UNITED
  STATES
  SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM
  10-KFOR ANNUAL AND TRANSITION REPORTS PUSUANT TO SECTIONS 13 OR 15(d)
  OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

ýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT   OF 1934

For the Fiscal
Year Ended December 31, 2005 OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____to ____Commission File
Number 1-32662NEWKIRK REALTY TRUST, INC.(Exact name of Registrant as specified in its
certificate of  incorporation)

|Maryland                                                       |  | 20-3164488                                
|-------------------------------------------------------------- |  | ------------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (IRS
      Employer Identification Number)
|                                                               |  |                                           
|7 Bulfinch Place, Suite 500, Boston, Massachusetts             |  | 02114                                     
|(Address
      of principal executive offices)                 |  | (Zip
      Code)                          

(617)
  570-4680(Registrants telephone number, including area code)

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

|Title
        of Each Class          |  | Name
        of Exchange on Which Registered
|------------------------------------ |  | --------------------------------------------
|Common
        Stock, $.01 par value |  | New
        York Stock Exchange             

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o
  No ý

Indicate by check mark if the  registrant  is not  required to file  reports  pursuant to Section 13 or Section  15(d) of the Act.
  Yeso
  No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý
  No o

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. o

Indicate
  by check mark whether the registrant is a large accelerated filer, an accelerate
  filer or a non-accelerated filer (as defined in Exchange Act Rule 12b-2). Large
  Accelerated Filer o
    Accelerated filer   o  Non-accelerated
  filer  ý

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).Yes
  o No ý

As of June 30, 2005, there was no aggregate market value of common shares held by non-affiliates of the registrant. The registrant
completed its initial public offering on November 7, 2005.

As of March 1, 2006, there were 19,375,000 shares of common stock outstanding

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  registrants  definitive  Proxy  Statement,  to be filed with the Securities and Exchange  Commission  within 120 days
after the end of the fiscal year covered by this Form 10-K, with respect to the 2006 Annual Meeting of  Stockholders,  are incorporated
by reference into Part III of this Annual Report on Form 10-K.











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|                        |  | TABLE
        OF CONTENTS                                                                                                |      |   
|----------------------- |  | ------------------------------------------------------------------------------------------------------------------------ | ---- | --
|Item
      of Form 10-K |  |                                                                                                                          | Page
|                        |  |                                                                                                                          |      |   
|                        |  | PART I                                                                                                                   |      |   
|                        |  |                                                                                                                          |      |   
|1.                      |  | Business                                                                                                                 |      | 5 
|1A.                     |  | Risk Factors                                                                                                             |      | 13
|1B.                     |  | Unresolved Staff
      Comments                                                                                          |      | 21
|2.                      |  | Properties                                                                                                               |      | 22
|3.                      |  | Legal Proceedings                                                                                                        |      | 31
|4.                      |  | Submission of Matters
      to a Vote of Security Holders                                                                |      | 31
|                        |  |                                                                                                                          |      |   
|                        |  | PART II                                                                                                                  |      |   
|                        |  |                                                                                                                          |      |   
|5.                      |  | Market for Registrants
      Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities |      | 32
|6.                      |  | Selected Financial
      Data                                                                                            |      | 33
|7.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |      | 35
|7A.                     |  | Quantitative and
      Qualitative Disclosures about Market Risk                                                         |      | 46
|8.                      |  | Financial Statements
      and Supplementary Data                                                                        |      | 47
|9.                      |  | Changes in and Disagreements
      with Accountants on Accounting and Financial Disclosure                               |      | 48
|9A.                     |  | Controls and Procedures                                                                                                  |      | 48
|9B.                     |  | Other Information                                                                                                        |      | 48
|                        |  |                                                                                                                          |      |   
|                        |  | PART III                                                                                                                 |      |   
|                        |  |                                                                                                                          |      |   
|10.                     |  | Directors and Executive
      Officers of the Registrant                                                                 |      | 49
|11.                     |  | Executive Compensation                                                                                                   |      | 49
|12.                     |  | Security Ownership
      of Certain Beneficial Owners and Management and Related Stockholder Matters                     |      | 49
|13.                     |  | Certain Relationships
      and Related Transactions                                                                     |      | 49
|14.                     |  | Principal Accountant
      Fees and Services                                                                             |      | 49
|                        |  |                                                                                                                          |      |   
|                        |  | PART IV                                                                                                                  |      |   
|                        |  |                                                                                                                          |      |   
|15.                     |  | Exhibits and Financial
      Statement Schedules                                                                         |      | 50
|                        |  | (a) Financial Statements
      and Financial Statement Schedule                                                          |      |   
|                        |  | (b) Exhibits                                                                                                             |      |   
|                        |  |                                                                                                                          |      |   
|                        |  | Signatures                                                                                                               |      | 51
|                        |  | Schedule III - -
      Real Estate and Accumulated Depreciation                                                          |      | 82
|                        |  | Exhibit Index                                                                                                            |      | 92

3



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CAUTIONARY
STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS

Any statements
in this report,  including any statements in the documents that are  incorporated by
reference  herein that  are not  strictly  historical  are  forward-looking  statements
within the meaning of the safe harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995. Any such  forward-looking  statements  contained or
incorporated  by  reference herein should not be relied upon as predictions of future
events.  Certain such  forward-looking  statements can  be  identified  by the use of
forward-looking  terminology  such as  believes, expects, may, should, seeks, approximately, intends, plans, pro
forma, estimates or  anticipates or the  negative  thereof
or other  variations  thereof or  comparable  terminology,  or by  discussions  of
strategy,  plans,  intentions or  anticipated  or  projected events,  results or
conditions.  Such forward-looking  statements are dependent on assumptions,  data or
methods  that may be incorrect or imprecise and they may be incapable of being realized.
Such  forward-looking  statements include  statements with respect to:

| |  |  | the
declaration or payment of distributions by us;
| | - |  | --------------------------------------------------

| |  |  | the
ownership, management and operation of properties;
| | - |  | ------------------------------------------------------

| |  |  | potential
acquisitions or dispositions of our properties, assets or other businesses;
| | - |  | -------------------------------------------------------------------------------------

| |  |  | our
policies regarding investments, acquisitions, dispositions, financings and other matters;
| | - |  | ---------------------------------------------------------------------------------------------

| |  |  | our
qualification as a REIT under the Internal Revenue Code of 1986, as amended;
| | - |  | --------------------------------------------------------------------------------

| |  |  | the
real estate industry and real estate markets in general;
| | - |  | ------------------------------------------------------------

| |  |  | the
availability of debt and equity financing;
| | - |  | ----------------------------------------------

| |  |  | interest
rates;
| | - |  | ---------------

| |  |  | general
economic conditions;
| | - |  | ----------------------------

| |  |  | supply
of real estate investment opportunities and demand;
| | - |  | ----------------------------------------------------------

| |  |  | trends
affecting us or our assets;
| | - |  | ----------------------------------

| |  |  | the
effect of acquisitions or dispositions on capitalization and financial flexibility;
| | - |  | ---------------------------------------------------------------------------------------

| |  |  | the
anticipated  performance  of our assets  and of  acquired  properties  and  businesses,
including,  without  limitation,  statements  regarding  anticipated  revenues,  cash
flows,  funds from operations,  earnings before interest,  depreciation and amortization,
property net operating  income,  operating or  profit margins and  sensitivity to
economic  downturns or anticipated  growth or  improvements in any of  the foregoing; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | our
ability, and that of our assets and acquired properties and businesses, to grow.
| | - |  | ------------------------------------------------------------------------------------

Our
stockholders  are cautioned  that,  while  forward-looking  statements  reflect our good
faith beliefs,  they are not  guarantees of future  performance  and they involve known
and unknown risks and  uncertainties.  Actual results may differ  materially from those
in the  forward-looking  statements as a result of various  factors.  The  information
contained or  incorporated by reference in this report and any amendment  hereof,
including,  without  limitation,  the information set  forth in Item 1A. Risk
Factors below or in any risk factors in documents  that are  incorporated  by
reference in this  report,  identifies  important factors that could cause such
differences.  We undertake no obligation to publicly release  the results of any
revisions to these forward-looking statements that may reflect any future events or
circumstances.

4



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PART I

ITEM 1.
BUSINESS

Overview

Newkirk Realty
Trust, Inc. is a recently-formed  Maryland  corporation that intends to qualify as a real
estate investment  trust or "REIT" under  Sections 856 through 860 of the
Internal  Revenue Code of 1986,  as amended (the  Code).  We were  formed in
July 2005 and  completed  our  initial  public  offering  (the  IPO) on
November  7, 2005.  We were formed to  acquire an  ownership  interest  in, and become
the general  partner  of, The  Newkirk  Master  Limited  Partnership  (the  Operating
Partnership),  a Delaware limited partnership.  The Operating Partnership owns
commercial properties,  most of  which are net leased to  investment  grade  corporate
tenants,  as well as other real  estate  assets.  See Our  Assets below.  All
references  to  We, Us, and  Company refer  to
Newkirk  Realty  Trust,  Inc.  and its  consolidated  subsidiaries.

As indicated
below, we hold a 30.1% ownership  interest in the Operating  Partnership.  All of our
assets are held through  the Operating  Partnership and its  subsidiaries.  We expect
that as limited partners in the Operating  Partnership  begin  exercising their right to
have their limited partnership  interests in the Operating  Partnership  redeemed,  which
cannot  occur until  November 7, 2006,  for cash or, at our election,  shares of our
common  stock,  our interest in the Operating  Partnership will increase.

The IPO

We consummated
the IPO on November 7, 2005.  In connection with the IPO:

| | o |  | We
issued 15,000,000 shares of our common stock.
| | - |  | ------------------------------------------------

| | o |  | We
issued  3,125,000  common shares in a private  transaction to Winthrop  Realty Trust
(formerly known as First  Union Real Estate  Equity and Mortgage  Investments)  in
exchange for  $50,000,000  and issued an additional  1,250,000  common  shares
($20,000,000  value)  in a  private  transaction  to  Winthrop  Realty  Trust  in
consideration  for its  assignment to us of certain  exclusivity  rights with respect to
net-lease  business  opportunities  offered to or generated by Michael Ashner, our and
Winthrop Realty Trust's Chairman and Chief  Executive  Officer.  625,000 shares
(reducing by 17,361 per month) issued in exchange for the assignment of  the exclusivity
right are subject to forfeiture  upon the occurrence of certain  events.  All shares of
our  common stock  issued to Winthrop  Realty Trust are subject to a lock-up  period
expiring  November 7, 2008,  subject to certain exceptions.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Both
us and the Operating  Partnership  retained NKT Advisors LLC (NKT Advisors),
an entity partially owned by  our executive  officers,  pursuant to an advisory agreement
(the Advisory  Agreement) to manage our assets  and the day-to-day operations
of us and the Operating  Partnership,  subject to the supervision of our board  of
directors;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | We
acquired  15,625,000  newly-issued  units of limited  partnership  interest in the
Operating  Partnership  in  exchange  for  $235,800,000  and an  additional  1,250,000
units in exchange  for the  contribution  of the  exclusivity  rights described above. We
also purchased  2,375,000  outstanding units from Apollo Real Estate  Investment Fund
III, L.P.  (Apollo) and 125,000 units of limited  partnership  interest from
WEM-Brynmawr  Associates  LLC, an entity  primarily owned by our executive  officers  (WEM),
for an aggregate  purchase  price of $37,700,000,  resulting in an aggregate ownership of
19,375,000 units of limited partnership in the  Operating Partnership or 30.1% of the
total outstanding units;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | We
were admitted as the general partner of the Operating Partnership;
| | - |  | ---------------------------------------------------------------------

| | o |  | NKT Advisors was issued our special voting preferred stock entitling it
      to vote on all matters for which our common stockholders are entitled to
      vote. The number of votes that NKT Advisors will be entitled to cast in
      respect of the special voting preferred stock will initially be 45,000,000
      votes or approximately 69.9% of the 64,375,000 votes entitled to be cast.
      The 45,000,000 votes represent the total number of units outstanding immediately
      following consummation of IPO (excluding units held by us). As units are
      redeemed at the option of a limited partner, the number of votes attaching
      to NKT Advisors' special voting preferred stock will decrease by an equivalent
      amount. The Advisory Agreement provides that on all matters for which NKT
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5



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| | Advisors
is entitled to cast votes in respect of its special voting  preferred  stock,  it will
cast its  votes in direct  proportion  to the votes that are cast by limited  partners of
the  Operating  Partnership,  other than us, on such matters,  except that NKT Advisors
(through its managing member) will be entitled to  vote in its sole  discretion  to the
extent that the voting  rights of  affiliates  of Vornado  Realty Trust  (Vornado)
are limited under certain circumstances; and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | We
granted  registration  rights to Apollo and Vornado in  connection  with shares  issuable
upon  conversion of  their units in the Operating  Partnership  and to Winthrop  Realty
Trust in connection  with their shares of  common stock.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our
Objectives and Strategies

We operate in a
structure  commonly referred to as an umbrella  partnership real estate  investment trust
or "UPREIT".  In  this structure,  as indicated  above,  all or our investments
are made through our ownership  interest in, and control of,  the Operating  Partnership.
Our investments are primarily limited to net lease assets although,  as
leases expire with  respect  to  net-lease  assets  we may hold  non-net  lease  assets.
Further,  subject  to the  approval  of our board of  directors,  we may hold  interests
subject  to  certain  contractual  restrictions,  in  non-net  lease  assets.  For our
purposes,  net lease assets include a property that is either  triple-net
leased or the tenant leases at least 85.0% of  the rentable  square footage of the
property,  and, in addition to base rent, the tenant is required to pay some or all of
the  operating  expenses  for the  property  and,  in either  case,  the  lease has a
remaining  term,  exclusive  of all  unexercised  renewal  terms,  of more  than  18 months.
Our use of the term net lease  assets  also  includes  management  agreements  and master
leases with terms of greater than three years where a manager or master lessee bears all
operating  expenses of a property and pays the owner a fixed  return.  The term net lease
assets also  includes all  retenanting  and  redevelopment  associated  with  net  leased
properties  as well as all  agreements,  leases  and  activities  incidental  thereto.
In  addition,  when we refer to  interests  in net  lease  properties,  we are
including,  without  limitation,  securities of companies, whether or not publicly
traded, that are primarily invested in net lease assets.

Our primary
long-term business  objectives are to increase funds from operations,  cash flow
available for distribution to  our stockholders and net asset value per share.  Because
our existing  properties  currently have contractual primary term  rental rates that are
signifantly  above market,  we anticipate  that in the short term, over the next four
years, as the  primary terms of these  existing  leases expire,  the funds from
operations  and cash flow  attributable  to the existing  properties  will  decline.  In
the short term,  we will measure our  performance  by our success in replacing the
built-in  step down in cash flow and funds from  operations  with new rents  derived from
the execution of our  acquisition  program  and management of the existing property lease
rollover.

| | o |  | Portfolio Growth Through Acquisitions:  We intend to employ
      our cash reserves as well as redeploy a portion of our cash flow from operations
      and property sales, net of distributions, to:
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | - |  | acquire
individual net leased properties and portfolios of net leased properties;
| | - |  | ---------------------------------------------------------------------------------

| | - |  | complete
sale/leaseback  transactions,  through which we acquire properties and lease the
properties back to  the seller or operator under a net lease;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | - |  | acquire
controlling and  non-controlling  interests in private and public companies primarily
engaged in the  business of making net lease investments;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | - |  | acquire
equity and debt interests in entities that own, develop,  manage or advise third parties
with regard  to net leased investments;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

| | - |  | acquire
senior and  subordinated  loans  secured by mortgages  on net leased  properties,
mezzanine  loans  secured  by  ownership  interests  in  entities  that  own net  leased
properties  as  well  as  commercial  mortgage-backed securities, B Notes and bridge
loans, relating to net leased properties;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | - |  | participate
in development projects relating to net lease properties; and
| | - |  | -------------------------------------------------------------------------

| | - |  | explore
investment opportunities in non-domestic markets.
| | - |  | ---------------------------------------------------------

| | o |  | Actively Managing Our Lease Rollover: We intend to manage our existing
      properties through lease renewals and extensions with existing tenants,
      new leases and/or, if strategically warranted, sales. Upon termination of
      a property's lease, we intend to extend the lease or promptly re-lease the
      property to a new tenant. If we are unable to extend a lease or re-lease
      property on a net lease basis, our general intention is to either sell that
      property or re-lease the property on a non-net leased basis and then sell
      it. However, depending on existing market conditions, we may elect to retain
      non-net leased properties so as to maximize returns.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6



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| | o |  | Selective Debt Refinancing:We intend to refinance our existing indebtedness
      to the extent strategically viable at lower average interest rates or on
      more attractive terms and increase our access to capital to finance property
      acquisitions and expansions.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Strategic Alliances:Where opportunity arises we intend to enter
      into strategic alliances with entities that historically have been leading
      sellers of net-lease assets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our Assets

General

As of December
31, 2005,  our primary  assets  consisted  of 203  properties  containing  an  aggregate
of  approximately  16,771,000  square feet of space  located in 35 states.  At December
31,  2005,  193 of these  properties  containing  an  aggregate  of  approximately
16,187,000  square feet were  triple-net  leased,  and the  remaining  ten  properties
were  unleased.  Substantially  all tenant leases provide for multiple tenant renewal
options at fixed rents. As of December 31,  2005,  approximately  83.6% of annualized
rental income earned from our tenants was paid by tenants with investment grade  rated
senior debt.  See Item 2. Properties below for additional information with
respect to these properties.

In addition to
our properties, we also own:

| | o |  | interests
in first and second mortgage loans and unsecured debt;
| | - |  | ----------------------------------------------------------------

| | o |  | equity
interests in various entities (including other REITs) that own net leased assets;
| | - |  | ----------------------------------------------------------------------------------------

| | o |  | majority
ownership of a management  company that provides  asset  management  services to our
subsidiaries  and  other real estate limited partnerships; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | ground
leases, remainder interests and the right to acquire remainder interests in net leased
properties.
| | - |  | ---------------------------------------------------------------------------------------------------------

Loan Receivables

1.
T-Two Loans

On  November
7, 2005,  the  Operating  Partnership  exercised  its option to acquire a 100%  ownership
interest in T-Two  Partners,  L.P. (T-Two Partners),  including  $44,400,000
of reserves,  and assumed $269,700,000 of debt for which T-Two  Partners  was the
obligor  and for which the  Operating  Partnership  had been the  guarantor.  See Loan
Obligations  -  KeyBank Loan below. In connection with this exercise,  the
Operating  Partnership  effectively purchased first and second  mortgages  with a
contractual  balance of  $271,000,000  for which the Operating  Partnership  is the
obligor and acquired  $18,200,000  in additional  first and second  mortgages,  the
obligors for which are affiliated  entities.  The additional  first and second  mortgages
had a balance  at  December  31,  2005,  including  accrued  interest  and  deficiencies,
of  $18,500,000, have interest rates ranging from 9% to 13% and mature on dates from 2014
to 2022.

2. El Segundo Mortgage Loan

We also own a
second  mortgage  loan on a  property  in El  Segundo,  California  in  which  we hold a
53%  interest.  The  mortgage loan was acquired for $6,250,000  which  represented  its
principal  balance and accrued  interest.  The mortgage  loan bears interest at 8.0% per
annum and matures in December 2023.

3. Chicago Athletic Loan

On December 29,
2005,  a joint  venture in which we hold a 50% interest  made a  $6,500,000  first
mortgage  loan to the  Chicago Athletic  Association.  The loan is secured by a property
solely occupied by the Chicago Athletic  Association and  located  at 12 S.  Michigan,
Chicago,  Illinois,  bears  interest  at  8.5%  per  annum,  requires  monthly  payments
of  approximately  $52,000 and matures on December 15, 2010, at which time the
outstanding  principal  balance of the loan is  expected to be approximately $6,089,000.

4.
FINCO Note

We also own a
note receivable from Administrator LLC (see The Management Company below).

7



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Investment
in  Debt Securities

We also own the
three most  junior  classes  of  interests  in a  securitized  pool of first  mortgages
which  previously  included  first  mortgage  loans  encumbering  a number of our
properties  and other  properties  owned by a  partnership  controlled  by our
affiliate.  In  connection  with the KeyBank loan  obtained in 2005 (see Loan
Obligations  - KeyBank  Loan below),  the risk of loss on account of these  classes
of interest  have  effectively  been  eliminated  as we were  required to defease the
securitized  pool of first  mortgages.  By defeasing the pool of mortgages,  we were
required to  acquire  United States  government  securities  with  maturities  sufficient
to make the required  payments on the various  mortgage loans  constituting the pool.
Accordingly,  we are ensured that we will receive all payments on account of these
classes of interest.  As a result,  the securitized pool is  collateralized  by the
United States  government  securities,  three of our  properties  and one other  property
owned by a partnership  controlled by our  affiliate.  In general,  the  classes of
interests in the pool  represent  priorities  of payments.  When a payment is made by us
on one of these loans,  the first amounts are used to make the required payments to the
holders of senior interests.

The interests
we hold are summarized as follows:

|                                                        |  |  | Class E 
        Certificate |           | Class F 
        Certificate |   | Class G 
        Certificate |  
|------------------------------------------------------- |  |  | ---------------------------- | --------- | ---------------------------- | - | ---------------------------- | -
|                                                        |  |  |                              |           |                              |   |                              |  
|Contractual
      Principal Amount at December 31, 2005 |  |  | $                            | 4,824,000 |                              | $ | 3,859,000                    |  
|Interest
      Rate                                     |  |  |                              | 8.29      | %                            |   | 8.29                         | %

The
Management Company

The Operating
Partnership  owns a 50.01%  interest in Newkirk Capital LLC.  Newkirk  Capital's
wholly-owned  subsidiary,  Newkirk Asset  Management LLC,  provides asset  management
services to most of our property owning  subsidiaries and nine  other  limited
partnerships,  the  general  partners  of which are  controlled  by us.  In 2005 and
2004,  approximately  $6,269,000 and $6,738,000,  respectively,  of asset  management
fees were paid, or accrued for payment,  to Newkirk Asset  Management.  For  financial
statement  purposes,  management  fees  of  approximately  $5,982,000  and  $6,406,000
were  eliminated  in  consolidation  as such  fees  were  paid by  entities  in  which
we own all or a  portion  of the  equity  interests.  All of the fees paid to Newkirk
Asset  Management  inure to our  benefit  through our  ownership  interest in  Newkirk
Capital and through our ownership of Newkirk Finco LLC which is discussed below.

The 49.99%
minority  interest  in Newkirk  Capital  LLC is owned by  Administrator  LLC,  an
unaffiliated  third  party.  Administrator  LLC is entitled to receive  100% of the
distributions  paid by Newkirk  Capital  until  Administrator  LLC  receives  $2,568,000
annually and  thereafter  the balance of the  distributions  are paid to us.  Income is
allocated to  Administrator  LLC based on the  distributions  it receives.  The
allocation of income and payments to  Administrator  LLC  are treated as minority
interest expense and distributions to minority interest partners,  respectively,  in the
financial  statements.  Administrator  LLC acquired its minority  interest in 1997 in
connection  with the sale by the  principals of  Administrator  LLC of  various  assets
that  were  eventually  acquired  by us in  the  exchange.  As  part  of the  1997
transaction  a  $40,000,000  loan was  made to  Administrator  LLC.  This  loan is now
held by  Newkirk  Finco  LLC,  our  wholly-owned  subsidiary.  The note bears interest at
a rate of 6.42% per annum and matures on  November 20,  2009.  Prior  to  maturity,
the note  requires  payments of interest  only.  The priority  distribution  to
Administrator  LLC enables  Administrator  LLC to pay  interest on the note and
therefore  we  effectively  receive  100% of the fees paid to Newkirk  Capital.  The note
is  secured  solely by  Administrator  LLC's  49.99%  membership  interest  in Newkirk
Capital  and is  otherwise  non-recourse.  Accordingly,  if Administrator LLC were to
default on the note, Newkirk Finco LLC would have the  ability to  foreclose  on
Administrator  LLC's  interest in Newkirk  Capital  resulting  in us owning a 100%
interest in  Newkirk Asset Management.  If Administrator  LLC repays the loan, then the
first  $10,000,000 of subsequent  distributions  made by Newkirk Capital will be paid to
Newkirk Finco LLC and thereafter  50.01% of distributions  will be paid to Newkirk  Finco
LLC and 49.99% will be paid to Administrator LLC.

8



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Recent
Developments

The following
summarizes  transactions  entered into by the Operating  Partnership from November 7,
2005 through March 1,  2006:

Property
Matters

Sales

In November
2005,  we sold our 430,000  square foot  facility  located in New  Kingston,
Pennsylvania  to Hershey  Foods  Corporation,  the tenant at the property  pursuant to
the purchase option contained in its lease for $11,350,000.  We also  received $3,838,000
of accrued and deferred rent.

Acquisitions

On January 18,
2006, we acquired an  approximately  115,500 square foot office building in  Bridgewater,
New Jersey for a  purchase price of $21,150,000.  The property is net leased to Biovail
Pharmaceuticals,  Inc., a company primarily engaged  in the  manufacture  and sale of
generic  pharmaceutical  products.  The lease  agreement has a current term  scheduled to
expire October 31, 2014 with two,  five-year  renewal  terms.  Net adjusted rent during
the current term is $1,397,000 per  year through October 31, 2009 and then $1,686,000
thereafter.

On January 26,
2006,  we acquired a 99,500  square foot 100% leased  office  building in Lisle,
Illinois  for a purchase  price of  $15,250,000.  Adjusted net rent for the property,
commencing  January 1, 2007 is projected to be  approximately  $1,225,000  per year.  The
property is 86% leased to National  Louis  University  with the  balance  being  leased
to two  tenants.  The National Louis University  lease has a primary term expiring
December 31, 2019 with annual base rent during  the primary term commencing at $943,000
through  December 31, 2006 (with a 50% rent concession  through August 31, 2006),
increasing by approximately $43,000 on each January 1 thereafter.

On February 13,
2006, we purchased a 10 year,  BBB rated bond secured by net leased  properties  owned by
Kindercare  Real  Estate LLC with a face value of  $11,700,000  and a  projected
unleveraged  yield to maturity of 7%. We intend to finance  this purchase through a
securitized financing or other nonrecourse facility.

Leasing

| | o |  | As
of March 1, 2006, the Operating Partnerships properties were 96.5% leased.
| | - |  | ------------------------------------------------------------------------------

| | o |  | Since
November 7, 2005,  six tenants  representing  leases at ten properties  containing
1,390,674  square feet  exercised  their  renewal  option,  of which  780,000  square
feet was renewed for a ten-year  term,  and 610,674  square feet was renewed for five
years.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | During
that same period,  two tenants  representing  leases at three  properties  containing
135,548 square feet  notified us that they would not exercise  their renewal  options.
We are currently  marketing  these  properties  for lease or sale.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Since
the IPO,  three  properties  comprising  143,173  square feet have been fully leased to
new tenants and one  office property has been partially leased to a 7,800 square foot
tenant.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Financing

On February
  10, 2006, we obtained a first mortgage loan from Greenwich Capital Financial
  Products, Inc., an unaffiliated third party, in the original principal amount
  of $14,800,000 secured by our property located in Bridgewater, New Jersey. The
  loan bears interest at 5.732%, requires monthly payments of interest only for
  the first 60 months and then requires monthly payments of principal and interest
  of $86,229 and is scheduled to mature on March 6, 2016, at which time the
  outstanding principal balance is expected to be approximately $13,730,274. We
  received net proceeds from this loan, after satisfying closing costs, of approximately
  $14,600,000.

9



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Miscellaneous

We own two
office  buildings in New Orleans,  Louisiana,  containing an aggregate of 403,027 square
feet of space that are  leased to Hibernia  Bank.  Both buildings are located in the area
affected by Hurricane  Katrina.  The tenant has remained  current in its rent obligations
and is responsible for all repairs,  maintenance and capital expenditures  associated
with  these properties.

On January 15,
2006,  we entered  into a strategic  alliance  with U.S.  Realty  Advisors,  LLC (US
Realty),  a leading  net-lease  property advisor,  pursuant to which we will
acquire  single-tenant  assets.  Pursuant to our agreement with US  Realty,  we are
obligated to pay to US Realty a fee of 1.5% of the gross purchase price for properties
acquired that were  offered to us by US Realty upon the consummation of such purchase and a
further  contingent fee for additional  services to be  provided  by US  Realty  equal to
25% of all cash  flow and net  capital  proceeds  after we  receive  a return  of all or
invested capital plus a 12% internal rate of return.

Lending
Activities

See
Our Assets  Loan Receivables  Chicago Athletic Loan above.

Loan Obligations

KeyBank Loan

The Operating
Partnership is the primary obligor under a $750,000,000 loan from KeyBank National
Association and Bank of  America,  N.A. In connection with the IPO,  $150,000,000 of the
proceeds we contributed to the Operating  Partnership were  used to make a  partial
prepayment  on the  loan.  At  December  31,  2005,  the  outstanding  principal  balance
on the  KeyBank/Bank of America Loan was $593,463,000.

The loan bears
interest at our election at a rate equal to either  (i) the  LIBOR Rate (as defined)
plus 175 basis points  (200  basis  points  prior to the  consummation  of the IPO) or
(ii) the  prime rate then  charged  by  KeyBank  National  Association  plus 50
basis  points.  The  loan is  scheduled  to  mature  on  August  11,  2008,  subject  to
two one year  extensions  and  requires  monthly  payments  of  interest  only.  The
loan  requires  quarterly  principal  payments  of  $1,875,000,  increasing to
$2,500,000  per quarter  during the  extension  periods.  The  Operating  Partnership  is
also  required to make principal  payments from the proceeds of property sales,
refinancings  and other asset sales if proceeds  are not reinvested in net leased
properties.  The required  principal  payments will be based on a minimum  release price
set forth in the loan  agreement  for property  sales and 100% of proceeds  from
refinancings,  economic  discontinuance,  insurance settlements and condemnations.  The
loan is secured by a lien on all of the Operating Partnerships assets.

The  Operating
Partnership  can  prepay  the loan in whole or in part at any time  together  with a
premium of 1% if such  prepayment  occurs on or before  August 11,  2006 and
thereafter  with no premium.  The loan  requires that the Operating  Partnership
maintain a (i) minimum  consolidated  debt service  coverage ratio (i.e.,  the ratio of
net cash revenue from  investments to required  consolidated  debt service  payments),
(ii) leverage ratio (i.e., the ratio of (x) the Operating  Partnerships  allocable
share of all  indebtedness  with respect to investments  plus the  outstanding  balance
under the  loan, to (y) the Operating  Partnerships  allocable share of all
investments,  and (iii) Operating  Partnerships  liquid  assets of at least
$5,000,000,  and (iv)  Operating  Partnerships  consolidated  net  worth.  The loan
also  limits  the  Operating  Partnerships,  and consequently  our,  ability to
incur any direct debt or contingent  liabilities but permits  the  Operating  Partnership
to  borrow  up to  $50,000,000  of  non-recourse  debt  on its  properties.  There  are
also  limitations on the Operating  Partnerships use of reinvestment  proceeds,
which are defined as proceeds generated by the  sale of our real estate,  such that the
Operating  Partnership may invest $30,000,000 of reinvestment  proceeds in new net  lease
business  opportunities  and must apply any additional  reinvestment  proceeds to the
prepayment of principal  under  the facility.

As a result of
the  acquisition of interest rate swap and cap  agreements,  (i) LIBOR on the loan is
effectively  fixed at  4.642% for  $250,000,000 of this loan for five years and (ii) the
LIBOR rate on  $295,000,000  of the loan  (decreasing to  $290,000,000  as of December
1, 2006) will be capped at 5.0%  through  November  2006 and 6.0% from  December  2006
until  August 2008.

10



---

The following
is a summary of scheduled principal maturities, excluding principal payments resulting
from anticipated  property sales, by year, of our total debt on the KeyBank/Bank of
America loan:

|Year |  |  |   | Amount      |    
|---- |  |  | - | ----------- | ---
|     |  |  |   |            
|2006 |  |  | $ | 7,500,000   |    
|2007 |  |  |   | 7,500,000   |    
|2008 |  |  |   | 578,463,000 | (1)
|     |  |  |   |            
|     |  |  | $ | 593,463,000 |    
|     |  |  |   |            

| | (1)
Unless extended in which event a $10,000,000 per annum principal payment is required
during the extension  period.
| | ----------------------------------------------------------------------------------------------------------------------

First
Mortgage Debt

For information
relating to our first mortgage debt see Item 8. Financial Statements and
Supplementary Data - Note 4.

Employees

At December
31,  2005,  we had no  employees.  During the first  quarter of 2006,  NKT  Advisors
hired two  employees to  perform acquisition, disposition and investment services for us.
The costs of these employees will be reimbursed by us.

Pursuant to the
terms of the Advisory  Agreement,  NKT  Advisors has been  retained to  administer  our
affairs  including  performing  accounting,  asset management and investor  relation
services for us and seeking,  servicing and managing our  investments.  The Advisory
Agreement has an initial term  scheduled to expire  December 31, 2008,  with annual
automatic  renewals unless either party elects not to renew.  NKT Advisors,  in turn, has
entered into a sub-Advisory  Agreement with  Winthrop Realty  Partners,  L.P.  (Winthrop),
an entity which is the direct employer of our executive  officers and the  entity that
had  previously  provided  such  services to the  Operating  Partnership.  Accordingly,
employees of Winthrop  continue to indirectly  provide the same services to the Operating
Partnership  that they directly  provided prior to the  IPO.

Pursuant to the
Advisory  Agreement,  we are required to pay a base  management fee to NKT Advisors,
which fee is payable  quarterly in arrears,  equal to the greater of (A) $4,800,000
or (B) 1.5% per annum of (1) $273,560,625  (which represents  the gross  purchase
price paid for shares our common  stock in  connection  with the IPO and the sale of
common  stock to  Winthrop  Realty Trust  (excluding  shares issued to Winthrop Realty
Trust in respect of the assignment of its exclusivity  right) net of  underwriting
discounts plus (2) the sum of the net proceeds from any additional  primary  issuances of
our  common or  preferred  equity or from the  issuance  by the  Operating  Partnership
of units,  each  after  deducting  any  underwriting  discounts and commissions and other
expenses and costs relating to such issuances,  plus (3) as and when, if  at all,
Apollo sells or converts for shares,  in whole or from time to time,  up to 5,000,000
units,  utilizing a deemed  value  per unit  equal to the  lesser of  (x) $19.00
and  (y) the  per share  price at which  such  units are sold or, if  converted,
the closing  price of the our common stock on the day on which such units are  converted
less (4) any  amount  that we or the Operating  Partnership  pay to repurchase
shares of our common stock or any units (other than amounts paid  with proceeds of the
IPO to purchase interests units from existing limited partners).

In addition to
the base management  fee, NKT Advisors will be entitled to an incentive  management fee
at such time, if at  all, as our adjusted funds from  operations  exceed certain
thresholds.  For  information  relating to the calculation of  the incentive management
fee, see Item 8. Financial Statements and Supplementary Data - Note 6.

11



---

Competition

We expect to
face  significant  competition for our targeted  investments.  We intend to capitalize on
the acquisition and  investment  opportunities  that our senior management may bring to
us as a result of its acquisition  experience.  Through  its broad  experience,  our
senior  management  team has  established a network of contacts and  relationships  in
the net  leased property industry,  including relationships with operators,  financiers,
commercial real estate brokers, potential  tenants  and other key  industry
participants.  In  addition,  we believe  that NKT  Advisors  significant  real
estate  management  infrastructure  will provide us with the economies of scale
associated with its current  business  operations  and thus will provide us with a
competitive advantage when bidding on investment opportunities.

We also compete
with a large number of real estate  property  owners and  developers  for tenants.  Principal
factors of  competition are rent charged,  attractiveness  of location and property
condition.  Our success will depend upon,  among  other  factors,  trends of the
national and local  economies,  financial  condition and  operating  results of current
and  prospective  tenants,  availability  and  cost  of  capital,  construction  and
renovation  costs,  taxes,  governmental  regulations, legislation and population trends.

Environmental
Regulations

Under various
federal,  state and local laws and  regulations,  an owner or operator of real estate may
be held liable for  the costs of removal or  remediation  of hazardous or toxic
substances  located on or in the  property.  These laws often  impose  such  liability
without  regard to whether  the owner  knows of, or was  responsible  for,  the  presence
of such  hazardous or toxic  substances.  The cost of any required  remediation or
removal of such  substances may be  substantial.  In addition,  the owner's  liability as
to any property is generally not limited under such laws and regulations and could
exceed the value of the  property  and/or the  aggregate  assets of the owner.  The
presence of such  substances,  or the  failure to  remediate  such  substances  properly,
may also  adversely  affect the  owner's  ability to sell or lease the  property  or to
borrow  using  the  property  as  collateral.  Under  such laws and  regulations,  an
owner or entity  who  arranges for the disposal or treatment of hazardous or toxic
substances  at a disposal or treatment  facility may also be  liable for the costs of
removal or  remediation of all such  substances at such facility,  whether or not such
facility is  owned or operated by such person.  Some laws and regulations  impose
liability for the release of certain  materials into  the air or water from a property,
including asbestos,  and such release can form the basis for liability to third parties
for personal injury or other damages.  Other laws and  regulations  can limit the
development of and impose  liability for  the disturbance of wetlands or the habitats of
threatened or endangered species.

Almost all of
our  properties  are  triple-net  leased,  and tenants are  therefore  generally
required to pay all of the  expenses  relating  to the leased  property.  Accordingly,
we  believe  that  compliance  with  federal,  state and local  provisions  otherwise
relating  to the  properties  or the  environment  will not have a material  effect on
our  capital  expenditures,  earnings  or  competitive  position.  However,  no
assurance  can be  given  that  material  environmental  liabilities  do not exist,  that
despite  the leases in place we will not be held liable for  environmental  liabilities,
that any prior  owner or operator of a property or land held for  development  did not
create any  material  environmental  condition not known to us, that a material
environmental  condition does not otherwise exist as to any one or more of our
properties  or  land  held  for  development,  or that  future  uses  and  conditions
(including  changes  in  applicable  environmental  laws  and  regulations  and the  uses
and  conditions  of  properties  in the  vicinity,  such as  leaking  underground
storage  tanks and the  activities  of the  tenants)  will not  result  in the
imposition  of  environmental  liability.  No material expenditures have been made by us
to date relating to environmental matters.

Segment Data

We operate in
only one business segment - net lease assets.

Additional
Information About Us

We make  the
following  materials  available  free of  charge  through  our  website  at
www.newkirkreit.com  as soon as  reasonably  practicable  after such materials are
electronically  filed with or furnished to the SEC under the Securities  Exchange Act of
1934, as amended (the Exchange Act):

| | o |  | our
and the Operating Partnerships annual reports on Form 10-K and all amendments
thereto;
| | - |  | -------------------------------------------------------------------------------------------

| | o |  | our
and the Operating Partnerships quarterly reports on Form 10-Q and all amendments
thereto;
| | - |  | ----------------------------------------------------------------------------------------------

| | o |  | our
and the Operating Partnerships current reports on Form 8-K and all amendments
thereto; and
| | - |  | -----------------------------------------------------------------------------------------------

12



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| | o |  | various
other filings that we or the Operating Partnership make with the SEC.
| | - |  | -----------------------------------------------------------------------------

We also make
the following materials available free of charge through our website at
www.newkirkreit.com:

| | o |  | Audit
Committee Charter;
| | - |  | ------------------------

| | o |  | Compensation
Committee Charter
| | - |  | ------------------------------

| | o |  | Conflicts
Committee Charter
| | - |  | ---------------------------

| | o |  | Nominating
and Corporate Governance Committee Charter,
| | - |  | ------------------------------------------------------

| | o |  | Code
of Business Conduct and Ethics; and
| | - |  | ----------------------------------------

| | o |  | Corporate
Governance Guidelines
| | - |  | -------------------------------

We will provide
a copy of the foregoing  materials  without  charge to anyone who makes a written
request to our Investor  Relations Department, c/o NKT Advisors, LLC, 7 Bulfinch Place,
Suite 500, P.O. Box 9507, Boston, Massachusetts 02114.

We also  intend
to  promptly  disclose on our website  any  amendments  that we make to, or waivers for
our  Directors  or  executive officers that we grant from, the Code of Business Conduct
and Ethics.

ITEM 1A.
 RISK FACTORS

Risks
Related to Our Business

We are
subject to the risks of commercial real estate ownership that could reduce the value of
our properties.

Our core
business is the ownership of real estate that is leased to retail, distribution and
service companies on a net  leased basis; accordingly, our performance is subject to
risks incident to the ownership of commercial real estate,  including:

| | o |  | changes
in the general economic and business climate;
| | - |  | -----------------------------------------------------

| | o |  | the
illiquid nature of real estate compared to most other financial assets;
| | - |  | ---------------------------------------------------------------------------

| | o |  | environmental
risks related to the presence of hazardous or toxic substances or materials on our
properties;
| | - |  | ------------------------------------------------------------------------------------------------------------

| | o |  | acts
of God, including earthquakes, floods and other natural disasters which may result in
uninsured losses;
| | - |  | ------------------------------------------------------------------------------------------------------------

| | o |  | changes
in consumer trends and preferences that affect the demand for products and services
offered by our  tenants;
| | - |  | --------------------------------------------------------------------------------------------------------------------

| | o |  | changes
in local real estate conditions;
| | - |  | ----------------------------------------

| | o |  | changes
in interest rates and the availability of financing;
| | - |  | ------------------------------------------------------------

| | o |  | real
estate valuations are subjective and may change over time; and
| | - |  | -------------------------------------------------------------------

| | o |  | changes
in laws and governmental regulations, including those governing real estate usage, zoning
and taxes.
| | - |  | ------------------------------------------------------------------------------------------------------------

If these or
similar events occur, it could cause the value of our real estate to decline, which could
adversely affect  the rents our tenants are willing to pay and our results of operations.

Our  success
depends on the  ability of NKT  Advisors  to operate  properties  and NKT  Advisors
failure to operate  our  properties in a sufficient  manner could have a material
adverse effect on the value of our real estate  investments  and  results of operations.

We presently
have no  employees.  Our officers  and NKT  Advisors  are  employees of Winthrop.
Although NKT Advisors has  hired two employees to perform dedicated business,
acquisition and investment  functions for us, we depend on the ability  of NKT  Advisors
to operate  our  properties  and manage our other  investments  in a manner  sufficient
to  maintain or

13



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increase
revenues and to generate  sufficient  revenues in excess of our  operating and other
expenses.  NKT Advisors is  not required to dedicate any particular  number of employees
or  employee-hours  (other than the two dedicated  employees)  to our  business in order
to fulfill its  obligations  under our Advisory  Agreement.  We are subject to the risk
that NKT  Advisors will  terminate the Advisory  Agreement and that no suitable
replacement  will be found to manage us. We believe  that our  success  depends to a
significant  extent  upon the  experience  of NKT  Advisors executive  officers,
whose  continued  service is not guaranteed.  If NKT Advisors  terminates the Advisory
Agreement,  we may not be able to execute  our business plan and may suffer losses,
which could have a material adverse effect on our ability to make  distributions  to our
stockholders.  The  failure of NKT  Advisors  to operate  our  properties  and manage our
other  investments  will  adversely  affect the underlying  value of our real estate
investments,  the results of our operations and our ability to  make distributions to our
stockholders and to pay amounts due on our indebtedness.

We depend on
the experience and expertise of our and NKT Advisors senior  management  team, and
the loss of the services  of our key personnel could have a material  adverse effect on
our business  strategy,  financial  condition and results of  operations.

We are
dependent on the efforts,  diligence,  skill,  network of business contacts and close
supervision of all aspects of  our  business by NKT  Advisors  and, in  particular,
Michael  Ashner,  chairman of our board of  directors  and our chief  executive officer,
and Peter Braverman,  our president,  as well as our other executive officers,  Carolyn
Tiffany, Thomas  Staples,  and Lara Sweeney  Johnson.  In addition,  the  resignation of
Michael Ashner as our officer and as an officer of  NKT  Advisors,  would  constitute
"cause" for which we would have the right to terminate  the Advisory
Agreement,  would  cause our exclusivity rights with respect to all business
opportunities  related to net leased assets that are offered to  or generated by Michael
Ashner to terminate and revert back to Winthrop  Realty Trust.  Our continued  success
will depend  on the continued  service of our and NKT Advisors senior  management
team.  The loss of their  services  could harm our  business  strategy,  financial
condition and results of operations,  which would adversely affect the value of our
common  stock.

NKT Advisors base
management  fee is payable  regardless of our  performance,  which may reduce its
incentive to devote  time and resources to our portfolio.

NKT  Advisors
is entitled  to receive a base  management  fee that is based on the amount of our equity
(as defined in the  Advisory  Agreement),  regardless  of  the  performance  of  our
portfolio.  NKT  Advisors entitlement  to  substantial  non-performance  based
compensation  might  reduce its  incentive  to devote  its time and  effort to seeking
profitable  opportunities for our portfolio. This in turn could hurt our ability to make
distributions to our partners.

NKT Advisors entitlement
to an incentive management fee may induce NKT Advisors to make certain  investments,
including  speculative investments.

Our senior
management's  right to  indirectly  benefit from the incentive  management  fee may cause
it to invest in high  risk investments.  In addition to its base management fee, NKT
Advisors is entitled to receive  incentive  management fees  based in part upon our
achievement  of targeted  levels of adjusted  funds from  operations.  Winthrop  Realty
Trust will  receive 80.0% of the incentive  management  fees earned by NKT Advisors.  Our
senior  management  will benefit  indirectly  from this payment through their indirect
ownership of securities of Winthrop Realty Trust and their  entitlement to share  in the
incentive  management  compensation earned by Winthrop Realty Trust's external advisor.
In evaluating  investments  and other management  strategies,  the opportunity to benefit
indirectly from NKT Advisors incentive  management fees may  lead NKT Advisors to
place undue emphasis on the  maximization  of adjusted funds from  operations at the
expense of other  criteria,  such as  preservation  of capital,  in order to achieve
higher  incentive  management  fees.  Investments  with  higher yield  potential are
generally  riskier or more  speculative.  This could result in increased  risk to the
value of  our invested portfolio.

Substantially
all of our leases  will  expire  over the next five years  which  could  unfavorably
affect our  financial  performance.

With respect to
our properties,  we are subject to the risk that, upon  expiration,  leases may not be
renewed,  the space  may not be leased, or the terms of renewal or leasing,  including
the cost of required renovations,  may be less favorable  than the current lease terms.
This may adversely  affect our  financial  performance.  This risk is increased in our
case  because  the  current  term of many of the leases for our  properties  will  expire
over the next five  years.  If we are  unable to promptly  relet or renew leases for all
or a substantial  portion of the space subject to expiring  leases or if  our  reserves
for these  purposes

14



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prove
inadequate,  our  revenue,  net income and  available  cash could be  adversely
affected.  In addition,  if it becomes  necessary for us to make capital  expenditures
for tenant  improvements,  leasing  commissions  and tenant  inducements  in order to
re-lease  space,  our revenue,  net income and cash available for future  investment
could be adversely affected.

Primary term
rents are substantially  higher than contractual  renewal rental rates which may cause a
material decrease in  our revenues.

Upon
expiration of their  initial term,  leases can be renewed at the option of the tenants
for one or more renewal terms  at fixed  renewal  rates that are  substantially  lower
than the rent during the initial  terms.  Lower  renewal rates may  cause a material
decrease in our revenues.

We face the
risk that a tenant will develop financial weakness which could unfavorably affect our
financial performance.

A tenant of a
property may  experience a downturn in its  business,  which could result in the tenant's
inability to make  rental  payments  when due. In addition,  a tenant may seek the
protection  of  bankruptcy,  insolvency  or similar laws,  which could result in the
rejection and  termination  of such tenant's  lease and cause a reduction in our cash
flows.  If  a lease were to be rejected and terminated at a single tenant property, the
entire property would become vacant.

We cannot
evict a tenant  solely  because of its  bankruptcy.  A court,  however,  may  authorize
a tenant to reject and  terminate  its  lease.  In such a case,  our claim  against  the
tenant  for  unpaid,  future  rent would be subject to a  statutory cap that might be
substantially  less than the remaining  amount of rent owed under the lease. In any
event, it  is unlikely  that a bankrupt  tenant will pay in full the  amounts it owes us
under a lease.  The loss of rental  payments  from  tenants,  whether  because of a
tenant's  bankruptcy or other  factors,  could  adversely  affect our cash flows and
operations.

In addition,  a
number of our properties  are leased to banks and insurance  companies that are not
eligible to be debtors  under the federal  bankruptcy  code,  but would be subject to the
liquidation  and  insolvency  provisions  of applicable  federal and state laws and
regulations.  If the FDIC or an analogous  state  authority were appointed as receiver of
such  a tenant because of a tenant's  insolvency,  we would become an unsecured  creditor
of the tenant and be entitled to share  with the  other  unsecured  non-depositor
creditors  in the  tenant's  assets  on an equal  basis  after  payment  to the
depositors  of their  claims.  For  example,  the FDIC has in the past taken the position
that it has the same  avoidance  powers as a trustee in  bankruptcy,  meaning that the
FDIC may try to reject the tenant's  lease with us. As a result,  we  would be unlikely
to have a claim for more than the insolvent  tenant's  accrued but unpaid rent owing
through the date of  the FDIC's  appointment  as  receiver.  In any event,  the amount
paid on claims in respect of the lease would  depend on,  among  other  factors,  the
amount of assets of the  insolvent  tenant  available  for  unsecured  claims.  We may
recover  substantially  less than the full  value of any  unsecured  claims,  which
could have a  material  adverse  effect on our  operating  results and financial
condition,  as well as our ability to pay dividends to stockholders at historical levels
or at all.

Adverse
developments  in various  industries  or  geographic  areas in which our tenants are
concentrated  could have an  unfavorable effect on our financial performance.

Tenants in the
banking and finance,  aerospace/defense,  supermarket and manufacturing  industries
represent 19.2%, 18.3%,  18.1%,  and 10.0% of our in-place  annualized  rental revenues
at December 31, 2005,  respectively,  and adverse  industry  developments  in any of
these  industries  could  result in our  tenants in such  industries  being  unable to
make rental  payments  when due,  which could have a material  adverse  effect on our
financial  condition  and results of  operations.  Properties  in  California,  Maryland
and Texas  account for 23.8%,  10.8% and 10.3% of our  in-place  annualized  rental
revenues at December 31, 2005,  respectively.  Adverse developments in those areas could
have a material adverse effect on  our financial condition and results of operations.

We operate in a
highly competitive market for investment opportunities.

For a
discussion of risks related to competition in the real estate business, see Item 1.
Business - Competition.

We could
experience  a reduction  in  revenues  if our  tenants  are unable to meet the lease
payments on our net leased  properties.

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The existing
lease  agreements  for our  properties  typically  obligate the tenant to pay all costs
associated  with the  property,  including real estate taxes, ground rent,  insurance,
utilities and maintenance costs. In addition,  the lease  payments,  assuming  tenants
exercise  their renewal  options,  are designed to be sufficient to satisfy our debt
service  requirements  on the loans  encumbering  the leased  properties.  Accordingly,
if a tenant were to  experience  financial  difficulty  and  default on its lease
payments,  we would  either  have to assume  such  obligations  or risk  losing the
property through foreclosure.  Any such default would have a negative impact on our
revenues and results of operations.

We may not be
able to invest our excess cash in suitable investments.

We may not be
able to identify  investments that meet our investment  criteria and we may not be
successful in closing the  investments  that we identify.  Our ability to generate
increased  revenues is dependent upon our ability to invest these  funds in real estate
related assets that will ultimately  generate favorable returns.  If we do not
successfully  identify  investments  or close  investments  we identify,  our growth
rate,  business  strategy and results of operations  could be  impaired.

We could
experience  increased  operating costs and limited amounts of growth if we are unable to
obtain reasonably priced  financing.

Our business
plan requires  significant  funds for asset  acquisition,  minimum REIT  distributions
and other needs. This  strategy  depends,  in  part,  on our  ability  to  access  the
debt and  equity  capital  markets  to  finance  our cash  requirements.  Our credit
facility with  KeyBank/Bank of America will mature in August 2008 and provides for two
one year  renewals.  We may need to develop and access  long-term debt financing
facilities or other  permanent debt  strategies in  order to  successfully  execute our
business  plan.  Our  inability to  effectively  access  these  markets  would have an
adverse effect on our ability to make new  investments and could  adversely  affect our
ability to make dividend  payments  to you over time.  Our  inability  to extend our
credit  facility  with  KeyBank/Bank  of America or to obtain  reasonably  priced
financing to replace the facility when it matures could create increased  operating costs
and diminished  levels of  growth as we may be  forced  to incur  indebtedness  with
above-market  interest  rates or with  substantial  restrictive  covenants.

Illiquidity of
our real estate investments could significantly impede our ability to respond to adverse
changes in the  performance of our properties and harm our financial condition.

Because real
estate  investments  are relatively  illiquid,  our ability  promptly to sell  properties
in our portfolio in  response to adverse changes in their  performance  may be limited,
which may harm our financial  condition.  If we decide  to sell an  investment,  we may
be unable  to  dispose  of it in the time  period  we  desire  and the sales  price of
any  investment may not recoup or exceed the amount of our  investment.  Our inability to
dispose of one or more  properties on  advantageous terms could result in losses to us,
which could limit our ability to pay dividends to our stockholders.

In  addition,
as part of an  acquisition  of a  property,  we may agree with the seller  that we will
not  dispose of the  acquired  properties or reduce the mortgage  indebtedness on them
for significant periods of time unless we pay certain of  the  resulting  tax costs of
the seller.  These  agreements  could  result in our holding on to  properties  that we
would  otherwise sell and not pay down or refinance indebtedness that we would otherwise
pay down or refinance.

Additional
regulations  applicable to our properties may require  substantial  expenditures to
ensure  compliance,  which  could adversely affect cash flows and operating results.

Our properties
are subject to various federal,  state and local regulatory  requirements  such as local
building codes and  other similar  regulations.  If we fail to comply with these
requirements,  governmental  authorities may impose fines on  us or private litigants may
be awarded damages against us.

We believe that
our properties are currently in substantial  compliance with all applicable regulatory
requirements.  New  regulations  or  changes  in  existing  regulations  applicable  to
our  properties,  however,  may  require  that we make  substantial  expenditures to
ensure regulatory  compliance to the extent that tenants under net leases are not
required to  pay such expenditures, which would adversely affect our cash flows and
operating results.

Insurance on
our  properties  may not  adequately  cover all losses to our  properties,  which could
reduce  returns if a  material uninsured loss occurs.

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Our tenants are
required to maintain property  insurance  coverage for the properties they operate.  We
maintain a blanket  policy on our  properties  not insured by our tenants.  There are
various  types of losses,  generally  of a  catastrophic  nature,  such as earthquakes,
floods,  hurricanes,  terrorism or acts of war that may be uninsurable or not
economically  insurable.  Should an uninsured  loss occur,  we could lose our capital
investment  and/or  anticipated  profits and cash  flow from one or more  properties.
Inflation,  changes in building codes and  ordinances,  environmental  considerations,
and other  factors,  including  terrorism or acts of war,  might make the  insurance
proceeds  insufficient  to repair or  replace a property if it is damaged or destroyed.
In that case,  the insurance  proceeds  received  might not be adequate  to restore our
economic  position  with  respect to the affected  real  property,  which could reduce
the amounts we have  available to pay dividends to you.

Our debt level
may have a negative impact on our ability to make  distributions  to  stockholders  and
pursue our business  strategy.

We have
  incurred indebtedness in connection with the acquisition of our properties and
  will incur new indebtedness in the future in connection with our operating activities.
  Our use of debt financing creates risks, including the risk that our cash flow
  will be insufficient to meet required payments of principal and interest and
  distributions and the risk that indebtedness on our properties, or unsecured
  indebtedness, will not be able to be renewed, repaid or refinanced when due,
  or that the terms of any renewal or refinancing will not be as favorable as
  the terms of such indebtedness. If we were unable to refinance such indebtedness
  on acceptable terms, or at all, we might be forced to dispose of one or more
  of our properties on disadvantageous terms, which might result in losses to
  us, which could have a material adverse effect on us and our ability to pay
  dividends to our stockholders and to pay amounts due on our indebtedness. Furthermore,
  if a property is mortgaged to secure payment of indebtedness and we are unable
  to meet mortgage payments, the mortgagor could foreclose upon the property,
  petition for the appointment a receiver or obtain an assignment of rents and
  leases or pursue other remedies, all with a consequent loss of revenues and
  asset value to us.

The covenants
contained in our  KeyBank/Bank  of America  credit  facility  include but are not limited
to a consolidated  leverage ratio,  minimum  liquidity test,  minimum  consolidated  net
worth test, and  consolidated  debt service coverage  ratio.  These covenants may impose
limitations on the amount of leverage we and our subsidiaries can incur.

Noncompliance
with environmental laws could unfavorably affect our financial condition and operating
results.

The real estate
properties we expect to own,  including  those that we may acquire by foreclosure in
connection  with our  net lease loans,  will be subject to various federal,  state and
local  environmental  laws. Under these laws,  courts and  government  agencies have the
authority to require the current owner of a contaminated  property to clean up the
property,  even if the  owner  did not  know of and was not  responsible  for the
contamination.  Liability  can be  imposed  upon a  property  owner  based on  activities
of a tenant.  These laws also apply to persons  who owned a property at the time it
became contaminated.  In addition to the costs of cleanup,  environmental contamination
can affect the value of a property  and,  therefore,  an owner's  ability to borrow funds
using the property as collateral or to sell the property.  Under the  environmental
laws,  courts and government  agencies also have the authority to require that a person
who sent waste to a  waste  disposal  facility,  such as a landfill or an  incinerator,
to pay for the clean-up of that facility if it becomes  contaminated  and  threatens
human health or the  environment.  A person that arranges for the disposal of, or
transports  for disposal or  treatment,  a hazardous  substance at a property  owned by
another may be liable for the costs of removal  or remediation of hazardous substances
released into the environment at that property.

Furthermore,
various  court  decisions  have  established  that third  parties may recover  damages
for injury  caused by  property  contamination.  Also,  some of these  environmental
laws restrict the use of a property or place  conditions on  various  activities.  For
example,  some laws require a business  using  chemicals to manage them  carefully and to
notify  local  officials that the chemicals are being used. We may be responsible  for
environmental  liabilities  created by our  tenants irrespective of the terms of any
lease.

We could be
responsible  for the costs related to  noncompliance  with  environmental  laws
discussed  above.  The costs  incurred to clean up a contaminated  property,  to defend
against a claim, or to comply with  environmental  laws could be  material and could
adversely affect our financial condition and operating results.

We may obtain
Phase I  environmental  reports or, in some cases, a Phase II  environmental  report
prior to acquisition of  or  foreclosure on a property.  However,  these reports may not
reveal all  environmental  conditions at a property and we  may incur material
environmental  liabilities of which we are unaware.  Future laws or  regulations  may
impose  material

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environmental
liabilities on us or our tenants and the current environmental  condition of our
properties may be affected  by the  condition  of the  properties  in the  vicinity of
our  properties  (such as the  presence of leaking  underground  storage tanks) or by
third parties unrelated to us.

Although our
leases  generally  require our tenants to operate in compliance  with all applicable laws
and to indemnify us  against any environmental  liabilities arising from a tenant's
activities on the property,  we would be subject to strict  liability by virtue of our
ownership  interest,  and we cannot be sure that our tenants will, or will be able to,
satisfy  their  indemnification  obligations  under our lease, if any. The discovery of
environmental  liabilities  attached to our  properties  could  adversely  affect a
lessee's  ability  to make  payments  to us or  otherwise  affect  our  results of
operations, our financial condition and our ability to pay dividends to you.

Compliance
with the  Americans  with  Disabilities  Act and fire,  safety and other  regulations
may  require us to make  unintended expenditures that adversely impact our ability to pay
dividends to you.

All of our
properties are required to comply with the Americans  with  Disabilities  Act, or the
ADA. The ADA has separate  compliance  requirements for "public
accommodations"  and "commercial  facilities," but generally requires that
buildings  be made  accessible to people with  disabilities.  Compliance  with the ADA
requirements  could require removal of access  barriers and non-compliance  could result
in imposition of fines by the U.S.  government or an award of damages to private
litigants,  or both.  While our tenants are obligated by law to comply with the ADA
provisions,  and typically our leases  and financing  agreements  obligate our tenants to
cover costs  associated with  compliance,  if required  changes involve  greater
expenditures than anticipated,  or if the changes must be made on a more accelerated
basis than anticipated,  the  ability of these  tenants to cover costs could be
adversely  affected and we could be required to expend our own funds to  comply with the
provisions  of the ADA. The  occurrence of such events could  adversely  affect our
results of operations  our financial condition and our ability to pay dividends to you.

In addition,
we are required to operate our  properties in compliance  with fire and safety
regulations,  building codes  and other land use regulations,  as they may be adopted by
governmental  agencies and bodies and become  applicable to our  properties.  We may be
required to make  substantial  capital  expenditures  to comply with those  requirements
and these  expenditures  could have an adverse  effect on our ability to pay dividends to
you.  Additionally,  failure to comply with  any of these  requirements  could result in
the  imposition of fines by  governmental  authorities or awards of damages to  private
litigants.  While we intend to acquire only  properties  that we believe are currently in
substantial  compliance  with all regulatory  requirements,  these  requirements  could
be changed or new requirements could be imposed which would  require  significant
unanticipated  expenditures  by us and could have an adverse  effect on our cash flow and
dividends  paid.

Properties
owned through joint ventures may limit our ability to act exclusively in our interests.

Approximately
23.7% of our in-place  annualized  rental revenues at December 31, 2005 is attributable
to properties owned  in  partnership  with other  parties.  In  addition,  in the future
we may  participate  in joint  ventures  and  purchase  properties  jointly with other
entities,  some of which may be unaffiliated  with us. There are additional  risks
involved  in these types of  transactions,  including  the loss of total  operational
control,  the  potential of our joint venture  partner  becoming  bankrupt  and the
possibility  that  our  partners  have  economic  or  business  interests  that  are
inconsistent with our business interests or goals.

These diverging
interests could result in exposing us to liabilities of the joint venture in excess of
our  proportionate  share of these  liabilities.  The partition of rights of each owner
in a jointly-owned  property could reduce the value of  each  portion  of the  divided
property.  In  addition,  the  fiduciary  obligation  that we may owe to our  partners
in  affiliated transactions may make it more difficult for us to enforce our rights.
Accordingly,  our participation in joint  ventures  could  adversely  affect  our
financial  condition,  results  of  operations,  cash  flow and  ability  to make
distributions with respect to our common stock.

We leverage our
portfolio,  which may adversely  affect our return on our  investments  and may reduce
cash available for  distribution.

We seek to
leverage our portfolio  through  borrowings.  Our return on investments and cash
available for  distribution to  our  stockholders  may be reduced to the extent  that
changes in market  conditions  cause the cost of our  financing  to  increase  relative
to the income that can be derived  from the assets.  Our debt  service  payments  reduce
the net income  available  for the payment of  dividends  to our  stockholders.  We may
not be able to meet our debt  service  obligations  and,  to the  extent

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that we
cannot,  we risk the loss of some or all of our  assets to  foreclosure  or forced  sale
to  satisfy  our debt  obligations.  A decrease  in the value of the assets may lead to a
requirement  that we repay  certain  borrowings. We may not have the funds available to
satisfy such repayments.

We are  subject
to  increases  in the cost of our  borrowings  as a result of rising  interest  rates,
which could have a  material unfavorable effect on us and our ability to pay dividends
and make debt service payments.

We have
incurred,  and may incur in the  future,  indebtedness  that  bears  interest  at
variable  rates.  Accordingly,  increases in interest rates may decrease the spread
between the returns on our portfolio  investments  and the cost of our  borrowings to the
extent that the related indebtedness was not protected by interest rate protection
arrangements,  which  could have a material  adverse  effect on us and our ability to pay
dividends to our  stockholders  and to pay amounts due  on our  indebtedness  or cause us
to be in default  under  certain debt  instruments.  In addition,  an increase in market
interest rates may encourage  holders to sell their common stock and reinvest the
proceeds in higher yielding  securities,  which  could  adversely  affect  the  market
price for our  common  stock.  We have  floating  rate debt  outstanding  of
approximately  $593,463,000.  This debt bears  interest  at a rate  elected by us equal
to either  (1) LIBOR,  as defined,  plus 175 basis points or (2) the  prime
rate charged by KeyBank plus 50 basis  points.  We entered into interest rate swap  and
cap  agreements  to limit  exposure  to  interest  rate  volatility.  As a result,  LIBOR
has been fixed at 4.642% for  $250,000,000 of the loan for five years.  In addition,
$295,000,000,  decreasing to  $290,000,000 as of December 1,  2006  will be subject
to a LIBOR cap of 5.0% through November 2006 and 6.0% from December 1, 2006
through August 2008.

Terrorist
attacks and other acts of violence or war may affect the market for our common stock,
the industry in which we  conduct our operations and our profitability.

Terrorist
attacks  may harm our results of  operations  and your  investment.  There may be future
terrorist  attacks or  armed conflicts against the United States or U.S.  businesses that
may directly impact the property  underlying our common  stock or the securities markets
in general. Losses resulting from these types of events may be uninsurable.

More
generally,  any of these  events  could cause  consumer  confidence  and spending to
decrease or result in increased  volatility in the United States and worldwide  financial
markets and economy.  Adverse economic  conditions could harm the  value of the property
underlying  our common stock or the securities  markets in general,  which could harm our
operating  results and revenues and may result in volatility of the value of our common
stock.

Risks Related
to Conflicts of Interest and Certain Relationships

There are
various  conflicts of interest  resulting  from the  relationships  among us, our
management,  NKT Advisors and  other parties.

Various
conflicts of interest exist among us, our  management,  and NKT Advisors  including the
allocation of time by NKT  Advisors senior  management team,  which also serves as
senior  management of, and holds economic  interests in, Winthrop  Realty Trust and its
advisor as well as Winthrop, between us and Winthrop Realty Trust, and between us and
Winthrop.

These
conflicts  may result in terms  that are more  favorable  to our  management,  NKT
Advisors  and/or NKT  Advisors affiliates than would have been obtained on an arm's
length basis, and may operate to the detriment of our stockholders.

Termination of
our Advisory Agreement with NKT Advisors may be costly.

Termination  of
the  Advisory  Agreement  with NKT Advisors  may be  difficult  and costly.  We may elect
not to renew our  Advisory  Agreement  after the initial  term or after any  one-year
renewal  period by the  affirmative  vote of at least  two-thirds of our  independent
directors.  We may also  terminate the Advisory  Agreement  (1) for cause at any
time upon  the affirmative vote of a majority of our independent  directors and (2) without
cause during any renewal period upon the  affirmative vote of at least two-thirds of our
independent  directors.  If we terminate  without cause or do not renew the  Advisory
Agreement,  in each case,  we are required to pay NKT Advisors a  termination  fee equal
to two times the annual  average of the sum of the base  management  and incentive  fees
earned during the previous  24 months.  In the case of any  termination or
non-renewal by us, our exclusivity  rights with respect to net lease property
opportunities  offered to or  generated  by Michael  Ashner will  terminate  and revert
back to Winthrop  Realty Trust and all lock-up  restrictions  on  vested  shares of our
common stock held by Winthrop  Realty Trust and all shares and units held by executive
officers and

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employees of
Winthrop  will  terminate.  These  provisions  may  increase  the  effective  cost to us
of  terminating  the  Advisory Agreement, thereby adversely affecting our ability to
terminate NKT Advisors without cause.

We have agreed
with  Vornado  Realty Trust that our  activities  will satisfy  certain  requirements.
If we are unable to  satisfy these requirements we could be liable for substantial
amounts.

Affiliates of
Vornado  Realty Trust own 10,186,991  units of limited  partnership  interest in the
Operating  Partnership,  representing a 15.8% equity  interest in us on a fully diluted
basis.  We have agreed to certain  restrictions  regarding  our activities and assets
intended to maintain our  qualification  as a REIT.  These  restrictions  will generally
expire  sixty  business  days  following  the date on which we notify  Vornado  Realty
Trust that its  aggregate  ownership in us  represents  less than a 2.0%  interest  in
us. If we breach any of these  agreements,  and,  as a result,  Vornado  Realty  Trust
fails to maintain  its  qualification  as a REIT or  otherwise  incurs  liability  for
any tax,  penalty or similar  charges,  we and our operating  partnership  could be
exposed to  substantial  liability for damages  attributable  to our  breach.

Risks Relating
to Our Election to be taxed as a REIT

Our REIT
requirements may force us to borrow to make distributions to partners.

As a REIT, we
must generally  distribute at least 90% of its annual REIT taxable income,  subject to
certain  adjustments,  to our  stockholders.  To the extent that we satisfy the REIT
distribution  requirement  but distribute less than 100% of  our  taxable  income,  we
will be  subject  to  federal  corporate  income tax on its  undistributed  taxable
income.  In  addition,  we will be subject to a 4% nondeductible  excise tax if the
actual amount that it pays to its stockholders in a  calendar year is less than a minimum
amount specified under federal tax laws.

From  time to
time,  we may  generate  taxable  income  greater  than our cash  flow  available  for
distribution  to our  stockholders  (for example,  due to substantial  non-deductible
cash outlays,  such as capital  expenditures or principal  payments on debt).  If we do
not have other funds  available  in these  situations  we could be required to borrow
funds,  sell  investments at  disadvantageous  prices or find  alternative  sources of
funds to make  distributions  sufficient to  enable us to pay out enough of its taxable
income to satisfy the REIT  distribution  requirement  and to avoid income and  excise
taxes in a particular  year.  These  alternatives  could  increase  our  operating  costs
or diminish our levels of  growth.

REIT
restrictions  on ownership of our common stock may delay or prevent our  acquisition by a
third party,  even if such  acquisition were in the best interests of our stockholders.

In order for us
to qualify as a REIT,  not more than 50% of the value of our  outstanding  shares of our
common  stock may  be owned, directly or indirectly, by five or fewer individuals during
the last half of a taxable year.

In order to
prevent five or fewer  individuals from acquiring more than 50% of the outstanding
shares of our common stock  resulting  in our failure to qualify as a REIT,  our charter
provides  that,  subject to certain  exceptions,  no person,  including  entities,  may
own, or be deemed to own by virtue of the attribution  provisions of the Internal
Revenue Code,  more than 9.8% of our outstanding  common stock.  While these
restrictions  are designed to prevent any five  individuals  from owning more than 50% of
the shares, they could also discourage a change in control of us.

Provisions  in
our charter and bylaws and Maryland  law may delay or prevent our  acquisition  by a
third  party,  even if  such acquisition were in the best interests of our stockholders.

Certain
provisions  of  Maryland  law and our  charter  and bylaws  could have the effect of
discouraging,  delaying  or  preventing  transactions  that  involve  an actual or
threatened  change in  control  of us,  and may have the  effect of  entrenching  our
management  and members of our board of directors,  regardless of their  performance.
These  provisions  include the following:

| | o |  | Preferred
stock.  Under our charter,  our board of directors has authority to issue preferred stock
from time to  time in one or more  series  and to  establish  the  terms,  preferences
and  rights of any such  series of  preferred stock, all without approval of our
stockholders.  The terms,  preferences and rights of any series  of our preferred stock
that becomes  outstanding may be unattractive to a potential  acquiror or may require  a
separate vote of the holders of such series of preferred stock to effect a change in
control of us.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | o |  | Duties
of directors  with  respect to  unsolicited  takeovers.  Maryland  law  provides
protection  for Maryland  corporations against unsolicited  takeovers by limiting,  among
other things, the duties of the directors in  unsolicited  takeover  situations.  The
duties of directors of Maryland  corporations do not require them to  (1) accept,
recommend or respond to any proposal by a person seeking to acquire control of the
corporation,  (2) authorize  the  corporation  to  redeem  any  rights  under,  or
modify  or  render  inapplicable,  any  stockholders  rights plan,  (3) make a
determination  under the Maryland  Business  Combination  Act or the  Maryland  Control
Share  Acquisition  Act, or (4) act or fail to act solely because of the effect of
the act  or failure to act may have on an acquisition or potential  acquisition of
control of the  corporation or the  amount  or type of  consideration  that  may be
offered  or paid  to the  stockholders  in an  acquisition.  Moreover,  under Maryland
law the act of the directors of a Maryland corporation relating to or affecting an
acquisition or potential  acquisition of control is not subject to any higher duty or
greater  scrutiny than  is applied to any other act of a director.  Maryland law also
contains a statutory  presumption  that an act  of a director of a Maryland  corporation
satisfies the applicable  standards of conduct for directors under  Maryland law.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Ownership
limit.  Our  charter  generally  prohibits  any  single  stockholder,  or  any  group  of
affiliated  stockholders,  from  beneficially  owning  more than 9.8% in value or number
of  shares,  whichever  is more  restrictive,  of the outstanding  shares of our common
stock (or securities  convertible in to or redeemable  for its common stock such as
units) and the  aggregate of the  outstanding  shares of all classes and series  of its
stock unless the board of directors waives or modifies this ownership limit.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Maryland Business Combination Act. The Maryland Business Combination
      Act which provides that unless exempted, a Maryland corporation may not
      engage in business combinations, including mergers, dispositions of 10%
      or more of its assets, certain issuances of shares of stock and other specified
      transactions, with an "interested stockholder" or an affiliate
      of an interested stockholder for five years after the most recent date on
      which the interested stockholder became an interested stockholder, and thereafter
      unless specified criteria are met. An interested stockholder is generally
      a person owning or controlling, directly or indirectly, 10% or more of the
      voting power of the outstanding stock of a Maryland corporation. Although
      our board of directors has adopted a resolution exempting us from this statute,
      they may repeal or modify this resolution in the future if such repeal or
      modification is approved by a unanimous vote of our independent directors,
      in which case the provisions of the Maryland Business Combination Act will
      be applicable to business combinations between us and other persons.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Maryland
Control Share  Acquisition Act.  Maryland law provides that "control shares" of
a corporation  acquired  in a "control  share  acquisition"  shall have no
voting rights  except to the extent  approved by a vote of  two-thirds  of the votes
eligible  to be cast on the  matter  excluding  all  interested  shares  under the
Maryland Control Share  Acquisition Act. "Control shares" means shares of stock
that, if aggregated with all  other shares of stock  previously  acquired by the
acquirer,  would entitle the acquirer to exercise  voting  power in electing  directors
within one of the following  ranges of the voting power: one tenth or more but  less than
one third,  one third or more but less than a majority or a majority or more of all
voting  power.  A "control share acquisition"  means the acquisition of control
shares,  subject to certain  exceptions.  If  voting rights of control shares acquired in
a control share  acquisition are not approved at a stockholders'  meeting,  then  subject
to  certain  conditions  and  limitations,  the issuer may redeem any or all of the
control  shares for fair value.  If voting  rights of such control  shares are  approved
at a  stockholders'  meeting and the acquirer  becomes  entitled to vote a majority of
the shares of stock  entitled to vote, all  other stockholders may exercise appraisal
rights. Our bylaws contain a provision  exempting  acquisitions of  its shares from the
Maryland Control Share Acquisition Act.  However,  we may amend our bylaws in the future
to repeal or modify this exemption if such  amendment is approved by the unanimous  vote
of our  independent  directors,  in which case any control shares acquired in a control
share  acquisition will be subject to the  Maryland Control Share Acquisition Act.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 1B.
UNRESOLVED STAFF COMMENTS

We have no
written  comments  regarding  our  periodic or current  reports from the staff of the
Securities  and Exchange  Commission that were issued 180 days or more preceding the end
of our 2005 fiscal year that remain unresolved.

21



---

ITEM 2.
PROPERTIES.

As of December
31,  2005,  we owned 203  properties.  Of these  properties,  177  properties  were
wholly-owned,  and 26  properties were owned by entities  controlled by us or our
affiliates and whose  operations are consolidated for financial  statement  purposes with
ours.  For  financial  statement  purposes,  as of December 31, 2005 our  properties
represented  approximately 73% of the total value of our assets.

Substantially
all of our  properties  and the  consolidated  properties  are net  leased to  investment
grade  corporate  tenants.  At December  31,  2005 we had 10  properties  that were not
subject to leases.  These  properties  contained  an  aggregate  of  approximately
584,000  square  feet or  approximately  3.5% of the  total  space  of all  properties.
Our  remaining  properties  are net leased to various  tenants.  The leases are similar
in many  respects  and  generally:  (i)  provide for fixed rent  payments and obligate
the tenant to pay all capital and  operating  expenses for a property;  (ii)  obligate
the tenant to perform all  responsibilities  (other than the payment of debt  service)
relating to the property;  (iii) require the tenant to maintain  insurance  against
casualty and liability  losses;  (iv) permit the tenant to sublet  the property;  and (v)
afford the tenant in many  instances the right to terminate the lease at certain  points
during the  primary term if it determines  that continued use and occupancy of the
property  would be uneconomic or  unsuitable.  Many  of the leases  grant the tenant an
option to purchase the property  upon the  expiration  of the primary term of the lease
and at the end of one or more  renewal  terms for a purchase  price equal to the fair
market  value of such  property.  We  maintain  insurance on properties that are not
leased and the general partner  believes that our properties are adequately  covered by
insurance.

The table below
summarizes, as of December 31, 2005, information on our 203 properties.

|Property Type |  |  | Number |     | Square Footage |  | In-Place Annualized 
  Rental Revenues | 
|------------- |  |  | ------ | --- | -------------- |  | -------------------------------------- | 
|              |  |  |        |     |                |  |                                        | 
|Office        |  |  |        | 36  |                |  | 6,909,517                              | 
|Retail        |  |  |        | 148 |                |  | 5,269,544                              | 
|Industrial    |  |  |        | 11  |                |  | 3,562,963                              | 
|Other         |  |  |        | 8   |                |  | 1,029,000                              | 
|              |  |  |        |     |                |  |                                        | 
|TOTAL         |  |  |        | 203 |                |  | 16,771,024                             | 
|              |  |  |        |     |                |  |                                        | 

The following
table sets forth certain  information  on our  properties  and the  consolidated
properties as of March 1,  2006, including discontinued  operations.  Except as otherwise
indicated in the table, we own 100% of the improvements and  land constituting the
property.

22



---

|State                                                                                                                                                                                                                                                                                                                                                                  |  | City                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Approximate 
        Leaseable 
        Building 
        Sq. Ft.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | January 1, 2006 
        Annualized Base 
        Rent per 
        Sq. Ft.($)                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Principal Tenant(12)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Current Term 
        Lease Expiration*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Renewal Terms                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|OFFICE:                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|AR
      
      AR 
      CA 
      CA 
      CA 
      CA 
      CO 
      CT 
      FL 
      FL 
      IN 
      LA 
      LA 
      MD 
      MO 
      NJ 
      NJ 
      NJ 
      NJ 
      NJ 
      NJ 
      NJ 
      NV 
      OH 
      OH 
      OH 
      PA 
      TN 
      TN 
      TN 
      TN 
      TX 
      TX 
      TX 
      TX 
      TX |  | Little Rock
      
      Pine Bluff 
      El Segundo 
      El Segundo 
      Long Beach(1)(3) 
      Walnut Creek(1) 
      Colorado Springs 
      Clinton(1)(6) 
      Orlando 
      Orlando(1) 
      Columbus(1) 
      New Orleans(1)(2)(7) 
      New Orleans(1)(2)(7) 
      Baltimore(1) 
      Bridgeton(16) 
      Carteret(1) 
      Elizabeth 
      Morris Township(1)(2) 
      Morris Township(1)(2) 
      Morris Township(1)(2) 
      Morristown(1)(2) 
      Plainsboro 
      Las Vegas 
      Miamisburg(1) 
      Miamisburg(1) 
      Toledo(1)(2) 
      Allentown 
      Johnson City 
      Kingport 
      Memphis 
      Memphis(1) 
      Beaumont 
      Beaumont(1) 
      Bedford(14) 
      Dallas 
      Garland(10) |  | 36,311 
        27,189 
        184,636 
        184,636 
        478,437 
        54,528 
        71,000 
        41,188 
        357,280 
        184,000 
        390,100 
        222,432 
        180,595 
        530,000 
        54,205 
        96,400 
        30,000 
        225,121 
        49,791 
        136,516 
        316,129 
        2,000 
        282,000 
        61,229 
        85,873 
        707,482 
        71,230 
        63,800 
        42,770 
        521,286 
        75,000 
        49,689 
        426,000 
        206,905 
        185,000 
        278,759 |  | $ 6.53 
        12.54 
        16.10 
        16.10 
        35.51 
        37.52 
        31.13 
        19.84 
        13.00 
        5.22 
        10.00 
        20.86 
        20.19 
        48.74 
        10.58 
        18.25 
        25.73 
        26.47 
        29.71 
        26.26 
        27.87 
        77.97 
        27.43 
        11.62 
        6.01 
        18.89 
        3.67 
        10.58 
        10.98 
        27.56 
        16.57 
        29.10 
        26.46 
        NA 
        16.39 
        5.40 |  | Entergy 
      Entergy 
      Raytheon Company 
      Raytheon Company 
      Raytheon Company 
      Hercules Credit, Inc. 
      Federal Express Corporation 
      Chesebrough Ponds/Unilever 
      Harcourt Brace & Company (Reed Elsevier, Inc.) 
      Martin Marietta Corporation (Lockheed Martin) 
      Cummins Engine Company Inc. 
      Hibernia Bank 
      Hibernia Bank 
      St Paul Fire and Marine Insurance Co. 
      The Kroger Co. 
      Pathmark Stores, Inc. 
      Bank of America 
      Honeywell, Inc. 
      Honeywell, Inc. 
      Honeywell, Inc. 
      Honeywell, Inc. 
      Bank of America 
      Nevada Power Company 
      Reed Elsevier, Inc. 
      Reed Elsevier, Inc. 
      Owens-Illinois, Inc. 
      Wachovia 
      Sun Trust Bank 
      American Electric Power 
      Federal Express Corporation 
      The Kroger Co. 
      Wells Fargo & Co. 
      Entergy 
      Vacant 
      Wells Fargo & Co. 
      Raytheon Company |  | 10/31/10 
        10/31/10 
        12/31/08 
        12/31/08 
        12/31/08 
        08/31/07 
        04/30/08 
        12/19/08 
        03/31/09 
        05/01/08 
        07/31/09 
        09/08/08 
        09/08/08 
        09/30/09 
        03/31/06 
        12/31/11 
        08/31/08 
        05/31/08 
        05/31/08 
        05/31/08 
        05/31/08 
        08/31/08 
        01/31/14 
        01/31/08 
        01/31/08 
        09/30/06 
        10/31/10 
        11/30/06 
        06/30/08 
        06/19/09 
        07/01/08 
        11/30/07 
        07/31/07 
        Vacant 
        12/28/07 
        05/31/11 |  | Four, 5 year
      
      Four, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Five, 5year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      09/08/33 
      09/08/33 
      Six, 5 year 
      Tenant has not elected to renew 
      Five, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Five, 5 year 
      Six, 5 year 
      Six, 5 year 
      Tenant has elected not to renew 
      Three, 5 year 
      Five, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Vacant 
      Six, 5 year 
      Five, 5 year
|                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|TOTAL/AVERAGE
      OFFICE                                                                                                                                                                                                                                                                                                                                             |  | 6,909,517                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | $ 21.95                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                                                                                             |  |                                                                                                                                                                |  |                                                                                                                                                       |  |                                                                                                                                      |  |                                                                                                                                                                                                                                 |  |                                                                                                                                                                         |  |                                                                                                                                                                                   
|-------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|RETAIL:                                                                                      |  |                                                                                                                                                                |  |                                                                                                                                                       |  |                                                                                                                                      |  |                                                                                                                                                                                                                                 |  |                                                                                                                                                                         |  |                                                                                                                                                                                   
|AL 
      AL 
      AL 
      AL 
      AL 
      AL 
      AL 
      AZ 
      AZ 
      AZ |  | Dothan 
      Florence 
      Huntsville 
      Huntsville 
      Montgomery 
      Montgomery 
      Tuscaloosa 
      Bisbee(1) 
      Mesa 
      Tucson(1) |  | 53,820 
        42,130 
        60,000 
        58,000 
        66,000 
        53,820 
        53,280 
        30,181 
        3,080 
        37,268 |  | $ 2.89 
        15.65 
        7.45 
        5.98 
        10.35 
        -- 
        2.42 
        9.06 
        6.61 
        9.77 |  | Albertsons Inc. 
      The Kroger Co. 
      Albertsons Inc. 
      Albertsons Inc. 
      Albertsons Inc. 
      Vacant 
      Albertsons Inc. 
      Safeway, Inc. 
      Albertson's Inc./CSK Auto 
      Safeway, Inc. |  | 12/31/10 
        07/01/08 
        05/31/07 
        12/31/06 
        5/31/07 
        Vacant 
        12/31/10 
        03/31/09 
        01/31/09 
        03/31/09 |  | Four, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Vacant 
      One, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year

23



---

|State                                                                                                                                                                                                                                                                                                                                        |  | City                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Approximate 
        Leaseable 
        Building 
        Sq. Ft.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | January 1, 2006 
        Annualized Base 
        Rent per 
        Sq. Ft.($)                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Principal Tenant(12)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Current Term 
        Lease Expiration*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Renewal Terms                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CA 
      CO 
      CO 
      CO 
      CO 
      CO 
      FL 
      FL 
      FL 
      FL 
      FL |  | Atascadero(5)
      
      Beaumont(5) 
      Corona(1) 
      Downey 
      Huntington Beach 
      Indio(1) 
      Lake Forest(11) 
      Lancaster 
      Livermore 
      Lomita(1) 
      Mammoth Lakes(1) 
      Morgan Hill(11) 
      Paso Robles(5) 
      Pinole(1) 
      Pleasanton 
      Redlands(11) 
      San Diego(1) 
      Santa Monica 
      Santa Rosa 
      Simi Valley(1) 
      Tustin(8) 
      Union City(11) 
      Ventura(13) 
      Yorba Linda(11) 
      Aurora 
      Aurora(1) 
      Aurora(1) 
      Littleton 
      Littleton(14) 
      Bradenton 
      Cape Coral 
      Casselberry 
      Gainesville 
      Largo |  | 4,000 
        4,000 
        9,400 
        39,000 
        43,900 
        9,600 
        10,250 
        42,000 
        53,061 
        33,000 
        44,425 
        10,250 
        7,000 
        58,300 
        175,000 
        11,200 
        225,919 
        150,000 
        22,452 
        40,000 
        72,000 
        10,800 
        39,600 
        10,800 
        41,384 
        24,000 
        41,896 
        39,000 
        29,360 
        60,000 
        30,380 
        68,000 
        40,717 
        40,496 |  | $ 8.02 
        7.61 
        26.43 
        12.09 
        12.61 
        22.70 
        11.75 
        12.75 
        4.72 
        10.24 
        18.33 
        6.91 
        4.70 
        7.16 
        6.73 
        5.53 
        7.08 
        5.74 
        5.25 
        12.03 
        1.99 
        7.32 
        19.92 
        7.62 
        NA 
        21.26 
        5.06 
        12.17 
        NA 
        12.16 
        14.85 
        11.26 
        12.53 
        14.86 |  | Albertson's
      Inc./CSK Auto 
      Albertson's Inc./CSK Auto 
      Mark C. Bloome (Goodyear) 
      Albertson's Inc. 
      Albertson's Inc. 
      Mark C. Bloome (Goodyear) 
      Mark C. Bloome (Goodyear) 
      Albertson's Inc. 
      Albertson's Inc. 
      Albertson's Inc. 
      Safeway, Inc. 
      Mark C. Bloome (Goodyear) 
      Albertson's Inc./CSK Auto 
      Albertson's Inc. 
      Federated Department Stores 
      Mark C. Bloome (Goodyear) 
      Nordstrom, Inc. 
      Federated Department Stores 
      Albertson's Inc. 
      Albertson's Inc. 
      Target 
      Mark C. Bloome (Goodyear) 
      City of Buenaventura 
      Mark C. Bloome (Goodyear) 
      Vacant 
      Safeway, Inc. 
      Albertson's Inc. 
      Albertson's Inc. 
      Vacant 
      Albertson's Inc. 
      Albertson's Inc./Lucky Stores 
      Albertson's Inc. 
      Albertson's Inc./Lucky Stores 
      Albertson's Inc./Lucky Stores |  | 01/31/09 
        01/31/09 
        09/30/07 
        12/31/07 
        02/28/09 
        09/30/07 
        05/31/09 
        02/28/09 
        07/31/11 
        01/30/08 
        05/31/07 
        05/31/09 
        01/31/09 
        08/31/11 
        08/31/12 
        05/31/09 
        12/31/16 
        09/30/12 
        03/31/11 
        01/31/08 
        12/31/07 
        05/31/09 
        11/30/13 
        05/31/09 
        Vacant 
        05/31/07 
        12/31/11 
        02/28/09 
        Vacant 
        12/31/07 
        10/31/08 
        12/31/07 
        10/31/08 
        10/31/08 |  | Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Five, 5 year 
      Five, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Five, 5 year 
      One, 8 year and Four, 5 year 
      Six, 5 year 
      One, 15 year and One, 5 year 
      One, 8 year and Four, 5 year 
      Five, 5 year 
      Five, 5 year and One, 71 month 
      Four, 5 year 
      Six, 5 year 
      No Renewal Terms 
      Six, 5 year 
      Vacant 
      Six, 5 year 
      Five, 5 year 
      Six, 5 year 
      Vacant 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year

24



---

|State                                                                                                                                                                                                                                                                                                                                                                                          |  | City                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Approximate 
        Leaseable 
        Building 
        Sq. Ft.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | January 1, 2006 
        Annualized Base 
        Rent per 
        Sq. Ft.($)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Principal Tenant(12)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Current Term 
        Lease Expiration*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Renewal Terms                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|FL 
      FL 
      FL 
      FL 
      FL 
      FL 
      FL 
      GA 
      GA 
      GA 
      GA 
      GA 
      GA 
      GA 
      GA 
      ID 
      ID 
      IL 
      IL 
      IN 
      IN 
      KY 
      KY 
      LA 
      LA 
      MT 
      MT 
      NC 
      NC 
      NC 
      NC 
      NC 
      NC 
      NE 
      NE 
      NE 
      NJ 
      NM 
      NM |  | Largo 
      Largo 
      Orlando(1) 
      Pinellas Park 
      Port Richey(14) 
      Tallahassee(14) 
      Venice 
      Atlanta(1) 
      Atlanta(1) 
      Chamblee(1) 
      Cumming(1) 
      Duluth(1) 
      Forest Park(1) 
      Jonesboro(1) 
      Stone Mountain(1) 
      Boise 
      Boise(1) 
      Freeport 
      Rock Falls(15) 
      Carmel 
      Lawrence 
      Louisville(1) 
      Louisville(1) 
      Baton Rouge 
      Minden 
      Billings(1) 
      Bozeman(1) 
      Charlotte 
      Concord 
      Jacksonville 
      Jefferson(1) 
      Lexington 
      Thomasville 
      Omaha 
      Omaha 
      Omaha 
      Garwood 
      Albuquerque(1) 
      Farmington(5) |  | 30,336 
        53,820 
        58,000 
        60,000 
        53,820 
        53,820 
        41,954 
        6,260 
        3,900 
        4,565 
        14,208 
        9,300 
        14,859 
        4,894 
        5,704 
        37,000 
        43,400 
        29,915 
        27,650 
        38,567 
        28,721 
        40,019 
        9,600 
        58,000 
        35,000 
        40,800 
        20,705 
        33,640 
        32,259 
        23,000 
        23,000 
        23,000 
        21,000 
        67,000 
        72,709 
        66,000 
        52,000 
        35,000 
        3,030 |  | $12.95 
        .3.97 
        5.67 
        11.74 
        NA 
        NA 
        5.76 
        25.29 
        28.46 
        27.36 
        19.73 
        18.95 
        18.98 
        22.30 
        23.56 
        15.76 
        8.05 
        12.77 
        14.57 
        4.11 
        6.72 
        16.45 
        11.57 
        12.21 
        11.55 
        9.05 
        4.19 
        2.90 
        6.09 
        3.63 
        3.17 
        6.02 
        5.07 
        10.99 
        5.32 
        10.71 
        11.91 
        18.70 
        5.20 |  | Albertson's
      Inc./Lucky Stores 
      Albertson's Inc. 
      Albertson's Inc. 
      Albertson's Inc. 
      Vacant 
      Vacant 
      Albertson's Inc. 
      Bank of America 
      Bank of America 
      Bank of America 
      Bank of America 
      Bank of America 
      Bank of America 
      Bank of America 
      Bank of America 
      Albertson's Inc. 
      Albertson's Inc. 
      Albertson's Inc./Lucky Stores 
      Albertson's Inc./Lucky Stores 
      Marsh Supermarkets, Inc. 
      Marsh Supermarkets, Inc. 
      The Kroger Co. 
      The Kroger Co. 
      Albertson's Inc. 
      Safeway, Inc. 
      Safeway, Inc. 
      Albertson's Inc. 
      Food Lion, Inc. (Delhaize America Inc.) 
      Food Lion, Inc. (Delhaize America Inc.) 
      Food Lion, Inc. (Delhaize America Inc.) 
      Food Lion, Inc. (Delhaize America Inc.) 
      Food Lion, Inc. (Delhaize America Inc.) 
      Food Lion, Inc. (Delhaize America Inc.) 
      Albertson's Inc. 
      Albertson's Inc. 
      Albertson's Inc. 
      Pathmark Stores, Inc. 
      Safeway, Inc. 
      Albertson's Inc./CSK Auto |  | 10/31/08 
        12/31/10 
        12/31/06 
        05/31/07 
        Vacant 
        Vacant 
        07/31/11 
        12/31/09 
        12/31/09 
        12/31/09 
        12/31/09 
        12/31/09 
        12/31/09 
        12/31/09 
        12/31/09 
        12/31/07 
        01/31/08 
        10/31/08 
        10/31/08 
        10/31/08 
        10/31/08 
        12/29/11 
        12/29/11 
        05/31/07 
        11/30/07 
        05/31/07 
        12/31/10 
        10/31/08 
        10/31/08 
        02/28/08 
        02/28/08 
        02/28/08 
        10/31/08 
        12/31/07 
        11/30/06 
        05/31/07 
        05/31/11 
        11/30/07 
        01/31/09 |  | Six, 5 year
      
      Five, 5 year 
      Six, 5 year 
      Six, 5 year 
      Vacant 
      Vacant 
      Five, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Five, 5 year and One, 71 month 
      Six, 5 year 
      Tenant exercised economic discontinuance 
      Six, 5 year 
      Six, 5 year 
      Five, 5 year 
      Five, 5 year 
      Six, 5 year 
      Six, 5 year 
      One, 3 year and One, 5 year 
      Four, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Two, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Two, 5 year 
      Six, 5 year 
      Six, 5 year

25



---

|State                                                                                                                                                                                                                                                        |  | City                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Approximate 
        Leaseable 
        Building 
        Sq. Ft.                                                                                                                                                                                                                                                                                                                                          |  | January 1, 2006 
        Annualized Base 
        Rent per 
        Sq. Ft.($)                                                                                                                                                                                                                                                                                                         |  | Principal Tenant(12)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Current Term 
        Lease Expiration*                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Renewal Terms                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|NM 
      NV 
      NV 
      NV 
      NV 
      NV 
      NY 
      OH 
      OH 
      OH 
      OK 
      OR 
      OR 
      OR 
      OR 
      PA 
      PA 
      PA 
      PA 
      PA 
      PA 
      PA 
      PA 
      PA 
      PA 
      PA |  | Las Cruces
      
      Las Vegas 
      Las Vegas(1) 
      Las Vegas(1) 
      Las Vegas(5) 
      Reno(1) 
      Portchester 
      Cincinnati(1) 
      Columbus(1) 
      Franklin 
      Lawton(1) 
      Beaverton 
      Grants Pass(1) 
      Portland 
      Salem 
      Doylestown 
      Lansdale 
      Lima 
      Philadelphia 
      Philadelphia 
      Philadelphia 
      Philadelphia 
      Philadelphia 
      Philadelphia 
      Philadelphia 
      Philadelphia |  | 30,000 
        38,000 
        60,000 
        38,042 
        2,800 
        42,000 
        59,000 
        25,628 
        34,019 
        29,119 
        30,757 
        42,000 
        33,770 
        41,612 
        51,902 
        3,800 
        3,800 
        3,800 
        3,800 
        3,800 
        3,800 
        3,800 
        3,800 
        3,800 
        3,800 
        3,800 |  | $14.64 
        4.45 
        7.57 
        14.13 
        8.85 
        13.16 
        18.89 
        14.39 
        23.44 
        3.83 
        10.84 
        13.02 
        8.65 
        8.29 
        7.81 
        38.81 
        41.04 
        44.66 
        36.58 
        52.19 
        11.77 
        42.99 
        49.12 
        38.81 
        39.09 
        55.26 |  | Albertson's
      Inc. 
      Albertson's Inc. 
      Albertson's Inc. 
      Albertson's Inc. 
      Albertson's Inc./CSK Auto 
      Albertson's Inc. 
      Pathmark Stores, Inc. 
      The Kroger Co. 
      The Kroger Co. 
      Marsh Supermarkets, Inc. 
      Safeway, Inc. 
      Albertson's Inc. 
      Safeway, Inc. 
      Albertson's Inc. 
      Albertson's Inc. 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) |  | 12/31/07 
        12/31/10 
        01/30/11 
        01/31/08 
        01/31/09 
        12/31/07 
        10/31/08 
        12/28/06 
        12/29/06 
        10/31/08 
        03/31/09 
        02/28/09 
        03/31/09 
        12/31/06 
        02/28/09 
        08/31/08 
        08/31/08 
        08/31/08 
        08/31/08 
        08/31/08 
        08/31/08 
        08/31/08 
        08/31/08 
        08/31/08 
        08/31/08 
        08/31/08 |  | Six, 5 year
      
      Five, 5 year 
      Two, 5 year 
      Two, 5 year and One, 71 month 
      Six, 5 year 
      Six, 5 year 
      Three, 5 year 
      One, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year

26



---

|State                                                                                                                                                                                                                                                                                                                                                                                          |  | City                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Approximate 
        Leaseable 
        Building 
        Sq. Ft.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | January 1, 2006 
        Annualized Base 
        Rent per 
        Sq. Ft.($)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Principal Tenant(12)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Current Term 
        Lease Expiration*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Renewal Terms                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|PA 
      PA 
      PA 
      SC 
      TN 
      TN 
      TX 
      TX 
      TX 
      TX 
      TX 
      TX 
      TX 
      TX 
      TX 
      TX 
      TX 
      TX 
      TX 
      TX 
      TX 
      UT 
      UT 
      VA 
      WA 
      WA 
      WA 
      WA 
      WA 
      WA 
      WA 
      WA 
      WA 
      WA 
      WA 
      WA 
      WY 
      WY 
      WY |  | Philadelphia 
      Richboro 
      Wayne 
      Moncks Corner(1) 
      Chattanooga(1) 
      Paris(1) 
      Carrolton(17) 
      Dallas(1) 
      El Paso(5) 
      El Paso(5) 
      Fort Worth(1) 
      Garland(1) 
      Granbury(1) 
      Grand Prairie(1) 
      Greenville(1) 
      Hillsboro(1) 
      Houston(1) 
      Lubbock(1)(14) 
      Lubbock(5) 
      Midland 
      Texarkana 
      Bountiful(1) 
      Sandy(1) 
      Staunton 
      Bothell(1) 
      Edmonds(1)(14) 
      Everett 
      Federal Way 
      Graham(1) 
      Kent 
      Milton(1) 
      Port Orchard(1)(18) 
      Redmond(1) 
      Spokane 
      Spokane(1) 
      Woodinville(1) 
      Cheyenne 
      Evanston (19) 
      Evanston |  | 50,000 
        3,800 
        3,800 
        23,000 
        42,130 
        31,170 
        61,000 
        68,024 
        2,625 
        2,800 
        44,000 
        40,000 
        35,000 
        49,349 
        48,427 
        35,000 
        52,200 
        53,820 
        2,550 
        60,000 
        46,000 
        49,500 
        41,612 
        23,000 
        27,968 
        35,459 
        35,000 
        42,000 
        44,718 
        42,000 
        44,718 
        27,968 
        44,718 
        42,000 
        38,905 
        29,726 
        31,420 
        28,086 
        10,378 |  | $ 8.08 
        36.02 
        52.75 
        2.69 
        16.81 
        15.04 
        8.24 
        7.89 
        7.79 
        6.44 
        13.72 
        17.05 
        12.15 
        10.02 
        4.20 
        9.62 
        14.45 
        NA 
        6.82 
        10.53 
        4.72 
        5.76 
        4.78 
        7.20 
        3.45 
        NA 
        17.22 
        9.76 
        9.22 
        12.99 
        10.63 
        3.00 
        11.26 
        5.13 
        9.63 
        5.77 
        6.87 
        NA 
        3.91 |  | Pathmark Stores, Inc. 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Meritor Savings Bank (Mellon Bank/Citizens Bank) 
      Food Lion, Inc. (Delhaize America Inc.) 
      The Kroger Co. 
      The Kroger Co. 
      Albertson's Inc. 
      The Kroger Co. 
      Albertson's/CSK Auto 
      Albertson's/CSK Auto 
      Safeway, Inc. 
      Safeway, Inc. 
      Safeway, Inc. 
      Safeway, Inc. 
      Safeway, Inc. 
      Safeway, Inc. 
      The Kroger Co. 
      Vacant 
      Albertson's/CSK Auto 
      Albertson's Inc. 
      Albertson's Inc. 
      Albertson's Inc. 
      Albertson's Inc. 
      Food Lion, Inc. (Delhaize America Inc.) 
      Albertson's Inc. 
      Vacant 
      Albertson's Inc. 
      Albertson's Inc. 
      Safeway, Inc. 
      Albertson's Inc. 
      Safeway, Inc. 
      Jubilee Fun 
      Safeway, Inc. 
      Albertson's Inc. 
      Safeway, Inc. 
      Albertson's Inc. 
      Albertson's Inc. 
      Uinta County Herald 
      Community First Bank (Bank of the West) |  | 11/30/10 
        08/31/08 
        08/31/08 
        02/28/08 
        07/01/08 
        07/01/08 
        01/30/06 
        12/28/06 
        01/31/09 
        01/31/09 
        05/31/07 
        11/30/07 
        11/30/07 
        03/31/09 
        05/31/11 
        11/30/07 
        12/29/11 
        Vacant 
        01/31/09 
        02/28/09 
        03/31/11 
        01/30/11 
        12/31/06 
        02/28/08 
        12/31/10 
        Vacant 
        12/31/07 
        12/31/07 
        03/31/09 
        02/28/09 
        03/31/09 
        month-month 
        03/31/09 
        12/31/10 
        03/31/09 
        12/31/06 
        03/31/06 
        Multi-Tenant/Vacant
        Multi-Tenant |  | Five, 5 year
      Six, 5 year 
      Six, 5 year 
      Two, 5 year 
      Six, 5 year 
      Six, 5 year 
      Tenant has not elected to renew 
      Tenant has elected not to renew 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Five, 5 year 
      Six, 5 year 
      Five, 5 year 
      Vacant 
      Six, 5 year 
      Six, 5 year 
      Five, 5 year 
      One, 5 year 
      Two, 5 year 
      Six, 5 year 
      Five, 5 year 
      Vacant 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      Six, 5 year 
      None 
      Six, 5 year 
      Five, 5 year 
      Six, 5 year 
      Five, 5 year 
      Tenant has not elected to renew 
      None 
      None

27



---

|State                                                                                                  |  | City                                                                                                                                                                                                                              |  | Approximate 
        Leaseable 
        Building 
        Sq. Ft.                                                                                                               |  | January 1, 2006 
        Annualized Base 
        Rent per 
        Sq. Ft.($)                                                                        |  | Principal Tenant(12)                                                                                                                                                                                                                                                                                                                   |  | Current Term 
        Lease Expiration*                                                                                                                                                      |  | Renewal Terms                                                                                                                                                                                                          
|------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                       |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                 |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                              |  |                                                                                                                                                                                                                        
|TOTAL/AVERAGE
      RETAIL                                                                             |  | 5,269,544                                                                                                                                                                                                                         |  | $9.22                                                                                                                                                                           |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                             
|                                                                                                       |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                 |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                              |  |                                                                                                                                                                                                                        
|INDUSTRIAL:                                                                                            |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                 |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                             
|CA 
      CA 
      FL 
      KY 
      ME 
      NY 
      SC 
      TN 
      TN 
      TX 
      WI |  | Long Beach(1)(3)
      
      Palo Alto(1) 
      Orlando(14) 
      Owensboro(1)(6) 
      North Berwick 
      Saugerties(9) 
      N. Myrtle Beach(1) 
      Franklin(1) 
      Memphis(1) 
      Lewisville 
      Windsor(1) |  | 200,541 
        123,000 
        205,016 
        443,380 
        820,868 
        52,000 
        36,828 
        289,330 
        780,000 
        256,000 
        356,000 |  | $ 14.88 
        32.37 
        5.89 
        11.93 
        2.21 
        2.35 
        3.88 
        5.10 
        3.67 
        5.89 
        7.52 |  | Raytheon Company
      
      Xerox Corporation 
      Walgreen Company 
      Chesebrough Ponds/Unilever 
      United Technologies Corp. 
      Rotron Inc/EG&G/URS 
      Food Lion, Inc. (Delhaize America Inc.) 
      United Technologies Corp. 
      Sears, Roebuck & Company 
      Xerox Corporation 
      Walgreen Company |  | 12/31/08 
        01/31/08 
        03/31/11 
        12/19/08 
        12/31/10 
        12/31/09 
        10/31/08 
        12/31/08 
        02/28/17 
        06/30/08 
        02/28/07 |  | Six, 5 year
      
      One, 5 year 
      Four, 5 year 
      Five, 5 year 
      Five, 5 year 
      Four, 5 year 
      Four, 5 year 
      Four, 5 year 
      Two, 10 year 
      Six, 5 year 
      Five, 5 year
|                                                                                                       |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                 |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                              |  |                                                                                                                                                                                                                        
|TOTAL/AVERAGE
      INDUSTRIAL                                                                         |  | 3,562,963                                                                                                                                                                                                                         |  | $ 6.42                                                                                                                                                                          |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                             
|                                                                                                       |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                 |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                              |  |                                                                                                                                                                                                                        
|AZ 
      CA 
      CO 
      NM 
      TX 
      TX 
      TX 
      TX                               |  | Sun City(13)
      
      El Segundo(4) 
      Ft. Collins 
      Carlsbad(13) 
      Corpus Christi(13) 
      El Paso(13) 
      McAllen(13) 
      Victoria(13)                                                                |  | 10,000 
        959,000 
        10,000 
        10,000 
        10,000 
        10,000 
        10,000 
        10,000                                                         |  | $ 15.00 
        16.10 
        24.96 
        15.00 
        15.00 
        15.00 
        15.00 
        15.00                                      |  | Furrs Cafeterias
      
      Raytheon Company 
      Lithia Motors 
      Furrs Cafeterias 
      Furrs Cafeterias 
      Furrs Cafeterias 
      Furrs Cafeterias 
      Furrs Cafeterias                                                                                                                                            |  | 05/31/12 
        12/31/08 
        05/31/12 
        05/31/12 
        05/31/12 
        05/31/12 
        05/31/12 
        05/31/12                                                       |  | None 
      Six, 5 year 
      Ten, 5 year 
      None 
      None 
      None 
      None 
      None                                                                                                                 
|                                                                                                       |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                 |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                              |  |                                                                                                                                                                                                                        
|                                                                                                       |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                 |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                              |  |                                                                                                                                                                                                                        
|TOTAL/AVERAGE
      OTHER                                                                              |  | 1,029,000                                                                                                                                                                                                                         |  | $ 16.12                                                                                                                                                                         |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                             
|                                                                                                       |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                 |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                              |  |                                                                                                                                                                                                                        
|                                                                                                       |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                 |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                              |  |                                                                                                                                                                                                                        
|GRAND
      TOTAL/AVERAGE                                                                              |  | 16,771,024                                                                                                                                                                                                                        |  | $ 14.30                                                                                                                                                                         |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                             
|                                                                                                       |  |                                                                                                                                                                                                                                   |  |                                                                                                                                                                                 |  |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                              |  |                                                                                                                                                                                                                        

__________

|* |  | Represents
the later of the current lease term or any exercised renewal term options.
|- |  | -------------------------------------------------------------------------------------

|(1) |  | Land
held in land estate or pursuant to ground lease.
|--- |  | -----------------------------------------------------

|(2) |  | See
"Item 1. Business-2005 Transactions and Subsequent Events" for information on
these properties.
|--- |  | ---------------------------------------------------------------------------------------------------

|(3) |  | 55.0%
interest owned by us.
|--- |  | ---------------------------

|(4) |  | 53.0%
interest owned by us.
|--- |  | ---------------------------

|(5) |  | 49.9%
interest owned by us.
|--- |  | ---------------------------

|(6) |  | 62.2%
interest owned by us.
|--- |  | ---------------------------

|(7) |  | 47.5%
interest owned by us.
|--- |  | ---------------------------

|(8) |  | 68.9%
interest owned by us.
|--- |  | ---------------------------

|(9) |  | 57.8%
interest owned by us.
|--- |  | ---------------------------

|(10) |  | 60.5%
interest owned by us.
|---- |  | ---------------------------

|(11) |  | 32.1%
interest owned by us.
|---- |  | ---------------------------

|(12) |  | The
listed company is either the tenant,  the obligor or guarantor with respect to the lease
or the  successor-in-interest  to  the initial tenant.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

28



---

|(13) |  | These
leases do not provide for renewal terms.
|---- |  | ----------------------------------------------

|(14) |  | Tenant
did not  exercise  the  renewal  option.  Accordingly,  it no longer  has the  right to
re-lease  this  space for the  contractual renewal rent.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(15) |  | We
received a notice  dated  August 30,  2005 from  Albertson's  Inc.  indicating  that it
intends to  exercise  its right to  terminate the lease for the property  located in Rock
Falls,  Illinois as of May 8, 2006. In accordance  with the terms of the  lease,
Albertson's  Inc. has made an offer to purchase the property for an amount  stipulated
in the lease of  approximately  $861,000.  We can reject this offer by notifying
Albertson's  Inc. by April 18, 2006.  We are  currently  evaluating  whether  the offer
should be rejected.  We recorded an impairment loss of $550,000 on this property during
the third quarter of 2005.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(16) |  | Tenant
did not  exercise  the  renewal  option.  Accordingly,  it no longer  has the  right to
re-lease  this  space for the  contractual  renewal rent.  However,  a lease has been
executed  with a new tenant for an initial seven year term  commencing  April 1,  2006.
Annual  rental  rates  under the lease  will be as  follow:  4/1/06  3/31/08,
$371,000;  4/1/08  3/31/11,  $384,000; 4/1/11  3/31/13, $397,000.  The lease
provides for two, five-year renewal options at fair market value.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(17) |  | Tenant
did not  exercise  the  renewal  option.  Accordingly,  it no longer  has the  right to
re-lease  this  space for the  contractual  renewal  rent.  However,  a lease has been
executed  with a new tenant for an initial  15-year  term  commencing  February  1, 2006.
Annual  rental  rates under the lease will be as follows:  2/1/06  1/31/09,
$240,832;  2/1/09  1/31/12,  $270,936;  2/1/12  1/31/15,  $301,040;  2/1/15
 1/31/18,  $331,144;  2/1/18  1/31/21,  $361,248. The new tenant was granted
free rent from 2/1/06  4/30/06 and for February  2007. The lease  provides for one,
five-year  renewal option at fair market  value.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(18) |  | Tenant
did not  exercise  the  renewal  option.  Accordingly,  it no longer  has the  right to
re-lease  this  space for the  contractual  renewal  rent.  However,  we have  entered
into an  agreement  with  the  subtenant  to rent the  premises  on a  month-to-month
basis.  We are currently negotiating a long term lease with the subtenant.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(19) |  | Approximately
7,800 square feet is rented under four separate leases to multiple tenants.
|---- |  | -----------------------------------------------------------------------------------------

Below is a
listing of tenants which accounted for 3% or more of aggregate  in-place  annualized
rental revenues from our properties as  of December 31, 2005:

|Tenant(1)                              |  | Number of 
  Properties |  | Square 
  Footage |  | 2005 Rental 
  Revenues |  | Percentage of 
  2005 Aggregate 
  Annual Rental 
  Revenue
|-------------------------------------- |  | ----------------------- |  | ----------------- |  | ----------------------- |  | -----------------------------------------------------------
|                                       |  |                         |  |                   |  |                         |  |                                                            
|Raytheon Company(2)                    |  | 6                       |  | 2,286,009         |  | $42,863,692             |  | 17.9                                                       
|St. Paul Fire and Marine Insurance Co. |  | 1                       |  | 530,000           |  | 25,832,664              |  | 10.8                                                       
|Albertson's Inc.                       |  | 71                      |  | 2,842,909         |  | 22,590,094              |  | 9.4                                                        
|Honeywell, Inc.(3)                     |  | 4                       |  | 727,557           |  | 19,833,669              |  | 8.3                                                        
|Federal Express Corporation            |  | 2                       |  | 592,286           |  | 16,575,578              |  | 6.9                                                        
|Owens-Illinois, Inc.                   |  | 1                       |  | 707,482           |  | 13,364,335              |  | 5.6                                                        
|Entergy Corporation                    |  | 3                       |  | 489,500           |  | 11,849,734              |  | 4.9                                                        
|Safeway Inc.                           |  | 19                      |  | 736,036           |  | 8,494,155               |  | 3.5                                                        
|Hibernia National Bank                 |  | 2                       |  | 403,027           |  | 8,286,145               |  | 3.5                                                        
|Nevada Power Company                   |  | 1                       |  | 282,000           |  | 7,735,260               |  | 3.2                                                        

__________

|(1) |  | The
listed company is either the tenant,  the obligor or guarantor with respect to the lease
or the  successor-in-interest  to  the initial tenant.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Properties
leased to Raytheon  represented  approximately  12.9% of our total assets for financial
reporting  purposes as of  December 31,  2005.  Raytheon is a public company
subject to the reporting  requirements  of the  Securities  Exchange Act of  1934.  As of
December 31, 2005, no other lessee leased property from us representing more than
10% of our total assets.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | In
June 2005,  we entered into an agreement with Honeywell  International, Inc.
the tenant of four office  buildings owned by  us in Morris  Township,  New Jersey to
restructure  the lease on the  properties.  See Item 1. Business - Property  Matters above.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29



---

The following
charts set forth certain  information as of December 31, 2005 concerning  expirations of
the current lease terms for our  properties (assuming no renewals other than those which
have already been exercised) from 2006 to 2016:

|Lease 
  Expiration 
  Date |  |  |  | Number of Properties 
  at Which 
  Lease Expires (1) |  |  | Approximate Sq. Ft. 
  Covered by 
  Expiring Leases (1) |  | Aggregate 
  In-Place 
  Rental Income (1) (2) |             |  | Cumulative Percentage 
  of Aggregate Revenues  (1)
|--------------------------- |  |  |  | ----------------------------------------------------- |  |  | -------------------------------------------------------- |  | ---------------------------------------------- | ----------- |  | ---------------------------------------------------
|                            |  |  |  |                                                       |  |  |                                                          |  |                                                |             |  |                                                    
|2006                        |  |  |  | 13                                                    |  |  | 1,283,375                                                |  | $                                              | 17,230,920  |  |                                                    
|2007                        |  |  |  | 32                                                    |  |  | 3,005,442                                                |  |                                                | 37,284,017  |  |                                                    
|2008                        |  |  |  | 63                                                    |  |  | 5,755,504                                                |  |                                                | 99,190,024  |  |                                                    
|2009                        |  |  |  | 45                                                    |  |  | 2,746,105                                                |  |                                                | 58,627,451  |  |                                                    
|2010                        |  |  |  | 12                                                    |  |  | 1,295,191                                                |  |                                                | 4,118,356   |  |                                                    
|2011                        |  |  |  | 16                                                    |  |  | 1,158,446                                                |  |                                                | 9,992,346   |  |                                                    
|2012                        |  |  |  | 9                                                     |  |  | 395,000                                                  |  |                                                | 3,187,134   |  |                                                    
|2013                        |  |  |  | 1                                                     |  |  | 39,600                                                   |  |                                                | 788,722     |  |                                                    
|2014                        |  |  |  | 1                                                     |  |  | 282,000                                                  |  |                                                | 7,735,260   |  |                                                    
|2015                        |  |  |  |                                                      |  |  |                                                         |  |                                                |            |  |                                                    
|2016                        |  |  |  | 1                                                     |  |  | 225,919                                                  |  |                                                | 1,600,000   |  |                                                    
|Vacant                      |  |  |  | 10                                                    |  |  | 584,442                                                  |  |                                                |            |  |                                                    
|                            |  |  |  |                                                       |  |  |                                                          |  |                                                |             |  |                                                    
|TOTAL PORTFOLIO             |  |  |  | 203                                                   |  |  | 16,771,024                                               |  | $                                              | 239,754,230 |  |                                                    
|                            |  |  |  |                                                       |  |  |                                                          |  |                                                |             |  |                                                    

|(1) |  | Covers
current term lease expirations only.
|--- |  | -------------------------------------------

|(2) |  | Based
on rent from continuing operations for the year ended December 31, 2005.
|--- |  | ------------------------------------------------------------------------------

30



---

ITEM 3.
LEGAL PROCEEDINGS

None

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

None

31



---

PART II

ITEM 5.
 MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES

We operate in a
manner  intended to enable us to continue to qualify as a real estate  investment  trust
under Sections  856-860 of the  Code.  In order to qualify as a REIT,  we are  generally
required  each year to  distribute  to our  stockholders  at least 90% of our  taxable
income (excluding any net capital gain).  We intend to comply with the foregoing minimum
distribution requirement.

We  currently
anticipate  making  regular  quarterly  dividends in respect of our  operations  in
amount equal to $.40 per quarter per  common share. However,  future distributions are
dependent upon many factors,  including our earnings,  capital requirements,  property
sales,  financial  condition  and  available  cash flow.  In this  regard,  the
KeyBank/Bank  of America Loan  requires the  Operating  Partnership to maintain liquid
assets of at least  $5,000,000 and a minimum  consolidated  net worth equal to
$400,000,000  during the  initial loan term and up to  $550,000,000  during the last
extended  term.  In addition,  under the terms of the loan,  the  Operating  Partnership
is prohibited from making  distributions  to us and its other partners if its
unconsolidated  debt service  coverage ratio  falls below 1.7 during the initial period
of the loan or 2.0 during the extension  periods.  These and other  restrictions
relating to  the  KeyBank/Bank of America loan could impact the Operating  Partnerships,
and similarly our,  ability to make  distributions in the  future.  However,  pursuant
to the terms of the  KeyBank/Bank  of  America  Loan,  the  Operating  Partnership  is
permitted  to make  distributions sufficient for us to meet our REIT requirements.

We paid a
dividend for the period from  November 7, 2005 (the date of the  consummation  of the
IPO) through  December 31, 2005 of $.27  per share.  During  that same time  period,  our
high and low  trading  prices on the New York Stock  Exchange  were  $16.14 and $15.00
respectively.

Our shares of
common stock are traded on the New York Stock Exchange  (Ticker Symbol:  NKT). As of
December 31, 2005,  there were three  record holders of the common stock.  We estimate
the total number of beneficial owners at approximately 2,321.

As required by
applicable New York Stock Exchange  listing  rules,  on February 9, 2006, our President
submitted to the New York Stock  Exchange  a  certification  that he was not aware of any
violation  by us of New York  Stock  Exchange  corporate  governance  listing  standards.

Sales of
Unregistered Securities

Simultaneously
with the  consummation of the IPO on November 7, 2005, we sold to Winthrop Realty Trust
3,125,000  shares of our common  stock for a purchase  price of $16 per share or
$50,000,000 in the aggregate.  In addition,  we issued an additional  1,250,000  shares
to Winthrop Realty Trust in  consideration  for the assignment by Winthrop Realty Trust
of certain  exclusivity  rights with respect to  net-lease  business  opportunities
offered to or  generated by Michael  Ashner,  our and Winthrop  Realty  Trusts
Chairman and Chief  Executive  Officer.  Both sales of shares were effected  pursuant to
the exemption  from  registration  provided by Section 4(2) of the  Securities Act of
1933.

Also in
connection  with the IPO, on November 7, 2005 we issued to NKT Advisors one share of our
special voting  preferred  stock.  The  special voting  preferred  stock entitles NKT
Advisors to vote on all matters for which our common  stockholders  are entitled to vote.
The number of votes that NKT  Advisors  will be entitled to cast in respect of the
special  voting  preferred  stock will  initially be  45,000,000  votes or  approximately
69.9% of the  64,375,000  votes entitled to be cast.  The  45,000,000  votes  represents
the total  number of units of limited partnership interest in the Operating Partnership
that were outstanding  immediately following  consummation  of the IPO  (excluding  units
held by us). As units are redeemed at the option of a  unitholder,  the number of votes
attaching to NKT  Advisors special voting preferred stock will decrease by an
equivalent  amount.  The Advisory  Agreement  provides that on all matters  for which NKT
Advisors is entitled to cast votes in respect of its special  voting  preferred  stock,
it will cast its votes in direct  proportion  to the votes that are cast by limited
partners on such  matters,  except that NKT Advisors  (through its managing  member)
will be entitled  to vote in its sole  discretion  to the extent  that the voting  rights
of  affiliates  of Vornado are limited  under  certain  circumstances.  The  issuance of
the special  voting  preferred  was  effected  pursuant to the  exemption  from
registration  provided by Section 4(2) of the Securities Act of 1933.

32



---

ITEM 6.
SELECTED FINANCIAL DATA

The  following
financial  data are derived  from our audited  consolidated  financial  statements  as of
December 31, 2005 and for the  period from  November 7, 2005 to December  31, 2005 and
from our  Operating  Partnerships  (the  Predecessor)  audited
consolidated  financial  statements  for the period from  January 1, 2005 to November 6,
2005 and as of and for the years ended  December  31,  2004,  2003 and 2002 and from the
combined  consolidated  financial  statements  of Newkirk RE  Holdings,  LLC and Newkirk
NL  Holdings,  LLC  (Previous  Predecessor  Entity) as of and for the year
ended  December 31, 2001. The financial data set forth below should be read in
conjunction  with Item 7.  Managementss  Discussions and Analysis of
Financial  Condition and Results of Operations below and Item  8. Financial
Statements and Supplementary Data and the notes thereto appearing elsewhere in this
report.

|                                                    |  |  | The Company                                              |           | The Predecessor (1)                                    |   | The
  Previous 
  Predecessor | 
|--------------------------------------------------- |  |  | -------------------------------------------------------- | --------- | ------------------------------------------------------ | - | ----------------------------- | 
|                                                    |  |  |                                                          |           |                                                        |   |                               | 
|                                                    |  |  | Period 
  November 7, 
  2005 to 
  December 31, 
  2005 |           | Period 
  January 1, 
  2005 to 
  November 6, 
  2005 |   | Year
  Ended December 31,     | 
|                                                    |  |  |                                                          |           |                                                        |   |                               | 
|                                                    |  |  |                                                          |           | 2004                                                   |   | 2003                          | 
|                                                    |  |  |                                                          |          
|                                                    |  |  | (in thousands, exept per share data)                     |          
|Operating Data                                      |  |  |                                                          |           |                                                        |   |                               | 
|Total revenues                                      |  |  | $                                                        | 35,308    |                                                        | $ | 197,563                       | 
|Income from continuing                              |  | 
|operations before minority interest                 |  |  |                                                          | 4,297     |                                                        |   | 52,231                        | 
|Income from continuing operations                   |  |  |                                                          | 948       |                                                        |   | 36,293                        | 
|Net income                                          |  |  |                                                          | 1,349     |                                                        |   | 43,171                        | 
|Net income per share                                |  |  |                                                          | 0 .07     |                                                        |   | --                            | 
|Weighted average common shares outstanding          |  |  |                                                          | 19,375    |                                                        |   | --                            | 
|Distribution declared per share                     |  |  |                                                          | 0.27      |                                                        |   | --                            | 
|Balance Sheet Data                                  |  | 
|Real estate investments, at cost                    |  |  |                                                          | 1,488,192 |                                                        |   | --                            | 
|Real estate investments, net of                     |  | 
|accumulated depreciation                            |  |  |                                                          | 943,992   |                                                        |   | --                            | 
|Total assets                                        |  |  |                                                          | 1,345,084 |                                                        |   | --                            | 
|Long term debt                                      |  |  |                                                          | 726,586   |                                                        |   | --                            | 
|Partners equity                                    |  |  |                                                          | --        |                                                        |   | --                            | 
|Stockholders equity                                |  |  |                                                          | 176,041   |                                                        |   | --                            | 
|Other Data (3)                                      |  | 
|Funds from continuing operations                    |  |  |                                                          | 3,290     |                                                        |   | --                            | 
|Adjusted funds from continuing operations           |  |  |                                                          | 6,449     |                                                        |   | --                            | 
|Adjusted funds from continuing operations per share |  |  |                                                          | 0.33      |                                                        |   | --                            | 

| | (1) |  | Represents
historical financial data for the Operating Partnership and its subsidiaries.
| | --- |  | ----------------------------------------------------------------------------------------

| | (2) |  | The
combined  consolidated  balance sheet at December 31, 2001 and the combined  consolidated
operating  results for the year  ended December 31, 2001 are not comparable to the
consolidated  balance sheet data at December 31, 2002 and the  consolidated  operating
data results for the year ended  December 31, 2002. The Previous  Predecessor  Entity
amounts  include assets that  were  not  transferred  to the  Operating  Partnership,
and the  Operating  Partnership  amounts  include  assets  that  were  contributed to the
Operating Partnership by partners other than the Previous Predecessor Entity.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

33



---

| | (3) |  | The
following  presents a  reconciliation  of our income from  continuing  operations to our
adjusted  funds from  continuing  operations for the period November 7, 2005 to December
31, 2005 (in thousands):
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Income from continuing operations                         |  |  | $ | 948   | 
|--------------------------------------------------------- |  |  | - | ----- | 
|                                                          |  |  |   |      
|Real estate depreciation                                  |  |  |   | 2,090 | 
|Real estate depreciation of unconsolidated interests      |  |  |   | 55    | 
|Amortization of lease intangibles                         |  |  |   | 197   | 
|                                                          |  |  |   |      
|                                                          |  |  |   |      
|Funds from continuing operations                          |  |  |   | 3,290 | 
|Add: Compensation expense incurred for exclusivity rights |  |  |   | 3,159 | 
|                                                          |  |  |   |      
|                                                          |  |  |   |      
|Adjusted funds from continuing operations                 |  |  | $ | 6,449 | 
|                                                          |  |  |   |      

We compute
funds from  continuing  operations  (FFO) as shown in the  calculation
above.  Funds  from  continuing  operations  is a  non-GAAP  financial  measure  which
represents  "funds  from  operations"  as defined  by NAREIT,  excluding  net
income  (loss)  from  discontinued  operations.  NAREIT  defines  funds from  operations
as net  income,  computed in  accordance  with  generally  accepted  accounting
principles or GAAP,  excluding  gains (or losses) from debt  restructuring  and sales of
property,  plus  depreciation  and  amortization on real estate assets,  and after
adjustments for  unconsolidated  partnerships and joint ventures.  We have also reported
our adjusted FFO (AFFO) as adjusted for the non-cash  charge  incurred in
connection  with the issuance of shares to Winthrop  Realty  Trust in exchange for
certain  exclusivity  rights with respect to net-lease business  opportunities  offered
to or generated by senior  management.  We consider AFFO a useful  additional  measure of
performance  for an equity REIT because it facilitates an  understanding  of the
operating  performance of its properties without giving effect to real estate
depreciation and amortization,  which assumes that  the value of real estate assets
diminishes  predictably  over time.  Since real estate values have  historically  risen
or fallen with  market  conditions,  we believe  that funds from  continuing  operations
provides a more  meaningful  and accurate  indication  of our  performance.  AFFO can
also  facilitate  a comparison  of current  operating  performance  among REITs.  AFFO
does not  represent  cash  generated by operating  activities in accordance  with GAAP
and should not be considered an alternative to net income or cash flow from  operating
activities as a measure of financial performance or liquidity.

34



---

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

Overview

We were formed
on July 22, 2005 to become and subsequently  became the general partner of the Operating
Partnership in connection with  the IPO on November 7, 2005.  Because of our limited
history,  we believe  that a discussion  of our  operating  results  would not be
meaningful.  We have therefore set forth below a discussion of the historical  operations
of the Operating  Partnership,  through which  we will conduct all of our  operations.
We intend to manage the Operating  Partnerships  existing  properties  through
lease renewals  and extensions with existing  tenants,  new leases and/or,  if
stragetically  warranted,  sales. Upon expiration of a propertys lease,  we intend
to extend the lease or promptly  re-lease  the  property to a new tenant.  If we are
unable to extend a lease or re-lease the  property on a net lease  basis,  our general
intention is to either sell that  property or re-lease  the  property on a non-net  lease
basis and then sell it. However,  depending on existing market  conditions,  we may elect
to retain non-net leased  properties so as to  maximize returns.

The primary
risks  associated  with  re-tenanting  properties  are: (i) the period of time required
to find a new tenant;  (ii) whether  renewal  rental rates will be lower than  in-place
rental  rates;  (iii)  significant  leasing  costs such as  commissions  and tenant
improvement  allowances;  and (iv) the payment of operating  costs such as real estate
taxes and insurance while there is no offsetting  revenue.  We address these risks by
contacting  tenants well in advance of their lease  expirations to ascertain their
occupancy needs,  visiting the  properties  to determine  the physical  condition of the
property and meeting wth local brokers to determine the depth of  the rental market.

Our strategy
differs from the Operating  Parnterships  historical  strategy in that we intend to
employ a portion of the proceeds from  the IPO as well as from future debt or equity
financing and redeploy a portion of our cash flow from  operations  and property  sales,
net of  distributions to our  stockholders,  to engage in  significantly  more
acquisition and investment  activity than the Operating  Partnership had previously
conducted.  We will look to:

| | o |  | acquire
individual net leased properties and portfolios of net leased properties;
| | - |  | ---------------------------------------------------------------------------------

| | o |  | complete
sale/leaseback transactions, through which we acquire properties and lease the property
back to the seller or  operator under a net lease;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | acquire
controlling and non-controlling interests in private and public companies primarily
engaged in the business of  making net lease investments;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | acquire
equity and debt interests in entities that own, develop, manage or advise third parties
with regard to net leased  investments;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

| | o |  | acquire
senior or subordinated loans secured by mortgages on net leased properties, mezzanine
loans secured by ownership  interests in entities that own net leased properties as well
as commercial mortgage-backed securities, B Notes and bridge  loans, relating to net
leased properties;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | participate
in development projects relating to net lease properties; and
| | - |  | -------------------------------------------------------------------------

| | o |  | explore
investment opportunities in non-domestic markets.
| | - |  | ---------------------------------------------------------

Where
opportunity  arises,  we intend to enter into strategic  alliances with entities that
historically have been leading sellers of  net-lease assets.

We will also
refinance our existing indebtedness to the extent strategically viable at lower average
interest rates or on more attractive  terms and increase our access to capital to finance
property acquisitions and expansions.

35



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Milestones
and Subsequent Events Since the IPO (November 7, 2005 to March 1, 2006)

Financings

| | o |  | On February 10, 2006, we obtained a first mortgage loan from Greenwich Capital
      Financial Products, Inc., an unaffiliated third party, in the original principal
      amount of $14,800,000 secured by our property located in Bridgewater, New
      Jersey.  See Property Acquisitions and Other Investments
      below.  The loan bears interest at 5.732%, requires monthly payments
      of interest only for the first 60 months and then requires monthly payments
      of principal and interest of $86,000 and is scheduled to mature on March
      6, 2016, at which time the outstanding principal balance is expected to
      be approximately $13,730,000.  We received net proceeds from this loan,
      after satisfying closing costs, of approximately $14,600,000.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Property Sales

| | o |  | In
November  2005,  we sold our  430,000  square  foot  facility  located in New  Kingston,
Pennsylvania  to  Hershey  Foods  Corporation,  the tenant at the property  pursuant to
the purchase  option  contained  in its lease for  $11,350,000.  We also  received
$3,838,000 of accrued and deferred rent.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Property
Acquisitions and Other Investments

| | o |  | On
January 18,  2006,  we acquired an  approximately  115,500  square foot office  building
in  Bridgewater,  New Jersey for a  purchase price of $21,150,000.  The property is net
leased to Biovail  Pharmaceuticals,  Inc., a company  primarily engaged in  the
manufacture  and sale of generic  pharmaceutical  products.  The lease  agreement has a
current term  scheduled to expire  October 31, 2014 with two,  five-year  renewal  terms.
Net  adjusted  rent during the  current  term is  $1,397,000  per year  through October
31, 2009 and then $1,686,000 thereafter.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | On
January 26, 2006, we acquired a 99,500 square foot 100% leased office  building in Lisle,
Illinois for a purchase price of  $15,250,000.  Adjusted net rent for the property,
commencing January 1, 2007 is projected to be approximately  $1,225,000 per  year.  The
property is 86% leased to National  Louis  University  with the balance  being leased to
two tenants.  The National  Louis  University  lease has a primary term expiring
December 31, 2019 with annual lease rent commencing at $943,000  through  December  31,
2006  (with a 50%  rent  concession  through  August  31,  2006),  increasing  by
$43,000  on each  January  1  thereafter.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | At
December 31,  2005,  we owned  securities  in the publicly  traded net lease REITs for an
aggregate  cost of  approximately  $5,030,000.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

Lending
Activities

| | o
On December 29, 2005, a joint  venture in which we hold a 50% interest  made a $6,500,000
first  mortgage loan to the Chicago  Athletic  Association.  The loan is secured by a
property solely occupied by the Chicago  Athletic  Association and located at  12 S.
Michigan,  Chicago,  Illinois,  bears interest at 8.5% per annum, requires monthly
payments of approximately $52,000 and  matures on December 15, 2010,  at which time the
outstanding  principal  balance of the loan is expected to be  approximately  $6,089,000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Leasing

| | o |  | As
of March 1, 2006, our properties were 96.5% leased.
| | - |  | ------------------------------------------------------

| | o |  | Since
November 7, 2005, six tenants  representing  leases at ten properties  containing
1,390,674 square feet exercised their  renewal option.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | During
that same period, two tenants  representing leases at three properties  containing
135,548 square feet notified us that  they would not exercise their renewal options.  We
are currently marketing these properties for lease.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Since
the IPO, three  properties  containing  143,173 square feet have been fully leased,  and
one property has been partially  leased to a 7,800 square foot tenant.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

36



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Other Matters

| | o |  | On
January  15, 2006 we entered  into a strategic  alliance  with U.S.  Realty  Advisors,
LLC, a leading  net-lease  property  advisor, pursuant to which we will acquire single
tenant assets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | In
January  2006,  we engaged  the  services of two  dedicated,  nationally  recognized
acquisition  professionals,  K. David  Beardsley and Brian Johnson.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

Trends

Competition

We expect to
face  significant  competition  for our targeted  investments.  We intend to capitalize
on the  acquisition and investment  opportunities that our senior management may bring to
us as a result of its acquisition experience.  Through its broad experience,  our  senior
management  team has  established  a network of contacts  and  relationships  in the net
leased  property  industry,  including  relationships with operators,  financiers,
commercial real estate brokers,  potential tenants and other key industry participants.
In  addition we believes that NKT Advisors significant real estate management
infrastructure will provide us with the economies of scale  associated  with its current
business  operations  and thus will provide us with a  competitive  advantage  when
bidding on investment  opportunities.

We also compete
with a large number of real estate  property owners and developers for tenants.  Principal
factors of competition are  rent charged,  attractiveness  of location and property
condition.  Our success will depend upon,  among other factors,  trends of the
national and local economies,  financial condition and operating results of current and
prospective  tenants,  availability and cost of  capital, construction and renovation
costs, taxes, governmental regulations, legislation and population trends.

Interest rate
environment

The  current
yield  curve  indicates  that  interest  rates may  increase.  The effect of future
interest  rate  increases  on future  acquisitions  is not  possible  to predict  but
with  respect  to the effect on our  floating  rate debt,  we may  utilize a variety of
financial  instruments,  including interest rate swaps, caps, options,  floors and other
interest rate exchange contracts,  in order to  limit the effects of  fluctuations in
interest rates on operations.  Toward that end, we have entered into the following
agreements in  order to limit the  exposure  to  interest  rate  volatility:  (i) a five
year  interest  rate swap  agreement  with  KeyBank  National  Association  effectively
setting the LIBOR Rate at 4.642% for  $250,000,000  of the loan balance;  (ii) an
interest rate cap agreement  with Fleet Bank for  $295,000,000  through  November 2006
capping the LIBOR Rate at 5%; and (iii) an interest  rate cap agreement  with  SMBC
Derivative  Products  Limited  capping the LIBOR Rate at 6% for the period from  November
2006 until  August 2008 for a notional  Amount of $290,000,000  related to KeyBank
National  Association debt. We do not intend to utilize derivatives for speculative or
other  purposes other than interest rate risk management.

Liquidity and
Capital Resources

General

Liquidity is a
measurement of our ability to meet potential  cash  requirements,  including  ongoing
commitments to repay  borrowings,  fund and maintain  investments and other general
business needs.  Historically,  the Operating  Partnership  principal sources of funds
have been operating  cash flows,  property  sales and  borrowings.  Operating cash flows
have been, and are expected to continue to be,  derived  primarily  from rental  income
received  by us from our  properties.  Pursuant  to the terms of the  leases,  the
tenants are  responsible  for  substantially  all  of the  operating  expenses  with
respect  to the  properties,  including  maintenance,  capital  improvements,  insurance
and taxes.  Accordingly,  we do not  anticipate  significant  needs for cash for these
costs.  To the extent  there is a vacancy in a property,  we would be obligated for all
operating  expenses,  including  real estate taxes and  insurance.  As  of December 31,
2005, ten properties were not subject to leases,  representing  approximately  3.5% of
our square  footage.  We believe  that cash flows from operations will continue to
provide adequate capital to fund our operating and  administrative  expenses,  regular
debt service  obligations  and all dividend  payments in accordance  with REIT
requirements  in both the short-term and long-term.  In  addition,  we  anticipate

37



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that cash on
hand,  borrowings  under our credit  facility and issuance of equity and debt, as well as
other  alternatives; will provide the necessary capital required for our investment
activities.

We received net
proceeds of  approximately  $273,000,000 in connection  with the IPO and sale of shares
to Winthrop  Realty Trust,  the  proceeds of which were used in connection  with the
November 7, 2005  transaction  to purchase  2,500,000  units from existing  limited
partners in the Operating  Partnership for a net cost of  approximately  $37,700,000,
and the balance of the proceeds were contributed  to the Operating  Partnership in
exchange for newly-issued  units. The Operating  Partnership used these proceeds to repay
$150,000,000  of existing  debt,  and the balance was added to cash  reserves to be
utilized to fund future  acquisitions  and fund  working  capital  requirements.  We will
conduct all of our  operations  through  the  Operating  Partnership.  As a public
company,  we have access to  public and private equity and debt markets and selective
secured indebtedness.  We may also seek an unsecured credit facility.

Our UPREIT
structure will enable us to acquire  properties for cash and/or by issuing to sellers,
as a form of consideration,  limited  partnership  interests  in the  Operating
Partnership.  We intend to utilize  this  structure  to  facilitate  our  ability to
acquire  individual  properties  and  portfolios  of  properties  by  structuring
transactions  which will defer tax payable by a seller  while  preserving our available
cash for other purposes, including the payment of dividends and distributions.

Future Cash
Requirements:

The following
table sets forth the timing of our payment  obligations  related to our off-balance
sheet and  contractual  obligations  from continuing operations, including all fixed and
variable rate debt obligations, as of December 31, 2005, (in thousands):

|                                 |  |  | Payments Due by  Period |        
|-------------------------------- |  |  | ----------------------- | -------
|                                 |  |  |                         |        
|Contractual Obligations          |  |  | Total                   |        
|                                 |  |  |                         |        
|Mortgage Loan Payable            |  |  | $                       | 166,195
|Note Payable                     |  |  |                         | 593,463
|Contract Right Mortgage Loan (4) |  |  |                         | 11,128 
|Ground Lease Obligations (1)     |  |  |                         | 1,291  
|Advisors Fee (2)                |  |  |                         | 14,400 
|                                 |  |  |                         |        
|                                 |  |  | $                       | 786,477
|                                 |  |  |                         |        
|Commitments (5)                  |  |  |                         | --     

| | (1) |  | Does
not include ground lease obligations where the lease agreements require the tenant to pay
the ground rent expense.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------

| | (2) |  | Based
upon  equity  in place at  December  31,  2005.  No effect  given to the  incentive  fee
as it is a  product  of future  performance.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------

| | (3) |  | No
amounts have been included due to the automatic annual renewal provisions of the Advisory
Agreement.
| | --- |  | -------------------------------------------------------------------------------------------------------

| | (4) |  | No
payments until 2009.
| | --- |  | -----------------------

| | (5) |  | Excludes
pending acquisitions from January 1, 2006 to January 26, 2006 of $36,400,000 that were
subject to due diligence at December 31, 2005.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

We carry
comprehensive  liability and all risk property  insurance:  (i) fire;  (ii) flood;  (iii)
extended  coverage;  (iv) acts of  terrorism, as defined in the Terrorism
Risk  Insurance Act of 2002,  and (v) rental loss  insurance  with respect to our assets.
In  addition, under the terms of the triple-net tenant leases, the tenant is obligated to
maintain adequate insurance coverage.

Our debt
instruments,  consisting of mortgage loans secured by our properties  (which are
generally  non-recourse to  us) and our secured debt facility contain  customary
covenants  requiring us to maintain  insurance.  Although we believe that we have
adequate insurance  coverage under these agreements,  we may not be able to obtain an
equivalent amount of coverage at reasonable costs  in the future.  Further,  if lenders
insist on greater  coverage than we are able to obtain,  it could adversely  affect our
ability to  finance and/or refinance our properties and expand our portfolio.

Cash Flows

For purposes of
the  following  discussion  of cash flow for the year ended  December 31, 2005 and
December 31, 2004,  we have combined  the cash flow from our operations for the period
from November 7, 2005 through  December 31, 2005,  and the Operating  Partnership  for
the period  from  January 1, 2005  through  November  6,  2005.  Internally,  we use
combined

38



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reporting  to
evaluate  our  operating  performance and believe that this presentation will provide
investors with additional insight into our financial results.

We had cash and
cash  equivalents of  $174,816,000  at December 31, 2005,  which consisted of $94,816,000
in cash and $80,000,000 in US  Treasury Bill cash  equivalents  with  maturities of less
than 90 days.  U.S.  Treasury Bills are classified as cash  equivalents.  The  average
annual yields on the U.S. Treasury Bills were 3.0% for the years ended December 31, 2005.

Our level of
liquidity based upon cash and cash  equivalents  increased by  approximately
$153,499,000  during the year ended December  31, 2005. The increase  resulted from
$142,463,000 of cash provided by our operating  activities,  $20,722,000 of cash provided
by our  investing activities and $9,686,000 of cash used by our financing activities.

Cash provided
by operating  activities of $142,463,000 was comprised of: (i) net income of $44,521,000;
(ii) adjustments  for non-cash  items of  $129,923,000,  and (iii) a net
negative  change in operating  assets and  liabilities of  $31,981,000.  The
adjustments for  non-cash items were primarily  comprised of  (i) depreciation  and
amortization of  $53,974,000;  (ii) impairment loss of $29,715,000;  (iii) loss on early
extinguishment of debt of $30,460,000;  (iv) minority interest of $19,004,000;  (v)
compensation expense related to  the  exclusivity  rights of  $10,500,000,  (vi) the
effect of  straight-lining  of rental  income of  $5,741,000.  These  amounts  were
partially offset by (i) net gains on disposal of real estate of $16,501,000,  (ii) equity
in net income of partially-owned  entities of  $2,729,000,  and  (iii) interest
earned on restricted cash of $239,000.  See Results of Operations below for additional
details on our  operations.

Cash provided
by our investing  activities  consisted of  $44,911,000  in proceeds from the sale of
real estate,  $44,405,000  from the  acquisition  of all the  partnership  interests in
T-Two  Partners and  $143,000 in proceeds  from the sale of real estate  securities,
partially offset by (i) purchases of various real estate  securities for $5,171,000,
(ii) deposits on future real estate  acquisitions  of  $2,126,000,  (iii) the issuance of
loans  receivable of  $6,500,000,  (iv) increases in our  restricted  cash of
$16,777,000,  (v)  investments  in limited  partnership  interests  of  $80,000,  (vi)
costs to obtain new leases of $65,000,  (vii)  $286,000 of building  acquisitions and
capital improvements to our existing properties, and (viii) $37,732,000 to acquire
outside minority interests.

During 2005 our
financing  activities used cash primarily for (i) principal  payment on mortgage notes of
$277,685,000,  (ii) principal  payments on notes payable of $319,035,000,  (iii)
principal payments on contract right mortgage notes of $85,481,000,  (iv) $37,692,000  of
distributions  made to our  unitholders,  and  financing  costs of  $6,997,000.  Cash
provided by financing  activities  consisted  primarily of (i)  $268,871,000  of net
proceeds from the sale of common shares by us in connection  with the IPO, (ii)
$477,759,000 of  net proceeds  from the  refinancing  of our secured  debt  facility,
and (iii)  $1,666,000  received in  contributions  form  minority  partners.

Dividends

In  connection
with our  intention  to qualify as a REIT for  Federal  income tax  purposes,  we expect
to pay  regular  dividends  to  stockholders.  These dividends are expected to be paid
from operating cash flows and/or other sources.

In December
2005,  we declared a dividend  of $0.27 per share which was paid on January 17, 2006 to
the  stockholders  of record as of  December 31, 2005.

Off-Balance
Sheet Arrangements

We do not have
any off-balance sheet arrangements as of December 31, 2005.

Capital
Expenditures

Due to the net
lease nature of our leases, we do not incur  significant  expenditures in the ordinary
course of business to maintain our  properties.  However,  as  leases  expire,  we expect
to incur  costs in  extending  the  existing  tenant  lease or  re-tenanting  the
properties.  The amounts of these expenditures can vary  significantly  depending on
tenant  negotiations,  market conditions and rental  rates.  These expenditures are
expected to be funded from operating cash flows or borrowings.

Results of
Operations

Comparison of
the year ended December 31, 2005 to the year ended December 31, 2004

39



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For purposes of
the  following  comparison  of operating  results for the years ended  December 31, 2005
and December 31, 2004, we have  combined our results of  operations  for the period from
November 7, 2005 through  December 31, 2005 with the  Operating  Partnerships  the
period  from  January 1, 2005  through  November  6,  2005.  Internally,  we use
combined  reporting  to  evaluate  our  operating  performance and believes that this
presentation will provide investors with additional insight into our financial results.

Income from
Continuing Operations

Income from
continuing  operations  decreased by $45,553,000 to $37,241,000  for the year ended
December 31, 2005 from  $82,794,000 for  the year  ended  December  31,  2004.  As more
fully  described  below,  this  decrease  is  primarily  attributable  to loss on early
extinguishment of debt and impairment charges incurred during 2005 and a 1.9% decline in
rental revenues.

Rental Income

Rental income
decreased by $4,307,000 or 1.9% to  $228,382,000  for the year ended  December 31, 2005
from  $232,689,000  for the year  ended  December 31, 2004.  Approximately  $2,437,000
of the decrease was due to the vacancy of a property  located in Bedford,  Texas.  The
decrease  was also due to lower rental  income  resulting  from lease  renewals at rates
that are lower than the primary term rates  which, in a number of instances,  are above
market rate.  Leased square footage  declined from  approximately  99% at December 31,
2004  to approximately 96.5% at December 31, 2005.

Interest Income

Interest
income  increased by $777,000 or  approximately  22.7% to $4,200,000 for the year ended
December 31, 2005 from $3,423,000 for  the year ended  December 31, 2004.  The increase
was due to higher  invested  cash  balances and an increase in yields  earned our cash
balances.

Management Fee
Income

Management fee
income  decreased by $45,000 or  approximately  13.5% to $287,000 for the year ended
December 31, 2005 from $332,000 for  the year ended December 31, 2004. The decrease is
attributable to fewer  properties  under  management  resulting from the sale of four
properties owned by unconsolidated partnerships.

Interest Expense

Interest
expense  decreased by $15,731,000  or  approximately  18.9% to  $67,665,000  for the year
ended December 31, 2005 compared to  $83,396,000  for the year ended December 31, 2004.
The decrease was primarily due to loan  prepayments  during the period and scheduled
principal  payments along with a reduced interest rate incurred in connection with our
August 11, 2005  refinancing.  In addition there  was a reduction to our amortization of
deferred financing costs of $3,239,000.

Loss from early
Extinguishment of Debt

The loss from
early  extinguishment  of debt increased by $28,722,000 to $28,808,000  for the year
ended December 31, 2005 from $86,000  for the year ended December 31, 2004. The increase
was primarily due to the  refinancing of Operating  Partnership  debt which occurred  on
August 11, 2005. We incurred  approximately  $23,548,000 of prepayment  penalties and
approximately  $7,323,000 of deferred mortgage  costs  were  written  off as a  result
of the  refinancing.  The  Operating  Partnership  also  recorded  a net gain  from  the
early  extinguishment  of the debt refinanced of approximately  $1,703,000 as the
carrying value for financial  reporting  purposes was higher  than the amount paid off.

Depreciation

Depreciation
expense  increased by $5,541,000 or  approximately  16.6% to $38,877,000 for the year
ended December 31, 2005 compared to  $33,336,000  for the year ended  December 31, 2004.
The increase is primarily  attributable  to the  shortening  of the useful life of  four
of our  properties.  In June 2005,  we entered into an agreement  with  Honeywell
International, Inc.,  the tenant of four office  buildings owned by us in Morris
Township,  New Jersey to restructure the lease on the properties.  Under the
restructuring,  the tenant  waived its right to exercise its economic  discontinuance
option (the ability to terminate

40



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its lease and
make an offer to purchase the  property  for a fixed  price)  and we  granted  the
tenant  an  option  to  purchase  the  properties  in  2007.  In  light  of  these
circumstances, we reduced our carrying value through an impairment charge and also
shortened the properties useful lives.

Impairment Loss

We recorded in
our  continuing  operations  a  $16,954,000  impairment  loss for the year ended
December  31,  2005.  Of this  amount,  $14,754,000 is the result of the restructuring of
the lease with Honeywell  International, Inc.  for its four office buildings owned
in  Morris  Township,  New Jersey as described  above.  The balance of this amount is an
impairment  loss of  $2,200,000  was recorded on a  property  located in Evanston,
Wyoming due to an offer to purchase the property  which was lower than the propertys
carrying  value.  In 2004 we recorded an impairment charge of $9,600,000 on a property
located in Bedford, Texas.

Amortization
Expense

Amortization
expense  increased by $219,000 or 7.8% to $3,013,000  for the year ended December 31,
2005 compared to $2,794,000 for the  year ended December 31, 2004. The increase  relates
to the amortization of in-place lease  intangibles  acquired in connection with the
November 7, 2005 purchase of limited partnership units in the Operating  Partnership.

Ground Rent

Ground rent
expense  increased by $185,000 or  approximately  6.0% to  $3,252,000  for the year ended
December  31, 2005  compared to  $3,067,000  for the year ended  December  31, 2004.  The
increase in ground rent expense is primarily  the result of an increase in the  ground
rental rate for a property located in Orlando, Florida.

State and Local
Taxes

State and local
tax expense  increased by $232,000 or approximately  17% to $1,608,000 for the year ended
December 31, 2005 compared to  $1,376,000 for the year ended December 31, 2004.  The
increase is primarily the result of an audit by the State of Tennessee.

Equity in
Income from Investments in Limited Partnerships

Equity in
income from  investments  in limited  partnerships  increased by $466,000 or
approximately  17.5% to $3,128,000 for the year  ended  December 31, 2005 compared to
$2,662,000  for the year ended  December 31, 2004.  The increase is primarily the result
of lower  interest  expense at the limited  partnerships  due to scheduled  debt
amortization  and additional  purchases of equity  positions in  limited partnerships.

Other Expense

Other  expense
for the year ended  December  31,  2005 of  $2,855,000  represents  the  minority
interest  expense  of the  Operating  Partnership.

Minority
Interest Expense

Minority
interest expense  increased by $803,000 or approximately  4.3% to $19,287,000 for the
year ended December 31, 2005 compared to  $18,484,000  for the year ended  December  31,
2004.  The  increase  was the result of an increase in  minority  interests  due to the
transactions on November 7, 2005 and the result of higher earnings at the non-wholly
owned consolidated properties.

Discontinued
Operations

During the year
ended December 31, 2005,  seven properties were sold for a combined net sales price of
approximately  $44,900,000.  We  recognized a net gain on disposal of one of these
properties of  $1,733,000,  and the Operating  Partnership  recognized a net gain on
disposal of these properties of $15,974,000.  The sale and operations of these
properties for all periods  presented has been recorded  as  discontinued  operations  in
compliance  with the  provisions of SFAS No. 144.  Also

41



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included in
discontinued  operations  are the  operations  attributed  to our property  located in
Toledo,  Ohio.  We have  received  notice that the tenant will not renew its lease.
While we will attempt to sell or re-lease the  property,  there is a  substantial  risk
that we will not be able to satisfy the balloon  payment due on the mortgage and that we
will lose this property  through  foreclosure  in 2006. The loss from  discontinued
operations  included an $11,328,000 impairment loss related to this property.

During the year
ended December 31, 2004, the Operating  Partnership  sold 58 properties for a combined
net sale price of  $127,231,000.  The Operating Partnership recognized a net gain on
disposal of these properties of $49,808,000.

Comparison of
the year ended December 31, 2004 to the year ended December 31, 2003.

Income from
Continuing Operations

Income from
continuing  operations  decreased by $3,847,000 to $82,794,000 for the year ended
December 31,  2004 from  $86,641,000 for  the year ended  December 31,  2003.
As more fully  described  below,  this decrease is  attributable  to a decrease in total
revenue of  $14,577,000  and an increase in minority  interest  expense of $187,000
which was partially  offset by a decrease in total expenses of  $10,309,000 and an
increase in equity in income from investments in limited partnerships of $608,000

Rental Income

Rental income
decreased by $14,942,000 or approximately  6.0% to $232,689,000 for the year ended
December 31,  2004 from  $247,631,000  for the year ended  December 31,  2003.
The decrease was primarily due to lower rental income  resulting  lease renewals at rates
that  are lower than the primary term rates. Leased square footage at December 31,
2004 and 2003 was approximately 99%.

Interest Income

Interest income
increased by $451,000 or  approximately  15.2% to $3,423,000 for the year ended  December 31,
2004 from $2,972,000 for  the year ended  December 31,  2003. The increase was
primarily due to interest  income of $456,000 on a loan to T-Two  Partners,  which  was
partially offset by a decrease in interest income of $107,000 on a note held by Newkirk
Finco LLC.

Management Fee
Income

Management fee
income  decreased by $86,000 or  approximately  21% to $332,000 for the year ended
December 31,  2004 from $418,000 for  the year ended December 31, 2003.  The
decrease is attributable to fewer properties under management.

Interest
Expense and Loss from the Early Extinguishment of Debt

Interest
expense and loss from the early  extinguishment  of debt decreased by $13,411,000 or
approximately  13.8% to $83,482,000 for  the year ended  December 31,  2004 compared
to  $96,893,000  for the year ended  December 31,  2003.  The decrease was primarily
due to  loan payoffs of $48,350,000,  normal scheduled  principal  payments of
$109,785,000 and payments on the note payable to Bank of America  of $43,028,000.

Depreciation

Depreciation
expense remained relatively  consistent at $33,336,000  decreasing 1.5% for the year
ended December 31,  2004 compared to  $33,850,000 for the year ended December 31,
2003.

General and
Administrative

General and
administrative  expenses decreased by $5,115,000 or approximately 58.0% to $3,699,000 for
the year ended December 31,  2004  compared to $8,814,000 for the year ended
December 31,  2003.  The decrease is primarily the result of a $4,437,000  decrease
in legal  costs due to a $3,600,000 legal settlement in 2003.

42



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Amortization
Expense

Amortization
expense decreased by $1,967,000 or approximately 41.3% to $2,794,000 for the year ended
December 31,  2004 as compared to  $4,761,000 for the year ended  December 31,
2003. The decrease in  amortization  expense is primarily the result of the refinancing
of  the debt in 2003.

Ground Rent

Ground rent
expense  increased by $16,000 to $3,067,000  for the year ended  December 31,  2004
as compared to $3,051,000  for the year  ended  December 31,  2003.  The  increase
in ground rent  expense is  primarily  the result of  increases  in ground rent rates for
two  partnerships.

State and Local
Taxes

State and local
tax expense increased by $618,000 or approximately  81.5% to $1,376,000 for the year
ended  December 31,  2004 compared  to  $758,000  for the year ended  December 31,
2003.  The  increase  is the result of higher  taxable  income in several  states  with
partnership income tax requirements.

Equity in
Income from Investments in Limited Partnerships

Equity in
income from investments in limited  partnerships  increased by $608,000 or approximately
30% to $2,662,000 for the year ended  December 31,  2004 compared to  $2,054,000
for the year ended  December 31,  2003.  This  increase was due to additional
purchases of  equity positions in limited partnerships.

Minority
Interest Expense

Minority
interest expense increased by $187,000 or approximately 1.0% to $18,484,000 for the year
ended  December 31,  2004 compared to  $18,297,000  for the year ended  December 31,
2003. The increase was the result of increased  profitability  at the  non-wholly  owned
partnerships.

Discontinued
Operations

During the year
ended December 31,  2004, the Operating  Partnership sold 58 properties for a
combined net sales price of $127,231,000.  The Operating  Partnership  recognized a net
gain on disposal of these properties of $49,808,000.  During the year ended  December 31,
2003,  the  Operating  Partnership  sold 14  properties  for a combined  net sales price
of  $156,409,000.  The  Operating  Partnership  recognized a net gain on disposal of
these  properties of  $33,844,000.  The sale and  operations of these  properties  for
all periods  presented  have been  recorded as  discontinued  operations  in compliance
with the  provisions  of Statement of Financial  Accounting  Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long Lived Assets."

Critical
Accounting Policies

The
  preparation of consolidated financial statements in conformity with accounting
  principles generally accepted in the United States of America requires management
  to make estimates and assumptions in certain circumstances that affect amounts
  reported in the accompanying consolidated financial statements and related notes.
  In preparing these consolidated financial statements, management has made its
  best estimates and judgments of certain amounts included in the consolidated
  financial statements, giving due consideration to materiality. We do not believe
  there is a great likelihood that materially different amounts would be reported
  related to the accounting policies described below. However, application of
  these accounting policies involves the exercise of judgment and use of assumptions
  as to future uncertainties and, as a result, actual results could differ from
  these estimates.

Impairment of
long-lived  assets.At December 31, 2005, we had  $943,992,000  of real estate (net) and
$41,685,000 of real estate held  for sale  (net),  which  combined,  account  for
approximately  73% of our  total  assets.  Buildings,  improvements  and real  estate
intangibles are carried at cost net of adjustments for depreciation and  amortization.
The fair values of our buildings,  improvements  and real estate intangibles are
dependent on the performance of the properties.

43



---

We  evaluate
recoverability  of the net  carrying  value of our real estate and related  assets at
least  annually,  and more often if  circumstances  dictate.  If there is an  indication
that the  carrying  value of a property  might not be  recoverable,  we prepare an
estimate  of the future  undiscounted  cash  flows  expected  to result  from the use of
the  property  and its  eventual  disposition,  generally  over a five-year  holding
period.  In  performing  this review,  we take into  account,  among other  things,  the
existing  occupancy, the expected leasing prospects of the property and the economic
situation in the region where the property is located.

If the
  sum of the expected future undiscounted cash flows is less than the carrying
  amount of the property, we recognize an impairment loss and reduce the carrying
  amount of the asset to its estimated fair value. Fair value is the amount at
  which the asset could be bought or sold in a current transaction between willing
  parties, that is, other than in a forced or liquidation sale. We estimate fair
  value using discounted cash flows or market comparables, as most appropriate
  for each property. Independent certified appraisers are utilized to assist management
  when warranted. During the years ended December 31, 2005 and December 31, 2004,
  we recorded $29,715,000 and $13,065,000, respectively, in impairment losses.

Because the
cash flows used to evaluate the  recoverability  of the assets and their fair values are
based upon  projections  of future  economic events, such as property occupancy rates,
rental rates,  operating cost inflation and market  capitalization  rates, which are
inherently  subjective,  the amounts  ultimately  realized at disposition  may differ
materially  from the net carrying  values at the  balance sheet dates.  The cash flows
and market  comparables  used in this process are based on good faith  estimates  and
assumptions  developed by management.

Unanticipated
events and  circumstances may occur, and some assumptions may not materialize;
therefore,  actual results may vary from  the estimates,  and variances may be material.
We may provide additional  write-downs,  which could be material in subsequent years if
real estate markets or local economic conditions change.

As discussed
above, we own a 707,482 square foot office building in Toledo,  Ohio that is leased to
Owens-Illinois  Inc. for an initial  term that expires on September  30, 2006.  The
property is  encumbered  by a  non-recourse  mortgage  which  matures in October 2006 at
which time a  $32,000,000  balloon  payment will be due. The tenant has six  five-year
renewal  options.  This tenant is presently not  using a  substantial  portion of the
building  and  elected  not to renew its lease.  While we will  attempt to sell or
re-lease  the  property  there is substantial  risk that we will not be able to satisfy
the balloon  payment due on the mortgage and that the mortgage  holder will foreclose on
this property.  We recognized an $11,328,000 impairment loss during the second quarter of
2005.

In the second
quarter of 2005, we entered into an agreement with Honeywell  International,  Inc., the
tenant  of four office buildings we own in Morris  Township,  New Jersey to restructure
the lease on the properties.  Under the  restructuring,  the tenant  waived its right to
exercise  its  economic  discontinuance  option and we granted  the tenant an option to
purchase  the  properties in 2007 for  $41,900,000.  As a result of this  restructuring,
we recognized a  $14,754,000  impairment  loss in the second  quarter of 2005.

Useful lives of
long-lived  assets.  Building and improvements  and certain other  long-lived  assets are
depreciated or amortized over  their useful lives.  Depreciation  and amortization  are
computed using the  straight-line  method over the useful life of the building  and
improvements.  The cost of  properties  represents  the initial cost of the  properties
plus  acquisition  and closing costs less  impairment adjustments.

Recently Issued
Accounting  Standards.  In March 2005, the FASB issued  Financial  Interpretation  No.
47,  Accounting for Conditional  Asset Retirement  Obligations  an
Interpretation  of FASB Statement No. 143, which specifies the accounting
treatment for obligations  associated  with the sale or disposal of an asset when there
are legal  requirements  attendant to such a  disposition.  We adopted this
pronouncement in 2005, as required,  but there was no impact as there are no legal
obligations  associated with the planned sale of any  properties.

In May 2005,
the FASB issued SFAS No. 154,  Accounting  changes and Error  corrections  A
Replacement  of APB Opinion No. 20 and SFAS  No. 3. SFAS No. 154 changes the
requirements  for the  accounting  and  reporting  of a change in  accounting  principle
by requiring  retrospective  application to prior period financial statements of the
change in accounting principle,  unless it is impracticable to do  so. SFAS No. 154 also
requires that a change in depreciation  and  amortization  for long-lived,  non financial
assets be accounted for  as a change in accounting  estimate effected by a change in
accounting  principle.  SFAS No. 154 is effective for accounting changes and  correction
of errors made in fiscal years  beginning  after  December 15, 2005. We do not believe
that the adoption of SFAS No. 154 will  have a material effect on our consolidated
financial statements.

44



---

In June 2005,
the FASB ratified the EITFs consensus on Issue 04-5,  Determining  Whether a
General Partner, or the General Partners as  a Group,  Controls a Limited  Partnership
or Similar  Entity When the Limited  Partners  Have Certain  Rights. Issue 04-5
provides a  framework for determining  whether a general partner controls,  and should
consolidate,  a limited  partnership or a similar entity. It  was effective after June
29, 2005, for all newly formed limited  partnerships and for any pre-existing  limited
partnerships that modify  their  partnership  agreements  after that date.  General
partners of all other limited  partnerships  will apply the consensus no later  than the
beginning of the first  reporting  period in fiscal years  beginning after December 15,
2005. We have not completed the process  of evaluating the impact that will result from
the adoption of the consensus in EITF 04-5 on our consolidated financial statements.

45



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ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Among
  our liabilities are both fixed and variable rate debt. To mitigate the effects
  of fluctations in interest rates on the variable rate portion of this debt,
  we own interest rate cap and swap agreements. All financial instruments were
  entered into for purposes other than trading. For the fixed rate portion of
  the our debt, changes in interest rates have no impact on interest incurred
  or cash flows, however such changes do impact the net financial position of
  the debt instruments. For our variable rate debt, changes in interest rates
  do not impact the net financial position of the instruments but do impact the
  interest incurred and cash flows.

At December 31,
2005, we had one loan which had a variable  interest rate. The loan,  which had an
outstanding  balance of $593,463,000  at December 31, 2005, was obtained in August 2005
and has a three-year  term.  Interest on the  outstanding  balance  accrues at a rate
equal to, at our  option,  either  (i) LIBOR  rate (as  defined)  plus 175 basis  points
or (ii) the  banks  prime  rate plus 50 basis  points.  As a result of the
acquisition  of  interest  rate swap and cap  agreements,  (i) LIBOR on the loan is
effectively  fixed at  4.642% for  $250,000,000 of this loan for five years and (ii) the
LIBOR rate on  $295,000,000  of the loan  (decreasing to $290,000,000  as of December 1,
2006) will be capped at 5.0% through November 2006 and 6.0% from December 2006 until
August 2008.

We elected to
pay the loan based on the LIBOR rate.  The  following  table  shows what the annual
effect of a change in the LIBOR rate  (4.29% at December 31,  2005) would have on
interest  expense  based upon the balance of the  variable  rate loan at December 31,
2005,  and assuming increases in the LIBOR rate up to the 5.0% maximum rate (based on the
terms of the interest rate cap).

|Additional interest expense | Change in LIBOR 
  .71%(in thousands) 
  $2,439
|--------------------------- | -----------------------------------------------

Any additional
increase in LIBOR above the 5.0% maximum rate would result in  approximately  $485,000 of
additional  interest  expense  per 1.0% increase in LIBOR.

46



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ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index
to Financial Statements under Item 15.  Exhibits and Financial Statement
Schedules

47



---

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

During our
fiscal year ended  December  31, 2005 and through the date of this  report,  there were
no  disagreements  with  Deloitte & Touche LLP on any matter of accounting  principle
or practice,  financial statement  disclosure,  or auditing scope or procedure which
disagreements  if not resolved to Deloitte & Touche LLPs  satisfaction,  as
applicable,  would have caused them to make reference to  the subject matter in
connection with their report on our financial statements for such year.

ITEM 9A.
CONTROLS AND PROCEDURES

In  accordance
with  Exchange  Act Rules  13a-15  and  15d-15,  we  carried  out an  evaluation,  under
the  supervision  and with the  participation  of our Chief Executive  Officer and Chief
Financial  Officer,  as well as other key members of our  management,  of the
effectiveness  of our  disclosure  controls  and  procedures  as of the  end of the
period  covered  by  this  report.  Based  on that  evaluation,  our Chief  Executive
Officer and Chief  Financial  Officer  concluded  that our disclosure  controls and
procedures  were  effective,  as of the end of the period  covered by this  report,  to
provide  reasonable  assurance  that  information  required to be  disclosed in our
reports filed or submitted  under the Exchange Act is recorded,  processed,  summarized
and reported  within the time  periods specified in the Securities and Exchange Commissions
rules and forms.

No change
occurred  in our  internal  controls  concerning  financial  reporting  during the fourth
quarter of the fiscal  year ended  December 31, 2005 that has materially  affected,  or
is reasonably  likely to materially  affect,  our internal controls over financial
reporting.

ITEM 9B.
OTHER INFORMATION

None.

48



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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)
Directors.

Election
of Directors presented in our 2006 Proxy Statement to be filed is incorporated
herein by reference.

(b)
Executive Officers.

Executive
Officers as presented in our 2006 Proxy Statement to be filed is incorporated
herein by reference.

ITEM 11.
EXECUTIVE COMPENSATION.

Compensation
of Directors and Executive Compensation, presented in our 2006 Proxy
Statement to be filed are incorporated  herein by reference.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.

Security
Ownership of  Directors,  Officers and Others presented in our 2006 Proxy
Statement to be filed is  incorporated  herein by reference.

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain
Transactions  and  Relationships presented  in our 2006  Proxy  Statement  to be
filed is  incorporated  herein by  reference.

ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

Principal
Accountant  Fees and  Services presented  in our 2006  Proxy  Statement  to be
filed is  incorporated  herein by  reference.

49



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PART IV

ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)
Financial Statements and Financial Statement Schedules.

(1)
Financial Statements:

| | Reports
of Independent Registered Public Accounting Firms on pages F-1 & F-2 of Item 8.
| | ---------------------------------------------------------------------------------------

| | Consolidated
Balance  Sheet for Newkirk  Realty Trust,  Inc. (the  Company) as of December
31, 2005 and the  Consolidated  Balance Sheet for The Newkirk Master Limited  Partnership
(the Predecessor) as of December  31, 2004 on page F-3 of Item 8.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Consolidated
Statements  of  Operations  and  Comprehensive  Income  for  Newkirk  Realty  Trust,
Inc.  (the  Company) for the period from November 7, 2005 through December
31, 2005 and the Consolidated  Statements  of Operations and  Comprehensive  Income for
The Newkirk Master Limited  Partnership  (the  Predecessor)  for the period
from  January 1, 2005  through  November 6, 2005 and for the years ended  December 31,
2004  and 2003 on page F-4 of Item 8.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Consolidated
Statement of  Stockholders Equity for the Newkirk Realty Trust,  Inc. (the  Company)
for the  period from  November 7, 2005  through  December  31, 2005 and the  Consolidated
Statement  of  Partners Equity for The Newkirk  Master  Limited  Partnership  (the
Predecessor)  for the period from January 1,  2005 through November 6, 2005
and for the years ended December 31, 2004 and 2003 on page F-5 of Item 8.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Consolidated
Statement of Cash Flows for Newkirk Realty Trust,  Inc. (the  Company) for
the period November  7, 2005 through  December 31, 2005 and the  Consolidated  Statements
of Cash Flows for The Newkirk  Master  Limited  Partnership (the  Predecessor)
for the period from January 1, 2005 through November 6, 2005 and  for the years ended
December 31, 2004 and 2003 on pages F-6 and F-7 of Item 8
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Notes
to Consolidated Financial Statements on pages F-8 through F-29 of Item 8.
| | -------------------------------------------------------------------------------

(2)
Financial Statement Schedules:

| | Schedule
III - Real Estate and Accumulated Depreciation.
| | --------------------------------------------------------

| | All
Schedules, other than III, are omitted, as the information is not required or is
otherwise furnished.
| | ---------------------------------------------------------------------------------------------------------

(b) Exhibits.

The
  exhibits listed on the Exhibit Index beginning on page 92 of this Report are filed as a part of this Report or incorporated by reference.

50



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SIGNATURES

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

|                            |  | NEWKIRK REALTY TRUST, INC. |                        
|--------------------------- |  | -------------------------- | -----------------------
|                            |  |                            |                        
|Dated:
      March 10, 2006 |  | By:                        | /s/ Michael L. Ashner  
|                            |  |                            |                        
|                            |  |                            | Michael L. Ashner      
|                            |  |                            |                        
|                            |  |                            | Chief Executive Officer
|                            |  |                            |                        
|Dated: March 10, 2006       |  | By:                        | /s/ Thomas Staples     
|                            |  |                            |                        
|                            |  |                            | Thomas Staples         
|                            |  |                            | Chief Financial Officer

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

|Name                        |                     | Title    |  | Date          
|--------------------------- | ------------------- | -------- |  | --------------
|                            |                     |          |  |               
|/s/
      Michael L. Ashner |                     | Director |  | March 10, 2006
|                            |                     |          |  |               
|/s/
      Peter Braverman   |                     | Director |  | March 10, 2006
|                            |                     |          |  |               
|Clifford
      Broser       |                     | Director |  |               
|                            |                     |          |  |               
|Harold
      First          |                     | Director |  |               
|                            |                     |          |  |               
|Richard
      S. Frary      |                     | Director |  |               
|                            |                     |          |  |               
|Lara
      Johnson          |                     | Director |  |               
|                            |                     |          |  |               
|Isidore
      Mayrock       |                     | Director |  |               
|                            |                     |          |  |               
|Lewis
      S. Meltzer      |                     | Director |  |               
|                            |                     |          |  |               
|Laura
      H. Pomerantz    |                     | Director |  |               
|                            |                     |          |  |               
|Miles
      M. Stuchin      |                     | Director |  |               
|                            |                     |          |  |               
|Steven
      Zalkind        |                     | Director |  |               
|                            |                     |          |  |               
|By:                         | /s/ Peter Braverman |          |  |               
|                            | Peter Braverman     |          |  |               
|                            | as Attorney in-fact |          |  |               

51



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Item 8. Financial Statements and Supplementary Data

NEWKIRK
REALTY TRUST, INC. (THE COMPANY) AND 
THE NEWKIRK MASTER LIMITED PARTNERSHIP
(THE PREDECESSOR)

INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Page                   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                        
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS                                                                                                                                                                                                                                                                                                                                                                                          |  | F - 1 to F- 2          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                        
|FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                        
|Consolidated Balance Sheet for Newkirk Realty Trust, Inc. (the Company) as of
  December 31, 2005 and the Consolidated Balance Sheet for The Newkirk Master
  Limited Partnership (the Predecessor) as of December 31, 2004                                                                                                                                                                                                                   |  | F - 3                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                        
|Consolidated Statement of Operations and Comprehensive Income for Newkirk
        Realty Trust, Inc. (the Company) for the period from November 7, 2005 through
  December 31, 2005 and the Consolidated Statements of Operations and Comprehensive
  Income for The Newkirk Master Limited Partnership (the Predecessor) for the
  period from January 1, 2005 through November 6, 2005 and for the years ended
  December 31, 2004 and 2003 |  | F - 4                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                        
|Consolidated Statement of Stockholders Equity for the Newkirk Realty Trust, Inc.
        (the Company) for the period from November 7, 2005 through December 31, 2005
        and the Consolidated Statement of Partners Equity for The Newkirk Master Limited
        Partnership (the Predecessor) for the period from January 1, 2005 through
  November 6, 2005 and for the years ended December 31, 2004 and 2003                      |  | F - 5                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                        
|Consolidated Statement of Cash Flows for Newkirk Realty Trust, Inc. (the Company)
  for the period November 7, 2005 through December 31, 2005 and the Consolidated
  Statements of Cash Flows for The Newkirk Master Limited Partnership (the Predecessor)
  for the period from January 1, 2005 through November 6, 2005 and for the years ended
  December 31, 2004 and 2003                                                                |  | F - 6 to F - 7         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                        
|Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                        |  | F - 8
        to F - 29

52



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Report of
Independent Registered Public Accounting Firm

[DELOITTE
& TOUCHE, LLP]

To the
Board of Directors of the Newkirk Realty Trust, Inc.

We
  have audited the accompanying consolidated balance sheet of Newkirk Realty Trust,
  Inc. (the Company) as of December 31, 2005 and the consolidated
  balance sheet of The Newkirk Master Limited Partnership (the Predecessor),
  as defined in Note 1, as of December 31, 2004, respectively, and the related
  consolidated statements of operations and comprehensive income, stockholders
  equity, and cash flows for the Company for the period from November 7, 2005
  (commencement of operations) to December 31, 2005 and the related consolidated
  statements of operations and comprehensive income, partners equity and
  cash flows of the Predecessor for the period from January 1, 2005 through November
  6, 2005 and for the year ended December 31, 2004. Our audits also included the
  financial statement schedule for the period from November 7, 2005 to December
  31, 2005 and for the year ended December 31, 2004 listed in the Index at Item
  15. These financial statements and financial statement schedule are the responsibility
  of the Companys management. Our responsibility is to express an opinion
  on the financial statements and financial statement schedule based on our audits.

We
  conducted our audits in accordance with the standards of the Public Company
  Accounting Oversight Board (United States). Those standards require that we
  plan and perform the audit to obtain reasonable assurance about whether the
  financial statements are free of material misstatement. The Company is not required
  to have, nor were we engaged to perform, an audit of its internal control over
  financial reporting. Our audits included consideration of internal control over
  financial reporting as a basis for designing audit procedures that are appropriate
  in the circumstances, but not for the purpose of expressing an opinion on the
  effectiveness of the Companys internal control over financial reporting.
  Accordingly, we express no such opinion. An audit also includes examining, on
  a test basis, evidence supporting the amounts and disclosures in the financial
  statements, 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 the Company as of December 31, 2005 and
  the financial position of the Predecessor as of December 31, 2004, the results
  of the Companys operations and its cash flows for the period from November
  7, 2005 to December 31, 2005, and for the Predecessors operations and
  its cash flows from January 1, 2005 through November 6, 2005 and for the year
  ended December 31, 2004, in conformity with accounting principles generally
  accepted in the United States of America. Also, in our opinion, such financial
  statement schedule, when considered in relation to the consolidated financial
  statements taken as a whole, presents fairly in all material respects the information
  set forth therein.

/s/ DELOITTE
& TOUCHE LLP  
Boston, Massachusetts  
March 10, 2006

F-1



---

Report of
Independent Registered Public Accounting Firm

To the
  Board of Directors of 
Newkirk Realty Trust, Inc.

We
have  audited the  accompanying  consolidated  statements  of  operations,  partners equity
and cash flows of The Newkirk  Master Limited  Partnership (the Predecessor)
for the year ended December 31, 2003. These consolidated  financial  statements are the
responsibility  of the  Predecessors  management.  Our  responsibility  is to
express  an  opinion  on these  consolidated  financial  statements based on our audit.

We
conducted our audit in accordance  with the standards of the Public Company  Accounting
Oversight  Board (United  States).  Those standards  require that we plan and perform the
audit to obtain  reasonable  assurance about whether the  consolidated  financial
statements  are free of material  misstatement.  An audit  includes  examining,  on a
test basis,  evidence  supporting the amounts and  disclosures  in the  consolidated
financial  statements.  An  audit  also  includes  assessing  the  accounting  principles
used  and  significant  estimates  made by  management,  as well as evaluating  the
overall  consolidated  financial  statement  presentation.  We  believe that our audit
provides a reasonable basis for our opinion.

In
our opinion,  the  consolidated  financial  statements  referred to above present
fairly,  in all material  respects,  the  results of  operations  and cash  flows of the
Predecessor  for the year ended  December  31,  2003,  in  conformity  with  accounting
principles generally accepted in the United States of America.

In
connection with our audit of the consolidated  financial  statements  referred to above,
we audited the financial statement  Schedule III for the year ended December 31, 2003. In
our opinion,  this financial statement  schedule,  when considered in relation to  the
consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information stated therein.

/s/ IMOWITZ
KOENIG & CO., LLP

New York, New
York  
March 10, 2006

F-2



---

NEWKIRK
REALTY TRUST, INC. (THE "COMPANY") AND  
THE NEWKIRK MASTER LIMITED PARTNERSHIP
(THE "PREDECESSOR")  
CONSOLIDATED BALANCE SHEETS(In thousands, except
per-share data)

|                                                             |  |  | The Company 
        December 31, 2005 |           | The Predecessor 
        December 31, 2004 |  
|------------------------------------------------------------ |  |  | -------------------------------------- | --------- | ------------------------------------------ | -
|                                                             |  |  |                                        |           |                                            |  
|ASSETS                                                       |  |  |                                        |           |                                            |  
|Real
      estate investments:                               |  | 
|Land                                                         |  |  | $                                      | 36,593    |                                            | $
|Land
      estates                                           |  |  |                                        | 43,997    |                                            |  
|Buildings
      and improvements                             |  |  |                                        | 1,407,602 |                                            |  
|                                                             |  |  |                                        |           |                                            |  
|Total
      real estate investments                          |  |  |                                        | 1,488,192 |                                            |  
|Less
      accumulated depreciation and amortization         |  |  |                                        | (544,200  | )                                          |  
|                                                             |  |  |                                        |           |                                            |  
|Real
      estate investments, net                           |  |  |                                        | 943,992   |                                            |  
|                                                             |  |  |                                        |           |                                            |  
|Real
      estate held for sale, net of accumulated          |  | 
|depreciation of $44,522 and $9,713                           |  |  |                                        | 41,685    |                                            |  
|                                                             |  |  |                                        |           |                                            |  
|Cash
      and cash equivalents                              |  |  |                                        | 174,816   |                                            |  
|Restricted
      cash                                        |  |  |                                        | 25,233    |                                            |  
|Real
      estate securities held for sale                   |  |  |                                        | 5,194     |                                            |  
|Receivables
      (including $6,078 and $10,119 from         |  | 
|related
      parties)                                       |  |  |                                        | 58,727    |                                            |  
|Deferred
      rental income receivable                      |  |  |                                        | 21,246    |                                            |  
|Loans
      receivable                                       |  |  |                                        | 16,058    |                                            |  
|Equity
      investments in limited partnerships             |  |  |                                        | 13,846    |                                            |  
|Deferred
      costs, net of accumulated amortization of     |  | 
|$17,677
      and $34,991                                    |  |  |                                        | 8,771     |                                            |  
|Lease
      intangibles, net of accumulated amortization     |  | 
|of
      $415                                                |  |  |                                        | 7,657     |                                            |  
|Other
      assets (including $1,304 and $10,111 from        |  | 
|related
      parties)                                       |  |  |                                        | 27,314    |                                            |  
|Other
      assets of discontinued operations                |  |  |                                        | 545       |                                            |  
|                                                             |  |  |                                        |           |                                            |  
|Total
      Assets                                           |  |  | $                                      | 1,345,084 |                                            | $
|                                                             |  |  |                                        |           |                                            |  
|                                                             |  |  |                                        |           |                                            |  
|LIABILITIES,
      MINORITY INTEREST AND                     |  | 
|STOCKHOLDERS/PARNTERS
      EQUITY                         |  | 
|Liabilities:                                                 |  | 
|Mortgage
      notes payable (including $15,536 and          |  | 
|$14,871
      to a related party)                            |  |  | $                                      | 166,195   |                                            | $
|Note
      payable                                           |  |  |                                        | 593,463   |                                            |  
|Contract
      right mortgage notes payable (including       |  | 
|0
      and $178,529 to a related party)                     |  |  |                                        | 11,128    |                                            |  
|Accrued
      interest payable (including $378 and $71,279   |  | 
|to
      related parties)                                    |  |  |                                        | 7,514     |                                            |  
|Accounts
      payable and accrued expenses                  |  |  |                                        | 5,656     |                                            |  
|Dividend
      payable                                       |  |  |                                        | 5,231     |                                            |  
|Other
      liabilities                                      |  |  |                                        | 4,834     |                                            |  
|Liabilities
      of discontinued operations                 |  |  |                                        | 40,491    |                                            |  
|                                                             |  |  |                                        |           |                                            |  
|Total
      Liabilities                                      |  |  |                                        | 834,512   |                                            |  
|                                                             |  |  |                                        |           |                                            |  
|Contingencies                                                |  | 
|                                                             |  |  |                                        |           |                                            |  
|Minority
      interests                                     |  |  |                                        | 334,531   |                                            |  
|Stockholders'
      equity/partners' equity                  |  | 
|Preferred
      stock; $.01 par                              |  | 
|value;
      100,000,000 shares authorized; 1 issued         |  | 
|and
      outstanding                                        |  |  |                                        | --        |                                            |  
|Common
      stock; $.01 par                                 |  | 
|value;
      400,000,000 shares authorized; 19,375,000       |  | 
|issued
      and outstanding                                 |  |  |                                        | 194       |                                            |  
|Additional
      paid-in capital                             |  |  |                                        | 179,871   |                                            |  
|Accumulated
      dividends in excess of net income          |  |  |                                        | (3,882    | )                                          |  
|Accumulated
      other comprehensive loss                   |  |  |                                        | (142      | )                                          |  
|Partners'
      Equity (47,864,193 limited partnership units |  | 
|outstanding
      at December 31, 2004)                      |  |  |                                        | --        |                                            |  
|                                                             |  |  |                                        |           |                                            |  
|Total
      Stockholders' Equity/Partners' Equity            |  |  |                                        | 176,041   |                                            |  
|                                                             |  |  |                                        |           |                                            |  
|Total
      Liabilities, Minority Interests and              |  | 
|Stockholders'
      Equity                                   |  |  | $                                      | 1,345,084 |                                            | $
|                                                             |  |  |                                        |           |                                            |  

See Notes to
Consolidated Financial Statements.

F-3



---

NEWKIRK
  REALTY TRUST, INC. (THE COMPANY) AND
  THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE PREDECESSOR) 
  CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(In thousands, except per-share data)

|                                                                   |  |  | THE
        COMPANY         |        | THE
        PREDECESSOR    |  
|------------------------------------------------------------------ |  |  | --------------------------- | ------ | -------------------------- | -
|                                                                   |  |  |                             |        |                            |  
|                                                                   |  |  | For
        the Period      |        | For
        the Period     |  
|                                                                   |  |  | November
        7, 2005 to |        | January
        1, 2005 to |  
|                                                                   |  |  | December
        31, 2005   |        | November
        6, 2005   |  
|                                                                   |  |  |                             |        |                            |  
|Revenue:                                                           |  |  |                             |        |                            |  
|Rental
      income                                                |  |  | $                           | 33,902 |                            | $
|Interest
      income                                              |  |  |                             | 1,366  |                            |  
|Management
      fees                                              |  |  |                             | 38     |                            |  
|Gain
      from disposal of real estate securities held for sale   |  |  |                             | 2      |                            |  
|                                                                   |  |  |                             |        |                            |  
|Total
      revenue                                                |  |  |                             | 35,308 |                            |  
|                                                                   |  |  |                             |        |                            |  
|Expenses:                                                          |  | 
|Interest
      (including $118, $17,614, $22,468 and               |  |  |                             | 8,683  |                            |  
|$10,223
      to related parties, respectively)                    |  | 
|Loss
      from early extinguishment of debt                       |  |  |                             | --     |                            |  
|Depreciation                                                       |  |  |                             | 6,680  |                            |  
|Compensation
      expense for exclusivity rights                  |  |  |                             | 10,500 |                            |  
|General
      and administrative (including $720, $1,638,          |  | 
|$1,882
      and $1,843 to related parties, respectively)          |  |  |                             | 1,274  |                            |  
|Operating                                                          |  |  |                             | 250    |                            |  
|Impairment
      loss                                              |  |  |                             | --     |                            |  
|Amortization                                                       |  |  |                             | 556    |                            |  
|Ground
      rent                                                  |  |  |                             | 527    |                            |  
|State
      and local taxes                                        |  |  |                             | 182    |                            |  
|Other
      expense                                                |  |  |                             | 2,855  |                            |  
|                                                                   |  |  |                             |        |                            |  
|Total
      expenses                                               |  |  |                             | 31,507 |                            |  
|                                                                   |  |  |                             |        |                            |  
|Income
      from continuing operations before                     |  | 
|equity
      in income from investments in limited                 |  | 
|partnerships
      and minority interest                           |  |  |                             | 3,801  |                            |  
|Equity
      in income from investments in                         |  |  |                             | 496    |                            |  
|limited
      partnerships                                         |  | 
|Minority
      interest                                            |  |  |                             | (3,349 | )                          |  
|                                                                   |  |  |                             |        |                            |  
|Income
      from continuing operations                            |  |  |                             | 948    |                            |  
|                                                                   |  |  |                             |        |                            |  
|Discontinued
      operations:                                     |  | 
|(Loss)
      income before minority interest                       |  |  |                             | (401   | )                          |  
|Impaiment
      loss                                               |  |  |                             | --     |                            |  
|Gain
      from disposal of real estate                            |  |  |                             | 1,733  |                            |  
|Minority
      interest                                            |  |  |                             | (931   | )                          |  
|                                                                   |  |  |                             |        |                            |  
|Income
      from discontinued operations                          |  |  |                             | 401    |                            |  
|                                                                   |  |  |                             |        |                            |  
|Net income                                                         |  |  | $                           | 1,349  |                            | $
|                                                                   |  |  |                             |        |                            |  
|Comprehensive
      income:                                        |  | 
|Net
      income                                                   |  |  | $                           | 1,349  |                            | $
|Unrealized
      gain on real estate securities available for sale |  |  |                             | 164    |                            |  
|Unrealized
      (loss) gain on interest rate derivative           |  |  |                             | (636   | )                          |  
|Minority
      interest in other comprehensive loss                |  |  |                             | 330    |                            |  
|                                                                   |  |  |                             |        |                            |  
|Comprehensive
      income                                         |  |  | $                           | 1,207  |                            | $
|                                                                   |  |  |                             |        |                            |  
|Per share
      data:                                              |  | 
|Income
      from continuing operations                            |  |  | $                           | 0.05   |                            |  
|Income
      from discontinued operations                          |  |  |                             | 0.02   |                            |  
|                                                                   |  |  |                             |        |                            |  
|Net
      income applicable to Common Stock                        |  |  | $                           | 0.07   |                            |  
|                                                                   |  |  |                             |        |                            |  
|Weighted
      average Common Stock                                |  |  |                             | 19,375 |                            |  
|                                                                   |  |  |                             |        |                            |  

See Notes to
Consolidated Financial Statements.

F-4



---

NEWKIRK
REALTY TRUST, INC. (THE COMPANY) AND
THE NEWKIRK MASTER LIMITED PARTNERSHIP
(THE PREDECESSOR)  
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
PARTNERS' EQUITY(In thousands)

|                                |  |                 |  |        |              |  |           |        |                     |   |                     |  | Accumulated   |          | Accumulated   |   |        |   |       |       
|------------------------------- |  | --------------- |  | ------ | ------------ |  | --------- | ------ | ------------------- | - | ------------------- |  | ------------- | -------- | ------------- | - | ------ | - | ----- | ------
|                                |  | Preferred Stock |  |        | Common Stock |  | Additonal |        | Dividends in Excess |   | Other Comprehensive |  | Partners     |          |               |  
|                                |  | Shares          |  | Amount |              |  | Shares    |        | Amount              |   | Paid-in Capital     |  | of Net Income |          | Income (Loss) |   | Equity |   | Total |       
|                                |  |                 |  |        |              |  |           |        |                     |   |                     |  |               |          |               |   |        |   |       |       
|THE PREDECEESOR                 |  |                 |  |        |              |  |           |        |                     |   |                     |  |               |          |               |   |        |   |       |       
|Balance at January 1, 2003      |  | --              |  |        | --           |  |           | --     |                     | $ | --                  |  | $             | --       |               | $ | --     |   | $     | --    
|Acqusition of entities          |  |                
|under common control            |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Minority interest charge        |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Distributions                   |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Limited partner buyouts         |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Net income                      |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|                                |  |                 |  |        |              |  |           |        |                     |   |                     |  |               |          |               |   |        |   |       |       
|Balance as of December 31, 2003 |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Equity contributions            |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Minority interest charge        |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Distributions                   |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Limited partner buyouts         |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Net income                      |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|                                |  |                 |  |        |              |  |           |        |                     |   |                     |  |               |          |               |   |        |   |       |       
|Balance as of December 31, 2004 |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Minority interest charge        |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Distributions                   |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Limited partner buyouts         |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Net income                      |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Other comprehensive income      |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | 1,636 
|                                |  |                 |  |        |              |  |           |        |                     |   |                     |  |               |          |               |   |        |   |       |       
|Balance as of November 6, 2005  |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | 1,636 
|THE COMPANY                     |  |                
|Reclassify Predecessor          |  |                
|Partners' Equity                |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | 220,091  |               |   | --     |   |       | (1,636
|Net proceeds from sale of       |  |                
|Common Stock                    |  | --              |  |        | --           |  |           | 18,250 |                     |   | 181                 |  |               | 271,968  |               |   | --     |   |       | --    
|Issuance of Common Stock        |  |                
|for Exclusivity Agreement       |  | --              |  |        | --           |  |           | 1,125  |                     |   | 13                  |  |               | 19,987   |               |   | --     |   |       | --    
|Issuance of Preferred Stock     |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | --    
|Record minority interests for   |  |                
|former owners' continuing       |  |                
|interests                       |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | (332,175 | )             |   | --     |   |       | --    
|Net income                      |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | 1,349  |   |       | --    
|Dividends accrued on Common     |  |                
|Stock                           |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | (5,231 | ) |       | --    
|Other comprehensive loss        |  | --              |  |        | --           |  |           | --     |                     |   | --                  |  |               | --       |               |   | --     |   |       | (142  
|                                |  |                 |  |        |              |  |           |        |                     |   |                     |  |               |          |               |   |        |   |       |       
|Balance December 31, 2005       |  | --              |  | $      | --           |  |           | 19,375 |                     | $ | 194                 |  | $             | 179,871  |               | $ | (3,882 | ) | $     | (142  
|                                |  |                 |  |        |              |  |           |        |                     |   |                     |  |               |          |               |   |        |   |       |       

See Notes to
Consolidated Financial Statements.

F-5



---

NEWKIRK
REALTY TRUST, INC. (THE COMPANY) AND  
THE NEWKIRK MASTER LIMITED PARTNERSHIP
(THE PREDECESSOR)

CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands)

|                                                     |  |  | THE COMPANY                                                         |          | THE PREDECESSOR                                                   |  
|---------------------------------------------------- |  |  | ------------------------------------------------------------------- | -------- | ----------------------------------------------------------------- | -
|                                                     |  |  |                                                                     |          |                                                                   |  
|                                                     |  |  | For the Period 
        November 7, 2005 to
      December 31, 2005 |          | For the Period 
        January 1, 2005 to
      November 6, 2005 |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|CASH FLOWS FROM OPERATING ACTIVITIES :               |  |  |                                                                     |          |                                                                   |  
|Net income                                           |  |  | $                                                                   | 1,349    |                                                                   | $
|Adjustments to reconcile net income to net cash      |  | 
|provided by operating activities:                    |  | 
|Amoritzation of deferred costs and land estates      |  |  |                                                                     | 1,949    |                                                                   |  
|Depreciation expense                                 |  |  |                                                                     | 8,445    |                                                                   |  
|Gain from disposal of real estate securities         |  | 
|held for sale                                        |  |  |                                                                     | (2       | )                                                                 |  
|Gain from disposal of real estate                    |  |  |                                                                     | (1,733   | )                                                                 |  
|Net loss (gain) from early extinguishment of debt    |  |  |                                                                     | 121      |                                                                   |  
|Compensation expense for exclusivity agreement       |  |  |                                                                     | 10,500   |                                                                   |  
|Impairment loss                                      |  |  |                                                                     | --       |                                                                   |  
|Minority interest expense                            |  |  |                                                                     | 4,280    |                                                                   |  
|Straight-lining of rental income                     |  |  |                                                                     | 1,064    |                                                                   |  
|Interest earned on restricted cash                   |  |  |                                                                     | (79      | )                                                                 |  
|Equity in undisturbed earnings of limited            |  | 
|partnerships                                         |  |  |                                                                     | (473     | )                                                                 |  
|Changes in operating assets and liabilities:         |  | 
|Receivables                                          |  |  |                                                                     | (6,185   | )                                                                 |  
|Loans reeceivable                                    |  |  |                                                                     | 325      |                                                                   |  
|Accounts payable and accrued expenses                |  |  |                                                                     | 2,055    |                                                                   |  
|Accrued interest-mortages and                        |  | 
|contract rights                                      |  |  |                                                                     | 4,402    |                                                                   |  
|Other assets                                         |  |  |                                                                     | 572      |                                                                   |  
|Other liabilities                                    |  |  |                                                                     | 2,855    |                                                                   |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|Net cash provided by operating activities            |  |  |                                                                     | 29,445   |                                                                   |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|CASH FLOWS FROM INVESTING ACTIVITIES :               |  |  |                                                                     |          |                                                                   |  
|Building improvements and land additions             |  |  |                                                                     | (127     | )                                                                 |  
|Change in restricted cash                            |  |  |                                                                     | (2,110   | )                                                                 |  
|Proceeds from disposal of real estate securities     |  | 
|held for sale                                        |  |  |                                                                     | 143      |                                                                   |  
|Deposits for future real estate acquisitions         |  |  |                                                                     | (2,075   | )                                                                 |  
|Purchase of real estate securities held for sale     |  |  |                                                                     | (5,171   | )                                                                 |  
|Issuance of loan receivable                          |  |  |                                                                     | (6,500   | )                                                                 |  
|Net proceeds from disposal of real estate            |  |  |                                                                     | 13,570   |                                                                   |  
|Leasing costs incurred                               |  |  |                                                                     | (64      | )                                                                 |  
|Cash related to previously unconsolidated  limited   |  | 
|partnerships                                         |  |  |                                                                     | --       |                                                                   |  
|Acquisition of units from existing unitholders       |  |  |                                                                     | (37,732  | )                                                                 |  
|Investments in limited partnership interests         |  |  |                                                                     | --       |                                                                   |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|Net cash (used in) provided by investing             |  | 
|activities                                           |  |  |                                                                     | (40,066  | )                                                                 |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|CASH FLOWS FROM FINANCING ACTIVITIES :               |  |  |                                                                     |          |                                                                   |  
|Principal payments of mortgage notes                 |  |  |                                                                     | (5,645   | )                                                                 |  
|Principal payments of notes payable                  |  |  |                                                                     | (138,470 | )                                                                 |  
|Principal payments of contract right mortgage notes  |  |  |                                                                     | --       |                                                                   |  
|Proceeds from note payable                           |  |  |                                                                     | --       |                                                                   |  
|Proceeds from termination of rate cap                |  |  |                                                                     | 120      |                                                                   |  
|Mortgage prepayment penalties                        |  |  |                                                                     | --       |                                                                   |  
|Net proceeds from sale of common stock               |  |  |                                                                     | 268,871  |                                                                   |  
|Distributions to partner                             |  |  |                                                                     | --       |                                                                   |  
|Limited partner buyouts                              |  |  |                                                                     | --       |                                                                   |  
|Distributions to minority interests                  |  |  |                                                                     | (461     | )                                                                 |  
|Contributions from minority interests                |  |  |                                                                     | 1,500    |                                                                   |  
|Deferred financing costs                             |  |  |                                                                     | (43      | )                                                                 |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|Net cash provided by (used in) financing activities  |  |  |                                                                     | 125,872  |                                                                   |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|Net increase (decrease) in cash and cash equivalents |  |  |                                                                     | 115,251  |                                                                   |  
|Cash and Cash Equivalents at Beginning of Year       |  |  |                                                                     | 59,565   |                                                                   |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|Cash and Cash Equivalents at End of Year             |  |  | $                                                                   | 174,816  |                                                                   | $
|                                                     |  |  |                                                                     |          |                                                                   |  
|                                                     |  |  |                                                                     |          |                                                                   |  
|Supplemental Disclosure of Cash Flow Information:    |  |  |                                                                     |          |                                                                   |  
|Cash paid for state and local taxes                  |  |  | $                                                                   | --       |                                                                   | $
|                                                     |  |  |                                                                     |          |                                                                   |  
|Cash paid for interest                               |  |  | $                                                                   | 3,466    |                                                                   | $
|                                                     |  |  |                                                                     |          |                                                                   |  
|Accrued distributions                                |  |  | $                                                                   | 17,381   |                                                                   | $
|                                                     |  |  |                                                                     |          |                                                                   |  
|                                                     |  |  |                                                                     |          |                                                                   |  

See Notes to
Consolidated Financial Statements.

F-6



---

NEWKIRK
REALTY TRUST, INC. (THE COMPANY) AND 
THE NEWKIRK MASTER LIMITED PARTNERSHIP
(THE PREDECESSOR)

CONSOLIDATED
STATEMENTS OF CASH FLOWS

Supplemental
Information

In March 2003,
in  connection  with the disposal of real estate,  the  purchaser of a property  assumed
$94,918,000  of the Operating  Partnerships debt.

In January
2004, in connection with the sale of a property,  the purchaser of the property assumed
$28,460,000 of associated  Operating  Partnership debt.

In April 2004,
the Operating  Partnership  issued 15,539 units in the Operating  Partnership  to holders
of minority  interests in two  partially owned consolidated partnerships.

On November 7,
2005,  in  connection  with the  Operating  Partnerships  purchase of all the
interests  in T-Two  Partners LP (T-Two  Partners),  the Operating
Partnership  assumed  $269,400,000 of T-Two  Partners debt as well as accounts
payable of $12,800,000 and  accrued  interest  payable of $300,000.  Additionally,  the
Operating  Partnership  received  contract  right  mortgage  receivables of  $239,700,000.

Also on
November 7, 2005,  the Company  issued  $20,000,000  or  1,250,000  shares to  Winthrop
Realty  Trust in exchange  for certain  exclusivity rights with respect to net-lease
business  opportunities  offered to or generated by Michael Ashner, the Chairman and
Chief  Executive Officer of Winthrop Realty Trust and the Company.

See Notes to
Consolidated Financial Statements.

F-7



---

NEWKIRK
REALTY TRUST, INC. AND  
THE NEWKIRK MASTER LIMITED PARTNERSHIP  
NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 1   ORGANIZATION
AND BUSINESS

| | Newkirk
Realty Trust,  Inc. (the Company) is a recently-formed  Maryland  corporation
that intends to qualify as a real  estate  investment  trust or REIT under
Sections 856 and 860 of the  Internal  Revenue Code of 1986,  as amended (the  Code).
The  Company  was formed in July 2005 and  completed  its initial  public  offering  (the
IPO) on November 7,  2005. The Company was formed to acquire an ownership
interest in, and become the general  partner of, The Newkirk Master  Limited Partnership
(the Predecessor or the Operating  Partnership),  a Delaware
limited  partnership.  The Operating  Partnership owns commercial  properties,  most of
which are net leased to investment grade corporate tenants,  as well as  other real
estate assets.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Operating  Partnership  was organized in October 2001 as a limited  partnership  under
the Delaware  Revised  Uniform  Limited  Partnership Act. The Operating  Partnerships
term is perpetual unless it is otherwise  dissolved in accordance  with the  terms of its
partnership  agreement.  The  Operating  Partnership  commenced  operations  on  January
1, 2002  following the completion of a transaction (the  Exchange)  involving
the merger into  wholly-owned  subsidiaries of the  Operating  Partnership  of  90
limited  partnerships,  each  of  which  owned  commercial  properties  (the  Newkirk
Partnerships),  and the  acquisition by the Operating  Partnership  of various
assets,  including  those related to the  management or capital  structure of the Newkirk
Partnerships.  In connection with the Exchange,  limited partners of the  merged
partnerships  and equity  owners of the entities  that  contributed  other assets in
exchange  received  units in  consideration  of the merger and  contributions.  From
January 1, 2002 to November 6, 2005,  the Operating  Partnerships  general  partner
was MLP GP LLC,  an entity  effectively  controlled  by  affiliates  of Apollo Real
Estate Fund III, LP  (Apollo),  executive officers (WEM) of
Winthrop Realty Partners L.P. formerly known as Winthrop Financial Associates,  and
affiliates of Vornado Realty Trust (Vornado).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
indicated below, the Company holds a controlling  30.1% ownership  interest in the
Operating  Partnership.  All of the  Companys  assets are held through the
Operating  Partnership and its  subsidiaries.  The Company expects that as limited
partners in the Operating  Partnership  begin exercising their right to have their
limited  partnership  interests in the  Operating  Partnership  redeemed,  which cannot
occur until  November 7, 2006,  for cash or, at the  Companys  election,  shares of
the Companys common stock, the Companys interest in the Operating Partnership
will increase.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
common stock of the Company is traded on the New York Stock Exchange under the symbol NKT.
In connection  with the IPO  on November 7, 2005:
| | --------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | The
Company issued 15,000,000 shares of its common stock;
| | - |  | ---------------------------------------------------------

| | o |  | The
Company issued  3,125,000  common shares in a private  transaction to Winthrop Realty
Trust (formerly known as First Union  Real Estate Equity and Mortgage  Investments)  in
exchange for  $50,000,000  and issued an  additional  1,250,000  common shares
($20,000,000  value) in a private  transaction to Winthrop Realty Trust in  consideration
for its  assignment  to the  Company of certain  exclusivity  rights  with  respect to
net-lease  business  opportunities  offered to or generated by Michael Ashner,  the
Company and Winthrop Realty Trust's  Chairman and Chief Executive  Officer.  625,000
shares  (reducing  by  17,361  per  month)  issued  in  exchange  for  the  assignment
of the  exclusivity  right are subject to  forfeiture  upon the  occurrence of certain
events.  All shares of our common  stock  issued to Winthrop  Realty Trust are subject to
a lock-up  period  expiring  November 7, 2008,  subject to  certain exceptions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | Both
the Company and the Operating  Partnership  retained NKT Advisors LLC (NKT Advisors),
an entity partially owned by the  Companys  executive  officers,  pursuant to an
advisory  agreement  (the  Advisory  Agreement)  to manage the  Companys
assets and the  day-to-day  operations  of the Company and the Operating  Partnership,
subject to the  supervision of the Companys Board of Directors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-8



---

NEWKIRK
REALTY TRUST, INC. AND  
THE NEWKIRK MASTER LIMITED PARTNERSHIP  
NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 1   ORGANIZATION
AND BUSINESS (Continued)

| | o |  | The
Company acquired 15,625,000  newly-issued units of limited partnership  interest in the
Operating  Partnership in exchange  for  $235,800,000 and an additional  1,250,000 units
in exchange for the exclusivity  rights described above. The  Company also purchased
2,375,000  outstanding units from Apollo Real Estate Investment Fund III, L.P. (Apollo)
and 125,000 units of limited  partnership  interest  from WEM, for an aggregate  purchase
price of  $37,700,000,  resulting in an aggregate  ownership of 19,375,000 units of
limited  partnership in the Operating  Partnership or  30.1% of the total outstanding
units;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | The
Company was admitted as the general partner of the Operating Partnership;
| | - |  | -----------------------------------------------------------------------------

| | o |  | NKT
Advisors  was issued the  Companys  special  voting  preferred  stock  entitling it
to vote on all matters for which the  Companys  common  stockholders  are entitled
to vote.  The number of votes that NKT Advisors will be entitled to  cast in respect of
the special voting  preferred stock will initially be 45,000,00 votes or  approximately
69.9%  of the  64,375,000  votes  entitled  to be cast.  The  45,000,000  votes
represents  the  total  number of units  outstanding  immediately  following
consummation  of IPO  (excluding  units held by the  Company).  As units are  redeemed at
the option of a limited  partner,  the number of votes  attaching  to NKT  Advisors special
voting  preferred stock will decrease by an equivalent  amount.  The Advisory  Agreement
provides that on all matters for  which NKT Advisors is entitled to cash votes in respect
of its special voting  preferred  stock, it will cast its  votes in direct  proportion to
the votes that are cast by limited  partners of the Operating  Partnership,  other  than
the Company,  on such matters,  except that NKT Advisors  (through its managing  member)
will be entitled to  vote in its sole  discretion  to the  extent  that the  voting
rights of  affiliates  of  Vornado  Realty  Trust  (Vornado) are limited
under certain circumstances; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o |  | The
Company  granted  registration  rights to Apollo and Vornado in connection  with shares
issuable upon conversion of their  units in the Operating Partnership and to Winthrop
Realty Trust in connection with their shares of common stock.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
2005,  2004 and 2003, the Operating  Partnership  acquired from its limited  partners
364,193,  155,180 and 871,711,  respectively, of its units of limited partnership
interest.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 2  -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

| | Basis
of Presentation
| | ---------------------

| | The
accompanying  consolidated  financial statements present the consolidated  financial
position,  results of operations  and cash flows of the Company and its controlled
subsidiaries.  All significant intercompany  transactions,  receivables  and  payables
have been  eliminated  in  consolidation.  Minority  interests  relate to the  interest
in the  Operating  Partnership not owned by the Company.  The Company  accounts for its
investments in partnerships  and joint ventures,  in  which it does not have a
controlling  interest,  using the equity method of accounting.  Equity  investments are
recorded  initially at cost and subsequently  adjusted for the Companys share of
the net income or loss and cash  contributions to  and distributions from these
partnerships and joint ventures.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
assets and liabilities of the Company at November 7, 2005 reflect the carryover
historical  basis of the Predecessor  and the  $37,700,000  acquisition  of the units
from limited  partners is accounted for in  accordance  with SFAS No. 141  Business
Combinations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-9



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 2  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | Use
of Estimates
| | ----------------

| | The
preparation of consolidated  financial statements in conformity with accounting
principles generally accepted in the  United States of America  requires  management to
make estimates and assumptions  that affect the amounts reported in the  consolidated
financial statements and accompanying notes.  Actual results could differ from those
estimates.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Real
Estate
| | -----------

| | Investments
in real  estate  are  stated at  historical  cost  basis less  accumulated  depreciation
and  amortization.  Depreciation of buildings and improvements is computed on a
straight-line  basis over their estimated useful lives, which  range from  fourteen to
forty years.  Amortization  of the land estates is computed on a  straight-line  basis
over their  estimated useful lives, which range from twenty-two to thirty years.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
2003, the Operating  Partnership made a change to its accounting  estimates with respect
to the depreciable  lives  of its real estate  assets.  The change in  accounting
estimates  resulted in a decrease in net income of  approximately  $6,800,000 and a
decrease in net income of approximately  $0.14 per limited  partnership unit for the year
ended December  31, 2003.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys real estate  investments  are reviewed for impairment if events or changes
in  circumstances  indicate that  the carrying  amount of the real estate may not be
recoverable.  In such an event,  a comparison  is made of the current  and  projected
operating  cash flows of such real estate on an  undiscounted  basis to the carrying
amount of such real  estate.  Such carrying  amount would be adjusted,  if  necessary,
to estimated  fair value to reflect  impairment in the  value of the real  estate.  Real
estate  assets for which the Company has  committed  to a plan to dispose of the assets,
whether  by sale or  abandonment,  are  reported  at the  lower of  carrying  amount  or
fair  value  less  cost to sell.  Preparation of projected  cash flows is inherently
subjective and is based on the Companys best estimate of assumptions  concerning
expected future conditions.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
fair value of the real estate acquired, which includes the impact of mark-to-market
adjustments for assumed mortgage  debt realized to property  acquisitions,  is allocated
to the acquired tangible assets,  consisting of land, building and  improvements,
fixtures and  equipment  and  identified  intangible  assets and  liabilities,
consisting of the value of  above-market and below-market  leases,  other value of
in-place leases and value of tenant  relationships,  based in each  case on managements
determination of their fair values.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
fair value of the  tangible  assets of an acquired  property  is  determined  by valuing
the  property as if it were  vacant,  and the  as-if-vacant value is then
allocated to land,  building and  improvements and fixtures and equipment  based on
managements  determination  of relative  fair values of these  assets.  Factors
considered  by  management in  performing these analyses include an estimate of carrying
costs during the expected lease-up periods  considering current  market  conditions and
costs to execute similar leases.  In estimating  carrying costs,  management  includes
real estate  taxes,  insurance and other operating  expenses and estimates of lost rental
revenue during the expected lease-up periods  based on current market demand.  Management
also estimates costs to execute similar leases including leasing commissions.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
allocating the fair value of the identified  intangible assets and liabilities of an
acquired  property,  above-market  and below-market  in-place lease values are recorded
based on the difference  between the current in-place lease rent and  a management
estimate of current market rents.  Below-market  lease intangibles are recorded as part
of deferred revenue  and amortized  into rental revenue over the  non-cancelable  periods
of the respective  leases.  Above-market  leases are  recorded as part of intangible
assets and amortized as a direct charge against  rental  revenue over the  non-cancelable
portion of the respective leases.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-10



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 2  -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | The
aggregate  value of other acquired  intangible  assets,  consisting of in-place leases
and tenant  relationships,  is  measured by the excess of (i) the purchase  price paid
for a property over (ii) the estimated  fair value of the property  as-if-vacant,
determined  as set forth above.  This  aggregate  value is allocated  between  in-place
leases and tenant  relationships  based on managements  evaluation of the specific
characteristics  of each tenants  lease.  The value of  in-place  leases and
customer  relationships  are amortized to expense over the remaining  non-cancelable
periods of the  respective leases.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company accounts for properties as held for sale under the provisions of Statement of
Financial  Accounting Standards  (SFAS) No. 144,  Accounting for the
Impairment or Disposal of Long-Lived  Assets (SFAS No. 144),  when all
criteria  of SFAS No. 144 have been met.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
and Cash Equivalents
| | -------------------------

| | Cash
and cash equivalents  consist of all highly liquid investments with original purchase
maturity dates of three months  or less.
| | -----------------------------------------------------------------------------------------------------------------------------------

| | Restricted
Cash
| | ---------------

| | Restricted
cash includes reserves for tenant improvements,  leasing commissions and related costs
established pursuant to  the Operating Partnerships note payable agreement.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Concentration
of Credit Risk
| | ----------------------------

| | Substantially
all of the Companys cash and cash  equivalents  consist of money market mutual
funds which invest in U.S.  Treasury Bills and repurchase agreements with original
maturity dates of three months or less.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company maintains cash with two banking  institutions,  which amounts at times exceed
federally  insured limits.  The  Company has not experienced any losses on its invested
cash.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Real
Estate Securities Available for Sale
| | -----------------------------------------

| | The
Company classifies  investments in real estate equity securities with readily
determinable fair market values on the  balance sheet as available-for-sale,  based on
the Companys intent with respect to those securities.  Specifically,  the  Companys
investments  in  equity  securities  with  readily  determinable  fair  market  values
are  accounted  for as  available-for-sale  because these securities are held
principally for investment  purposes and not for sale in the short  term.  Accordingly,
the Company  records these  investments at fair market value,  and  unrealized  gains and
losses are  recognized through  stockholders equity, as a component of other
comprehensive  income.  Realized gains and losses and  charges for  other-than-temporary
impairments are included in net income.  Sales of securities are recorded on the trade
date and gains and losses are determined by the specific identification method.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Receivables
| | -----------

| | Receivables
consist  of rent from  tenants  and other  receivables  which are  deemed  collectable
by the  Company.  No  provision for doubtful  accounts was considered  necessary based
upon the Companys  evaluation of the  collectability of  these amounts.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Loans
Receivable
| | ----------------

| | Loans
receivable  include the note receivable from Administrator LLC and a secured note
receivable from an unaffiliated  party.
| | -------------------------------------------------------------------------------------------------------------------------------

F-11



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | Loans
Receivable (Continued)
| | ----------------------------

| | The
Company evaluates the  collectability of both interest and principal of each of its
loans, if circumstances  warrant,  to determine whether it is impaired.  A 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.  When a loan is  considered  to be  impaired,  the amount of the loss
accrual is  calculated  by  comparing  the recorded  investment to the value determined
by discounting the expected future cash flows at the loans  effective  interest
rate.  Interest on impaired loans is recognized on a cash basis.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Investments
in Debt Securities
| | ------------------------------

| | Investments
in debt  securities  are  classified as  held-to-maturity,  reported at amortized cost
and are included with  other assets in the accompanying consolidated balance
sheets.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Lease
Intangibles
| | -----------------

| | Upon
acquisition of real estate,  the Company records  intangible  assets and liabilities
acquired at their fair market  value. The Company amortizes  identified  intangible
assets and liabilities over the period which the assets are expected  to contribute to
future cash flows of the property acquired over the terms of the applicable leases.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Deferred
Financing Costs
| | ------------------------

| | Deferred
        financing costs consist primarily of fees paid in connection with the
        financing of the Operating Partnerships properties and are deferred
        and amortized over the terms of the related agreements as a component
        of interest expense.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Investments
in Partnerships
| | ---------------------------

| | The
Company  evaluated its  investments in  partially-owned  entities in accordance with
Financial  Accounting  Standards  Board (FASB)  Interpretation No. 46
(revised December 2003),  Consolidation of Variable Interest Entities,  or FIN 46R.  If
the partially-owned  entity is a variable interest entity, or a VIE, and
the Company is the primary  beneficiary as defined in FIN 46R, the Company
would account for such investment as if it were a consolidated subsidiary.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
a  partnership  investment  which is not a VIE or in which the  Company is not the
primary  beneficiary,  the Company  follows the  accounting  set forth in AICPA
Statement of Position No. 78-9  Accounting  for  Investments in Real Estate
Ventures (SOP 78-9).  In accordance  with this  pronouncement,  the Company  accounts for
its investments in partnerships  and joint ventures in which it does not have a
controlling  interest using the equity method of accounting.  Factors that  are
considered in determining  whether or not the Company  exercises  control  include
important  rights of partners in  significant  business decisions,  including
dispositions and acquisitions of assets,  financing,  operations and capital  budgets,
other  contractual  rights,  and ultimate removal of the general partner in situations
where the Company is the  general  partner.  To the  extent  that the  Company  is
deemed to  control  these  entities,  these  entities  would be  consolidated.
Determination is made on a case-by-case basis.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-12



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | Investments
in Partnerships (Continued)
| | ---------------------------------------

| | The
Company accounts for the purchase of minority  interests at fair value utilizing the
purchase method of accounting in  accordance with SFAS No. 141, Business
Combinations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenue
Recognition
| | -------------------

| | The
Companys lease  agreements are operating  leases and generally  provide for varying
rents over the lease terms.  The  Company  records rental income for the full term of
each lease on a  straight-line  basis.  Accordingly,  deferred rental  income is recorded
from tenants for the amount that is expected to be  collected  over the  remaining  lease
term rather  than  currently.  When a  property  is  acquired,  the term of  existing
leases  is  considered  to  commence  as of the  acquisition date for purposes of this
calculation.  Deferred rent receivable  amounted to $21,200,000 and $27,100,000 at
December 31, 2005 and 2004, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.  In
order to qualify as a REIT,  the  Company is  generally  required  each year to
distribute to is  stockholders at least 90% of its taxable income  (excluding any net
capital gain).  The Company intends  to comply with the foregoing minimum distribution
requirement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Taxable
income or loss of the Operating  Partnership is reported in the income tax returns of its
partners.  Accordingly,  no provision for income taxes is made in the consolidated
financial  statements of the Operating  Partnership.  However,  the Operating Partnership
is required to pay certain state and local entity level taxes which are expensed as
incurred.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Unit
Split
| | ----------

| | On
November 7, 2005, the Operating  Partnership  affected a 7.5801 to 1 unit split of the
outstanding  units.  Partners equity  activity for all periods  presented  has been
restated to give  retroactive  recognition  to the unit split.  In  addition,  all
references in the financial  statements and notes to the consolidated  financial
statements,  to weighted  average  limited  partnership  units and per  limited  partner
unit  amounts  have  been  adjusted  to give  retroactive  recognition to the unit split.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Earnings
Per Share
| | ------------------

| | The
Company  has  calculated  earnings  per share in  accordance  with SFAS  No.128,  Earnings
Per Share.  SFAS No.128  requires that common share equivalents be excluded from
the  weighted-average  shares  outstanding for the calculation of  basic earnings per
share.  The Company does not have any common share equivalents.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-13



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | Segment
Reporting
| | -----------------

| | The
Company has one reportable  segment,  net leased commercial real estate.  The Company
evaluates  performance based on  net operating income, which is income before
depreciation, amortization, interest and non-operating items.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Fair
Value of Financial Instruments
| | -----------------------------------

| | Financial
instruments held by the Company include cash and cash equivalents,  receivables, accounts
payable and long-term  debt. The fair value of cash and cash equivalents,  receivables
and accounts payable  approximates their current carrying  amounts  due to their
short-term  nature.  The fair  value of  long-term  debt,  which has  fixed  interest
rates,  was  determined  based upon current  market  conditions  and interest  rates.
The fair value of the  mortgage  notes  payable  approximates fair value for debt with
similar terms and conditions due to yield  maintenance  requirements and prepayment
penalties.  The fair value of the  Companys  interest rate swap and interest  rate
caps is  approximately  $1,700,000 at  December 31, 2005. Such fair value  estimates are
not  necessarily  indicative of the amounts that would be realized upon  disposition of
the Companys financial instruments.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Derivative
Financial Instruments
| | --------------------------------

| | The
Company  accounts for its interest rate swap  agreement and interest rate cap  agreements
in accordance  with FAS No.  133, Accounting for Derivative  Instruments and
Hedging Activities, as amended and interpreted.  In accordance with FAS  No. 133,
the interest rate swap and cap agreements are carried on the balance sheet at their fair
value,  as an asset, if  their fair value is positive,  or as a  liability,  if their
fair value is negative.  Certain of these  transactions  are  designated as cash
flow hedges and one of the  Companys  interest  rate cap  agreements  is not
designated as a hedge  instrument  and is measured at fair value with the resulting  gain
or less being  recognized  in interest  expense in the  period of change.  Since the
Companys  interest rate swap and one of the Companys  interest  rate cap
agreements  are  designated  as cash flow  hedges, comprehensive  income or
loss for hedges that qualify as effective and the change in  the fair value is
transferred  from other  comprehensive  income or loss to  earnings  as the hedged
liability  affects  earnings.  The  ineffective  amount of the interest rate swap and cap
agreement,  if any, is recognized in earnings each  quarter.  To date,  the Company has
not  recognized any change in the value of its interest rate swap or cap agreement in
earnings as a result of the hedge or a portion  thereof  being  ineffective.
Accordingly,  changes in value are recorded  through  other  comprehensive  income.
During the year ending  December 31,  2006,  the Company  estimates  that it will
reclassify approximately $192,000 from other comprehensive income to earnings as an
increase to interest expense.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Upon
entering into hedging  transactions,  the Company documents the relationship  between the
interest rate swap and cap  agreements and the hedged liability.  The Company also
documents its risk-management  policies,  including objectives and  strategies,  as they
relate to its hedging  activities.  The Company  assesses,  both at  inception of a hedge
and on and  on-going  basis,  whether or not the hedge is highly  effective,
as defined by FAS No. 133.  The Company  discontinues  hedge  accounting on a prospective
basis with changes in the estimated fair value  reflected in earnings when: (i) it is
determined that the derivative is no longer  effective in offsetting  cash flows of a
hedged item  (including  forecasted  transactions);  (ii) it is no longer probable that
the forecasted  transaction will occur; or (iii) it is determined that  designating  the
derivative as an interest rate swap or cap  agreements is no longer  appropriate.  To
date, the Company  has not  discontinued  hedge accounting for its interest rate swap or
cap agreement.  The Company utilizes  interest rate  swap and cap agreements to manage
interest rate risk and does not anticipate  entering into derivative  transactions  for
speculative or trading purposes.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-14



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | Reclassifications
| | -----------------

| | Certain
prior year  amounts  have been  reclassified  to  conform  to the 2005  presentation,
due to the  reporting  of  discontinued  operations  for those assets that have been
disposed of or  classified as held for sale in accordance  with  SFAS No. 144.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Recently
Issued Accounting Standards and Pronouncements
| | -------------------------------------------------------

| | In
March 2005, the FASB issued Financial  Interpretation No. 47, Accounting for
Conditional Asset Retirement Obligations   an Interpretation of FASB Statement No.
143, which specifies the accounting treatment for obligations  associated with  the
sale or disposal of an asset when there are legal requirements  attendant to such a
disposition.  The Company adopted  this  pronouncement in 2005, as required,  but there
was no impact as there are no legal obligations  associated with the  planned sale of any
properties in our Real Estate Owned portfolio.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
May 2005, the FASB issued SFAS No. 154,  Accounting  Changes and Error Corrections
 A Replacement of APB Opinion No.  20 and SFAS No. 3. SFAS No. 154 changes
the  requirements  for the  accounting  and  reporting of a change in accounting
principle  by requiring  retrospective  application  to prior period  financial
statements  of the change in  accounting  principle,  unless  it is  impracticable  to do
so.  SFAS  No.  154  also  requires  that a change  in  depreciation  and  amortization
for  long-lived,  non financial  assets be accounted for as a change in accounting
estimate  affected by a  change in  accounting  principle.  SFAS No. 154 is effective
for  accounting  changes and  correction  of errors made in  fiscal years  beginning
after  December  15,  2005.  The Company does not believe that the adoption of SFAS No.
154 will  have a material effect on the Companys consolidated financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2005,  the FASB  ratified the EITFs  consensus on Issue 04-5,  Determining
Whether a General  Partner,  or the  General  Partners as a Group,  Controls a Limited
Partnership or Similar  Entity When the Limited  Partners Have Certain  Rights. Issue
04-5 provides a framework for determining whether a general partner controls,  and should
consolidate,  a  limited  partnership  or a similar  entity.  It became  effective for
all newly formed limited  partnerships  and for any  pre-existing limited  partnerships
that modify their partnership  agreements after June 29, 2005. General partners of all
other limited  partnerships  will apply the consensus no later than the beginning of the
first reporting period in fiscal  years  beginning  after  December 15, 2005.  The
Company has not completed the process of evaluating the impact that will  result from the
adoption of the consensus in EITF 04-5 on the Companys consolidated financial
statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 3 -REAL
ESTATE INVESTMENTS

| | Most
of the Companys  properties are net leased to a single  commercial  tenant.  The
properties are located  throughout  the United  States.  The leases are similar in many
respects and  generally  provide for fixed rent payments and obligate  the tenant to pay
all capital and operating expenses for a property;  obligate the tenant to perform all
responsibilities  (other than the payment of debt  service)  relating to the  property;
require the tenant to maintain  insurance  against  casualty and  liability  losses;
permit the tenant to sublet the property;  and afford the tenant in many  instances the
right to terminate  the lease at certain  points  during the primary term if it
determines  that its  continued  use and  occupancy of the property would be uneconomic
or unsuitable.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys  ability to maintain and operate its properties and satisfy its
contractual  obligations is dependent upon  the  performance  by the tenants of their
obligations  under their lease  agreements  with the  Company.  Under  certain
conditions (including the destruction of the property),  many of the tenants have an
option to purchase the property upon  the  expiration  of the primary term of the lease
and at the end of one or more  renewal  terms for a price stated in the  lease agreement.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-15



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 3  -
REAL ESTATE INVESTMENTS (Continued)

| | The
future  minimum lease  payments  that are  scheduled to be received  under
non-cancellable  operating  leases are as  follows (in thousands):
| | -------------------------------------------------------------------------------------------------------------------------------------------------

|2006       |  |  | $ | 238,365 | 
|---------- |  |  | - | ------- | 
|2007       |  |  |   | 208,847 | 
|2008       |  |  |   | 156,645 | 
|2009       |  |  |   | 57,680  | 
|2010       |  |  |   | 25,832  | 
|Thereafter |  |  |   | 43,817  | 
|           |  |  |   |        
|           |  |  | $ | 731,186 | 
|           |  |  |   |        

| | Three
tenants accounted for approximately 37% and 36% of the aggregate rental revenues
including discontinued  operations  of the Company and the Operating  Partnership in 2005
and 2004,  respectively.  Two tenants  accounted for  approximately  24% of the aggregate
rental revenues including discontinued operations of the Operating Partnership in 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company owns the fee interest in the land on which certain of its  properties  are
located,  leases the land pursuant  to ground leases or holds an estate for years with an
option to lease the land upon expiration of the estate for years.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys properties are encumbered by mortgage notes payable.
| | ------------------------------------------------------------------

| | The
rent payable under the ground leases is as follows (in thousands):
| | ----------------------------------------------------------------------

|2006       |  |  | $ | 3,122 | 
|---------- |  |  | - | ----- | 
|2007       |  |  |   | 2,496 | 
|2008       |  |  |   | 1,673 | 
|2009       |  |  |   | 982   | 
|2010       |  |  |   | 569   | 
|Thereafter |  |  |   | 192   | 
|           |  |  |   |      
|           |  |  | $ | 9,034 | 
|           |  |  |   |      

Note 4  -
NOTES AND CONTRACT RIGHTS PAYABLE

| | The
Company and the Operating Partnership,  excluding discontinued operations, had
outstanding mortgage notes payable and  contract right mortgage notes payable with an
aggregate  principal  balance of $177,300,000  and $742,000,000 at December  31, 2005 and
2004,  respectively.  The mortgage notes are at fixed interest rates with payments of
principal and interest  generally due either monthly or  semi-annually.  All the mortgage
notes are  collateralized by the Companys real estate;  some of the mortgage notes
are cross-collateralized.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | An
aggregate of  $166,200,000  in  indebtedness  under the  mortgage  notes  mature at
various  dates from 2006 to 2024.  Prepayment of most of the mortgage  notes is permitted
only with a yield  maintenance  payment or prepayment  penalty as  defined in the
mortgage  note  agreements.  Interest  rates on the  mortgages  ranged from 5% to 9.89%,
with a weighted  average  interest rate of 6.1% at December 31, 2005.  Interest  rates on
the  mortgages  ranged from 5.0% to 10.4% with a  weighted average interest rate of 8.1%
at December 31, 2004.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
remaining  contract right  mortgage note at December 31, 2005 of  $11,100,000  has a
fixed interest rate of 9.68% and  matures in January 2009. The outstanding contract
rights of $263,100,000,  excluding discontinued  operations at December  31, 2004 had
interest rates ranging from 8.11% to 13.9%, with a weighted average interest rate of
10.7%.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-16



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 4  -
NOTES AND CONTRACT RIGHTS PAYABLE (Continued)

| | Mortgage
notes payable and contract  right mortgage  notes payable  aggregating  approximately
$1.1 billion and accrued  interest  thereon were assumed as part of the  Exchange.  These
notes were recorded at their fair value as of the various  dates of acquisition.  This
accounting method resulted in recorded  interest expense that was $3,100,000,  $5,500,000
and  $3,800,000 greater than the contractual  interest expense for the period from
January 1, 2005 to November 6, 2005 and for  the years  ended  December  31,  2004 and
2003,  respectively.  The effect of  utilizing  this  accounting  method was to  increase
the  principal  balance of mortgage  and contract  rights  notes  payable and reduce
interest  accrued on these  obligations.  The cumulative  reduction in liabilities
related to utilizing this  accounting  method was  $35,400,000 at  November 6, 2005.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Most
of these mortgage notes payable and some of the contract  right mortgage notes payable
were  refinanced  during 2005  as discussed below.  Also,  during 2005, the Operating
Partnership  acquired the entity which owns most of the remaining  contract right
mortgage notes payable (See Note 6 - Related Party Transactions).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
November 2003, the Operating  Partnership  obtained a $208,500,000  loan from Bank of
America,  N.A., which had an  outstanding  balance of  $165,300,000  at December  31,
2004.  The note  payable  bore  interest at a rate elected by the  Operating  Partnership
equal to either (1) LIBOR plus 450 basis points or (2) the prime rate charged by the bank
plus 250  basis points.  The note payable was scheduled to mature on November 24, 2006,
subject to two one-year extensions.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
August 11, 2005, the Operating  Partnership obtained a $477,759,000 loan from KeyBank
National Association and Bank of  America,  N.A.  (the  Lenders)  which bears
interest at the  election of the Company at a rate equal to either (i) the  LIBOR Rate
plus 200 basis points (reduced to 175 basis points after  consummation of the IPO) or
(ii) the prime rate then  charged by KeyBank  National  Association  plus 50 basis
points.  The loan was obtained to (i) replace the existing loan  from Bank of America,
N.A. which had an outstanding balance including accrued interest of $163,379,000 and bore
interest  at the LIBOR Rate plus 450 basis points or prime plus 250 basis points, (ii)
satisfy  $186,566,000 of first mortgage debt  encumbering  the  Operating  Partnerships
real  properties,  which  constituted  substantially  all  of  the  Operating  Partnerships
first  mortgage debt and (iii) satisfy  $86,801,000  of second  mortgage  debt
encumbering  the Operating  Partnerships  real  properties.  The Operating
Partnership  incurred  $6,945,000 of closing  costs and  $23,548,000  of  prepayment
penalties on the  transaction.  Concurrently  with the loan,  T-Two  Partners  also
obtained a loan from the  Lenders in the  principal  amount of  $272,241,000  (the T-Two
Loan),  the  proceeds of which were used to satisfy the  outstanding  balance
including  accrued  interest  on a loan  made  by  Bank of  America,  N.A.  to  T-Two
Partners  of  $271,989,000.  The interest  rate,  maturity  date and  principal  terms of
the T-Two Loan are the same as the  Operating  Partnerships  loan.  The Operating
Partnership  agreed to guarantee the  obligations  of T-Two Partners under the T-Two
Loan.  On November 7, 2005,  the Operating  Partnership  assumed this debt as part of an
exercise of an option to acquire  the  interests  of T-Two  Partners,  (See  Note 6 -
Related  Party  Transactions).  The loan  with  the  Lenders  had an  outstanding
principal  balance of $593,500,000  at December 31, 2005. The Operating  Partnership
also advanced  closing  costs of  $3,903,000  for T-Two  Partners.  Excess  proceeds
from the loan of  $6,537,000  were used to make a principal  payment on September 1, 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
loan is scheduled to mature on August 11, 2008,  subject to two one year extensions and
will require monthly payments  of interest  only. In addition,  the loan required (i)
initial  principal  payments of 50% of excess cash flow after debt  service during the
period between August 11, 2005 and the  consummation of the IPO (November 7, 2005)
offering,  less any  amounts paid on account of the T-Two Loan (as described  below),
(ii) a principal payment equal to $150,000,000 less the  amount of the  initial
principal  payments on the closing of the IPO made  pursuant  to (i) above,  and (iii)
quarterly  principal  payments of $1,875,000 during the term of the loan,  increasing to
$2,500,000 per quarter during the extension  periods.  The Company is also required to
make principal  payments from the proceeds of property sales,  refinancings and  other
asset sales if proceeds are not reinvested into net leased  properties.  The required
principal payments are based  on a minimum  release price set forth in the loan
agreement for property  sales and 100% of proceeds from  refinancings,  economic
discontinuance, insurance settlements and condemnations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-17



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 4  -
NOTES AND CONTRACT RIGHTS PAYABLE (Continued)

| | The
loan is  secured  by a lien on the  Companys  assets  and the assets of the  Companys
subsidiaries,  with  certain  exceptions  such as  direct  liens on most of the  real
estate  owned  by the  Operating  Partnership  or the  Companys  subsidiaries.  The
Company  can  prepay the loan in whole or in part at any time  together  with a premium
of 1% if such  prepayment occurs on or before August 11, 2006 and thereafter with no
premium.  The loan contains customary financial and  other covenants consistent with the
prior loan.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Operating  Partnership  entered  into the  following  agreements  in order to limit the
exposure to  interest  rate  volatility:  (i) a five year interest rate swap agreement
with KeyBank National Association effectively setting the LIBOR  rate at 4.642% for
$250,000,000  of the loan balance;  (ii) a LIBOR rate cap agreement at 5% with Bank of
America,  N.A.  for $295,000,000  through November 2006; and (iii) a LIBOR rate cap
agreement at 6% with SMBC Derivative Products Limited  for the period from November 2006
until August 2008 for a notional amount of $290,000,000.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection  with the Operating  Partnerships  refinancings,  real estate sales and
repayments of mortgage debt during  2005,  the Company has  recognized a net loss from
debt  extinguishment  of $100,000,  which is included in  discontinued  operations for
the period November 7, 2005 to December 31, 2005, and the Operating  Partnership has
recognized a net loss  from early  extinguishment of debt of $30,400,000,  of which
$1,600,000 is included in discontinued  operations.  The net  loss from  early
extinguishment  of debt  consisted  of loss from  debt  extinguishment  of  $7,000,000,
plus  mortgage  prepayment  penalties  of  $23,500,000.  During  2004,  the  Operating
Partnership  recognized  a net  loss  from  early  extinguishment  of debt of
$6,600,000,  $6,500,000 of which is included in  discontinued  operations.  The net loss
from  early  extinguishment  of debt  consisted  of loss from debt  extinguishment  of
$6,300,000,  plus  mortgage  prepayment  penalties of $300,000.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Scheduled
payments of principal at December 31, 2005, for the next five years and thereafter
through  maturity,  are as  follows (in thousands):
| | ------------------------------------------------------------------------------------------------------------------------------------------------

|Year       |  |  | Mortgage Notes 
        Payable |         | Note
        Payable |   | Contract 
        Mortgage Notes 
        Payable |  | Principal Total |        | Accrued 
        Interest |   | Total   | 
|---------- |  |  | ------------------------------- | ------- | -------------------- | - | ------------------------------------------------- |  | --------------- | ------ | ------------------------- | - | ------- | 
|           |  |  |                                 |         |                      |   |                                                   |  |                 |        |                           |   |         | 
|2006       |  |  | $                               | 36,700  |                      | $ | 7,500                                             |  | $               | --     |                           | $ | 44,200  | 
|2007       |  |  |                                 | 38,946  |                      |   | 7,500                                             |  |                 | --     |                           |   | 46,446  | 
|2008       |  |  |                                 | 41,523  |                      |   | 578,463                                           |  |                 | --     |                           |   | 619,986 | 
|2009       |  |  |                                 | 16,245  |                      |   | --                                                |  |                 | 229    |                           |   | 16,474  | 
|2010       |  |  |                                 | 380     |                      |   | --                                                |  |                 | 491    |                           |   | 871     | 
|Thereafter |  |  |                                 | 32,401  |                      |   | --                                                |  |                 | 10,408 |                           |   | 42,809  | 
|           |  |  |                                 |         |                      |   |                                                   |  |                 |        |                           |   |         | 
|           |  |  | $                               | 166,195 |                      | $ | 593,463                                           |  | $               | 11,128 |                           | $ | 770,786 | 
|           |  |  |                                 |         |                      |   |                                                   |  |                 |        |                           |   |         | 

F-18



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 5  -
EQUITY INVESTMENTS IN LIMITED PARTNERSHIPS

| | The
equity investments in limited partnerships consists of the following (in thousands):
| | ----------------------------------------------------------------------------------------

|                                         |  |  | 2005 |        | 2004 |  
|---------------------------------------- |  |  | ---- | ------ | ---- | -
|                                         |  |  |      |        |      |  
|Balance, beginning of year               |  |  | $    | 11,107 |      | $
|Investments in limited partnership       |  |  |      | 10     |      |  
|Equity in income of limited partnerships |  |  |      | 3,128  |      |  
|Distributions from limited partnerships  |  |  |      | (399   | )    |  
|                                         |  |  |      |        |      |  
|Balance, end of year                     |  |  | $    | 13,846 |      | $
|                                         |  |  |      |        |      |  

| | The
Company and Operating  Partnership have paid a premium for its allocable share of the
underlying limited partnerships  which  resulted in an excess of the carrying  amounts of
the Company and  Operating  Partnerships  investments  over the  underlying  net
assets of these  limited  partnerships  of  $5,100,000  and  $5,000,000 as of December
31, 2005 and 2004,  substantially all of which relates to the difference  between the
fair values at the date of acquisition of the Companys  underlying  properties  and
historical  carrying  amounts.  Such  premium is being  amortized  as an  adjustment  to
the  Companys  equity in  earnings  of the limited  partnerships  over the useful
lives of the  underlying  properties.  The  amortization  expense  amounted  to $19,000;
$109,000;  $126,000;  and  $42,000 for the period from  November 7, 2005 to  December
31,  2005,  the period  January 1, 2005 to  November 6, 2005 and the years  ended
December  31, 2004 and 2003,  respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
limited  partnerships  condensed  combined  statements of operations  and condensed
combined  balance  sheets are as  follows (in thousands):
| | -------------------------------------------------------------------------------------------------------------------------------------------------

| | Condensed
Statements of Operations:
| | -----------------------------------

|                            |  |  | The Company                                                    |       | The Predecessor                                            |  
|--------------------------- |  |  | -------------------------------------------------------------- | ----- | ---------------------------------------------------------- | -
|                            |  |  |                                                                |       |                                                            |  
|(Unaudited)                 |  |  | For the Period 
  November 7,
  2005 to 
  December 31,
  2005 |       | For the Period 
  January 1, 2005
  to 
  November 6, 2005 |  
|                            |  |  |                                                                |       |                                                            |  
|Rental revenue and interest |  |  |                                                                |       |                                                            |  
|income                      |  |  | $                                                              | 3,977 |                                                            | $
|Interest expense            |  |  |                                                                | 1,423 |                                                            |  
|Administrative expense      |  |  |                                                                | 15    |                                                            |  
|Depreciation expense        |  |  |                                                                | 522   |                                                            |  
|Amortization expense        |  |  |                                                                | 78    |                                                            |  
|                            |  |  |                                                                |       |                                                            |  
|Net income                  |  |  | $                                                              | 1,939 |                                                            | $
|                            |  |  |                                                                |       |                                                            |  

F-19



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 5  -
EQUITY INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

| | Condensed
Balance Sheets:
| | -------------------------

|                                        |  |  | December 31, 
  2005 |         | December 31, 
  2004 |  
|--------------------------------------- |  |  | -------------------- | ------- | -------------------- | -
|                                        |  |  |                      |         |                      |  
|                                        |  |  | (Unaudited)          |        
|                                        |  |  |                      |         |                      |  
|Cash                                    |  |  | $                    | 1,744   |                      | $
|Real estate, net                        |  |  |                      | 81,043  |                      |  
|Other assets                            |  |  |                      | 2,928   |                      |  
|                                        |  |  |                      |         |                      |  
|Total assets                            |  |  | $                    | 85,715  |                      | $
|                                        |  |  |                      |         |                      |  
|Accounts payable and other liabilities  |  |  | $                    | 1,436   |                      | $
|Mortgages payable                       |  |  |                      | 96,238  |                      |  
|Partners deficit                       |  |  |                      | (11,959 | )                    |  
|                                        |  |  |                      |         |                      |  
|Total liabilities and partners deficit |  |  | $                    | 85,715  |                      | $
|                                        |  |  |                      |         |                      |  

Note 6  -
RELATED PARTY TRANSACTIONS

| | Winthrop
Realty Partners L.P.  performed asset  management  services for the Operating
Partnership and received a fee of  $1,600,000,  $1,900,000  and  $1,800,000  for the
period from January 1, 2005 to November 6, 2005 and for the years ended  December 31,
2004 and 2003, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of November 7, 2005,  NKT Advisors  performs the asset  management  services for the
Company,  previously  provided by  Winthrop Realty Partners L.P.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | NKT
        Advisors receives an annual base management fee which is payable quarterly
        in arrears in cash. The base management fee is equal to the greater of
        (A) $4,800,000 or (B) 1.5% per annum of (1) the gross purchase price paid
        for shares of the Companys common stock in connection with the IPO
        and the sale of common stock to Winthrop Realty Trust (excluding in respect
        of shares of its common stock issued to Winthrop Realty Trust in consideration
        for its assignment of certain exclusivity rights) net of underwriting
        discounts ($273,560,625) plus (2) the sum of the net proceeds from any
        additional primary issuances of the Companys common or preferred
        equity or from the issuance of the Operating Partnerships units,
        each after deducting any underwriting discounts and commissions and other
        expenses and costs relating to the issuance, plus (3) as and when, if
        at all, Apollo sells or coverts for shares, in whole or from time to time,
        up to 5,000,000 Operating Partnership units, utilizing a deemed value
        per Operating Partnership unit equal to the lesser of (x) $19.00 and (y)
        the per share price at which such Operating Partnership units are sold
        or, if converted, the closing price of the Companys shares on the
        day on which such Operating Partnership units are converted, less (4)
        any amount that the Company or the Operating Partnership pays to repurchase
        shares of the Companys common stock or any Operating Partnership
        units.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
first $4,200,000  (subject to an annual consumer price index increase) in base management
fees per annum will be paid  by NKT Advisors to Winthrop Realty  Partners L.P. for
services to the Company that NKT Advisors  subcontracts to Winthrop  Realty Partners L.P.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-20



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 6  -
RELATED PARTY TRANSACTIONS (Continued)

| | In
addition,  NKT Advisors is entitled to receive  incentive  management fees each fiscal
quarter,  payable  quarterly in  arrears, in an annual amount equal to:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 20%
of the amount by which adjusted funds from  operations for the Operating  Partnership,
before  incentive  management  fees exceeds,  for the quarter then ended, the amount of
adjusted funds from operations but after providing for dividends  on any of the preferred
equity issued in the future required to produce an annualized return on the greater of:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A)
$650,000,000, or
| | -------------------

| | B)
(i) the gross equity  proceeds of the IPO and the sale of shares to Winthrop  Realty
Trust,  Inc.  ($290,000,000),  plus (ii) the book value of partners equity in the
Operating  Partnership  as of June 30, 2005  (approximately  $209,100,000),  plus (iii)
the gross  proceeds  of any  subsequent  issuance of common  equity or any  subsequent
issuance of Operating  Partnership units, minus (iv) amounts paid by the Company or the
Operating  Partnership in  any tender for or repurchase of the Companys equity or
the Operating Partnerships equity.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Equal
to the  greater of the yield on 10-year  Treasuries  as of the last  business  day of
such  quarter  plus 250 basis  points or the returns set forth below:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|Year          |  | Return
|------------- |  | ------
|              |  |       
|2005 and 2006 |  | 25%   
|2007          |  | 22%   
|2008          |  | 20%   
|2009          |  | 15%   
|2010          |  | 12%   
|Thereafter    |  | 10%   

| | Adjusted
funds from operations  represent  funds from  operations as determined in
accordance  with standards  prescribed by  NAREIT,  adjusted to add back any asset
impairment  charges and non-cash  restricted  stock  issuances.  NAREIT defines funds
from operations as net income,  computed in accordance  with GAAP,  excluding  gains (or
losses) from debt  restructuring  and  sales of  property,  plus  depreciation  and
amortization  on real estate  assets and after  adjustments  for  unconsolidated
partnerships  and joint ventures.  Adjusted funds from operations does not represent cash
generated from operating  activities  in  accordance  with GAAP and should not be
considered  as an  alternative  to net income as an  indication  of the Companys
performance or to cash flows as a measure of liquidity or ability to make distributions.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | NKT
Advisors  received a base  management  fee of $720,000  for the period from  November 7,
2005 to December  31,  2005.  No  incentive management fee was earned during the period.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company provides certain asset management,  investor and administrative  services to some
unconsolidated  partnerships in  which it owns an equity interest and to other affiliated
partnerships.  Asset management fees of $38,000,  $249,000,  $332,000  and  $418,000
were  earned for the period  November  7, 2005 to  December  31,  2005 and the period
from  January 1, 2005 to  November 6, 2005 and for the years ended  December  31, 2004
and 2003,  respectively.  The Company and  Operating  Partnership  had  receivables  for
management  fees of $800,000 and $900,000  due from these  partnerships  at December 31,
2005 and 2004,  respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-21



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 6  -
RELATED PARTY TRANSACTIONS (Continued)

| | The
Company has an ownership  interest in the three most junior  tranches of a securitized
pool of first mortgages which  includes  three first  mortgage  loans  encumbering  three
Company  properties  and one other  property  controlled by an  affiliate.  The Company
and the Operating Partnerships ownership interest, net of discount,  amounted to
$10,500,000 and  $10,100,000 at December 31, 2005 and 2004,  respectively,  and the
Company and the Operating  Partnership earned interest  income of $200,000,  $1,000,000,
$1,200,000 and $1,200,000 for the period from November 7, 2005 to December 31, 2005 and
the period from  January 1, 2005 to November 6, 2005 and for the years  ended  December
31, 2004 and 2003  respectively,  related to this ownership interest.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | WEM
owned  $17,300,000 of a $145,200,000  Real Estate  Mortgage  Investment  Conduit  (REMIC)
which was secured by the  contract  rights  payable of the  Operating  Partnership.  WEM
earned  $2,200,000  of interest  income  during 2003.  The  affiliates  and  executives
were repaid in 2003 when T-Two  Partners  purchased the T-1  Certificate as discussed in
the  following paragraph.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | T-Two
Partners is the 100% beneficial  owner of certain of the contract  rights.  T-Two
Partners owned the portion of the  contract  rights referred to as the T-2 Certificate
and during 2003 purchased the portion of the contract rights referred  to as the T-1
Certificate.  The Operating  Partnership,  prior to its acquisition of T-Two Partners,
as discussed below,  incurred  $18,600,000,  $25,000,000  and  $13,800,000  ($1,700,000,
$3,300,000  and  $4,300,000  of which is included in  discontinued  operations,
respectively)  of interest  expense on these contract rights during the period from
January 1,  2005 to November 6, 2005 and for the years  ended  December  31, 2004 and
2003,  respectively.  Contract  right  mortgage  notes and accrued  interest  payable
amounted to $249,500,000  due to T-Two Partners at December 31, 2004. The Operating
Partnership had the right to acquire T-Two  Partners interest in the contract
rights in January 2008 by acquiring T-Two  Partners in exchange  for units.  T-Two
Partners had the right to require the  Operating  Partnership  to purchase  this
interest in December 2007 in exchange for units.  During 2003, as described  below,  the
Operating  Partnership  and the  owners of T-Two Partners modified these rights.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
November  2003,  T-Two  Partners  obtained a  $316,500,000  loan.  This loan is referred
to as the Original T-Two  Loan. The owners of T-Two  Partners  agreed to eliminate  their
put option which could require the Operating  Partnership  to purchase T-Two Partners in
December 2007 and the Operating  Partnership agreed to guarantee  repayment of the
Original  T-Two Loan.  The Original  T-Two Loan was secured by all of the assets of T-Two
Partners,  including the contract  right  mortgage  notes  receivable  from the Operating
Partnership.  T-Two Partners also agreed to provide a credit line to the  Operating
Partnership bearing interest at LIBOR plus 450 basis points.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with the November 2003 financing  transactions described above, the Operating
Partnership and the owners of  T-Two Partners modified the Operating  Partnership option
in certain respects.  Initially,  the Operating Partnership was  given the right to
exercise  the option at any time between  November  24, 2006 and  November  24,  2009.
As part of the  November 7, 2005 transactions,  the option was modified to permit its
immediate exercise.  Second, the purchase price was  payable in cash rather than units of
the Operating  Partnership.  Finally, the formula for determining the purchase price
payable by the Operating Partnership if it exercised the option was revised in a manner
that the Operating  Partnerships  general partner believed to be significantly
more favorable to the Operating  Partnership than the formula previously in  effect.
Specifically,  the purchase price would be calculated as follows:  the sum of
$316,526,573  plus T-Two Partners costs of  obtaining  the  Original  T-Two  Loan
(approximately  $7,346,000),  the cost of any  refinancing  ($3,903,000,  representing
amounts  allocated in connection with the August 11, 2005 refinancing  discussed in Note
4) and the cost of  administering  the trust that holds the second  mortgage  loans,
together  with  interest  on the  foregoing  sum at the  effective  rate of interest
paid by T-Two  Partners on the Original  T-Two Loan,  less all payments  made from and
after  November  24, 2003 on the second  mortgage  loans.  The purchase  price was to be
reduced to the extent of any  mortgages  assumed by the Operating Partnership but not
below zero.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-22



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 6  -
RELATED PARTY TRANSACTIONS (Continued)

| | The
Operating  Partnership  had determined  that T-Two Partners is a VIE, but that the
Operating  Partnership was not the  primary beneficiary of the VIE and therefore T-Two
Partners was not consolidated.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | T-Two
Partners was to reimburse the Operating  Partnership  for  approximately  $7,300,000 of
closing costs  incurred in  connection  with the Original  T-Two Loan and $3,903,000 of
closing costs  incurred in connection  with the  refinancing,  together  with  interest
thereon  at a rate equal to LIBOR  plus 450 basis  points.  The  Operating  Partnership
earned  interest  income of $400,000 and $500,000 on this  obligation  during the period
from January 1, 2005 to November 6, 2005  and the year ended December 31, 2004,
respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
November  7, 2005,  the  Operating  Partnership  exercised  the  option.  The  purchase
price was  determined  to be  $238,100,000 in accordance with the formula described
above.  However,  the purchase price was satisfied by the Operating  Partnerships
assumption of the T-Two  Partners Loan and accrued  interest of  $269,700,000.  The
Operating  Partnership  recorded the purchase of the interest in T-Two Partners in
accordance  with FAS 141 and recorded the acquired  assets and  liabilities  at fair
market value at the date of purchase.  The  Operating  Partnership  recorded the
following  assets,  liabilities and gain: (in millions)
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Cash                                     |  |  | $ | 44.4   |  
|---------------------------------------- |  |  | - | ------ | -
|Contract right mortgage notes receivable |  |  |   | 239.7  |  
|Accounts payable                         |  |  |   | (12.8  | )
|Notes payable                            |  |  |   | (269.4 | )
|Accrued interest payable                 |  |  |   | (0.3   | )
|Gain                                     |  |  |   | (1.6   | )

| | The
gain recognized in the transaction is recorded in the Companys  (gain) loss from
early  extinguishment  of debt. The  contract right mortgage notes  receivable  and
accounts  payable are eliminated in the Companys  consolidated  financial
statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | An
affiliate  of the  general  partner  owns a portion of the second  mortgage  indebtedness
of a property in which the  Company has an interest.  The second mortgage payable and
accrued interest owned by the affiliate aggregated  $15,500,000  and  $15,200,000  at
December 31, 2005 and December 31,  2004,  respectively.  Included in interest  expense
is $100,000,  $600,000,  $700,000 and $700,000  related to this second mortgage payable
for the period November 7, 2005 to December 31,  2005, the period January 1, 2005 to
November 6, 2005 and for the years ended December 31, 2004 and 2003, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
July 29, 2004, the Operating  Partnership sold 25 properties for a combined net sales
price of $63,800,000 to Vornado,  which is a limited partner in the Operating
Partnership  and, at such time, an affiliate of the Operating  Partnerships  then
general partner.  After satisfying existing mortgage debt of $31,500,000,  the net sales
proceeds were approximately  $32,300,000  of which  $23,700,000  was applied to a
principal  payment on the note payable.  The  Operating  Partnership  recognized a net
gain on the sale of these properties of $38,700,000.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
August 2005, Winthrop Realty Partners L.P. loaned $200,000 to a partnership in which the
Operating  Partnership has an  interest.  The loan accrues interest at a rate of prime
plus 2%.  The loan was repaid in the first quarter of 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Also
see Note 8 for related party acquisitions.
| | -----------------------------------------------

F-23



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 7  -
CONTINGENCIES AND IMPAIRMENTS

| | The
Company owns a 707,482 square foot office building in Toledo,  Ohio that is leased to
Owens-Illinois  for an initial  term that expires on September 30, 2006. The property is
encumbered by a  non-recourse  mortgage which matures in October  2006 at which time a
$32,000,000  balloon  payment  will be due. The tenant has six,  five-year  renewal
options.  This  tenant is  presently  not using a  substantial  portion of the  building
and elected  not to renew its lease.  While the  Company  will attempt to sell or
re-lease the  property  there is  substantial  risk that the Company will not be able to
satisfy the balloon  payment due on the mortgage  and that the  mortgage  holder will
foreclose  on this  property.  The  Operating  Partnership  recognized an  $11,328,000
impairment  loss during the second quarter of 2005. The operations of  the property were
placed into discontinued operations effective December 31, 2005.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2005, the Operating Partnership entered into an agreement with Honeywell
International,  Inc., the tenant of four  office  buildings  owned by the Operating
Partnership in Morris  Township,  New Jersey to  restructure  the lease on the
properties.  Under the restructuring,  the tenant waived its right to exercise its
economic discontinuance option and the  Operating  Partnership  granted the tenant an
option to purchase the properties in 2007 for  $41,900,000.  As a result of  this
restructuring, the Operating Partnership recognized a $14,754,000 impairment loss in the
second quarter of 2005.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Operating  Partnership  received a notice dated August 30, 2005 from Albertsons,
Inc. indicating that it intends to  exercise  its right to  terminate  the lease for the
property  located in Rock  Falls,  Illinois  as of May 8, 2006.  In  accordance  with the
terms of the lease,  Albertsons,  Inc.  has made an offer to purchase  the
property  for an amount  stipulated  in the lease of  approximately  $861,000.  The
Operating  Partnership  can reject  this  offer by  notifying  Albertsons,  Inc. by
April 18, 2006.  The Company is  currently  evaluating  whether the offer  should be
rejected.  The  Company  recorded an impairment  loss of $550,000 on this property
during the third quarter of 2005.  The  operations of  the property were placed into
discontinued operations effective August 30, 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company owns two office buildings in New Orleans, Louisiana,  containing an aggregate of
403,027 square feet of space  that are leased to Hibernia Bank.  Both buildings are
located in the area affected by Hurricane  Katrina.  The tenant has  remained  current in
its rent  obligations  and is  responsible  for all repairs,  maintenance  and capital
expenditures  associated with these properties.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-24



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 8  -
ACQUISITIONS

| | On
January 1, 2003, the Operating  Partnership  acquired from an affiliate of the general
partner,  limited  partnership  interests in nine limited  partnerships  that own net
leased commercial  properties.  The limited  partnership  interests  acquired by the
Operating  Partnership  ranged between 4.9% and 57.75% of each  partnership and were
acquired in exchange  for 317,813 limited partnership units of the Operating  Partnership
valued at $22,700,000.  In August 2003, the Operating  Partnership  acquired
approximately  an  additional  10.05%  interest in one of these  limited  partnerships
for a cash  purchase price of $525,000,  increasing the partnership interest to 23.55%
from 13.5%. These interests were acquired from  unaffiliated  limited  partners.  In
April 2004,  the Operating  Partnership  exercised an option to purchase  additional
limited  partnership  interests in two of the  partnerships  in exchange for 15,539
units.  The values of the net leased  real  estate  partnerships  and the  Operating
Partnership  units  were  determined  without  arms-length  negotiations.  Independent
appraisals  were obtained on the value of the properties  owned by the limited
partnerships.  The Operating  Partnership  has accounted for the  acquisition on a
historical cost basis.  Four of the limited  partnerships  have been  consolidated  into
the  Operating  Partnerships  financial  statements  and five of the limited
partnerships  are being  accounted for under the equity method of accounting.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2004, the Operating  Partnership  acquired for $297,500,  pursuant to a tender
offer,  approximately 9.85% of the  total limited partnership units outstanding in one
partially owned consolidated  partnership.  The Operating  Partnership  then owned
approximately 45.2% of the limited partnership.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2004, the Operating  Partnership  acquired the land underlying one of its properties
in Bedford,  Texas. The land  was acquired from an unaffiliated party for approximately
$2,600,000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
July 2004,  the Operating  Partnership  acquired for $472,500 and $325,000,  pursuant to
two separate  tender  offers,  approximately 7% and 4.5% of the total limited
partnership  units outstanding in two partially owned  partnerships.  The  Operating
Partnership  currently owns  approximately  62.2% in one of the partnerships whose
operations are consolidated  and 45.3% in the other partnership.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
February 2005, the Operating  Partnership  acquired for $10,000  approximately  0.29% of
the total limited partnership  units  outstanding  in  a  partially  owned
non-consolidated  partnership.  The  Operating  Partnership  currently  owns
approximately 23.84% in the partnership.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2005, the Operating  Partnership  acquired for $35,000 an additional  limited
partnership  unit in one partially  owned  consolidated  partnership.  The  Operating
Partnership  owned  approximately  46.35% of the  limited  partnership  following the
acquisition.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
September  2005,  the  Operating  Partnership  acquired for $35,000 an  additional
limited  partnership  unit in one  partially owned consolidated  partnership.  The
Operating  Partnership currently owns approximately 47.51% of the limited  partnership.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
November 7, 2005, the Operating  Partnership  acquired 100% of the interests in T-Two
Partners.  (See Note 6 - Related  Party Transactions).
| | -----------------------------------------------------------------------------------------------------------------------------------------------

F-25



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 9  -
DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE

| | During
the period from  November 7, 2005 to December  31,  2005,  the Company  sold one property
for a net sales price of  $11,300,000.  The Company also  received  $3,800,000  of
accrued and deferred  rent in  connection  with the sale of this  property.  The Company
recognized a net gain on sale of this property of $1,700,000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the period from January 1, 2005 to November 6, 2005, the Operating  Partnership sold six
properties for a combined  net  sales  price of  $31,300,000.  The  Operating
Partnership  recognized  a net gain on sale of  these  properties  of  $16,000,000.
During the year ended  December 31, 2004, the Operating  Partnership  sold 58 properties
for a combined net  sales  price  of  $127,200,000.  The  Operating  Partnership
recognized  a net  gain  on  sale of  these  properties  of  $49,800,000.  During the
year ended  December 31, 2003, the Operating  Partnership  sold 14 properties for a
combined net  sales  price  of  $156,400,000.  The  Operating  Partnership  recognized  a
net  gain  on  sale of  these  properties  of  $33,800,000.  The sale and operations of
these  properties for all periods  presented have been recorded as  discontinued
operations in accordance  with the  provisions of SFAS No. 144. In addition,  the
Operating  Partnership  has  classified  various  properties  which have met all of the
criteria of SFAS No. 144 as real estate held for sale in the  accompanying  consolidated
balance sheets and has classified the operations of the properties and the sold
properties as discontinued  operations in the accompanying consolidated statements of
operations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Discontinued
operations for the years ended December 31, 2005, 2004 and 2003 are summarized as follows
(in thousands):
| | ----------------------------------------------------------------------------------------------------------------------

|                                                  |  |  | The Company                                                    |        | The Predecessor                                            |  
|------------------------------------------------- |  |  | -------------------------------------------------------------- | ------ | ---------------------------------------------------------- | -
|                                                  |  |  |                                                                |        |                                                            |  
|                                                  |  |  | For the Period 
  November 7,
  2005 to 
  December 31,
  2005 |        | For the Period 
  January 1, 2005
  to 
  November 6, 2005 |  
|                                                  |  |  |                                                                |        |                                                            |  
|Revenue                                           |  |  | $                                                              | 2,050  |                                                            | $
|Expenses                                          |  |  |                                                                | (2,330 | )                                                          |  
|Impairment loss on real estate                    |  |  |                                                                | --     |                                                            |  
|Net (loss) gain from early extinguishment of debt |  |  |                                                                | (121   | )                                                          |  
|Gain from disposal of real estate                 |  |  |                                                                | 1,733  |                                                            |  
|Minority interest                                 |  |  |                                                                | (931   | )                                                          |  
|                                                  |  |  |                                                                |        |                                                            |  
|Income from discontinued operations               |  |  | $                                                              | 401    |                                                            | $
|                                                  |  |  |                                                                |        |                                                            |  

| | Expenses
include  interest  expense to related  parties of  $1,700,000,  $2,200,000  and
$3,200,000 for the period from  January 1, 2005 to November 6, 2005 and for the years
ended December 31, 2004 and 2003, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Other
assets of discontinued operations at December 31, 2005 and 2004 are summarized as follows
(in thousands):
| | ---------------------------------------------------------------------------------------------------------------

|             |  |  | 2005 |     | 2004 |  
|------------ |  |  | ---- | --- | ---- | -
|             |  |  |      |     |      |  
|Receivables  |  |  | $    | 213 |      | $
|Other assets |  |  |      | 332 |      |  
|             |  |  |      |     |      |  
|             |  |  | $    | 545 |      | $
|             |  |  |      |     |      |  

F-26



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 9  -
DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE (Continued)

| | Liabilities
of discontinued operations at December 31, 2005 and 2004 are summarized as follows:
| | -----------------------------------------------------------------------------------------------

|                                            |  |  | 2005 |        | 2004 |  
|------------------------------------------- |  |  | ---- | ------ | ---- | -
|                                            |  |  |      |        |      |  
|Mortgage notes and accrued interest payable |  |  | $    | 40,491 |      | $
|Contract right mortgage notes and accrued   |  | 
|interest payable (including $0 and $11,825  |  | 
|to related parties)                         |  |  |      | --     |      |  
|                                            |  |  |      |        |      |  
|                                            |  |  | $    | 40,491 |      | $
|                                            |  |  |      |        |      |  

Note 10  -
INCOME TAXES

| | The
Company has made no  provision  for current or deferred  federal and state
income taxes on the basis that it  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. In order to qualify as a REIT,  the Company is generally
required each year to distribute  to its  stockholders at least 90% of its taxable income
(excluding any net capital gain).  The Company intends to comply  with the foregoing
minimum distributions requirements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Operating  Partnerships  taxable  income for 2005,  2004 and 2003 differs from net
income for  financial  reporting  purposes as follows (in thousands):
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  |  |  | 2005 |         | 2004 |   | 2003    |  
|------------------------------------------------- |  |  | ---- | ------- | ---- | - | ------- | -
|                                                  |  |  |      |         |      |   |         |  
|Net income for financial reporting purposes       |  |  | $    | 49,295  |      | $ | 137,808 |  
|Depreciation and amortization                     |  |  |      | 40,729  |      |   | 30,472  |  
|Compensation expense                              |  |  |      | 10,500  |      |   | --      |  
|Interest expense                                  |  |  |      | 3,112   |      |   | 4,650   |  
|Gain on sale of real estate                       |  |  |      | 15,084  |      |   | 42,290  |  
|Impairment loss                                   |  |  |      | 29,715  |      |   | 13,065  |  
|Other                                             |  |  |      | 3,581   |      |   | (8,538  | )
|Net loss (gain) from early extinguishment of debt |  |  |      | 48,311  |      |   | 6,269   |  
|Straight-line rent adjustment                     |  |  |      | 5,741   |      |   | 5,139   |  
|                                                  |  |  |      |         |      |   |         |  
|Taxable income                                    |  |  | $    | 206,068 |      | $ | 231,155 |  
|                                                  |  |  |      |         |      |   |         |  

| | The
net basis of the  Operating  Partnerships  assets  and  liabilities  for tax
reporting  purposes  is  approximately  $869,000,000 and $818,000,000  lower than the
amount reported for financial  statement  purposes at December 31, 2005 and  2004,
respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-27



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 11  -
SUBSEQUENT EVENTS

| | On
January 15, 2006, the Company entered into a strategic  alliance with U.S.  Realty
Advisors,  LLC (US Realty),  a  leading net-lease property advisor,  pursuant
to which the Company will acquire single-tenant  assets.  Pursuant to our  agreement
with US Realty,  the Company is obligated to pay to US Realty a fee of 1.5% of the gross
purchase price for  properties  acquired that were offered to us by US Realty upon the
consummation of such purchase and an economic  interest  for  additional  services to be
provided by US Realty equal to 25% of all cash flow and net capital  proceeds after the
Company receives a return of all its invested capital plus a 12% internal rate of return.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
January 18, 2006, the Company  acquired an  approximately  115,500 square foot office
building in  Bridgewater,  New  Jersey for a purchase  price of  $21,150,000.  The
property is net leased to Biovail  Pharmaceuticals,  Inc., a company  primarily  engaged
in the manufacture and sale of generic  pharmaceutical  products.  The lease agreement
has a current  term  scheduled to expire  October 31, 2014 with two,  five-year  renewal
terms.  Net adjusted rent during the current  term is $1,397,000 per year through October
31, 2009 and then $1,686,000 thereafter.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
January 26, 2006,  the Operating  Partnership  acquired a 99,500  square foot 100% leased
office  building in Lisle,  Illinois for a purchase  price of  $15,250,000.  Adjusted net
rent for the  property,  commencing  January 1, 2007,  is  projected to be  approximately
$1,225,000 per year. The property is 86% leased to National Louis  University  with the
balance of the space being  leased to two tenants.  The National  Louis  University
lease has a primary term  expiring  December  31, 2018,  with annual base rent during the
primary term  commencing  at $943,000  through  December 31, 2006  (with a 50% rent
concession through August 31, 2006), increasing by $43,000 on each January 1 thereafter.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
February 10, 2006, the Company obtained a first mortgage loan from Greenwich  Capital
Financial  Products,  Inc., an  unaffiliated third party, in the original principal
amount of $14,800,000  secured by the Companys property located in  Bridgewater,
New Jersey.  The loan bears interest at 5.732%,  requires monthly payments of interest
only for the first  60 months and then  requires  monthly  payments  of  principal  and
interest  of $86,000  and is scheduled to mature on  March 6, 2016, at which time the
outstanding  principal  balance is expected to be approximately  $13,730,000.  The
Company received net proceeds from this loan, after satisfying closing costs, of
approximately $14,600,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
February  13,  2006,  the Company  purchased a 10 year,  BBB rated bond  secured by net
leased  properties  owned by  Kindercare  Real Estate LLC with a face value of
$11,700,000 and a projected  unleveraged  yield to maturity of 7%. The  Company intends
to finance this purchase through a securitized financing or other nonrecourse facility
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-28



---

NEWKIRK
REALTY TRUST, INC. AND  THE NEWKIRK MASTER LIMITED PARTNERSHIP  NOTES TO  CONSOLIDATED
FINANCIAL STATEMENTS

Note 12 -
SUMMARY OF QUARTERLY RESULTS (UNAUDITED)

| | The
following  summary  represents  the  consolidated  quarterly  financial  data for the
years ended 2005 and 2004:
| | --------------------------------------------------------------------------------------------------------------------

| | (In
thousands, except per share  amounts)
| | -----------------------------------------

|                             |  |  | The Predecessor                |        | The Company                    |  
|---------------------------- |  |  | ------------------------------ | ------ | ------------------------------ | -
|                             |  |  |                                |        |                                |  
|                             |  |  | Quarter Ended 
  March 31,2005 |        | Quarter Ended 
  June 30, 2005 |  
|                             |  |  |                                |        |                                |  
|Revenues                     |  |  | $                              | 58,641 |                                | $
|                             |  |  |                                |        |                                |  
|Net income (loss)            |  |  | $                              | 27,131 | (1)                            | $
|                             |  |  |                                |        |                                |  
|Net income per Common  Share |  |  |                                | N/A    |                                |  
|                             |  |  |                                |        |                                |  

|                            |  |  | The Predecessor                |       
|--------------------------- |  |  | ------------------------------ | ------
|                            |  |  |                                |       
|                            |  |  | Quarter Ended 
  March 31,2004 |       
|                            |  |  |                                |       
|Revenues                    |  |  | $                              | 59,937
|                            |  |  |                                |       
|Net income (loss)           |  |  | $                              | 37,844
|                            |  |  |                                |       
|Net income per Common Share |  |  |                                | N/A   

| | (1) |  | Includes
gain from disposal of real estate of $600,000.
| | --- |  | -------------------------------------------------------

| | (2) |  | Includes
loss from early extinguishment of debt of $100,000.
| | --- |  | ------------------------------------------------------------

| | (3) |  | Includes
gain from disposal of real estate of $15,500,000 and a loss from early extinguishment of
debt of $29,100,000.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------

| | (4) |  | Includes
loss from disposal of real estate of $100,000and a gain from early extinguishment of debt
of $400,000.
| | --- |  | ---------------------------------------------------------------------------------------------------------------

| | (5) |  | Includes
gain from disposal of real estate of $500,000.
| | --- |  | -------------------------------------------------------

| | (6) |  | Includes
gain from disposal of real estate of $7,700,000.
| | --- |  | ---------------------------------------------------------

| | (7) |  | Includes
gain from disposal of real estate of $1,800,000 and an impairment loss of $9,700,000.
| | --- |  | ----------------------------------------------------------------------------------------------

| | (8) |  | Includes
gain from disposal of real estate of $38,900,000, an impairment loss of $3,400,000 and a
net loss from early  extinguishment of debt of $6,700,000.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (9) |  | Includes
gain from disposal of real estate of $1,000,000.
| | --- |  | ---------------------------------------------------------

F-29



---

|                                                                                                                                                                                                                               |                       |    |   |              |   |                        |   |                                    |   |                                                   |   |                                 |   |                           |   |            |   |              |   |                      |   |             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------- | -- | - | ------------ | - | ---------------------- | - | ---------------------------------- | - | ------------------------------------------------- | - | ------------------------------- | - | ------------------------- | - | ---------- | - | ------------ | - | -------------------- | - | ------------
|NEWKIRK
        REALTY TRUST INC. (THE "COMPANY") AND THE NEWKIRK MASTER LIMITED
        PARTNERSHIP ("THE PREDECESSOR") 
        SCHEDULE III 
        REAL ESTATE AND ACCUMULATED DEPRECIATION 
        At December 31, 2005
|                                                                                                                                                                                                                               |                       |    |   |              |   |                       
|                                                                                                                                                                                                                               |                       |    |   |              |   |                        |   | Initial
        Cost to Registrant |   | Cost
        capitalized subsequentto acquisition |   | As
        of December 31, 2005 |   |                           |   |           
|                                                                                                                                                                                                                               |                       |    |   |              |   |                        |   |                                    |   |                                                  
|                                                                                                                                                                                                                               |                       |    |   |              |   |                        |   |                                    |   | Land                                              |   | Building
        and            |   | Land/Building
        and |   |            |   | Land         |   | Building
        and |   |             
|Description                                                                                                                                                                                                                    | Location              |    |   | Encumbrances |   | Land                   |   | Estates                            |   | Improvements                                      |   | Improvements                    |   | Land                      |   | Estates    |   | Improvements |   | Total                |   | Depreciation
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                               |                       |    |   | Mortgage     |   | Contract
        Right |   |                                    |   |                                                   |   |                                 |   |                           |   |            |   |              |   |                      |   |             
|                                                                                                                                                                                                                               |                       |    |   |              |   |                        |   |                                    |   |                                                   |   |                                 |   |                           |   |            |   |              |   |                      |   |             
|Continuing
      Operations:                                                                                                                                                                                                   |                       |    |   |              |   |                        |   |                                    |   |                                                   |   |                                 |   |                           |   |            |   |              |   |                      |   |             
|                                                                                                                                                                                                                               |                       |    |   |              |   |                        |   |                                    |   |                                                   |   |                                 |   |                           |   |            |   |              |   |                      |   |             
|Office                                                                                                                                                                                                                         | Little
      Rock     | AR | $ | -            | $ | -                      | $ | 259,073.00                         | $ | -                                                 | $ | 2,648,757.00                    | $ | -                         | $ | 259,073.00 | $ | -            | $ | 2,648,757.00         | $ | 2,907,830.00
|Office                                                                                                                                                                                                                         | Pine
      Bluff      | AR |   | -            |   | -                      |   | 48,183                             |   | -                                                 |   | 3,033,884                       |   | -                         |   | 48,183     |   | -            |   | 3,033,884            |   | 3,082,067   
|Office                                                                                                                                                                                                                         | Sierra
      Vista    | AR |   | -            |   | -                      |   | 20,013                             |   | -                                                 |   | -                               |   | -                         |   | 20,013     |   | -            |   | -                    |   | 20,013      
|Office                                                                                                                                                                                                                         | El
      Segundo      | CA |   | 24,453,803   |   | -                      |   | 841,962                            |   | 1,466,543                                         |   | 39,908,628                      |   | -                         |   | 841,962    |   | 1,466,543    |   | 39,908,628           |   | 42,217,133  
|Office                                                                                                                                                                                                                         | Long
      Beach      | CA |   | 33,772,277   |   | 7,833,842              |   | -                                  |   | 15,161,774                                        |   | 72,329,336                      |   | -                         |   | -          |   | 15,161,774   |   | 72,329,336           |   | 87,491,109  
|Office                                                                                                                                                                                                                         | Walnut
      Creek    | CA |   | -            |   | -                      |   | -                                  |   | 1,339,403                                         |   | 12,908,242                      |   | -                         |   | -          |   | 1,339,403    |   | 12,908,242           |   | 14,247,645  
|Office                                                                                                                                                                                                                         | Colorado
      Spring | CO |   | -            |   | -                      |   | 425,344                            |   | -                                                 |   | 13,678,452                      |   | -                         |   | 425,344    |   | -            |   | 13,678,452           |   | 14,103,796  
|Office                                                                                                                                                                                                                         | Clinton               | CT |   | 968,281      |   |                        |   | -                                  |   | -                                                 |   | 1,534,014                       |   | -                         |   | -          |   | -            |   | 1,534,014            |   | 1,534,014   
|Office                                                                                                                                                                                                                         | Orlando               | FL |   | -            |   | -                      |   | -                                  |   | -                                                 |   | 15,554,619                      |   | -                         |   | -          |   | -            |   | 15,554,619           |   | 15,554,619  
|Office                                                                                                                                                                                                                         | Orlando               | FL |   | -            |   | -                      |   | 2,280,002                          |   | -                                                 |   | 40,536,802                      |   | -                         |   | 2,280,002  |   | -            |   | 40,536,802           |   | 42,816,804  
|Office                                                                                                                                                                                                                         | Columbus              | IN |   | -            |   | -                      |   | -                                  |   | -                                                 |   | 54,153,711                      |   | -                         |   | -          |   | -            |   | 54,153,711           |   | 54,153,711  
|Office                                                                                                                                                                                                                         | Carondelet            | LA |   | 10,198,946   |   | -                      |   | -                                  |   | -                                                 |   | 12,117,596                      |   | -                         |   | -          |   | -            |   | 12,117,596           |   | 12,117,596  
|Office                                                                                                                                                                                                                         | Tulane                | LA |   | 8,106,878    |   | -                      |   | -                                  |   | -                                                 |   | 9,695,060                       |   | -                         |   | -          |   | -            |   | 9,695,060            |   | 9,695,060   
|Office                                                                                                                                                                                                                         | Baltimore             | MD |   | -            |   | -                      |   | -                                  |   | -                                                 |   | 140,633,984                     |   | 45,000                    |   | -          |   | -            |   | 140,678,984          |   | 140,678,984 
|Office                                                                                                                                                                                                                         | Bridgeton             | MO |   | -            |   | -                      |   | -                                  |   | 420,249                                           |   | 3,290,408                       |   | -                         |   | -          |   | 420,249      |   | 3,290,408            |   | 3,710,657   
|Office                                                                                                                                                                                                                         | Carteret              | NJ |   | -            |   | -                      |   | 549,364                            |   | -                                                 |   | 10,687,657                      |   | -                         |   | 549,364    |   | -            |   | 10,687,657           |   | 11,237,021  
|Office                                                                                                                                                                                                                         | Elizabeth             | NJ |   | -            |   | -                      |   | 284,124                            |   | -                                                 |   | 4,860,873                       |   | -                         |   | 284,124    |   | -            |   | 4,860,873            |   | 5,144,997   
|Office                                                                                                                                                                                                                         | Morristown            | NJ |   | -            |   | -                      |   | -                                  |   | -                                                 |   | 55,382,037                      |   | -                         |   | -          |   | -            |   | 55,382,037           |   | 55,382,037  
|Office                                                                                                                                                                                                                         | MorrisTownship        | NJ |   | -            |   | -                      |   | -                                  |   | -                                                 |   | 31,396,697                      |   | -                         |   | -          |   | -            |   | 31,396,697           |   | 31,396,697  
|Office                                                                                                                                                                                                                         | MorrisTownship        | NJ |   | -            |   | -                      |   | -                                  |   | -                                                 |   | 6,973,447                       |   | -                         |   | -          |   | -            |   | 6,973,447            |   | 6,973,447   
|Office                                                                                                                                                                                                                         | MorrisTownship        | NJ |   | -            |   | -                      |   | -                                  |   | -                                                 |   | 18,825,824                      |   | -                         |   | -          |   | -            |   | 18,825,824           |   | 18,825,824  
|Office                                                                                                                                                                                                                         | Plainsboro            | NJ |   | -            |   | -                      |   | 51,704                             |   | -                                                 |   | 877,125                         |   | -                         |   | 51,704     |   | -            |   | 877,125              |   | 928,829     
|Office                                                                                                                                                                                                                         | Las
      Vegas       | NV |   | -            |   | -                      |   | 2,234,005                          |   | -                                                 |   | 43,419,151                      |   | -                         |   | 2,234,005  |   | -            |   | 43,419,151           |   | 45,653,156  
|Office                                                                                                                                                                                                                         | Miamisburg            | OH |   | -            |   | -                      |   | -                                  |   | 702,011                                           |   | 8,042,032                       |   | -                         |   | -          |   | 702,011      |   | 8,042,032            |   | 8,744,043   
|Office                                                                                                                                                                                                                         | Miamisburg            | OH |   | -            |   | -                      |   | -                                  |   | 251,821                                           |   | 6,621,854                       |   | -                         |   | -          |   | 251,821      |   | 6,621,854            |   | 6,873,675   
|Office                                                                                                                                                                                                                         | Allentown             | PA |   | -            |   | -                      |   | 68,342                             |   | -                                                 |   | 4,946,115                       |   | -                         |   | 68,342     |   | -            |   | 4,946,115            |   | 5,014,457   
|Office                                                                                                                                                                                                                         | Johnson
      City    | TN |   | -            |   | -                      |   | 588,228                            |   | -                                                 |   | 4,707,710                       |   | -                         |   | 588,228    |   | -            |   | 4,707,710            |   | 5,295,938   
|Office                                                                                                                                                                                                                         | Kingport              | TN |   | -            |   | -                      |   | 96,550                             |   | -                                                 |   | 3,183,690                       |   | -                         |   | 96,550     |   | -            |   | 3,183,690            |   | 3,280,240   
|Office                                                                                                                                                                                                                         | Memphis               | TN |   | -            |   | -                      |   | -                                  |   | 647,570                                           |   | 6,185,494                       |   | -                         |   | -          |   | 647,570      |   | 6,185,494            |   | 6,833,064   
|Office                                                                                                                                                                                                                         | Memphis               | TN |   | -            |   | -                      |   | 594,344                            |   | -                                                 |   | 64,003,369                      |   | -                         |   | 594,344    |   | -            |   | 64,003,369           |   | 64,597,713  
|Office                                                                                                                                                                                                                         | Beaumont              | TX |   | -            |   | -                      |   | 406,201                            |   | -                                                 |   | 9,629,921                       |   | -                         |   | 406,201    |   | -            |   | 9,629,921            |   | 10,036,122  
|Office                                                                                                                                                                                                                         | Beaumont              | TX |   | -            |   | -                      |   | -                                  |   | -                                                 |   | 50,122,467                      |   | -                         |   | -          |   | -            |   | 50,122,467           |   | 50,122,467  
|Office                                                                                                                                                                                                                         | Bedford               | TX |   | -            |   | -                      |   | 2,555,275                          |   | -                                                 |   | 12,673,652                      |   | 51,395                    |   | 2,555,275  |   | -            |   | 12,725,047           |   | 15,280,322  
|Office                                                                                                                                                                                                                         | Dallas                | TX |   | -            |   | -                      |   | 705,371                            |   | -                                                 |   | 20,313,643                      |   | -                         |   | 705,371    |   | -            |   | 20,313,643           |   | 21,019,014  
|Office                                                                                                                                                                                                                         | Garland               | TX |   | -            |   | -                      |   | 359,460                            |   | 1,676,696                                         |   | 11,819,422                      |   | -                         |   | 359,460    |   | 1,676,696    |   | 11,819,422           |   | 13,855,578  
|                                                                                                                                                                                                                               |                       |    |   |              |   |                        |   |                                    |   |                                                   |   |                                 |   |                           |   |            |   |              |   |                      |   |             
|                                                                                                                                                                                                                               |                       |    |   |              |   |                       
|                                                                                                                                                                                                                               |                       |    |   | 77,500,185   |   | 7,833,842              |   | 12,367,545                         |   | 21,666,067                                        |   | 796,695,672                     |   | 96,395                    |   | 12,367,545 |   | 21,666,067   |   | 796,792,067          |   | 830,825,679 
|                                                                                                                                                                                                                               |                       |    |   |              |   |                       



---

|NEWKIRK
        REALTY TRUST INC. (THE "COMPANY") AND THE NEWKIRK MASTER LIMITED
        PARTNERSHIP ("THE PREDECESSOR") 
        SCHEDULE III 
        REAL ESTATE AND ACCUMULATED DEPRECIATION 
        At December 31, 2005
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Description                                                                                                                                                                                                                   
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Retail                                                                                                                                                                                                                        
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|Retail                                                                                                                                                                                                                        



---

|NEWKIRK
        REALTY TRUST INC. (THE "COMPANY") AND THE NEWKIRK MASTER LIMITED
        PARTNERSHIP ("THE PREDECESSOR") 
        SCHEDULE III 
        REAL ESTATE AND ACCUMULATED DEPRECIATION 
        At December 31, 2005
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Description                                                                                                                                                                                                                   
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Retail                                                                                                                                                                                                                        
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|Retail                                                                                                                                                                                                                        



---

|NEWKIRK
        REALTY TRUST INC. (THE "COMPANY") AND THE NEWKIRK MASTER LIMITED
        PARTNERSHIP ("THE PREDECESSOR") 
        SCHEDULE III 
        REAL ESTATE AND ACCUMULATED DEPRECIATION 
        At December 31, 2005
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                              
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|                                                                                                                                                                                                                              
|Description                                                                                                                                                                                                                   
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|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        



---

|NEWKIRK
        REALTY TRUST INC. (THE "COMPANY") AND THE NEWKIRK MASTER LIMITED
        PARTNERSHIP ("THE PREDECESSOR") 
        SCHEDULE III 
        REAL ESTATE AND ACCUMULATED DEPRECIATION 
        At December 31, 2005
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Description                                                                                                                                                                                                                   
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        



---

|NEWKIRK
        REALTY TRUST INC. (THE "COMPANY") AND THE NEWKIRK MASTER LIMITED
        PARTNERSHIP ("THE PREDECESSOR") 
        SCHEDULE III 
        REAL ESTATE AND ACCUMULATED DEPRECIATION 
        At December 31, 2005
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Description                                                                                                                                                                                                                   
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
|Retail                                                                                                                                                                                                                        
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|                                                                                                                                                                                                                              



---

|NEWKIRK
        REALTY TRUST INC. (THE "COMPANY") AND THE NEWKIRK MASTER LIMITED
        PARTNERSHIP ("THE PREDECESSOR") 
        SCHEDULE III 
        REAL ESTATE AND ACCUMULATED DEPRECIATION 
        At December 31, 2005
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Description                                                                                                                                                                                                                   
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Industrial                                                                                                                                                                                                                    
|Industrial                                                                                                                                                                                                                    
|Industrial                                                                                                                                                                                                                    
|Industrial                                                                                                                                                                                                                    
|Industrial                                                                                                                                                                                                                    
|Industrial                                                                                                                                                                                                                    
|Industrial                                                                                                                                                                                                                    
|Industrial                                                                                                                                                                                                                    
|Industrial                                                                                                                                                                                                                    
|Industrial                                                                                                                                                                                                                    
|Industrial                                                                                                                                                                                                                    
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Other                                                                                                                                                                                                                         
|Other                                                                                                                                                                                                                         
|Other                                                                                                                                                                                                                         
|Other                                                                                                                                                                                                                         
|Other                                                                                                                                                                                                                         
|Other                                                                                                                                                                                                                         
|Other                                                                                                                                                                                                                         
|Other                                                                                                                                                                                                                         
|Other                                                                                                                                                                                                                         
|Other                                                                                                                                                                                                                         
|Other                                                                                                                                                                                                                         
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Total
      from Continuing Operations                                                                                                                                                                                        
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Discontinued
      Operations:                                                                                                                                                                                                
|                                                                                                                                                                                                                              
|Retail                                                                                                                                                                                                                        
|Office                                                                                                                                                                                                                        
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|Total
      from Discontinued Operations                                                                                                                                                                                      
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              
|                                                                                                                                                                                                                              

The aggregate
cost for federal income tax purposes was approximately $1,500,000,000.



---

NEWKIRK
  REALTY TRUST, INC. (THE COMPANY) AND 
  THE NEWKIRK MASTER LIMITED PARTNERSHIP (THE PREDECESSOR)

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION  (amounts in thousands)

The following
is a reconciliation of real estate assets and accumulated depreciation:

|                                                        |  |  | Year ended 
        December 31,
        2005 (1) |           | Year
        ended 
        December 31,
        2004 |   | Year ended 
        December 31,
        2003 | 
|------------------------------------------------------- |  |  | ------------------------------------------------- | --------- | ----------------------------------------------------- | - | --------------------------------------------- | 
|                                                        |  |  |                                                   |          
|Real
      Estate                                       |  |  |                                                   |           |                                                       |   |                                               | 
|Balance
      at beginning of year                      |  |  | $                                                 | 1,578,182 |                                                       | $ | 1,655,430                                     | 
|Additions
      during the year:                        |  | 
|Land
      and land estates                             |  |  |                                                   | 30        |                                                       |   | 2,557                                         | 
|Buildings
      and improvements                        |  |  |                                                   | 256       |                                                       |   | 4,538                                         | 
|Step
      up adjustment                                |  |  |                                                   | 30,588    |                                                       |   | --                                            | 
|                                                        |  |  |                                                   |           |                                                       |   |                                               | 
|                                                        |  |  |                                                   | 1,609,056 |                                                       |   | 1,662,525                                     | 
|Less:
      Reclassification to discontinued operations |  | 
|and
      disposition of assets                         |  |  |                                                   | 120,864   |                                                       |   | 84,343                                        | 
|                                                        |  |  |                                                   |           |                                                       |   |                                               | 
|Balance
      at end of year                            |  |  | $                                                 | 1,488,192 |                                                       | $ | 1,578,182                                     | 
|                                                        |  |  |                                                   |           |                                                       |   |                                               | 
|                                                        |  |  |                                                   |           |                                                       |   |                                               | 
|Accumulated
      Depreciation                          |  |  |                                                   |           |                                                       |   |                                               | 
|Balance
      at beginning of year                      |  |  | $                                                 | 545,385   |                                                       | $ | 526,193                                       | 
|Additions
      charged to operating expenses           |  |  |                                                   | 49,271    |                                                       |   | 39,231                                        | 
|                                                        |  |  |                                                   |           |                                                       |   |                                               | 
|                                                        |  |  |                                                   | 594,656   |                                                       |   | 565,424                                       | 
|Less:
      Reclassification to discontinued operations |  | 
|and
      disposition of assets                         |  |  |                                                   | 50,456    |                                                       |   | 20,039                                        | 
|                                                        |  |  |                                                   |           |                                                       |   |                                               | 
|Balance
      at end of year                            |  |  | $                                                 | 544,200   |                                                       | $ | 545,385                                       | 
|                                                        |  |  |                                                   |           |                                                       |   |                                               | 

|(1) |  | The
year ended December 31, 2005 represents consolidated operating results of the Company
from  November 7, 2005 to December 31, 2005 and consolidated operating results of the
Predecessor from  January 1, 2005 to November 6, 2005.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

EXHIBIT
INDEX

|3.1   |  | Amended and Restated Articles of Incorporation of the Company                                                                                                                                                                                                                                                          |  | (d)
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|3.2   |  | Amended and Restated By-laws of the Company                                                                                                                                                                                                                                                                            |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|4.1   |  | Form of Certificate of Common Stock                                                                                                                                                                                                                                                                                    |  | (c)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|4.2   |  | Form of Special Voting Preferred Stock                                                                                                                                                                                                                                                                                 |  | (c)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.1  |  | Advisory Agreement, dated as of November 7, 2005, by and between the Company,
The Newkirk Master Limited Partnership and NKT Advisors LLC.                                                                                                                                                                             |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.2  |  | Acquisition Agreement, dated as of November 7, 2005, between the Company and
  First Union Real Estate Equity and Mortgage Investments ("First Union")
(incorporated by reference to Exhibit 10.4 to First Union's Current Report on
Form 8-K filed with the Securities and Exchange Commission on November 10, 2005). |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.3  |  | Amended and Restated Agreement of Limited Partnership of The Newkirk Master
Limited Partnership dated as of November 7, 2005.                                                                                                                                                                                          |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.4  |  | Registration Rights Agreement, dated as of November 7, 2005, between the Company
and Vornado Realty Trust                                                                                                                                                                                                              |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.5  |  | Registration Rights Agreement dated as of November 7, 2005, between the Company
  and Apollo Real Estate Investment Fund III, L.P. ("Apollo")                                                                                                                                                                          |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.6  |  | Registration Rights Agreement dated as of November 7, 2005, between the Company
and First Union.                                                                                                                                                                                                                       |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.7  |  | Unit Purchase Agreement between the Company and Apollo.                                                                                                                                                                                                                                                                |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.8  |  | Unit Purchase Agreement between the Company and WEM-Brynmawr Associates LLC.                                                                                                                                                                                                                                           |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.9  |  | Securities Purchase Agreement between the Registrant and First Union                                                                                                                                                                                                                                                   |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.10 |  | Exclusivity Services Agreement between the Company and Michael L. Ashner.                                                                                                                                                                                                                                              |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.11 |  | Lock-Up Agreement dated November 7, 2005 among First Union and the Underwriters
named therein.                                                                                                                                                                                                                         |  | (d)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.7  |  | Registrant's 2005 Stock Incentive Plan                                                                                                                                                                                                                                                                                 |  | (c)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.15 |  | Letter Agreement among the Registrant, Apollo Real Estate Investment Fund III,
L.P., The Newkirk Master Limited Partnership, NKT Advisors LLC, Vornado Realty
Trust, VNK Corp., Vornado Newkirk LLC, Vornado MLP GP LLC and WEM Bryn Mawr
Associates LLC                                                               |  | (c)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.16 |  | Master Loan Agreement, dated August 11, 2005, among The Newkirk Master Limited
Partnership and T-Two Partners, L.P., KeyBank National Association, Bank of
America, N.A., Lasalle Bank, National ssociation, and KeyBanc Capital Markets                                                                               |  | (b)

92



---

EXHIBIT
INDEX (Continued)

|10.17 |  | Master
      Promissory Note, dated as of August 11, 2005, by The Newkirk Master Limited
      Partnership in favor of KeyBank National Association                                                                                                                                                                    |  | (b)
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.18 |  | Form of Mortgage,
      dated as of August 11, 2005, from The Newkirk Master Limited Partnership
      in favor of KeyBank National Association                                                                                                                                                                        |  | (b)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.19 |  | Ownership Interest
      Pledge and Security Agreement, dated as of August 11, 2005, from The Newkirk
      Master Limited Partnership to KeyBank National Association                                                                                                                                                 |  | (b)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.20 |  | Ownership Interest
      Pledge and Security Agreement (Subsidiaries), dated as of August 11, 2005,
      from The Newkirk Master Limited Partnership to KeyBank National Association                                                                                                                                  |  | (b)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.21 |  | Ownership Interest
      Pledge and Security Agreement (Finco, GP and Capital), dated as of August
      11, 2005, from The Newkirk Master Limited Partnership to KeyBank National
      Association                                                                                                                   |  | (b)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.22 |  | Indemnity Agreement,
      dated as of August 11, 2005, from The Newkirk Master Limited Partnership
      to KeyBank National Association                                                                                                                                                                              |  | (b)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.23 |  | Guaranty, dated as
      of August 11, 2005, from The Newkirk Master Limited Partnership to KeyBank
      National Association with respect to the T-Two Loan                                                                                                                                                          |  | (b)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|10.25 |  | Amendment to the
      Letter Agreement among the Registrant, Apollo Real Estate Investment Fund
      III, L.P., The Newkirk Master Limited Partnership, NKT Advisors LLC, Vornado
      Realty Trust, Vornado Realty L.P., VNK Corp., Vornado Newkirk LLC, Vornado
      MLP GP LLC, and WEM-Brynmawr Associates LLC |  | (c)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|16.1  |  | Letter of Imowitz
      Koenig & Co., LLP                                                                                                                                                                                                                                                                              |  | (a)
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|21    |  | Subsidiaries of Registrant                                                                                                                                                                                                                                                                                             |  | *  
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|24    |  | Power of Attorney                                                                                                                                                                                                                                                                                                      |  | *  
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|31.   |  | Certifications Pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                         |  | *  
|      |  |                                                                                                                                                                                                                                                                                                                        |  |    
|32.   |  | Certifications Pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                         |  | *  

* Filed herewith

|(a) |  | Incorporated
by reference to the Registrant's Registration Statement on Form S-11 (Registration No.
333-127278), filed on  August 8, 2005
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Incorporated
by reference to Amendment No. 1 to the Registrant's Registration Statement on Form S-11
(Registration No.  333-127278), filed on August 8, 2005) or Form S-11 (Registration No.
333-127278) filed on September 16, 2005
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) |  | Incorporated
by reference to Amendment No. 5 to the Registrant's Registration Statement on Form S-11
(Registration No.  333-127278) filed on October 28, 2005
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) |  | Incorporated
by reference to the Company's Current Report on 8K filed November 15, 2005
|--- |  | ---------------------------------------------------------------------------------------

93