<PAGE>   1



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

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
                   For the fiscal year ended December 31, 2000

                          Commission file number 1-8594

                         PRESIDENTIAL REALTY CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

           DELAWARE                                           13-1954619
-----------------------------------------             --------------------------
  (State or other jurisdiction of                          (I.R.S. Employer
   incorporation or organization)                          Identification No.)

180 South Broadway, White Plains, New York                      10605
------------------------------------------           ---------------------------
  (Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code     914-948-1300

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

                                           Name of each exchange on
         Title of each class               which registered

Class A Common Stock                                     American Stock Exchange

Class B Common Stock                                     American Stock Exchange

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

         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 the
filing requirements for at least the past 90 days. Yes __x__ No ______

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

         The aggregate market value of voting stock held by nonaffiliates of the
registrant was $18,589,000 at February 15, 2001.

         The number of shares outstanding of each of the registrant's classes of
common stock on March 6, 2001 was 478,840 shares of Class A common and 3,232,098
shares of Class B common.

         Documents Incorporated by Reference: The Company's definitive Proxy
Statement for its Annual Meeting of Shareholders to be held on June 14, 2001,
which Proxy Statement will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A, is incorporated by reference into Part III of this
Form 10-K.
<PAGE>   2
                         PRESIDENTIAL REALTY CORPORATION


                                      INDEX



FACING PAGE                                                                 1

INDEX                                                                       2

PART I
     Item 1.   Business                                                     3
     Item 2.   Properties                                                  15
     Item 3.   Legal Proceedings                                           19
     Item 4.   Submission of Matters to a Vote of
                   Security Holders                                        19

PART II
     Item 5.   Market for the Registrant's Common Equity
                   and Related Stockholder Matters                         20
     Item 6.   Selected Financial Data                                     21
     Item 7.   Management's Discussion and Analysis of
                   Financial Condition and Results of
                   Operations                                              23
     Item 7A.  Quantitative and Qualitative Disclosures
                  About Market Risk                                        34
     Item 8.   Financial Statements and Supplementary Data                 34
     Item 9.   Changes in and Disagreements with Accountants
                   on Accounting and Financial Disclosure                  34

PART III
     Item 10.  Directors and Executive Officers of the
                   Registrant                                              34
     Item 11.  Executive Compensation                                      35
     Item 12.  Security Ownership of Certain Beneficial
                   Owners and Management                                   35
     Item 13.  Certain Relationships and Related
                   Transactions                                            35

PART IV
     Item 14.  Exhibits, Financial Statement Schedules
                       and Reports on Form 8-K                             35

Table of Contents to Consolidated Financial Statements                     40


                                       2
<PAGE>   3
ITEM 1.  BUSINESS

(a)      General

Presidential Realty Corporation is a Delaware corporation organized in 1983 to
succeed to the business of a company of the same name which was organized in
1961 to succeed to the business of a closely held real estate business founded
in 1911. The terms "Presidential" or the "Company" refer to the present
Presidential Realty Corporation or its predecessor company of the same name and
to any subsidiaries. Since 1982 the Company has elected to be treated as a real
estate investment trust ("REIT") for Federal and State income tax purposes. See
Qualification as a REIT.

The Company's principal assets fall into the following three general categories:

         (i) The largest portion of the Company's assets are equity interests in
         fifteen rental properties and one parcel of land. These properties have
         an historical cost of $63,537,365, less accumulated depreciation of
         $9,818,165, resulting in a net carrying value of $53,719,200. See
         Properties below.

         (ii) A substantial portion of the Company's assets consists of notes
         receivable, which are reflected on the Company's Consolidated Balance
         Sheet at December 31, 2000 as "Mortgage portfolio: sold properties".
         The $28,191,380 aggregate principal amount of these notes have been
         reduced by $1,621,104 of discounts (which reflect the difference
         between the stated interest rates on the notes and the market interest
         rates at the time the notes were accepted) and $11,224,373 of gains on
         sales which have been deferred. See Notes 1-E and 1-F of Notes to
         Consolidated Financial Statements. Accordingly, the net carrying value
         of the Company's "Mortgage portfolio: sold properties" was $15,345,903
         at December 31, 2000.

         All of the loans included in this category of assets were in good
         standing at December 31, 2000.

         While notes reflected under "Mortgage portfolio: sold properties"
         consist primarily of notes received from sales of real properties
         previously owned by the Company, this


                                       3
<PAGE>   4
         category of assets also includes notes in the aggregate principal
         amount of $970,202 which relate to sold cooperative apartments, the
         majority of which were either acquired by the Company in connection
         with the settlement agreement executed in November, 1991 (the
         "Settlement Agreement") with Ivy Properties, Ltd. and its affiliates
         (collectively "Ivy") or obtained as a result of sales of cooperative
         apartments which the Company received pursuant to the Settlement
         Agreement. See Relationship with Ivy Properties, Ltd. below.

         (iii) A smaller portion of the Company's assets consists of notes
         receivable in the aggregate principal amount of $1,447,959 from loans
         made to Ivy in connection with the conversion of apartment buildings to
         cooperative ownership or the sales in 1981 and 1984 by the Company to
         Ivy of two apartment projects. These loans are reflected on the
         Company's Consolidated Balance Sheet at December 31, 2000 as "Mortgage
         portfolio: related parties". The principal amounts of these notes have
         been reduced by discounts and valuation reserves of $114,794 and
         deferred gains of $884,355 and, accordingly, these notes have a net
         carrying value at December 31, 2000 of $448,810. Management believes
         that it holds sufficient collateral to protect its interests in all of
         the outstanding loans to Ivy to the extent of the net carrying value of
         these loans. At December 31, 2000, all of the loans due from related
         parties were in good standing. See Relationship with Ivy Properties,
         Ltd., and Notes 3 and 18 of Notes to Consolidated Financial Statements.

Under the Internal Revenue Code of 1986, as amended (the "Code"), a REIT which
meets certain requirements is not subject to Federal income tax on that portion
of its taxable income which is distributed to its shareholders, if at least 95%
of its "real estate investment trust taxable income" (exclusive of capital
gains) is so distributed. Since January 1, 1982, the Company has elected to be
taxed as a REIT and has paid regular quarterly cash distributions. Total
dividends paid by the Company in 2000 were $.64 per share.

While the Company intends to operate in such a manner as to enable it to be
taxed as a REIT, and to pay dividends in an amount sufficient to maintain REIT
status, no assurance can be given that the Company will, in fact, continue to be
taxed as a REIT, that distributions will be maintained at the current rate or
that the Company will have cash available to pay sufficient dividends in


                                       4
<PAGE>   5
order to maintain REIT status. See Qualification as a REIT and Market for the
Registrant's Common Equity and Related Stockholder Matters.

At December 31, 2000, the Company employed twelve persons.

(b)      Investment Strategies

The Company's current overall investment strategy is to make investments in real
property which offer attractive current yields with potential for capital
appreciation. The Company's investment policy is not contained in or subject to
restrictions included in the Company's Certificate of Incorporation or Bylaws,
and there are no limits in the Company's Certificate of Incorporation or Bylaws
on the percentage of assets which it may invest in any one type of asset or the
percentage of securities of any one issuer which it may acquire. The investment
policy may, therefore, be changed by the Directors or Officers of the Company
without the concurrence of the holders of its outstanding stock. However, to
continue qualifying as a REIT, the Company must restrict its activities to those
permitted under the Code. See Qualification as a REIT.

The Company's current primary investment strategies are as follows:

         (i) Equity Properties

         The Company's current investment policy is focused on acquiring
         additional equity interests in income producing properties, principally
         moderate income apartment properties in the eastern United States.
         Although the Company's present intention is to acquire additional
         moderate income apartment properties, Presidential has in the past
         invested in other commercial properties, including office buildings,
         shopping centers and light industrial properties, and may do so in the
         future. Geographically, the Company expects to invest primarily in the
         eastern United States, although Presidential has in the past invested
         in other locations and may do so in the future. However, the Company's
         plans to expand its portfolio of real estate equities may be adversely
         affected by limitations on its ability to obtain funds for investment
         on satisfactory terms from external sources. Pursuant to this policy,
         in 2000 the Company acquired a 224 unit apartment property in
         Clearwater, Florida and a 320 unit apartment property in Tucker,
         Georgia, a suburb of Atlanta.


                                       5
<PAGE>   6
(ii)     Holding of Long Term Notes

         The Company holds and expects to continue to hold long term mortgage
         notes obtained from the sales of real property previously owned by the
         Company. These notes provide for balloon principal payments at varying
         times. The Company may in appropriate circumstances agree to extend and
         modify these notes and may make additional loans secured by interests
         in real property. See the table set forth below under Loans and
         Investments.

         It should be noted that there can be no assurance that the balloon
         principal payments due in accordance with the purchase money notes will
         actually be made when due.

         The capital gains from sales of real properties previously owned by the
         Company are recognized for income tax purposes on the installment
         method as principal payments are received. To the extent that such
         payments are received by Presidential, it may, as a REIT, either (i)
         elect to retain such payments, in which event it will be required to
         pay Federal and State income tax on the portion of the payments which
         represent capital gain, (ii) distribute all or a portion of such
         payments to shareholders, in which event Presidential will not be
         required to pay taxes on the capital gain to the extent that it is
         distributed to shareholders or (iii) elect to retain such payments and
         designate them as a retained capital gain dividend, in which event the
         Company would pay the Federal tax on such gain, the shareholders would
         be taxed on their share of the undistributed long-term capital gain and
         the shareholders would receive a tax credit for their share of the
         Federal tax that the Company paid and adjust the basis of their stock
         for the difference between the long-term capital gain and the tax
         credit. To the extent that Presidential retains such payments, the
         proceeds, after payment of any taxes, will be available for future
         investment. Presidential has not adopted a specific policy with respect
         to the distribution or retention of capital gains, and its decision as
         to any such gain will be made in connection with all of the
         circumstances existing at the time the gain is recognized. However, in
         1999 the Company elected to retain $.17 per share of long-term capital
         gains that the Company had received in 1999 and subsequently paid a
         capital gains tax of $.06 per share.


                                       6
<PAGE>   7
         (iii) Funding of Investments

         In the past, the Company has obtained funds to make loans and
         investments from excess cash from operations or capital transactions,
         loans from financial institutions secured by specific real property or
         from general corporate borrowings. Such loans have in the past been,
         and may in the future be, secured by real property and provide for
         recourse to Presidential. However, funds may not be readily available
         from these sources and such unavailability may limit the Company's
         ability to make new investments. See Management's Discussion and
         Analysis of Financial Condition and Results of Operations - Liquidity
         and Capital Resources.

(c)      Loans and Investments

The following tables set forth information as of December 31, 2000 with respect
to the mortgage loan portfolio resulting from the sale of properties and the
loan portfolio due from Ivy.


                                       7
<PAGE>   8
             MORTGAGE PORTFOLIO: NOTES RECEIVABLE - SOLD PROPERTIES
                                DECEMBER 31, 2000





<TABLE>
<CAPTION>
                                                                                      Net                             Interest
                                         Note                        Deferred       Carrying           Maturity         Rate
   Name of Property                    Receivable      Discount        Gain          Value               Date           2000
   ----------------                    ----------      --------      --------       --------           --------       --------
<S>                        <C>         <C>             <C>          <C>            <C>                    <C>        <C>
Chelsea Village Apartments (1)         $4,000,000      $1,353,379   $              $2,646,621             2009        9.625%
  Atlantic City, NJ
Liberty Gardens
  Bergenfield, NJ
Town Oaks Apartments
  South Bound Brook, NJ

Encore Apartments          (2)         12,300,000                   6,991,540       5,308,460             2002       11.50%
  New York, NY

Mark Terrace Associates    (3)          2,148,000                     462,250       1,685,750             2005        6.16%
  Bronx, NY

Mark Terrace Associates                    33,262                                      33,262             2002        9.00%
  Bronx, NY

Newcastle Apartments       (4)          6,000,000                   2,991,850       3,008,150             2006        7.90%
  Greece, NY

Pinewood I & II                           100,000                                     100,000             2008       12.00%
  Des Moines, IA

Windsor at Arbors          (5)          1,175,500         255,281     684,991         235,228             2001        9.25%
  Alexandria, VA

Woodland Village           (6)            934,355                                     934,355             2005       10.00%
  Hartford, CT

Woodland Village           (6)            530,061                                     530,061             2005       10.00%
  Hartford, CT
                                       ----------       ---------  ----------      ----------
Subtotal                               27,221,178       1,608,660  11,130,631      14,481,887
                                       ----------       ---------  ----------      ----------
</TABLE>


                                       8
<PAGE>   9
             MORTGAGE PORTFOLIO: NOTES RECEIVABLE - SOLD PROPERTIES
                          DECEMBER 31, 2000 (CONTINUED)




<TABLE>
<CAPTION>
                                                                                         Net                       Interest
                                         Note                          Deferred        Carrying     Maturity         Rate
  Name of Property                    Receivable        Discount         Gain           Value         Date           2000
 -----------------                    ----------        --------       --------        ---------    --------       --------
<S>                       <C>      <C>              <C>            <C>             <C>              <C>            <C>
Sold Co-op Apartments:
Emily Towers              (7)(8)      $198,793            $644          $5,687        $192,462      2002-2008      7.00-9.50%
  Flushing, NY

330 W.72nd St.            (7)(9)        56,753           8,434                          48,319         2016        8.00-9.25%
  New York, NY

330 W.72nd St. Purchasers (7)          128,208                          49,089          79,119         2003           8.75%
  New York, NY

Towne House               (7)(8)       451,917           2,392          38,966         410,559      2002-2010      7.75-9.50%
  New Rochelle, NY

6300 Riverdale Ave.       (7)(8)        14,138              71                          14,067         2003        7.50-8.25%
  Riverdale, NY

Mark Terrace                            34,085                                          34,085         2003           9.00%
  Bronx, NY

Sherwood House            (7)(10)       21,425             903                          20,522      2002-2010      9.00-9.50%
  Long Beach, NY

Rye Colony                              64,883                                          64,883         2010           11.00%
 Rye, NY

                                   -----------      ----------     -----------     -----------
Subtotal                               970,202          12,444          93,742         864,016
                                   -----------      ----------     -----------     -----------
Total Notes Receivable-
  Sold Properties                  $28,191,380      $1,621,104     $11,224,373     $15,345,903
                                   ===========      ==========     ===========     ===========
</TABLE>


                                       9
<PAGE>   10
             MORTGAGE PORTFOLIO: NOTES RECEIVABLE - SOLD PROPERTIES
                                DECEMBER 31, 2000   (CONCLUDED)

(1)      The Fairfield Towers Second Mortgage was modified in February, 1999,
         when the Company sold the Fairfield Towers First Mortgage and
         substantially all of the Fairfield Towers Second Mortgage. The
         modification provides for an interest rate of 9.625% per annum through
         February 17, 2002 and an interest rate of 10.50% per annum thereafter.
         The note matures on February 18, 2009. The discount on this note was
         computed at a rate of 18%. To secure this obligation, Presidential
         obtained subordinate security interests in three apartment properties
         located in New Jersey as collateral for the note.

(2)      In June, 1999, the Crown Tower and Madison Towers wraparound mortgage
         notes were modified. The Company repaid the $2,300,000 first mortgage
         debt on these properties (wrap mortgage debt on sold properties),
         received a $1,000,000 principal repayment and consolidated the
         $12,300,000 outstanding principal balance of the mortgage notes into
         one consolidated note. The modified note provides for an initial
         interest rate of 10% per annum, with a 1/2 percent annual rate increase
         and additional interest of $369,000 due at maturity, which will
         increase the effective interest rate on the note to 11.50% per annum
         through maturity. The modified note matures on June 29, 2002, and is
         secured by a second mortgage on the Encore Apartments and commercial
         space located in New York, New York and by a limited guarantee of
         $2,500,000 from one of the owners of the property.

(3)      Annual interest rate on this note increases by 1% per year, from 6.16%
         per annum at November 30, 1999 to 11.16% per annum at November 30,
         2004.

(4)      Interest on this note is 7.90% per annum through July 31, 2001.
         Thereafter interest will be at a rate equal to 150 basis points in
         excess of the yield on specified Treasury bills.

(5)      The discount on this note was computed at a yield of 12%. The note was
         modified in 2000, and the maturity date of the loan was changed from
         2007 to 2001. The loan was paid on January 3, 2001.

(6)      The discounts on the Woodland Village notes were computed at a yield of
         25%. As a result of the sale of the Woodland property and the
         assumption of the notes by the purchaser in 1998, the interest rate on
         the notes was increased from 9% to 10% through 2001 and 10.25%
         thereafter. The notes are amortizing monthly based on a 20 year term at
         the above rates, and have balloon payments due at maturity.

(7)      These notes were either assigned by Ivy as a result of the Settlement
         Agreement with Ivy or were received from purchasers of apartments which
         Presidential held as foreclosed property.

(8)      The amount under discount represents unamortized mortgage points
         received from purchasers.

(9)      The discount on this note was computed at 16% of face value.

(10)     The discount on this note was computed at 15% of face value.


                                       10
<PAGE>   11
             MORTGAGE PORTFOLIO: NOTES RECEIVABLE - RELATED PARTIES
                               DECEMBER 31, 2000




<TABLE>
<CAPTION>
                                                                             Net        Final
                              Note                          Deferred       Carrying    Maturity     Interest
  Name of Property         Receivable         Discount       Gain            Value       Date         Rate
                          -----------         --------      ---------      --------    --------    ---------------
<S>                  <C>  <C>                <C>          <C>            <C>         <C>         <C>
UTB End Loans         (1)    $130,594          $85,972      $              $44,622     Various       Various

Consolidated Loans    (2)      24,694                                       24,694       2016        Chase Prime

Overlook                      884,355                        884,355                     2003          6.0%
Alexandria, VA

University Towers     (3)     408,316           28,822                     379,494     Various     11.80 to 25.33%
New Haven, CT              ----------         --------      --------      --------

                           $1,447,959         $114,794      $884,355      $448,810
                           ==========         ========      ========      ========
</TABLE>




(1)      Ivy's equity in these purchase money notes (which are secured by co-op
         apartment units at University Towers, New Haven, CT) was transferred to
         Presidential as part of the Settlement Agreement. Included in the
         $85,972 discount on these notes is a valuation reserve of $33,944. This
         valuation reserve was recorded by the Company in 1997 to reflect the
         decline in the estimated fair value of the underlying collateral.

(2)      As part of the Settlement Agreement with Ivy, certain of Presidential's
         outstanding nonrecourse loans (most of which had previously been
         written down to zero) were consolidated into two notes which currently
         have an aggregate outstanding principal balance of $4,794,744. The
         $24,694 represents Presidential's net carrying value of the notes.
         Presidential does not expect to recover any material amounts on these
         notes in excess of their net carrying value.

(3)      These notes represent a 100% interest in notes receivable held by UTB
         Associates, a partnership in which Presidential has a 66-2/3% interest.
         These notes are amortized over a period of approximately 28 years from
         the date of a co-op apartment sale. Included in the $28,822 discount on
         these notes is a valuation reserve of $9,849. This valuation reserve
         was recorded by the Company in 1997 to reflect the decline in the
         estimated fair value of the underlying collateral.


                                       11
<PAGE>   12
(d) Qualification as a REIT

Since 1982, the Company has operated in a manner intended to permit it to
qualify as a REIT under Sections 856 to 860 of the Code. The Company intends to
continue to operate in a manner to permit it to qualify as a REIT. However, no
assurance can be given that it will be able to continue to operate in such a
manner or to remain qualified.

In any year that the Company qualifies as a REIT and meets other conditions,
including the distribution to stockholders of at least 95% of its "real estate
investment trust taxable income" (excluding long-term capital gains but before a
deduction for dividends paid), the Company will be entitled to deduct the
distributions that it pays to its stockholders in determining its ordinary
income and capital gains that are subject to federal income taxation (see Note 8
of Notes to Consolidated Financial Statements). Income not distributed is
subject to tax at rates applicable to a domestic corporation. In addition, the
Company is subject to an excise tax (at a rate of 4%) if the amounts actually or
deemed distributed during the year do not meet certain distribution
requirements. In order to receive this favorable tax treatment, the Company must
restrict its operations to those activities which are permitted under the
Internal Revenue Code and to restrict itself to the holding of assets that a
REIT is permitted to hold.

It should be noted that no assurance can be given that the Company will, in
fact, continue to be taxed as a REIT; that distributions will be maintained at
the current rate; that the Company will have sufficient cash to pay dividends in
order to maintain REIT status or that it will be able to make cash distributions
in the future. In addition, even if the Company continues to qualify as a REIT,
the Board of Directors has the discretion to determine whether or not to
distribute long-term capital gains and other types of income not required to be
distributed in order to maintain REIT tax treatment.

(e) Relationship with Ivy Properties, Ltd.

From 1979 to 1989, Presidential made loans to Ivy Properties, Ltd. and its
affiliates ("Ivy") in connection with Ivy's cooperative conversions of apartment
properties in the New York metropolitan area. In 1981, UTB Associates, a
partnership controlled by Presidential, sold an apartment property to Ivy in
return for purchase money notes. In addition, in 1984, Presidential sold to


                                       12
<PAGE>   13
Ivy its 50% partnership interest in the partnership which owned Overlook
Gardens, a 308 unit apartment complex in Alexandria, Virginia for a purchase
money note.

Ivy is owned by Thomas Viertel, Steven Baruch and Jeffrey Joseph (the "Ivy
Principals"), who are the sole partners of Pdl Partnership, which owns 198,735
shares of the Company's Class A common stock. As a result of the ownership of
these shares and 24,601 additional shares of Class A common stock owned in the
aggregate individually by the Ivy Principals, Pdl Partnership and the Ivy
Principals have beneficial ownership of an aggregate of approximately 47% of the
outstanding shares of Class A common stock of the Company, which class of stock
is entitled to elect two-thirds of the Board of Directors of the Company. By
reason of such beneficial ownership, the Ivy Principals are in a position
substantially to control elections of the Board of Directors of the Company.

Jeffrey Joseph is the President and a Director of Presidential. Thomas Viertel,
an Executive Vice President and the Chief Financial Officer of Presidential, is
the son of Joseph Viertel, a Director and a former President of Presidential,
and the nephew of Robert E. Shapiro, Chairman of the Board of Directors and a
former President of Presidential. Steven Baruch, an Executive Vice President of
Presidential, is the cousin of Robert E. Shapiro and Joseph Viertel.

In November, 1999, these three officers exercised stock options for the purchase
of an aggregate of 60,000 shares of Class B common stock at an exercise price of
$6.125 per share and now hold an aggregate of 87,764 shares of Class B common
stock. Presidential made loans totaling $367,500 to these officers for the
payment of the purchase price of the 60,000 shares. The loans, which are
recourse loans, provide for an interest rate of 8% per annum, mature on November
30, 2004 and are secured by a security interest in the shares. For the year
ended December 31, 2000, interest income on these notes was $29,481. In 1999,
these officers were granted options to purchase an additional 60,000 shares of
Class B common stock.

As a result of the deterioration of the sales market for cooperative apartments
in the New York metropolitan area in 1989 and 1990, Ivy defaulted on certain of
its outstanding loans from Presidential in 1990 and 1991. In November, 1991,
Presidential and Ivy consummated a Settlement Agreement with respect to various
outstanding loans to Ivy. The Settlement Agreement was negotiated for
Presidential by a committee of three members of the Board of Directors with no


                                       13
<PAGE>   14
affiliations with the Ivy Principals (the "Independent Committee") and an
officer of Presidential who was not affiliated with the Ivy Principals, and was
approved unanimously by the Board of Directors of Presidential.

In connection with the Settlement Agreement, Presidential received, among other
things, a number of vacant and occupied cooperative apartment units in the New
York metropolitan area and certain third party promissory notes held by Ivy.
Presidential received these assets in exchange for (i) the satisfaction of all
of Ivy's recourse debt to Presidential and certain of its nonrecourse debt to
Presidential with respect to which Presidential held first priority security
interests and (ii) the release by Presidential of certain subordinate security
interests in collateral securing some of the defaulted loans.

Most of Ivy's remaining nonrecourse debt to Presidential was consolidated, on
modified terms, into two nonrecourse loans (collectively, the "Consolidated
Loans") which were collateralized by substantially all of Ivy's remaining
business assets with respect to which Presidential either did not previously
have any security interest or had a junior security interest (collectively, the
"Consolidated Collateral"). The terms of the Settlement Agreement permitted Ivy
to use the proceeds of each sale of Consolidated Collateral to (1) pay existing
indebtedness of Ivy to its bank and trade creditors and certain operating
expenses and (2) create and fund specified reserves to provide for payment of
future obligations and potential liabilities. At December 31, 2000, the
Consolidated Loans had an outstanding principal balance of $4,794,744 and a net
carrying value of $24,694. Since, as permitted by the terms of the Consolidated
Loans, substantially all of Ivy's assets have been sold and the sales proceeds
used to pay other recourse obligations of Ivy, Presidential does not expect to
recover any material amount on the Consolidated Loans in excess of their net
carrying value.

In 1996, Presidential and the Ivy Principals agreed to a modification of the
Settlement Agreement to provide that the Ivy Principals will make payments on
the Consolidated Loans in an amount equal to 25% of the operating cash flow
(after provision for certain reserves) of Scorpio Entertainment, Inc.
("Scorpio"), a company owned by the Ivy Principals which acts as a producer of
theatrical productions. This agreement, and Presidential's decision not to
exercise an option (which it had received as part of the original Settlement
Agreement) to acquire the capital stock of Scorpio, was made pursuant to the
unanimous determination of the Independent Committee that such actions were in
the best interests of


                                       14
<PAGE>   15
Presidential. During 2000, Presidential received $14,565 of principal payments
and $2,940 of interest on the Consolidated Loans.

The table entitled "Mortgage portfolio: notes receivable - related parties" set
forth under Loans and Investments above reflects all loans to Ivy outstanding at
December 31, 2000. All of such loans are in good standing. Management believes
that it holds sufficient collateral to protect its interests in the loans that
remain outstanding to Ivy to the extent of the net carrying value of these
loans.

Any transactions relating to the implementation of the terms of the Settlement
Agreement, or otherwise involving the Ivy Principals, are subject to the
approval of the Independent Committee.

(f) Competition

The real estate business is highly competitive in all respects. In attempting to
expand its portfolio of owned properties, the Company will be in competition
with other potential purchasers for properties and sources of financing, many of
whom will be larger and have greater financial resources than the Company. As a
result of such competition, there can be no assurance that the Company will be
able to obtain opportunities for new investments at attractive rates of return.

ITEM 2. PROPERTIES

As of December 31, 2000, the Company had an ownership or leasehold interest in
1,331 apartment units (of which 544 apartment units were acquired during 2000,
see Management's Discussion and Analysis of Financial Condition and Results of
Operations below), 645,900 square feet of commercial, industrial and
professional space and one parcel of land, all of which are carried on the
balance sheet at $53,719,200 (net of accumulated depreciation of $9,818,165).
The Company has mortgage debt on the majority of these properties in the
aggregate principal amount of $59,846,143, all of which is nonrecourse to
Presidential with the exception of $245,278 pertaining to the mortgage on the
Mapletree Industrial Center property.

Included in the 1,331 apartment units owned or leased by Presidential are 56
cooperative apartment units which the Company received from Ivy (see
Relationship with Ivy Properties, Ltd.). Although it may from time to time sell
individual or groups of occupied apartments, Presidential intends to continue to
hold these


                                       15
<PAGE>   16
apartments until they become vacant and may in some circumstances re-rent
apartments free from rent regulations after they have become vacant.

The chart below indicates the operating results of each of the properties owned
by the Company at December 31, 2000 in accordance with accounting principles
generally accepted in the United States of America ("GAAP") and, following that,
in terms of cash flow from operations.


                                       16
<PAGE>   17
                PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
                                   REAL ESTATE
                                DECEMBER 31, 2000

<TABLE>
<CAPTION>
                Property                                                         Vacancy
                --------                                Rentable                   Rate          Mortgage              Maturity
Residential                                            Space (approx.)           Percent         Balance                 Date
-----------                                            ----------------------  ------------     -----------          --------------
<S>                                      <C>          <C>                    <C>             <C>             <C>    <C>
  APARTMENT BUILDINGS

Cambridge Green,  Council Bluffs, IA                    201 Apt. Units             7.22%         $3,130,708          October, 2029

Continental Gardens,  Miami, FL                         208 Apt. Units             4.90%          7,878,505   (3)    August, 2007

Crown Court,  New Haven, CT              ( 4 )          105 Apt. Units & 2,000   (Net Lease)      2,686,817          November, 2021
                                                        sq.ft. of comml.space

Fairlawn Gardens, Martinsburg, WV                       112 Apt. Units             4.06%          2,241,935   (3)    April, 2008

Farrington Apartments,  Clearwater, FL                  224 Apt. Units             7.25%          7,866,120   (3)    May, 2010

Preston Lake Apartments,  Tucker, GA                    320 Apt. Units             8.85%         13,938,310   (3)    May, 2010

Sunwood Apartments,  Miami, FL           ( 5 )          105 Apt. Units            13.15%          4,748,406   (3)    September, 2008

  INDIVIDUAL COOPERATIVE APARTMENTS
Sherwood House,  Long Beach, NY                         1 Apt. Unit                0.00%

6300 Riverdale Ave.,  Riverdale, NY                     8 Apt. Units               0.00%

330 W. 72nd St.,  New York, NY                          3 Apt. Units               0.00%

Towne House,  New Rochelle, NY                          42 Apt. Units              1.72%

University Towers,  New Haven, CT                       2 Apt. Units               0.00%

COMMERCIAL BUILDINGS
Building Industries Center,
White Plains, NY                         ( 6 )          23,500 sq.ft.              0.95%

Home Mortgage Plaza,  Hato Rey, PR       ( 7 )          211,000 sq.ft.             0.99%         17,105,804   (3)     May, 2008

Mapletree Industrial Center,
Palmer, MA                                              385,000 sq.ft.             1.36%            245,278           June, 2011

University Towers Prof. Space,
New Haven, CT                            ( 7 ) ( 8 )    24,400 sq.ft.              4.04%

OTHER - LAND
Towers Shoppers Parcade,  New Haven, CT                 1/4 acre                   0.00%              4,260           August, 2001
                                                                                                -----------
                                                                                                $59,846,143
                                                                                                ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                               Cash Flow
                Property                                           Income                     (Deficiency)
                --------                            Interest     (Loss) from                      from
Residential                                            Rate       Operations (1)               Operations (2)
-----------                                         ---------     --------------              ---------------
<S>                                    <C>          <C>          <C>                       <C>
  APARTMENT BUILDINGS

Cambridge Green,  Council Bluffs, IA                    6.65%       ($77,337)                   $48,550

Continental Gardens,  Miami, FL                         8.16%        258,739                    455,578

Crown Court,  New Haven, CT             ( 4 )           7.00%         89,478                     74,576

Fairlawn Gardens, Martinsburg, WV                       7.06%         62,956                     91,785

Farrington Apartments,  Clearwater, FL                  8.25%        (77,352)                   100,810

Preston Lake Apartments,  Tucker, GA                    8.15%       (202,135)                   119,826

Sunwood Apartments,  Miami, FL           ( 5 )          6.55%         30,677                    150,192

  INDIVIDUAL COOPERATIVE APARTMENTS
Sherwood House,  Long Beach, NY                                       (5,509)                    (4,791)

6300 Riverdale Ave.,  Riverdale, NY                                   (6,250)                    (4,022)

330 W. 72nd St.,  New York, NY                                         6,599                      7,488

Towne House,  New Rochelle, NY                                        59,190                     80,427

University Towers,  New Haven, CT                                       (767)                     1,014

COMMERCIAL BUILDINGS
Building Industries Center,
White Plains, NY                         ( 6 )                        35,201                     62,998

Home Mortgage Plaza,  Hato Rey, PR       ( 7 )          7.38%        224,133                    263,325

Mapletree Industrial Center,
Palmer, MA                                              9.50%        340,519                    343,949

University Towers Prof. Space,
New Haven, CT                            ( 7 ) ( 8 )                 (44,772)                   (26,667)

OTHER - LAND
Towers Shoppers Parcade,  New Haven, CT                 9.75%          5,058                       (718)
                                                                    --------                 ----------
                                                                    $698,428                 $1,764,320
                                                                    ========                 ==========
</TABLE>


See notes on following page.


                                       17
<PAGE>   18
(1)      The results are calculated in accordance with GAAP and therefore
         reflect the deduction of noncash charges such as depreciation and
         amortization of mortgage costs.

(2)      Cash flow or deficiencies from operations as reflected in the above
         chart are calculated before deduction of depreciation, valuation
         adjustments, amortization of mortgage costs and property replacements
         and additions, but after deduction of mortgage amortization. These
         results should not be considered as an alternative to income or loss
         from operations on the GAAP basis as an indicator of the properties'
         performance or to cash flows presented in accordance with GAAP. These
         results do not reflect the cash available to fund cash requirements.

(3)      These mortgages amortize monthly with balloon payments due at maturity.

(4)      The Crown Court property is subject to a long-term net lease containing
         an option to purchase commencing in 2009.

(5)      The Sunwood Apartments property experienced a high vacancy rate in 2000
         as a result of heavy rains which caused flood damage to approximately
         35 apartments in October, 2000. Vacancy losses of approximately $52,000
         were incurred while these apartments were being renovated. Renovations
         (which were fully covered by insurance) have been completed on all of
         the flood damaged apartments subsequent to December 31, 2000.

(6)      In May, 2000 the Company repaid the $901,689 outstanding mortgage
         balance on the Building Industries Center property. This amount is not
         included in Cash Flow (Deficiency) from Operations.

(7)      These results are net of minority interest share of partnership income.

(8)      The University Towers Professional Space property had a loss from
         operations of $44,772 as a result of substantial legal and professional
         fees incurred in 2000. See Legal Proceedings below.

In the opinion of management, all of the Company's properties are adequately
covered by insurance in accordance with normal insurance practices. All real
estate owned by the Company is owned in fee simple (except for the University
Towers professional space, which is held under a valid and existing long-term
lease), with title


                                       18
<PAGE>   19
generally insured for the benefit of the Company by reputable title insurance
companies.

The mortgages on the Company's properties have fixed rates of interest and the
majority of the mortgages amortize monthly with balloon payments due at
maturity.

ITEM 3. LEGAL PROCEEDINGS

UTB Associates, a partnership in which the Company holds a 66-2/3% interest, is
a tenant under a lease (the "Professional Space Lease") of 24,400 square feet of
professional office space at University Towers, a cooperative apartment building
in New Haven, Connecticut. In June, 1999, University Towers Owners Corp., the
cooperative corporation, filed a petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District
of Connecticut, New Haven division. As part of the bankruptcy proceedings, in
July, 1999 the cooperative corporation filed an Adversary Proceeding against UTB
Associates for termination of the Professional Space Lease and damages primarily
based on claims arising under Connecticut law. A court trial was held in this
matter over four days during June and August, 2000, but no decision has yet been
rendered by the court. The Company has been advised by its litigation counsel
that there are meritorious defenses to the claims raised by the cooperative
corporation and that if these defenses are successful, it is unlikely that the
Professional Space Lease will be terminated or that any damages will be assessed
against UTB Associates. However, in light of the uncertainties of litigation, no
assurances can be given as to the outcome of the litigation. The Company's
financial statements reflect a loss of approximately $45,000 from the
Professional Space Lease in 2000. This loss can be attributed to approximately
$204,000 of legal and professional fees which were incurred in connection with
the litigation.

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

None.


                                       19
<PAGE>   20
ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS


(a)      The principal market for the Company's Class A and Class B Common Stock
         is the American Stock Exchange (ticker symbols PDL A and PDL B). The
         high and low prices for the stock on such principal exchange for each
         quarterly period during the past two years, and the per share dividends
         declared per quarter, are as follows:


<TABLE>
<CAPTION>
                                 Stock Prices            Dividends
                  ------------------------------------  Declared Per
                      Class A            Class B          Share on
                  ---------------  -------------------   Class A and
                  High     Low      High        Low       Class B

<S>              <C>      <C>       <C>        <C>           <C>
Calendar 2000
First Quarter    $6.6875  $5.625    $7.25      $5.375        $.16
Second Quarter    7.00     5.75      7.125      5.8125        .16
Third Quarter     7.125    6.06      7.00       5.00          .16
Fourth Quarter    6.38     5.50      6.63       5.13          .16

Calendar 1999
First Quarter    $7.75    $6.625    $8.125     $6.625        $.16
Second Quarter    7.75     6.625     7.50       6.375         .16
Third Quarter     7.00     6.5625    7.25       6.125         .16
Fourth Quarter    6.875    5.875     6.9375     5.50          .16
</TABLE>

(b)      The number of record holders for the Company's Common Stock at December
         31, 2000 was 163 for Class A and 668 for Class B.

(c)      Under the Internal Revenue Code of 1986, as amended, a REIT which meets
         certain requirements is not subject to Federal income tax on that
         portion of its taxable income which is distributed to its shareholders,
         if at least 95% of its "real estate investment trust taxable income"
         (exclusive of capital gains) is so distributed. Since January 1, 1982,
         the Company has elected to be taxed as a REIT and has paid regular
         quarterly cash distributions. No assurance can be given that the
         Company will, in fact, continue to be taxed as a REIT, or that the
         Company will have sufficient cash to pay dividends in order to maintain
         REIT status. See Qualification as a REIT above.



                                       20
<PAGE>   21
ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                                            YEAR ENDED DECEMBER 31,
                                                                                   ------------------------------------------------
                                                                                   2000             1999         1998

                                                                               (Amounts in thousands, except per common share data)
<S>                                                                                 <C>           <C>           <C>
Selected Data from Consolidated Statements of Operations:

  Revenues:

     Rental                                                                         $ 14,585      $ 10,672      $ 9,716
     Interest on mortgages                                                             3,225         3,853        5,490
     Investment and other                                                                281           719          207
                                                                                    --------      --------     --------
   Total                                                                            $ 18,091      $ 15,244       15,413
                                                                                    ========      ========     ========

  Income before net (loss) gain from sales of properties, notes
       and securities                                                                $ 1,218       $ 1,378      $ 2,017
   Net (loss) gain from sales of properties, notes and securities (1)                     (5)        7,703          756
                                                                                    --------      --------     --------
   Net Income                                                                        $ 1,213       $ 9,081      $ 2,773
                                                                                    ========      ========     ========


  Earnings per common share (basic and diluted):
    Income before net (loss) gain from sales of properties, notes
         and securities                                                               $ 0.33        $ 0.38       $ 0.56
     Net (loss) gain from sales of properties, notes and securities                                   2.12         0.21
                                                                                    --------      --------     --------
     Net Income                                                                       $ 0.33        $ 2.50       $ 0.77
                                                                                    ========      ========     ========



   Cash distributions per common share                                                $ 0.64        $ 0.64       $ 0.63
                                                                                    ========      ========     ========

   Weighted average number of shares outstanding                                       3,698         3,629        3,593
                                                                                    ========      ========     ========
</TABLE>





<TABLE>
<CAPTION>
                                                                                             YEAR ENDED DECEMBER 31,
                                                                                   ------------------------------------------------
                                                                                        1997               1996

                                                                               (Amounts in thousands, except per common share data)
<S>                                                                                <C>                 <C>

Selected Data from Consolidated Statements of Operations:

  Revenues:

     Rental                                                                          $ 8,428            $ 8,451
     Interest on mortgages                                                             5,568              4,117
     Investment and other                                                                240                371
                                                                                    --------           --------
   Total                                                                            $ 14,236           $ 12,939
                                                                                    ========           ========


  Income before net (loss) gain from sales of properties, notes
       and securities                                                                $ 2,135            $ 1,723
   Net (loss) gain from sales of properties, notes and securities (1)                    596                845
                                                                                    --------           --------
   Net Income                                                                        $ 2,731            $ 2,568
                                                                                    ========           ========


  Earnings per common share (basic and diluted):
    Income before net (loss) gain from sales of properties, notes
         and securities                                                               $ 0.60             $ 0.49
     Net (loss) gain from sales of properties, notes and securities                     0.17               0.24
                                                                                    --------           --------
     Net Income                                                                       $ 0.77             $ 0.73
                                                                                    ========           ========



   Cash distributions per common share                                                $ 0.60             $ 0.60
                                                                                    ========           ========
   Weighted average number of shares outstanding                                       3,564              3,539
                                                                                    ========           ========
</TABLE>


(1)      The 1999 net gain from sales of properties, notes and securities
         includes a net gain of $7,394,000 from the sale of the Fairfield Towers
         First and Second Mortgage Notes and a net gain of $1,000,000 from
         principal payments received on the Crown Tower and Madison Towers
         Notes. These gains were partially offset by a $1,450,000 loss on the
         sale of securities.


                                       21
<PAGE>   22
ITEM 6.  SELECTED FINANCIAL DATA (CONCLUDED)
--------------------------------------------

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,
                                                            ----------------------------------------------------------

                                                                2000                1999                 1998
                                                            --------------      --------------      ---------------

                                                                             (Amounts in thousands)
<S>             <C>                                              <C>                 <C>                  <C>
Selected Data from Consolidated Balance Sheets:

   Real estate  (1)                                              $ 63,537            $ 35,648             $ 34,704
   Less: accumulated depreciation                                   9,818               8,232                7,232
                                                                 --------            --------             --------

   Net real estate                                               $ 53,719            $ 27,416             $ 27,472
                                                                 ========            ========             ========

   Total mortgage portfolio (2)                                  $ 29,639            $ 30,056             $ 62,729
                                                                 ========            ========             ========

   Mortgage portfolio - net of discounts and
      deferred gains (2)                                         $ 15,795            $ 15,857             $ 31,100
                                                                 ========            ========             ========

   Foreclosed properties
                                                                 ========            ========             ========

   Securities available for sale                                 $      5            $  2,299             $  1,275
                                                                 ========            ========             ========

   Total assets                                                  $ 83,938            $ 64,061             $ 73,906
                                                                 ========            ========             ========

   Mortgage debt - includes amounts due in one year:
       Properties owned  (1)(3)                                  $ 59,846            $ 39,379             $ 39,728
       Wrap mortgage debt on sold properties (4)                                                             4,668
                                                                 --------            --------             --------

   Total                                                         $ 59,846            $ 39,379             $ 44,396
                                                                 ========            ========             ========

   Note payable - includes amounts due in one year (2)                                                    $ 10,395
                                                                 ========            ========             ========

   Stockholders' equity                                          $ 18,716            $ 19,547             $ 12,851
                                                                 ========            ========             ========
</TABLE>

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                            ------------------------------------

                                                                  1997                1996
                                                              --------------      --------------

                                                                    (Amounts in thousands)


<S>                                                                <C>                 <C>
Selected Data from Consolidated Balance Sheets:

   Real estate  (1)                                                $ 27,691            $ 25,369
   Less: accumulated depreciation                                     6,405               5,680
                                                                   --------            --------

   Net real estate                                                 $ 21,286            $ 19,689
                                                                   ========            ========

   Total mortgage portfolio (2)                                    $ 64,101            $ 63,726
                                                                   ========            ========

   Mortgage portfolio - net of discounts and
      deferred gains (2)                                           $ 30,684            $ 28,389
                                                                   ========            ========

   Foreclosed properties                                                                  $ 589
                                                                   ========            ========

   Securities available for sale                                      $ 227               $ 975
                                                                   ========            ========

   Total assets                                                    $ 60,009            $ 57,800
                                                                   ========            ========

   Mortgage debt - includes amounts due in one year:
       Properties owned  (1)(3)                                    $ 26,271            $ 26,514
       Wrap mortgage debt on sold properties (4)                      5,149               5,613
                                                                   --------            --------

   Total                                                           $ 31,420            $ 32,127
                                                                   ========            ========

   Note payable - includes amounts due in one year (2)             $ 10,543             $ 8,643
                                                                   ========            ========

   Stockholders' equity                                            $ 12,173            $ 11,438
                                                                   ========            ========
</TABLE>



(1)      In March, 2000, the Company acquired Farrington Apartments and Preston
         Lake Apartments for an aggregate purchase price of $27,276,000 and
         obtained first mortgage loans in the aggregate amount of $21,900,000 on
         the properties. In 1998, the Company acquired Sunwood Apartments for a
         purchase price of $6,505,000 and obtained a $4,875,000 first mortgage
         loan on that property.

(2)      During 1999, the Company sold the Fairfield Towers First Mortgage Note
         and all but a $4,000,000 portion of the Fairfield Towers Second
         Mortgage Note, and the equity portion of the Grant House wraparound
         mortgage. The Company also received payments on notes as a result of
         modifications or prepayments. In addition, the Company repaid the bank
         note payable from the proceeds of the sale of the Fairfield Towers
         Mortgage Notes.

(3)      During 1998, the Company refinanced the mortgage on the Home Mortgage
         Plaza property, increasing the mortgage debt on that property by
         $6,711,000. The Company also obtained a $2,300,000 mortgage on the
         Fairlawn Gardens property.

(4)      During 1999, the Company repaid the $2,300,000 Crown Tower and Madison
         Towers wrap mortgage debt and wrote off the wrap mortgage debt on Grant
         House as a result of the sale of the equity portion of the Grant House
         wraparound mortgage note.


                                       22
<PAGE>   23
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Results of Operations

     2000 vs 1999

Revenue increased by $2,847,035 primarily as a result of increases in rental
income, offset by decreases in all other revenue categories.

Rental income increased by $3,912,557 primarily as a result of the purchase of
Farrington Apartments and Preston Lake Apartments in March, 2000, which
increased rental income by $3,430,630. In addition, rental income increased by
$221,381 at the Home Mortgage Plaza property and by $260,546 at all other
properties.

Interest on mortgages-sold properties decreased by $45,291 primarily as a result
of the $509,793 decrease in amortization of discounts on notes receivable.
Amortization of discounts on notes receivable decreases as notes mature or are
sold. These decreases were offset by increases of $464,502 in interest income
primarily due to interest received on the New Haven note which was modified in
1999.

Interest on wrap mortgages decreased by $528,173 as a result of the modification
of the New Haven wraparound mortgage notes in 1999 and the sale of the Grant
House wraparound mortgage note in 1999. As a result of these transactions, the
Company no longer holds any wraparound mortgage notes.

Interest on mortgages-related parties decreased by $53,646 primarily as a result
of the $61,465 decrease in interest received on the Consolidated Loans. This
decrease was partially offset by increases of $18,499 from the amortization of
discounts on the UTB End Loans as a result of prepayments received on those
loans in 2000.

Investment income decreased by $405,153 primarily as a result of the sale of
securities in the fourth quarter of 1999 and during 2000.

Other income decreased by $33,259 primarily as a result of a $30,750 fee
received in 1999 from the modification of the New Haven notes.

Costs and expenses increased by $3,007,352 primarily due to increases in all
categories of rental property operations. The increases were due to the
acquisitions of Farrington Apartments and Preston Lake Apartments in March,
2000. These increases were partially offset by


                                       23
<PAGE>   24
decreases in amortization of mortgage costs, decreases in general and
administrative expenses, a decrease in interest expense on note payable and
other and a decrease in interest expense on wrap mortgage debt.

General and administrative expenses decreased by $357,126 primarily as a result
of a bad debt write-off of $378,522 in 1999. In addition, there were decreases
in professional fees of $66,501, franchise tax expense of $47,851 and salary
expense of $18,614. These decreases were offset by increases in executive
pension plan expenses of $75,910 and employee pension plan expenses of $78,684.

Interest on note payable and other decreased by $236,739 as a result of the
repayment of the note payable in February, 1999.

Interest on wrap mortgage debt decreased by $54,586 as a result of the repayment
and sale of the wrap mortgage debts in 1999.

Rental property operating expenses increased by $1,616,319. Rental property
operating expenses for Farrington Apartments and Preston Lake Apartments were
$1,505,350. Operating expenses increased by $176,064 at the University Towers
Professional Space property as a result of increases of $176,536 in legal and
professional fees incurred in connection with the litigation with University
Towers Owners Corp. In addition, operating expenses at the Home Mortgage Plaza
property increased by $92,700 primarily as a result of an increase of $65,172 in
electric expense and a $41,580 increase in bad debts. These increases were
offset by decreases of $138,998 at the Cambridge Green property.

Interest on mortgages increased by $1,309,652. Mortgage interest expense for
Farrington Apartments and Preston Lake Apartments was $1,401,796. These
increases were partially offset by a $55,733 decrease at the Building Industries
Center property as a result of the repayment of that mortgage in May of 2000.

Real estate tax expense increased by $301,724. Real estate tax expense for
Farrington Apartments and Preston Lake Apartments was $272,149. Real estate tax
expense increased by $28,171 at the Continental Gardens property as a result of
refunds for prior years' real estate taxes which were received in 1999 thereby
reducing 1999 expenses below that which was expected to recur.

Depreciation on real estate increased by $579,494. Depreciation expense for
Farrington Apartments and Preston Lake Apartments was $522,517. Depreciation
expense increased by $56,977 at all other


                                       24
<PAGE>   25
properties as a result of additions and improvements made to the properties.

Amortization of mortgage costs decreased by $185,174 primarily as a result of
the write-off in 1999 of unamortized mortgage costs of $166,756 and the $31,200
prepayment penalty fee associated with the prior mortgage on the Cambridge Green
property which was refinanced in 1999.

Net gain from sales of properties, notes and securities are sporadic (as they
depend on the timing of sales or the receipt of installments or prepayments on
purchase money notes). In 2000, the net loss from sales of properties, notes and
securities was $5,027 compared with a net gain of $7,703,081 in 1999:

<TABLE>

Gain (loss) from sales recognized at December 31,    2000               1999
<S>                                                 <C>            <C>

  Sales of mortgage notes:
    Fairfield Towers First and Second Mortgages
    (net of taxes of $220,500)                                     $7,393,844
    Grant House wraparound mortgage note                              425,000
  Deferred gains recognized upon receipt of
    principal payments on notes:
    New Haven - $1,000,000 principal payment                        1,000,000
    Pinewood - $317,662 principal prepayment                          218,534
    Mark Terrace                                    $ 96,000
    Overlook                                          23,988           21,714
    Fairfield Towers Second Mortgage                                   19,466
  Sales of property:
    Sherwood House apartment units                                     74,672
    Broad Park Lodge apartment units                  60,839
  Sales of securities                               (185,854)      (1,450,149)
                                                     --------       ----------

  Net gain (loss)                                   $ (5,027)      $7,703,081
                                                     ========      ==========
</TABLE>

Balance Sheet

Real estate increased by $27,899,732 as a result of the purchase of Farrington
Apartments and Preston Lake Apartments in March, 2000. The capitalized costs for
Farrington Apartments, a 224 unit garden apartment property in Clearwater,
Florida, was $1,900,000 for land and $7,896,421 for buildings and improvements.
The capitalized costs for Preston Lake Apartments, a 320 unit garden apartment
property in Tucker, Georgia, was $2,240,000 for land and $15,239,465 for
buildings and improvements. In addition, net additions and improvements to
properties were $613,846.


                                       25
<PAGE>   26
Prepaid expenses and deposits in escrow increased by $256,934 primarily as a
result of the purchase of Farrington Apartments and Preston Lake Apartments.

Other receivables increased by $238,435 as a result of increases of $8,487 in
tenants accounts receivables, increases of $127,169 in miscellaneous receivables
and an increase of $102,779 in accrued interest receivable.

Securities available for sale decreased by $2,294,497 as a result of the sale of
$2,516,973 in marketable equity securities, primarily interest-bearing corporate
preferred stocks, offset by a $222,476 increase in the fair value of securities
available for sale.

Cash and cash equivalents decreased by $4,854,881 primarily as a result of the
cash utilized for the purchase of Farrington Apartments and Preston Lake
Apartments and the repayment by the Company of the $901,689 outstanding mortgage
debt on its Building Industries Center property.

Other assets increased by $356,063 primarily due to increases in mortgage costs
and tenant security deposits as a result of the purchase of Farrington
Apartments and Preston Lake Apartments.

Mortgage debt increased by $20,466,685 primarily due to the $7,900,000 mortgage
on Farrington Apartments and the $14,000,000 mortgage on Preston Lake
Apartments. This increase was partially offset by the $901,689 repayment of the
mortgage on the Building Industries Center property.

Deferred income increased by $73,492 primarily as a result of increases of
$11,000 in deferred interest income, $46,385 in prepaid rents and $17,857 in
deferred utility income.

Other liabilities increased by $119,766 primarily as a result of increases of
$122,262 in tenant security deposits.

Net unrealized gain (loss) on securities available for sale decreased by
$222,476 primarily as a result of the sales of securities in the first half of
2000 and an increase in the fair value of securities available for sale.


                                       26
<PAGE>   27
Results of Operations

         1999 vs 1998

Revenue decreased by $168,483 primarily as a result of decreases in interest on
mortgages-sold properties, interest on wrap mortgages and interest on
mortgages-related parties. These decreases were offset by increases in rental
income, investment income and other income.

Interest on mortgages-sold properties decreased by $699,796 primarily due to the
sale of the Fairfield Towers First Mortgage in February of 1999, which decreased
interest income by $1,404,406. In addition, the amortization of discounts on
notes receivable decreased by $354,238. Amortization of discounts on notes
receivable decreases as notes mature or are sold. These decreases were partially
offset by the $333,667 of interest received on the $4,000,000 unsold portion of
the Fairfield Towers Second Mortgage and interest of $707,592 received on the
modified New Haven note.

Interest on wrap mortgages decreased by $749,301 primarily as a result of the
Company's repayment in June, 1999 of the first mortgage debt on the Crown Tower
and Madison Towers properties. The Crown Tower and Madison Towers wraparound
mortgage notes were modified into one consolidated note (the "New Haven note").
As a result of these transactions, wrap mortgage interest decreased by $680,606
because the modified New Haven note is not a wraparound mortgage note. In
addition, the sale of the Grant House wraparound mortgage note in January, 1999
decreased interest by $68,695.

Interest on mortgages-related parties decreased by $187,549 primarily as a
result of decreases in interest on the Consolidated Loans of $111,719 and
decreases in interest on the Overlook loan of $68,906. The decrease in interest
on the Overlook loan is a result of principal prepayments received in 1998.

Rental income increased by $956,140 primarily as a result of increased rental
income of $670,515 at the Sunwood Apartments property, which was purchased in
August of 1998. In addition, rental income increased by $285,625 at all other
properties.

Investment income increased by $479,914 primarily as a result of increased
dividend income on securities available for sale.

Other income increased by $32,109 primarily as a result of a $30,750 fee
received on the modification of the New Haven note.


                                       27
<PAGE>   28
Costs and expenses increased by $470,662 primarily due to increases in general
and administrative expenses, rental property operating expenses, interest on
mortgages, depreciation on real estate, amortization of mortgage costs, and an
increase in minority interest share of partnership income. These increases were
partially offset by a decrease in interest expense on note payable and a
decrease in interest expense on wrap mortgage debt.

General and administrative expenses increased by $429,350 primarily as a result
of the $378,522 bad debt write-off for receivables due from the Company's
unaffiliated rental property management company. These receivables resulted from
unreimbursed shared overhead expenses and advances made from time to time by
Presidential to the management company. Although these outstanding advances of
$378,522 have not been forgiven, it is unlikely that Presidential will collect
them in the near future and, accordingly, Presidential determined that it was
appropriate to write off these receivables. In addition, there were increases in
salary expenses of $107,087 (of which $60,442 pertains to increases in executive
bonuses), increases in executive pension plan expenses of $91,437, increases in
professional fees of $63,792 and increases of $37,341 in other categories of
general and administrative expenses. These increases were partially offset by a
decrease in franchise tax expenses of $248,829. The decrease in 1999 is a result
of a franchise tax expense incurred in 1998 on the partnership distributions
received from the proceeds of the mortgage refinancing on the Home Mortgage
Plaza property.

Interest on note payable and other decreased by $891,714 primarily as a result
of the repayment of the note payable in February, 1999.

Interest on wrap mortgage debt decreased by $150,630 as a result of the
repayment of the first mortgage debt on the Crown Tower and Madison Towers
properties in June of 1999. In addition, in January, 1999, the Company sold the
Grant House wraparound mortgage note and the related first mortgage debt on the
property was assigned to the purchaser.

Rental property operating expenses increased by $412,078 primarily as a result
of increased operating expenses at the Cambridge Green and Sunwood Apartments
properties of $233,837 and $229,365, respectively. The increased operating
expenses at the Cambridge Green property were a result of renovations at the
property in 1999. These increases were partially offset by a $70,329 decrease in
operating expenses at the Home Mortgage Plaza property.


                                       28
<PAGE>   29
Interest on mortgages increased by $304,795 primarily as a result of the
addition of the Sunwood Apartments property, which increased mortgage interest
expense by $209,342. In April, 1998, the Company refinanced the $10,788,825
mortgage on the Home Mortgage Plaza property for a new $17,500,000 mortgage,
which increased mortgage interest expense by $125,474. In addition, the Company
obtained a new mortgage on the Fairlawn Gardens property in March, 1998, which
increased mortgage interest expense by $33,738. These increases were offset by a
decrease of $43,760 on the Cambridge Green mortgage which was refinanced in
January, 1999.

Depreciation expense on real estate increased by $180,265 primarily as a result
of $112,345 of increased depreciation expense on the Sunwood Apartments property
and increases in depreciation expense on all other properties as a result of
additions and improvements.

Amortization of mortgage costs increased by $81,404 primarily as a result of the
write-off of unamortized mortgage costs of $166,756 and the $31,200 prepayment
penalty fee resulting from the refinancing of the mortgage on the Cambridge
Green property in January, 1999. This increase was offset by a decrease of
$124,556 in amortization of mortgage costs on the Home Mortgage Plaza property.
In 1998, the Company had written off $107,412 of unamortized mortgage costs in
connection with the refinancing of the mortgage on the Home Mortgage Plaza
property.

Minority interest share of partnership income increased by $111,979 as a result
of an increase in partnership income on the Home Mortgage Plaza property.

Net gain from sales of properties, notes and securities are sporadic (as they
depend on the timing of sales or the receipt of installments or prepayments on
purchase money notes). In 1999, the net gain from sales of properties, notes and
securities was $7,703,081 compared with $755,801 in 1998:

<TABLE>
<CAPTION>
Gain (loss) from sales recognized at December 31,    1999             1998
                                                     ----             ----
<S>                                               <C>             <C>
  Sales of mortgage notes:
    Fairfield Towers First and Second Mortgages
    (net of taxes of $220,500)                    $7,393,844
    Grant House wraparound mortgage note             425,000
  Deferred gains recognized upon receipt of
    principal payments on notes:
    New Haven - $1,000,000 principal payment       1,000,000
    Pinewood - $317,662 principal prepayment         218,534
    Overlook                                          21,714      $613,285
</TABLE>


                                       29
<PAGE>   30
<TABLE>
<CAPTION>
Gain (loss) from sales recognized at December 31,     1999            1998
                                                      ----            ----
(continued)
<S>                                              <C>              <C>
    Fairfield Towers Second Mortgage                 19,466         69,217
    Hastings Gardens                                                 7,754
    Towne House                                                      3,672
  Sales of property:
    Sherwood House apartment units                   74,672         40,435
  Sales of securities                            (1,450,149)        21,438
                                                  ----------      --------
  Net gain                                       $7,703,081       $755,801
                                                 ==========       ========
</TABLE>

Funds From Operations

Funds from operations ("FFO") represents net income (computed in accordance with
generally accepted accounting principles) ("GAAP"), excluding gains (losses)
from sales of properties, notes and securities, plus depreciation and
amortization on real estate. FFO is calculated in accordance with the National
Association of Real Estate Investment Trusts ("NAREIT") definition. FFO does not
represent cash generated from operating activities in accordance with GAAP which
is disclosed in the Consolidated Statements of Cash Flows included in the
financial statements and is not necessarily indicative of cash available to fund
cash requirements. There are no material legal or functional restrictions on the
use of FFO. FFO should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flows as a measure of liquidity. Management considers FFO a supplemental measure
of operating performance and along with cash flow from operating activities,
financing activities and investing activities, it provides investors with an
indication of the ability of the Company to incur and service debt, to make
capital expenditures and to fund other cash requirements.

FFO, as calculated in accordance with the NAREIT definition, is summarized in
the following table:

<TABLE>
<CAPTION>
                                           Year ended December 31,
                                   ------------------------------------
                                        2000         1999         1998
                                        ----         ----         ----
<S>                                <C>            <C>          <C>
Income before net gain
  (loss) from sales of
  properties, notes and
  securities                        $ 1,217,984   $ 1,378,301  $ 2,017,446
Depreciation and
  amortization on real
  estate                              1,587,545     1,008,051      827,786
                                    -----------   -----------  -----------
Funds From Operations               $ 2,805,529   $ 2,386,352  $ 2,845,232
                                    ===========   ===========  ===========
</TABLE>

                                       30
<PAGE>   31
<TABLE>
<CAPTION>
                                           Year ended December 31,
                                   --------------------------------------
                                        2000         1999         1998
                                        ----         ----         ----
<S>                                <C>           <C>           <C>
Distributions paid to
  Shareholders                      $ 2,367,098   $ 2,325,046  $ 2,263,235
                                    ===========   ===========  ===========

FFO payout ratio                       84.4%         97.4%        79.5%
                                    ===========   ===========  ===========

Cash flows from:
Operating activities               $  3,184,030  $  3,772,326  $ 1,755,553
                                   ============  ============  ===========
Investing activities               $(25,301,365) $ 17,933,561  $(6,274,418)
                                   ============  ============  ===========
Financing activities               $ 17,262,454  $(16,455,810) $ 5,303,618
                                   ============  ============  ===========
</TABLE>

Forward-Looking Statements

Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include statements regarding the intent, belief or
current expectations of the Company and its management and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
following: general economic and business conditions, which will, among other
things, affect the demand for apartments or commercial space, availability and
creditworthiness of prospective tenants, lease rents and the terms and
availability of financing; adverse changes in the real estate markets including,
among other things, competition with other companies; risks of real estate
development and acquisition; governmental actions and initiatives; and
environment/safety requirements.

Liquidity and Capital Resources

Management believes that the Company has sufficient liquidity and capital
resources to carry on its existing business and, barring any unforeseen
circumstances, to pay the dividends required to maintain REIT status in the
foreseeable future. As described below under Investing Activities, in March
2000, the Company purchased two new apartment properties and utilized a
substantial portion of its available funds. Except as discussed herein,
management is not aware of any other trends, events, commitments or
uncertainties that will have a significant effect on liquidity.


                                       31
<PAGE>   32
Presidential obtains funds for working capital and investment from its available
cash and cash equivalents, from securities available for sale, from operating
activities, from refinancing of mortgage loans on its real estate equities, and
from the sales of or repayments on its mortgage portfolio. The Company also has
at its disposal a $250,000 unsecured line of credit from a lending institution.

At December 31, 2000, Presidential had $2,159,661 in available cash and cash
equivalents, a decrease of $4,854,881 from the $7,014,542 at December 31, 1999.
This decrease in cash and cash equivalents was due to cash used in investing
activities of $25,301,365, offset by cash provided by operating activities of
$3,184,030 and financing activities of $17,262,454.

In January, 2001, the Company received the $1,175,500 principal payment on a
note receivable that had been secured by the Windsor at Arbors property in
Alexandria, Virginia. As a result, in 2001, the Company will recognize an
unamortized discount of $255,281 and a deferred gain of $684,991.

In February, 2001, the Company utilized substantially all of the loan repayment
proceeds to make a $1,100,000 loan secured by three apartment properties located
in New Jersey, which properties also secure the $4,000,000 Fairfield Towers
loan, and by a personal guarantee limited to $750,000 by one of the borrower's
principals. The loan requires monthly payments of interest only at the rate of
13% per annum with the entire principal balance due at maturity in February,
2009.

         Operating Activities

Cash from operating activities includes interest on the Company's mortgage
portfolio and net cash received from rental property operations, which were
$3,079,724 and $2,180,893 in 2000, respectively. Net cash received from rental
property operations is net of distributions from partnership operations to
minority partners but before additions and improvements and mortgage
amortization.

         Investing Activities

Presidential holds a portfolio of mortgage notes receivable. During 2000, the
Company received principal payments of $431,540 on its mortgage portfolio, of
which $284,709 represented prepayments, which


                                       32
<PAGE>   33
are sporadic and cannot be relied upon as a regular source of liquidity.

In March, 2000, the Company purchased Farrington Apartments and Preston Lake
Apartments for a purchase price of $9,630,950 and $17,450,000, respectively. To
finance these purchases, the Company obtained first mortgage loans of $7,900,000
and $14,000,000, respectively, which are collateralized by the properties.

During 2000, the Company invested $637,617 in additions and improvements to its
properties.

         Financing Activities

The Company's indebtedness at December 31, 2000, consisted of $59,846,143 of
mortgage debt. The mortgage debt, which is collateralized by individual
properties, is nonrecourse to the Company with the exception of the $245,278
Mapletree Industrial Center mortgage, which is collateralized by the property
and a guarantee of repayment by Presidential. In addition, some of the Company's
mortgages provide for personal liability for damages resulting from specified
acts or circumstances, such as for environmental liabilities and fraud.
Generally, mortgage debt repayment is serviced with cash flow from the
operations of the individual properties. During 2000, the Company made
$1,433,315 of principal payments on mortgage debt. Included in the $1,433,315
principal payments on mortgage debt was a balloon payment of $901,689 that the
Company paid in May, 2000 on the mortgage on its Building Industries Center
property.

In connection with the purchase of Farrington Apartments and Preston Lake
Apartments in March, 2000, the Company obtained first mortgage loans
collateralized by the properties as follows:

<TABLE>
<CAPTION>
                   Mortgage   Interest   Monthly      Maturity     Balloon
Property              Loan       Rate    Payment        Date       Payment

<S>               <C>            <C>     <C>         <C>         <C>
Farrington Apts.  $ 7,900,000    8.25%   $ 59,350    5/1/2010    $ 7,106,299
Preston Lake Apts. 14,000,000    8.15     104,195    5/1/2010     12,564,077
</TABLE>

In addition, the Company paid mortgage costs of $350,094 for the mortgages
obtained for the new properties.

The mortgages on the Company's properties are self-liquidating at fixed rates of
interest with the exception of the following mortgages:


                                       33
<PAGE>   34
<TABLE>
<CAPTION>
                     Outstanding   Maturity  Interest    Balloon
  Property             Balance      Date       Rate      Payment

<S>                 <C>           <C>          <C>     <C>
Continental Gardens $ 7,878,505   Aug., 2007   8.16%   $ 7,158,323
Fairlawn Gardens      2,241,935   April,2008   7.06      2,012,668
Farrington Apts.      7,866,120   May,  2010   8.25      7,106,299
Home Mtg. Plaza      17,105,804   May,  2008   7.38     15,445,099
Preston Lake Apts.   13,938,310   May,  2010   8.15     12,564,077
Sunwood Apts.         4,748,406   Sept.,2008   6.55      4,146,349
</TABLE>

During 2000, Presidential declared and paid cash distributions of $2,367,098 to
its shareholders and received proceeds from its dividend reinvestment and share
purchase plan of $87,395.

         Environmental Matters

The Company is not aware of any environmental issues at any of its properties.
The presence, with or without the Company's knowledge, of hazardous substances
at any of its properties could have an adverse effect on the Company's operating
results and financial condition.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
         MARKET RISK

The Company's financial instruments consist primarily of mortgage notes
receivable and mortgage notes payable. Substantially all of these instruments
bear interest at fixed rates, so the Company's cash flows from them are not
directly impacted by changes in market rates of interest. The Company does not
own any derivative financial instruments or engage in hedging activities.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Table of Contents to Consolidated Financial Statements.

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


None.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Reference is made to the Company's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held June 14, 2001, which Proxy Statement will be
filed with the Securities and Exchange


                                       34
<PAGE>   35
Commission pursuant to Regulation 14A and which is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

Reference is made to the Company's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held June 14, 2001, which Proxy Statement will be
filed with the Securities and Exchange Commission pursuant to Regulation 14A and
which is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Reference is made to the Company's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held June 14, 2001, which Proxy Statement will be
filed with the Securities and Exchange Commission pursuant to Regulation 14A and
which is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Reference is made to the Company's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held June 14, 2001, which Proxy Statement will be
filed with the Securities and Exchange Commission pursuant to Regulation 14A and
which is incorporated herein by reference.

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


(a) and (d) A Table of Contents to Consolidated Financial Statements and
Schedules is included in this report.

(b) No report on Form 8-K was filed during the calendar quarter ended December
31, 2000.

(c) Exhibits:

3.1 Certificate of Incorporation of the Company (incorporated herein by
reference to Exhibit 3.5 to Post-effective Amendment No. 1 to the Company's
Registration Statement on Form S-14, Registration No. 2-83073).

3.2 Certificate of Amendment to Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3 to the


                                       35
<PAGE>   36
Company's Annual Report on Form 10-K for the year ended December 31, 1987,
Commission File No. 1-8594).

3.3 Certificate of Amendment to Certificate of Incorporation of the Company,
filed July 21, 1988 with the Secretary of State of the State of Delaware
(incorporated herein by reference to Exhibit 3.3 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1988, Commission File No. 1-8594).

3.4 Certificate of Amendment to Certificate of Incorporation of the Company,
filed on September 12, 1989 with the Secretary of State of the State of Delaware
(incorporated herein by reference to Exhibit 3.4 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1989, Commission File No. 1-8594).

3.5 By-laws of the Company (incorporated herein by reference to Exhibit 3.7 to
Post-effective Amendment No. 1 to the Company's Registration Statement on Form
S-14, Registration No. 2-83073).

10.1 Employment Agreement dated as of November 1, 1982 between the Company and
Robert E. Shapiro, as amended by Amendments dated March 1, 1983, November 25,
1985, February 23, 1987 and January 4, 1988, (incorporated herein by reference
to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1988, Commission File No. 1-8594).

10.2 Employment Agreement dated as of November 1, 1982 between the Company and
Joseph Viertel, as amended by Amendments dated March 1, 1983, November 22, 1985,
February 23, 1987, (incorporated herein by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1992,
Commission File No. 1-8594).

10.3 Settlement Agreement dated November 14, 1991 between the Company and Steven
Baruch, Jeffrey F. Joseph and Thomas Viertel, (incorporated herein by reference
to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 1-8594).

10.4 First Amendment dated August 1, 1996 to Settlement Agreement dated November
14, 1991 between the Company and Steven Baruch, Jeffrey F. Joseph and Thomas
Viertel (incorporated herein by reference to Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 1997, Commission
File No. 1-8594).

                                       36
<PAGE>   37
10.5 Presidential Realty Corporation Defined Benefit Plan dated December 16,
1994, (incorporated herein by reference to Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, Commission File No.
1-8594).

10.6 First and Second Amendments dated December 11, 1995 and December 8, 1999,
respectively, to the Presidential Realty Corporation Defined Benefit Plan
(incorporated herein by reference to Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999, Commission File No.
1-8594).

10.7 Employment Agreement dated January 1, 2000 between the Company and Jeffrey
F. Joseph, (incorporated herein by reference to Exhibit 10.12 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 2000, Commission
File No. 1-8594).

10.8 Employment Agreement dated January 1, 2000 between the Company and Steven
Baruch, (incorporated herein by reference to Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 2000, Commission
File No. 1-8594).

10.9 Employment Agreement dated January 1, 2000 between the Company and Thomas
Viertel, (incorporated herein by reference to Exhibit 10.14 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 2000, Commission
File No. 1-8594).

10.10 1999 Stock Option Plan for 150,000 shares of Class B common stock
(incorporated herein by reference to Exhibit 10.11 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999, Commission File No.
1-8594).

21. List of Subsidiaries of Registrant dated December 31, 2000 (see page 80).


                                       37
<PAGE>   38
                                   SIGNATURES

Pursuant to the requirements of Section 13 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.

                        PRESIDENTIAL REALTY CORPORATION

                         By:     THOMAS VIERTEL
                            ---------------------------
                                 Thomas Viertel
                             Chief Financial Officer
                                 March 22, 2001

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

         Signature and Title                                  Date
         -------------------                                  ----

By:    ROBERT E. SHAPIRO                                      March 22, 2001
   ------------------------------
         Robert E. Shapiro
         Chairman of the Board of
         Directors and Director

By:    JEFFREY F. JOSEPH                                      March 22, 2001
   -------------------------------
         Jeffrey F. Joseph
         President and Director

By:    THOMAS VIERTEL                                         March 22, 2001
   -------------------------------
         Thomas Viertel
         Executive Vice President
         (Chief Financial Officer)

By:    ELIZABETH DELGADO                                      March 22, 2001
   -------------------------------
         Elizabeth Delgado
         Treasurer
         (Principal Accounting Officer)

By:    RICHARD BRANDT                                         March 22, 2001
   -------------------------------
         Richard Brandt
         Director

By:    MORTIMER M. CAPLIN                                     March 22, 2001
   -------------------------------
         Mortimer M. Caplin
         Director
                                       38
<PAGE>   39
SIGNATURES (Continued)


Signature and Title                                          Date



By:    ROBERT FEDER                                           March 22, 2001
   -------------------------------
         Robert Feder
         Director


By:    JOSEPH VIERTEL                                         March 22, 2001
   -------------------------------
         Joseph Viertel
         Director


                                       39
<PAGE>   40
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                     Page

Independent Auditors' Report                                         41

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheets - December 31, 2000
  and 1999                                                           42

Consolidated Statements of Operations for the
  Years Ended December 31, 2000, 1999 and 1998                       44

Consolidated Statements of Stockholders' Equity for
  the Years Ended December 31, 2000, 1999 and 1998                   45

Consolidated Statements of Cash Flows for the
  Years Ended December 31, 2000, 1999 and 1998                       46

Notes to Consolidated Financial Statements                           48

CONSOLIDATED SCHEDULES:

II.      Valuation and Qualifying Accounts for the Years
           Ended December 31, 2000, 1999 and 1998                    75

III.     Real Estate and Accumulated Depreciation at
           December 31, 2000                                         76

IV.      Mortgage Loans on Real Estate at December 31, 2000          78


NOTE:    All schedules, other than those indicated above, are omitted because of
         the absence of the conditions under which they are required or because
         the required information is included in the consolidated financial
         statements or the notes to the consolidated financial statements.


                                       40
<PAGE>   41
INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Presidential Realty Corporation
White Plains, New York

We have audited the accompanying consolidated balance sheets of Presidential
Realty Corporation and subsidiaries (the "Company") as of December 31, 2000 and
1999 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2000. Our audits also included the financial statement schedules listed in the
foregoing Table of Contents. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Presidential Realty Corporation and
subsidiaries at December 31, 2000 and 1999 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2000 in conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth herein.

Deloitte & Touche LLP


Stamford, Connecticut
March 2, 2001


                                       41
<PAGE>   42
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
Assets                                                        December 31,                       December 31,
                                                                  2000                               1999

<S>                                                            <C>                                <C>
  Real estate (Note 2)                                         $63,537,365                        $35,647,633
    Less: accumulated depreciation                               9,818,165                          8,231,480
                                                               -----------                        -----------
  Net real estate                                               53,719,200                         27,416,153
                                                               -----------                        -----------
  Mortgage portfolio (Note 3):
    Sold properties                                             28,191,380                         28,481,797
    Related parties                                              1,447,959                          1,574,028
                                                               -----------                        -----------
    Total mortgage portfolio                                    29,639,339                         30,055,825
                                                               -----------                        -----------
  Less discounts:
    Sold properties                                              1,621,104                          1,837,722
    Related parties                                                114,794                            132,073
                                                               -----------                        -----------
    Total discounts                                              1,735,898                          1,969,795
                                                               -----------                        -----------
  Less deferred gains:
    Sold properties                                             11,224,373                         11,320,373
    Related parties                                                884,355                            908,343
                                                               -----------                        -----------
    Total deferred gains                                        12,108,728                         12,228,716
                                                               -----------                        -----------
  Net mortgage portfolio                                        15,794,713                         15,857,314
                                                               -----------                        -----------

  Minority partners' interest (Note 4)                           7,838,643                          7,904,533
  Prepaid expenses and deposits in escrow                        1,691,013                          1,434,079
  Other receivables (net of valuation allowance of
    $181,838 in 2000 and $139,822 in 1999)                         732,655                            494,220
  Securities available for sale (Note 5)                             4,997                          2,299,494
  Cash and cash equivalents                                      2,159,661                          7,014,542
  Other assets                                                   1,997,158                          1,641,095
                                                               -----------                        -----------
  Total Assets                                                 $83,938,040                        $64,061,430
                                                               ===========                        ===========
</TABLE>











  See notes to consolidated financial statements.



                                       42
<PAGE>   43
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

Liabilities and Stockholders' Equity

<TABLE>
<CAPTION>
                                                                                         December 31,           December 31,
                                                                                             2000                   1999
                                                                                       ----------------       ----------------


<S>                                                                                          <C>                    <C>
        Liabilities:
          Mortgage debt (of which $624,439 in 2000 and
                $1,338,491 in 1999 are due within one year) (Note 6)                         $59,846,143            $39,379,458
          Executive pension plan liability (Note 15)                                           1,530,148              1,479,185
          Accrued liabilities                                                                  1,868,547              1,637,069
          Accrued taxes payable (Note 8)                                                                                220,500
          Accrued postretirement costs (Note 16)                                                 518,334                538,398
          Deferred income                                                                        120,025                 46,533
          Accounts payable                                                                       419,290                414,195
          Other liabilities                                                                      919,256                799,490
                                                                                             ------------           ------------

        Total Liabilities                                                                     65,221,743             44,514,828
                                                                                             ------------           ------------


        Stockholders' Equity:
          Common stock; par value $.10 per share (Note 11)
          Class A, authorized 700,000 shares, issued 478,940 shares
              and at  December 31, 2000, 100 shares held in treasury                              47,894                 47,894
            Class B             December 31, 2000         December 31, 1999                      323,015                321,240
            -----------      --------------------      ------------------
            Authorized:                10,000,000              10,000,000
            Issued:                     3,230,148               3,212,402
            Treasury:                       1,850                   1,258

          Additional paid-in capital                                                           2,677,126              2,573,281
          Retained earnings                                                                   16,055,448             17,209,589
          Accumulated other comprehensive income (loss) (Note 5)                                   1,402               (221,074)
          Treasury stock (at cost)                                                               (21,088)               (16,828)
          Notes receivable for exercise of stock options (Notes 14 and 18)                      (367,500)              (367,500)
                                                                                             ------------           ------------

        Total Stockholders' Equity                                                            18,716,297             19,546,602
                                                                                             ------------           ------------

        Total Liabilities and Stockholders' Equity                                           $83,938,040            $64,061,430
                                                                                             ============           ============
</TABLE>










          See notes to consolidated financial statements.


                                       43
<PAGE>   44
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                        ----------------------------------------------------

                                                                          2000                  1999                 1998
                                                                        -----------          -----------          ----------
<S>                                                                     <C>                  <C>                  <C>
Income:
  Rental                                                                $14,584,793          $10,672,236          $9,716,096
  Interest on mortgages - sold properties                                 3,028,743            3,074,034           3,773,830
  Interest on wrap mortgages                                                                     528,173           1,277,474
  Interest on mortgages - related parties                                   196,845              250,491             438,040
  Investment income                                                         243,068              648,221             168,307
  Other                                                                      37,868               71,127              39,018
                                                                         -----------         ------------        ------------

Total                                                                    18,091,317           15,244,282          15,412,765
                                                                         -----------         ------------        ------------

Costs and Expenses:
  General and administrative                                              2,741,146            3,098,272           2,668,922
  Interest on note payable and other                                                             236,739           1,128,453
  Interest on wrap mortgage debt                                                                  54,586             205,216
  Amortization of  loan acquisition costs                                                          3,128              32,459
  Depreciation on non-rental property                                        23,578               25,497              24,594
  Rental property:
    Operating expenses                                                    6,300,631            4,684,312           4,272,234
    Interest on mortgage debt                                             4,262,463            2,952,811           2,648,016
    Real estate taxes                                                     1,229,068              927,344             905,781
    Depreciation on real estate                                           1,587,545            1,008,051             827,786
    Amortization of mortgage costs                                           88,578              273,752             192,348
    Minority interest share of partnership income                           640,324              601,489             489,510
                                                                         -----------         ------------        ------------

Total                                                                    16,873,333           13,865,981          13,395,319
                                                                         -----------         ------------        ------------


Income before net (loss) gain from sales of properties,
  notes and securities                                                    1,217,984            1,378,301           2,017,446

Net (loss) gain from sales of properties, notes and securities
(includes a provision for income taxes of $220,500 in 1999)
(Notes 3, 5 and 8)                                                           (5,027)           7,703,081             755,801
                                                                         -----------         ------------        ------------

Net Income                                                               $1,212,957           $9,081,382          $2,773,247
                                                                         ===========         ============        ============


Earnings per Common Share (basic and diluted) (Note 1-I):
  Income before net (loss) gain from sales of properties, notes
  and securities                                                              $0.33                $0.38               $0.56

  Net (loss) gain from sales of properties, notes and securities               0.00                 2.12                0.21
                                                                         -----------         ------------        ------------

  Net Income per Common Share                                                 $0.33                $2.50               $0.77
                                                                         ===========         ============        ============

Cash Distributions per Common Share (Note 12)                                 $0.64                $0.64               $0.63
                                                                         ===========         ============        ============

Weighted Average Number of Shares Outstanding                             3,698,471            3,629,333           3,592,543
                                                                         ===========         ============        ============
</TABLE>










See notes to consolidated financial statements.





                                       44
<PAGE>   45
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                                Accumulated
                                                                         Additional                                Other
                                                         Common            Paid-in           Retained           Comprehensive
                                                         Stock             Capital           Earnings           Income (Loss)
                                                        --------         ----------         ----------        -----------------

<S>                                                     <C>              <C>                <C>                 <C>
Balance at January 1, 1998                              $359,271         $2,043,653         $9,943,241            $19,505

Net proceeds from dividend reinvestment
  and share purchase plan                                  2,232            148,455
Cash distributions ($.63 per share)                                                         (2,263,235)
Issuance of treasury stock (Note 13)                                        (19,740)
Comprehensive income:
   Net income                                                                                2,773,247
   Other comprehensive income-
      Net unrealized gain (loss) on securities
        available for sale, net of reclassification
        adjustment (see disclosure below)                                                                          (3,828)

Comprehensive income


                                                        ---------        -----------        -----------         ---------
Balance at December 31, 1998                              361,503          2,172,368         10,453,253            15,677

Net proceeds from dividend reinvestment
  and share purchase plan                                   1,631            103,863
Exercise of stock options (Notes 14 and 18)                 6,000            361,500
Cash distributions ($.64 per share)                                                          (2,325,046)
Issuance of treasury stock (Note 13)                                         (64,450)
Purchase of treasury stock
Comprehensive income:
   Net income                                                                                 9,081,382
   Other comprehensive income-
      Net unrealized gain (loss) on securities
        available for sale, net of reclassification
        adjustment (see disclosure below)                                                                        (236,751)

Comprehensive income


                                                        ---------        -----------        -----------         ----------
Balance at December 31, 1999                              369,134          2,573,281         17,209,589          (221,074)

Net proceeds from dividend reinvestment
  and share purchase plan                                   1,475             85,920
Cash distributions ($.64 per share)                                                          (2,367,098)
Issuance of stock (Note 13)                                   300             17,925
Purchase of treasury stock
Comprehensive income:
   Net income                                                                                 1,212,957
   Other comprehensive income-
      Net unrealized gain (loss) on securities
        available for sale, net of reclassification
        adjustment (see disclosure below)                                                                         222,476

Comprehensive income


                                                        ---------        -----------        -----------         ----------
Balance at December 31, 2000                             $370,909         $2,677,126        $16,055,448            $1,402
                                                        =========        ===========        ===========         ==========
</TABLE>






<TABLE>
<CAPTION>
                                                                                Notes
                                                                               Receivable                                Total
                                                             Treasury        for Exercise of     Comprehensive       Stockholders'
                                                              Stock           Stock Options         Income               Equity
                                                        --------------     ----------------    ---------------      ---------------

<S>                                                      <C>                   <C>                <C>                   <C>
Balance at January 1, 1998                               ($192,587)                                                     $12,173,083

Net proceeds from dividend reinvestment
  and share purchase plan                                                                                                   150,687
Cash distributions ($.63 per share)                                                                                      (2,263,235)
Issuance of treasury stock (Note 13)                        40,620                                                           20,880
Comprehensive income:
   Net income                                                                                      $2,773,247             2,773,247
   Other comprehensive income-
      Net unrealized gain (loss) on securities
        available for sale, net of reclassification
        adjustment (see disclosure below)                                                              (3,828)               (3,828)
                                                                                                  ------------
Comprehensive income                                                                               $2,769,419
                                                                                                  ============

                                                          ---------            ----------                                ----------
Balance at December 31, 1998                              (151,967)                                                      12,850,834

Net proceeds from dividend reinvestment
  and share purchase plan                                                                                                   105,494
Exercise of stock options (Notes 14 and 18)                                    ($367,500)
Cash distributions ($.64 per share)                                                                                      (2,325,046)
Issuance of treasury stock (Note 13)                       135,398                                                           70,948
Purchase of treasury stock                                    (259)                                                            (259)
Comprehensive income:
   Net income                                                                                      $9,081,382             9,081,382
   Other comprehensive income-
      Net unrealized gain (loss) on securities
        available for sale, net of reclassification
        adjustment (see disclosure below)                                                            (236,751)             (236,751)
                                                                                                   -----------
Comprehensive income                                                                               $8,844,631
                                                                                                   ===========

                                                           ---------           ----------                               -----------
Balance at December 31, 1999                               (16,828)             (367,500)                                19,546,602

Net proceeds from dividend reinvestment
  and share purchase plan                                                                                                    87,395
Cash distributions ($.64 per share)                                                                                      (2,367,098)
Issuance of stock (Note 13)                                                                                                  18,225
Purchase of treasury stock                                  (4,260)                                                          (4,260)
Comprehensive income:
   Net income                                                                                      $1,212,957             1,212,957
   Other comprehensive income-
      Net unrealized gain (loss) on securities
        available for sale, net of reclassification
        adjustment (see disclosure below)                                                             222,476               222,476
                                                                                                   ----------
Comprehensive income                                                                               $1,435,433
                                                                                                   ==========

                                                         ----------             -----------                             -----------
Balance at December 31, 2000                              ($21,088)              ($367,500)                             $18,716,297
                                                         ==========             ===========                             ===========
</TABLE>

<TABLE>
<CAPTION>

Disclosure of reclassification amount:                                     Year Ended December 31,
                                                        ----------------------------------------------------------------

                                                              2000                     1999                      1998
                                                            ---------                --------                   -------

<S>                                                         <C>                    <C>                          <C>
Unrealized holding gain (loss) arising during year          $ 36,622                ($1,686,900)                $17,610
Add/subtract: reclassification adjustment for
  loss/gain included in net income                           185,854                  1,450,149                 (21,438)
                                                            ---------               ------------                --------
Net unrealized gain (loss) on securities available
  for sale                                                  $222,476                  ($236,751)                ($3,828)
                                                            =========               ============                ========
</TABLE>

See notes to consolidated financial statements.


                                       45
<PAGE>   46
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                   ---------------------------------------------------

                                                                        2000               1999              1998
                                                                    -------------      -------------     -------------
<S>                                                                  <C>                <C>               <C>
Cash Flows from Operating Activities:
  Cash received from rental properties                               $14,630,103        $10,703,186        $9,645,206
  Interest received                                                    3,079,724          3,671,309         4,447,382
  Miscellaneous income                                                    35,374             62,597            34,522
  Interest paid on rental property mortgage debt                      (4,118,491)        (2,959,551)       (2,608,842)
  Interest paid on wrap mortgage debt                                                       (54,586)         (205,216)
  Interest paid on note payable and other                                                  (201,863)         (920,230)
  Cash disbursed for rental property operations                       (7,756,285)        (4,676,761)       (5,931,851)
  Cash disbursed for general and administrative costs                 (2,686,395)        (2,772,005)       (2,705,418)
                                                                     ------------      -------------      ------------

Net cash provided by operating activities                              3,184,030          3,772,326         1,755,553
                                                                     ------------      -------------      ------------


Cash Flows from Investing Activities:
  Payments received on notes receivable                                  431,540          2,192,841         1,420,506
  Payments disbursed for investments in notes receivable                                                      (60,000)
  Proceeds from sale of notes receivable                                                 20,328,728           400,000
  Payments disbursed for deferred sales commission                                       (1,000,000)
  Payments of taxes payable on gain from sale of notes                  (220,500)
  Payments disbursed for additions and improvements                     (637,617)          (967,802)         (529,261)
  Purchase of property                                               (27,275,886)                          (6,549,637)
  Purchases of securities                                                               (10,343,705)       (1,054,562)
  Proceeds from sales of securities                                    2,331,119          7,632,045            23,986
  Other                                                                   69,979             91,454            74,550
                                                                     ------------      -------------      ------------

Net cash (used in) provided by investing activities                  (25,301,365)        17,933,561        (6,274,418)
                                                                     ------------      -------------      ------------

Cash Flows from Financing Activities:
  Principal payments on mortgage debt:
    Properties owned                                                  (1,433,315)          (423,883)         (429,237)
    Wrap mortgage debt on sold properties                                                  (156,222)         (480,755)
  Mortgage debt payment from proceeds of mortgage refinancing                            (3,120,190)      (10,788,825)
  Mortgage proceeds                                                   21,900,000          3,195,500        24,675,000
  Repayment of wrap mortgage debt                                                        (2,300,000)
  Mortgage refinancing repairs and replacement escrows                                                       (558,730)
  Mortgage costs paid                                                   (350,094)           (82,823)         (591,251)
  Principal payments on note payable                                                    (10,395,361)         (147,191)
  Cash distributions on common stock                                  (2,367,098)        (2,325,046)       (2,263,235)
  Proceeds from dividend reinvestment and share purchase plan             87,395            105,494           150,687
  Distributions to minority partners                                    (574,434)          (953,279)       (4,262,845)
                                                                     ------------      -------------      ------------

Net cash provided by (used in) financing activities                   17,262,454        (16,455,810)        5,303,618
                                                                     ------------      -------------      ------------


Net (Decrease) Increase in Cash and Cash Equivalents                  (4,854,881)         5,250,077           784,753

Cash and Cash Equivalents, Beginning of Year                           7,014,542          1,764,465           979,712
                                                                     ------------      -------------      ------------

Cash and Cash Equivalents, End of Year                                $2,159,661         $7,014,542        $1,764,465
                                                                     ============      =============      ============
</TABLE>






See notes to consolidated financial statements.


                                       46
<PAGE>   47
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                        YEAR ENDED DECEMBER 31,
                                                                         ------------------------------------------------

                                                                            2000            1999              1998
                                                                         -------------  --------------   ---------------



<S>                                                                        <C>             <C>               <C>
Reconciliation of Net Income to Net Cash
  Provided by Operating Activities
Net Income                                                                 $1,212,957      $9,081,382        $2,773,247
                                                                           ----------      ----------        ----------


Adjustments to reconcile net income to net cash provided by operating
  activities:
    Depreciation and amortization                                           1,699,701       1,310,428         1,077,187
    Losses (gains) from sales of properties, notes and securities               5,027      (7,703,081)         (755,801)
    Issuance of stock for fees and expenses                                    18,225          21,510            20,880
    Amortization of discounts on notes and fees                              (392,512)       (702,041)       (1,094,967)
    Minority share of partnership income                                      640,324         601,489           489,510
    Changes in assets and liabilities:
    Decrease (increase) in accounts receivable                                (94,873)        129,301           100,173
    Increase (decrease) in accounts payable and accrued liabilities           267,472         383,041            (9,299)
    Increase (decrease) in deferred income                                     73,492        (119,180)         (108,385)
    Decrease (increase) in prepaid expenses, deposits in escrow
      and deferred charges                                                   (246,383)        777,142          (491,120)
    Increase in security deposit restricted funds                                                              (352,573)
    Increase in security deposit liabilities                                    7,356           1,124           112,243
    Other                                                                      (6,756)         (8,789)           (5,542)
                                                                           ----------      ----------        ----------

Total adjustments                                                           1,971,073      (5,309,056)       (1,017,694)
                                                                           ----------      ----------        ----------


Net cash provided by operating activities                                  $3,184,030      $3,772,326        $1,755,553
                                                                           ==========      ==========        ==========
Supplemental noncash disclosures:
    Property received in satisfaction of debt                                                 $39,858           $11,569
                                                                                           ==========        ==========
</TABLE>


See notes to consolidated financial statements.

                                       47
<PAGE>   48
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. General - Presidential Realty Corporation ("Presidential" or the "Company"),
a Real Estate Investment Trust ("REIT"), is engaged principally in the holding
of notes and mortgages secured by real estate and in the ownership of income
producing real estate. Presidential operates in a single business segment,
investments in real estate related assets.

B. Real Estate - Real estate is stated at cost. Generally, depreciation is
provided on the straight-line method over the assets' estimated useful lives,
which range from twenty to fifty years for buildings and leaseholds and from
three to ten years for furniture and equipment. Maintenance and repairs are
charged to operations as incurred and renewals and replacements are capitalized.
The Company reviews each of its property investments for possible impairment at
least annually, and more frequently if circumstances warrant. Impairment of
properties is determined to exist when estimated amounts recoverable through
future operations on an undiscounted basis are below the properties' carrying
value. If a property is determined to be impaired, it is written down to its
estimated fair value.

The determination of impairment value is based not only upon future cash flows,
which rely upon estimates and assumptions including expense growth, occupancy
and rental rates, but also upon market capitalization and discount rates as well
as other market indicators. Management believes that the estimates and
assumptions used are appropriate in evaluating the carrying amounts of the
Company's properties. However, changes in market conditions and circumstances
may occur in the near term which would cause these estimates and assumptions to
change, which, in turn, could cause the amounts ultimately realized upon the
sale or other disposition of the properties to differ materially from their
estimated fair value. Such changes may also require write-downs in future years.

C. Mortgage Portfolio - Net mortgage portfolio represents the outstanding
principal amounts of notes receivable reduced by discounts and/or deferred
gains. Real estate is the primary form of collateral on all notes receivable.
The Company periodically evaluates the collectibility of both interest on and
principal of


                                       48
<PAGE>   49
its notes receivable to determine whether they are impaired. A mortgage loan is
considered to be impaired when, based on current information and events, it is
probable that the Company will be unable to collect all amounts due according to
the existing contractual terms of the loan. When the mortgage loan is considered
to be impaired, the Company establishes a valuation allowance equal to the
difference between a) the carrying value of the loan, and b) the present value
of the expected cash flows from the loan at its effective interest rate, or, for
practical purposes, at the estimated fair value of the real estate
collateralizing the loan.

D. Securities Available for Sale - The Company's investments are in marketable
equity securities consisting of common and preferred stocks of listed
corporations. Disposition of such securities may be appropriate for either
liquidity management or in response to changing economic conditions, so they are
classified as securities available for sale.

Securities available for sale are reported at fair value with unrealized gains
and losses reported as other comprehensive income in the statement of
stockholders' equity until realized. Gains and losses on sales of securities are
determined using the specific identification method.

E. Sale of Real Estate - Presidential complies with the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 66, "Accounting for Sales of Real
Estate". Accordingly, the gains on certain transactions are deferred and are
being recognized on the installment method until such transactions have complied
with the criteria for full profit recognition.

F. Discounts on Notes Receivable - Presidential assigned discounted values to
long-term notes received from the sales of properties to reflect the difference
between the stated interest rates on the notes and market interest rates at the
time of acceptance. In addition, discounts on notes receivable include discounts
received from the purchase of notes. Such discounts are being amortized using
the interest method.

G. Principles of Consolidation - The consolidated financial statements include
the accounts of Presidential Realty Corporation and its wholly owned
subsidiaries. Additionally, the consolidated financial statements include 100%
of the account balances of UTB Associates and PDL, Inc. and Associates Limited
Co-Partnership ("Home Mortgage Partnership"), partnerships in which Presidential
or PDL, Inc., a wholly owned subsidiary of Presidential, is the General


                                       49
<PAGE>   50
Partner and owns a 66-2/3% interest and an aggregate 26% interest, respectively
(see Note 4).

All significant intercompany balances and transactions have been eliminated.

H. Rental Income Recognition - Rental income is recorded on the accrual method.
Recognition of rental income is generally discontinued when the rental is
delinquent for ninety days or more, or earlier if management determines that
collection is doubtful.

I. Net Income Per Share - Basic net income per share data is computed by
dividing the net income by the weighted average number of shares of Class A and
Class B common stock outstanding during each year. Basic net income per share
and diluted income per share are the same in 1998, 1999 and 2000. The dilutive
effect of stock options is calculated using the treasury stock method.

J. Cash and Cash Equivalents - Cash and cash equivalents includes cash on hand,
cash in banks and money market funds.

K. Benefits - The Company follows SFAS Nos. 87, 106 and 132 in accounting for
pension and postretirement benefits (see Notes 15 and 16).

L. Management Estimates - The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America. In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities as of the date of the consolidated balance sheets and the
reported amounts of income and expense for the reporting period. Actual results
could differ from those estimates.

M. Accounting for Stock Options - The Company complies with the additional
disclosures required by SFAS No. 123 "Accounting for Stock-Based Compensation"
but has elected to continue to account for employee stock-based compensation as
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees". Additional disclosures are required because of options
granted and vested in 1999 (see Note 14).

N. Derivative Instruments - The Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", on January 1, 2001. Company
management has determined that the Company


                                       50
<PAGE>   51
has no derivative financial instruments; therefore, implementation of this
standard had no impact on the Company.

2.       REAL ESTATE

         Real estate is comprised of the following:

<TABLE>
<CAPTION>
                                                     December 31,
                                              -------------------------
                                                 2000         1999
                                                 ----         ----

<S>                                           <C>           <C>
Land                                          $ 9,599,970   $ 5,461,173
Buildings and leaseholds                       53,595,647    29,909,205
Furniture and equipment                           341,748       277,255
                                              -----------   -----------

Total real estate                             $63,537,365   $35,647,633
                                              ===========   ===========
</TABLE>

In March, 2000, the Company purchased two apartment properties, Farrington
Apartments, a 224 unit garden apartment property in Clearwater, Florida and
Preston Lake Apartments, a 320 unit garden apartment property in Tucker,
Georgia. The purchase price for the Farrington Apartments property was
$9,630,950 and the purchase price for the Preston Lake Apartments property was
$17,450,000. Additional acquisition costs for these properties were $165,471 and
$29,465, respectively. In connection with the purchase of these two apartment
properties, the Company obtained first mortgage loans of $7,900,000 and
$14,000,000, respectively.

The following pro forma consolidated results of operations are presented as if
the acquisitions of Farrington Apartments and Preston Lake Apartments had
occurred on January 1, 1999.


                                       51
<PAGE>   52
PRO FORMA INFORMATION

<TABLE>
<CAPTION>
                                                 Year Ended December 31, 2000      Year Ended December 31, 1999
                                                 ----------------------------      ----------------------------
                                                 As Reported        Pro Forma        As Reported    Pro Forma
                                                 -----------       -----------      ------------  -----------
Income:
<S>                                              <C>               <C>              <C>           <C>
  Rental                                         $14,584,793       $15,576,398      $10,672,236   $14,951,566
  Other                                            3,506,524         3,506,524        4,572,046     4,572,046
                                                 -----------       -----------      -----------   -----------
Total                                             18,091,317        19,082,922       15,244,282    19,523,612
                                                 -----------       -----------      -----------   -----------
Costs and Expenses:
  Rental property:
    Operating expenses                             6,300,631         6,646,054        4,684,312     6,056,633
    Interest on mortgage debt                      4,262,463         4,680,158        2,952,811     4,765,024
    Real estate taxes                              1,229,068         1,303,747          927,344     1,258,446
    Depreciation and amortization                  1,676,123         1,837,734        1,281,803     1,968,328
  Other                                            3,405,048         3,405,048        4,019,711     4,019,711
                                                 -----------       -----------      -----------   -----------
Total                                             16,873,333        17,872,741       13,865,981    18,068,142
                                                 -----------       -----------      -----------   -----------

Income before net (loss) gain from sales of
 properties, notes and securities                  1,217,984         1,210,181        1,378,301     1,455,470

Net (loss) gain from sales of properties,
 notes and securities                                 (5,027)           (5,027)       7,703,081     7,703,081
                                                 -----------       -----------      -----------   -----------
Net Income                                        $1,212,957        $1,205,154       $9,081,382    $9,158,551
                                                 ===========       ===========      ===========   ===========

Net Income per Common Share (basic
 and diluted)                                          $0.33             $0.33            $2.50         $2.52
                                                 ===========       ===========      ===========   ===========
</TABLE>


                                       52
<PAGE>   53
The pro forma consolidated results of operations include the actual operating
results of the acquired properties from January 1, 1999 to the date of
acquisition, plus adjustments to give effect to revised property management
fees, interest expense on acquisition debt, depreciation expense on the acquired
properties and amortization of mortgage costs. The pro forma information is not
necessarily indicative of the results of operations that would have occurred had
the acquisitions been made at the beginning of 1999 or the results of operations
for future periods.

Three of the properties owned by the Company represented 29%, 14% and 13% of
total rental income in 2000. During 1999, two properties represented 37% and 17%
of total rental income and in 1998, three properties represented 39%, 18% and
10% of total rental income.

3.       MORTGAGE PORTFOLIO

The Company's mortgage portfolio includes notes receivable - sold properties and
notes receivable - related parties.

Notes receivable - sold properties consist of:

(1)      Long-term purchase money notes from sales of properties previously
         owned by the Company or notes purchased by the Company. These purchase
         money notes have varying interest rates with balloon payments due at
         maturity.

(2)      Notes receivable from sales of cooperative apartment units. These notes
         generally have market interest rates and the majority of these notes
         amortize monthly with balloon payments due at maturity.

Notes receivable - related parties are all due from Ivy Properties, Ltd. or its
affiliates (collectively "Ivy") and consist of:

(1)      Purchase money notes resulting from sales of property or partnership
         interests to Ivy.

(2)      Notes receivable relating to loans made by the Company to Ivy in
         connection with Ivy's cooperative conversion business.

At December 31, 2000, all of the notes in the Company's mortgage portfolio are
current.

The following table summarizes the components of the mortgage portfolio:


                                       53
<PAGE>   54
MORTGAGE PORTFOLIO

<TABLE>
<CAPTION>
                                              Sold Properties                                   Related Parties
                            ------------------------------------------      ---------------------------------------    ------------
                            Properties         Cooperative                  Properties       Cooperative                  Total
                            previously          apartment                    previously      conversion                  mortgage
                              owned               units          Total         owned            loans       Total        portfolio
                            --------------     ------------- -----------    ------------     -----------  ----------    -----------
December 31, 2000

<S>                            <C>            <C>           <C>             <C>              <C>         <C>           <C>
Notes receivable               $27,221,178      $970,202     $28,191,380     $1,292,671       $155,288    $1,447,959    $29,639,339

Less:  Discounts                 1,608,660        12,444       1,621,104         28,822         85,972       114,794      1,735,898
       Deferred gains           11,130,631        93,742      11,224,373        884,355                      884,355     12,108,728
                               -----------    ----------     -----------     ----------       --------    ----------    -----------
Net                            $14,481,887      $864,016     $15,345,903       $379,494        $69,316      $448,810    $15,794,713
                               ===========    ==========     ===========     ==========       ========    ==========    ===========

Due within one year               $273,139       $42,510        $315,649        $16,665        $30,678       $47,343       $362,992
Long-term                       14,208,748       821,506      15,030,254        362,829         38,638       401,467     15,431,721
                               -----------    ----------     -----------     ----------       --------    ----------    -----------
Net                            $14,481,887      $864,016     $15,345,903       $379,494        $69,316      $448,810    $15,794,713
                               ===========    ==========     ===========     ==========       ========    ==========    ===========

December 31, 1999

Notes receivable               $27,390,774    $1,091,023     $28,481,797     $1,376,586       $197,442    $1,574,028    $30,055,825

Less:  Discounts                 1,822,754        14,968       1,837,722         31,606        100,467       132,073      1,969,795
       Deferred gains           11,226,631        93,742      11,320,373        908,343                      908,343     12,228,716
                               -----------    ----------     -----------     ----------       --------    ----------    -----------
Net                            $14,341,389      $982,313     $15,323,702       $436,637        $96,975      $533,612    $15,857,314
                               ===========    ==========     ===========     ==========       ========    ==========    ===========

Due within one year                $37,119       $45,922         $83,041        $14,339        $30,423       $44,762       $127,803
Long-term                       14,304,270       936,391      15,240,661        422,298         66,552       488,850     15,729,511
                               -----------    ----------     -----------     ----------       --------    ----------    -----------
Net                            $14,341,389      $982,313     $15,323,702       $436,637        $96,975      $533,612    $15,857,314
                               ===========    ==========     ===========     ==========       ========    ==========    ===========
</TABLE>


                                       54
<PAGE>   55
Prepayments

During 2000, the Company received $96,000 in principal payments on its Mark
Terrace note resulting in the recognition of a deferred gain of $96,000. The
payments were made in connection with the resumption of sales by the sponsor of
the cooperative apartment units at the Mark Terrace property and the release of
these units from the Company's security interest.

In 1999, the Company received a $317,662 principal prepayment on its $417,662
mortgage note which is secured by 316 apartment units at Pinewood in Des Moines,
Iowa. As a result of the $317,662 prepayment, the Company recognized a deferred
gain of $218,534.

During 1998, the Company received $590,000 in prepayments from two mortgages
which had been assigned by Ivy to the Company as security for the Overlook loan.
In connection with this transaction, the Company recognized a deferred gain of
$590,000.

Modifications

In September, 2000, the Woodgate note with an outstanding principal amount of
$1,175,500 was modified, changing the maturity date of the note from September,
2007 to January, 2001. In connection with this modification, the Company
received a $5,000 fee. Subsequently, in January, 2001, the $1,175,500 Woodgate
note was paid in full. Accordingly, the net carrying value of this note of
$235,228 was included as "Due within one year" in the table above. As a result
of the payment received on the Woodgate note, in 2001, the Company will
recognize an unamortized discount of $255,281 and a deferred gain of $684,991.

In February, 2001, the Company utilized the loan proceeds to fund a $1,100,000
loan secured by three apartment properties in New Jersey, which properties also
secure the $4,000,000 Fairfield Towers loan, and a personal guarantee of
$750,000 by one of the borrower's principals. The $1,100,000 principal balance
is due in February, 2009 and the annual interest rate is 13%.

In June of 1999, the Crown Tower and Madison Towers wraparound mortgage notes in
the outstanding principal amount of $13,300,000 were modified. In connection
with the modification, the Company repaid the $2,300,000 first mortgage debt on
these properties (wrap mortgage debt on sold properties) and consolidated the
$13,300,000 outstanding principal balance of the wraparound mortgage notes into
one consolidated note (the "New Haven note"). Concurrently, the


                                       55
<PAGE>   56
Company received a $1,000,000 principal payment on the New Haven note and paid,
with the proceeds, a $1,000,000 deferred brokerage commission. As a result of
these transactions, the Company received a $30,750 loan modification fee and
recognized a deferred gain of $1,000,000.

The New Haven note with an outstanding principal balance of $12,300,000 at
December 31, 2000, is due on June 29, 2002. The note provides for an interest
rate of 10% per annum, with a 1/2 percent annual rate increase and additional
interest of $369,000 due at maturity, which will increase the effective interest
rate to 11.5% per annum. The New Haven note is secured by a second mortgage on
the Encore Apartments and commercial space located in New York, New York and by
a limited guarantee of $2,500,000 from one of the owners of the property.

Sold Notes

         Fairfield Towers

On February 22, 1999, Presidential consummated the sale of its Fairfield Towers
First and Second Mortgage Notes (excluding a $4,000,000 portion of the Second
Mortgage Note, which it retained). At the date of the sale, the Fairfield Towers
First Mortgage Note had a net carrying value of $13,957,284. The Fairfield
Towers Second Mortgage Note, which was classified as an impaired loan, had a net
carrying value of $1,311,908. The aggregate sales price for the Fairfield Towers
First and Second Mortgage Notes (excluding the $4,000,000 interest retained by
Presidential) was $21,350,000.

As a result of this transaction, Presidential repaid the $10,195,442 outstanding
principal balance of its bank note payable, which had been secured by
Presidential's interest in the Fairfield Towers First Mortgage Note.
Presidential recognized a gain on sale of $7,393,844 net of Federal taxes of
$220,500.

In connection with this transaction, the $4,000,000 portion of the Second
Mortgage Note retained by Presidential was modified to provide for interest at
the rate of 9.625% per annum for the first three years and 10.5% per annum for
the remaining seven years. The $4,000,000 outstanding principal balance is due
on February 18, 2009. To secure this obligation, Presidential obtained
subordinate security interests in three apartment properties located in New
Jersey.


                                       56
<PAGE>   57
         Grant House

On January 28, 1999, the Company sold its equity interest in the $3,235,833
Grant House wraparound mortgage note, which had been classified as an impaired
loan. The Company's underlying second mortgage in the outstanding principal
amount of $1,023,593 was sold to the purchaser for $500,000, of which $75,000 of
the sales proceeds was applied to unpaid interest and the Company recognized a
gain on sale of $425,000. The nonrecourse first mortgage which Presidential's
second mortgage wrapped around was also assigned to the purchaser. As a result
of this transaction, Presidential wrote off the $2,212,240 balance on the first
mortgage and the related $2,212,240 mortgage debt.


4.       MINORITY PARTNERS' INTEREST

Presidential is the General Partner of UTB Associates and PDL, Inc. (a wholly
owned subsidiary of Presidential) is the General Partner of Home Mortgage
Partnership. Presidential has a 66-2/3% interest in UTB Associates, and
Presidential and PDL, Inc. have an aggregate 26% interest in Home Mortgage
Partnership. As the General Partner of these partnerships, Presidential and PDL,
Inc., respectively, exercise effective control over the business of these
partnerships, and, accordingly, Presidential consolidates these partnerships in
the accompanying financial statements. The minority partners' interest reflects
the minority partners' equity in the partnerships.

The minority partners' interest in the Home Mortgage Partnership is a negative
interest and therefore, minority partners' interest is a net asset on the
Company's financial statements. The negative basis for each partner's interest
in the Home Mortgage Partnership is due to the refinancing of the mortgage on
the property and the distribution of the proceeds to the partners. The mortgage
debt, which is included in the Company's financial statements, is substantially
in excess of the net carrying amount of the property, but the estimated fair
value of the property is significantly greater than the mortgage debt. Thus, the
asset recorded as minority partners' interest should be realized upon sale of
the property.


                                       57
<PAGE>   58
Minority partners' interest is comprised of the following:

<TABLE>
<CAPTION>
                                             December 31,
                                        --------------------------
                                           2000          1999
                                           ----          ----

<S>                                     <C>           <C>
Home Mortgage Partnership               $8,040,310    $8,112,127

UTB Associates                            (201,667)     (207,594)
                                         ----------    ----------

Total minority partners' interest       $7,838,643    $7,904,533
                                        ==========    ============
</TABLE>


5.       SECURITIES AVAILABLE FOR SALE

The cost and fair value of securities available for sale are as follows:

<TABLE>
<CAPTION>
                                             December 31,
                                         -----------------------
                                            2000        1999
                                            ----        ----
<S>                                      <C>        <C>
Cost                                      $3,595    $2,520,568
Gross unrealized gains                     1,448         1,824
Gross unrealized losses                      (46)     (222,898)
                                          ------    -----------

Fair value                                $4,997    $2,299,494
                                         =======    ===========
</TABLE>


Sales activity results for securities available for sale are as follows:

<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                         ---------------------------------------
                                            2000          1999             1998
                                            ----          ----             ----

<S>                                      <C>            <C>              <C>
Gross sales proceeds                     $2,331,119     $ 7,632,045      $23,986
                                         ==========     ===========      =======

Gross realized gains                     $    2,306     $                $21,438
Gross realized losses                      (188,160)     (1,450,149)
                                         ----------       ----------    --------

Net realized gain (loss)                 $ (185,854)    $(1,450,149)     $21,438
                                         ==========      ===========    ========
</TABLE>


                                       58
<PAGE>   59
6.       MORTGAGE DEBT

All mortgage debt is secured by individual properties and is nonrecourse to the
Company with the exception of the $245,278 mortgage on the Mapletree Industrial
Center property in Palmer, Massachusetts, which is guaranteed by Presidential.

In connection with the purchase of Farrington Apartments and Preston Lake
Apartments in March, 2000, the Company obtained first mortgage loans
collateralized by the properties as follows:

<TABLE>
<CAPTION>
                 Mortgage  Interest   Monthly  Maturity     Balloon
Property           Loan      Rate     Payment     Date      Payment
<S>             <C>           <C>     <C>       <C>       <C>
Farrington
  Apartments    $ 7,900,000   8.25%   $ 59,350  5/1/2010  $ 7,106,299
Preston Lake
  Apartments     14,000,000   8.15     104,195  5/1/2010   12,564,077
</TABLE>

In May, 2000, the mortgage on the Company's Building Industries Center property
became due and the Company made a $901,689 balloon payment to repay the
mortgage.

As described in Note 3, during the year ended December 31, 1999, the Company
sold the Grant House wraparound mortgage and repaid the Crown Tower and Madison
Towers first mortgage debt (the wrap mortgage debt). As a result of these
transactions, wrap mortgage debt was reduced from $4,668,462 at December 31,
1998 to $0 at December 31, 1999. Interest income and interest expense related to
wrap mortgages are shown as gross amounts in the consolidated statements of
operations.

Amortization requirements of all mortgage debt as of December 31, 2000 are
summarized as follows:

<TABLE>
<CAPTION>
Year ending December 31:
<S>                                                  <C>
2001                                                 $   624,439
2002                                                     669,200
2003                                                     722,129
2004                                                     770,111
2005                                                     840,240
2006 - 2029                                           56,220,024
                                                     -----------

TOTAL                                                $59,846,143
                                                     ===========
</TABLE>


                                       59
<PAGE>   60
Interest on mortgages is payable at annual rates, summarized as follows:

<TABLE>
<CAPTION>
Interest rates:

<S>                                                  <C>
6.55%-6.65%                                          $ 7,879,114
7%-7.75%                                              22,034,556
8.15%-8.25%                                           29,682,935
9.50% - 9.75%                                            249,538
                                                     -----------

TOTAL                                                $59,846,143
                                                     ===========
</TABLE>

7.       LINE OF CREDIT

The Company has an unsecured $250,000 line of credit from a lending institution.
The interest rate is 1% above the prime rate and the line of credit expires in
February, 2002. Presidential pays a 1% annual fee for the line of credit. At
December 31, 2000, no advances are outstanding on this line of credit.

8.       INCOME TAXES

Presidential has elected to qualify as a Real Estate Investment Trust under the
Internal Revenue Code. A REIT which distributes at least 95% of its real estate
investment trust taxable income to its shareholders each year by the end of the
following year and which meets certain other conditions will not be taxed on
that portion of its taxable income which is distributed to its shareholders.

Upon filing the Company's income tax return for the year ended December 31,
1999, Presidential applied its available 1999 stockholders' distributions and
elected to apply (under Section 858 of the Internal Revenue Code) all but
approximately $87,000 of its 2000 stockholders' distributions to reduce its
taxable income for 1999 to zero. For the year ended December 31, 1999, the
Company retained undistributed capital gains designated as paid (under Section
857(b)(3)(D) in the amount of $630,000 ($.17 per share) and paid income taxes of
$220,500 in January, 2000 on that retained gain.

For the year ended December 31, 2000, the Company had taxable income (before
distributions to stockholders) of approximately $818,000 ($.22 per share), which
is net of capital losses of approximately $32,000 ($.01 per share). This amount
will be reduced by the $87,000 ($.02 per share) of its 2000 distributions that
were not utilized in reducing the Company's 1999 taxable income. In addition,


                                       60
<PAGE>   61
the Company may elect to apply any eligible year 2001 distributions to reduce
its 2000 taxable income.

As previously stated, in order to retain REIT status, Presidential is required
to distribute 95% of its REIT taxable income ($.22 per share exclusive of
capital gains and losses). Presidential will apply the available 2000
distributions (approximately $.02 per share) and will be required to pay
additional distributions of not less than $.20 per share in 2001 to maintain
REIT status, which it intends to do. In addition, although no assurances can be
given, it is the Company's present intention to distribute all of its 2000
taxable income during 2000 and 2001 so that it will not have to pay Federal
income taxes for 2000. Therefore, no provision for income taxes has been made at
December 31, 2000.

Presidential has, for tax purposes, reported the gain from the sale of certain
of its properties using the installment method.

9.       COMMITMENTS AND CONTINGENCIES

Presidential is not a party to any material legal proceedings except as noted
below.

UTB Associates, a partnership in which the Company holds a 66-2/3% interest, is
a tenant under a lease (the "Professional Space Lease") of 24,400 square feet of
professional office space at University Towers, a cooperative apartment building
in New Haven, Connecticut. UTB Associates sublets the professional space to
unrelated parties. In June, 1999, University Towers Owners Corp., the
cooperative corporation, filed a petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. As part of the bankruptcy proceedings, in July, 1999
the cooperative corporation filed an Adversary Proceeding against UTB Associates
for termination of the Professional Space Lease and damages primarily based on
claims arising under Connecticut law. The Company has been advised by its
litigation counsel that there are meritorious defenses to the claim raised by
the cooperative corporation and that if these defenses are successful, it is
unlikely that the Professional Space Lease will be terminated or that any
damages will be assessed against UTB Associates. However, in light of the
uncertainties of litigation, no assurances can be given as to the outcome of the
litigation. The Company's financial statements reflect a loss of approximately
$45,000 from the Professional Space Lease in 2000 and income of approximately
$66,000 in 1999.


                                       61
<PAGE>   62
In addition, the Company may be a party to routine litigation incidental to the
ordinary course of its business.

In the opinion of management, all of the Company's properties are adequately
covered by insurance in accordance with normal insurance practices. The Company
is not aware of any environmental issues at any of its properties. The presence,
with or without the Company's knowledge, of hazardous substances at any of its
properties could have an adverse effect on the Company's operating results and
financial condition.

10.      CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of its mortgage portfolio, cash and cash
equivalents, and securities available for sale.

The Company's mortgage portfolio consists of long-term notes receivable
collateralized by real estate located in five states (primarily New York and New
Jersey). The real estate securing these notes, consisting primarily of moderate
income apartment properties and, to a lesser extent, cooperative apartment
units, has at a minimum an estimated fair value equal to the net carrying value
of the notes.

The Company generally maintains its cash in money market funds with high credit
quality financial institutions. Periodically, the Company may invest in time
deposits with such institutions. Although the Company may maintain balances at
these institutions in excess of the FDIC insurance limit, the Company does not
anticipate and has not experienced any losses.

The Company also invests its funds in marketable equity securities available for
sale. Such investments are reflected on the Company's consolidated balance
sheets at their fair value.

11.      COMMON STOCK

The Class A and Class B common stock of Presidential have identical rights
except that the holders of Class A common stock are entitled to elect two-thirds
of the Board of Directors and the holders of the Class B common stock are
entitled to elect one-third of the Board of Directors.


                                       62
<PAGE>   63
Other than as described in Note 14, no shares of common stock of Presidential
are reserved for officers, employees, warrants or other rights.

12.      DISTRIBUTIONS ON COMMON STOCK

For income tax purposes, distributions paid on common stock are allocated as
follows:

<TABLE>
<CAPTION>
                    Total                   Taxable                    Taxable
Year         Distribution                Ordinary Income            Capital Gain

<S>                 <C>                      <C>                         <C>
2000                $0.64                    $0.04                       $0.60
1999                 0.64                     0.42                        0.22
1998                 0.63                     0.22                        0.41
</TABLE>

Designated Undistributed Long-Term Capital Gains:

In addition, on December 31, 1999, the Company elected to retain $0.17 per share
of long-term capital gains received in 1999. This undistributed long-term
capital gain of $0.17 per share was taxable to shareholders as a long-term
capital gains distribution. Shareholders received a tax credit of $0.06 per
share and increased the basis of their shares by $0.11 per share.

13.      STOCK COMPENSATION

In March, 2000, three directors of the Company were each given 1,000 shares of
the Company's Class B common stock as partial payment for directors fees for
2000. As a result of this transaction, the Company recorded $18,225 in directors
fees based on the average market value of the Class B common stock of $6.075 per
share for the previous month. The Company recorded additions to the Company's
Class B common stock of $300 at par value of $.10 per share and $17,925 to
additional paid-in capital.

In March, 1999, three directors of the Company were each given 1,000 shares of
the Company's Class B common stock as partial payment for directors fees for
1999. Such shares had been held in treasury at an average cost of approximately
$13.54 per share. The average market value for the previous month of the Class B
common stock, on which the fees were based, was $7.17 per share. As a result of
this transaction, the Company recorded $21,510 for directors fees based on the
average market value of the stock. Treasury stock was reduced by a cost of
$40,618 and additional paid-in capital was charged $19,108 for the excess of the
cost over the market value. In addition, on


                                       63
<PAGE>   64
March 24, 1999, an executive of the Company was given 7,000 shares of the
Company's Class B common stock at a market price of $7.0625 per share (the
closing price of the stock on the date of issuance). The Company recorded a
salary expense of $49,438, reduced treasury stock by a cost of $94,780 and
charged additional paid-in capital $45,342 for the excess of the cost over the
market value.

In March, 1998, three directors of the Company were each given 1,000 shares of
the Company's Class B common stock as partial payment for directors fees for
1998. Such shares had been held in treasury at an average cost of approximately
$13.54 per share. The average market value for the previous month of the Class B
common stock, on which the fees were based, was $6.96 per share. As a result of
this transaction, the Company recorded $20,880 for directors fees based on the
average market value of the stock. Treasury stock was reduced by a cost of
$40,620 and additional paid-in capital was charged $19,740 for the excess of the
cost over the market value.

14.      STOCK OPTION PLANS

In 1993, the Company adopted a Nonqualified Stock Option Plan (the "1993 Stock
Option Plan"). The 1993 Stock Option Plan provided that options to purchase up
to 250,000 shares of the Company's Class B common stock could be issued prior to
December 31, 1998 to the Company's key employees at exercise prices equal to the
market value on the date the option was granted. On November 17, 1993, options
to purchase 60,000 shares were granted to three employees at an exercise price
of $6.125 per share. All of the options were exercised on November 10, 1999. No
other options have been granted, exercised or cancelled under this plan from
inception to December 31, 2000 and no further options can be granted under this
plan.

In connection with the exercise of the options discussed above, the Company
loaned the three employees, who are officers of Presidential, $367,500 to pay
for the stock. See Note 18.

In 1999, the Company adopted a Nonqualified Stock Option Plan (the "1999 Stock
Option Plan"). The 1999 Stock Option Plan provides that options to purchase up
to 150,000 shares of the Company's Class B common stock may be issued prior to
December 31, 2003 to the Company's key employees at exercise prices equal to the
market value on the date the option is granted. On November 10, 1999, options to
purchase 60,000 shares were granted to three employees at an exercise price of
$6.375 per share. All of the options are exercisable at December 31, 2000 and
expire on November 10, 2005. No other options have been granted, exercised or
cancelled under


                                       64
<PAGE>   65
this plan. The Company has agreed that to the extent that any of the existing
stock options held by these key employees are either exercised or lapse, the
Company will grant new options in the amount of the stock options that have
either been exercised or lapse, which new options will have an exercise price
equal to the closing price of the Class B common stock on the date that the new
option is actually granted, will have a term of six years from the date such new
option is granted and will be otherwise subject to the terms of the 1999 Stock
Option Plan or any successor plan.

In 1999, the Company determined that the pro forma effect of the stock options
granted in 1999 on compensation expense was not material.

15.      PENSION PLANS

Defined Benefit Plan

The Company has a noncontributory defined benefit pension plan, which covers
substantially all of its employees. The plan provides monthly retirement
benefits commencing at age 65. The monthly benefit is equal to the sum of (1)
7.15% (as of January 1, 2000, 7.15% was changed from 6.5%) of average monthly
compensation multiplied by the total number of plan years of service (up to a
maximum of 10 years), plus (2) .62% of such average monthly compensation in
excess of one-twelfth of covered compensation multiplied by the total number of
plan years of service (up to a maximum of 10 years). The Company makes annual
contributions that meet the minimum funding requirements and the maximum
contribution limitations under the Internal Revenue Code. Periodic pension costs
are reflected in general and administrative expenses.

<TABLE>
<CAPTION>
                                         Year Ended December 31,
                                         ------------------------
                                         2000      1999      1998
                                         ----      ----      ----
<S>                                   <C>        <C>       <C>
Components of net periodic
benefit cost
  Service cost                        $397,950   $330,649   $324,374
  Interest cost                        158,635    112,973     79,370
  Expected return on plan assets      (167,175)  (131,403)   (96,438)
  Amortization of prior service cost    12,616
  Amortization of accumulated gain     (22,479)   (11,356)    (8,950)
                                      --------   --------   --------
Net periodic benefit cost             $379,547   $300,863   $298,356
                                      ========   ========   ========
</TABLE>


                                       65
<PAGE>   66
The following sets forth the plan's funded status and amount recognized in the
Company's consolidated balance sheets:

<TABLE>
<CAPTION>
                                                        December 31,
                                                     -----------------
                                                     2000         1999
                                                     ----         ----
<S>                                              <C>          <C>
Change in benefit obligation
Benefit obligation at beginning of year          $2,266,218   $1,613,907
Service cost                                        397,950      330,649
Interest cost                                       158,635      112,973
Amendments                                                       194,286
Actuarial (gain) loss                               (16,783)      14,403
                                                 ----------   ----------
Benefit obligation at end
  of year                                         2,806,020    2,266,218
                                                 ----------   ----------

Change in plan assets
Fair value of plan assets at
  beginning of year                               2,258,934    1,804,482
Actual return on plan assets                        (48,170)     360,412
Employer contributions                              269,398       94,040
                                                 ----------   ----------
Fair value of plan assets at
  end of year                                     2,480,162    2,258,934
                                                 ----------   ----------

Funded status actuarial                            (325,858)      (7,284)
Unrecognized prior service cost                     181,670      194,286
Unrecognized gain                                  (348,890)    (569,931)
                                                 ----------    ---------
Net amount recognized
  (in accrued liabilities)                       $ (493,078)   $(382,929)
                                                 ==========    =========
</TABLE>

<TABLE>
<CAPTION>
Weighted-average assumptions as of
  December 31                                        2000           1999
                                                     ----           ----
<S>                                                  <C>            <C>
Discount rate                                         7%              7%
Expected return on plan assets                        7%              7%
Rate of compensation increase                         5%              5%
</TABLE>

Additional disclosure items for the underfunded plan at December 31, 2000:
<TABLE>
<S>                                                  <C>
Accumulated benefit obligation                       $2,753,866
Projected benefit obligation                          2,806,020
Fair value of plan assets                             2,480,162
</TABLE>

                                       66
<PAGE>   67
<TABLE>
<CAPTION>
                                                      December 31,
                                                ------------------------
                                                   2000         1999
                                                   -----        ----
<S>                                             <C>           <C>
Plan Assets
Cash and cash equivalents                       $  163,514    $  162,332
Securities available for sale                    2,316,648     2,096,602
                                                ----------    ----------
Total plan assets                               $2,480,162    $2,258,934
                                                ==========    ===========
</TABLE>

Executive Pension Plan

Presidential has employment contracts with several active and retired key
officers and employees. Such contracts are being accounted for as constituting
pension agreements. The contracts generally provide for annual benefits in
specified amounts for each participant for life, commencing upon retirement,
with an annual adjustment for an increase in the consumer price index. Periodic
pension costs are reflected in general and administrative expenses.

<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                               ---------------------------
                                                 2000     1999     1998
                                                 ----     ----     ----
<S>                                           <C>       <C>       <C>
Components of net periodic
benefit cost
  Service cost                                $ 60,861  $ 52,364  $ 15,127
  Interest cost                                183,241   173,211   166,262
  Amortization of prior
    service cost                                21,683    (4,079)   (4,079)
  Recognized actuarial loss                    200,362   168,741   121,490
                                               --------  --------  --------
Net periodic benefit cost                     $466,147  $390,237  $298,800
                                              ========   =======  ========
</TABLE>


Presidential has elected not to fund expenses accrued under these contracts. The
following set forth the pension liability included in Presidential's
consolidated balance sheets:

<TABLE>
<CAPTION>
                                                  December 31,
                                             ----------------------
                                                2000         1999
                                                ----         ----
<S>                                         <C>          <C>
Change in benefit obligation
Benefit obligation at beginning of year     $3,032,916   $2,881,845
Service cost                                    60,861       52,364
Interest cost                                  183,241      173,211
Amendments                                                  138,611
Actuarial loss                                 194,017      194,294
Benefits paid                                 (415,184)    (407,409)
                                             ----------   ----------
Benefit obligation at end of year            3,055,851    3,032,916
                                             ----------   ----------
</TABLE>


                                       67
<PAGE>   68
<TABLE>
<CAPTION>
<S>                                           <C>              <C>
Change in plan assets
Employer contributions                            415,184          407,409
Benefits paid                                    (415,184)        (407,409)
                                                ----------       ----------
Fair value of plan assets at end of year                0                0
                                                ----------       ----------

Funded status                                  (3,055,851)      (3,032,916)
Unrecognized net actuarial loss                 1,432,335        1,438,680
Unrecognized prior service cost                    93,368          115,051
                                                -----------      -----------
Net amount recognized                         $(1,530,148)     $(1,479,185)
                                                ===========      ===========
</TABLE>
<TABLE>
<CAPTION>
Weighted-average assumptions as of
  December 31                                        2000        1999
                                                     ----        ----
<S>                                                  <C>         <C>
Discount rate                                         7%          7%
Expected return on plan assets                        7%          7%
Rate of compensation increase                         5%          5%
</TABLE>


16.      POSTRETIREMENT BENEFITS

Presidential has employment contracts with several active and retired key
officers and employees which provide for postretirement benefits other than
pensions (such as health care benefits). The Company accrues the estimated cost
of retiree benefit payments during the years the employee provides services.

The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligations was 8% for 1999, decreasing gradually each
successive year until it reaches 5% in 2002, after which it remains constant.

<TABLE>
<CAPTION>
                                               Year Ended December 31,
                                              -----------------------------
                                                2000       1999        1998
                                                ----       ----        ----
<S>                                          <C>        <C>         <C>
Components of net periodic
benefit cost
  Service cost                               $13,544    $ 7,180     $ 6,711
  Interest cost                               34,289     32,785      34,241
  Amortization of prior service cost          (9,612)   (10,386)     (9,196)
                                              -------    -------     -------
  Net periodic benefit cost                  $38,221    $29,579     $31,756
                                             =======    =======     =======
</TABLE>



                                       68
<PAGE>   69
The accumulated postretirement benefit obligation and recorded liability, none
of which has been funded, was as follows:

<TABLE>
<CAPTION>
                                                       December 31,
                                               -----------------------
                                                    2000         1999
                                                    ----         ----
<S>                                            <C>          <C>
Change in benefit obligation
Benefit obligation at beginning of year        $ 475,920    $ 498,846
Service cost                                      13,544        7,180
Interest cost                                     34,289       32,785
Actuarial loss (gain)                             27,036       (9,543)
Benefits paid                                    (58,285)     (53,348)
                                                ---------    ---------
Benefit obligation at end of year                492,504      475,920
                                                ---------    ---------

Change in plan assets
Employer contributions                            58,285       53,348
Benefits paid                                    (58,285)     (53,348)
                                                ---------    ---------
Fair value of plan assets at end of year               0            0
                                                ---------    ---------

Funded status                                   (492,504)    (475,920)
Unrecognized prior service cost                  (52,866)     (62,478)
Unrecognized net loss                             27,036
                                                ---------    ---------
Net amount recognized                          $(518,334)   $(538,398)
                                                =========    =========
</TABLE>

<TABLE>
<CAPTION>
Weighted-average assumptions as of
December 31                                       2000         1999
                                                  ----         ----
<S>                                               <C>          <C>
Discount rate                                      7%            7%
Expected return on plan assets                     7%            7%
</TABLE>


Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:


<TABLE>
<CAPTION>
                                              1-Percentage-    1-Percentage-
                                              Point Increase   Point Decrease
                                              --------------   --------------
<S>                                            <C>              <C>
Effect on total service and interest
 cost components                               $ 5,142          $ (4,405)
Effect on postretirement benefit
 obligation                                     45,340           (39,397)
</TABLE>


17.      DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN

Presidential maintains a Dividend Reinvestment and Share Purchase Plan (the
"Plan"). Under the Plan, stockholders may reinvest cash dividends and make
optional cash payments to purchase Class B common stock without incurring any
brokerage commission or service charge.


                                       69
<PAGE>   70
Additionally, the price of Class B common stock purchased with reinvested cash
dividends will be discounted by 5% from the average of the high and low market
prices of the five days immediately prior to the dividend payment date, as
reported on the American Stock Exchange.

Class B Common Shares issued under the Plan are summarized below:

<TABLE>
<CAPTION>
                                                      Net Proceeds
                                             Shares     Received
<S>                                          <C>      <C>
Total shares issued at January 1, 1998       327,754  $2,230,058
Shares issued during 1998                     22,319     150,687
                                             -------  ----------
Total shares issued at December 31, 1998     350,073   2,380,745
Shares issued during 1999                     16,310     105,494
                                            -------   ----------
Total shares issued at December 31, 1999     366,383   2,486,239
Shares issued during 2000                     14,746      87,395
                                             -------  ----------
Total shares issued at December 31, 2000     381,129  $2,573,634
                                             =======  ==========
</TABLE>

18.      RELATED PARTY TRANSACTIONS

In connection with the exercise of stock options in November, 1999, the Company
loaned $367,500 in the aggregate to three of its officers to pay for the
purchase of the stock. The recourse notes, secured by the stock, bear interest
at 8% per annum, payable quarterly, and the principal is due at maturity on
November 30, 2004. For the years ended December 31, 2000 and 1999, Presidential
recognized interest income on these notes of $29,481 and $4,108, respectively.

As shown in Note 3, the Company holds nonrecourse purchase money notes
receivable from Ivy, relating to properties sold to Ivy in prior years, as well
as nonrecourse notes receivable relating to loans made to Ivy in connection with
Ivy's former cooperative conversion business. In the aggregate, the loans
receivable from Ivy had a balance of $1,447,959 as of December 31, 2000, and a
carrying amount, net of discounts and deferred gains, of $448,810. Presidential
received interest of $164,512, $236,457 and $426,990 from Ivy during 2000, 1999
and 1998, respectively, on these loans.

In addition, in 2000, 1999 and 1998, Presidential recognized $32,333, $14,034
and $11,050, respectively, of income representing the amortization of discounts
on notes receivable.

One of the notes, with a carrying amount of $24,694 at December 31, 2000 and an
outstanding principal amount of $4,794,744, requires payments in an amount equal
to 25% of the operating cash flow (after


                                       70
<PAGE>   71
provision for certain reserves) of Scorpio Entertainment, Inc. ("Scorpio"), a
company owned by the owners of Ivy. Scorpio acts as a producer of theatrical
productions. The Company received $14,565 of principal payments and $2,940 of
interest on this loan during 2000 and $13,309 of principal payments and $64,405
of interest during 1999.

All outstanding loans from Ivy at December 31, 2000 are current. Management
believes that Presidential holds sufficient collateral to protect its interests
in the loans that remain outstanding from Ivy to the extent of the net carrying
value of these loans.

The loans from Ivy were subject to various settlement agreements and
modifications in previous years. Ivy is owned by three officers of the Company,
who also hold beneficial ownership of an aggregate of approximately 47% of the
outstanding shares of Class A common stock of the Company, which class of stock
is entitled to elect two-thirds of the Board of Directors of the Company.
Because of the relationship between the owners of Ivy and the Company, all
transactions with Ivy are negotiated on behalf of the Company, and subject to
approval, by a committee of three members of the Board of Directors with no
affiliations with the owners of Ivy.

19.      ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Estimated fair values of the Company's financial instruments as of December 31,
2000 and 1999 have been determined using available market information and
various valuation estimation methodologies. Considerable judgement is required
to interpret the effects on fair value of such items as future expected loss
experience, current economic conditions, risk characteristics of various
financial instruments and other factors. The estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. Also, the use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
values.

The following table summarizes the estimated fair values of financial
instruments:


                                       71
<PAGE>   72
FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>

                                               December 31, 2000                            December 31, 1999

                                           --------------------------          -------------------------------------
                                            Net            Estimated               Net                   Estimated
                                           Carrying          Fair                Carrying                   Fair
                                           Value (1)         Value               Value (1)                  Value

Assets:

<S>                                        <C>             <C>                  <C>                      <C>
  Cash and cash equivalents                $2,159,661      $2,159,661           $7,014,542               $7,014,542
  Securities available for sale                 4,997           4,997            2,299,494                2,299,494
  Notes receivable-sold properties         15,345,903      27,101,235           15,323,702               28,461,062
  Notes receivable-related parties            448,810       1,629,782              533,612                1,651,797

Liabilities:
  Mortgage debt                            59,846,143      54,081,441           39,379,458               34,716,388
</TABLE>




(1) Net carrying value is net of discounts and deferred gains where applicable.

                                       72
<PAGE>   73
The fair value estimates presented above are based on pertinent information
available to management as of December 31, 2000 and 1999. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued since
December 31, 2000 and, therefore, current estimates of fair value may differ
significantly from the amounts presented above.

Fair value methods and assumptions are as follows:

Cash and Cash Equivalents - The estimated fair value approximates carrying
value, due to the short maturity of these investments.

Securities Available for Sale - The fair value of securities available for sale
is estimated based on quoted market prices or dealer quotes, if available. If a
quote is not available, fair value is estimated using quoted market prices for
similar securities.

Notes Receivable - The fair value of notes receivable has been estimated by
discounting projected cash flows using current rates for similar notes
receivable.

Mortgage Debt - The fair value of mortgage debt has been estimated by
discounting projected cash flows using current rates for similar debt.




                                       73
<PAGE>   74
20.      QUARTERLY FINANCIAL INFORMATION - UNAUDITED
 (Amounts in thousands, except earnings (loss) per common share)

<TABLE>
<CAPTION>
                       Income Before                     Earnings
                       Net Gain (Loss)                   (Loss)
Year                   from Sales of                     Per
Ended                  Properties, Notes  Net Income     Common
December 31  Revenues  and Securities       (Loss)       Share

2000

<S>          <C>          <C>             <C>               <C>
First        $3,817       $459            $  472            $0.13
Second        4,695        260               134             0.03
Third         4,755        220               242             0.07
Fourth        4,824        279               365             0.10

1999

First        $3,922       $298            $7,017 (1)        $1.94 (1)
Second        3,782        561             1,641             0.46
Third         3,747        423               428             0.11
Fourth        3,793         96(2)             (5)(1)        (0.01)(1)
</TABLE>


(1)      Net income for the first quarter of 1999 included a net gain of
         $6,050,740 (after accrued taxes of $1,566,474) from the sale of the
         Fairfield Towers First and Second Mortgage Notes. The tax accrual of
         $1,566,474 was based on management's intention, at that time, that the
         Company would retain all of the taxable gain from the sale of the
         Fairfield Towers Notes. On December 31, 1999, the Company elected to
         retain only $630,000 of this taxable gain. This election reduced the
         accrued taxes on the sale from $1,566,474 to $220,500 and resulted in
         an increase in the net gain from sales of $1,345,974. This increase was
         offset by the $1,450,149 loss incurred in the fourth quarter of 1999
         from the sales of securities.

(2)      Income before net gain (loss) from sales of properties, notes and
         securities for the fourth quarter of 1999 included a $378,522 write-off
         to bad debt expense of amounts advanced to the Company's unaffiliated
         rental property management company. Although it is unlikely that the
         rental property management company will be able to repay these advances
         in the near future, Presidential has not released the management
         company from its liability for these amounts due.


                                       74
<PAGE>   75
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES


VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998                SCHEDULE II
-------------------------------------------------------------------------------




<TABLE>
<CAPTION>
                                         BALANCE AT        CHARGED                               BALANCE
                                         BEGINNING           TO                                   AT END
       CLASSIFICATION                     OF YEAR         EXPENSES      DEDUCTIONS (1)           OF YEAR

     2000
    ------
<S>                                     <C>              <C>               <C>                  <C>
Discount on mortgage
portfolio and valuation
allowance for other receivables         $2,109,617       $156,913             $348,794          $1,917,736
                                        ==========       ========          ===========          ==========

     1999
    ------
Discount on mortgage
portfolio and valuation
allowance for other receivables        $11,916,555        $60,488           $9,867,426 (2)(3)   $2,109,617
                                       ===========        =======           ==========          ==========

     1998
    ------
Discount on mortgage
portfolio and valuation
allowance for other receivables        $13,020,904        $46,799           $1,151,148         $11,916,555
                                       ===========        =======           ==========         ===========
</TABLE>



(1)   Represents amortization of discount on mortgages and notes using the
      interest method and also includes write-off of discounts on notes due to
      prepayments on notes.

(2)   Includes $3,045,411 of discount on the Fairfield Towers First Mortgage
      which was recognized as a gain on the sale of the Fairfield Towers First
      Mortgage.

(3)   Includes a write-off of discount of $6,075,210 relating to the Fairfield
      Towers Second Mortgage which was sold in 1999.


                                       75
<PAGE>   76
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000                                                SCHEDULE III

<TABLE>
<CAPTION>

                                                          INITIAL COST TO                             GROSS AMOUNT AT WHICH CARRIED
                                                            COMPANY                     COSTS                AT CLOSE OF YEAR
                                                         ------------------------    CAPITALIZED      ------------------------------
                                                                       BUILDING     SUBSEQUENT TO                        BUILDING
                                       AMOUNT OF                         AND         ACQUISITION                            AND
            PROPERTIES               ENCUMBRANCES         LAND        IMPROVEMENTS  IMPROVEMENTS (1)     LAND           IMPROVEMENTS

<S>                                  <C>              <C>            <C>             <C>               <C>             <C>

APARTMENT BUILDINGS
Cambridge Green,
  Council Bluffs, IA                   $3,130,708       $200,000       $2,034,315      $1,389,488        $200,000        $3,423,803

Continental Gardens,
  Miami, FL                             7,878,505      2,448,000        7,389,786         485,389       2,448,000         7,875,175

Crown Court,
  New Haven, CT                         2,686,817        168,000        3,077,445          58,481         168,000         3,135,926

Fairlawn Gardens
  Martinsburg, WV                       2,241,935         71,408          657,805       1,211,994          71,408         1,869,799

Farrington Apartments
  Clearwater, FL                        7,866,120      1,900,000        7,896,421          68,263       1,900,000         7,964,684

Preston Lake Apartments
   Tucker, GA                          13,938,310      2,240,000       15,239,465         145,198       2,240,000        15,384,663

Sunwood Apartments
  Miami, FL                             4,748,406      1,680,000        4,860,251          49,550       1,680,000         4,909,801

INDIVIDUAL COOPERATIVE APARTMENTS
Sherwood House,
  Long Beach, NY                                           7,316           51,930         (42,926)(2)       1,788            14,532

6300 Riverdale Ave.,
  Riverdale, NY                                           10,164           66,032           4,010          10,164            70,042

330 W.72nd St.,
  New York, NY                                            20,891           28,013                          20,891            28,013

Towne House,
  New Rochelle, NY                                        61,051          343,286         181,430          81,204           504,563

University Towers,
  New Haven, CT                                            1,375           54,735           1,374           1,375            56,109

COMMERCIAL BUILDINGS
Building Industries Center,
  White Plains, NY                                        61,328          496,198         598,412          61,328         1,094,610

Home Mortgage Plaza,
  Hato Rey, Puerto Rico                17,105,804        636,712        5,070,769       1,974,704         636,712         7,045,473

Mapletree Industrial Center,
  Palmer, MA                              245,278         79,100                          227,027          79,100           227,027

University Towers,
  New Haven, CT                                                                           322,612                           322,612

OTHER
Towers Shoppers Parcade,
  New Haven, CT                             4,260                           7,000           3,563                            10,563
                                      -----------     ----------      -----------      ----------      ----------       -----------
TOTAL                                 $59,846,143     $9,585,345      $47,273,451      $6,678,569      $9,599,970       $53,937,395
                                      ===========     ==========      ===========      ==========      ==========       ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                                             YEARS ON
                                                                                                             WHICH DE-
                               GROSS AMOUNT AT WHICH CARRIED                                                 PRECIATION
                               COSTS AT CLOSE OF YEAR                                                        IN LATEST
                               -----------------------------                                                 INCOME
                                                                                                             STATE-
                                                            ACCUMULATED       DATE OF         DATE           MENT IS
            PROPERTIES                    TOTAL             DEPRECIATION      CONSTRUCTION    ACQUIRED       COMPUTED
<S>                                     <C>                <C>                <C>           <C>              <C>

APARTMENT BUILDINGS
Cambridge Green,
  Council Bluffs, IA                     $3,623,803          $890,911              1974         1992               50

Continental Gardens,
  Miami, FL                              10,323,175         1,377,147              1971         1994           27-1/2

Crown Court,
  New Haven, CT                           3,303,926         2,609,128              1973         1973               40

Fairlawn Gardens
  Martinsburg, WV                         1,941,207           175,172              1964         1996               50

Farrington Apartments
  Clearwater, FL                          9,864,684           185,869         1973-1974         2000               35

Preston Lake Apartments
   Tucker, GA                            17,624,663           336,648         1986-1987         2000               35

Sunwood Apartments
  Miami, FL                               6,589,801           393,304              1976         1998               30

INDIVIDUAL COOPERATIVE APARTMENTS
Sherwood House,
  Long Beach, NY                             16,320             2,083                           1997           31 1/2

6300 Riverdale Ave.,
  Riverdale, NY                              80,206             8,569                           1997           31 1/2

330 W.72nd St.,
  New York, NY                               48,904             3,556                           1997           31 1/2

Towne House,
  New Rochelle, NY                          585,767            56,860                           1997           31 1/2

University Towers,
  New Haven, CT                              57,484             5,776                           1997           31 1/2

COMMERCIAL BUILDINGS
Building Industries Center,
  White Plains, NY                        1,155,938           947,697              1956         1966               25

Home Mortgage Plaza,
  Hato Rey, Puerto Rico                   7,682,185         2,684,173         1966-1967         1966               40

Mapletree Industrial Center,
  Palmer, MA                                306,127            43,516         1902-1966         1974               20

University Towers,
  New Haven, CT                             322,612            90,637

OTHER
Towers Shoppers Parcade,
  New Haven, CT                              10,563             7,119              1962         1962               15
                                        -----------        ----------
TOTAL                                   $63,537,365        $9,818,165
                                        ===========        ==========
</TABLE>


(1) Includes furniture and equipment of $341,748.
(2) Includes sales of cooperative apartments in 1998 and 1999.


                                       76
<PAGE>   77
  PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
  -----------------------------------------------------------------------------


  REAL ESTATE AND ACCUMULATED DEPRECIATION                         SCHEDULE III
  DECEMBER 31, 2000                                                 (CONCLUDED)
  -----------------------------------------------------------------------------

  (3)  The aggregate cost of real estate for Federal income tax purposes is
       $62,599,788 at December 31, 2000.

  (4)  The reconciliations of the total cost of real estate at the beginning
       of each year with the total cost at the end of each year are as follows:

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                           -----------------------------------------
                                              2000          1999         1998
                                           -----------------------------------------

<S>                                       <C>           <C>           <C>
  Balance at the beginning of year        $35,647,633   $34,703,657   $27,690,535
  Additions during the year:
   Acquisitions through foreclosure                          44,284        11,569
   Additions and improvements              27,899,732       917,365     7,036,611
                                           -----------------------------------------

                                           63,547,365    35,665,306    34,738,715

  Deductions during the year:
     Dispositions                              10,000        17,673        35,058
                                           --------------------------------------

  Balance at end of year                  $63,537,365   $35,647,633   $34,703,657
                                          =======================================
</TABLE>



  (5)  The reconciliations of the accumulated depreciation at the beginning
       of each year with the total shown at the end of each year are as follows:

<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,
                                          ------------------------------------
                                              2000        1999       1998
                                          ------------------------------------
<S>                                        <C>          <C>         <C>
  Balance at the beginning of year         $8,231,480   $7,231,639  $6,404,797
  Additions during the year:
    Depreciation charged to income          1,587,545    1,008,051     827,786
                                          ------------------------------------

                                            9,819,025    8,239,690   7,232,583
  Deductions during the year:
    Dispositions and replacements                 860        8,210         944
                                          ------------------------------------

  Balance at end of year                   $9,818,165   $8,231,480  $7,231,639
                                          ====================================
</TABLE>


                                       77
<PAGE>   78
           PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

           MORTGAGE LOANS ON REAL ESTATE
           DECEMBER 31, 2000                                   SCHEDULE IV

<TABLE>
<CAPTION>
                                                                                           PERIODIC
                                                   INTEREST             MATURITY           PAYMENT           PRIOR      FACE AMOUNT
                       DESCRIPTION                    RATE                DATE              TERMS           MORTGAGES   OF MORTGAGE
<S>                                               <C>              <C>              <C>   <C>              <C>         <C>
           First Mortgages:
             Apartment buildings:
               Greece, NY                            7.90%               2006         (2)    (3)                        $6,000,000
               Hartford, CT                         10.00-10.25%         2005         (4)    (4)                         1,464,416

             Sold Co-op Apartments:
               Bronx, NY (2 notes)                    9.00%              2003                (5)                            34,085
               Flushing, NY (8 notes)                 7.00-9.50%         2002-2008           (5) (6)                       198,793
               Long Beach, NY (2 notes)               9.00-9.50%         2002-2010           (5) (6)                        21,425
               New Rochelle, NY (16 notes)            7.75-9.50%         2002-2010           (5) (6)                       451,917
               New York, NY (3 notes)                 8.00-9.25%         2003-2016           (5) (6)                       184,961
               Riverdale, NY (3 notes)                7.50-8.25%         2003                (6)                            14,138
               Rye, NY (1 note)                      11.00%              2010                (6)                            64,883
                                                                                                          ------------- -----------
           Total First Mortgage Loans                                                                                     8,434,618
                                                                                                          ------------- -----------
           Junior Mortgages:
             Apartment buildings:
               Alexandria, VA                         9.25%              2001          (7)   (3)          $19,863,610    1,175,500
               Bronx, NY                              6.16-11.16%        2002-2005     (8)   (3)            3,450,000    2,181,262
               Atlantic City, NJ                )     9.625-10.50%       2009          (9)   (3)            6,669,532    4,000,000
               Bergenfield, NJ                  )                                                           8,898,289
               South Bound Brook, NJ            )                                                           3,250,758
               Des Moines, IA                         12.00%             2008                (3)                           100,000
               New York, NY                           11.50%             2002          (10)  (3)           50,000,000   12,300,000
                                                                                                          -----------  -----------
           Total Junior Mortgage Loans                                                                     92,132,189   19,756,762
                                                                                                           -----------  ----------
           Total Mortgage Loans                                                                           $92,132,189  $28,191,380
                                                                                                          ============ ===========
</TABLE>

<TABLE>
<CAPTION>
                                                       CARRYING             PRINCIPAL AMT. OF LOANS
                                                        AMOUNT OF           SUBJECT TO DELINQUENT
                       DESCRIPTION                     MORTGAGE (1)          PRINCIPAL OR INTEREST

<S>                                                  <C>                     <C>
           First Mortgages:
             Apartment buildings:
               Greece, NY                              $3,008,150
               Hartford, CT                             1,464,416

             Sold Co-op Apartments:
               Bronx, NY (2 notes)                         34,085
               Flushing, NY (8 notes)                     192,462
               Long Beach, NY (2 notes)                    20,522
               New Rochelle, NY (16 notes)                410,559
               New York, NY (3 notes)                     127,438
               Riverdale, NY (3 notes)                     14,067
               Rye, NY (1 note)                            64,883
                                                        ---------               ---------
           Total First Mortgage Loans                   5,336,582
                                                        ---------               ---------
           Junior Mortgages:
             Apartment buildings:
               Alexandria, VA                             235,228
               Bronx, NY                                1,719,012
               Atlantic City, NJ                )       2,646,621
               Bergenfield, NJ                  )
               South Bound Brook, NJ            )
               Des Moines, IA                             100,000
               New York, NY                             5,308,460
                                                        ---------               ---------
           Total Junior Mortgage Loans                 10,009,321
                                                       ----------               ---------
           Total Mortgage Loans                       $15,345,903
                                                      ===========               =========
</TABLE>


                                       78
<PAGE>   79
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
MORTGAGE LOANS ON REAL ESTATE                                        SCHEDULE IV
DECEMBER 31, 2000                                                   (CONCLUDED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                     Year Ended               Year Ended                Year Ended
                                               ----------------------  ----------------------    --------------------------
                                                 December 31, 2000         December 31, 1999          December 31, 1998
                                               ----------------------  ----------------------    --------------------------
<S>                                            <C>      <C>             <C>         <C>           <C>              <C>
Balance at beginning of year                            $15,323,702                 $30,481,189                    $30,036,785
  Additions during the year:
    New mortgage loans                                                                            $  60,000
  Less:
    Discounts on additions
                                               -------                  ----------                ---------

  Net addition to carrying amount                                                                                       60,000

  Deductions during the year:
    Reclass of loan foreclosed                                              39,858                   11,569
    Collections of principal                   290,417                   2,062,203                  768,587
    Collections on notes sold                                           21,775,000
    Write-off balance of notes sold                                      8,670,424
  Less:
    Amortization of discounts                  216,618                     688,007                1,083,917
    Discount recognized as gain on sale                                  3,045,411
    Write-off of discounts on notes sold                                 6,075,210
    Deferred gains recognized                   96,000                   7,581,370                   80,643
                                               -------                  ----------                ---------

  Net reduction of carrying amount                          (22,201)                 15,157,487                       (384,404)
                                                        ------------                -----------                     ----------

Balance at end of year                                  $15,345,903                 $15,323,702                    $30,481,189
                                                        ===========                 ===========                    ===========
</TABLE>



(1)      Carrying value is net of discounts and deferred gains. The aggregate
         net carrying value of this portfolio for tax purposes at December 31,
         2000, is $6,903,635.

(2)      Interest is at the rate of 7.90% per annum through July 31, 2001.
         Thereafter interest will be at a rate equal to 150 basis points in
         excess of the yield on specified Treasury bills.

(3)      Entire principal due at Final Maturity Date.

(4)      In January, 1997, the maturity dates of these loans were extended to
         2005. As a result of the sale of the property and the assumption of the
         notes by the purchaser in 1998, the interest rate on the notes was
         increased from 9% to 10% through 2001 and 10.25% thereafter. The notes
         are amortizing monthly, based on a 20 year term at the above rates, and
         have balloon payments of $1,234,813 due at maturity.

(5)      Principal amortization each year with a balloon payment in the year of
         maturity.

(6)      Principal amortization each year through maturity.

(7)      In September, 2000, this note was modified and the maturity date of
         this loan was changed from 2007 to 2001. In January, 2001, the Company
         received the $1,175,500 principal repayment on this note.

(8)      The $2,148,000 matures on November 29, 2005 and the interest rate on
         this note increases by 1% per year, from 6.16% per annum at November
         30, 1999 to 11.16% per annum at November 30, 2004. The $33,262 smaller
         portion of the note matures on December 31, 2002 and the interest rate
         is 9% per annum.

(9)      The Fairfield Towers Second Mortgage was modified in February, 1999,
         when the Company sold the Fairfield Towers First Mortgage and
         substantially all of the Fairfield Towers Second Mortgage. The
         modification provides for an interest rate of 9.625% per annum through
         February 17, 2002 and an interest rate of 10.50% per annum thereafter.
         The note matures on February 18, 2009. To secure this obligation,
         Presidential obtained subordinate security interests in three apartment
         properties located in New Jersey.

(10)     In June, 1999, the New Haven, Connecticut wraparound mortgage notes
         were modified. The Company repaid the $2,300,000 first mortgage debt on
         these properties (wrap mortgage debt on sold properties), received a
         $1,000,000 principal repayment and consolidated the $12,300,000
         outstanding principal balance of the mortgage notes into one
         consolidated note. The modified note provides for an interest rate of
         10% per annum, with a 1/2 percent annual rate increase and additional
         interest of $369,000 due at maturity, which will increase the effective
         interest rate on the note to 11.50% per annum through maturity. The
         modified note matures on June 29, 2002, and is secured by a second
         mortgage on the Encore Apartments and commercial space located in New
         York, New York and by a limited guarantee of $2,500,000 from one of the
         owners of the property.


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