##### Table of Contents



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

For the fiscal year ended December 31, 2002


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
incorporation or organization) |  | (I.R.S. Employer 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:

|                     |  |                                            
|-------------------- |  | -------------------------------------------
|Title of each class  |  | Name of each exchange on  
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]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).   Yes  
[ ]   No   [x]

The aggregate market value of voting stock held by nonaffiliates of the
registrant was $22,402,000 at March 7, 2003. The registrant has no non-voting
stock.

The number of shares outstanding of each of the registrants classes of
common stock on March 7, 2003 was 478,840 shares of Class A common and
3,275,681 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 12, 2003,
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.





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TABLE OF CONTENTS



|                                                       |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                       | ITEM 1. BUSINESS                                                                             
|                                                       | ITEM 2. PROPERTIES                                                                           
|                                                       | ITEM 3. LEGAL PROCEEDINGS                                                                    
|                                                       | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                                       | ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS            
|                                                       | ITEM 6. SELECTED FINANCIAL DATA                                                              
|                                                       | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                       | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                                                       | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                                       | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|                                                       | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|                                                       | ITEM 11. EXECUTIVE COMPENSATION                                                              
|                                                       | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|                                                       | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|                                                       | ITEM 14. CONTROLS AND PROCEDURES                                                             
|                                                       | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    
|SIGNATURES                                            
|TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS
|JEFFREY F. JOSEPH EMPLOYMENT AGREEMENT                
|STEVEN BARUCH EMPLOYMENT AGREEMENT                    
|THOMAS VIERTEL EMPLOYMENT AGREEMENT                   
|CERTIFICATION OF CEO                                  
|CERTIFICATION OF CFO                                  



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##### Table of Contents



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                                   |  | 20 | 
|PART II                                                |          |    |                                                                                      
|                                                       | Item 5.  |    | Market for the Registrants Common Equity and
Related Stockholder Matters             |  | 20 | 
|                                                       | Item 6.  |    | Selected Financial Data                                                               |  | 22 | 
|                                                       | Item 7.  |    | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  | 24 | 
|                                                       | Item 7A. |    | Quantitative and Qualitative Disclosures
About Market Risk                            |  | 45 | 
|                                                       | Item 8.  |    | Financial Statements and Supplementary Data                                           |  | 45 | 
|                                                       | Item 9.  |    | Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure  |  | 45 | 
|PART III                                               |          |    |                                                                                      
|                                                       | Item 10. |    | Directors and Executive Officers of the
Registrant                                    |  | 45 | 
|                                                       | Item 11. |    | Executive Compensation                                                                |  | 45 | 
|                                                       | Item 12. |    | Security Ownership of Certain Beneficial
Owners and Management                        |  | 46 | 
|                                                       | Item 13. |    | Certain Relationships and Related
Transactions                                        |  | 46 | 
|                                                       | Item 14. |    | Controls and Procedures                                                               |  | 46 | 
|PART IV                                                |          |    |                                                                                      
|                                                       | Item 15. |    | Exhibits, Financial Statement Schedules
and Reports on Form 8-K                       |  | 46 | 
|Table of Contents to Consolidated Financial Statements |          | 53 |                                                                                      

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##### Table of Contents






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 thirteen rental properties. These properties have an historical
cost of $49,739,676, less accumulated depreciation of $9,216,531,
resulting in a net carrying value of $40,523,145 at December 31,
2002. 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, 2002 as Mortgage
portfolio: sold properties and other - net. The $24,653,481
aggregate principal amount of these notes have been reduced by
$1,157,565 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 $6,278,042 of
gains on sales which have been deferred. See Notes 1-C, 1-D,
1-E and 3 of Notes to Consolidated Financial Statements.
Accordingly, the net carrying value of the Companys Mortgage
portfolio: sold properties and other was $17,217,874 at
December 31, 2002.
|
| | All of the loans included in this category of assets were current at
December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | While notes reflected under Mortgage portfolio: sold properties and
other - net consist primarily of notes received from sales of real
properties previously owned by                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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| |                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the Company, this category of assets also includes loans originated
by the Company in the aggregate principal amount of $2,875,000 and
notes in the aggregate principal amount of $447,803 which relate to
sold cooperative apartments.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (iii) A small portion of the Companys assets consists of notes
receivable in the aggregate principal amount of $1,326,512 resulting
from loans made to Ivy Properties, Ltd. (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, 2002 as Mortgage portfolio: related parties - net.
The principal amounts of these notes have been reduced by discounts
and valuation reserves of $105,669 and deferred gains of $830,927
and, accordingly, these notes have a net carrying value at December
31, 2002 of $389,916. 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, 2002, all of the loans due from related parties were
current. See Relationship with Ivy Properties, Ltd., and Notes 3
and 19 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 90%
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 2002 were $.64 per share.

In addition, at December 31, 2002, the Company elected to retain $.38 per share
of long-term capital gains that the Company had received during 2002 and
subsequently paid a capital gains tax of $.13 per share. As a result, each
shareholder (i) includes its pro rata share of the designated long-term capital
gains in computing its long-term capital gains, (ii) receives a tax credit for
its pro rata share of the tax paid by the REIT and (iii) increases the tax
basis of its shares by the difference between the amount of capital gains
allocated to such shareholder and the tax credit received by the shareholder
(see Investment Strategies - Holding of Notes).

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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
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, 2002, 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, in some cases,
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, among other

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | things a) limitations on its ability to obtain funds for investment on
satisfactory terms from external sources and b) competition for investment
properties from other potential purchasers with greater financial
resources.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | While it is Presidentials policy to acquire properties for long term
investment, it may from time to time sell its equity interests in such
properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | While Presidential still seeks to use its funds available for investment
to acquire equity interests in real estate, under current market
conditions the Company has not found any such investments that offer rates
of return satisfactory to the Company or otherwise meet the Companys
investment criteria. Accordingly, the Company has from time to time used
its funds available for investment to make loans secured by interests in
real estate. See Holding of Notes below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (ii) Holding of 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 any such gain is
recognized by Presidential, or to the extent that Presidential incurs a
capital gain from the sale of a property, it may, as a REIT, either (i)
elect to retain such gain, in which event it will be required to pay
Federal and State income tax on such gain, (ii) distribute all or a
portion of such gain to shareholders, in which event Presidential will not
be required to pay taxes on the gain to the extent that it is distributed
to shareholders or (iii) elect to retain such gain and designate it 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

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | shareholders would receive a tax credit for their share of the Federal tax
that the Company paid and increase the tax basis of their stock for the
difference between the long-term capital gain and the tax credit. To the
extent that Presidential retains any principal payments on notes or
proceeds of sale, 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.                                                                                                                                                   
|
| | The Company has in the last two years made, and may continue to make,
additional loans secured by interests in real property. These loans may
be mezzanine type loans which are secured by subordinate security
interests in real property or by ownership interests in entities that own
real property, and may include borrower personal guarantees. These loans
carry interest rates in excess of rates obtainable on first priority
loans. See notes 2 and 3 to the Mortgage portfolio: notes receivable-sold
properties and other table under Loans and Investments. Subsequent to
December 31, 2002, the Company advanced a mezzanine type loan in the
principal amount of $1,500,000 secured by ownership interests in an entity
which owns real property and by a personal guarantee from the borrower.
|
| | (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, 2002 with respect
to the mortgage loan portfolio resulting from the sale of properties and the
loan portfolio due from Ivy.

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MORTGAGE PORTFOLIO: NOTES RECEIVABLE - SOLD PROPERTIES AND OTHER

DECEMBER 31, 2002

|                              |                           |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |   | 
|----------------------------- | ------------------------- | - | - |  |  | -- | - |  |  | -- | - |  | ---------- | --------- | ---------- |  | ---- | --------- | --------- | -------- | ---- | --------- | --------- | -------- | - | --------- | ---------- |  |  | --------- |  | -------- |  | ----------- | - | 
|                              |                           |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   | Net       |            |  |  |           |  | Interest
|                              |                           |   |   |  |  |    |   |  |  |    |   |  |            | Note      |            |  |      |           |           | Deferred |      | Carrying  |           | Maturity |   | Rate     
|Name of Property              |                           |   |   |  |  |    |   |  |  |    |   |  | Receivable |           | Discount   |  | Gain |           | Value     |          | Date |           | 2002     
|                              |                           |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |          
|Chelsea Village Apartments    |                           | ) |   |  |  | (a | ) |  |  | (1 | ) |  | $          | 4,000,000 |            |  | $    | 1,148,843 |           |          | $    |           |           |          | $ | 2,851,157 |            |  |  | 2009      |  |          |  | 9.625-10.50 | %
|                              | Atlantic City, NJ         |   | ) |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |   | 
|Liberty Gardens               |                           | ) |   |  |  | (b | ) |  |  | (2 | ) |  |            | 1,100,000 |            |  |      |           |           |          |      |           |           |          |   | 1,100,000 |            |  |  | 2009      |  |          |  | 13.00       | %
|                              | Bergenfield, NJ           |   | ) |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |   | 
|Town Oaks Apartments          |                           | ) |   |  |  | (b | ) |  |  | (3 | ) |  |            | 1,775,000 |            |  |      |           |           |          |      |           |           |          |   | 1,775,000 |            |  |  | 2003      |  |          |  | 11.50       | %
|                              | South Bound Brook, NJ     |   | ) |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |   | 
|Encore Apartments             |                           |   |   |  |  | (a | ) |  |  | (4 | ) |  |            | 8,550,000 |            |  |      |           |           |          |      | 3,241,540 |           |          |   | 5,308,460 |            |  |  | 2009      |  |          |  | 10.17       | %
|                              | New York, NY              |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |   | 
|Mark Terrace Associates       |                           |   |   |  |  | (a | ) |  |  | (5 | ) |  |            | 1,300,000 |            |  |      |           |           |          |      |           |           |          |   | 1,300,000 |            |  |  | 2005      |  |          |  | 8.16-9.16   | %
|                              | Bronx, NY                 |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |   | 
|Newcastle Apartments          |                           |   |   |  |  | (a | ) |  |  |    |   |  |            | 6,000,000 |            |  |      |           |           |          |      | 2,991,850 |           |          |   | 3,008,150 |            |  |  | 2006      |  |          |  | 6.45        | %
|                              | Greece, NY                |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |   | 
|Pinewood I & II               |                           |   |   |  |  | (a | ) |  |  |    |   |  |            | 100,000   |            |  |      |           |           |          |      |           |           |          |   | 100,000   |            |  |  | 2008      |  |          |  | 12.00       | %
|                              | Des Moines, IA            |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |   | 
|Woodland Village              |                           |   |   |  |  | (a | ) |  |  | (6 | ) |  |            | 880,928   |            |  |      |           |           |          |      |           |           |          |   | 880,928   |            |  |  | 2005      |  |          |  | 10.25       | %
|                              | Hartford, CT              |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |   | 
|Woodland Village              |                           |   |   |  |  | (a | ) |  |  | (6 | ) |  |            | 499,750   |            |  |      |           |           |          |      |           |           |          |   | 499,750   |            |  |  | 2005      |  |          |  | 10.25       | %
|                              | Hartford, CT              |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |   | 
|Various Sold Co-op Apartments |                           |   |   |  |  | (c | ) |  |  | (7 | ) |  |            | 447,803   |            |  |      | 8,722     |           |          |      | 44,652    |           |          |   | 394,429   |            |  |  | 2003-2017 |  |          |  | 5.50-11.00  | %
|                              |                           |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |  
|Total Notes Receivable-       |                           |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |  
|                              | Sold Properties and Other |   |   |  |  |    |   |  |  |    |   |  |            | $         | 24,653,481 |  |      | $         | 1,157,565 |          |      | $         | 6,278,042 |          |   | $         | 17,217,874 |  |  |           |  |          |  |             |   | 
|                              |                           |   |   |  |  |    |   |  |  |    |   |  |            |           |            |  |      |           |           |          |      |           |           |          |   |           |            |  |  |           |  |          |  |             |  

(a) Notes from sales of properties previously owned by the Company.

(b) Notes originated by the Company.

(c) Notes received from the sales of cooperative apartments.

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|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 previously held
by the Company. The modification provided 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 February, 2001, the Company made a $1,100,000 loan which is secured by
three apartment properties located in New Jersey (which properties also
secure the Fairfield Towers Second Mortgage) and by a $750,000 personal
guarantee by one of the borrowers principals. The interest rate is 13%
per annum and the note matures on February 18, 2009, but may be prepaid
after February 18, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(3) |  | In July, 2002, the Company made a $1,775,000 loan which is secured by
three apartment properties located in New Jersey and a $887,500 personal
guarantee from the borrowers. These properties also secure the Fairfield
Towers Second Mortgage and a $1,100,000 loan to the same borrowers. The
interest rate is 11.5% per annum and the note matures in July, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(4) |  | In April, 2002, the $12,300,000 note secured by a second mortgage on the
Encore Apartments in New York, New York was modified at the Companys
request. Under the terms of the modification, Presidential received a
principal repayment of $3,750,000 and additional interest of $369,000
(which was due under the terms of the original note). The $8,550,000
balance of the note matures on April 30, 2009. Interest rates on the note
are 11% per annum through June 30, 2002, 9% per annum from July 1, 2002
through April 18, 2004, 10% per annum from April 19, 2004 through April
18, 2007 and 10-1/2% per annum from April 19, 2007 through maturity with
additional interest of $171,000 due at maturity, which will increase the
effective interest rate to 10.17% per annum. The $8,550,000 note is
secured by a second mortgage on the Encore apartment property and by a
pledge of the ownership interests in the entity owning the Encore
Apartments.
|   
|(5) |  | Annual interest rate on this note increases by 1% per year, from 8.16%
per annum at November 30, 2001 to 11.16% per annum at November 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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|    |  |                                                                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) |  | These notes are amortizing monthly based on a 20 year term and have
balloon payments due at maturity.                                                                                                  
|   
|(7) |  | The majority of 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.

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##### Table of Contents



MORTGAGE PORTFOLIO: NOTES RECEIVABLE - RELATED PARTIES
DECEMBER 31,2002

|                   |    |   |  |  |  |            |           |          |  |      |         |          |  |          |         |          |  |      |         |  |  |         |      |          |                |             |     |  
|------------------ | -- | - |  |  |  | ---------- | --------- | -------- |  | ---- | ------- | -------- |  | -------- | ------- | -------- |  | ---- | ------- |  |  | ------- | ---- | -------- | -------------- | ----------- | --- | -
|                   |    |   |  |  |  |            |           |          |  |      |         |          |  |          |         |          |  | Net  |         |  |  |         |      | Interest
|                   |    |   |  |  |  | Note       |           |          |  |      |         | Deferred |  | Carrying |         | Maturity |  | Rate
|Name of Property   |    |   |  |  |  | Receivable |           | Discount |  | Gain |         | Value    |  | Date     |         | 2002    
|                   |    |   |  |  |  |            |           |          |  |      |         |          |  |          |         |         
|UTB End Loans      | (1 | ) |  |  |  | $          | 118,681   |          |  | $    | 78,307  |          |  | $        |         |          |  | $    | 40,374  |  |  | Various |      |          | Various        |            
|Consolidated Loans | (2 | ) |  |  |  |            |           |          |  |      |         |          |  |          |         |          |  |      | 0       |  |  |         | 2016 |          |                | Chase Prime |    
|Overlook           |    |   |  |  |  |            | 830,927   |          |  |      |         |          |  |          | 830,927 |          |  |      | 0       |  |  |         | 2003 |          |                |             | 6.0 | %
|Alexandria, VA    
|University Towers  | (3 | ) |  |  |  |            | 376,904   |          |  |      | 27,362  |          |  |          |         |          |  |      | 349,542 |  |  | Various |      |          | 11.80 to 25.33 | %          
|New Haven, CT     
|                   |    |   |  |  |  |            |           |          |  |      |         |          |  |          |         |          |  |      |         |  |  |         |      |          |                |             |     |  
|                   |    |   |  |  |  | $          | 1,326,512 |          |  | $    | 105,669 |          |  | $        | 830,927 |          |  | $    | 389,916 |  |  |         |      |          |                |             |     |  
|                   |    |   |  |  |  |            |           |          |  |      |         |          |  |          |         |          |  |      |         |  |  |         |      |          |                |             |     |  



|(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 in 1991 as part of
the Settlement Agreement with Ivy (see Relationship with Ivy Properties, Ltd. below). Included
in the $78,307 discount on these notes is a valuation reserve of $33,944. This valuation reserve
was recorded by the Company in 1997 to reflect a decline in the estimated fair value of the
underlying collateral.                                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | As part of the Settlement Agreement with Ivy in 1991, 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
$4,770,050 and a net carrying value of zero. Presidential does not expect to recover any
material principal amounts on these notes. However, to the extent that Presidential does receive payments,
such payments will be applied to unpaid and unaccrued interest and recognized as income.
During 2002, the Company received interest payments of $195,819 on these notes (see Relationship with
Ivy Properties, Ltd. below and Note 19 of Notes to Consolidated Financial Statements).
|   
|(3) |  | These notes represent a 100% interest in notes receivable held by UTB Associates, a limited
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
$27,362 discount on these notes is a valuation reserve of $9,849. This valuation reserve was
recorded by the Company in 1997 to reflect a decline in the estimated fair value of the
underlying collateral.                                                                                                                                                                                                                                                                        

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(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 90% 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
9 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
Code and to restrict itself to the holding of assets that a REIT is permitted
to hold.

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

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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. 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, 2002, interest income on these
notes was $29,400. These three officers own an aggregate of 96,589 shares of
the Companys Class B common stock. 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

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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, most of Ivys subordinate
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 not
otherwise disposed of pursuant to the Settlement Agreement (collectively, the
Consolidated Collateral) and required payments to be made only from certain
proceeds of sale of the Consolidated Collateral. Since substantially all of
the Consolidated Collateral has been sold and the sales proceeds used to pay
other obligations of Ivy as permitted by the terms of the Settlement Agreement,
Presidential does not expect to recover any material principal amounts on the
Consolidated Loans. However, in 1996 Presidential and the Ivy Principals
agreed to modify 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 two of the Ivy Principals
which acts as a producer of theatrical productions. Scorpio is one of the
producers of The Producers, a much acclaimed Broadway show which opened in
April, 2001, and of Hairspray, another highly acclaimed Broadway musical
which opened in August, 2002. The Producers recouped its original investment
on Broadway in November, 2001 and has distributed profits regularly since then.
A national tour commenced performances in September, 2002 and additional tours
and productions are scheduled. Hairspray recouped its original investment on
Broadway in March, 2003. A national tour commences performances in September,
2003. Amounts received by Presidential from Scorpio will be applied to unpaid
and unaccrued interest on the Consolidated Loans and recognized as income. The
Company anticipates that these amounts will be significant over the next
several years. However, the continued profitability of any theatrical
production is by its nature uncertain and management believes that any estimate
of payments from Scorpio on the Consolidated Loans for future periods is too
speculative to project. During 2002, Presidential received $8,733 of principal
payments and $195,819 of interest on the Consolidated Loans. As of December
31, 2002, the Consolidated Loans had an outstanding principal balance of
$4,770,050 and a net carrying value of zero.

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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, 2002. All of such loans are current under their modified
terms. 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, most
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, 2002, the Company had an ownership interest in 1,224
apartment units and 410,500 square feet of commercial, industrial and
professional space, all of which are carried on the balance sheet at
$40,523,145 (net of accumulated depreciation of $9,216,531). The Company has
mortgage debt on the majority of these properties in the aggregate principal
amount of $37,191,814, all of which is nonrecourse to Presidential with the
exception of $211,258 pertaining to the mortgage on the Mapletree Industrial
Center property.

Included in the 1,224 apartment units owned by Presidential are 54 cooperative
apartment units. Although it may from time to time sell individual or groups
of these apartments, Presidential intends to continue to hold them as rental
apartments.

In addition, PDL, Inc. (a wholly owned subsidiary of Presidential) is the
General Partner of PDL, Inc. and Associates Limited Co-Partnership (Home
Mortgage Partnership). PDL, Inc. and Presidential have an aggregate 31%
general and limited partner interest in the Home Mortgage Partnership. The
Home Mortgage Partnership owns and operates an office building, with 211,000

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##### Table of Contents



square feet of commercial space, located in Hato Rey, Puerto Rico.
Presidential accounts for its investment in this partnership under the equity
method. At December 31, 2002, the Companys investment in the partnership was
a negative basis of $2,358,164. The negative basis was a result of
distributions received from the partnership in excess of investments and
earnings, and not a result of partnership operating losses. The negative
interest has been classified as a liability on the Companys consolidated
balance sheets, captioned distributions from partnership in excess of
investment and earnings. For the year ended December 31, 2002, the Companys
equity in income from the partnership was $295,564.

The chart below indicates the operating results of each of the properties owned
by the Company at December 31, 2002 in accordance with accounting principles
generally accepted in the United States of America (GAAP) and, following
that, in terms of cash flow from operations.

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PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
REAL ESTATE
DECEMBER 31, 2002



|                                             |                                   |  |    |   |  |                 |                        |         |            |         |          |  |           |            |            |      |          |    |   |  |                |               |  |  | 
|-------------------------------------------- | --------------------------------- |  | -- | - |  | --------------- | ---------------------- | ------- | ---------- | ------- | -------- |  | --------- | ---------- | ---------- | ---- | -------- | -- | - |  | -------------- | ------------- |  |  | 
|                                             |                                   |  |    |   |  |                 |                        |         |            |         | Vacancy  |  |           |            |            |      |          |    |   |  |                |               | 
|                                             |                                   |  |    |   |  |                 | Rentable               |         | Rate       |         | Mortgage |  |           |            |            |      | Maturity
|Property                                     |                                   |  |    |   |  | Space (approx.) |                        | Percent |            | Balance |          |  |           |            |            | Date
|                                             |                                   |  |    |   |  |                 |                        |         |            |         |          |  |           |            |            |     
|Residential                                  |                                   |  |    |   |  |                 |                        |         |            |         |          |  |           |            |            |      |          |    |   |  |                |               |  | 
|                                             | Apartment Buildings               |  |    |   |  |                 |                        |         |            |         |          |  |           |            |            |      |          |    |   |  |                |               |  |  | 
|Cambridge Green, Council Bluffs, IA          |                                   |  |    |   |  |                 | 201 Apt. Units         |         |            | 7.97    | %        |  | $         | 3,053,719  |            |      |          |    |   |  |                | October, 2029
|Continental Gardens, Miami, FL               |                                   |  |    |   |  |                 | 208 Apt. Units         |         |            | 4.70    | %        |  |           | 7,698,869  |            |      |          | (3 | ) |  |                | August, 2007 
|Crown Court, New Haven, CT                   |                                   |  | (4 | ) |  |                 | 105 Apt. Units & 2,000 |         | (Net Lease | )       |          |  | 2,565,053 |            |            |      |          |    |   |  | November, 2021
|                                             |                                   |  |    |   |  |                 | sq.ft. of comml.space  |         |            |         |          |  |           |            |            |      |          |    |   |  |                |               | 
|Fairlawn Gardens, Martinsburg, WV            |                                   |  |    |   |  |                 | 112 Apt. Units         |         |            | 3.99    | %        |  |           | 2,189,923  |            |      |          | (3 | ) |  |                | April, 2008  
|Farrington Apartments, Clearwater, FL        |                                   |  | (5 | ) |  |                 | 224 Apt. Units         |         |            | 10.97   | %        |  |           | 7,748,423  |            |      |          | (3 | ) |  |                | May, 2010    
|Preston Lake Apartments, Tucker, GA          |                                   |  | (6 | ) |  |                 | 320 Apt. Units         |         |            | 15.86   | %        |  |           | 13,724,569 |            |      |          | (3 | ) |  |                | May, 2010    
|                                             | Individual Cooperative Apartments |  |    |   |  |                 |                        |         |            |         |          |  |           |            |            |      |          |    |   |  |                |               |  |  | 
|Sherwood House, Long Beach, NY               |                                   |  |    |   |  |                 | 1 Apt. Unit            |         |            | 0.00    | %        |  |           |            |            |      |          |    |   |  |                |               | 
|6300 Riverdale Ave., Riverdale, NY           |                                   |  |    |   |  |                 | 6 Apt. Units           |         |            | 0.00    | %        |  |           |            |            |      |          |    |   |  |                |               | 
|330 W. 72nd St., New York, NY                |                                   |  |    |   |  |                 | 3 Apt. Units           |         |            | 0.00    | %        |  |           |            |            |      |          |    |   |  |                |               | 
|Towne House, New Rochelle, NY                |                                   |  |    |   |  |                 | 42 Apt. Units          |         |            | 2.32    | %        |  |           |            |            |      |          |    |   |  |                |               | 
|University Towers, New Haven, CT             |                                   |  |    |   |  |                 | 2 Apt. Units           |         |            | 6.34    | %        |  |           |            |            |      |          |    |   |  |                |               | 
|Commercial Buildings                         |                                   |  |    |   |  |                 |                        |         |            |         |          |  |           |            |            |      |          |    |   |  |                |               |  | 
|Building Industries Center, White Plains, NY |                                   |  |    |   |  |                 | 23,500 sq.ft           |         |            | 0.00    | %        |  |           |            |            |      |          |    |   |  |                |               | 
|Mapletree Industrial Center, Palmer, MA      |                                   |  |    |   |  |                 | 385,000 sq.ft          |         |            | 4.82    | %        |  |           | 211,258    |            |      |          |    |   |  |                | June, 2011   
|                                             |                                   |  |    |   |  |                 |                        |         |            |         |          |  |           |            |            |      |          |    |   |  |                |               |  | 
|                                             |                                   |  |    |   |  |                 |                        |         |            |         |          |  |           | $          | 37,191,814 |      |          |    |   |  |                |               |  | 
|                                             |                                   |  |    |   |  |                 |                        |         |            |         |          |  |           |            |            |      |          |    |   |  |                |               |  | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                             |                                   |      |          |                |             |                |          |   |              |   |           |   | 
|-------------------------------------------- | --------------------------------- | ---- | -------- | -------------- | ----------- | -------------- | -------- | - | ------------ | - | --------- | - | 
|                                             |                                   |      |          |                |             |                |          |   |              |   | Cash Flow
|                                             |                                   |      |          |                |             |                | Income   |   | (Deficiency)
|                                             |                                   |      | Interest |                | (Loss) from |                | from    
|Property                                     |                                   | Rate |          | Operations (1) |             | Operations (2)
|                                             |                                   |      |          |                |             |               
|Residential                                  |                                   |      |          |                |             |                |          |   |              |   |           |  
|                                             | Apartment Buildings               |      |          |                |             |                |          |   |              |   |           |   | 
|Cambridge Green, Council Bluffs, IA          |                                   |      | 6.65     | %              |             | $              | 126,501  |   |              | $ | 247,791   |  
|Continental Gardens, Miami, FL               |                                   |      | 8.16     | %              |             |                | 280,593  |   |              |   | 468,881   |  
|Crown Court, New Haven, CT                   |                                   |      | 7.00     | %              |             |                | 100,201  |   |              |   | 77,091    |  
|Fairlawn Gardens, Martinsburg, WV            |                                   |      | 7.06     | %              |             |                | 127,470  |   |              |   | 157,149   |  
|Farrington Apartments, Clearwater, FL        |                                   |      | 8.25     | %              |             |                | (195,175 | ) |              |   | 7,844     |  
|Preston Lake Apartments, Tucker, GA          |                                   |      | 8.15     | %              |             |                | (440,266 | ) |              |   | (47,074   | )
|                                             | Individual Cooperative Apartments |      |          |                |             |                |          |   |              |   |           |   | 
|Sherwood House, Long Beach, NY               |                                   |      |          |                |             |                | (7,842   | ) |              |   | (7,124    | )
|6300 Riverdale Ave., Riverdale, NY           |                                   |      |          |                |             |                | (7,586   | ) |              |   | (5,303    | )
|330 W. 72nd St., New York, NY                |                                   |      |          |                |             |                | 7,129    |   |              |   | 8,018     |  
|Towne House, New Rochelle, NY                |                                   |      |          |                |             |                | 94,490   |   |              |   | 113,409   |  
|University Towers, New Haven, CT             |                                   |      |          |                |             |                | (4,367   | ) |              |   | (2,453    | )
|Commercial Buildings                         |                                   |      |          |                |             |                |          |   |              |   |           |  
|Building Industries Center, White Plains, NY |                                   |      |          |                |             |                | 100,299  |   |              |   | 117,560   |  
|Mapletree Industrial Center, Palmer, MA      |                                   |      | 4.75     | %              |             |                | 301,682  |   |              |   | 305,263   |  
|                                             |                                   |      |          |                |             |                |          |   |              |   |           |  
|                                             |                                   |      |          |                |             | $              | 483,129  |   |              | $ | 1,441,052 |  
|                                             |                                   |      |          |                |             |                |          |   |              |   |           |  

See notes on following page.

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|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) |  | Income (loss) from operations and cash flow (deficiency) from operations
for Farrington Apartments in 2001 were $(93,881) and $117,725,
respectively. Operating results in 2002 were adversely affected compared
to 2001 by an increase in vacancy loss and increased operating expenses at
the property, especially expenses for insurance, water and sewer and
maintenance.                                                                                                                                                                                     
|   
|(6) |  | Income (loss) from operations and cash flow (deficiency) from operations
for Preston Lake Apartments in 2001 were $(48,365) and $322,564,
respectively. Operating results in 2002 were adversely affected compared
to 2001 by a substantial reduction in gross rents and an increase in
vacancy rates resulting from the weak rental market in the greater Atlanta
area and to a lesser extent by increased operating expenses at the
property, especially expenses for insurance, utilities and maintenance.                                                     

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 with title 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.

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ITEM 3. LEGAL PROCEEDINGS

UTB Associates, a partnership in which the Company holds a 66-2/3% interest,
was 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. From 1999 through 2001, UTB Associates and
University Towers Owners Corp., the cooperative corporation, were in litigation
regarding the termination of the Professional Space Lease. As a result of the
outcome of the litigation, the Professional Space Lease was terminated and
operation of the Professional Space Lease property was relinquished to the
cooperative corporation as of September 1, 2001. UTB Associates appealed the
decision and pending the outcome of the appeal, UTB Associates and the
cooperative corporation agreed to settle the various issues involved in the
litigation and a settlement was finalized in May, 2002. Under the terms of the
settlement, UTB Associates agreed to the termination of the lease and the
subleases and the associated tenant improvements were assigned to the
cooperative corporation. As a part of the settlement, Presidential transferred
its interest in the Towers Shoppers Parcade property, which is used for parking
for tenants at the Professional Space Lease property, to the cooperative
corporation. UTB Associates and the Company received non-interest bearing
notes from the cooperative corporation in the total amount of $850,000 for the
transfers of the Professional Space Lease and the Towers Shoppers Parcade
property.

Under the terms of the notes, UTB Associates and the Company would receive
monthly payments on the notes over a nine-year period in the annual amount of
$70,000 and $21,111, respectively, for the first three years and $75,000 and
$21,111, respectively, for the last six years. Under the terms of the notes,
University Towers Owners Corp. had the right to prepay the notes for a
prepayment price equal to the present value of the projected note payments
calculated at a discount rate of 3% per annum. University Towers Owners Corp.
made eight monthly payments and then repaid the balance of the notes in full in
November, 2002. As a result, UTB Associates and the Company received total
payments of $757,365 (total monthly payments of $60,741 and a prepayment of
$696,624 after a present value discount of $92,635).

UTB Associates received payments of $588,013, recorded a net gain on sale of
$284,434 (which includes the minority interest share of $94,830) and
amortization of discount of $26,377. The net book value of the assets
transferred by UTB Associates to the cooperative

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corporation was $212,488. The Company received payments of $169,352, recorded a
gain on sale of $153,579 and amortization of discount of $7,627. The net book
value of the assets transferred by the Company to the cooperative corporation
were $3,146.




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

None.




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:

|               |  |              |      |              |  |             |      |     |  |         |      |  |  |   |      |  |  |   |     | 
|-------------- |  | ------------ | ---- | ------------ |  | ----------- | ---- | --- |  | ------- | ---- |  |  | - | ---- |  |  | - | --- | 
|               |  |              |      |              |  |             |      |     |  |         |      |  |  |   |      |  |  |  
|               |  |              |      | Dividends   
|               |  | Stock Prices |      | Declared Per
|               |  |              |      | Declared Per
|               |  | Class A      |      | Class B      |  | Share on   
|               |  |              |      |              |  | Class A and
|               |  | High         |      | Low          |  | High        |      | Low |  | Class B
|               |  |              |      |              |  |             |      |     |  |        
|Calendar 2002  |  |              |      |              |  |             |      |     |  |         |      |  |  |   |      |  |  |   |     | 
|First Quarter  |  | $            | 9.50 |              |  | $           | 8.00 |     |  | $       | 7.10 |  |  | $ | 6.00 |  |  | $ | .16 | 
|Second Quarter |  |              | 9.00 |              |  |             | 6.90 |     |  |         | 7.20 |  |  |   | 6.10 |  |  |   | .16 | 
|Third Quarter  |  |              | 7.34 |              |  |             | 6.70 |     |  |         | 7.00 |  |  |   | 6.21 |  |  |   | .16 | 
|Fourth Quarter |  |              | 7.35 |              |  |             | 7.20 |     |  |         | 7.60 |  |  |   | 6.55 |  |  |   | .16 | 
|Calendar 2001  |  |              |      |              |  |             |      |     |  |         |      |  |  |   |      |  |  |   |     | 
|First Quarter  |  | $            | 6.40 |              |  | $           | 5.00 |     |  | $       | 7.00 |  |  | $ | 5.12 |  |  | $ | .16 | 
|Second Quarter |  |              | 7.01 |              |  |             | 6.15 |     |  |         | 7.05 |  |  |   | 5.80 |  |  |   | .16 | 
|Third Quarter  |  |              | 7.50 |              |  |             | 6.75 |     |  |         | 7.10 |  |  |   | 6.50 |  |  |   | .16 | 
|Fourth Quarter |  |              | 8.00 |              |  |             | 7.35 |     |  |         | 6.90 |  |  |   | 6.00 |  |  |   | .16 | 

|    |  |                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------
|(b) |  | The number of record holders for the Companys Common Stock
at December 31, 2002 was 152 for Class A and 605 for Class B.

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|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) |  | Under 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 90% 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.
|   
|(d) |  | Stock Option Plan not approved by security holders (see Note 15 of
Notes to the Consolidated Financial Statements):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                           |  |                     |       |                         |  |  |        | 
|-------------------------- |  | ------------------- | ----- | ----------------------- |  |  | ------ | 
|                           |  |                     |       | Number of securities   
|                           |  |                     |       | remaining available    
|                           |  |                     |       | for future issuance    
|                           |  |                     |       | under equity           
|Number of securities       |  | Weighted-average    |       | compensation plans     
|to be issued upon
exercise |  | exercise
price of   |       | excluding securities   
|of outstanding options     |  | outstanding
options |       | reflected in column (a)
|(a)                        |  | (b)                 |       | (c)                    
|60,000                     |  | $                   | 6.375 |                         |  |  | 90,000 | 

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ITEM 6. SELECTED FINANCIAL DATA

|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |       |        |       | 
|--------------------------------------------------------- | ---------------------------------------------------------------------------- | ----- | --------------------------------------------------------------------- | ----- | ---------------------------------------------------- | ------ | ---- | ----- | ------ | ------ | ---- | ----- | ------ | ----- | --- | ----- | ----- | ----- | - | ----- | ------ | ----- | 
|                                                          |                                                                              |       |                                                                       |       | YEAR ENDED DECEMBER 31,                             
|                                                          |                                                                              |       |                                                                       |       |                                                     
|                                                          |                                                                              |       |                                                                       |       | 2002                                                 |        | 2001 |       | 2000   |        | 1999 |       | 1998  
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       | (1)    |        | (1)  |       | (1)    |       | (1)
|                                                          |                                                                              |       |                                                                       |       | (Amounts in thousands, except per common share data)
|Selected Data from Consolidated Statements of Operations: |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Revenues:                                                                    |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |       |       
|                                                          |                                                                              |       | Rental                                                                |       | $                                                    | 10,084 |      |       | $      | 10,149 |      |       | $      | 9,029 |     |       | $     | 5,347 |   |       | $      | 5,219 | 
|                                                          |                                                                              |       | Interest on mortgages                                                 |       |                                                      | 2,900  |      |       |        | 3,330  |      |       |        | 3,226 |     |       |       | 3,853 |   |       |        | 5,490 | 
|                                                          |                                                                              |       | Other                                                                 |       |                                                      | 21     |      |       |        | 27     |      |       |        | 38    |     |       |       | 71    |   |       |        | 39    | 
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          |                                                                              | Total |                                                                       | $     | 13,005                                               |        |      | $     | 13,506 |        |      | $     | 12,293 |       |     | $     | 9,271 |       |   | $     | 10,748 |      
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Income before net gain (loss) from sales of properties, notes
and securities |       | $                                                                     | 539   |                                                      |        | $    | 1,191 |        |        | $    | 1,228 |        |       | $   | 1,286 |       |       | $ | 1,948 |       
|                                                          | Net gain (loss) from sales of properties, notes and securities (2) (3)       |       |                                                                       | 3,873 |                                                      |        |      | 1,198 |        |        |      | (5    | )      |       |     | 7,703 |       |       |   | 756   |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Income from continuing operations                                            |       |                                                                       | 4,412 |                                                      |        |      | 2,389 |        |        |      | 1,223 |        |       |     | 8,989 |       |       |   | 2,704 |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Discontinued Operations:                                                     |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |       |       
|                                                          |                                                                              |       | Income (loss) from discontinued operations (4)                        |       |                                                      | 202    |      |       |        | 232    |      |       |        | (10   | )   |       |       | 92    |   |       |        | 69    | 
|                                                          |                                                                              |       | Net gain from sales of discontinued operations (5)                    |       |                                                      | 1,486  |      |       |        |        |      |       |        |       |     |       |       |       |   |       |        |       | 
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Total income (loss) from discontinued operations                             |       |                                                                       | 1,688 |                                                      |        |      | 232   |        |        |      | (10   | )      |       |     | 92    |       |       |   | 69    |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Net Income                                                                   |       | $                                                                     | 6,100 |                                                      |        | $    | 2,621 |        |        | $    | 1,213 |        |       | $   | 9,081 |       |       | $ | 2,773 |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Earnings per common share (basic and diluted):                               |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |       |       
|                                                          |                                                                              |       | Income before net gain from sales of properties, notes
and securities |       | $                                                    | 0.14   |      |       | $      | 0.32   |      |       | $      | 0.33  |     |       | $     | 0.35  |   |       | $      | 0.54  | 
|                                                          |                                                                              |       | Net gain from sales of properties, notes and securities               |       |                                                      | 1.04   |      |       |        | 0.32   |      |       |        | 0.00  |     |       |       | 2.12  |   |       |        | 0.21  | 
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          |                                                                              |       | Income from continuing operations                                     |       |                                                      | 1.18   |      |       |        | 0.64   |      |       |        | 0.33  |     |       |       | 2.47  |   |       |        | 0.75  | 
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Discontinued Operations:                                                     |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |       |       
|                                                          |                                                                              |       | Income from discontinued operations                                   |       |                                                      | 0.05   |      |       |        | 0.07   |      |       |        | 0.00  |     |       |       | 0.03  |   |       |        | 0.02  | 
|                                                          |                                                                              |       | Net gain from sales of discontinued operations                        |       |                                                      | 0.40   |      |       |        |        |      |       |        |       |     |       |       |       |   |       |        |       | 
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Total income from discontinued operations                                    |       |                                                                       | 0.45  |                                                      |        |      | 0.07  |        |        |      | 0.00  |        |       |     | 0.03  |       |       |   | 0.02  |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Net Income per Common Share - basic                                          |       | $                                                                     | 1.63  |                                                      |        | $    | 0.71  |        |        | $    | 0.33  |        |       | $   | 2.50  |       |       | $ | 0.77  |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Net Income per Common Share - diluted                                        |       | $                                                                     | 1.63  |                                                      |        | $    | 0.71  |        |        | $    | 0.33  |        |       | $   | 2.50  |       |       | $ | 0.77  |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Cash distributions per common share                                          |       | $                                                                     | 0.64  |                                                      |        | $    | 0.64  |        |        | $    | 0.64  |        |       | $   | 0.64  |       |       | $ | 0.63  |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Weighted average number of shares outstanding - basic                        |       |                                                                       | 3,735 |                                                      |        |      | 3,716 |        |        |      | 3,698 |        |       |     | 3,629 |       |       |   | 3,593 |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      
|                                                          | Weighted average number of shares outstanding - diluted                      |       |                                                                       | 3,739 |                                                      |        |      | 3,718 |        |        |      | 3,698 |        |       |     | 3,633 |       |       |   | 3,605 |       
|                                                          |                                                                              |       |                                                                       |       |                                                      |        |      |       |        |        |      |       |        |       |     |       |       |       |   |      



|(1) |  | As Restated for the items described in Note 23 of Notes to the Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                    
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The 2002 net gain from sales of properties, notes and securities includes a net gain of $3,750,000 from principal
payments received on the New Haven Towers note receivable, which is secured by the Encore Apartments.                                                                                                                                                                                                              
|   
|(3) |  | 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.                                                                
|   
|(4) |  | In 2002, the Company sold the Sunwood Apartments property, the University Towers Professional Space
Lease property and the Towers Shoppers Parcade property. The operations of those properties have been reclassified
from rental operations to discontinued operations for all prior years presented.                                                                                                                              
|   
|(5) |  | The 2002 net gain from sales of discontinued operations includes a net gain of $1,143,000 from the sale of the Sunwood
Apartments property, and net gains of $189,000 and $154,000 from the sale of the University Towers Professional Space
Lease property and the Towers Shoppers Parcade property, respectively. The net gain from the sale of the Sunwood
Apartments property includes a provision for Federal taxes of $499,000.

22



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ITEM 6. SELECTED FINANCIAL DATA (CONCLUDED)

|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |        |        | 
|----------------------------------------------- | --------------------------------------------------- | ----------------------------------------- | - | ---------------------- | ------ | ---- | - | ------ | ------ | ---- | - | ------ | ------ | --- | - | ------ | ------ |  | - | ------ | ------ | 
|                                                |                                                     |                                           |   | DECEMBER 31,          
|                                                |                                                     |                                           |   |                       
|                                                |                                                     |                                           |   | 2002                   |        | 2001 |   | 2000   |        | 1999 |   | 1998  
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |       
|                                                |                                                     |                                           |   |                        |        |      |   | (1)    |        | (1)  |   | (1)    |        | (1)
|                                                |                                                     |                                           |   | (Amounts in thousands)
|Selected Data from Consolidated Balance Sheets: |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |       
|                                                | Real estate (2)                                     |                                           | $ | 49,740                 |        |      | $ | 49,367 |        |      | $ | 48,932 |        |     | $ | 21,256 |        |  | $ | 20,803 |       
|                                                | Less: accumulated depreciation                      |                                           |   | 9,217                  |        |      |   | 7,916  |        |      |   | 6,643  |        |     |   | 5,567  |        |  |   | 5,050  |       
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |       
|                                                | Net real estate                                     |                                           | $ | 40,523                 |        |      | $ | 41,451 |        |      | $ | 42,289 |        |     | $ | 15,689 |        |  | $ | 15,753 |       
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |       
|                                                | Net mortgage portfolio (3)                          |                                           | $ | 17,608                 |        |      | $ | 16,410 |        |      | $ | 15,795 |        |     | $ | 15,857 |        |  | $ | 31,100 |       
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |       
|                                                | Assets related to discontinued operations (4)       |                                           |   |                        |        |      | $ | 6,495  |        |      | $ | 6,659  |        |     | $ | 6,763  |        |  | $ | 6,756  |       
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |        |       
|                                                | Total assets                                        |                                           | $ | 67,781                 |        |      | $ | 69,321 |        |      | $ | 69,252 |        |     | $ | 49,256 |        |  | $ | 58,744 |       
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |       
|                                                | Mortgage debt - includes amounts due in one year:   |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |        |       
|                                                |                                                     | Properties owned (2)                      |   | $                      | 37,192 |      |   | $      | 37,606 |      |   | $      | 37,988 |     |   | $      | 17,295 |  |   | $      | 17,431 | 
|                                                |                                                     | Wrap mortgage debt on sold properties (5) |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |        | 4,668  | 
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |        |       
|                                                | Total                                               |                                           | $ | 37,192                 |        |      | $ | 37,606 |        |      | $ | 37,988 |        |     | $ | 17,295 |        |  | $ | 22,099 |       
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |       
|                                                | Note payable - includes amounts due in one year (3) |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  | $ | 10,395 |       
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |        |       
|                                                | Liabilities related to discontinued operations (4)  |                                           |   |                        |        |      | $ | 4,787  |        |      | $ | 4,846  |        |     | $ | 4,915  |        |  | $ | 4,986  |       
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |        |       
|                                                | Accumulated other comprehensive loss                |                                           | $ | (2,641                 | )      |      | $ | (1,752 | )      |      | $ | (1,431 | )      |     | $ | (1,660 | )      |  | $ | (1,370 | )     
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |       
|                                                | Stockholders equity                                |                                           | $ | 20,272                 |        |      | $ | 17,309 |        |      | $ | 17,284 |        |     | $ | 18,108 |        |  | $ | 11,465 |       
|                                                |                                                     |                                           |   |                        |        |      |   |        |        |      |   |        |        |     |   |        |        |  |   |       



|(1) |  | As Restated for the items described in Note 23 of Notes to the Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | 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.                                                                                                                                                                                                        
|   
|(3) |  | 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.
|   
|(4) |  | In 2002, the Company sold the Sunwood Apartments property, the University Towers Professional Space
Lease property and the Towers Shoppers Parcade property. The assets and related liabilities applicable to
these sales have been reclassified to assets related to discontinued operations and liabilities related
to discontinued operations for all prior years presented.                                                          
|   
|(5) |  | 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.                                                                                                                                                                                          

23



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

As discussed in Note 23 of Notes to the Consolidated Financial Statements, the
2001 and 2000 Consolidated Financial Statements have been restated to account
for the Companys investment in PDL, Inc. and Associates Limited Co-Partnership
(Home Mortgage Partnership) under the equity method, instead of the previous
accounting, which treated the Home Mortgage Partnership as a consolidated
subsidiary. In addition, the net amount recognized in the balance sheet for
the contractual pension benefit liability has been reclassified to reflect its
different components on a gross basis, including an intangible asset and
accumulated other comprehensive loss. The effect of this reclassification was
to decrease stockholders equity as of January 1, 2000 by $1,438,680.

The restatement did not affect previously reported net income or earnings per
common share, but affected numerous accounts on the consolidated balance sheets
and statements of operations. The accompanying managements discussion and
analysis of financial condition and results of operations is based on such
restated financial statements.

Critical Accounting Policies

In preparing the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
(GAAP), management is required to make estimates and assumptions that affect
the financial statements and disclosures. These estimates require managements
most difficult, complex or subjective judgments. The Companys critical
accounting policies are set forth below:

Real Estate

Real estate is carried at cost, net of accumulated depreciation and
amortization. Additions and improvements are capitalized and repairs and
maintenance are charged to rental property operating expenses as incurred.
Depreciation is generally provided on the straight-line method over the
estimated useful life of the asset. The useful life of each property, as well
as the allocation of the costs associated with a property to its various
components, requires estimates by management. If management incorrectly
estimates those costs or incorrectly estimates the useful lives of its real
estate, depreciation expense may be misstated.

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The Company reviews each of its properties, including the property held by the
Home Mortgage Partnership, for impairment at least annually or more often if
events or changes in circumstances warrant. If impairment were to occur, the
property would be written down to its estimated fair value. The Company
assesses fair value based on estimated undiscounted cash flow projections that
utilize appropriate capitalization rates. The future estimated cash flows of a
property are based on current rental revenues and operating expenses, as well
as the current local economic climate of the property. Changes in these
estimates could cause the estimated cash flows to change and impairment could
occur. As of December 31, 2002, the Companys net real estate was $40,523,145
and the Home Mortgage Partnerships net real estate was $4,471,850. No
impairments have been recorded on any of these properties.

Mortgage Portfolio

The Company evaluates the collectibility of both interest and principal on its
$25,979,993 mortgage portfolio to determine whether there are any impaired
loans. If a mortgage loan were considered to be impaired, the Company would
establish 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. Although, a
loan modification could be an indicator of a possible impairment, the Company
has in the past, and may in the future, modify loans for business purposes and
not as a result of debtor financial difficulties. Income on impaired loans is
recognized only as cash is received. The net mortgage portfolio was
$17,607,790 at December 31, 2002, all loans are current as to payment of
principal and interest according to their terms, as modified, and no loans have
been classified as impaired.

Allowance for Doubtful Accounts

Management assesses the collectibility of amounts due from tenants and other
receivables, using indicators such as past-due accounts, the nature and age of
the receivable, the payment history and the ability of the tenant or debtor to
meet its payment obligations. Managements estimate of allowances for doubtful
accounts is subject to revision as these factors change. Rental revenue is
recorded on the accrual method and rental revenue recognition is generally
discontinued when the tenant in occupancy is delinquent for ninety days or more
and bad debt expense is charged for vacated tenant accounts. At December 31,
2002, other receivables net of an

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allowance for doubtful accounts of $99,249, were $437,984. For the year ended
December 31, 2002, bad debt expense (all of which was for tenant obligations)
was $78,602, less than 1% of total rental revenues.

Pension Plans

The Company maintains a qualified defined benefit pension plan, which covers
substantially all of its employees. The plan provides for monthly retirement
benefits commencing at age 65. The Company makes annual contributions that meet
the minimum funding requirements and the maximum contribution levels under the
Internal Revenue Code. Contributions for the years ended December 31, 2002,
2001 and 2000 were $740,536, $407,204 and $269,398, respectively. Required
contributions for 2003 are approximately $990,000 (see Defined Benefit Plan
below). Net periodic benefit costs for the years ended December 31, 2002, 2001
and 2000 were $508,000, $431,576 and $379,547, respectively. The accumulated
benefit obligation at December 31, 2002 was $4,333,619 and the fair value of
the plan assets was $2,498,859. The discount rate for 2002 was 6.5% compared to
7% for the two prior years and the expected rate of return on plan assets was
unchanged from 7%. Management continues to evaluate the plan assets, the
actuarial assumptions and the expected rate of return. Changes in actuarial
assumptions, interest rates or changes in the fair value of the plan assets can
materially affect the benefit obligation, the required funding and the benefit
costs.

In addition, the Company has contractual retirement agreements with certain
active and retired officers providing for unfunded pension benefits. The
Company accrues on an actuarial basis the estimated costs of these benefits
during the years the employee provides services. The benefits generally
provide for annual payments in specified amounts for each participant for life,
commencing upon retirement, with an annual cost of living increase. Certain
contracts were amended effective January 1, 2002, for three active officers to
change the benefit commencement date to four years after they actually retire.
Benefits paid for the years ended December 31, 2002, 2001 and 2000 were
$435,286, $427,235 and $415,184, respectively. Benefit costs for the years
ended December 31, 2002, 2001 and 2000 were $320,716, $512,680 and $466,147,
respectively. The accumulated contractual pension benefit obligation at
December 31, 2002 was $2,814,176. The discount rate used for 2002 was 6.5%
compared to 7% in the two prior years. Changes in interest rates and actuarial
assumptions, amendments to the plan and life expectancies could materially
affect benefit costs and the contractual accumulated pension benefit
obligation.

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Income Taxes

The Company operates in a manner intended to enable it to continue to qualify
as a Real Estate Investment Trust (REIT) under Sections 856-860 of the Code.
Under those sections, 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 90% of its REIT taxable income (exclusive of
capital gains) is so distributed. The Company has distributed 100% of its REIT
taxable income (exclusive of capital gains) for the 2002 year. In addition, at
December 31, 2002, the Company designated an undistributed long-term capital
gain dividend of $1,425,000 and subsequently paid a $498,750 income tax on that
retained gain. Although no assurances can be given, the Company currently
expects to distribute all of its remaining 2002 taxable income (after the
$1,425,000 retained capital gain) of approximately $2,256,000 ($.60 per share)
during 2003 and, accordingly, has made no provisions for income taxes other
than the $498,750 for the retained gain. If the Company failed to distribute
the required amounts of income to its shareholders, or otherwise fails to meet
the REIT requirements, it would fail to qualify as a REIT and substantial
adverse tax consequences could result.

Results of Operations

2002 vs 2001

Revenue decreased by $501,569 primarily as a result of decreases in rental
revenues and decreases in interest income on mortgages-sold properties and
other. These decreases were partially offset by increases in interest income
on mortgages-related parties.

Rental revenues decreased by $64,585. Although rental revenues increased by
$221,272 at a majority of the Companys rental properties, rental revenues at
Preston Lake Apartments decreased by $285,857 due to an increase in vacancy
losses of $85,729 and decreases in rental revenues of $200,128. The rental
market in the Tucker, Georgia area continues to be plagued by a struggling
economy and in order to increase the occupancy level at this property, the
Company has reduced the rental rates for new occupancies.

Interest on mortgages-sold properties and other decreased by $573,045 primarily
due to the $255,281 amortization of discount in 2001 on the Woodgate note as a
result of the principal payment received on that note in 2001. Interest income
and amortization of discount decreased

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by $359,835 on the Encore note receivable as a result of the $3,750,000
principal payment received on that note in April, 2002. In addition, interest
income on the Westgate note receivable decreased by $50,750 as a result of a
decrease in the interest rate, which occurred in August, 2001, in accordance
with the terms of the note. The interest rate on the note for the period
August 1, 2001 through July 31, 2006 is 6.45% per annum and is based on the
yield of United States Treasury bills maturing on July 1, 2006 plus 150 basis
points. The prior interest rate was 7.9% per annum. These decreases were
offset by interest income of $94,124 earned on a new $1,775,000 loan made in
July, 2002 with an interest rate of 11.5% per annum.

Interest on mortgages - related parties increased by $142,085 primarily as a
result of an increase of $152,342 in payments of interest income received on
the Consolidated Loans. Payments on the Consolidated Loans are based on a
percentage of operating cash flows of an entity related to the debtor.

Costs and expenses increased by $197,787 primarily due to increases in rental
property operating expenses and real estate tax expenses, offset by a decrease
in general and administrative expenses.

General and administrative expenses decreased by $63,653 primarily as a result
of decreases of $170,580 in contractual pension and postretirement benefits
expenses, as a result of an amendment extending the pension benefit
commencement date for three active officers from age 65 to age 69, or
four years after they actually retire, if later. These
decreases were offset by increases of $76,424 in defined benefit plan expenses
and an increase of $24,248 in professional services.

Rental property operating expenses increased by $228,995 primarily as a result
of a $103,266 increase in repairs and maintenance expense. In addition,
insurance expense increased by $55,118, bad debt expense increased by $37,464,
and fuel and utilities increased by $37,514.

Real estate tax expense increased by $36,215 primarily as a result of increased
real estate taxes on five properties.

Other income increased by $46,956 primarily as a result of a $33,583 increase
in equity in income of partnership. During 2002, the Company purchased an
additional 4% interest in the Home Mortgage Partnership increasing its
ownership interest from 27% to 31%. The increase in partnership interest
increased the Companys share of net income from the partnership. In addition,
investment income increased by $13,373 primarily as a result of increased cash
investments.

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Income from continuing operations before net gain from sales of properties and
securities decreased by $651,339, from $1,190,177 in 2001 to $538,838 in 2002.
The $651,339 decrease was primarily a result of a $430,960 net decrease in
interest income on the Companys mortgage portfolio (sold properties and other
and related parties) as discussed above. In addition, income from rental
property operations decreased by $326,890. The decrease in income from rental
property operations was primarily the result of increased losses on the Preston
Lake Apartments property and on the Farrington Apartments property. These
decreases were partially offset by a decrease of $63,653 in general and
administrative expenses and an increase of $33,583 of equity in income of
partnership.

Net gain from sales of properties consists primarily of recognition of deferred
gains from sales in prior years. The recognition of such gains is sporadic (as
it depends on the timing of sales or the receipt of installments or prepayments
on purchase money notes). In 2002, the net gain from sales of properties was
$3,873,119 compared with $1,198,428 in 2001:

|                                                           |                                                                        |                                         |           |      |           |   |           |   |         | 
|---------------------------------------------------------- | ---------------------------------------------------------------------- | --------------------------------------- | --------- | ---- | --------- | - | --------- | - | ------- | 
|Gain from sales recognized for the year ended December 31, |                                                                        | 2002                                    |           | 2001
|                                                           |                                                                        |                                         |           |     
|                                                           | Deferred gains recognized upon receipt of
principal payments on notes: |                                         |           |      |           |   |           |   |        
|                                                           |                                                                        | Encore - $3,750,000 principal payment   |           | $    | 3,750,000 |   |           | $ |         | 
|                                                           |                                                                        | Woodgate - $1,175,500 principal payment |           |      |           |   |           |   | 684,991 | 
|                                                           |                                                                        | Mark Terrace                            |           |      |           |   |           |   | 462,250 | 
|                                                           |                                                                        | Overlook                                |           |      | 26,929    |   |           |   | 26,500  | 
|                                                           |                                                                        | 330 West 72nd St. - co-op apt. notes    |           |      | 24,402    |   |           |   | 24,687  | 
|                                                           | Sale of property:                                                      |                                         |           |      |           |   |           |   |        
|                                                           |                                                                        | 6300 Riverdale Ave. apartment units     |           |      | 71,788    |   |           |   |         | 
|                                                           |                                                                        |                                         |           |      |           |   |           |  
|Net gain                                                   |                                                                        | $                                       | 3,873,119 |      |           | $ | 1,198,428 |  
|                                                           |                                                                        |                                         |           |      |           |   |           |   |         | 

Income from discontinued operations was $201,766 in 2002 compared to $232,420
in 2001. During 2002, the Company sold the Sunwood Apartments property in
Miami, Florida, the Towers Shoppers Parcade property in New Haven, Connecticut
and the University Towers Professional Space Lease property in New Haven,
Connecticut.

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The net gain from sales of discontinued operations of $1,485,917 in 2002 is
from the following sales:

|                                                                      |  |   |           | 
|--------------------------------------------------------------------- |  | - | --------- | 
|Sunwood Apartments (net of a provision
for Federal taxes of $498,750) |  | $ | 1,142,734 | 
|University Towers Professional Space Lease                            |  |   | 189,604   | 
|Towers Shoppers Parcade                                               |  |   | 153,579   | 
|                                                                      |  |   |           | 
|                                                                      |  | $ | 1,485,917 | 
|                                                                      |  |   |           | 

Balance Sheet

Net mortgage portfolio increased by $1,197,861 primarily as a result of a
$1,775,000 loan made in July, 2002. The $1,775,000 loan is secured by three
apartment properties in New Jersey and a $887,500 personal guarantee from the
borrowers. The loan has an interest rate of 11.50% per annum and matures in
July, 2003. This increase was partially offset by principal payments of
$352,000 received on the Mark Terrace note and principal payments of $281,678
received on sold co-op apartment notes. In addition, in April, 2002, the
Company received a $3,750,000 principal payment on the $12,300,000 Encore note
receivable and as a result, mortgage receivables and deferred gains on sales
each decreased by $3,750,000 (a net effect of zero on the mortgage portfolio)
and a $3,750,000 deferred gain was recognized in gain from sales of properties
and securities on the Companys Consolidated Statements of Operations.

At December 31, 2001 assets related to discontinued operations were $6,494,951
and liabilities related to discontinued operations were $4,786,739. These
assets and liabilities were related to the Sunwood Apartments property, the
University Towers Professional Space Lease property and the Towers Shoppers
Parcade property, which were all sold in 2002.

Prepaid expenses and deposits in escrow increased by $132,847 as a result of
increases of $134,897 in deposits in escrow.

Other receivables decreased by $286,663 primarily as a result of the receipt in
2002 of the $369,000 of additional interest due on the Encore note receivable.

Cash and cash equivalents increased by $4,950,544 primarily as a result of the
receipt of the $3,807,643 net proceeds from the sales of discontinued
operations in 2002 and a principal repayment of $3,750,000 received on the
Encore note. These increases were partially offset by a $1,775,000 loan made
in July, 2002, a $255,500

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purchase of an additional 4% interest in the Home Mortgage Partnership and the
$221,694 of distributions to the minority partners of UTB Associates.

Other assets decreased by $112,000 primarily as a result of the $84,301
decrease in intangible assets for the defined benefit plan and the contractual
pension plan.

Contractual pension and postretirement benefits liabilities decreased by
$293,973 primarily as a result of an amendment effective January 1, 2002 to
change the benefit commencement date for three active officers from age 65 to
age 69, or four years after they actually retire, if later.

Defined benefit plan liability increased by $757,850 primarily due to an
increase in the projected benefit obligation as a result of losses in the
pension plan asset portfolio, increased benefit levels and a decrease in the
discount rate from 7% to 6.5%.

The Company designated an undistributed capital gain dividend of $1,425,000 for
the taxable year ended December 31, 2002. As a result, $498,750 has been
accrued for federal income taxes payable on the $1,425,000 undistributed
long-term capital gain.

Distributions from partnership in excess of investment and earnings decreased
by $268,084. In 2002, the Company purchased an additional 4% partnership
interest in the Home Mortgage Partnership for a purchase price of $255,500,
received distributions of $282,980 and recorded its share of income of
$295,564.

Other liabilities increased by $102,293 primarily as a result of increases in
deferred revenues and tenant security deposits.

Accumulated other comprehensive loss increased by $888,233 primarily as a
result of an increase of $1,003,002 in the unrecognized loss relating to the
defined benefit plan liability partially offset by a decrease of $113,967 in
the unrecognized loss relating to the contractual pension liability.

Results of Operations

2001 vs 2000

Revenue increased by $1,213,708 primarily as a result of increases in rental
revenue and interest income on mortgages-sold properties and other.

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Rental revenue increased by $1,119,881 primarily as a result of the purchase of
Farrington Apartments and Preston Lake Apartments in March, 2000. Rental
revenue increased by $912,733 for these two properties. In addition, rental
income increased by $207,148 at other properties.

Interest on mortgages-sold properties and other increased by $97,763 primarily
due to the $255,281 amortization of discount on notes, which resulted from the
$1,175,500 principal payment received on the Woodgate note receivable that had
been secured by the Windsor at Arbors property in Alexandria, Virginia. This
increase was partially offset by decreases of $156,001 in amortization of
discounts on notes receivable.

Costs and expenses increased by $1,180,514 primarily due to increases in a
majority of all categories of costs and expenses as set forth below.

General and administrative expenses increased by $387,024 primarily as a result
of increases in salary expense of $182,289 of which $127,221 pertains to
increases in executive bonuses pursuant to existing contracts and $55,068
pertains to increases in salaries. Contractual pension and defined benefit
plan expenses increased by $98,562, insurance expense increased by $45,445,
professional fees and computer expenses increased by $42,072 and franchise tax
expense increased by $10,120.

Rental property operating expenses increased by $124,642 primarily as a result
of increased operating expenses of $76,297 at the Farrington Apartments and
Preston Lake Apartments which were owned for only nine months in 2000 and for
the entire year in 2001. In addition, at other properties, insurance expense
increased by $54,034.

Interest expense on mortgage debt increased by $353,907. The increase in
interest expense on mortgage debt for Farrington Apartments and Preston Lake
Apartments was $400,752. This increase was partially offset by a $29,246
decrease in interest expense on mortgage debt as a result of the repayment of
the mortgage on the Building Industries Center property in May of 2000.

Real estate tax expense increased by $105,518. The increase in real estate tax
expense which is attributable to the acquisition of Farrington Apartments and
Preston Lake Apartments was $99,146.

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Depreciation expense on real estate increased by $196,251. The increase in
depreciation expense which is attributable to the acquisition of Farrington
Apartments and Preston Lake Apartments was $186,028.

Amortization of mortgage costs increased by $7,980. The increase in
amortization of mortgage costs which is attributable to the acquisition of
Farrington Apartments and Preston Lake Apartments was $9,055.

Investment income decreased by $113,001 primarily as a result of lower interest
rates and the sale of securities during 2000.

Net gain from sales of properties and securities consists primarily of
recognition of deferred gains from sales in prior years. The recognition of
such gains is sporadic (as it depends on the timing of sales or the receipt of
installments or prepayments on purchase money notes). In 2001, the net gain
from sales of properties and securities was $1,198,428 compared with a net loss
of $5,027 in 2000:

|                                                                       |                                         |      |           |         |  |   |          |        | 
|---------------------------------------------------------------------- | --------------------------------------- | ---- | --------- | ------- |  | - | -------- | ------ | 
|Gain (loss) from sales recognized for the year ended December 31,      |                                         | 2001 |           | 2000   
|                                                                       |                                         |      |           |        
|Deferred gains recognized upon receipt of
principal payments on notes: |                                         |      |           |         |  |   |          |       
|                                                                       | Woodgate - $1,175,500 principal payment |      | $         | 684,991 |  |   |          |        | 
|                                                                       | Mark Terrace                            |      |           | 462,250 |  |   | $        | 96,000 | 
|                                                                       | Overlook                                |      |           | 26,500  |  |   |          | 23,988 | 
|                                                                       | 330 West 72nd St. - co-op apt. note     |      |           | 24,687  |  |   |          |        | 
|Sale of property:                                                      |                                         |      |           |         |  |   |          |       
|                                                                       | Broad Park Lodge apartment units        |      |           |         |  |   |          | 60,839 | 
|Sales of securities                                                    |                                         |      |           |         |  |   | (185,854 | )     
|                                                                       |                                         |      |           |         |  |   |          |        | 
|Net gain (loss)                                                        |                                         | $    | 1,198,428 |         |  | $ | (5,027   | )     
|                                                                       |                                         |      |           |         |  |   |          |        | 

Income from discontinued operations increased by $242,310 from a loss of $9,880
in 2000 to income of $232,430 in 2001. The increase of $242,310 was primarily
a result of increased income of $168,050 on the Sunwood Apartments property as
a result of increases of $202,475 in rental revenue. In addition, the
University Towers Professional Space Lease property income increased by $74,341
from a loss of $44,772 in 2000 to income of $29,569 in 2001. This increase was
a result of a $129,005 decrease in professional fees, partially offset by
decreases in rental revenue of $116,275 and decreases of $29,150 in
depreciation and minority interest share of partnership income.

Funds From Operations

Funds from operations (FFO) represents net income computed in accordance with
GAAP, excluding gains or losses from sales of properties and securities
(including properties classified as

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discontinued operations), 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:

|                                                                        |  |                         |            |      |  |      |            |   |  |   |             |  
|----------------------------------------------------------------------- |  | ----------------------- | ---------- | ---- |  | ---- | ---------- | - |  | - | ----------- | -
|                                                                        |  | Year ended December 31,
|                                                                        |  |                        
|                                                                        |  | 2002                    |            | 2001 |  | 2000
|                                                                        |  |                         |            |      |  |     
|Net Income                                                              |  | $                       | 6,099,640  |      |  | $    | 2,621,035  |   |  | $ | 1,212,957   |  
|Net (gain) loss from sale of
properties and securities                  |  |                         | (3,873,119 | )    |  |      | (1,198,428 | ) |  |   | 5,027       |  
|Net gain from sale of discontinued
operations                           |  |                         | (1,485,917 | )    |  |      |            |   |  |   |             |  
|Depreciation and amortization on
real estate                            |  |                         | 1,304,377  |      |  |      | 1,273,078  |   |  |   | 1,076,827   |  
|Depreciation and amortization on real
estate of discontinued operations |  |                         | 44,528     |      |  |      | 193,257    |   |  |   | 197,839     |  
|                                                                        |  |                         |            |      |  |      |            |   |  |   |             |  
|Funds from Operations                                                   |  | $                       | 2,089,509  |      |  | $    | 2,888,942  |   |  | $ | 2,492,650   |  
|                                                                        |  |                         |            |      |  |      |            |   |  |   |             |  
|Distributions paid to shareholders                                      |  | $                       | 2,390,579  |      |  | $    | 2,378,222  |   |  | $ | 2,367,098   |  
|                                                                        |  |                         |            |      |  |      |            |   |  |   |             |  
|FFO payout ratio (1)                                                    |  |                         | 114.4      | %    |  |      | 82.3       | % |  |   | 95.0        | %
|                                                                        |  |                         |            |      |  |      |            |   |  |   |             |  
|Cash flows from:                                                        |  |                         |            |      |  |      |            |   |  |   |             |  
|Operating activities                                                    |  | $                       | 1,960,283  |      |  | $    | 2,627,729  |   |  | $ | 2,179,677   |  
|                                                                        |  |                         |            |      |  |      |            |   |  |   |             |  
|Investing activities                                                    |  | $                       | 10,580,188 |      |  | $    | 412,865    |   |  | $ | (25,198,348 | )
|                                                                        |  |                         |            |      |  |      |            |   |  |   |             |  
|Financing activities                                                    |  | $                       | (7,589,927 | )    |  | $    | (2,764,729 | ) |  | $ | 17,989,596  |  
|                                                                        |  |                         |            |      |  |      |            |   |  |   |             |  

(1)  In 2002, the Company decided to maintain its cash dividend at the annual
rate of $.64 per share despite the fact the dividends paid exceeded funds from
operations. As a result of balloon payments received on the Companys mortgage
portfolio and proceeds

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from sales of properties, the Company had funds available to it for
distribution to shareholders in addition to funds from operations. See
Liquidity and Capital Resources below.

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. Except as discussed herein, management is not aware of any
other trends, events, commitments or uncertainties that will have a significant
effect on liquidity.

Presidential obtains funds for working capital and investment from its
available cash and cash equivalents, from operating activities, from
refinancing of mortgage loans on its real estate equities, or from sales of
such equities and from repayments on its mortgage portfolio. The Company also
has at its disposal a $250,000 unsecured line of credit from a lending
institution, which was not utilized during 2002, 2001 or 2000.

At December 31, 2002, Presidential had $6,738,768 in available cash and cash
equivalents, an increase of $4,950,544 from the $1,788,224 at December 31,
2001. This increase in cash and cash equivalents

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was due to cash provided by operating activities of $1,960,283 and investing
activities of $10,580,188, offset by cash used in financing activities of
$7,589,927.

During 2002, the Company paid cash distributions to shareholders of $2,390,579
which exceeded cash flows from operating activities by $430,296. In 2002, the
Company received $4,352,243 of balloon payments on its mortgage portfolio and
net proceeds of $3,807,643 from sales of discontinued operations. These
payments are available to the Company for distribution to its shareholders or
the Company may retain these payments for future investment. The Company may
in the future, as it did in 2002, pay dividends in excess of its cash flow from
operating activities if management believes that the Companys liquidity and
capital resources are sufficient to pay such dividends.

To the extent that payments received on its mortgage portfolio or payments
received from sales are taxable as capital gains, the Company has the option to
distribute the gain to its shareholders or retain the gain and pay Federal
income tax on it. In 2002, the Company retained $1,425,000 of taxable capital
gain and subsequently paid a $498,750 tax on that gain (see Sale of Sunwood
Apartments below).

The Company does not have a specific policy as to the retention or distribution
of capital gains. The Companys dividend policy regarding capital gains for
future periods will be based upon many factors including, but not limited to,
the Companys present and projected liquidity, its desire to retain funds
available for additional investment, its historical dividend rate and its
ability to reduce taxes by paying dividends. While the Company expects to
maintain the $.64 dividend rate in 2003, no assurances can be given that the
present dividend rate will be maintained in the future.

Insurance

The Company carries comprehensive liability, fire, flood (where necessary),
extended coverage, rental loss and acts of terrorism insurance on all of its
properties. Management believes that all of its properties are adequately
covered by insurance. In 2002, the cost for this insurance was approximately
$514,000. The Company has renewed its insurance coverage for 2003, and the
increase in premium costs is approximately 14%. Although the Company has been
able to obtain terrorism coverage on its properties in the past, this coverage
may not be available in the future.

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Defined Benefit Plan

In 2002, the Company made contributions of approximately $741,000 for its
Defined Benefit Plan and paid benefits of approximately $415,000. Pursuant to
its actuarys estimates, the contribution requirements in 2003 will be
approximately $990,000, an increase of approximately $249,000. The increase in
pension plan contributions is required as a result of losses to the pension
plan asset portfolio over the last three years and increased benefit levels in
2002.

Loan Modification

The Companys $12,300,000 note secured by a second mortgage on the Encore
Apartments in New York, New York was due to mature on June 29, 2002. In April,
2002, the Company modified the terms of this note. Under the terms of the
modification, Presidential received a $3,750,000 principal repayment, a $21,375
commitment fee on the $8,550,000 outstanding balance and additional interest of
$369,000 (which was due under the terms of the original note). The $8,550,000
balance of the $12,300,000 note was modified to extend the maturity date from
June 29, 2002 to April 30, 2009 and to provide for interest payable monthly at
annual interest rates of 11% through June 30, 2002, 9% from July 1, 2002
through April 18, 2004, 10% from April 19, 2004 through April 18, 2007 and 10
1/2% from April 19, 2007 through maturity. Presidential will also receive an
additional interest payment of $171,000 at maturity, which will increase the
effective interest rate for the modified loan term to 10.17% per annum. This
modification was initiated by the Company for business reasons, and not as a
result of borrower financial difficulties. This loan is not considered to be
impaired under GAAP.

Consolidated Loans

Presidential holds two nonrecourse loans (the Consolidated Loans) which were
collateralized by substantially all of the remaining assets of Ivy Properties,
Ltd. and its affiliates (Ivy). At December 31, 2002, the Consolidated Loans
have an outstanding principal balance of $4,770,050 and a net carrying value of
zero. Pursuant to existing agreements between the Company and the Ivy
principals, the Company is entitled to receive, as payments of principal and
interest on the Consolidated Loans, 25% of the cash flow of Scorpio
Entertainment, Inc. (Scorpio), a company owned by two of the Ivy principals,
(Steven Baruch, Executive Vice President of Presidential, and Thomas Viertel,
Executive Vice President and Chief Financial Officer of Presidential), to carry
on theatrical

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productions. Scorpio is one of the producers of The Producers, a much
acclaimed Broadway show which opened in April, 2001, and of Hairspray,
another highly acclaimed Broadway musical which opened in August, 2002. The
Producers recouped its original investment on Broadway in November, 2001 and
has distributed profits regularly since then. A national tour commenced
performances in September, 2002 and additional tours and productions are
scheduled. Hairspray recouped its original investment on Broadway in March,
2003. A national tour commences performances in September, 2003. Amounts
received by Presidential from Scorpio will be applied to unpaid and unaccrued
interest on the Consolidated Loans and recognized as income. The Company
anticipates that these amounts will be significant over the next several years.
However, the continued profitability of any theatrical production is by its
nature uncertain and management believes that any estimate of payments from
Scorpio on the Consolidated Loans for future periods is too speculative to
project. Presidential received payments of $195,819 in 2002, $43,477 in 2001
and $2,940 in 2000 of interest income on the Consolidated Loans.

Professional Space Lease Property

UTB Associates, a partnership in which the Company holds a 66-2/3% interest,
was 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 and University Towers
Owners Corp., the cooperative corporation, had been in litigation regarding the
termination of the Professional Space Lease, and in September, 2001, the court
terminated the Professional Space Lease which resulted in the operation of the
Professional Space Lease property being relinquished to the cooperative
corporation. UTB Associates appealed the decision and pending the outcome of
the appeal, UTB Associates and the cooperative corporation reached an agreement
to settle the various issues involved in the litigation and a settlement was
finalized in May, 2002. Under the terms of the settlement, UTB Associates
agreed to the cancellation of the lease and the cooperative corporation
received rights to the subleases and the associated tenant improvements. As a
part of the settlement, Presidential transferred its interest in the Towers
Shoppers Parcade property, which is used for parking for tenants at the
Professional Space Lease property, to the cooperative corporation. UTB
Associates and the Company received non-interest bearing notes from the
cooperative corporation in the total amount of $850,000 for the transfers of
the Professional Space Lease and the Towers Shoppers Parcade property.

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UTB Associates and the Company were to receive monthly payments on the notes
over a nine-year period in the amount of $70,000 per year and $21,111 per year,
respectively, for the first three years and $75,000 per year and 21,111 per
year, respectively, for the last six years. However, after receipt of eight
monthly payments, the notes were repaid in full. Under the terms of the
notes, the prepayment price was equal to the present value of the projected
note payments calculated at a discount rate of 3% per annum. UTB Associates and
the Company received total payments of $757,365 (total monthly payments of
$60,741 and a prepayment of $696,624 after a present value discount of
$92,635).

In connection with the above transactions, UTB Associates received cash
payments of $588,013, recorded a gain on sale of $284,434 (including $94,830 of
minority interest share) and recorded amortization of discount of $26,377. The
net book value of the assets transferred was $212,488 and expenses of sale were
$64,714.

As a result of the transfer of the Towers Shoppers Parcade property, the
Company received $169,352 in cash payments, recorded a gain on sale of $153,579
and amortization of discount of $7,627. The net book value of the assets
transferred was $3,146 and expenses of sale were $5,000.

Income from operations and gain from sales have been recorded in Discontinued
Operations.

Sale of Sunwood Apartments

On August 30, 2002, the Company consummated the sale of its Sunwood Apartments
property in Miami, Florida to Sunwood Development LLC for a sales price of
$8,000,000 pursuant to a contract for the sale executed in February, 2002. The
net cash proceeds of sale, after repayment of the $4,641,879 first mortgage
loan, a brokerage fee of $240,000 and other expenses of sale of $39,139, were
$3,078,982. Presidential had intended to purchase an exchange property
pursuant to a tax free exchange under Section 1031 of the Internal Revenue
Code. However, Presidential did not find a suitable property in the allotted
time frame and the proceeds from the sale were released from escrow.

The taxable capital gain from the sale of Sunwood Apartments property is
approximately $1,844,000 ($.49 per share). In addition to its regular annual
cash distribution of $.64 per share, Presidential elected to designate an
undistributed capital gain

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dividend of $1,425,000 ($.38 per share) pursuant to Code Section 857(b)(3)(D),
and subsequently paid federal income taxes of $498,750 ($.13 per share) on the
retained dividend. Accordingly, each shareholder will (i) include its pro rata
share of the retained capital gain in computing its long-term capital gain,
(ii) receive a tax credit for its pro rata share of the tax paid by
Presidential and (iii) increase the tax basis of its shares by the difference
between the amount of the capital gain allocated to it and the tax credit
received.

The carrying value of the Sunwood Apartments property was $6,009,837 (net of
accumulated depreciation of $611,303). Presidential has, for financial
reporting purposes, recognized a gain from the sale (after a $498,750 provision
for income taxes) of $1,142,734. For the year ended December 31, 2002, this
property had gross revenues of $749,790 and operating income of $180,085.
Income from operations and the gain from sale have been recorded in
Discontinued Operations.

Operating Activities

Cash from operating activities includes interest on the Companys mortgage
portfolio, net cash received from rental property operations and distributions
received from partnership, which were $3,195,188, $1,553,587 and $282,980 in
2002, 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 2002, the
Company received principal payments of $4,478,370 on its mortgage portfolio, of
which $4,352,243 represented prepayments and balloon payments. Prepayments and
balloon payments are sporadic and cannot be relied upon as a regular source of
liquidity.

Presidential made a $1,775,000 mortgage loan in July, 2002. The loan has an
interest rate of 11.5% per annum and the entire principal balance is due at
maturity in July, 2003.

During 2002, the Company invested $399,568 in additions and improvements to its
properties. It is projected that additions and improvements in 2003 will be
approximately at the same level. In 2002, the Company also purchased an
additional 4% interest in the Home Mortgage Partnership for a purchase price of
$255,500.

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Subsequent to December 31, 2002, the Company made a $1,500,000 loan secured by
ownership interests in Reisterstown Town Square Associates, LLC, which owns
Reisterstown Apartments in Baltimore, Maryland, and a personal guarantee from
the borrower. The loan matures on January 31, 2008 and has an annual interest
rate of 10.50% for the first three years and fluctuates thereafter with a base
of 10.50% per annum.

Financing Activities

The Companys indebtedness at December 31, 2002, consisted of $37,191,814 of
mortgage debt. The mortgage debt, which is collateralized by individual
properties, is nonrecourse to the Company with the exception of the $211,258
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 2002, the Company made
$414,397 of principal payments on mortgage debt.

The mortgages on the Companys properties are at fixed rates of interest. With
the exception of three mortgages which are self-liquidating, the remaining
mortgages have balloon payments due at maturity as follows:

|                    |  |             |            |          |  |             |  |         |      |   |  |   |            |  |  | 
|------------------- |  | ----------- | ---------- | -------- |  | ----------- |  | ------- | ---- | - |  | - | ---------- |  |  | 
|                    |  | Outstanding |            | Maturity |  | Interest    |  | Balloon
|Property            |  | Balance     |            | Date     |  | Rate        |  | Payment
|                    |  |             |            |          |  |             |  |        
|Continental Gardens |  | $           | 7,698,869  |          |  | Aug.,  2007 |  |         | 8.16 | % |  | $ | 7,158,323  | 
|Fairlawn Gardens    |  |             | 2,189,923  |          |  | April, 2008 |  |         | 7.06 |   |  |   | 2,012,668  | 
|Farrington Apts.    |  |             | 7,748,423  |          |  | May,  2010  |  |         | 8.25 |   |  |   | 7,106,299  | 
|Preston Lake Apts.  |  |             | 13,724,569 |          |  | May,  2010  |  |         | 8.15 |   |  |   | 12,564,077 | 

During 2002, Presidential declared and paid cash distributions of $2,390,579 to
its shareholders and received proceeds from its dividend reinvestment and share
purchase plan of $122,629.

Discontinued Operations

Effective January 1, 2002, the Company adopted the Financial Accounting
Standards Board Statement No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, which requires that

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the operations of properties that have been sold or are being held for sale be
presented as discontinued operations in the statement of operations for all
periods presented and properties that are being held for sale be designated as
assets held for sale on the balance sheet.

During 2002, the Company sold the University Towers Professional Space Lease,
the Towers Shopping Parcade property and the Sunwood Apartments property.
Income (loss) from discontinued operations for the years ended December 31,
2002, 2001, and 2000 was $201,766, $232,430 and $(9,880), respectively. Net
gain from the sales of discontinued operations for the year ended December 31,
2002, was $1,485,917. The net gain from sales includes a provision for income
taxes of $498,750.

At December 31, 2001, assets related to discontinued operations were $6,494,951
and liabilities related to discontinued operations were $4,786,739, all of
which were sold during 2002.

Cash from discontinued operations for the years ended December 31, 2002, 2001
and 2000 was as follows: cash provided by operating activities was $256,168,
$418,064 and $172,967, cash provided by (used in) investing activities was
$8,440,716, $(22,533) and $(103,119) and cash used in financing activities was
$4,685,886, $66,780 and $64,461, respectively.

Contractual Commitments

The Companys significant contractual commitments are its liabilities under
mortgage debt which are payable as follows:

Year ending December 31:

|            |  |   |            | 
|----------- |  | - | ---------- | 
|2003        |  | $ | 448,487    | 
|2004        |  |   | 478,588    | 
|2005        |  |   | 522,277    | 
|2006        |  |   | 563,927    | 
|2007        |  |   | 7,707,392  | 
|2008 - 2029 |  |   | 27,471,143 | 
|            |  |   |            | 
|TOTAL       |  | $ | 37,191,814 | 
|            |  |   |            | 

In addition, the Company has contractual commitments for pension and
postretirement benefits. The contractual pension benefits generally provide
for annual payments in specified amounts for each participant for life,
commencing upon retirement, with an annual

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adjustment for an increase in the consumer price index. The contractual
benefit plans are not funded. For the year ended December 31, 2002, the
Company paid $435,286 for pension benefits and $54,623 for postretirement
benefits.

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.

Accounting Pronouncements

In June of 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for
Asset Retirement Obligations (effective January 1, 2003). SFAS No. 143
requires the recording of the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. Implementation of this
standard is not expected to have any impact on the Companys financial
statements.

In April, 2002, the FASB issued SFAS No. 145, Rescission of SFAS No. 4, 44 and
64, Amendment of SFAS No. 13, and Technical Corrections. SFAS No. 145, among
other things, rescinds SFAS No. 4 Reporting Gains and Losses from
Extinguishment of Debt, and accordingly, the reporting of gains or losses from
the early extinguishment of debt as extraordinary items will only be required
if they meet the specific criteria for extraordinary items included in
Accounting Principles Board Opinion (APB) No. 30, Reporting the Results of
Operations. The rescission of SFAS No. 4 is effective January 1, 2003.
Management believes that adoption of this statement will not have a material
effect on the Companys financial statements.

In July, 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (effective January 1, 2003). SFAS No. 146
replaces current accounting literature and requires the recognition of costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. The Company does not
anticipate the adoption of this statement will have a material effect on the
Companys financial statements.

In December, 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based
Compensation-Transition and Disclosure. This statement

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amends SFAS No. 123 to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation and amends the disclosure requirements of SFAS No. 123.
Adoption of the provisions of the Statement in 2003 will not have any impact
since the Company will continue to use the intrinsic value method as set forth
in APB No. 25. The Company has not granted any stock options during the last
three years.

In November of 2002, the FASB issued Interpretation No. 45 Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies
that a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure provisions of this Interpretation are effective for
the Companys December 31, 2002 financial statements; the Company has no
guarantees requiring disclosure under this Interpretation. The initial
recognition and initial measurement provisions of this Interpretation are
applicable to guarantees issued or modified after December 31, 2002. The
Company does not believe that the initial recognition and measurement
provisions of this Interpretation will have a material effect on the Companys
financial statements.

In January of 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. This Interpretation clarifies the application of
existing accounting pronouncements to certain entities in which equity
investors do not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other
parties. The provisions of the Interpretation will be immediately effective
for all variable interests in variable interest entities created after January
31, 2003, and the Company will need to apply its provisions to any existing
variable interests in variable interest entities by no later than the third
quarter of 2003. The Company believes that it does not hold any investments in
entities that will be deemed variable interest entities and, accordingly, that
the implementation of this Interpretation will not have a material effect on
the Companys financial statements.

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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. Changes in market
rates of interest impact the fair values of these fixed rate assets and
liabilities. However, because the Company generally holds its notes receivable
until maturity and repays its notes payable at maturity or upon sale of the
related properties, any fluctuations in values do not impact the Companys
earnings, balance sheet or cash flows. 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 12, 2003, which Proxy Statement will be
filed with the Securities and Exchange 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 12, 2003, which Proxy Statement will be
filed with the Securities and Exchange Commission pursuant to Regulation 14A
and which is incorporated herein by reference.

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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 12, 2003, 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 12, 2003, 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. CONTROLS AND PROCEDURES

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Within the 90 days prior to the filing of this Annual Report on Form
10-K, the Company carried out an evaluation, under the supervision and
with the participation of our Chief Executive Officer and Chief Financial
Officer of the effectiveness of the design and operation of its disclosure
controls and procedures. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls
and procedures are effective in timely alerting them to material
information required to be included in this report.
|   
|(b) |  | There have been no significant changes in the Companys internal controls
or in other factors which could significantly affect internal controls
subsequent to the date we carried out this evaluation.                                                                                                                                                                                                                                                                                                                                                                




ITEM 15. 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, 2002.

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(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 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

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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).

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, 2003 between the Company and Jeffrey
F. Joseph.

10.8 Employment Agreement dated January 1, 2003 between the Company and Steven
Baruch.

10.9 Employment Agreement dated January 1, 2003 between the Company and Thomas
Viertel.

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 (incorporated herein by reference to
Exhibit 21 to the Companys Annual Report on Form 10-K for the year ended
December 31, 2000, Commission File No. 1-8594).

99.1 Certification of Chief Executive Officer of the Company pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

99.2 Certification of Chief Financial Officer of the Company pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

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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 26, 2003         

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 26, 2003
|                    |  |                                |  |               
|                    |  | Robert E. Shapiro              |  |               
|                    |  | Chairman of the Board of       |  |               
|                    |  | Directors and Director         |  |               
|                    |  |                                |  |               
|By:                 |  | JEFFREY F. JOSEPH              |  | March 26, 2003
|                    |  |                                |  |               
|                    |  | Jeffrey F. Joseph              |  |               
|                    |  | President and Director         |  |               
|                    |  | (Chief Executive Officer)      |  |               
|                    |  |                                |  |               
|By:                 |  | THOMAS VIERTEL                 |  | March 26, 2003
|                    |  |                                |  |               
|                    |  | Thomas Viertel                 |  |               
|                    |  | Executive Vice President       |  |               
|                    |  | (Chief Financial Officer)      |  |               
|                    |  |                                |  |               
|By:                 |  | ELIZABETH DELGADO              |  | March 26, 2003
|                    |  |                                |  |               
|                    |  | Elizabeth Delgado              |  |               
|                    |  | Treasurer                      |  |               
|                    |  | (Principal Accounting Officer) |  |               
|                    |  |                                |  |               
|By:                 |  | RICHARD BRANDT                 |  | March 26, 2003
|                    |  |                                |  |               
|                    |  | Richard Brandt                 |  |               
|                    |  | Director                       |  |               

49



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##### Table of Contents



SIGNATURES (Continued)

|    |  |                     |  |               
|--- |  | ------------------- |  | --------------
|    |  | Signature and Title |  | Date          
|    |  |                     |  |               
|    |  |                     |  |               
|By: |  | MORTIMER M. CAPLIN  |  | March 26, 2003
|    |  |                     |  |               
|    |  | Mortimer M. Caplin  |  |               
|    |  | Director            |  |               
|    |  |                     |  |               
|By: |  | ROBERT FEDER        |  | March 26, 2003
|    |  |                     |  |               
|    |  | Robert Feder        |  |               
|    |  | Director            |  |               
|    |  |                     |  |               
|By: |  | JOSEPH VIERTEL      |  | March 26, 2003
|    |  |                     |  |               
|    |  | Joseph Viertel      |  |               
|    |  | Director            |  |               

50



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##### Table of Contents



CERTIFICATION

I, Jeffrey F. Joseph, Chief Executive Officer of Presidential Realty
Corporation (the Company), certify that:

|   |  |                                                                                                                                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. |  | I have reviewed this annual report on Form 10-K of the Company;                                                                                                                                                                                                                                                         
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Company as of, and for, the periods presented in this annual report;                      
|  
|4. |  | The Companys other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
have:                                                                                                     

|   |  |                                                                                                                                                                                                                                                                                          
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
|  
|b) |  | evaluated the effectiveness of the Companys disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and                                                                                                  
|  
|c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                     

|   |  |                                                                                                                                                                                
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. |  | The Companys other certifying officers and I have disclosed, based on
our most recent evaluation, to the Companys auditors and the Audit
Committee of the Board of Directors:

|   |  |                                                                                                                                                                                                                                                                                         
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the Companys ability to record,
process, summarize and report financial data and have identified for
the Companys auditors any material weaknesses in internal controls;
and
|  
|b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the Companys internal
controls; and                                                                                                                                     

|   |  |                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. |  | The Companys other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

|      |  |                |  |                          
|----- |  | -------------- |  | -------------------------
|DATE: |  | March 26, 2003 |  | By: /s/ Jeffrey F. Joseph
|      |  |                |  |                          
|      |  |                |  | Jeffrey F. Joseph        
|      |  |                |  | Chief Executive Officer  

51



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##### Table of Contents



CERTIFICATION

I, Thomas Viertel, Chief Financial Officer of Presidential Realty Corporation
(the Company), certify that:

|   |  |                                                                                                                                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. |  | I have reviewed this annual report on Form 10-K of the Company;                                                                                                                                                                                                                                                         
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Company as of, and for, the periods presented in this annual report;                      
|  
|4. |  | The Companys other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
have:                                                                                                     

|   |  |                                                                                                                                                                                                                                                                                          
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
|  
|b) |  | evaluated the effectiveness of the Companys disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the Evaluation Date); and                                                                                                  
|  
|c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                     

|   |  |                                                                                                                                                                                
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. |  | The Companys other certifying officers and I have disclosed, based on
our most recent evaluation, to the Companys auditors and the Audit
Committee of the Board of Directors:

|   |  |                                                                                                                                                                                                                                                                                         
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the Companys ability to record,
process, summarize and report financial data and have identified for
the Companys auditors any material weaknesses in internal controls;
and
|  
|b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the Companys internal
controls; and                                                                                                                                     

|   |  |                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. |  | The Companys other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

|      |  |                |  |  |  |                        
|----- |  | -------------- |  |  |  | -----------------------
|DATE: |  | March 26, 2003 |  |  |  | By: /s/ Thomas Viertel 
|      |  |                |  |  |  |                        
|      |  |                |  |  |  | Thomas Viertel         
|      |  |                |  |  |  | Chief Financial Officer

52



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##### Table of Contents



PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS




|                                                                                                                            |  |      |    | 
|--------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                            |  | Page
|                                                                                                                            |  |     
|Independent Auditors Report                                                                                                |  |      | 54 | 
|CONSOLIDATED FINANCIAL STATEMENTS:                                                                                          |  |      |    | 
|Consolidated Balance Sheets  December 31, 2002
and 2001 (Restated)                                                         |  |      | 55 | 
|Consolidated Statements of Operations for the
Years Ended December 31, 2002, 2001 (Restated),
and 2000 (Restated)           |  |      | 56 | 
|Consolidated Statements of Stockholders Equity for
the Years Ended December 31, 2002, 2001 (Restated),
and 2000 (Restated) |  |      | 57 | 
|Consolidated Statements of Cash Flows for the
Years Ended December 31, 2002, 2001 (Restated),
and 2000 (Restated)           |  |      | 58 | 
|Notes to Consolidated Financial Statements                                                                                  |  |      | 60 | 
|CONSOLIDATED SCHEDULES:                                                                                                     |  |      |    | 
|II. Valuation and Qualifying Accounts for the Years
Ended December 31, 2002, 2001, and 2000                                 |  |      | 87 | 
|III. Real Estate and Accumulated Depreciation at
December 31, 2002                                                          |  |      | 88 | 
|IV. Mortgage Loans on Real Estate at December 31, 2002                                                                      |  |      | 90 | 

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.

53



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##### Table of Contents



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, 2002 and
2001, and the related consolidated statements of operations, stockholders
equity and cash flows for each of the three years in the period ended December
31, 2002. 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 the 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, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002 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.

As discussed in Note 1, on January 1, 2002, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets.

As discussed in Note 23, the accompanying 2001 and 2000 consolidated financial
statements have been restated.

Deloitte & Touche LLP

Stamford, Connecticut
March 26, 2003

54



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##### Table of Contents



PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |            |            |         |  |  |              |         |              |  |              |  | 
|------------------------------------------------------ | ------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---------- | ----------------- | ---------- | ----------------- | ---------- | ---------- | ---------- | ------- |  |  | ------------ | ------- | ------------ |  | ------------ |  | 
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |            |            |         |  |  | December 31, |         | December 31,
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |            |            |         |  |  | 2002         |         | 2001        
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |            |            |         |  |  |              |         |             
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |            |            |         |  |  |              |         |              |  | As Restated-
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |            |            |         |  |  |              |         |              |  | See Note 23 
|Assets                                                 |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |           
|                                                       | Real estate (Note 2)                                                                  |                                                                                                 | $                                                                                         | 49,739,676 |                   |            | $                 | 49,367,042 |           
|                                                       |                                                                                       | Less: accumulated depreciation                                                                  |                                                                                           | 9,216,531  |                   |            |                   | 7,915,785  |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|                                                       | Net real estate                                                                       |                                                                                                 |                                                                                           | 40,523,145 |                   |            |                   | 41,451,257 |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|                                                       | Mortgage portfolio (Note 3):                                                          |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|                                                       |                                                                                       | Sold properties and other - net                                                                 |                                                                                           |            | 17,217,874        |            |                   |            | 15,995,237 |           
|                                                       |                                                                                       | Related parties - net                                                                           |                                                                                           |            | 389,916           |            |                   |            | 414,692    |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|                                                       | Net mortgage portfolio                                                                |                                                                                                 |                                                                                           | 17,607,790 |                   |            |                   | 16,409,929 |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|                                                       | Assets related to discontinued operations (Note 4)                                    |                                                                                                 |                                                                                           |            |                   |            |                   | 6,494,951  |           
|                                                       | Prepaid expenses and deposits in escrow                                               |                                                                                                 |                                                                                           | 1,158,157  |                   |            |                   | 1,025,310  |           
|                                                       | Other receivables (net of valuation allowance of
$99,249 in 2002 and $87,504 in 2001) |                                                                                                 |                                                                                           | 437,984    |                   |            |                   | 724,647    |           
|                                                       | Cash and cash equivalents                                                             |                                                                                                 |                                                                                           | 6,738,768  |                   |            |                   | 1,788,224  |           
|                                                       | Other assets                                                                          |                                                                                                 |                                                                                           | 1,314,657  |                   |            |                   | 1,426,657  |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|Total Assets                                           |                                                                                       |                                                                                                 | $                                                                                         | 67,780,501 |                   |            | $                 | 69,320,975 |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|Liabilities and Stockholders Equity                   |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|                                                       | Liabilities:                                                                          |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|                                                       |                                                                                       | Mortgage debt (of which $448,487 in 2002 and
$413,414 in 2001 are due within one year) (Note 5) |                                                                                           | $          | 37,191,814        |            |                   | $          | 37,606,211 |           
|                                                       |                                                                                       | Liabilities related to discontinued operations (Note 4)                                         |                                                                                           |            |                   |            |                   |            | 4,786,739  |           
|                                                       |                                                                                       | Contractual pension and postretirement benefits liabilities (Note 16)                           |                                                                                           |            | 3,328,083         |            |                   |            | 3,622,056  |           
|                                                       |                                                                                       | Defined benefit plan liability (Note 17)                                                        |                                                                                           |            | 1,772,630         |            |                   |            | 1,014,780  |           
|                                                       |                                                                                       | Accrued liabilities                                                                             |                                                                                           |            | 1,269,703         |            |                   |            | 1,305,696  |           
|                                                       |                                                                                       | Accrued taxes payable (Note 9)                                                                  |                                                                                           |            | 498,750           |            |                   |            |            |           
|                                                       |                                                                                       | Accounts payable                                                                                |                                                                                           |            | 218,798           |            |                   |            | 185,618    |           
|                                                       |                                                                                       | Distributions
from partnership in excess of investment and earnings (Note 6)                    |                                                                                           |            | 2,358,164         |            |                   |            | 2,626,248  |           
|                                                       |                                                                                       | Other liabilities                                                                               |                                                                                           |            | 755,333           |            |                   |            | 653,040    |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |           
|Total Liabilities                                      |                                                                                       |                                                                                                 | 47,393,275                                                                                |            |                   |            | 51,800,388        |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |           
|Minority Interest in Consolidated Partnership (Note 7) |                                                                                       |                                                                                                 | 115,623                                                                                   |            |                   |            | 211,974           |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |           
|                                                       | Stockholders Equity:                                                                 |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|                                                       |                                                                                       | Common stock; par value $.10 per share (Note 12)                                                |                                                                                           |            |                   |            |                   |            |            |           
|                                                       |                                                                                       |                                                                                                 | Class A, authorized 700,000 shares, issued 478,940 shares
and 100 shares held in treasury |            |                   | 47,894     |                   |            |            | 47,894     |        
|                                                       |                                                                                       |                                                                                                 | Class B                                                                                   |            | December 31, 2002 |            | December
31, 2001 |            |            |            | 326,899 |  |  |              | 324,717 |             
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |            |            |        
|                                                       |                                                                                       |                                                                                                 | Authorized:                                                                               |            |                   | 10,000,000 |                   |            |            | 10,000,000 |         | 
|                                                       |                                                                                       |                                                                                                 | Issued:                                                                                   |            |                   | 3,268,986  |                   |            |            | 3,247,166  |         | 
|                                                       |                                                                                       |                                                                                                 | Treasury:                                                                                 |            |                   | 1,897      |                   |            |            | 1,897      |         | 
|                                                       |                                                                                       | Additional paid-in capital                                                                      |                                                                                           |            | 2,919,080         |            |                   |            | 2,779,100  |           
|                                                       |                                                                                       | Retained earnings                                                                               |                                                                                           |            | 20,007,322        |            |                   |            | 16,298,261 |           
|                                                       |                                                                                       | Accumulated other comprehensive loss                                                            |                                                                                           |            | (2,640,684        | )          |                   |            | (1,752,451 | )         
|                                                       |                                                                                       | Treasury stock (at cost)                                                                        |                                                                                           |            | (21,408           | )          |                   |            | (21,408    | )         
|                                                       |                                                                                       | Notes receivable for exercise of stock options (Note 19)                                        |                                                                                           |            | (367,500          | )          |                   |            | (367,500   | )         
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|Total Stockholders Equity                             |                                                                                       |                                                                                                 | 20,271,603                                                                                |            |                   |            | 17,308,613        |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |           
|Total Liabilities and Stockholders Equity             |                                                                                       | $                                                                                               | 67,780,501                                                                                |            |                   | $          | 69,320,975        |           
|                                                       |                                                                                       |                                                                                                 |                                                                                           |            |                   |            |                   |            |           

See notes to consolidated financial statements.

55



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##### Table of Contents



PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |           |           | 
|------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ---------- | ---------- | ----------------------- | --------- | ---------- | ---------- | ------------ | --------- | ------------ | --------- | --------- | --------- | 
|                                                                                            |                                                                                                     |                                                |            |            | YEAR ENDED DECEMBER 31,
|                                                                                            |                                                                                                     |                                                |            |            |                        
|                                                                                            |                                                                                                     |                                                |            |            | 2002                    |           | 2001       |            | 2000        
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |             
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            | As Restated- |           | As Restated-
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            | See Note 23  |           | See Note 23 
|Revenues:                                                                                   |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |          
|                                                                                            | Rental                                                                                              |                                                | $          | 10,084,418 |                         |           | $          | 10,149,003 |              |           | $            | 9,029,122 |          
|                                                                                            | Interest on mortgages - sold properties and other                                                   |                                                |            | 2,553,461  |                         |           |            | 3,126,506  |              |           |              | 3,028,743 |          
|                                                                                            | Interest on mortgages - related parties                                                             |                                                |            | 345,872    |                         |           |            | 203,787    |              |           |              | 196,845   |          
|                                                                                            | Other revenues                                                                                      |                                                |            | 20,966     |                         |           |            | 26,990     |              |           |              | 37,868    |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Total                                                                                       |                                                                                                     |                                                | 13,004,717 |            |                         |           | 13,506,286 |            |              |           | 12,292,578   |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Costs and Expenses:                                                                         |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |          
|                                                                                            | General and administrative                                                                          |                                                |            | 3,064,517  |                         |           |            | 3,128,170  |              |           |              | 2,741,146 |          
|                                                                                            | Depreciation on non-rental property                                                                 |                                                |            | 27,905     |                         |           |            | 28,770     |              |           |              | 23,578    |          
|                                                                                            | Rental property:                                                                                    |                                                |            |            |                         |           |            |            |              |           |              |           |          
|                                                                                            |                                                                                                     | Operating expenses                             |            |            | 4,405,766               |           |            |            | 4,176,771    |           |              |           | 4,052,129 |          
|                                                                                            |                                                                                                     | Interest on mortgage debt                      |            |            | 2,977,010               |           |            |            | 3,013,489    |           |              |           | 2,659,582 |          
|                                                                                            |                                                                                                     | Real estate taxes                              |            |            | 1,002,266               |           |            |            | 966,051      |           |              |           | 860,533   |          
|                                                                                            |                                                                                                     | Depreciation on real estate                    |            |            | 1,304,377               |           |            |            | 1,273,078    |           |              |           | 1,076,827 |          
|                                                                                            |                                                                                                     | Amortization of mortgage costs                 |            |            | 56,198                  |           |            |            | 53,923       |           |              |           | 45,943    |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Total                                                                                       |                                                                                                     |                                                | 12,838,039 |            |                         |           | 12,640,252 |            |              |           | 11,459,738   |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Other Income:                                                                               |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |          
|                                                                                            | Investment income                                                                                   |                                                |            | 96,061     |                         |           |            | 82,688     |              |           |              | 195,689   |          
|                                                                                            | Equity in income of partnership                                                                     |                                                |            | 295,564    |                         |           |            | 261,981    |              |           |              | 224,133   |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Income before minority interest and net gain (loss)
from sales of properties and securities |                                                                                                     |                                                | 558,303    |            |                         |           | 1,210,703  |            |              |           | 1,252,662    |          
|Minority interest                                                                           |                                                                                                     |                                                | 19,465     |            |                         |           | 20,526     |            |              |           | 24,798       |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Income before net gain (loss) from sales of properties and securities                       |                                                                                                     |                                                | 538,838    |            |                         |           | 1,190,177  |            |              |           | 1,227,864    |          
|Net gain (loss) from sales of properties and securities                                     |                                                                                                     |                                                | 3,873,119  |            |                         |           | 1,198,428  |            |              |           | (5,027       | )        
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Income from continuing operations                                                           |                                                                                                     |                                                | 4,411,957  |            |                         |           | 2,388,605  |            |              |           | 1,222,837    |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Discontinued Operations (Note 4):                                                           |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |          
|                                                                                            | Income (loss) from discontinued operations                                                          |                                                |            | 201,766    |                         |           |            | 232,430    |              |           |              | (9,880    | )        
|                                                                                            | Net gain from sales of discontinued operations (includes a
provision for Federal taxes of $498,750) |                                                |            | 1,485,917  |                         |           |            |            |              |           |              |           |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |          
|Total income (loss) from discontinued operations                                            |                                                                                                     |                                                | 1,687,683  |            |                         |           | 232,430    |            |              |           | (9,880       | )        
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Net Income                                                                                  |                                                                                                     | $                                              | 6,099,640  |            |                         | $         | 2,621,035  |            |              | $         | 1,212,957    |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Earnings per Common Share (basic and diluted) (Note 1-H):                                   |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |          
|                                                                                            | Income before net gain (loss) from sales of properties and securities                               |                                                | $          | 0.14       |                         |           | $          | 0.32       |              |           | $            | 0.33      |          
|                                                                                            | Net gain (loss) from sales of properties and securities                                             |                                                |            | 1.04       |                         |           |            | 0.32       |              |           |              | 0.00      |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|                                                                                            | Income from continuing operations                                                                   |                                                |            | 1.18       |                         |           |            | 0.64       |              |           |              | 0.33      |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|                                                                                            | Discontinued Operations:                                                                            |                                                |            |            |                         |           |            |            |              |           |              |           |          
|                                                                                            |                                                                                                     | Income (loss) from discontinued operations     |            |            | 0.05                    |           |            |            | 0.07         |           |              |           | 0.00      |          
|                                                                                            |                                                                                                     | Net gain from sales of discontinued operations |            |            | 0.40                    |           |            |            |              |           |              |           |           |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|                                                                                            | Total income (loss) from discontinued operations                                                    |                                                |            | 0.45       |                         |           |            | 0.07       |              |           |              | 0.00      |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|                                                                                            | Net Income per Common Share - basic                                                                 |                                                | $          | 1.63       |                         |           | $          | 0.71       |              |           | $            | 0.33      |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |           |          
|                                                                                            |                                                                                                     | - diluted                                      |            | $          | 1.63                    |           |            | $          | 0.71         |           |              | $         | 0.33      |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Cash Distributions per Common Share (Note 13)                                               |                                                                                                     | $                                              | 0.64       |            |                         | $         | 0.64       |            |              | $         | 0.64         |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|Weighted Average Number of Shares Outstanding - basic                                       |                                                                                                     |                                                | 3,735,415  |            |                         |           | 3,715,915  |            |              |           | 3,698,471    |          
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          
|                                                                                            |                                                                                                     |                                                | - diluted  |            |                         | 3,739,331 |            |            |              | 3,718,250 |              |           |           | 3,698,471 | 
|                                                                                            |                                                                                                     |                                                |            |            |                         |           |            |            |              |           |              |           |          

See notes to consolidated financial statements.

56



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##### Table of Contents



PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (AS RESTATED - SEE NOTE 23)

|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |           |          |  
|--------------------------------------------------------------- | --------------------------- | --------------------------------------------------------------------------------------------------------------- | ------- | ------ |  | ------- | --------- | ---------- |  | ------------- | ---------- | --------- |  | --------------- | ----------- | ------------- | -------- | ------------- | -------- | ---------- |  | ----- | --------- | - |  | ----- | --------- | --------- | -------- | - | ---------- | --------- | -------- | -
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             | Accumulated   |          |               |          |            |  | Notes |           |   |  |       |           |           |          |  
|                                                                |                             |                                                                                                                 |         |        |  |         |           | Additional |  |               |            |           |  | Other           |             |               |          |               |          | Receivable |  |       |           |   |  | Total
|                                                                |                             |                                                                                                                 |         | Common |  | Paid-in |           | Retained   |  | Comprehensive |            | Treasury  |  | for Exercise of |             | Comprehensive |          | Stockholders
|                                                                |                             |                                                                                                                 |         | Stock  |  | Capital |           | Earnings   |  | (Loss) Income |            | Stock     |  | Stock Options   |             | Income        |          | Equity       
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |              
|Balance at January 1, 2000                                      |                             | $                                                                                                               | 369,134 |        |  | $       | 2,573,281 |            |  | $             | 17,209,589 |           |  |                 | ($1,659,754 | )             |          |               | ($16,828 | )          |  |       | ($367,500 | ) |  |       |           |           |          | $ | 18,107,922 |          
|Net proceeds from dividend reinvestment
and share purchase plan |                             |                                                                                                                 | 1,475   |        |  |         | 85,920    |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   | 87,395     |          
|Cash distributions ($.64 per share)                             |                             |                                                                                                                 |         |        |  |         |           |            |  |               | (2,367,098 | )         |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   | (2,367,098 | )        
|Issuance of stock (Note 14)                                     |                             |                                                                                                                 | 300     |        |  |         | 17,925    |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   | 18,225     |          
|Purchase of treasury stock                                      |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               | (4,260   | )          |  |       |           |   |  |       |           |           |          |   | (4,260     | )        
|Comprehensive income:                                           |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|                                                                | Net income                  |                                                                                                                 |         |        |  |         |           |            |  |               |            | 1,212,957 |  |                 |             |               |          |               |          |            |  |       |           |   |  |       | $         | 1,212,957 |          |   |            | 1,212,957 |         
|                                                                | Other comprehensive income- |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |           |         
|                                                                |                             | Net unrealized gain on securities
available for sale, net of reclassification
adjustment (see disclosure below) |         |        |  |         |           |            |  |               |            |           |  |                 |             |               | 222,476  |               |          |            |  |       |           |   |  |       |           |           | 222,476  |   |            |           | 222,476  |  
|                                                                |                             | Minimum pension liability adjustment                                                                            |         |        |  |         |           |            |  |               |            |           |  |                 |             |               | 6,345    |               |          |            |  |       |           |   |  |       |           |           | 6,345    |   |            |           | 6,345    |  
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|Comprehensive income                                            |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  | $     | 1,441,778 |           |          |   |            |          
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|Balance at December 31, 2000                                    |                             |                                                                                                                 | 370,909 |        |  |         | 2,677,126 |            |  |               | 16,055,448 |           |  |                 | (1,430,933  | )             |          |               | (21,088  | )          |  |       | (367,500  | ) |  |       |           |           |          |   | 17,283,962 |          
|Net proceeds from dividend reinvestment
and share purchase plan |                             |                                                                                                                 | 1,402   |        |  |         | 85,339    |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   | 86,741     |          
|Cash distributions ($.64 per share)                             |                             |                                                                                                                 |         |        |  |         |           |            |  |               | (2,378,222 | )         |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   | (2,378,222 | )        
|Issuance of stock (Note 14)                                     |                             |                                                                                                                 | 300     |        |  |         | 16,635    |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   | 16,935     |          
|Purchase of treasury stock                                      |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               | (320     | )          |  |       |           |   |  |       |           |           |          |   | (320       | )        
|Comprehensive income:                                           |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|                                                                | Net income                  |                                                                                                                 |         |        |  |         |           |            |  |               |            | 2,621,035 |  |                 |             |               |          |               |          |            |  |       |           |   |  |       | $         | 2,621,035 |          |   |            | 2,621,035 |         
|                                                                | Other comprehensive income- |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |           |         
|                                                                |                             | Net unrealized gain on securities
available for sale                                                            |         |        |  |         |           |            |  |               |            |           |  |                 |             |               | 1,544    |               |          |            |  |       |           |   |  |       |           |           | 1,544    |   |            |           | 1,544    |  
|                                                                |                             | Minimum pension liability adjustment                                                                            |         |        |  |         |           |            |  |               |            |           |  |                 |             |               | (323,062 | )             |          |            |  |       |           |   |  |       |           |           | (323,062 | ) |            |           | (323,062 | )
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|Comprehensive income                                            |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  | $     | 2,299,517 |           |          |   |            |          
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|Balance at December 31, 2001                                    |                             |                                                                                                                 | 372,611 |        |  |         | 2,779,100 |            |  |               | 16,298,261 |           |  |                 | (1,752,451  | )             |          |               | (21,408  | )          |  |       | (367,500  | ) |  |       |           |           |          |   | 17,308,613 |          
|Net proceeds from dividend reinvestment
and share purchase plan |                             |                                                                                                                 | 1,882   |        |  |         | 120,747   |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   | 122,629    |          
|Cash distributions ($.64 per share)                             |                             |                                                                                                                 |         |        |  |         |           |            |  |               | (2,390,579 | )         |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   | (2,390,579 | )        
|Issuance of stock (Note 14)                                     |                             |                                                                                                                 | 300     |        |  |         | 19,233    |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   | 19,533     |          
|Comprehensive income:                                           |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|                                                                | Net income                  |                                                                                                                 |         |        |  |         |           |            |  |               |            | 6,099,640 |  |                 |             |               |          |               |          |            |  |       |           |   |  |       | $         | 6,099,640 |          |   |            | 6,099,640 |         
|                                                                | Other comprehensive income- |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |           |         
|                                                                |                             | Net unrealized gain on securities
available for sale                                                            |         |        |  |         |           |            |  |               |            |           |  |                 |             |               | 802      |               |          |            |  |       |           |   |  |       |           |           | 802      |   |            |           | 802      |  
|                                                                |                             | Minimum pension liability adjustment                                                                            |         |        |  |         |           |            |  |               |            |           |  |                 |             |               | (889,035 | )             |          |            |  |       |           |   |  |       |           |           | (889,035 | ) |            |           | (889,035 | )
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|Comprehensive income                                            |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  | $     | 5,211,407 |           |          |   |            |          
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          
|Balance at December 31, 2002                                    |                             | $                                                                                                               | 374,793 |        |  | $       | 2,919,080 |            |  | $             | 20,007,322 |           |  |                 | ($2,640,684 | )             |          |               | ($21,408 | )          |  |       | ($367,500 | ) |  |       |           |           |          | $ | 20,271,603 |          
|                                                                |                             |                                                                                                                 |         |        |  |         |           |            |  |               |            |           |  |                 |             |               |          |               |          |            |  |       |           |   |  |       |           |           |          |   |            |          

|                                                                               |  |                         |     |      |  |      |       |  |  |   |         | 
|------------------------------------------------------------------------------ |  | ----------------------- | --- | ---- |  | ---- | ----- |  |  | - | ------- | 
|                                                                               |  | Year Ended December 31,
|                                                                               |  |                        
|                                                                               |  | 2002                    |     | 2001 |  | 2000
|                                                                               |  |                         |     |      |  |     
|Disclosure of reclassification amount:                                         |  |                         |     |      |  |      |       |  |  |   |         | 
|Unrealized holding gain arising during year                                    |  | $                       | 802 |      |  | $    | 1,544 |  |  | $ | 36,622  | 
|Add/subtract: reclassification adjustment for
loss/gain included in net income |  |                         |     |      |  |      |       |  |  |   | 185,854 | 
|                                                                               |  |                         |     |      |  |      |       |  |  |   |         | 
|Net unrealized gain on securities available
for sale                           |  | $                       | 802 |      |  | $    | 1,544 |  |  | $ | 222,476 | 
|                                                                               |  |                         |     |      |  |      |       |  |  |   |         | 

See notes to consolidated financial statements.

57



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##### Table of Contents



PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |             |  
|------------------------------------------------------ | --------------------------------------------------- | ----------------------------------------------------------- | ---------- | ----------------------- | ---------- | ---- | ---------- | ------------ | ---------- | ------------ | ----------- | ---------- | ----------- | -
|                                                       |                                                     |                                                             |            | YEAR ENDED DECEMBER 31,
|                                                       |                                                     |                                                             |            |                        
|                                                       |                                                     |                                                             |            | 2002                    |            | 2001 |            | 2000        
|                                                       |                                                     |                                                             |            |                         |            |      |            |             
|                                                       |                                                     |                                                             |            |                         |            |      |            | As Restated- |            | As Restated-
|                                                       |                                                     |                                                             |            |                         |            |      |            | See Note 23  |            | See Note 23 
|Cash Flows from Operating Activities:                  |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |           
|                                                       | Cash received from rental properties                |                                                             | $          | 10,109,818              |            |      | $          | 10,095,676   |            |              | $           | 9,071,203  |            
|                                                       | Interest received                                   |                                                             |            | 3,195,188               |            |      |            | 2,968,869    |            |              |             | 3,032,345  |            
|                                                       | Distributions received from partnership             |                                                             |            | 282,980                 |            |      |            | 227,080      |            |              |             | 198,900    |            
|                                                       | Miscellaneous income                                |                                                             |            | 18,470                  |            |      |            | 24,494       |            |              |             | 35,374     |            
|                                                       | Interest paid on rental property mortgage debt      |                                                             |            | (3,008,148              | )          |      |            | (3,017,195   | )          |              |             | (2,516,633 | )          
|                                                       | Cash disbursed for rental property operations       |                                                             |            | (5,514,474              | )          |      |            | (5,189,958   | )          |              |             | (5,128,084 | )          
|                                                       | Cash disbursed for general and administrative costs |                                                             |            | (3,379,719              | )          |      |            | (2,899,301   | )          |              |             | (2,686,395 | )          
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|Net cash provided by continuing operations             |                                                     |                                                             | 1,704,115  |                         |            |      | 2,209,665  |              |            |              | 2,006,710   |           
|Net cash provided by discontinued operations           |                                                     |                                                             | 256,168    |                         |            |      | 418,064    |              |            |              | 172,967     |           
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|Net cash provided by operating activities              |                                                     |                                                             | 1,960,283  |                         |            |      | 2,627,729  |              |            |              | 2,179,677   |           
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|Cash Flows from Investing Activities:                  |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |           
|                                                       | Cash flows from continuing operations:              |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|                                                       |                                                     | Payments received on notes receivable                       |            |                         | 4,478,370  |      |            |              | 2,055,976  |              |             |            | 431,540     |  
|                                                       |                                                     | Payments disbursed for investments in notes receivable      |            |                         | (1,775,000 | )    |            |              | (1,100,000 | )            |             |            |             |  
|                                                       |                                                     | Payments of taxes payable on gain from sale of notes        |            |                         |            |      |            |              |            |              |             |            | (220,500    | )
|                                                       |                                                     | Payments disbursed for additions and improvements           |            |                         | (399,568   | )    |            |              | (470,258   | )            |             |            | (431,481    | )
|                                                       |                                                     | Purchase of property                                        |            |                         |            |      |            |              |            |              |             |            | (27,275,886 | )
|                                                       |                                                     | Proceeds from sales of securities                           |            |                         |            |      |            |              |            |              |             |            | 2,331,119   |  
|                                                       |                                                     | Purchase of additional interest in partnership              |            |                         | (255,500   | )    |            |              | (50,000    | )            |             |            |             |  
|                                                       |                                                     | Other                                                       |            |                         | 91,170     |      |            |              | (320       | )            |             |            | 69,979      |  
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|                                                       |                                                     |                                                             | 2,139,472  |                         |            |      | 435,398    |              |            |              | (25,095,229 | )         
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|                                                       | Cash flows from discontinued operations:            |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|                                                       |                                                     | Proceeds from sales of property                             |            |                         | 8,449,522  |      |            |              |            |              |             |            |             |  
|                                                       |                                                     | Payments disbursed for additions and improvements           |            |                         | (8,806     | )    |            |              | (22,533    | )            |             |            | (103,119    | )
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|                                                       |                                                     |                                                             | 8,440,716  |                         |            |      | (22,533    | )            |            |              | (103,119    | )         
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|Net cash provided by (used in) by investing activities |                                                     |                                                             | 10,580,188 |                         |            |      | 412,865    |              |            |              | (25,198,348 | )         
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|Cash Flows from Financing Activities:                  |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |           
|                                                       | Cash flows from continuing operations:              |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|                                                       |                                                     | Principal payments on mortgage debt                         |            |                         | (414,397   | )    |            |              | (381,461   | )            |             |            | (1,207,812  | )
|                                                       |                                                     | Mortgage proceeds                                           |            |                         |            |      |            |              |            |              |             |            | 21,900,000  |  
|                                                       |                                                     | Mortgage costs paid                                         |            |                         |            |      |            |              |            |              |             |            | (350,094    | )
|                                                       |                                                     | Cash distributions on common stock                          |            |                         | (2,390,579 | )    |            |              | (2,378,222 | )            |             |            | (2,367,098  | )
|                                                       |                                                     | Proceeds from dividend reinvestment and share purchase plan |            |                         | 122,629    |      |            |              | 86,741     |              |             |            | 87,395      |  
|                                                       |                                                     | Distributions to minority partners                          |            |                         | (221,694   | )    |            |              | (25,007    | )            |             |            | (8,334      | )
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|                                                       |                                                     |                                                             | (2,904,041 | )                       |            |      | (2,697,949 | )            |            |              | 18,054,057  |           
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|                                                       | Cash flows from discontinued operations:            |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|                                                       |                                                     | Principal payments on mortgage debt                         |            |                         | (44,007    | )    |            |              | (66,780    | )            |             |            | (64,461     | )
|                                                       |                                                     | Repayment of mortgage debt from sale of property            |            |                         | (4,641,879 | )    |            |              |            |              |             |            |             |  
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|                                                       |                                                     |                                                             | (4,685,886 | )                       |            |      | (66,780    | )            |            |              | (64,461     | )         
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|Net cash (used in) provided by financing activities    |                                                     |                                                             | (7,589,927 | )                       |            |      | (2,764,729 | )            |            |              | 17,989,596  |           
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|Net Increase (Decrease) in Cash and Cash Equivalents   |                                                     |                                                             | 4,950,544  |                         |            |      | 275,865    |              |            |              | (5,029,075  | )         
|Cash and Cash Equivalents, Beginning of Year           |                                                     |                                                             | 1,788,224  |                         |            |      | 1,512,359  |              |            |              | 6,541,434   |           
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            
|Cash and Cash Equivalents, End of Year                 |                                                     | $                                                           | 6,738,768  |                         |            | $    | 1,788,224  |              |            | $            | 1,512,359   |           
|                                                       |                                                     |                                                             |            |                         |            |      |            |              |            |              |             |            |            

See notes to consolidated financial statements.

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PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |         |           |         |  
|---------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------ | ------- | ----------------------- | ------- | --------- | ------- | ------------ | ------- | ------------ | ------- | --------- | ------- | -
|                                                                                   |                                                                                         |                                                                                  |                                      |         | YEAR ENDED DECEMBER 31,
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                        
|                                                                                   |                                                                                         |                                                                                  |                                      |         | 2002                    |         | 2001      |         | 2000        
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |             
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         | As Restated- |         | As Restated-
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         | See Note 23  |         | See Note 23 
|Reconciliation of Net Income to Net Cash
Provided by Operating Activities          |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|Net Income                                                                         |                                                                                         | $                                                                                | 6,099,640                            |         |                         | $       | 2,621,035 |         |              | $       | 1,212,957    |        
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|Adjustments to reconcile net income to net
cash provided by continuing operations: |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|                                                                                   |                                                                                         | Net loss (gain) from sales of properties and securities                          |                                      |         | (3,873,119              | )       |           |         | (1,198,428   | )       |              |         | 5,027     |        
|                                                                                   |                                                                                         | Net gain from sales of discontinued operations                                   |                                      |         | (1,485,917              | )       |           |         |              |         |              |         |           |        
|                                                                                   |                                                                                         | Loss (income) from discontinued operations                                       |                                      |         | (201,766                | )       |           |         | (232,430     | )       |              |         | 9,880     |        
|                                                                                   |                                                                                         | Equity in income of partnership                                                  |                                      |         | (295,564                | )       |           |         | (261,981     | )       |              |         | (224,133  | )      
|                                                                                   |                                                                                         | Depreciation and amortization                                                    |                                      |         | 1,388,480               |         |           |         | 1,355,771    |         |              |         | 1,146,348 |        
|                                                                                   |                                                                                         | Issuance of stock for fees and expenses                                          |                                      |         | 19,533                  |         |           |         | 16,935       |         |              |         | 18,225    |        
|                                                                                   |                                                                                         | Amortization of discounts on notes and fees                                      |                                      |         | (134,942                | )       |           |         | (467,802     | )       |              |         | (392,512  | )      
|                                                                                   |                                                                                         | Minority interest                                                                |                                      |         | 19,465                  |         |           |         | 20,526       |         |              |         | 24,798    |        
|                                                                                   |                                                                                         | Distributions received from partnership                                          |                                      |         | 282,980                 |         |           |         | 227,080      |         |              |         | 198,900   |        
|                                                                                   |                                                                                         | Changes in assets and liabilities:                                               |                                      |         |                         |         |           |         |              |         |              |         |           |        
|                                                                                   |                                                                                         | Decrease (increase) in other receivables                                         |                                      |         | 314,963                 |         |           |         | 70,337       |         |              |         | (97,922   | )      
|                                                                                   |                                                                                         | Increase (decrease) in accounts payable and accrued liabilities                  |                                      |         | (283,397                | )       |           |         | 67,712       |         |              |         | 299,516   |        
|                                                                                   |                                                                                         | Increase (decrease) in deferred income                                           |                                      |         | 37,519                  |         |           |         | (17,190      | )       |              |         | 65,469    |        
|                                                                                   |                                                                                         | Decrease (increase) in prepaid expenses, deposits in escrow
and deferred charges |                                      |         | (197,966                | )       |           |         | 21,480       |         |              |         | (246,419  | )      
|                                                                                   |                                                                                         | Increase (decrease) in security deposit liabilities                              |                                      |         | 16,702                  |         |           |         | (12,921      | )       |              |         | (6,668    | )      
|                                                                                   |                                                                                         | Other                                                                            |                                      |         | (2,496                  | )       |           |         | (459         | )       |              |         | (6,756    | )      
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|Total adjustments                                                                  |                                                                                         |                                                                                  | (4,395,525                           | )       |                         |         | (411,370  | )       |              |         | 793,753      |        
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|Net cash provided by continuing operations                                         |                                                                                         |                                                                                  | 1,704,115                            |         |                         |         | 2,209,665 |         |              |         | 2,006,710    |        
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|Discontinued operations:                                                           |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|                                                                                   | Income (Loss) from Discontinued Operations                                              |                                                                                  |                                      | 201,766 |                         |         |           | 232,430 |              |         |              | (9,880  | )        
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|                                                                                   | Adjustments to reconcile income (loss) to net
cash provided by discontinued operations: |                                                                                  |                                      |         |                         |         |           |         |              |         |              |         |          
|                                                                                   |                                                                                         |                                                                                  | Depreciation and amortization        |         |                         | 51,026  |           |         |              | 202,628 |              |         |           | 206,774 |  
|                                                                                   |                                                                                         |                                                                                  | Amortization of discounts on notes   |         |                         | (34,004 | )         |         |              |         |              |         |           |         |  
|                                                                                   |                                                                                         |                                                                                  | Minority interest                    |         |                         | 11,046  |           |         |              | 14,789  |              |         |           | (22,393 | )
|                                                                                   |                                                                                         |                                                                                  | Net change in assets and liabilities |         |                         | 26,334  |           |         |              | (31,783 | )            |         |           | (1,534  | )
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|                                                                                   | Total adjustments                                                                       |                                                                                  |                                      | 54,402  |                         |         |           | 185,634 |              |         |              | 182,847 |          
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|Net cash provided by discontinued operations                                       |                                                                                         |                                                                                  | 256,168                              |         |                         |         | 418,064   |         |              |         | 172,967      |        
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        
|Net cash provided by operating activities                                          |                                                                                         | $                                                                                | 1,960,283                            |         |                         | $       | 2,627,729 |         |              | $       | 2,179,677    |        
|                                                                                   |                                                                                         |                                                                                  |                                      |         |                         |         |           |         |              |         |              |        

See notes to consolidated financial statement.

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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
ownership of income producing real estate and in the holding of notes and
mortgages secured by 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.

C.     Mortgage Portfolio  Net mortgage portfolio represents the outstanding
principal amounts of notes receivable reduced by discounts and/or deferred
gains. The primary forms of collateral on all notes receivable are real estate
and ownership interests in entities that own real property, and may include
borrower personal guarantees. The Company periodically evaluates the
collectibility of both interest on and principal of 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. The Company also considers loan modifications
as possible indicators of impairment, although all modifications during the
three years ended December 31, 2002 have been at the Companys request for
business purposes and not as a result of debtor financial difficulties. 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

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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. Income on impaired loans, including interest, and
the recognition of deferred gains and unamortized discounts, is recognized only
as cash is received. The Company currently has no loans that are impaired
according to their terms as modified.

D.     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.

E.     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. Such discounts are being amortized using the interest
method.

F.     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, a partnership in which Presidential
is the General Partner and owns a 66-2/3% interest (see Note 7).

All significant intercompany balances and transactions have been eliminated.

G.     Rental Revenue Recognition  The Company acts as lessor under operating
leases. Rental revenue is recorded on the accrual method. Recognition of
rental revenue is generally discontinued when the rental is delinquent for
ninety days or more, or earlier if management determines that collection is
doubtful.

H.     Net Income Per Share  Basic net income per share data is computed by
dividing net income by the weighted average number of shares of Class A and
Class B common stock outstanding during each year. Diluted net income per
share is computed by dividing net income by the weighted average shares
outstanding, including the dilutive effect, if any, of stock options
outstanding. The dilutive effect of stock options is calculated using the
treasury stock method.

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I.     Cash and Cash Equivalents  Cash and cash equivalents includes cash on hand,
cash in banks and money market funds.

J.     Benefits  The Company follows SFAS Nos. 87, 106 and 132 in accounting for
pension and postretirement benefits (see Notes 16 and 17).

K.     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.

L.     Accounting for Stock Options  The Company complies with the additional
disclosures required when necessary 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
(APB) No. 25, Accounting for Stock Issued to Employees. The Company has
not granted any stock options in the last three years.

M.     Adoption of Recent Accounting Pronouncements  The Company adopted SFAS No.
142, Goodwill and Other Intangible Assets on January 1, 2002. Implementation
of this statement did not have a material impact on the Companys financial
statements. On January 1, 2002, the Company also adopted SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. This
statement requires that the operations related to the properties that have been
sold or properties that are intended to be sold be presented as discontinued
operations in the statements of operations for all periods presented and
properties intended to be sold are to be designated as held for sale on the
balance sheet. Under this pronouncement, the operations of properties sold
prior to January 1, 2002 are not reclassified as discontinued operations.

N.     New Accounting Pronouncements  In June of 2001, the Financial Accounting
Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement
Obligations (effective January 1, 2003). SFAS No. 143 requires the recording
of the fair value of a liability for an asset retirement obligation in the
period in which it is incurred.
Implementation of this standard is not expected to have any impact on the
Companys financial statements.

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In April, 2002, the FASB issued SFAS No. 145, Rescission of SFAS No. 4, 44 and
64, Amendment of SFAS No. 13, and Technical Corrections. SFAS No. 145, among
other things, rescinds SFAS No. 4 Reporting Gains and Losses from
Extinguishment of Debt, and accordingly, the reporting of gains or losses from
the early extinguishment of debt as extraordinary items will only be required
if they meet the specific criteria for extraordinary items included in
Accounting Principles Board Opinion No. 30, Reporting the Results of
Operations. The rescission of SFAS No. 4 is effective January 1, 2003.
Management believes that adoption of this statement will not have a material
effect on the Companys financial statements.

In July, 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (effective January 1, 2003). SFAS No. 146
replaces current accounting literature and requires the recognition of costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. The Company does not
anticipate the adoption of this statement will have a material effect on the
Companys financial statements.

In December, 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based
Compensation-Transition and Disclosure. This statement amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation and
amends the disclosure requirements of SFAS No. 123. Adoption of the provisions
of the Statement in 2003 will not have any impact since the Company will
continue to use the intrinsic value method as set forth in APB No. 25.

In November of 2002, the FASB issued Interpretation No. 45 Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies
that a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure provisions of this Interpretation are effective for
the Companys December 31, 2002 financial statements; the Company has no
guarantees requiring disclosure under this Interpretation. The initial
recognition and
initial measurement provisions of this Interpretation are applicable to
guarantees issued or modified after December 31, 2002. The

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Company does not believe that the initial recognition and measurement
provisions of this Interpretation will have a material effect on the Companys
financial statements.

In January of 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. This Interpretation clarifies the application of
existing accounting pronouncements to certain entities in which equity
investors do not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other
parties. The provisions of the Interpretation will be immediately effective
for all variable interests in variable interest entities created after January
31, 2003, and the Company will need to apply its provisions to any existing
variable interests in variable interest entities by no later than the third
quarter of 2003. The Company believes that it does not hold any investments in
entities that will be deemed variable interest entities and, accordingly, that
the implementation of this Interpretation will not have a material effect on
the Companys financial statements.

O.     Reclassification  Certain prior year amounts have been reclassified to
conform with the 2002 presentation for discontinued operations.

2.     REAL ESTATE

Real estate is comprised of the following:

|                         |  |              |            |      |  |   |            | 
|------------------------ |  | ------------ | ---------- | ---- |  | - | ---------- | 
|                         |  | December 31,
|                         |  |             
|                         |  | 2002         |            | 2001
|                         |  |              |            |     
|Land                     |  | $            | 7,280,424  |      |  | $ | 7,283,258  | 
|Buildings and leaseholds |  |              | 42,069,582 |      |  |   | 41,710,766 | 
|Furniture and equipment  |  |              | 389,670    |      |  |   | 373,018    | 
|                         |  |              |            |      |  |   |            | 
|Total real estate        |  | $            | 49,739,676 |      |  | $ | 49,367,042 | 
|                         |  |              |            |      |  |   |            | 

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

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properties, the Company obtained first mortgage loans of $7,900,000 and
$14,000,000, respectively.

Four of the properties owned by the Company represented 24%, 21%, 16% and 11%
of total rental revenue in 2002; 27%, 20%, 16% and 11% of total rental revenue
in 2001; and 23%, 21%, 15% and 11% of total rental revenue in 2000.

3.     MORTGAGE PORTFOLIO

The Companys mortgage portfolio includes notes receivable  sold properties
and other, and notes receivable  related parties.

Notes receivable  sold properties and other consist of:



|(1) |  | Long-term purchase money notes from sales of properties previously owned
by the Company and loans and mortgages originated 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, 2002, all of the notes in the Companys mortgage portfolio are
current, in accordance with their terms, as modified.

The following table summarizes the components of the mortgage
portfolio:

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MORTGAGE PORTFOLIO



|                    |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |            | 
|------------------- | -------------- | - | ------------------------- | --------- | ----------- | - | ----------- |  | ----- | - | ------- | ------ |  | - | ---------- | ---------- | 
|                    |                |   | Sold Properties and Other
|                    |                |   |                          
|                    |                |   | Properties                |           | Other       |   | Cooperative |  |       |   |        
|                    |                |   | previously                |           | (originated |   | apartment   |  |       |   |        
|                    |                |   | owned                     |           | loans)      |   | units       |  | Total
|                    |                |   |                           |           |             |   |             |  |      
|December 31, 2002   |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |           
|Notes receivable    |                | $ | 21,330,678                |           |             | $ | 2,875,000   |  |       | $ | 447,803 |        |  | $ | 24,653,481 |           
|Less: Discounts     |                |   | 1,148,843                 |           |             |   |             |  |       |   | 8,722   |        |  |   | 1,157,565  |           
|                    | Deferred gains |   |                           | 6,233,390 |             |   |             |  |       |   |         | 44,652 |  |   |            | 6,278,042  | 
|                    |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |           
|Net                 |                | $ | 13,948,445                |           |             | $ | 2,875,000   |  |       | $ | 394,429 |        |  | $ | 17,217,874 |           
|                    |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |           
|Due within one year |                | $ | 46,741                    |           |             | $ | 1,775,000   |  |       | $ | 177,244 |        |  | $ | 1,998,985  |           
|Long-term           |                |   | 13,901,704                |           |             |   | 1,100,000   |  |       |   | 217,185 |        |  |   | 15,218,889 |           
|                    |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |           
|Net                 |                | $ | 13,948,445                |           |             | $ | 2,875,000   |  |       | $ | 394,429 |        |  | $ | 17,217,874 |           
|                    |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |           
|December 31, 2001   |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |           
|Notes receivable    |                | $ | 25,474,883                |           |             | $ | 1,100,000   |  |       | $ | 729,481 |        |  | $ | 27,304,364 |           
|Less: Discounts     |                |   | 1,246,959                 |           |             |   |             |  |       |   | 9,723   |        |  |   | 1,256,682  |           
|                    | Deferred gains |   |                           | 9,983,390 |             |   |             |  |       |   |         | 69,055 |  |   |            | 10,052,445 | 
|                    |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |           
|Net                 |                | $ | 14,244,534                |           |             | $ | 1,100,000   |  |       | $ | 650,703 |        |  | $ | 15,995,237 |           
|                    |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |           
|Due within one year |                | $ | 42,205                    |           |             | $ |             |  |       | $ | 235,745 |        |  | $ | 277,950    |           
|Long-term           |                |   | 14,202,329                |           |             |   | 1,100,000   |  |       |   | 414,958 |        |  |   | 15,717,287 |           
|                    |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |           
|Net                 |                | $ | 14,244,534                |           |             | $ | 1,100,000   |  |       | $ | 650,703 |        |  | $ | 15,995,237 |           
|                    |                |   |                           |           |             |   |             |  |       |   |         |        |  |   |            |           

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                    |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |            | 
|------------------- | -------------- | - | --------------- | ------- | ----------- | - | ------- |  | --------- | - | --------- | ------- |  | - | ---------- | ---------- | 
|                    |                |   | Related Parties |         |             |   |        
|                    |                |   |                 |         |             |   |        
|                    |                |   | Properties      |         | Cooperative |   |         |  |           |   | Total    
|                    |                |   | previously      |         | conversion  |   |         |  |           |   | mortgage 
|                    |                |   | owned           |         | loans       |   | Total   |  | portfolio
|                    |                |   |                 |         |             |   |         |  |          
|December 31, 2002   |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |           
|Notes receivable    |                | $ | 1,207,831       |         |             | $ | 118,681 |  |           | $ | 1,326,512 |         |  | $ | 25,979,993 |           
|Less: Discounts     |                |   | 27,362          |         |             |   | 78,307  |  |           |   | 105,669   |         |  |   | 1,263,234  |           
|                    | Deferred gains |   |                 | 830,927 |             |   |         |  |           |   |           | 830,927 |  |   |            | 7,108,969  | 
|                    |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |           
|Net                 |                | $ | 349,542         |         |             | $ | 40,374  |  |           | $ | 389,916   |         |  | $ | 17,607,790 |           
|                    |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |           
|Due within one year |                | $ | 50,152          |         |             | $ | 11,913  |  |           | $ | 62,065    |         |  | $ | 2,061,050  |           
|Long-term           |                |   | 299,390         |         |             |   | 28,461  |  |           |   | 327,851   |         |  |   | 15,546,740 |           
|                    |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |           
|Net                 |                | $ | 349,542         |         |             | $ | 40,374  |  |           | $ | 389,916   |         |  | $ | 17,607,790 |           
|                    |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |           
|December 31, 2001   |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |           
|Notes receivable    |                | $ | 1,251,585       |         |             | $ | 127,414 |  |           | $ | 1,378,999 |         |  | $ | 28,683,363 |           
|Less: Discounts     |                |   | 28,144          |         |             |   | 78,307  |  |           |   | 106,451   |         |  |   | 1,363,133  |           
|                    | Deferred gains |   |                 | 857,856 |             |   |         |  |           |   |           | 857,856 |  |   |            | 10,910,301 | 
|                    |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |           
|Net                 |                | $ | 365,585         |         |             | $ | 49,107  |  |           | $ | 414,692   |         |  | $ | 16,409,929 |           
|                    |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |           
|Due within one year |                | $ | 16,826          |         |             | $ | 20,646  |  |           | $ | 37,472    |         |  | $ | 315,422    |           
|Long-term           |                |   | 348,759         |         |             |   | 28,461  |  |           |   | 377,220   |         |  |   | 16,094,507 |           
|                    |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |           
|Net                 |                | $ | 365,585         |         |             | $ | 49,107  |  |           | $ | 414,692   |         |  | $ | 16,409,929 |           
|                    |                |   |                 |         |             |   |         |  |           |   |           |         |  |   |            |           

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Loans, Payoffs and Prepayments

In July, 2002, the Company made a $1,775,000 loan secured by three apartment
properties located in New Jersey and an $887,500 personal guarantee from the
borrowers. The loan requires monthly interest payments at the rate of 11.5%
per annum and the entire principal amount is due at maturity in July, 2003. In
February, 2001, the Company made a $1,100,000 loan secured by the same three
apartment properties located in New Jersey and by a $750,000 personal guarantee
by one of the borrowers principals. The loan requires monthly interest
payments at the rate of 13% per annum and the entire principal amount is due at
maturity in February, 2009.
The three properties in New Jersey also secure the $4,000,000 Fairfield Towers
loan.

During 2002, 2001 and 2000, the Company received $352,000, $529,262 and
$98,738, respectively, in principal payments on its Mark Terrace notes
receivable resulting in the recognition of previously deferred gains of
$462,250 and $96,000 in 2001 and 2000, respectively. The payments were made in
connection with the 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 January, 2001, the Company received payment in full on its $1,175,500
Woodgate note receivable that had been secured by the Windsor at Arbors
property in Alexandria, Virginia. As a result, the Company recognized $255,281
of unamortized discount and $684,991 of deferred gain.

Subsequent to December 31, 2002, the Company made a $1,500,000 loan secured by
ownership interests in Reisterstown Town Square Associates, LLC, which owns
Reisterstown Apartments in Baltimore, Maryland, and a personal guarantee from
the borrower. The loan matures on January 31, 2008 and has an annual interest
rate of 10.50% for the first three years and fluctuates thereafter with a base
of 10.50% per annum.

Modifications

In April, 2002, the $12,300,000 New Haven note secured by a second mortgage on
the Encore Apartments in New York, New York was modified at the Companys
request. Under the terms of the modification, Presidential received a
principal repayment of $3,750,000 and additional interest of $369,000 (which
was due under the terms of the original note). The $8,550,000 balance of the
$12,300,000 note was modified to extend the maturity date from June 29, 2002
until

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April 30, 2009 and to provide for interest payable monthly at annual rates of
11% through June 30, 2002, 9% from July 1, 2002 through April 18, 2004, 10%
from April 19, 2004 through April 18, 2007 and 10-1/2% from April 19, 2007
through maturity and additional interest of $171,000 due at maturity, which
will increase the effective interest rate to 10.17% per annum. The $8,550,000
note is secured by a second mortgage on the Encore apartment property and by a
pledge of the ownership interests in the entity owning the Encore Apartments.
In connection with the modification, Presidential received a $21,375 commitment
fee and recognized a previously deferred gain of $3,750,000, which is included
in net gain from sales of properties and securities in the Consolidated
Statements of Operations.

4.     DISCONTINUED OPERATIONS

Income from discontinued operations relates to the Sunwood Apartments property,
the University Towers Professional Space Lease property and the Towers Shoppers
Parcade property, all of which were sold during 2002. The following table
summarizes revenue and expense for these properties sold.

|                                           |                                |  |                         |         |      |  |           |           |  |  |           |           | 
|------------------------------------------ | ------------------------------ |  | ----------------------- | ------- | ---- |  | --------- | --------- |  |  | --------- | --------- | 
|                                           |                                |  | Year ended December 31,
|                                           |                                |  |                        
|                                           |                                |  | 2002                    |         | 2001 |  | 2000     
|                                           |                                |  |                         |         |      |  |          
|Revenue:                                   |                                |  |                         |         |      |  |           |           |  |  |           |          
|                                           | Rental                         |  | $                       | 749,712 |      |  | $         | 1,477,588 |  |  | $         | 1,392,387 | 
|                                           | Interest                       |  |                         | 34,004  |      |  |           |           |  |  |           |           | 
|                                           |                                |  |                         |         |      |  |           |           |  |  |           |          
|Total                                      |                                |  | 783,716                 |         |      |  | 1,477,588 |           |  |  | 1,392,387 |          
|                                           |                                |  |                         |         |      |  |           |           |  |  |           |          
|Rental property expenses:                  |                                |  |                         |         |      |  |           |           |  |  |           |          
|                                           | Operating expenses             |  |                         | 236,239 |      |  |           | 596,889   |  |  |           | 780,024   | 
|                                           | Interest on mortgage debt      |  |                         | 204,388 |      |  |           | 308,947   |  |  |           | 313,483   | 
|                                           | Real estate taxes              |  |                         | 80,078  |      |  |           | 124,712   |  |  |           | 126,187   | 
|                                           | Depreciation on real estate    |  |                         | 44,528  |      |  |           | 193,257   |  |  |           | 197,839   | 
|                                           | Amortization of mortgage
costs |  |                         | 6,498   |      |  |           | 9,371     |  |  |           | 8,935     | 
|                                           |                                |  |                         |         |      |  |           |           |  |  |           |          
|Total                                      |                                |  | 571,731                 |         |      |  | 1,233,176 |           |  |  | 1,426,468 |          
|                                           |                                |  |                         |         |      |  |           |           |  |  |           |          
|Other income  investment
income           |                                |  | 827                     |         |      |  | 2,807     |           |  |  | 1,808     |          
|                                           |                                |  |                         |         |      |  |           |           |  |  |           |          
|Income (loss) before minority
interest     |                                |  | 212,812                 |         |      |  | 247,219   |           |  |  | (32,273   | )        
|Minority interest share of
(income) loss   |                                |  | (11,046                 | )       |      |  | (14,789   | )         |  |  | 22,393    |          
|                                           |                                |  |                         |         |      |  |           |           |  |  |           |          
|Income (loss) from
discontinued operations |                                |  | 201,766                 |         |      |  | 232,430   |           |  |  | (9,880    | )        
|                                           |                                |  |                         |         |      |  |           |           |  |  |           |          

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|                                                 |                                                                |   |                         |           |      |   |         |  |  |   |        |   | 
|------------------------------------------------ | -------------------------------------------------------------- | - | ----------------------- | --------- | ---- | - | ------- |  |  | - | ------ | - | 
|                                                 |                                                                |   | Year ended December 31,
|                                                 |                                                                |   |                        
|                                                 |                                                                |   | 2002                    |           | 2001 |   | 2000   
|                                                 |                                                                |   |                         |           |      |   |        
|Gain from sale of
discontinued operations:       |                                                                |   |                         |           |      |   |         |  |  |   |        |  
|                                                 | Net gain before provision
for income tax and
minority interest |   |                         | 2,079,497 |      |   |         |  |  |   |        |   | 
|                                                 | Less:                                                          |   |                         |           |      |   |         |  |  |   |        |   | 
|                                                 | Provision for Federal taxes                                    |   |                         | 498,750   |      |   |         |  |  |   |        |   | 
|                                                 | Minority interest                                              |   |                         | 94,830    |      |   |         |  |  |   |        |   | 
|                                                 |                                                                |   |                         |           |      |   |         |  |  |   |        |  
|                                                 | Net gain from sale of
discontinued operations                  |   |                         | 1,485,917 |      |   |         |  |  |   |        |   | 
|                                                 |                                                                |   |                         |           |      |   |         |  |  |   |        |  
|Total income (loss) from
discontinued operations |                                                                | $ | 1,687,683               |           |      | $ | 232,430 |  |  | $ | (9,880 | )
|                                                 |                                                                |   |                         |           |      |   |         |  |  |   |        |  

On August 30, 2002, the Company consummated the sale of its Sunwood Apartments
property in Miami, Florida to Sunwood Development LLC for a sales price of
$8,000,000 pursuant to a contract for the sale executed in February, 2002. The
net cash proceeds of sale, after repayment of the $4,641,879 first mortgage
loan, a brokerage fee of $240,000 and other expenses of sale of $39,139, were
$3,078,982. The carrying value of the Sunwood Apartments property was
$6,009,837 (net of accumulated deprecation of $611,303). Presidential has, for
financial reporting purposes, recognized a gain from the sale of $1,142,734 net
of Federal taxes of $498,750.

In May, 2002, UTB Associates, a consolidated partnership in which the Company
holds a 66-2/3% interest, finalized a settlement of certain litigation issues
with University Towers Owners Corp. UTB Associates was 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. Since 1999, UTB Associates and University Towers Owners Corp.,
the cooperative corporation, had been in litigation regarding the termination
of the Professional Space Lease. In September, 2001, the court terminated the
Professional Space Lease and, as a result, effective September 1, 2001,
operation of the Professional Space Lease property was relinquished to the
cooperative corporation. UTB Associates appealed the decision and pending the
outcome of the appeal, UTB Associates and the cooperative corporation reached
an agreement to settle the various issues involved in the litigation. Under
the terms of the settlement, UTB Associates agreed to the termination of the
lease and the subleases and the associated tenant improvements were assigned to
the cooperative corporation. In return, UTB Associates was to receive payments
from the cooperative corporation (that effectively began April 1, 2002 under
the terms of

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a $660,000 non-interest bearing promissory note) over a nine-year period in the
amount of approximately $5,833 per month for the first three years and $6,250
per month for the last six years. As part of the settlement, Presidential
transferred to the cooperative corporation its interest in the Towers Shoppers
Parcade property which is used for parking for tenants at the professional
space property and in return was to receive under the terms of a $190,000
non-interest bearing promissory note a monthly payment of approximately $1,759
for the next nine years starting April 1, 2002. However, in November, 2002,
the notes due from University Towers Owners Corp. were repaid in full. Under
the terms of the notes, the prepayment price was equal to the present value of
the projected note payments calculated at a discount rate of 3% per annum. As
a result, UTB Associates and the Company received a total prepayment of
$696,624 after a discount of $92,635.

The net book value of the assets transferred to the cooperative corporation in
May, 2002 was $212,488 and $3,146 by UTB Associates and Presidential,
respectively. After closing costs, UTB Associates recorded a gain on sale of
$284,434 (including the minority interest share of $94,830) and amortization of
discount of $26,377. Presidential recorded a gain on sale of $153,579 and
amortization of discount of $7,627.

The assets and liabilities of these properties are segregated in the
consolidated balance sheets at December 31, 2001. The components are as
follows:

|                                                |                         |                                |                   |           |              |           | 
|----------------------------------------------- | ----------------------- | ------------------------------ | ----------------- | --------- | ------------ | --------- | 
|                                                |                         |                                |                   |           | December 31,
|                                                |                         |                                |                   |           | 2001        
|                                                |                         |                                |                   |           |             
|Assets related to discontinued operations:      |                         |                                |                   |          
|                                                | Land                    |                                | $                 | 1,680,000 |             
|                                                | Building                |                                |                   | 5,257,363 |             
|                                                | Furniture and equipment |                                |                   | 8,145     |             
|                                                |                         | Less: accumulated depreciation |                   |           | (684,317     | )        
|                                                |                         |                                |                   |          
|                                                | Net real estate         |                                |                   | 6,261,191 |             
|                                                | Prepaid expenses        |                                |                   | 52,117    |             
|                                                | Other assets            |                                |                   | 181,643   |             
|                                                |                         |                                |                   |          
|Total                                           |                         | $                              | 6,494,951         |          
|                                                |                         |                                |                   |          
|Liabilities related to discontinued
operations: |                         |                                |                   |          
|                                                |                         |                                | Mortgage debt     |           | $            | 4,685,886 | 
|                                                |                         |                                | Other liabilities |           |              | 100,853   | 
|                                                |                         |                                |                   |          
|Total                                           |                         | $                              | 4,786,739         |          
|                                                |                         |                                |                   |          

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5.     MORTGAGE DEBT

All mortgage debt is secured by individual properties and is nonrecourse to the
Company with the exception of the $211,258 mortgage on the Mapletree Industrial
Center property in Palmer, Massachusetts, which is guaranteed by Presidential.

Amortization requirements of all mortgage debt as of December 31, 2002 are
summarized as follows:

|                         |  |   |            | 
|------------------------ |  | - | ---------- | 
|Year ending December 31: |  |   |            | 
|                         |  |   |            | 
|2003                     |  | $ | 448,487    | 
|2004                     |  |   | 478,588    | 
|2005                     |  |   | 522,277    | 
|2006                     |  |   | 563,927    | 
|2007                     |  |   | 7,707,392  | 
|2008 - 2029              |  |   | 27,471,143 | 
|                         |  |   |            | 
|TOTAL                    |  | $ | 37,191,814 | 
|                         |  |   |            | 

Interest on mortgages is payable at fixed rates, summarized as follows:

|                |  |   |            | 
|--------------- |  | - | ---------- | 
|Interest rates: |  |   |            | 
|                |  |   |            | 
|4.75%           |  | $ | 211,258    | 
|6.65%           |  |   | 3,053,719  | 
|7%-7.06%        |  |   | 4,754,976  | 
|8.15%-8.25%     |  |   | 29,171,861 | 
|                |  |   |            | 
|TOTAL           |  | $ | 37,191,814 | 
|                |  |   |            | 

6.     DISTRIBUTIONS FROM PARTNERSHIP IN EXCESS OF INVESTMENT AND
EARNINGS

PDL, Inc. (a wholly owned subsidiary of Presidential) is the General Partner of
PDL, Inc. and Associates Limited Co-Partnership (Home Mortgage Partnership).
The partnership owns and operates an office building in Hato Rey, Puerto Rico.
Presidential and PDL, Inc. have an aggregate 31% general and limited partner
interest in Home Mortgage Partnership at December 31, 2002. This interest has
increased from 26% owned prior to 2001 as a result of a 1% interest
acquired for a purchase price of $50,000 in 2001 and a 4% interest acquired for
$255,500 in 2002. The Company accounts for its

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investment in this partnership under the equity method, because it exercises
significant influence, but not control, over the partnerships affairs.

The Companys interest in the Home Mortgage Partnership is a negative interest
and therefore, is classified as a liability on the Companys consolidated
balance sheets, captioned distributions from partnership in excess of
investment and earnings. The negative basis is solely due to the refinancing
of the mortgage on the property owned by the partnership and the distribution
of the proceeds to the partners in prior years, and not due to partnership
operating losses.

Summary financial information for Home Mortgage Partnership is as follows:

|                                                                    |                                            |   |              |             |      |   |           |             |  
|------------------------------------------------------------------- | ------------------------------------------ | - | ------------ | ----------- | ---- | - | --------- | ----------- | -
|                                                                    |                                            |   | December 31,
|                                                                    |                                            |   |             
|                                                                    |                                            |   | 2002         |             | 2001
|                                                                    |                                            |   |              |             |     
|Condensed Balance Sheets                                            |                                            |   |              |             |      |   |           |            
|                                                                    | Net real estate                            | $ | 4,471,850    |             |      | $ | 4,657,766 |            
|                                                                    | Prepaid expenses and deposits in escrow    |   | 804,205      |             |      |   | 651,882   |            
|                                                                    | Cash and cash equivalents                  |   |              | 696,220     |      |   |           | 769,115     |  
|                                                                    | Receivables and other assets               |   |              | 622,500     |      |   |           | 667,214     |  
|                                                                    |                                            |   |              |             |      |   |           |            
|                                                                    | Total Assets                               |   | $            | 6,594,775   |      |   | $         | 6,745,977   |  
|                                                                    |                                            |   |              |             |      |   |           |            
|                                                                    | Nonrecourse mortgage debt                  |   | $            | 16,737,569  |      |   | $         | 16,928,550  |  
|                                                                    | Other liabilities                          |   |              | 550,624     |      |   |           | 550,352     |  
|                                                                    |                                            |   |              |             |      |   |           |            
|                                                                    | Total Liabilities                          |   |              | 17,288,193  |      |   |           | 17,478,902  |  
|                                                                    | Partners Deficiency                       |   |              | (10,693,418 | )    |   |           | (10,732,925 | )
|                                                                    |                                            |   |              |             |      |   |           |            
|                                                                    | Total Liabilities and
Partners Deficiency |   | $            | 6,594,775   |      |   | $         | 6,745,977   |  
|                                                                    |                                            |   |              |             |      |   |           |            
|On the Companys Consolidated Balance Sheets:                       |                                            |   |              |             |      |   |           |            
|Distributions from partnership in
excess of investment and earnings |                                            | $ | 2,358,164    |             |      | $ | 2,626,248 |            
|                                                                    |                                            |   |              |             |      |   |           |            

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|                                                        |                                 |  |                         |            |      |  |      |            |   |  |   |            |  
|------------------------------------------------------- | ------------------------------- |  | ----------------------- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | -
|                                                        |                                 |  | Year Ended December 31,
|                                                        |                                 |  |                        
|                                                        |                                 |  | 2002                    |            | 2001 |  | 2000
|                                                        |                                 |  |                         |            |      |  |     
|Condensed Statements of Operations                      |                                 |  |                         |            |      |  |      |            |   |  |   |           
|                                                        | Revenues                        |  | $                       | 4,384,810  |      |  | $    | 4,233,202  |   |  | $ | 4,163,283  |  
|                                                        | Interest on mortgage debt       |  |                         | (1,259,330 | )    |  |      | (1,273,117 | ) |  |   | (1,289,398 | )
|                                                        | Other expenses                  |  |                         | (2,132,776 | )    |  |      | (2,003,623 | ) |  |   | (2,057,405 | )
|                                                        | Investment income               |  |                         | 16,803     |      |  |      | 39,896     |   |  |   | 45,571     |  
|                                                        |                                 |  |                         |            |      |  |      |            |   |  |   |           
|                                                        | Net Income                      |  | $                       | 1,009,507  |      |  | $    | 996,358    |   |  | $ | 862,051    |  
|                                                        |                                 |  |                         |            |      |  |      |            |   |  |   |           
|On the Companys Consolidated
Statements of Operations: |                                 |  |                         |            |      |  |      |            |   |  |   |           
|                                                        | Equity in income of partnership |  | $                       | 295,564    |      |  | $    | 261,981    |   |  | $ | 224,133    |  
|                                                        |                                 |  |                         |            |      |  |      |            |   |  |   |           

7.     MINORITY INTEREST IN CONSOLIDATED PARTNERSHIP

Presidential is the General Partner of UTB Associates, a partnership in which
Presidential has a 66-2/3% interest. Subsequent to December 31, 2002,
Presidential acquired an additional 8-1/3% interest in UTB Associates for a
purchase price of $37,763. As the General Partner of UTB Associates,
Presidential exercises effective control over this partnership, through its
ability to manage the affairs of the partnership in the ordinary course of
business, including the ability to approve the partnerships budgets, and
through its significant equity interest. Accordingly, Presidential
consolidates this partnership in the accompanying financial statements. The
minority interest reflects the minority partners equity in the partnership.

8.     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, 2004. Presidential pays a 1% annual fee for the
line of credit. There were no borrowings under this line of credit during
2002, 2001 and 2000.

9.     INCOME TAXES

Presidential has elected to qualify as a Real Estate Investment Trust under the
Internal Revenue Code. A REIT which distributes at least 90% 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.

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Upon filing the Companys income tax return for the year ended December 31,
2001, Presidential applied its available 2001 stockholders distributions and
elected to apply (under Section 858 of the Internal Revenue Code) approximately
$838,000 ($.22 per share) of its 2002 stockholders distributions to reduce its
taxable income for 2001 to zero.

For the year ended December 31, 2002, the Company had taxable income (before
distributions to stockholders) of approximately $5,234,000 ($1.40 per share),
which included approximately $4,935,000 ($1.32 per share) of capital gains.
This amount will be reduced by $1,425,000 ($.38 per share) of undistributed
capital gains designated as paid under Section 857(b)(3)(D) of the Internal
Revenue Code (see below) and by the $1,553,000 ($.42 per share) of its 2002
distributions that were not utilized in reducing the Companys 2001 taxable
income. In addition, the Company may elect to apply any eligible year 2003
distributions to reduce its 2002 taxable income.

As previously stated, in order to retain REIT status, Presidential is required
to distribute 90% of its REIT taxable income (exclusive of capital gains). As
of December 31, 2002, Presidential has distributed all of the required 90%
($.07 per share) of its 2002 REIT taxable income exclusive of capital gains.

Under the provisions of the Internal Revenue Code, Section 857(b)(3)(D),
Presidential elected to designate and retain net long-term capital gains of
$1,425,000 received in 2002. Presidential subsequently paid a $498,750 income
tax on this retained capital gain. Each shareholder (i) includes its pro rata
share ($.38 per share) of the Companys retained capital gain in computing its
long-term capital gain, (ii) receives a tax credit for its pro rata share ($.13
per share) of the tax paid by Presidential and (iii) increases the tax basis of
its shares ($.25 per share) by the difference between the amount of the capital
gain allocated to it and the tax credit received. In addition, although no
assurances can be given, the Company currently expects to distribute all of its
remaining 2002 taxable income (after the $1,425,000 retained capital gain) of
approximately $2,256,000 ($.60 per share) during 2003 and, accordingly, has
made no provisions for income taxes other than the $498,750 for the retained
gain.

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

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10.     COMMITMENTS AND CONTINGENCIES

Presidential is not a party to any material legal proceedings. 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 h
ave an adverse effect on the Companys operating
results and financial condition.

11.     CONCENTRATIONS OF CREDIT RISK

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

The Companys mortgage portfolio consists of long-term notes receivable
collateralized by real estate located in four 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.

12.     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.

Other than as described in Note 15, no shares of common stock of Presidential
are reserved.

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|13. |  | DISTRIBUTIONS ON COMMON STOCK
|--- |  | -----------------------------

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

|     |  |              |      |                 |  |              |      |  |  |   |      | 
|---- |  | ------------ | ---- | --------------- |  | ------------ | ---- |  |  | - | ---- | 
|     |  | Total        |      | Taxable         |  | Taxable     
|Year |  | Distribution |      | Ordinary Income |  | Capital Gain
|     |  |              |      |                 |  |             
|2002 |  | $            | 0.64 |                 |  | $            | 0.10 |  |  | $ | 0.54 | 
|2001 |  |              | 0.64 |                 |  |              | 0.48 |  |  |   | 0.16 | 
|2000 |  |              | 0.64 |                 |  |              | 0.04 |  |  |   | 0.60 | 

Designated Undistributed Long-Term Capital Gains:

In addition, on December 31, 2002, the Company elected to retain $0.38 per
share of long-term capital gains received in 2002. This undistributed
long-term capital gain of $0.38 per share is taxable to shareholders as a
long-term capital gains distribution. Shareholders will receive a tax credit
of $0.13 per share and should increase the tax basis of their shares by $0.25
per share.



|14. |  | STOCK COMPENSATION
|--- |  | ------------------

During the first quarter of each year, three directors of the Company each
receive 1,000 shares of the Companys Class B common stock as partial payment
for directors fees for the year. As a result of these transactions, the
Company records an amount for directors fees based on the market value of the
Class B common stock at the grant date, records additions to the Companys
Class B common stock of $300 at par value of $.10 per share and the balance is
added to additional paid-in capital.

Stock compensation activity for the three years ended December 31, 2002 was as
follows:

|     |  |              |       |                 |  |   |        | 
|---- |  | ------------ | ----- | --------------- |  | - | ------ | 
|     |  | Market Value |       | Total          
|Year |  | per Share    |       | Directors' Fees
|     |  |              |       |                
|2002 |  | $            | 6.511 |                 |  | $ | 19,533 | 
|2001 |  |              | 5.645 |                 |  |   | 16,935 | 
|2000 |  |              | 6.075 |                 |  |   | 18,225 | 

15.     STOCK OPTION PLANS

In 1999, the Company adopted a Nonqualified Stock Option Plan (the 1999 Stock
Option Plan). The 1999 Stock Option Plan provides that

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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 of the Companys
officers at an exercise price of $6.375 per share. All of the options are
exercisable at December 31, 2002 and expire on November 10, 2005. No other
options have been granted, exercised or cancelled under this plan. The Company
has agreed that to the extent that any of the existing stock options held by
these officers 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.



|16. |  | CONTRACTUAL PENSION AND POSTRETIREMENT BENEFITS
|--- |  | -----------------------------------------------

Presidential has employment contracts with several active and retired officers
and employees. These contracts provide for annual pension benefits and other
postretirement benefits such as health care benefits. The pension benefits
generally provide for annual payments in specified amounts for each participant
for life, commencing upon retirement, with an annual adjustment for an increase
in the consumer price index. The contracts were amended effective January 1,
2002 to change the benefit commencement date for three active officers to four
years after they actually retire. The Company accrues on an actuarial basis
the estimated costs of these benefits during the years the employee provides
services. Periodic benefit costs are reflected in general and administrative
expenses. The contractual benefit plans are not funded.

The prior assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 8% for 1999, decreasing gradually each
successive year to 5% in 2002. The revised assumed health care cost trend rate
at December 31, 2001 was 11% for 2001, decreasing gradually each successive
year until it reaches 5% by the year 2013.

The following tables summarize the actuarial costs of the contractual pension
and postretirement benefits:

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CONTRACTUAL PENSION AND POSTRETIREMENT BENEFITS

|                                         |  |                             |         |                                     |  |      |         |      |  |      |         |      |  |   |        |   |  |   |        |   |  |   |        |  
|---------------------------------------- |  | --------------------------- | ------- | ----------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                         |  | Contractual Pension Benefit |         | Contractual Postretirement Benefits
|                                         |  | Year Ended December 31,     |         | Year Ended December 31,            
|                                         |  |                             |         |                                    
|                                         |  | 2002                        |         | 2001                                |  | 2000 |         | 2002 |  | 2001 |         | 2000
|                                         |  |                             |         |                                     |  |      |         |      |  |      |         |     
|Components of net periodic benefit cost: |  |                             |         |                                     |  |      |         |      |  |      |         |      |  |   |        |   |  |   |        |   |  |   |        |  
|Service cost                             |  | $                           | 32,599  |                                     |  | $    | 65,547  |      |  | $    | 60,861  |      |  | $ | 18,540 |   |  | $ | 13,953 |   |  | $ | 13,544 |  
|Interest cost                            |  |                             | 162,649 |                                     |  |      | 184,004 |      |  |      | 183,241 |      |  |   | 38,163 |   |  |   | 34,140 |   |  |   | 34,289 |  
|Amortization of prior service cost       |  |                             | (24,693 | )                                   |  |      | 21,683  |      |  |      | 21,683  |      |  |   | (9,612 | ) |  |   | (9,612 | ) |  |   | (9,612 | )
|Recognized actuarial loss                |  |                             | 150,161 |                                     |  |      | 241,446 |      |  |      | 200,362 |      |  |   | 13,781 |   |  |   | 1,007  |   |  |   |        |  
|                                         |  |                             |         |                                     |  |      |         |      |  |      |         |      |  |   |        |   |  |   |        |   |  |   |        |  
|Net periodic benefit cost                |  | $                           | 320,716 |                                     |  | $    | 512,680 |      |  | $    | 466,147 |      |  | $ | 60,872 |   |  | $ | 39,488 |   |  | $ | 38,221 |  
|                                         |  |                             |         |                                     |  |      |         |      |  |      |         |      |  |   |        |   |  |   |        |   |  |   |        |  

The recorded contractual pension and postretirement benefits liability of
$3,328,083 at December 31, 2002 is comprised of $2,814,176 for pension benefits
and $513,907 for postretirement benefits. The accumulated pension and
postretirement benefit obligations and recorded liabilities, none of which has
been funded, were as follows:

|                                                    |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|--------------------------------------------------- |  | --------------------------- | ----------- | ----------------------------------- |  | ---- | ----------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                    |  | Contractual Pension Benefit |             | Contractual Postretirement Benefits
|                                                    |  | December 31,                |             | December 31,                       
|                                                    |  |                             |             |                                    
|                                                    |  | 2002                        |             | 2001                                |  | 2002 |             | 2001
|                                                    |  |                             |             |                                     |  |      |             |     
|Change in benefit obligation:                       |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Benefit obligation at beginning of year             |  | $                           | 3,114,398   |                                     |  | $    | 3,055,851   |      |  | $ | 585,317   |   |  | $ | 492,504   |  
|Service cost                                        |  |                             | 32,599      |                                     |  |      | 65,547      |      |  |   | 18,540    |   |  |   | 13,953    |  
|Interest cost                                       |  |                             | 162,649     |                                     |  |      | 184,004     |      |  |   | 38,163    |   |  |   | 34,140    |  
|Amendments                                          |  |                             | (355,553    | )                                   |  |      |             |      |  |   |           |   |  |   |           |  
|Actuarial loss (gain)                               |  |                             | 295,369     |                                     |  |      | 236,231     |      |  |   | (5,904    | ) |  |   | 94,884    |  
|Benefits paid                                       |  |                             | (435,286    | )                                   |  |      | (427,235    | )    |  |   | (54,623   | ) |  |   | (50,164   | )
|                                                    |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Benefit obligation at end of year                   |  |                             | 2,814,176   |                                     |  |      | 3,114,398   |      |  |   | 581,493   |   |  |   | 585,317   |  
|                                                    |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Change in plan assets:                              |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Employer contributions                              |  |                             | 435,286     |                                     |  |      | 427,235     |      |  |   | 54,623    |   |  |   | 50,164    |  
|Benefits paid                                       |  |                             | (435,286    | )                                   |  |      | (427,235    | )    |  |   | (54,623   | ) |  |   | (50,164   | )
|                                                    |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Fair value of plan assets at end of year            |  |                             | 0           |                                     |  |      | 0           |      |  |   | 0         |   |  |   | 0         |  
|                                                    |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Funded status                                       |  |                             | (2,814,176  | )                                   |  |      | (3,114,398  | )    |  |   | (581,493  | ) |  |   | (585,317  | )
|Unrecognized net actuarial loss                     |  |                             | 1,572,329   |                                     |  |      | 1,427,121   |      |  |   | 101,228   |   |  |   | 120,913   |  
|Unrecognized prior service cost                     |  |                             | (259,175    | )                                   |  |      | 71,685      |      |  |   | (33,642   | ) |  |   | (43,254   | )
|                                                    |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Net amount recognized                               |  |                             | ($1,501,022 | )                                   |  |      | ($1,615,592 | )    |  |   | ($513,907 | ) |  |   | ($507,658 | )
|                                                    |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Amounts recognized in the balance sheet consist of: |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Accrued benefit liability                           |  |                             | ($2,814,176 | )                                   |  |      | ($3,114,398 | )    |  |   | ($513,907 | ) |  |   | ($507,658 | )
|Intangible asset                                    |  |                             |             |                                     |  |      | 71,685      |      |  |   |           |   |  |   |           |  
|Accumulated other comprehensive loss                |  |                             | 1,313,154   |                                     |  |      | 1,427,121   |      |  |   |           |   |  |   |           |  
|                                                    |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Net amount recognized                               |  |                             | ($1,501,022 | )                                   |  |      | ($1,615,592 | )    |  |   | ($513,907 | ) |  |   | ($507,658 | )
|                                                    |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Weighted
average assumptions as of December 31      |  |                             |             |                                     |  |      |             |      |  |   |           |   |  |   |           |  
|Discount rate                                       |  |                             | 6.5         | %                                   |  |      | 7           | %    |  |   | 6.5       | % |  |   | 7         | %
|Expected return on plan assets                      |  |                             | N/A         |                                     |  |      | N/A         |      |  |   | N/A       |   |  |   | N/A       |  
|Rate of compensation increase                       |  |                             | N/A         |                                     |  |      | N/A         |      |  |   | N/A       |   |  |   | N/A       |  

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

|                                                     |  |                |        |                |  |  |          |  
|---------------------------------------------------- |  | -------------- | ------ | -------------- |  |  | -------- | -
|                                                     |  | 1-Percentage-  |        | 1-Percentage- 
|                                                     |  | Point Increase |        | Point Decrease
|                                                     |  |                |        |               
|Effect on total service and interest cost components |  | $              | 5,515  |                |  |  | ($4,740  | )
|Effect on postretirement benefit obligation          |  | $              | 48,264 |                |  |  | ($41,877 | )

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|17. |  | 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% 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.

|                                         |  |                         |          |      |  |      |          |   |  |   |          |  
|---------------------------------------- |  | ----------------------- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                         |  | Year Ended December 31,
|                                         |  |                        
|                                         |  | 2002                    |          | 2001 |  | 2000
|                                         |  |                         |          |      |  |     
|Components of net periodic
benefit cost: |  |                         |          |      |  |      |          |   |  |   |          |  
|Service cost                             |  | $                       | 447,845  |      |  | $    | 417,007  |   |  | $ | 397,950  |  
|Interest cost                            |  |                         | 231,702  |      |  |      | 196,421  |   |  |   | 158,635  |  
|Expected return on plan assets           |  |                         | (185,287 | )    |  |      | (189,683 | ) |  |   | (167,175 | )
|Amortization of prior service cost       |  |                         | 12,616   |      |  |      | 12,616   |   |  |   | 12,616   |  
|Amortization of accumulated
loss (gain)  |  |                         | 1,124    |      |  |      | (4,785   | ) |  |   | (22,479  | )
|                                         |  |                         |          |      |  |      |          |   |  |   |          |  
|Net periodic benefit cost                |  | $                       | 508,000  |      |  | $    | 431,576  |   |  | $ | 379,547  |  
|                                         |  |                         |          |      |  |      |          |   |  |   |          |  

The following sets forth the plans funded status and amount recognized in the
Companys consolidated balance sheets:

|                                        |  |              |           |      |  |   |           | 
|--------------------------------------- |  | ------------ | --------- | ---- |  | - | --------- | 
|                                        |  | December 31,
|                                        |  |             
|                                        |  | 2002         |           | 2001
|                                        |  |              |           |     
|Change in benefit obligation:           |  |              |           |      |  |   |           | 
|Benefit obligation at beginning of year |  | $            | 3,534,826 |      |  | $ | 2,806,020 | 
|Service cost                            |  |              | 447,845   |      |  |   | 417,007   | 
|Interest cost                           |  |              | 231,702   |      |  |   | 196,421   | 
|Actuarial loss                          |  |              | 534,268   |      |  |   | 115,378   | 
|Benefits paid                           |  |              | (415,022  | )    |  |   |           | 
|                                        |  |              |           |      |  |   |           | 
|Benefit obligation at end of year       |  |              | 4,333,619 |      |  |   | 3,534,826 | 
|                                        |  |              |           |      |  |   |           | 

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|                                                    |                                      |   |              |            |      |   |            |            |  
|--------------------------------------------------- | ------------------------------------ | - | ------------ | ---------- | ---- | - | ---------- | ---------- | -
|                                                    |                                      |   | December 31,
|                                                    |                                      |   |             
|                                                    |                                      |   | 2002         |            | 2001
|                                                    |                                      |   |              |            |     
|Change in plan assets:                              |                                      |   |              |            |      |   |            |           
|Fair value of plan assets at
beginning of year      |                                      |   | 2,478,800    |            |      |   | 2,480,162  |           
|Actual return on plan assets                        |                                      |   | (305,455     | )          |      |   | (408,566   | )         
|Employer contributions                              |                                      |   | 740,536      |            |      |   | 407,204    |           
|Benefits paid                                       |                                      |   | (415,022     | )          |      |   |            |           
|                                                    |                                      |   |              |            |      |   |            |           
|Fair value of plan assets at
end of year            |                                      |   | 2,498,859    |            |      |   | 2,478,800  |           
|                                                    |                                      |   |              |            |      |   |            |           
|Funded status actuarial                             |                                      |   | (1,834,760   | )          |      |   | (1,056,026 | )         
|Unrecognized prior service cost                     |                                      |   | 156,438      |            |      |   | 169,054    |           
|Unrecognized loss                                   |                                      |   | 1,393,408    |            |      |   | 369,522    |           
|                                                    |                                      |   |              |            |      |   |            |           
|Net amount recognized                               |                                      | $ | (284,914     | )          |      | $ | (517,450   | )         
|                                                    |                                      |   |              |            |      |   |            |           
|Amounts recognized in the balance
sheet consist of: |                                      |   |              |            |      |   |            |           
|                                                    | Accrued benefit liability            |   | $            | (1,772,630 | )    |   | $          | (1,014,780 | )
|                                                    | Intangible asset                     |   |              | 156,438    |      |   |            | 169,054    |  
|                                                    | Accumulated other comprehensive
loss |   |              | 1,331,278  |      |   |            | 328,276    |  
|                                                    |                                      |   |              |            |      |   |            |           
|Net amount recognized                               |                                      | $ | (284,914     | )          |      | $ | (517,450   | )         
|                                                    |                                      |   |              |            |      |   |            |           

|                                   |  |      |     |      |  |  |   |  
|---------------------------------- |  | ---- | --- | ---- |  |  | - | -
|Weighted-average assumptions as of |  |      |     |      |  |  |   |  
|December 31                        |  | 2002 |     | 2001
|                                   |  |      |     |     
|Discount rate                      |  |      | 6.5 | %    |  |  | 7 | %
|Expected return on plan assets     |  |      | 7   | %    |  |  | 7 | %
|Rate of compensation increase      |  |      | 5   | %    |  |  | 5 | %

Additional disclosure items for the underfunded plan at December 31:

|                               |  |      |           |      |  |   |           | 
|------------------------------ |  | ---- | --------- | ---- |  | - | --------- | 
|                               |  | 2002 |           | 2001
|                               |  |      |           |     
|Accumulated benefit obligation |  | $    | 4,271,489 |      |  | $ | 3,493,580 | 
|Projected benefit obligation   |  |      | 4,333,619 |      |  |   | 3,534,826 | 
|Fair value of plan assets      |  |      | 2,498,859 |      |  |   | 2,478,800 | 

|                              |  |              |           |      |  |   |           | 
|----------------------------- |  | ------------ | --------- | ---- |  | - | --------- | 
|                              |  | December 31,
|                              |  |             
|                              |  | 2002         |           | 2001
|                              |  |              |           |     
|Plan Assets:                  |  |              |           |      |  |   |           | 
|Cash and cash equivalents     |  | $            | 288,493   |      |  | $ | 116,831   | 
|Securities available for sale |  |              | 2,210,366 |      |  |   | 2,361,969 | 
|                              |  |              |           |      |  |   |           | 
|Total plan assets             |  | $            | 2,498,859 |      |  | $ | 2,478,800 | 
|                              |  |              |           |      |  |   |           | 

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|18. |  | 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. 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:

|                                         |  |        |         |          |  |              |           | 
|---------------------------------------- |  | ------ | ------- | -------- |  | ------------ | --------- | 
|                                         |  |        |         |          |  | Net Proceeds
|                                         |  | Shares |         | Received
|                                         |  |        |         |         
|Total shares issued at January 1, 2000   |  |        | 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 | 
|Shares issued during 2001                |  |        | 14,018  |          |  |              | 86,741    | 
|                                         |  |        |         |          |  |              |           | 
|Total shares issued at December 31, 2001 |  |        | 395,147 |          |  |              | 2,660,375 | 
|Shares issued during 2002                |  |        | 18,820  |          |  |              | 122,629   | 
|                                         |  |        |         |          |  |              |           | 
|Total shares issued at December 31, 2002 |  |        | 413,967 |          |  | $            | 2,783,004 | 
|                                         |  |        |         |          |  |              |           | 



|19. |  | 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, 2002, 2001 and 2000,
Presidential recognized interest income on these notes of $29,400, $29,400 and
$29,481, 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 carrying amount of $1,326,512 as of December 31,
2002, and a net carrying amount of $389,916, after deducting discounts and
deferred gains. Presidential received interest of $345,090, $195,444 and
$164,512 from Ivy during 2002, 2001 and 2000, respectively, on these loans.

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In addition, in 2002, 2001 and 2000, Presidential recognized $782, $8,343 and
$32,333, respectively, of income representing the amortization of discounts on
notes receivable.

One of the notes has an outstanding principal balance of $4,770,050 at December
31, 2002. This note was received by the Company in 1991 for nonrecourse loans
that had been previously written off by the Company. Accordingly, this note
was recorded at zero except for a $155,584 portion of the note that was
adequately secured and, as of December 31, 2002, has been repaid. In 1996, the
Company and Ivy agreed that the only payments required under the terms of the
note would be 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 two of the owners of Ivy. Scorpio acts as a producer of
theatrical productions. The Company received $8,733 of principal payments and
$195,819 of interest on this loan during 2002, $15,961 of principal payments
and $43,477 of interest during 2001 and $14,565 of principal payments and
$2,940 of interest during 2000. The Company does not expect to recover any
material principal amounts on this note; amounts received from Scorpio will be
applied to unpaid, unaccrued interest and recognized as income when received.

All outstanding loans from Ivy at December 31, 2002 are current in accordance
with their modified terms. 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.



|20. |  | ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
|--- |  | ---------------------------------------------

Estimated fair values of the Companys financial instruments as of December 31,
2002 and 2001 have been determined using available market information and
various valuation estimation methodologies. Considerable judgement is required
to interpret the effects on fair

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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:

|             |                                  |   |                        |        |                   |   |           |        |           |   |       |        |  |   |       |        | 
|------------ | -------------------------------- | - | ---------------------- | ------ | ----------------- | - | --------- | ------ | --------- | - | ----- | ------ |  | - | ----- | ------ | 
|             |                                  |   | December 31, 2002      |        | December 31, 2001
|             |                                  |   |                        |        |                  
|             |                                  |   | (Amounts in thousands)
|             |                                  |   | Net                    |        | Estimated         |   | Net       |        | Estimated
|             |                                  |   | Carrying               |        | Fair              |   | Carrying  |        | Fair     
|             |                                  |   | Value (1)              |        | Value             |   | Value (1) |        | Value    
|             |                                  |   |                        |        |                   |   |           |        |          
|Assets:      |                                  |   |                        |        |                   |   |           |        |           |   |       |        |  |   |       |       
|             | Cash and cash equivalents        | $ | 6,739                  |        |                   | $ | 6,739     |        |           | $ | 1,788 |        |  | $ | 1,788 |       
|             | Notes receivable-sold properties |   |                        | 17,218 |                   |   |           | 24,383 |           |   |       | 15,995 |  |   |       | 26,266 | 
|             | Notes receivable-related parties |   |                        | 390    |                   |   |           | 1,394  |           |   |       | 415    |  |   |       | 1,568  | 
|Liabilities: |                                  |   |                        |        |                   |   |           |        |           |   |       |        |  |   |       |       
|             | Mortgage debt                    |   |                        | 37,192 |                   |   |           | 38,051 |           |   |       | 37,606 |  |   |       | 38,738 | 



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

The fair value estimates presented above are based on pertinent information
available to management as of December 31, 2002 and 2001. 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, 2002 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.

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

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



|21. |  | FUTURE MINIMUM ANNUAL BASE RENTS
|--- |  | --------------------------------

Future minimum annual base rental revenue for the next five years for
commercial real estate owned at December 31, 2002, and subject to
non-cancelable operating leases is as follows:

|                         |  |   |           | 
|------------------------ |  | - | --------- | 
|Year Ending December 31, |  |   |           | 
|2003                     |  | $ | 858,849   | 
|2004                     |  |   | 354,138   | 
|2005                     |  |   | 154,387   | 
|2006                     |  |   | 107,820   | 
|2007                     |  |   | 28,303    | 
|                         |  |   |           | 
|Total                    |  | $ | 1,503,497 | 
|                         |  |   |           | 

The above table assumes that all leases which expire are not renewed and tenant
renewal options are not exercised, therefore neither renewal rentals nor
rentals from replacement tenants are included. The above table does not
reflect the annual base rental revenue for residential apartments owned, as the
leases for residential apartment units are usually for one year terms.



|22. |  | QUARTERLY FINANCIAL INFORMATION  UNAUDITED
(Amounts in thousands, except earnings per common share)
|--- |  | ----------------------------------------------------------------------------------------------------

|            |  |             |       |          |  |        |       |  |  |   |       |           |  |  |  |     |  |   |      |     |  |  |  | 
|----------- |  | ----------- | ----- | -------- |  | ------ | ----- |  |  | - | ----- | --------- |  |  |  | --- |  | - | ---- | --- |  |  |  | 
|            |  | Revenues(1) |       |          |  |        |       |  |  |   |       |           |  |  |  |     |  |  
|            |  |             |       |          |  |        |       |  |  |   |       | Earnings  |  |  |  |    
|Year        |  | As          |       |          |  |        |       |  |  |   |       |           |  |  |  | Per |  |   |      |    
|Ended       |  | Previously  |       | As       |  | Net    |       |  |  |   |       | Common    |  |  |  |    
|December 31 |  | Reported    |       | Restated |  | Income |       |  |  |   |       | Share (3) |  |  |  |    
|            |  |             |       |          |  |        |       |  |  |   |       |           |  |  |  |    
|2002        |  |             |       |          |  |        |       |  |  |   |       |           |  |  |  |     |  |   |      |     |  |  |  | 
|First       |  | $           | 4,321 |          |  | $      | 3,273 |  |  | $ | 137   |           |  |  |  |     |  | $ | 0.04 |     |  |  |  | 
|Second      |  |             | 4,314 |          |  |        | 3,271 |  |  |   | 3,960 | (2)       |  |  |  |     |  |   | 1.06 | (2) |  |  |  | 
|Third       |  |             | 4,357 |          |  |        | 3,261 |  |  |   | 1,520 |           |  |  |  |     |  |   | 0.41 |     |  |  |  | 
|Fourth      |  |             | 3,200 |          |  |        | 3,200 |  |  |   | 483   |           |  |  |  |     |  |   | 0.13 |     |  |  |  | 
|2001        |  |             |       |          |  |        |       |  |  |   |       |           |  |  |  |     |  |   |      |     |  |  |  | 
|First       |  | $           | 4,623 |          |  | $      | 3,578 |  |  | $ | 1,404 |           |  |  |  |     |  | $ | 0.38 |     |  |  |  | 
|Second      |  |             | 4,340 |          |  |        | 3,279 |  |  |   | 389   |           |  |  |  |     |  |   | 0.10 |     |  |  |  | 
|Third       |  |             | 4,350 |          |  |        | 3,342 |  |  |   | 512   |           |  |  |  |     |  |   | 0.14 |     |  |  |  | 
|Fourth      |  |             | 4,426 |          |  |        | 3,307 |  |  |   | 316   |           |  |  |  |     |  |   | 0.09 |     |  |  |  | 

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| | (1) |  | Amounts have been adjusted to give effect to the reclassification
from revenues to discontinued operations for the Sunwood Apartments
property, the University Towers Professional Space Lease property and
the Towers Shoppers Parcade property, which were sold during 2002. In
addition, adjustments have been made to present investment income as
other income, rather than as a part of revenues.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The amounts have also been adjusted to reflect the restatement of the
amounts for Home Mortgage Partnership to equity in income of
partnership (see Note 23).                                                                                                                                                                                                                                          
|
| | (2) |  | Net income for the second quarter of 2002 includes the recognition of
a previously deferred gain of $3,750,000 from the 1984 sale of the New
Haven property as a result of a $3,750,000 partial principal payment
received on the note.                                                                                                                                                                
|
| | (3) |  | Earnings per common share are computed independently for each of the
quarters presented. Therefore, the sum of quarterly earnings per share
may not equal the total computed for the year, as is the case in 2002.                                                                                                                                                                                     



|23. |  | RESTATEMENT
|--- |  | -----------

Subsequent to the issuance of the 2001 financial statements, the Company
determined that its investment in the Home Mortgage Partnership should be
accounted for under the equity method, instead of the previous accounting,
which treated the Home Mortgage Partnership as a consolidated subsidiary. The
equity method was deemed to be appropriate due to certain provisions in the
partnership agreement which prevent the Company from exercising unilateral
control over the Home Mortgage Partnership. As a result, the 2001 and 2000
financial statements have been restated. In addition, the net amount
recognized in the balance sheet for the contractual pension benefit liability
has been reclassified to reflect its different components on a gross basis,
including an intangible asset and accumulated other comprehensive loss. The
effect of this reclassification was to decrease stockholders equity as of
January 1, 2000 by $1,438,680.

The restatement did not affect previously reported net income or earnings per
common share, but affected numerous accounts on the consolidated balance sheets
and statements of operations, the most significant of which are summarized
below:

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|                                                                    |  |            |            |  |  |  |  |          |  |   |            | 
|------------------------------------------------------------------- |  | ---------- | ---------- |  |  |  |  | -------- |  | - | ---------- | 
|At December 31:                                                     |  | 2001      
|                                                                    |  |           
|                                                                    |  | As         |            |  |  |  |  |          |  |  
|                                                                    |  | Previously |            |  |  |  |  | As      
|                                                                    |  | Reported   |            |  |  |  |  | Restated
|                                                                    |  |            |            |  |  |  |  |         
|Net real estate                                                     |  | $          | 46,380,666 |  |  |  |  |          |  | $ | 41,451,257 | 
|Minority partners interest                                         |  |            | 7,623,061  |  |  |  |  |          |  |   |            | 
|Prepaid expenses and deposits in escrow                             |  |            | 1,677,190  |  |  |  |  |          |  |   | 1,025,310  | 
|Other receivables                                                   |  |            | 787,421    |  |  |  |  |          |  |   | 724,647    | 
|Cash and cash equivalents                                           |  |            | 2,557,340  |  |  |  |  |          |  |   | 1,788,224  | 
|Other assets                                                        |  |            | 1,959,412  |  |  |  |  |          |  |   | 1,426,657  | 
|Mortgage debt                                                       |  |            | 54,534,762 |  |  |  |  |          |  |   | 37,606,211 | 
|Contractual pension and postretirement
benefits liabilities         |  |            | 2,123,250  |  |  |  |  |          |  |   | 3,622,056  | 
|Accrued liabilities                                                 |  |            | 1,429,279  |  |  |  |  |          |  |   | 1,305,696  | 
|Accounts payable                                                    |  |            | 304,586    |  |  |  |  |          |  |   | 185,618    | 
|Distributions from partnership in excess of
investment and earnings |  |            |            |  |  |  |  |          |  |   | 2,626,248  | 
|Other liabilities                                                   |  |            | 960,840    |  |  |  |  |          |  |   | 653,040    | 
|Minority Interest in Consolidated Partnership                       |  |            |            |  |  |  |  |          |  |   | 211,974    | 
|Accumulated other comprehensive loss                                |  |            | 325,330    |  |  |  |  |          |  |   | 1,752,451  | 
|Total Stockholders Equity                                          |  |            | 18,735,734 |  |  |  |  |          |  |   | 17,308,613 | 

|                                   |  |            |            |      |  |  |  |          |  |            |            |    |  |   |            |          |  |  |  |  |  |   |           | 
|---------------------------------- |  | ---------- | ---------- | ---- |  |  |  | -------- |  | ---------- | ---------- | -- |  | - | ---------- | -------- |  |  |  |  |  | - | --------- | 
|For the year ended December 31:    |  | 2001       |            | 2000
|                                   |  |            |            |     
|                                   |  | As         |            |      |  |  |  |          |  |            |            | As |  |   |            |          |  |  |  | 
|                                   |  | Previously |            |      |  |  |  | As       |  | Previously |            |    |  |   |            | As      
|                                   |  | Reported   |            |      |  |  |  | Restated |  | Reported   |            |    |  |   |            | Restated
|                                   |  |            |            |      |  |  |  |          |  |            |            |    |  |   |            |         
|Rental revenues                    |  | $          | 14,382,205 |      |  |  |  |          |  | $          | 10,149,003 |    |  | $ | 13,192,406 |          |  |  |  |  |  | $ | 9,029,122 | 
|Rental property operating expenses |  |            | 5,585,105  |      |  |  |  |          |  |            | 4,176,771  |    |  |   | 5,520,607  |          |  |  |  |  |  |   | 4,052,129 | 
|Interest on mortgage debt          |  |            | 4,286,606  |      |  |  |  |          |  |            | 3,013,489  |    |  |   | 3,948,980  |          |  |  |  |  |  |   | 2,659,582 | 
|Real estate taxes                  |  |            | 1,208,399  |      |  |  |  |          |  |            | 966,051    |    |  |   | 1,102,881  |          |  |  |  |  |  |   | 860,533   | 
|Depreciation on real estate        |  |            | 1,586,484  |      |  |  |  |          |  |            | 1,273,078  |    |  |   | 1,389,706  |          |  |  |  |  |  |   | 1,076,827 | 
|Amortization of mortgage costs     |  |            | 93,459     |      |  |  |  |          |  |            | 53,923     |    |  |   | 79,643     |          |  |  |  |  |  |   | 45,943    | 
|Investment income                  |  |            | 122,585    |      |  |  |  |          |  |            | 82,688     |    |  |   | 241,260    |          |  |  |  |  |  |   | 195,689   | 
|Equity in income of partnership    |  |            |            |      |  |  |  |          |  |            | 261,981    |    |  |   |            |          |  |  |  |  |  |   | 224,133   | 
|Minority interest                  |  |            | 754,903    |      |  |  |  |          |  |            | 20,526     |    |  |   | 662,717    |          |  |  |  |  |  |   | 24,798    | 
|Net Income                         |  |            | 2,621,035  |      |  |  |  |          |  |            | 2,621,035  |    |  |   | 1,212,957  |          |  |  |  |  |  |   | 1,212,957 | 
|Net Income per Common Share        |  |            | 0.71       |      |  |  |  |          |  |            | 0.71       |    |  |   | 0.33       |          |  |  |  |  |  |   | 0.33      | 

The amounts listed above as previously reported reflect the reclassification of
discontinued operations (see Note 4).

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PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

|                                                                                       |  |            
|-------------------------------------------------------------------------------------- |  | -----------
|VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 |  | SCHEDULE II

|                                                                             |      |         |            |          |         |                |        |         |  |   |         |  |  |   |           |  | 
|---------------------------------------------------------------------------- | ---- | ------- | ---------- | -------- | ------- | -------------- | ------ | ------- |  | - | ------- |  |  | - | --------- |  | 
|                                                                             |      |         | BALANCE AT |          | CHARGED |                |        |         |  |   | BALANCE
|                                                                             |      |         | BEGINNING  |          | TO      |                |        |         |  |   | AT END 
|CLASSIFICATION                                                               |      | OF YEAR |            | EXPENSES |         | DEDUCTIONS (1) |        | OF YEAR
|                                                                             |      |         |            |          |         |                |        |        
|                                                                             | 2002 |         |            |          |         |                |        |         |  |   |         |  |  |   |           |  | 
|Discount on mortgage
portfolio and valuation
allowance for other receivables |      | $       | 1,450,637  |          |         | $              | 78,602 |         |  | $ | 166,756 |  |  | $ | 1,362,483 | 
|                                                                             |      |         |            |          |         |                |        |         |  |   |         |  |  |   |           | 
|                                                                             | 2001 |         |            |          |         |                |        |         |  |   |         |  |  |   |           |  | 
|Discount on mortgage
portfolio and valuation
allowance for other receivables |      | $       | 1,832,092  |          |         | $              | 44,055 |         |  | $ | 425,510 |  |  | $ | 1,450,637 | 
|                                                                             |      |         |            |          |         |                |        |         |  |   |         |  |  |   |           | 
|                                                                             | 2000 |         |            |          |         |                |        |         |  |   |         |  |  |   |           |  | 
|Discount on mortgage
portfolio and valuation
allowance for other receivables |      | $       | 1,989,172  |          |         | $              | 98,379 |         |  | $ | 255,459 |  |  | $ | 1,832,092 | 
|                                                                             |      |         |            |          |         |                |        |         |  |   |         |  |  |   |           | 



|(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.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

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PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

|                                                           |  |             
|---------------------------------------------------------- |  | ------------
|REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2002 |  | SCHEDULE III



|                                             |  |              |            |      |  |                 |           |                  |  |             |            |               |  |             |           |      
|-------------------------------------------- |  | ------------ | ---------- | ---- |  | --------------- | --------- | ---------------- |  | ----------- | ---------- | ------------- |  | ----------- | --------- | -----
|                                             |  |              |            |      |  | INITIAL COST TO |           |                  |  |            
|                                             |  |              |            |      |  | COMPANY         |           |                  |  |            
|                                             |  |              |            |      |  |                 |           | COSTS           
|                                             |  |              |            |      |  |                 |           |                  |  |             |            |               |  | CAPITALIZED
|                                             |  |              |            |      |  |                 |           |                  |  | BUILDING    |            | SUBSEQUENT TO
|                                             |  | AMOUNT OF    |            |      |  |                 |           | AND              |  | ACQUISITION
|PROPERTIES                                   |  | ENCUMBRANCES |            | LAND |  | IMPROVEMENTS    |           | IMPROVEMENTS (1)
|                                             |  |              |            |      |  |                 |           |                 
|Apartment Buildings                          |  |              |            |      |  |                 |           |                  |  |             |            |               |  |             |           |      
|Cambridge Green,
Council Bluffs, IA          |  | $            | 3,053,719  |      |  | $               | 200,000   |                  |  | $           | 2,034,315  |               |  | $           | 1,521,589 |      
|Continental Gardens,
Miami, FL               |  |              | 7,698,869  |      |  |                 | 2,448,000 |                  |  |             | 7,389,786  |               |  |             | 626,610   |      
|Crown Court,
New Haven, CT                   |  |              | 2,565,053  |      |  |                 | 168,000   |                  |  |             | 3,077,445  |               |  |             | 58,481    |      
|Fairlawn Gardens
Martinsburg, WV             |  |              | 2,189,923  |      |  |                 | 71,408    |                  |  |             | 657,805    |               |  |             | 1,245,328 |      
|Farrington Apartments
Clearwater, FL         |  |              | 7,748,423  |      |  |                 | 1,900,000 |                  |  |             | 7,896,421  |               |  |             | 258,655   |      
|Preston Lake Apartments
Tucker, GA           |  |              | 13,724,569 |      |  |                 | 2,240,000 |                  |  |             | 15,239,465 |               |  |             | 271,933   |      
|Individual Cooperative
Apartments            |  |              |            |      |  |                 |           |                  |  |             |            |               |  |             |           |      
|Sherwood House,
Long Beach, NY               |  |              |            |      |  |                 | 7,316     |                  |  |             | 51,930     |               |  |             | (42,926   | ) (2)
|6300 Riverdale Ave.,
Riverdale, NY           |  |              |            |      |  |                 | 10,164    |                  |  |             | 66,032     |               |  |             | (17,019   | ) (2)
|330 W.72nd St.,
New York, NY                 |  |              |            |      |  |                 | 20,891    |                  |  |             | 28,013     |               |  |             |           |      
|Towne House,
New Rochelle, NY                |  |              |            |      |  |                 | 61,051    |                  |  |             | 343,286    |               |  |             | 203,600   |      
|University Towers,
New Haven, CT             |  |              |            |      |  |                 | 1,375     |                  |  |             | 54,735     |               |  |             | 2,856     |      
|Commercial Buildings                         |  |              |            |      |  |                 |           |                  |  |             |            |               |  |             |           |      
|Building Industries Center,
White Plains, NY |  |              |            |      |  |                 | 61,328    |                  |  |             | 496,198    |               |  |             | 620,573   |      
|Mapletree Industrial Center,
Palmer, MA      |  |              | 211,258    |      |  |                 | 79,100    |                  |  |             |            |               |  |             | 385,932   |      
|                                             |  |              |            |      |  |                 |           |                  |  |             |            |               |  |             |           |      
|TOTAL                                        |  | $            | 37,191,814 |      |  | $               | 7,268,633 |                  |  | $           | 37,335,431 |               |  | $           | 5,135,612 |      
|                                             |  |              |            |      |  |                 |           |                  |  |             |            |               |  |             |           |      

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                             |  |                               |           |              |  |          |            |  |  |   |            | 
|-------------------------------------------- |  | ----------------------------- | --------- | ------------ |  | -------- | ---------- |  |  | - | ---------- | 
|                                             |  | GROSS AMOUNT AT WHICH CARRIED
|                                             |  | AT CLOSE OF YEAR (3) (4) (5) 
|                                             |  |                              
|                                             |  |                               |           |              |  | BUILDING |            |  |  |  
|                                             |  |                               |           |              |  | AND      |            |  |  |  
|PROPERTIES                                   |  | LAND                          |           | IMPROVEMENTS |  | TOTAL   
|                                             |  |                               |           |              |  |         
|Apartment Buildings                          |  |                               |           |              |  |          |            |  |  |   |            | 
|Cambridge Green,
Council Bluffs, IA          |  | $                             | 200,000   |              |  | $        | 3,555,904  |  |  | $ | 3,755,904  | 
|Continental Gardens,
Miami, FL               |  |                               | 2,448,000 |              |  |          | 8,016,396  |  |  |   | 10,464,396 | 
|Crown Court,
New Haven, CT                   |  |                               | 168,000   |              |  |          | 3,135,926  |  |  |   | 3,303,926  | 
|Fairlawn Gardens
Martinsburg, WV             |  |                               | 71,408    |              |  |          | 1,903,133  |  |  |   | 1,974,541  | 
|Farrington Apartments
Clearwater, FL         |  |                               | 1,900,000 |              |  |          | 8,155,076  |  |  |   | 10,055,076 | 
|Preston Lake Apartments
Tucker, GA           |  |                               | 2,240,000 |              |  |          | 15,511,398 |  |  |   | 17,751,398 | 
|Individual Cooperative
Apartments            |  |                               |           |              |  |          |            |  |  |   |            | 
|Sherwood House,
Long Beach, NY               |  |                               | 1,788     |              |  |          | 14,532     |  |  |   | 16,320     | 
|6300 Riverdale Ave.,
Riverdale, NY           |  |                               | 7,330     |              |  |          | 51,847     |  |  |   | 59,177     | 
|330 W.72nd St.,
New York, NY                 |  |                               | 20,891    |              |  |          | 28,013     |  |  |   | 48,904     | 
|Towne House,
New Rochelle, NY                |  |                               | 81,204    |              |  |          | 526,733    |  |  |   | 607,937    | 
|University Towers,
New Haven, CT             |  |                               | 1,375     |              |  |          | 57,591     |  |  |   | 58,966     | 
|Commercial Buildings                         |  |                               |           |              |  |          |            |  |  |   |            | 
|Building Industries Center,
White Plains, NY |  |                               | 61,328    |              |  |          | 1,116,771  |  |  |   | 1,178,099  | 
|Mapletree Industrial Center,
Palmer, MA      |  |                               | 79,100    |              |  |          | 385,932    |  |  |   | 465,032    | 
|                                             |  |                               |           |              |  |          |            |  |  |   |            | 
|TOTAL                                        |  | $                             | 7,280,424 |              |  | $        | 42,459,252 |  |  | $ | 49,739,676 | 
|                                             |  |                               |           |              |  |          |            |  |  |   |            | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                             |  |              |           |              |  |          |           |          |  |  |      |  |  |            |        | 
|-------------------------------------------- |  | ------------ | --------- | ------------ |  | -------- | --------- | -------- |  |  | ---- |  |  | ---------- | ------ | 
|                                             |  |              |           |              |  |          |           |          |  |  |      |  |  | YEARS ON  
|                                             |  |              |           |              |  |          |           |          |  |  |      |  |  | WHICH DE- 
|                                             |  |              |           |              |  |          |           |          |  |  |      |  |  | PRECIATION
|                                             |  |              |           |              |  |          |           |          |  |  |      |  |  | IN LATEST 
|                                             |  |              |           |              |  |          |           |          |  |  |      |  |  | INCOME    
|                                             |  |              |           |              |  |          |           |          |  |  |      |  |  | STATE-    
|                                             |  | ACCUMULATED  |           | DATE OF      |  | DATE     |           | MENT IS 
|PROPERTIES                                   |  | DEPRECIATION |           | CONSTRUCTION |  | ACQUIRED |           | COMPUTED
|                                             |  |              |           |              |  |          |           |         
|Apartment Buildings                          |  |              |           |              |  |          |           |          |  |  |      |  |  |            |        | 
|Cambridge Green,
Council Bluffs, IA          |  | $            | 1,186,877 |              |  |          | 1974      |          |  |  | 1992 |  |  |            | 50     | 
|Continental Gardens,
Miami, FL               |  |              | 1,905,737 |              |  |          | 1971      |          |  |  | 1994 |  |  |            | 27-1/2 | 
|Crown Court,
New Haven, CT                   |  |              | 2,688,920 |              |  |          | 1973      |          |  |  | 1973 |  |  |            | 40     | 
|Fairlawn Gardens
Martinsburg, WV             |  |              | 270,464   |              |  |          | 1964      |          |  |  | 1996 |  |  |            | 50     | 
|Farrington Apartments
Clearwater, FL         |  |              | 697,002   |              |  |          | 1973-1974 |          |  |  | 2000 |  |  |            | 35     | 
|Preston Lake Apartments
Tucker, GA           |  |              | 1,268,850 |              |  |          | 1986-1987 |          |  |  | 2000 |  |  |            | 35     | 
|Individual Cooperative
Apartments            |  |              |           |              |  |          |           |          |  |  |      |  |  |            |        | 
|Sherwood House,
Long Beach, NY               |  |              | 3,519     |              |  |          |           |          |  |  | 1997 |  |  |            | 31 1/2 | 
|6300 Riverdale Ave.,
Riverdale, NY           |  |              | 9,570     |              |  |          |           |          |  |  | 1997 |  |  |            | 31 1/2 | 
|330 W.72nd St.,
New York, NY                 |  |              | 5,334     |              |  |          |           |          |  |  | 1997 |  |  |            | 31 1/2 | 
|Towne House,
New Rochelle, NY                |  |              | 93,159    |              |  |          |           |          |  |  | 1997 |  |  |            | 31 1/2 | 
|University Towers,
New Haven, CT             |  |              | 9,470     |              |  |          |           |          |  |  | 1997 |  |  |            | 31 1/2 | 
|Commercial Buildings                         |  |              |           |              |  |          |           |          |  |  |      |  |  |            |        | 
|Building Industries Center,
White Plains, NY |  |              | 993,584   |              |  |          | 1956      |          |  |  | 1966 |  |  |            | 25     | 
|Mapletree Industrial Center,
Palmer, MA      |  |              | 84,045    |              |  |          | 1902-1966 |          |  |  | 1974 |  |  |            | 20     | 
|                                             |  |              |           |              |  |          |           |          |  |  |      |  |  |            |        | 
|TOTAL                                        |  | $            | 9,216,531 |              |  |          |           |          |  |  |      |  |  |            |        | 
|                                             |  |              |           |              |  |          |           |          |  |  |      |  |  |            |        | 



|(1) |  | Includes furniture and equipment of $389,670.
|--- |  | ---------------------------------------------
|   
|(2) |  | Includes sales of cooperative apartments.    

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PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

|                                                           |  |                         
|---------------------------------------------------------- |  | ------------------------
|REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2002 |  | SCHEDULE III
(CONCLUDED)



|(3) |  | The aggregate cost of real estate for Federal income tax purposes is
$48,959,379 at December 31, 2002.                                        
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|   
|(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:

|                                 |                            |              |            |                         |        |      |            |         |       |   |            |            |        | 
|-------------------------------- | -------------------------- | ------------ | ---------- | ----------------------- | ------ | ---- | ---------- | ------- | ----- | - | ---------- | ---------- | ------ | 
|                                 |                            |              |            | YEAR ENDED DECEMBER 31,
|                                 |                            |              |            |                        
|                                 |                            |              |            | 2002                    |        | 2001 |            | 2000   
|                                 |                            |              |            |                         |        |      |            |        
|Balance at the beginning of year |                            | $            | 49,367,042 |                         |        | $    | 48,932,205 |         |       | $ | 21,255,609 |           
|Additions during the year:       |                            |              |            |                         |        |      |            |         |       |   |            |           
|                                 | Additions and improvements |              |            | 395,646                 |        |      |            | 437,100 |       |   |            | 27,686,596 |       
|                                 |                            |              |            |                         |        |      |            |         |       |   |            |           
|                                 |                            |              | 49,762,688 |                         |        |      | 49,369,305 |         |       |   | 48,942,205 |           
|Deductions during the year:      |                            |              |            |                         |        |      |            |         |       |   |            |           
|                                 |                            | Dispositions |            |                         | 23,012 |      |            |         | 2,263 |   |            |            | 10,000 | 
|                                 |                            |              |            |                         |        |      |            |         |       |   |            |           
|Balance at end of year           |                            | $            | 49,739,676 |                         |        | $    | 49,367,042 |         |       | $ | 48,932,205 |           
|                                 |                            |              |            |                         |        |      |            |         |       |   |            |           



|(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:
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

|                                 |                                |   |                         |           |      |   |           |           |  |   |           |           | 
|-------------------------------- | ------------------------------ | - | ----------------------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                 |                                |   | YEAR ENDED DECEMBER 31,
|                                 |                                |   |                        
|                                 |                                |   | 2002                    |           | 2001 |   | 2000     
|                                 |                                |   |                         |           |      |   |          
|Balance at the beginning of year |                                | $ | 7,915,785               |           |      | $ | 6,642,932 |           |  | $ | 5,566,965 |          
|Additions during the year:       |                                |   |                         |           |      |   |           |           |  |   |           |          
|                                 | Depreciation charged to income |   |                         | 1,304,377 |      |   |           | 1,273,078 |  |   |           | 1,076,827 | 
|                                 |                                |   |                         |           |      |   |           |           |  |   |           |          
|                                 |                                |   | 9,220,162               |           |      |   | 7,916,010 |           |  |   | 6,643,792 |          
|Deductions during the year:      |                                |   |                         |           |      |   |           |           |  |   |           |          
|                                 | Dispositions and replacements  |   |                         | 3,631     |      |   |           | 225       |  |   |           | 860       | 
|                                 |                                |   |                         |           |      |   |           |           |  |   |           |          
|Balance at end of year           |                                | $ | 9,216,531               |           |      | $ | 7,915,785 |           |  | $ | 6,642,932 |          
|                                 |                                |   |                         |           |      |   |           |           |  |   |           |          

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PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

|                                                |  |            
|----------------------------------------------- |  | -----------
|MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 2002 |  | SCHEDULE IV

|                            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                  |  | 
|--------------------------- | ---------------------- | --------------------------- | - | -------- | ----------- | -------- |  |  | --------- | ----- |  | --------- | -- | ----------- |  | ------------ | -- | --------- | ---------- | ------------ | ---------- | - | ---------- | - | --------- | -------- | ---------- | ------------- | --------- |  |  | ---------------- |  | 
|                            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  | PRINCIPAL AMOUNT
|                            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  | OF LOANS SUBJECT
|                            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  | PERIODIC     |    |           |            |              |            |   |            |   |           | CARRYING |            | TO DELINQUENT
|                            |                        |                             |   | INTEREST |             | MATURITY |  |  |           |       |  | PAYMENT   |    | PRIOR       |  | FACE AMOUNT  |    | AMOUNT OF |            | PRINCIPAL OR
|DESCRIPTION                 |                        | RATE                        |   | DATE     |             |          |  |  |           | TERMS |  | MORTGAGES |    | OF MORTGAGE |  | MORTGAGE (1) |    | INTEREST 
|                            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |          
|First Mortgages:            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                 
|                            | Apartment buildings:   |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                  | 
|                            |                        | Greece, NY                  |   |          | 6.45        | %        |  |  | 2006      |       |  |           |    |             |  |              | (2 | )         |            | $            |            |   |            | $ | 6,000,000 |          |            | $             | 3,008,150 |  |  |                  |  | 
|                            |                        | Hartford, CT                |   |          | 10.25       | %        |  |  | 2005      |       |  |           |    |             |  |              | (3 | )         |            |              |            |   |            |   | 1,380,678 |          |            |               | 1,380,678 |  |  |                  |  | 
|                            | Sold Co-op Apartments: |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                  | 
|                            |                        | Bronx, NY (1 note)          |   |          | 9.00        | %        |  |  | 2003      |       |  |           |    |             |  |              | (4 | )         |            |              |            |   |            |   | 16,476    |          |            |               | 16,476    |  |  |                  |  | 
|                            |                        | Flushing, NY (5 notes)      |   |          | 8.00-9.50   | %        |  |  | 2003-2004 |       |  |           |    |             |  |              | (4 | )         |            |              |            |   |            |   | 97,835    |          |            |               | 91,827    |  |  |                  |  | 
|                            |                        | Long Beach, NY (1 note)     |   |          | 9.00        | %        |  |  | 2010      |       |  |           |    |             |  |              | (5 | )         |            |              |            |   |            |   | 6,981     |          |            |               | 6,981     |  |  |                  |  | 
|                            |                        | New Rochelle, NY (11 notes) |   |          | 7.75-9.50   | %        |  |  | 2003-2010 |       |  |           |    |             |  |              | (4 | ) (5)     |            |              |            |   |            |   | 268,804   |          |            |               | 228,818   |  |  |                  |  | 
|                            |                        | New York, NY (1 note)       |   |          | 5.50-7.75   | %        |  |  | 2016      |       |  |           |    |             |  |              | (5 | )         |            |              |            |   |            |   | 26,388    |          |            |               | 19,008    |  |  |                  |  | 
|                            |                        | Riverdale, NY (2 notes)     |   |          | 7.50-8.25   | %        |  |  | 2003      |       |  |           |    |             |  |              | (5 | )         |            |              |            |   |            |   | 2,383     |          |            |               | 2,383     |  |  |                  |  | 
|                            |                        | Rye, NY (1 note)            |   |          | 11.00       | %        |  |  | 2017      |       |  |           |    |             |  |              | (5 | )         |            |              |            |   |            |   | 28,936    |          |            |               | 28,936    |  |  |                  |  | 
|                            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                 
|Total First Mortgage Loans  |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   | 7,828,481  |   |           |          | 4,783,257  |               |           |  |  |                 
|                            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                 
|Junior Mortgages:           |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                 
|                            | Apartment buildings:   |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                  | 
|                            |                        | Bronx, NY                   |   |          | 8.16-11.16  | %        |  |  | 2005      |       |  |           | (6 | )           |  |              | (2 | )         |            |              | 4,250,000  |   |            |   | 1,300,000 |          |            |               | 1,300,000 |  |  |                  |  | 
|                            |                        | Atlantic
City,
NJ           | ) |          | 9.625-13.00 | %        |  |  | 2003-2009 |       |  |           | (7 | )           |  |              | (2 | )         |            |              | 6,524,268  |   |            |   | 6,875,000 |          |            |               | 5,726,157 |  |  |                  |  | 
|                            |                        | Bergenfield,
NJ             | ) |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              | 8,703,285  |   |            |   |           |          |            |               |           |  |  |                  |  | 
|                            |                        | South Bound Brook, NJ       | ) |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              | 3,160,882  |   |            |   |           |          |            |               |           |  |  |                  |  | 
|                            |                        | Des Moines, IA              |   |          | 12.00       | %        |  |  | 2008      |       |  |           |    |             |  |              | (2 | )         |            |              |            |   |            |   | 100,000   |          |            |               | 100,000   |  |  |                  |  | 
|                            |                        | New York, NY                |   |          | 10.17       | %        |  |  | 2009      |       |  |           | (8 | )           |  |              | (2 | )         |            |              | 68,059,418 |   |            |   | 8,550,000 |          |            |               | 5,308,460 |  |  |                  |  | 
|                            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                 
|Total Junior Mortgage Loans |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           | 90,697,853 |              |            |   | 16,825,000 |   |           |          | 12,434,617 |               |           |  |  |                 
|                            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                 
|Total Mortgage Loans        |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    | $         | 90,697,853 |              |            | $ | 24,653,481 |   |           | $        | 17,217,874 |               |           |  |  |                 
|                            |                        |                             |   |          |             |          |  |  |           |       |  |           |    |             |  |              |    |           |            |              |            |   |            |   |           |          |            |               |           |  |  |                 

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##### Table of Contents



PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

|                                                |  |                        
|----------------------------------------------- |  | -----------------------
|MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 2002 |  | SCHEDULE IV
(CONCLUDED)

|                             |                                  |                           |  |                   |           |                   |            |                   |  |   |  |  |           |   |            |           |  |   |  |  |         |   |            |         |   | 
|---------------------------- | -------------------------------- | ------------------------- |  | ----------------- | --------- | ----------------- | ---------- | ----------------- |  | - |  |  | --------- | - | ---------- | --------- |  | - |  |  | ------- | - | ---------- | ------- | - | 
|                             |                                  |                           |  | Year Ended        |           | Year Ended        |            | Year Ended       
|                             |                                  |                           |  |                   |           |                   |            |                  
|                             |                                  |                           |  | December 31, 2002 |           | December 31, 2001 |            | December 31, 2000
|                             |                                  |                           |  |                   |           |                   |            |                  
|Balance at beginning of year |                                  | $                         |  |                   |           | $                 | 15,995,237 |                   |  | $ |  |  |           | $ | 15,345,903 |           |  | $ |  |  |         | $ | 15,323,702 |        
|                             | Additions during the year:       |                           |  |                   |           |                   |            |                   |  |   |  |  |           |   |            |           |  |   |  |  |         |   |            |         |  
|                             |                                  | New mortgage loans        |  |                   | 1,775,000 |                   |            |                   |  |   |  |  | 1,100,000 |   |            |           |  |   |  |  |         |   |            |         |   | 
|                             | Less:                            |                           |  |                   |           |                   |            |                   |  |   |  |  |           |   |            |           |  |   |  |  |         |   |            |         |  
|                             |                                  | Discounts on additions    |  |                   |           |                   |            |                   |  |   |  |  |           |   |            |           |  |   |  |  |         |   |            |         |   | 
|                             |                                  |                           |  |                   |           |                   |            |                   |  |   |  |  |           |   |            |           |  |   |  |  |         |   |            |        
|                             | Net addition to carrying amount  |                           |  |                   |           |                   |            | 1,775,000         |  |   |  |  |           |   |            | 1,100,000 |  |   |  |  |         |   |            |         |  
|                             | Deductions during the year:      |                           |  |                   |           |                   |            |                   |  |   |  |  |           |   |            |           |  |   |  |  |         |   |            |         |  
|                             |                                  | Collections of principal  |  |                   | 4,425,883 |                   |            |                   |  |   |  |  | 1,987,016 |   |            |           |  |   |  |  | 290,417 |   |            |         |   | 
|                             | Less:                            |                           |  |                   |           |                   |            |                   |  |   |  |  |           |   |            |           |  |   |  |  |         |   |            |         |  
|                             |                                  | Amortization of discounts |  |                   | 99,117    |                   |            |                   |  |   |  |  | 364,422   |   |            |           |  |   |  |  | 216,618 |   |            |         |   | 
|                             |                                  | Deferred gains recognized |  |                   | 3,774,403 |                   |            |                   |  |   |  |  | 1,171,928 |   |            |           |  |   |  |  | 96,000  |   |            |         |   | 
|                             |                                  |                           |  |                   |           |                   |            |                   |  |   |  |  |           |   |            |           |  |   |  |  |         |   |            |        
|                             | Net reduction of carrying amount |                           |  |                   |           |                   |            | 552,363           |  |   |  |  |           |   |            | 450,666   |  |   |  |  |         |   |            | (22,201 | )
|                             |                                  |                           |  |                   |           |                   |            |                   |  |   |  |  |           |   |            |           |  |   |  |  |         |   |            |        
|Balance at end of year       |                                  |                           |  |                   |           | $                 | 17,217,874 |                   |  |   |  |  |           | $ | 15,995,237 |           |  |   |  |  |         | $ | 15,345,903 |        
|                             |                                  |                           |  |                   |           |                   |            |                   |  |   |  |  |           |   |            |           |  |   |  |  |         |   |            |        



|(1) |  | Carrying value is net of discounts and deferred gains. The aggregate net carrying value of this portfolio for tax purposes at December 31, 2002, is $7,891,956.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Entire principal due at Final Maturity Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(3) |  | These notes are amortizing monthly, based on a 20 year term and have balloon payments of $1,234,813 due at maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(4) |  | Principal amortization each year with a balloon payment in the year of maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(5) |  | Principal amortization each year through maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(6) |  | The interest rate on this note increases by 1% per year, from 8.16% per annum at November 30, 2001 to 11.16% per annum at
November 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(7) |  | The $4,000,000 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. In
February, 2001 the Company made a $1,100,000 loan, with an interest
rate of 13% per annum, maturing on February 18, 2009. In July, 2002,
the Company made a $1,775,000 loan with an interest rate of 11% per
annum, maturing on July 19, 2003. Both of these loans are secured by
the same properties that secure the Fairfield Towers Second Mortgage
and by personal guarantees of $1,637,500 from the borrowers.
|   
|(8) |  | In April, 2002, the $12,300,000 note secured by a second mortgage on
the Encore Apartments in New York, New York, was modified. Under the
terms of the modification, the Company received a $3,750,000
principal repayment and additional interest of $369,000. The
$8,550,000 balance of the $12,300,000 note provides for interest at a
rate of 11% through June 30, 2002, 9% from July 1, 2002 through April
18, 2004, 10% from April 19, 2004 through April 18, 2007 and 10 1/2 %
from April 19, 2007 through maturity with additional interest of
$171,000 due at maturity, which will increase the effective interest
rate to 10.17% per annum. The maturity date of the loan is April 30,
2009. The $8,550,000 note is secured by a second mortgage on the
Encore Apartments and by a pledge of ownership interests in the
entity owning the Encore Apartments.                                                                                       

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