ............     42,168,811      22,568,593     64,737,404      41,333,327
                                                           ------------    ------------   ------------    ------------

            Total liabilities and members'/shareholders'
                equity .................................   $ 44,084,538    $ 22,977,946   $ 67,062,484    $ 41,760,901
                                                           ============    ============   ============    ============
<FN>
              The accompanying notes are an integral part of the
                            financial statements.
</TABLE>

                                     F-3





<TABLE>
<CAPTION>

                     METROPOLITAN REALTY COMPANY, L.L.C.

                           STATEMENT OF OPERATIONS
             for the years ended December 31, 1996, 1995 and 1994

                                  ---------


                                                            1996                      1995           1994
                                        ---------------------------------------       ----           ----
                                          Class A        Class B
                                           Member        Member
                                          Interest       Interest       Total
                                          --------       --------       -----
<S>                                     <C>           <C>           <C>           <C>           <C>
Income:

  Interest income:
    From mortgage notes, unaffiliated   $ 2,407,234                 $ 2,407,234   $ 2,363,121   $ 2,678,387
    From mortgage notes, affiliated .       389,732                     389,732       391,854       394,843

  Investment income .................     1,020,763   $    74,178     1,094,941       866,168       555,849

  Miscellaneous income ..............       107,671            --       107,671       142,916       228,949
                                        -----------   -----------   -----------   -----------   -----------

          Total income ..............     3,925,400        74,178     3,999,578     3,764,059     3,858,028
                                        -----------   -----------   -----------   -----------   -----------

Operating expenses:

  General and administrative ........       552,141            --       552,141       841,903       436,562

  Amortization of organization costs             --         5,585         5,585            --            --

  Change in allowance for loan losses            --            --            --       600,000      (461,500)

  Net loss from foreclosed
    property held for sale ..........            --            --            --       331,953     1,295,416
                                        -----------   -----------   -----------   -----------   -----------

          Total operating expenses ..       552,141         5,585       557,726     1,773,856     1,270,478
                                        -----------   -----------   -----------   -----------   -----------

          Net investment income .....   $ 3,373,259   $    68,593   $ 3,441,852   $ 1,990,203   $ 2,587,550
                                        ===========   ===========   ===========   ===========   ===========

Net investment income per share .....             *             *             *   $       .44   $       .57
                                                                                  ===========   ===========

Weighted average shares of common
  stock outstanding .................             *             *             *     4,532,169     4,532,169
                                                                                  ===========   ===========
<FN>
* Per share information is no longer relevant as a result of the
  restructuring described in Note 1.

              The accompanying notes are an integral part of the
                            financial statements.
</TABLE>


                                     F-4





<TABLE>
<CAPTION>

                     METROPOLITAN REALTY COMPANY, L.L.C.

                  STATEMENT OF MEMBERS'/SHAREHOLDERS' EQUITY
             for the years ended December 31, 1996, 1995 and 1994

                                  ---------

                                                                 Unrealized
                                                               Holding Gains
                                  Common Stock     Additional   (Losses) on   Distributions of  Members' Equity  Total Members'/
                               ------------------   Paid-in      Marketable    Net Investment   ---------------  Shareholder's
                                Shares    Amount    Capital      Securities       Income(1)     Class A Class B      Equity
                                ------    ------   ----------  -------------- ----------------  ------- -------  -------------
<S>                            <C>        <C>      <C>          <C>            <C>                                <C>
Balances at January 1, 1994    4,532,169  $45,322  $43,355,529                 $(2,296,762)                       $41,104,089

Net investment income                                                            2,587,550                          2,587,550

Cash dividend of $.63
per share                                                                       (2,855,266)                        (2,855,266)

Adjustment to beginning
balance for change
in accounting
principle (Note 2)                                               $   3,624                                              3,624

Change in unrealized holding
gains (losses) on marketable
securities                                                        (360,573)                                          (360,573)
                               ---------   ------   ----------   ---------     -----------                        -----------
Balances at December 31, 1994  4,532,169   45,322   43,355,529    (356,949)     (2,564,478)                        40,479,424

Net investment income                                                            1,990,203                          1,990,203

Change in unrealized holding
gains (losses) on marketable
securities                                                         404,639                                            404,639

Cash dividend of $.34
per share                                                                       (1,540,939)                        (1,540,939)
                               ---------   ------   ----------   ---------     -----------                        -----------
Balances at December 31, 1995  4,532,169   45,322   43,355,529      47,690      (2,115,214)                        41,333,327
</TABLE>


                                     F-5




<TABLE>
<CAPTION>

                     METROPOLITAN REALTY COMPANY, L.L.C.

            STATEMENT OF MEMBERS'/SHAREHOLDERS' EQUITY, continued

                                  ---------

                                                            Unrealized
                                                           Holding Gains
                              Common Stock     Additional   (Losses) on   Distributions of  Members' Equity     Total Members'/
                           ------------------   Paid-in      Marketable    Net Investment   ---------------     Shareholder's
                            Shares    Amount    Capital      Securities       Income(1)     Class A Class B         Equity
                            ------    ------   ----------  -------------- ----------------  ------- -------      -------------
<S>                     <C>          <C>        <C>           <C>          <C>           <C>           <C>          <C>
Net investment income
1/1 - 12/6/96                                                              $3,109,286                               $ 3,109,286

Change in unrealized
holding gains (losses)
on marketable
securities
1/1-12/6/96                                                   $ (58,498)                                                (58,498)

Cash dividend of $.11
per share                                                                    (498,539)                                 (498,539)

Declared payment in
dissolution
with respect
to Minority
Shareholders (Note 1)     (214,948)  $ (2,149)  $(1,938,831)                                                         (1,940,980)

Distribution of
Class A Membership
Interests in
dissolution
with respect to
Majority
Shareholders
(Note 1)                (4,317,221)   (43,173)  (41,416,698)     10,808      (495,533)   $41,944,596                         --
                        ----------   --------   -----------   ---------    ----------    -----------   -----------  -----------

Balances at
December 6, 1996                --         --            --          --            --     41,944,596                 41,944,596

Contributions --
Class B                                                                                                $22,500,000   22,500,000

Net investment income
12/7 - 12/31/96                                                                              263,973        68,593      332,566

Change in unrealized
holding gains
(losses)
on marketable
securities
12/7-12/31/96                                                   (39,758)                                                (39,758)
                        ----------   --------   -----------   ---------    ----------    -----------   -----------  -----------

Balances at
December 31, 1996               --         --            --   $ (39,758)           --    $42,208,569   $22,568,593  $64,737,404
                        ==========   ========   ===========   =========    ==========    ===========   ===========  ===========

<FN>
(1) See Note 7 to the financial statements.

             The accompanying notes are an integral part of the
                            financial statements.
</TABLE>

                                     F-6



                     METROPOLITAN REALTY COMPANY, L.L.C.

<TABLE>
<CAPTION>

                           STATEMENT OF CASH FLOWS
             for the years ended December 31, 1996, 1995 and 1994

                                                              1996           1995           1994
                                                              ----           ----           ----
<S>                                                      <C>             <C>            <C>
Cash flows from operating activities:
  Net investment income                                  $  3,441,852    $ 1,990,203    $ 2,587,550
                                                         ------------    -----------    -----------
  Adjustments to reconcile net investment income to
    net cash provided by operating activities:
    Amortization of net loan origination fees                 (55,619)       (50,095)      (104,008)
    Depreciation and amortization expense                       8,538         43,702         71,012
    Expiration of commitment and application fees             (29,400)       (15,000)       (22,838)
    Allowance for loan losses (recovery) expense                 --          600,000       (461,500)
    Valuation provision for foreclosed property                  --          314,421        994,134
    Other                                                      33,208         23,263         16,557
    Increase in assets:
      Accrued interest and other receivables                  (47,935)       (26,896)       (33,784)
      Other assets                                            (95,097)      (181,926)      (131,293)
    Increase (decrease) in liabilities:
      Accounts payable                                        (20,311)       (59,373)        16,615
      Other liabilities                                        (3,763)       (83,197)        24,566
                                                         ------------    -----------    -----------
                        Total adjustments                    (210,379)       564,899        369,461
                                                         ------------    -----------    -----------
                        Net cash provided by operating
                          activities                        3,231,473      2,555,102      2,957,011
                                                         ------------    -----------    -----------
Cash flows from investing activities:
  Purchases of marketable securities                       (8,039,531)    (3,507,381)    (4,767,232)
  Collections of principal from marketable securities       6,573,374      1,345,072      1,093,691
  Loan disbursements                                       (3,355,137)      (444,293)      (150,000)
  Loan repayments                                             436,818        355,151      4,876,191
  Commitment fees received                                     67,000         73,525         38,000
  Cash proceeds from sale of foreclosed property, net            --           92,157           --
  Loan origination expenses paid                                 --          (10,237)          --
  Capital expenditures                                           --           (1,270)          --
                                                         ------------    -----------    -----------
                        Net cash provided by (used in)
                          investing activities             (4,317,476)    (2,097,276)     1,090,650
                                                         ------------    -----------    -----------
Cash flows from financing activities:
  Members' Equity contributions                            22,500,000           --             --
  Dividends paid                                             (498,539)    (1,540,939)    (2,855,266)
                                                         ------------    -----------    -----------
                        Net cash provided by (used in)
                          financing activities             22,001,461     (1,540,939)    (2,855,266)
                                                         ------------    -----------    -----------
Net increase (decrease) in cash and cash
  equivalents                                              20,915,458     (1,083,113)     1,192,395

Cash and cash equivalents, beginning of year                2,446,221      3,529,334      2,336,939
                                                         ------------    -----------    -----------

Cash and cash equivalents, end of year                   $ 23,361,679    $ 2,446,221    $ 3,529,334
                                                         ============    ===========    ===========
</TABLE>


Supplemental disclosure of cash flow information:

  1996 Noncash Financing Activities: Payable to minority shareholders for
     surrender of shares - $1,940,980.
  1995 Noncash Investing Activities: Receivable from sale of foreclosed
     property - $455,000.


   The accompanying notes are an integral part of the financial statements.


                                     F-7




                     METROPOLITAN REALTY COMPANY, L.L.C.

                        NOTES TO FINANCIAL STATEMENTS


1.      ORGANIZATION:

        Metropolitan Realty Company, L.L.C., a Delaware limited liability
        company, (the "Company") is the successor in interest to Metropolitan
        Realty Corporation (the "Corporation"). The Corporation, incorporated
        November 13, 1986, was organized to qualify as a real estate
        investment trust ("REIT") under the provisions of the Internal
        Revenue Code. On December 6, 1996, pursuant to the terms of a
        restructuring agreement, the assets and liabilities of the
        Corporation were transferred to Metropolitan Realty Company, L.L.C.
        in exchange for Class A Membership Interests in the Company. Holders
        of fewer than 50,000 shares of common stock of the corporation as of
        October 9, 1996 (the Record Date) will receive, upon surrender of
        their shares, a cash payment in lieu of the distribution of Class A
        Membership Interests in the Company. This amount totaled $1,940,980
        and was recorded as a payable of the Corporation. The Corporation
        was then dissolved, and the Class A Membership Interests were
        distributed pro rata to the Corporation's shareholders who owned
        50,000 shares or more of the Corporation's common stock.

        For financial statement presentation, the assets and liabilities,
        with the exception of marketable securities, were transferred to the
        Company at their carrying values at the date of distribution.
        Marketable securities were recorded at fair market value with the
        unrealized loss recorded as a reduction in Class A members' equity.

        Concurrently with the consummation of the Restructuring, the Company
        offered Class B Membership Interests in a separate offering to create
        a new investment pool. The proceeds from the offering of Class B
        Membership Interests totaled $22,500,000 and are invested in money
        market funds at December 31, 1996.

        The Company intends to invest substantially all of its assets in real
        estate investments. The Company intends to make, where possible, the
        majority of its real estate investments in Detroit, with the balance
        being in southeastern Michigan. At December 31, 1996, the Company's
        total mortgage loan portfolio is invested 77% in projects located in
        the City of Detroit, 9% in projects located in the County of Macomb,
        and 14% in projects located in the County of Wayne outside the City
        of Detroit.

        The Company's mortgage loans include financing for industrial and
        mixed-use facilities, office buildings, and retail and residential
        centers. The Company has favored investments that will provide a
        competitive return and permanent financing for projects which will
        create construction jobs and stimulate the southeastern Michigan
        economy. All mortgage loans to date are collateralized by a first
        lien on real property. At December 31, 1996, the Company's largest
        loan approximates 9.5% of its total Class A assets and 6.2% of total
        assets. The carrying value of all mortgage loans approximates 64% of
        its total Class A Assets and 42% of total assets. The net proceeds
        from the offering of Class B Membership Interests will be invested in
        short-term investments until such time as the proceeds are invested
        in real estate loans.


                                  Continued

                                     F-8




                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued


2.      ACCOUNTING POLICIES:

        The preparation of these financial statements, in order to be
        presented in conformity with generally accepted accounting
        principles, requires that management use estimates and assumptions
        regarding events anticipated and transpired, together with their
        potential effects upon the reported amounts of assets and
        liabilities, as well as the disclosures and assessments of contingent
        liabilities at the date of the financial statements, and in
        determining the reported amounts of revenues, costs and expenses of
        the reporting periods.
        Actual results could differ from those estimates.

        Cash Equivalents

               The Company considers all highly liquid debt instruments
               purchased with an original maturity of three months or less to
               be cash equivalents.

        Marketable Securities

               The Company adopted Statement of Financial Accounting
               Standards No. 115, "Accounting for Certain Investments in
               Debt and Equity Securities" (SFAS No. 115), effective
               January 1, 1994. Under SFAS No. 115, marketable securities
               available for sale are carried at market value, and
               unrealized gains and losses are included in a separate
               component of members'/shareholders' equity. Class A
               Members' equity includes net unrealized holding losses on
               marketable securities of $39,758 at December 31, 1996 and net
               unrealized holding gains on marketable securities of $47,690
               at December 31, 1995. Realized gains or losses on sales of
               securities are determined based upon specific identification.
               The realized net loss on marketable securities, included in
               investment income in the accompanying statement of operations,
               resulted from called mortgaged-backed securities and
               aggregated $33,208, $23,263 and $16,557 for the years ended
               December 31, 1996, 1995 and 1994, respectively. At December
               31, 1996 and 1995, all marketable securities are considered
               available for sale.

        Allowance for Loan Losses

               The Company adopted SFAS 114, "Accounting by Creditors for
               Impairment of a Loan", on January 1, 1995. Under the new
               standard, a loan is considered impaired, based on current
               information and events, if it is probable that the Company
               will be unable to collect the scheduled payments of principal
               or interest when due according to the contractual terms of the
               loan agreement. The measurement of impaired loans is generally
               based on the present value of expected future cash flows
               discounted at the historical effective interest rate, except
               that all collateral-dependent loans are measured for
               impairment based on the fair value of the collateral. The
               cumulative effect of adopting the provisions of SFAS 114 was
               not significant.


                                  Continued

                                     F-9




                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued


2.      ACCOUNTING POLICIES, continued

        Allowance for Loan Losses, continued

               The Company provides for possible losses on its portfolio of
               mortgage notes receivable based on an evaluation of each
               mortgage note. In determining the allowance for possible
               losses, the Company has considered various indicators of
               value, including market evaluations of the underlying
               collateral, the cost of money, operating cash flow from
               the property during the projected holding period and expected
               capitalization rates applied to the stabilized net operating
               income of the specified property.

               The allowance for loan losses is established through charges
               to earnings in the form of a provision for credit losses.
               Increases and decreases in the allowance due to changes in the
               measurement of the impaired loans are included in the
               provision for credit losses. Loans continue to be classified
               as impaired unless they are brought fully current and the
               collection of scheduled interest and principal is considered
               probable. When a loan or portion of a loan is determined to be
               uncollectible, the portion deemed uncollectible is charged
               against the allowance and subsequent recoveries, if any, are
               credited to the allowance.

               The allowance is based upon management's estimates and
               ultimate losses may vary from the current estimates. These
               estimates are reviewed by management at least quarterly, and
               as adjustments become necessary, they are reported in the
               statement of operations in the period in which they become
               known.

        Foreclosed Property Held for Sale

               Property acquired through loan foreclosure is initially
               recorded at the lesser of mortgage loan balance or fair value
               at the date of foreclosure. Losses, if any, attributable to
               the excess of the recorded investment, including accrued
               interest over fair value are charged to the allowance for loan
               losses on mortgage loans at the time of foreclosure. A
               valuation allowance is also established at the time of
               foreclosure for the estimated costs to sell the property, as
               the Company is dependent on the liquidation of the property
               for the recovery of its investment in foreclosed real estate.
               Subsequent to foreclosure, the property is carried at the
               lower of cost or fair value less estimated costs to sell. The
               property's operating income and expenses from the date of
               foreclosure are reflected in the statement of operations.
               Depreciation of the property commences one year from the date
               of foreclosure. Income from guarantor settlements is
               recognized when received.


                                  Continued

                                     F-10





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued




2.      ACCOUNTING POLICIES, continued

        Organization and Restructuring Costs

               Certain costs related to the organization of the Class B
               investment pool of the Company have been capitalized and are
               amortized on a straight-line basis over 60 months. Costs
               associated with the restructuring of the Class A investment
               pool were expensed as incurred.

        Income Taxes

               As a limited liability company, it is intended that the
               Company will be classified as a partnership for federal income
               tax purposes and, as such, it generally will be treated as a
               "pass-through" entity that is not subject to federal income
               tax. Prior to the restructuring into a limited liability
               company, the Company operated at all times to qualify as a
               real estate investment trust under provisions of the Internal
               Revenue Code. As a real estate investment trust, each year
               qualification is met, income is not subject to federal income
               tax at the company level, to the extent distributed to
               shareholders.

        Revenue Recognition

               Loan origination fees received from the borrower, in excess of
               loan origination costs paid, are amortized to interest income
               using the effective interest method over the life of the
               mortgage loan.

               Interest income is accrued when earned. The Company
               discontinues the accrual of interest income when circumstances
               exist which cause the collection of interest to be doubtful.
               The determination to discontinue accruing interest is made
               after a review by the Company's management of all relevant
               facts, including delinquency of principal and/or interest, and
               financial stability of the borrower. The Company classifies
               loans on which the accrual of interest has been discontinued
               as nonearning. Interest income on nonaccrual loans is
               recognized on a cash basis if the future collectibility of the
               recorded loan balance is expected. When the future
               collectibility of the recorded loan balance is doubtful,
               collection of interest will be applied as a reduction to
               outstanding loan principal. All mortgage loans held by the
               Company are classified as earning loans at December 31, 1996
               and 1995.

        General Expenses

               Those expenses incurred by the Company that are not directly
               attributable to a particular class of Membership Interest
               shall be allocated in accordance with a formula, established
               in the Operating Agreement, based primarily on the real estate
               investments held by each class of assets.


                                  Continued

                                     F-11





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued



2.      ACCOUNTING POLICIES, continued

        Distributions

               In accordance with the terms of the Company's Operating
               Agreement, Class A and Class B members will receive pro rata
               quarterly distributions of cash income, less expenses
               from their respective class of net assets. The Operating
               Agreement also provides for the pass through to Class A
               members (commencing in the year 2001, if elected) and
               Class B members (commencing in the year 2000), from their
               respective class of net assets, of principal returned with
               respect to real estate investments and any cash and cash
               equivalents which have not been invested in real estate
               investments. All distributions are subject to a determination
               by the Managing Board that the Company will have sufficient
               cash on hand to meet its current and anticipated needs to
               fulfill its business purpose.

        Other

               Certain prior year accounts have been reclassified to conform
               with current year presentations.






                                  Continued

                                     F-12





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, continued



3.      MARKETABLE SECURITIES:

        Marketable securities at December 31, 1996 and 1995 consisted of the
following:


<TABLE>
<CAPTION>
                                                        1996                        1995
                                               ----------------------      ---------------------
                            Interest Rate
                             at 12/31/96       Cost      Market Value      Cost     Market Value
                            -------------      ----      ------------      ----     ------------
<S>                          <C>           <C>           <C>           <C>           <C>
U.S. Treasury Notes          5.625%-6.5%   $ 6,526,289   $ 6,515,940   $ 3,507,383   $ 3,516,940


Mortgage-backed
securities:

  Federal National           6.07%-6.17%     5,331,622     5,235,831     5,956,601     5,948,714
  Mortgage Association,
  pass through

  Federal Home Loan          7.45%-7.99%     2,854,082     2,909,655     3,815,059     3,861,079
  Mortgage Corporation,
  pass through
                                           -----------   -----------   -----------   -----------
                                           $14,711,993   $14,661,426   $13,279,043   $13,326,733
                                           ===========   ===========   ===========   ===========


        The U.S. Treasury notes have scheduled maturities from August 1997 to
        September 1998. The mortgage-backed securities mature according to
        payment characteristics of the underlying loans. The ultimate
        maturity dates of the mortgage-backed securities held by the Company
        at December 31, 1996 range from January 2017 to August 2024. There
        can be no assurance that cash flows will materialize as scheduled as
        a result of prepayments of the underlying mortgages.



                                  Continued

                                     F-13




                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

                                  ---------

4.   MORTGAGE NOTES RECEIVABLE:

     Mortgage notes receivable as of dates indicated are summarized as
     follows:


</TABLE>
<TABLE>
<CAPTION>
====================================================================================================
                                                    Final
                            Interest              Maturity              Periodic
    Description               Rate                  Date              Payment Terms
----------------------------------------------------------------------------------------------------
First Mortgage Notes on Industrial and Mixed-Use Facilities and Office Buildings:
----------------------------------------------------------------------------------------------------
<S>                  <C>                        <C>             <C>
First mortgage note           9.09%             December 2000   Monthly payments of principal
on parking garage in                                            and interest of $35,494 until
Detroit, Michigan                                               maturity, at which time the
                                                                remaining unpaid principal
                                                                balance of approximately
                                                                $4,010,000 is due. The note may
                                                                be prepaid in whole, but not in
                                                                part, for a fee ranging from 1
                                                                percent to 1.5 percent of the
                                                                outstanding principal balance at
                                                                the time of prepayment.

First mortgage on    10.25% through March 31,    April 2000     Monthly payments in varying
rehabilitation of    1995 adjusted to 9.26% on                  installments of principal and
historic office      April 1, 1995 based on the                 interest until maturity, at which
building located in  U.S. Treasury Securities                   time the remaining unpaid
Detroit, Michigan    weekly average yield                       principal balance of approxi-
                     adjusted to a constant                     mately $1,858,000 is due. The
                     maturity of 5 years plus                   note may be prepaid in whole,
                     2.25%                                      but not in part, for a set fee
                                                                based upon the rate by which the
                                                                annual yield on certain U.S.
                                                                Treasury securities exceeds the
                                                                yield on the note through April
                                                                1997, after which time the fee
                                                                ranges from 1 percent to 3
                                                                percent of the outstanding
                                                                principal balance at the time of
                                                                prepayment.
<CAPTION>
========================================================================================================
                                                                                              Principal
                                                                                              Amount of
                                                                                                Loans
                                                                                               Subject
                                                           Carrying Amount of                     to
                                     Face               Mortgages at December 31,*            Delinquent
                         Prior     Amount of            --------------------------            Principal
    Description          Liens     Mortgage         1996           1995           1994       and Interest
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Industrial and Mixed-Use Facilities and Office Buildings:
---------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>            <C>            <C>            <C>            <C>
First mortgage note      None     $4,376,000     $4,177,441     $4,206,330     $4,238,157
on parking garage in
Detroit, Michigan

First mortgage on        None      1,900,000      1,784,069      1,812,889      1,836,190
rehabilitation of
historic office
building located in
Detroit, Michigan

<FN>
------------
* The carrying amount is reduced for unamortized loan origination
  fees received in excess of loan origination costs paid.
</TABLE>

Continued                         F-14





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

                                  ---------

4.  MORTGAGE NOTES RECEIVABLE, Continued:

<TABLE>
<CAPTION>
====================================================================================================
                                                    Final
                            Interest              Maturity              Periodic
    Description               Rate                  Date              Payment Terms
----------------------------------------------------------------------------------------------------
First Mortgage Notes on Industrial and Mixed-Use Facilities and Office Buildings:
----------------------------------------------------------------------------------------------------
<S>                          <C>                <C>             <C>
First mortgage                9.875%            February 1999   Monthly payments in varying
permanent loan on a                                             installments of principal and
light industrial                                                interest until maturity, at which
building located in                                             time the remaining unpaid
Plymouth Township,                                              principal balance of approxi-
Michigan                                                        mately $2,402,000 is due. The
                                                                note may be prepaid in whole,
                                                                but not in part, for a fee based
                                                                upon the rate by which the
                                                                annual yield on certain U.S.
                                                                Treasury securities exceeds the
                                                                yield on the note at the time of
                                                                prepayment.

First mortgage on            10.50%             December 2000   Monthly payments of interest
day care center                                                 only until January 1993 when
located in Plymouth,                                            payments in varying installments
Michigan                                                        of principal and interest
                                                                commence until maturity, at which
                                                                time the remaining unpaid
                                                                principal balance of
                                                                approximately $908,000 is due.
                                                                The note may be prepaid in whole,
                                                                but not in part, for a fee based
                                                                upon the rate by which the annual
                                                                yield on certain U.S. Treasury
                                                                securities exceeds the yield on
                                                                the note at the time of
                                                                prepayment.
<CAPTION>
========================================================================================================
                                                                                              Principal
                                                                                              Amount of
                                                                                                Loans
                                                                                               Subject
                                                           Carrying Amount of                     to
                                     Face               Mortgages at December 31,*            Delinquent
                        Prior      Amount of            --------------------------            Principal
    Description         Liens      Mortgage         1996           1995           1994       and Interest
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Industrial and Mixed-Use Facilities and Office Buildings:
---------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>            <C>            <C>            <C>            <C>
First mortgage           None     $2,525,000     $2,430,975     $2,445,235     $2,458,787
permanent loan on a
light industrial
building located in
Plymouth Township,
Michigan

First mortgage on        None        960,000        935,431        940,653        945,613
day care center
located in Plymouth,
Michigan
<FN>
------------
* The carrying amount is reduced for unamortized loan origination
  fees received in excess of loan origination costs paid.
</TABLE>

Continued                            F-15





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

                                  ---------

4.  MORTGAGE NOTES RECEIVABLE, Continued:

<TABLE>
<CAPTION>
====================================================================================================
                                                    Final
                            Interest              Maturity              Periodic
    Description               Rate                  Date              Payment Terms
----------------------------------------------------------------------------------------------------
First Mortgage Notes on Industrial and Mixed-Use Facilities and Office Buildings:
----------------------------------------------------------------------------------------------------
<S>                  <C>                         <C>            <C>
First mortgage on    9.875% through October 31,  October 2000   Monthly payments in varying
retail tire          1995 adjusted to 7.25% on                  installments of principal and
center located in    November 1, 1995 based on                  interest until maturity, at which
Woodhaven,           the U.S. Treasury average                  time the remaining unpaid
Michigan             weekly yield adjusted to                   principal balance of approxi-
                     a constant maturity of                     mately $647,000 is due. The note
                     5 years plus 1.5% at                       may be prepaid in whole, but not
                     that date                                  in part, for a fee of 1 percent of
                                                                the outstanding principal balance
                                                                or based upon the rate by which
                                                                the annual yield on certain U.S.
                                                                Treasury securities exceeds the
                                                                yield on the note at the time of
                                                                prepayment.

First mortgage on    9.50% through February 28,  February 2001  Monthly payments in varying
retail tire center   1996 adjusted to 6.75% on                  installments of principal and
located in Sterling  March 1, 1996 based on the                 interest until maturity, at which
Heights, Michigan    U.S. Treasury Securities                   time the remaining unpaid
                     weekly average yield                       principal balance of approxi-
                     adjusted to a constant                     mately $693,000 is due. The note
                     maturity of 5 years                        may be prepaid in whole, but not
                     plus 1.5%                                  in part, for a fee of 1 percent to 2
                                                                percent of the outstanding
                                                                principal balance or based upon
                                                                the rate by which the annual
                                                                yield on certain U.S. Treasury
                                                                securities exceeds the yield on
                                                                the note at the time of
                                                                prepayment.

<CAPTION>
========================================================================================================
                                                                                              Principal
                                                                                              Amount of
                                                                                                Loans
                                                                                               Subject
                                                           Carrying Amount of                     to
                                     Face               Mortgages at December 31,*            Delinquent
                         Prior     Amount of            --------------------------            Principal
    Description          Liens     Mortgage         1996           1995           1994       and Interest
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Industrial and Mixed-Use Facilities and Office Buildings:
---------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>            <C>            <C>            <C>            <C>
First mortgage on        None     $695,000       $661,773       $669,449       $673,579
retail tire
center located in
Woodhaven,
Michigan

First mortgage on        None      750,000        711,498        719,601        723,425
retail tire center
located in Sterling
Heights, Michigan
<FN>
------------
* The carrying amount is reduced for unamortized loan origination
  fees received in excess of loan origination costs paid.
</TABLE>

Continued                           F-16





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

                                  ---------

4.  MORTGAGE NOTES RECEIVABLE, Continued:

<TABLE>
<CAPTION>
====================================================================================================
                                                    Final
                            Interest              Maturity              Periodic
    Description               Rate                  Date              Payment Terms
----------------------------------------------------------------------------------------------------
First Mortgage Notes on Industrial and Mixed-Use Facilities and Office Buildings:
----------------------------------------------------------------------------------------------------
<S>                    <C>                       <C>            <C>
First mortgage on            10.25%              April 2003     Monthly payments of interest
office building                                                 only through April 1995 and
located in Detroit,                                             varying installments of principal
Michigan                                                        and interest from May 1995 until
                                                                maturity, at which time the
                                                                remaining unpaid principal
                                                                balance of approximately
                                                                $1,695,000 is due. The note may
                                                                be prepaid in whole, but not in
                                                                part, at varying prepayment
                                                                rates, based on the date of
                                                                prepayment.

Renovation of office   Bank prime rate plus 1%   July 1997      Monthly payments in varying
building located in    (Prime Rate at December                  installments of interest until
Detroit, Michigan      31, 1996 was 8.25%)                      maturity, at which time it is
                                                                anticipated that it will convert
                                                                to a permanent loan. The
                                                                construction note may be prepaid
                                                                in whole, but not in part, for a
                                                                fee based upon the rate by
                                                                which the annual yield on certain
                                                                U.S. Treasury Securities exceeds
                                                                the yield on the rate at the time
                                                                of prepayment.
<CAPTION>
========================================================================================================
                                                                                              Principal
                                                                                              Amount of
                                                                                                Loans
                                                                                               Subject
                                                           Carrying Amount of                     to
                                     Face               Mortgages at December 31,*            Delinquent
                         Prior     Amount of            --------------------------            Principal
    Description          Liens     Mortgage         1996           1995           1994       and Interest
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Industrial and Mixed-Use Facilities and Office Buildings:
---------------------------------------------------------------------------------------------------------
<S>                      <C>    <C>              <C>            <C>            <C>            <C>
First mortgage on        None   $1,800,000       $1,737,891     $1,741,822     $1,743,332
office building
located in Detroit,
Michigan

Renovation of office     None   $1,365,000          925,543        420,406             --
building located in             (of which
Detroit, Michigan               approximately
                                $416,000 is
                                undisbursed at
                                December 31,
                                1996)
<FN>
------------
* The carrying amount is reduced for unamortized loan origination
  fees received in excess of loan origination costs paid.
</TABLE>

Continued                          F-17





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

                                  ---------

4.  MORTGAGE NOTES RECEIVABLE, Continued:

<TABLE>
<CAPTION>
====================================================================================================
                                                    Final
                            Interest              Maturity              Periodic
    Description               Rate                  Date              Payment Terms
----------------------------------------------------------------------------------------------------
First Mortgage Notes on Shopping Centers:
----------------------------------------------------------------------------------------------------
<S>              <C>                            <C>             <C>
Shopping center  10.50% through December        December 1999   Monthly payments in varying
located in       31, 1994 adjusted to                           installments of principal and
Detroit,         10.875% on January 1, 1995                     interest until maturity, at which
Michigan         based on the U.S. Treasury                     time the remaining unpaid
                 Securities weekly average                      principal balance of approxi-
                 yield adjusted to a constant                   mately $941,000 is due. The note
                 maturity of 5 years plus 3%.                   may be prepaid in whole, but not
                                                                in part, for a fee ranging from 1
                                                                percent to 5 percent of the
                                                                outstanding principal balance or
                                                                based upon the rate by which the
                                                                annual yield on certain U.S.
                                                                Treasury securities exceeds the
                                                                yield on the note at the time of
                                                                prepayment.
<CAPTION>
========================================================================================================
                                                                                              Principal
                                                                                              Amount of
                                                                                                Loans
                                                                                               Subject
                                                           Carrying Amount of                     to
                                     Face               Mortgages at December 31,*            Delinquent
                         Prior     Amount of            --------------------------            Principal
    Description          Liens     Mortgage         1996           1995           1994       and Interest
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Shopping Centers:
---------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>            <C>            <C>            <C>            <C>
Shopping center          None     $1,080,500     $960,439       $965,898       $971,030
located in Detroit,
Michigan
<FN>
------------
* The carrying amount is reduced for unamortized loan origination
  fees received in excess of loan origination costs paid.
</TABLE>

Continued                            F-18





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

                                  ---------

4.  MORTGAGE NOTES RECEIVABLE, Continued:

<TABLE>
<CAPTION>
====================================================================================================
                                                    Final
                            Interest              Maturity              Periodic
    Description               Rate                  Date              Payment Terms
----------------------------------------------------------------------------------------------------
First Mortgage Notes on Shopping Centers:
----------------------------------------------------------------------------------------------------
<S>                          <C>                <C>             <C>
Shopping center               9.3752%           January 2000    Monthly payments of principal
located in Sterling                                             and interest of $18,298 until
Heights, Michigan                                               maturity, at which time the
                                                                remaining unpaid principal
                                                                balance of approximately
                                                                $2,028,000 is due. The note may
                                                                be prepaid in whole, but not in
                                                                part, for a fee based upon the
                                                                rate by which the annual yield on
                                                                certain U.S. Treasury securities
                                                                at the time of prepayment exceeds
                                                                the yield on the note through
                                                                January 1997. After such date,
                                                                the note may be prepaid without a
                                                                fee.

Rehabilitation of            11.25%             October 2000    Monthly payments of principal
shopping center                                                 and interest of $16,471 until
located in Detroit,                                             maturity, at which time the
Michigan                                                        remaining unpaid principal
                                                                balance of approximately
                                                                $1,477,000 is due. The note may
                                                                be prepaid in whole, but not in
                                                                part, for a fee based upon the rate
                                                                by which the annual yield on
                                                                certain U.S. Treasury securities
                                                                exceeds the yield on the note at
                                                                the time of prepayment.
<CAPTION>
========================================================================================================
                                                                                              Principal
                                                                                              Amount of
                                                                                                Loans
                                                                                               Subject
                                                           Carrying Amount of                     to
                                     Face               Mortgages at December 31,*            Delinquent
                         Prior     Amount of            --------------------------            Principal
    Description          Liens     Mortgage         1996           1995           1994       and Interest
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Shopping Centers:
---------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>            <C>            <C>            <C>            <C>
Shopping center          None     $2,200,000     $2,093,322     $2,111,851     $2,127,504
located in Sterling
Heights, Michigan

Rehabilitation of        None      1,650,000      1,560,208      1,575,680      1,589,953
shopping center
located in Detroit,
Michigan
<FN>
------------
* The carrying amount is reduced for unamortized loan origination
  fees received in excess of loan origination costs paid.
</TABLE>

Continued                           F-19





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

                                  ---------

4.  MORTGAGE NOTES RECEIVABLE, Continued:

<TABLE>
<CAPTION>
====================================================================================================
                                                    Final
                            Interest              Maturity              Periodic
    Description               Rate                  Date              Payment Terms
----------------------------------------------------------------------------------------------------
First Mortgage Notes on on Shopping Centers:
----------------------------------------------------------------------------------------------------
<S>                          <C>                <C>             <C>
Rehabilitation of            11.25%             October 2000    Monthly payments of principal
shopping center                                                 and interest of $21,961 until
located in Detroit,                                             maturity, at which time the
Michigan                                                        remaining unpaid principal
                                                                balance of approximately
                                                                $1,969,000 is due. The loan may
                                                                be prepaid in whole, but not in
                                                                part, and may require payment of
                                                                a fee based upon the rate by
                                                                which the annual yield on certain
                                                                U.S. Treasury securities exceeds
                                                                the yield on the note at the time
                                                                of prepayment.

Shopping center              10.25%             April 1997      Monthly payments in varying
located in Detroit,            and                              installments of principal and
Michigan                      9.75%                             interest until maturity, at which
                                                                time the remaining unpaid
                                                                principal balance of
                                                                approximately $2,277,000 is due.
                                                                The note may be prepaid in whole,
                                                                but not in part, for a fee based
                                                                upon the rate by which the annual
                                                                yield on certain U.S. Treasury
                                                                securities exceeds the yield on
                                                                the note at the time of
                                                                prepayment.
<CAPTION>
========================================================================================================
                                                                                              Principal
                                                                                              Amount of
                                                                                                Loans
                                                                                               Subject
                                                           Carrying Amount of                     to
                                     Face               Mortgages at December 31,*            Delinquent
                         Prior     Amount of            --------------------------            Principal
    Description          Liens     Mortgage         1996           1995           1994       and Interest
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Shopping Centers:
---------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>            <C>            <C>            <C>            <C>
Rehabilitation of        None     $2,200,000     $2,080,277     $2,100,907     $2,119,938
shopping center
located in Detroit,
Michigan

Shopping center          None      2,500,000      2,292,465      2,329,018      2,362,444
located in Detroit,
Michigan
<FN>
------------
* The carrying amount is reduced for unamortized loan origination fees
  received in excess of loan origination costs paid.
</TABLE>


Continued                           F-20



                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

                                  ---------

4.  MORTGAGE NOTES RECEIVABLE, Continued:
<TABLE>
<CAPTION>
====================================================================================================
                                                    Final
                            Interest              Maturity              Periodic
    Description               Rate                  Date              Payment Terms
----------------------------------------------------------------------------------------------------
First Mortgage Notes on Shopping Centers:
----------------------------------------------------------------------------------------------------
<S>                           <C>               <C>             <C>
Shopping center               9.00%             December 1997   Monthly interest payments of
located in Detroit,                                             $21,375 until maturity, at which
Michigan                                                        time it is anticipated that it will
                                                                convert to a permanent loan. The
                                                                construction note may be prepaid
                                                                in whole, but not in part, for a
                                                                fee based upon the rate by which
                                                                the annual yield on certain U.S.
                                                                Treasury securities exceeds the
                                                                yield on the rate at the time of
                                                                prepayment.
<CAPTION>
---------------------------------------------------------------------------------------------------
First Mortgage Notes on Apartment Buildings:
---------------------------------------------------------------------------------------------------
<S>                           <C>               <C>             <C>
Renovation of 75-             8.0%              August 2000     Monthly payments of interest
unit building located          and                              only through April 1994 and
in Detroit, Michigan          9.5%                              varying installments of principal
                                                                and interest from May 1994 until
                                                                maturity, at which time the
                                                                remaining unpaid principal
                                                                balance of approximately
                                                                $1,284,000 is due. The note may
                                                                be prepaid in whole, but not in
                                                                part, and may require payment of
                                                                a fee based upon the rate by
                                                                which the annual yield on certain
                                                                U.S. Treasury securities exceeds
                                                                the yield on the note at the time
                                                                of prepayment.
<CAPTION>
========================================================================================================
                                                                                              Principal
                                                                                              Amount of
                                                                                                Loans
                                                                                               Subject
                                                           Carrying Amount of                     to
                                     Face               Mortgages at December 31,*            Delinquent
                         Prior     Amount of            --------------------------            Principal
    Description          Liens     Mortgage         1996           1995           1994       and Interest
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Shopping Centers:
---------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>            <C>            <C>            <C>            <C>
Shopping center          None     $2,850,000     $2,793,000             --             --
located in Detroit,
Michigan
<CAPTION>
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Apartment Buildings:
---------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>            <C>            <C>            <C>            <C>
Renovation of 75-        None      1,260,000**    1,354,681     $1,361,789     $1,369,349
unit building located
in Detroit, Michigan
<FN>
------------
 * The carrying amount is reduced for unamortized loan origination fees
   received in excess of loan origination costs paid.

** During 1993, the Company modified the terms of this mortgage note,
   pursuant to which approximately $125,000 of interest was added to the
   principal balance of the mortgage.
</TABLE>
Continued                          F-21




                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

                                  ---------

4.  MORTGAGE NOTES RECEIVABLE, Continued:

<TABLE>
<CAPTION>
====================================================================================================
                                                    Final
                            Interest              Maturity              Periodic
    Description               Rate                  Date              Payment Terms
----------------------------------------------------------------------------------------------------
First Mortgage Notes on Apartment Buildings:
----------------------------------------------------------------------------------------------------
<S>                          <C>               <C>              <C>
Renovation of 54-             9.25%            September 2000   Monthly payments of principal
unit building located                                           and interest of $5,800 until
in Detroit, Michigan                                            maturity, at which time the
                                                                remaining unpaid principal
                                                                balance of approximately
                                                                $557,000 is due. The note may
                                                                be prepaid in whole, but not in
                                                                part, and may require payment of
                                                                a fee based upon the rate by
                                                                which the annual yield on certain
                                                                U.S. Treasury securities exceeds
                                                                the yield on the note at the time
                                                                of prepayment.**

24-unit building             10.25%            January 2001     Monthly payments in varying
located in Detroit,                                             installments of principal and
Michigan                                                        interest until maturity, at which
                                                                time the remaining unpaid
                                                                principal balance of
                                                                approximately $241,000 is due.
                                                                The note may be prepaid in whole,
                                                                but not in part, and may require
                                                                payment of a fee based upon the
                                                                rate by which the annual yield on
                                                                certain U.S. Treasury securities
                                                                exceeds the yield on the note at
                                                                the time of prepayment.
<CAPTION>
========================================================================================================
                                                                                              Principal
                                                                                              Amount of
                                                                                                Loans
                                                                                               Subject
                                                           Carrying Amount of                     to
                                     Face               Mortgages at December 31,*            Delinquent
                         Prior     Amount of            --------------------------            Principal
    Description          Liens     Mortgage         1996           1995           1994       and Interest
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Apartment Buildings:
---------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>            <C>            <C>            <C>            <C>
Renovation of 54-        None     $728,000       $604,392       $614,211       $622,842
unit building located
in Detroit, Michigan

24-unit building         None      275,000        255,850        258,623        261,166
located in Detroit,
Michigan
<FN>
------------
 * The carrying amount is reduced for unamortized loan origination fees
   received in excess of loan origination costs paid.

** In December 1994, the Company modified the terms of this loan pursuant to
   which $75,000 of principal was prepaid and the interest rate was reduced
   from 11% to 9.25%.
</TABLE>
Continued                           F-22




                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

                                  ---------

4.  MORTGAGE NOTES RECEIVABLE, Continued:

<TABLE>
<CAPTION>
====================================================================================================
                                                    Final
                            Interest              Maturity              Periodic
    Description               Rate                  Date              Payment Terms
----------------------------------------------------------------------------------------------------
First Mortgage Notes on Apartment Buildings:
----------------------------------------------------------------------------------------------------
<S>                     <C>                      <C>            <C>
Renovation of 167-      10.25% and 12.25%        April 1997     Monthly payments in varying
unit building located                                           installments of principal and
in Detroit, Michigan                                            interest until maturity, at which
                                                                time the remaining unpaid
                                                                principal balance of
                                                                approximately $1,911,000 is due.
                                                                The note may be prepaid in whole,
                                                                but not in part, for a fee based
                                                                upon the rate by which the annual
                                                                yield on certain U.S. Treasury
                                                                securities exceeds the yield on
                                                                the note at the time of
                                                                prepayment.

205-unit high-rise           10.00%              August 2000    Monthly payments in varying
apartment building                                              installments of principal and
located in Detroit,                                             interest until maturity, at which
Michigan                                                        time the remaining unpaid
                                                                principal balance of
                                                                approximately $375,000 is due.
                                                                The note may be prepaid in
                                                                whole or in part at anytime.
<CAPTION>
========================================================================================================
                                                                                              Principal
                                                                                              Amount of
                                                                                                Loans
                                                                                               Subject
                                                           Carrying Amount of                     to
                                     Face               Mortgages at December 31,*            Delinquent
                         Prior     Amount of            --------------------------            Principal
    Description          Liens     Mortgage         1996           1995           1994       and Interest
---------------------------------------------------------------------------------------------------------
First Mortgage Notes on Apartment Buildings:
---------------------------------------------------------------------------------------------------------
<S>                      <C>      <C>            <C>            <C>            <C>            <C>
Renovation of 167-       None     $ 2,500,000    $ 2,084,656    $ 2,239,156    $ 2,350,670
unit building located
in Detroit, Michigan

205-unit high-rise       None         455,000        437,355        450,810             --
apartment building
located in Detroit,
Michigan
                                   33,769,500     29,881,266     26,964,328     26,393,979         --
                                  -----------    -----------    -----------    -----------    -----------
Allowance for loan
  losses                                          (1,600,000)    (1,600,000)    (1,000,000)
                                  -----------    -----------    -----------    -----------    -----------
Mortgage notes
  receivable, net of
  allowance for
  loan losses                     $33,769,500    $28,281,266    $25,364,328    $25,393,979         --
                                  ===========    ===========    ===========    ===========    ===========
<FN>
------------
* The carrying amount is reduced for unamortized loan origination fees
  received in excess of loan origination costs paid.
</TABLE>


Continued                         F-23





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued

4.  MORTGAGE NOTES RECEIVABLE, Continued:


    Aggregate, contractual annual maturities of mortgage notes receivable
    principal are as follows:

<TABLE>
        <S>                                           <C>
                      1997                            $ 8,439,690
                      1998                                282,886
                      1999                                311,938
                      2000                             12,080,500
                      2001                              7,294,295
                      2002 and after                    1,719,185
                                                      -----------
                                                       30,128,494
        Less unamortized net loan
          origination fees                               (247,228)
                                                      -----------
                                                      $29,881,266
                                                      ===========
</TABLE>

    Of the $8,439,690 in 1997 contractual maturities, approximately
    $3,800,000 represents maturities of construction loans which the Company
    anticipates will then convert to permanent loans. There can be no
    assurance that cash flows will materialize as scheduled as a result of
    prepayments of the mortgage notes.

Continued                          F-24





                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued


4.      MORTGAGE NOTES RECEIVABLE, continued:

        A reconciliation of the carrying value of mortgage notes receivable
        for the years ended December 31, 1996, 1995 and 1994 is as follows:


<TABLE>
<CAPTION>
                                                          December 31,
                                         --------------------------------------------
                                              1996           1995             1994
                                              ----           ----             ----
<S>                                      <C>             <C>             <C>
Mortgage notes receivable:
Balance, beginning of year               $ 26,964,328    $ 26,393,979    $ 31,049,162
                                         ------------    ------------    ------------
Additions:
    New mortgage loans                      3,355,137         899,293         150,000
    Amortization of net loan
      origination fees                         55,619          50,095         104,008
                                         ------------    ------------    ------------
               Total additions              3,410,756         949,388         254,008
                                         ------------    ------------    ------------
Deductions:
    Collections of principal                 (436,818)       (355,151)     (4,876,191)
    Loan origination fees received            (57,000)        (23,888)        (33,000)
                                         ------------    ------------    ------------
               Total deductions              (493,818)       (379,039)     (4,909,191)
                                         ------------    ------------    ------------

Balance, close of year                     29,881,266      26,964,328      26,393,979
                                         ------------    ------------    ------------
Allowance for loan losses:
Balance, beginning of year                 (1,600,000)     (1,000,000)     (1,461,500)
                                         ------------    ------------    ------------
Changes in the provision                         --          (600,000)        461,500
                                         ------------    ------------    ------------
Balance, close of year                     (1,600,000)     (1,600,000)     (1,000,000)
                                         ------------    ------------    ------------
Mortgage notes receivable, net of
    allowance for loan losses            $ 28,281,266    $ 25,364,328    $ 25,393,979
                                         ============    ============    ============
</TABLE>


During the year ended December 31, 1996, the Company earned approximately
$390,000 or 9.8% of its total income on one mortgage note with a carrying
value of approximately $4,177,000.

Two mortgage notes carried at an aggregate carrying value of approximately
$3,640,000; four mortgage notes carried at an aggregate carrying value of
approximately $3,175,000, and two mortgage notes carried at an aggregate
carrying value of approximately $2,663,000 at December 31, 1996, made to
entities affiliated through common ownership earned $420,732, $324,100 and
$254,665, respectively, during the year ended December 31, 1996.


                                  Continued
                                     F-25




                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued


4.      MORTGAGE NOTES RECEIVABLE, continued:

        The Company evaluates its portfolio of mortgage loans on an
        individual basis, comparing the amount at which the investment is
        carried to its estimated net realizable value. In making its
        evaluations, the Company has assumed that it will be able to acquire
        property collateralizing mortgage loans by foreclosure, if deemed
        appropriate, and hold and dispose of such assets and real estate
        currently owned in the ordinary course of business to maximize the
        return to the Company. The evaluations and related assumptions are
        dependent upon current estimates of future operations, proceeds,
        costs, events and general market and economic conditions all of which
        are influenced by many unpredictable factors. Accordingly, the
        ultimate realizations of the Company's investments, including future
        income, may differ from amounts presently estimated.

        The Company had maintained an allowance for doubtful accounts of
        $1,461,500 from December 31, 1992 through the third quarter of 1994
        to reflect the expected recoverable cash flows from three troubled
        loans. During 1994, the cash flows generated by one of the above
        loans which had previously been in default, collateralized by a
        shopping center, increased significantly. As this increase was
        supported by an improvement in tenant base, the Company determined at
        December 31, 1994 that this loan no longer required a loss reserve.
        The loan loss reserve was reduced, accordingly, by $461,500 during
        the fourth quarter of 1994 to $1,000,000. The other loan with an
        affiliated borrower, which was also formerly in default, had not
        exhibited the same magnitude of improvement in cash flows and tenants
        during 1994. The loan loss reserve, however, was further reduced by
        $250,000 in the second quarter of 1995, based on the Company's
        determination that the continued assignment of rents reduced the risk
        of loss associated with this loan.

        During the third quarter of 1995, the Company determined that an
        $850,000 increase in the allowance related to certain loans was
        necessary as a result of the continued deterioration of the
        underlying collateral and limited market rent potential on these
        loans. In its analysis of the adequacy of the allowance for loan
        losses, the Company used operating cash flow analyses and other
        information obtained through an independent valuation of the
        Company's mortgage portfolio performed in conjunction with the
        planned restructuring discussed in Note 1. The Company believes that
        the allowance for loan losses of $1,600,000 at December 31, 1996 and
        1995 is adequate to properly reflect the portfolio of mortgage loans
        at estimated net realizable value.

        The Company adopted Statement of Financial Accounting Standards No.
        114, "Accounting by Creditors for Impairment of a Loan" (SFAS 114),
        as amended by SFAS 118, on January 1, 1995. Under these new
        standards, a loan is considered impaired, based on current
        information and events, if it is probable that the Company will be
        unable to collect the scheduled payments of principal or interest
        when due according to the contractual terms of the loan agreement.
        The measurement of impaired loans is based on the discounted cash
        flows of the underlying collateral. The cumulative effect of adopting
        the provisions of SFAS No. 114 was not significant.

        At December 31, 1996 and 1995, the total recorded investment in
        impaired loans, as defined by SFAS 114, was $5,264,000 and
        $5,308,000, respectively. The allowance related to these loans
        totaled $1,600,000 at December 31, 1996 and 1995. The average
        recorded

                                  Continued
                                     F-26




                       METROPOLITAN REALTY CORPORATION

                   NOTES TO FINANCIAL STATEMENTS, Continued


4.      MORTGAGE NOTES RECEIVABLE, continued:

        investment in impaired loans was approximately $5,278,000 and
        $5,328,000 and interest income was $538,000 and $536,000 for the
        years ended December 31, 1996 and 1995, respectively. All impaired
        loans were classified as earning loans during 1996 and 1995, with
        interest income recognized on an accrual basis.


5.      REAL ESTATE OWNED:

        A sale of the property which was foreclosed by the Company in 1992
        was consummated on August 1, 1995. In accordance with the terms of
        the purchase agreement, the Company received $100,000 of the purchase
        price at the August 1, 1995 settlement date. The remaining $455,000
        of the purchase price will be paid, pursuant to the terms of the
        mortgage note bearing interest at 10% per annum, in monthly
        installments of principal and interest of $4,889 commencing in
        September 1995 until maturity in August 2000, at which time the
        remaining unpaid principal of approximately $375,000 is due. The
        mortgage note is guaranteed by the borrower and may be prepaid in
        whole or in part at any time. The property's operating income and
        expenses, from the date of foreclosure to the date of sale, are
        reflected in the statement of operations.

        The net loss from foreclosed property held for sale totaled $331,953
        and $1,295,416 for the years ended December 31, 1995 and 1994,
        respectively, and consisted of the following:


<TABLE>
<CAPTION>
                                      1995             1994
                                      ----             ----
Rental income                       $432,292         $661,679
                                    --------         --------
<S>                                  <C>              <C>
Expenses:
  Operating expenses                 380,011          840,950
  Valuation provision                314,421          994,134
  Depreciation expense                38,422           65,866
  Management fees                     23,779           37,538
  Professional fees                    7,612           18,607
                                   ---------       ----------
    Total expenses                   764,245        1,957,095
                                    --------        ---------
Net loss from foreclosed
  property held for sale            $331,953       $1,295,416
                                    ========       ==========
</TABLE>




                                  Continued
                                     F-27




                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued


6.      FINANCIAL INSTRUMENTS:

        The estimated fair value of financial instruments held by the Company
        at December 31, 1996 and 1995, and the valuation techniques used to
        estimate the fair value, were as follows:

<TABLE>
<CAPTION>
                                             1996                      1995
                                   ----------------------      ------------------------
                                   Carrying     Estimated      Carrying      Estimated
                                    Value      Fair Value       Value        Fair Value
                                   --------    ----------      --------      ----------
<S>                              <C>           <C>           <C>           <C>
Cash and cash equivalents        $23,361,679   $23,361,679   $ 2,446,221   $ 2,446,221
Marketable securities             14,661,426    14,661,426    13,326,733    13,326,733
Mortgage notes receivable, net    28,281,266    28,374,000    25,364,328    25,490,028
Accrued interest and other
receivables                          330,555       330,555       282,620       282,620
Accounts payable                   2,046,201     2,046,201       125,532       125,532

</TABLE>

  Cash and cash equivalents       -      The carrying amount is a reasonable
                                         estimate of fair value.

  Marketable securities           -      The estimated fair value
                                         of marketable securities
                                         is estimated based on
                                         quoted market prices.

  Mortgage notes receivable, net  -      The fair value of mortgage
                                         notes receivable is
                                         estimated by discounting
                                         future cash flows using an
                                         estimated discount rate
                                         which reflects the current
                                         credit, interest rate and
                                         prepayment risks
                                         associated with similar
                                         types of instruments.

  Accrued interest and other      -      The carrying amount is a reasonable
  receivables                            estimate of  fair value.

  Accounts payable                -      The carrying amount is a reasonable
                                         estimate of fair value.

7.      FEDERAL INCOME TAX:

        Prior to the restructuring, the Company operated to qualify as a real
        estate investment trust and was not subject to federal income tax on
        taxable income distributed to its shareholders during its fiscal year
        and subsequent year, but prior to filing its federal tax return. As
        part of the restructuring, the Company contributed its assets to the
        limited liability company (LLC) in exchange for Class A membership
        interests in the LLC. The Company then distributed the Class A
        membership interests to its majority shareholders in a liquidating
        distribution. Income for tax and financial reporting purposes is
        reconciled as follows:

                                  Continued
                                     F-28




                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued


7.      FEDERAL INCOME TAX, continued:

<TABLE>
<CAPTION>
                                                   1996           1995          1994
                                                   ----           ----          ----
<S>                                           <C>            <C>            <C>
Investment income before income tax on
  undistributed earnings                      $ 3,441,852    $ 1,990,203    $ 2,587,550

Less investment income from the date of
restructuring (for the period
December 7-31, 1996)                             (346,456)          --             --

Increase (decrease) in taxable income
 resulting from:

    Loan origination and application
      fees, net                                   (24,023)         8,430        (88,845)

    Provision for valuation allowances, net          --          914,421        532,634

    Realized loss on sale of
      foreclosed property                            --       (1,566,594)          --

    Bad debt expense                                 --             --         (312,000)

    Dividend deductions:

      From regular distributions                 (453,217)    (1,314,329)    (2,764,623)

      From liquidating distribution            (2,595,903)          --             --

    Other, net                                    (22,253)       (32,131)        45,284
                                              -----------    -----------    -----------
          Taxable investment income                  --             --             --
                                              ===========    ===========    ===========


8.      RELATED PARTY TRANSACTIONS:

        The Company was involved in various transactions with affiliates as
follows:

        o      One of the Company's legal counselors is also a member of the
               Company's Managing Board. Fees for legal services provided by
               the Managing Board Member's law firm amount to $95,277,
               $306,394 and $153,296 for the years ended December 31, 1996,
               1995 and 1994, respectively, of which $14,313, $227,586 and
               $70,076 of the fees earned in 1996, 1995 and 1994,
               respectively, relate to the restructuring of the Company and
               new offering discussed in Note 1. Accrued legal fees of
               $30,581 and $30,860 are included in accounts payable in the
               accompanying balance sheet at December 31, 1996 and 1995,
               respectively.



                                  Continued
                                     F-29




                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued


8.      RELATED PARTY TRANSACTIONS, continued:

        o      Fees aggregating $22,951, $23,920 and $19,831 for the years
               ended December 31, 1996, 1995 and 1994, respectively, were
               earned by a member manager of the Company for providing
               various investment and other services to the Company. Accrued
               fees of $12,786 and $5,500 are included in accounts payable in
               the accompanying balance sheet at December 31, 1996 and 1995,
               respectively.

        o      Consulting fees under a contractual agreement aggregating
               $46,746, $44,520 and $42,400 were earned by an officer of the
               Company in 1996, 1995 and 1994 respectively.

        o      During 1995, one of the Company's Managing Board Members
               became the vice president of an entity which has a mortgage
               note with the Company. The carrying amount of the mortgage
               note receivable totaled $4,177,441 and $4,206,330 at December
               31, 1996 and 1995, respectively, and earned the Company
               $389,732, $391,854 and $394,843 during the years ended
               December 31, 1996, 1995 and 1994, respectively.


9.      COMMITMENTS:

        At December 31, 1996, the Company had outstanding loan commitments
        aggregating $415,570.



                                  Continued
                                     F-30




                     METROPOLITAN REALTY COMPANY, L.L.C.

                   NOTES TO FINANCIAL STATEMENTS, Continued


12.     INTERIM FINANCIAL INFORMATION (unaudited):


                                                              Net Investment
                              Total        Net Investment     Income (Loss)
Quarters Ended               Income         Income (Loss)       per Share
--------------               ------        --------------     --------------

Fiscal 1996
-----------

December 31                $1,105,276           $895,275            N/A(1)
September 30                  982,329            872,881            .19
June 30                       916,011            802,400            .18
March 31                      995,962            871,296            .19
                           ----------         ----------          -----
                           $3,999,578         $3,441,852            N/A(1)
                           ==========         ==========          =====

Fiscal 1995
-----------

December 31                  $913,133           $674,776          $ .15
September 30                  973,527           (183,720)          (.04)(2)
June 30                       926,886            736,626            .16
March 31                      950,513            762,521            .17
                           ----------         ----------           ----
                           $3,764,059         $1,990,203          $ .44
                           ==========         ==========          =====
<FN>
---------

(1) Effective upon the consummation of the Restructuring of Metropolitan
Realty Corporation, the Company's predecessor in interest, on December 6,
1996, Class A Membership Interests were distributed pro rata to the majority
shareholders of Metropolitan Realty Corporation. Per share information is no
longer relevant as a result of the restructuring (See Note 1).


(2) The results of operations for the third quarter of fiscal year 1995
include a $850,000 increase in the allowance for loan losses and a $200,000
increase in general and administrative expenses for costs associated with the
Company's planned restructuring into a limited liability company.
</TABLE>


                                     F-31




                     METROPOLITAN REALTY COMPANY, L.L.C.
                                 SCHEDULE II
                      VALUATION AND QUALIFYING ACCOUNTS
             for the years ended December 31, 1996, 1995 and 1994


<TABLE>
<CAPTION>

                               Additions,    Charged
                               Charged to   (Credited) to
                  Balance at   Costs and     Other                           Balance at
 Description      January 1    Expenses      Accounts        Deductions      December 31
 -----------      ---------    ----------    ------------    ----------      -----------
<S>              <C>            <C>                        <C>               <C>
Allowance for
Loan Losses:
   1996          $1,600,000                                                  $1,600,000
   1995           1,000,000     $600,000                                      1,600,000
   1994           1,461,500                                $  (461,500)(1)    1,000,000

Valuation
Allowance:
   1996                 --                                                          --
   1995           1,134,134      314,421                    (1,448,555)(2)          --
   1994             140,000      994,134                                      1,134,134


(1)  Decrease in allowance for loan losses reduced operating expenses.

(2)  Foreclosed property sold in 1995.
</TABLE>














                                     F-32



<TABLE>
<CAPTION>
                              INDEX TO EXHIBITS


                                                                                                                     Page
 Exhibit                                                 Incorporated Herein                             Filed      Number
   No.                  Description                        by Reference to                              Herewith    Herein
 -------                -----------                      -------------------                            --------    ------
   <S>                                                  <C>                                                <C>        <C>
   3.1        Certificate of Formation of               Exhibit 3.1 to the Company's Registration
              Metropolitan Realty Company, L.L.C.       Statement on Form S-4, File No. 033-
                                                        99694

   3.2        Operating Agreement of Metropolitan       Exhibit 3.2 to the Company's Registration
              Realty Company, L.L.C.                    Statement on Form S-4, File No. 033-
                                                        99694

   3.3        Certificate of Amendment to               Exhibit 3.3 to the Company's Registration
              Certificate of Formation of               Statement on Form S-4, File No. 033-
              Metropolitan Realty Company, L.L.C.       99694

   10.1       Investment Management Service             Exhibit 10.2 to Metropolitan Realty
              Agreement dated February 15, 1989         Corporation's Annual Report on Form 10-
              between the Company's predecessor         K for the fiscal year ending December
              in interest, Metropolitan Realty          31, 1988, Commission File No. 1-9450
              Corporation, and NBD Bank, N.A.
              (formerly National Bank of Detroit)

   10.2       Buhl Building Lease dated April 25,       Exhibit 10.4 to Metropolitan Realty
              1991 between the Company's                Corporation's Annual Report on Form 10-
              predecessor in interest, Metropolita      K for the fiscal year ending December
              Realty Corporation, and Buhl Realty       31, 1991, Commission File No. 1-9450
              Company

   10.3       First lease amendment to Buhl             Exhibit 10.6 to Metropolitan Realty
              Building Lease dated May 14, 1992         Corporation's Annual Report on Form 10-
              between the Company and Buhl              K for the fiscal year ending December
              Realty Company                            31, 1992, Commission File No. 1-9450

   10.4       Second lease amendment to Buhl            Exhibit 10.8 to Metropolitan Realty
              Building Lease dated May 14, 1992         Corporation's Annual Report on Form 10-
              between the Company and Buhl              K for the fiscal year ending December
              Realty Company                            31, 1993, Commission File No. 1-9450

   25         Powers of Attorney                                                                           X          E-3
</TABLE>



                                     E-1