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


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

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

                For the quarterly period ended June 30, 2000

                      Commission File Number 001-13937
                                             ----------


                          ANTHRACITE CAPITAL, INC.
            ----------------------------------------------------
           (Exact name of registrant as specified in its charter)


                     Maryland                         13-3978906
         -------------------------------          ------------------
         (State or other jurisdiction of           (I.R.S. Employer
          incorporation or organization)          Identification No.)

       345 Park Avenue, New York, New York               10154
       -----------------------------------               -----
     (Address of principal executive offices)         (Zip Code)

    (Registrant's telephone number including area code): (212) 409-3333
                                                         ---------------

                              NOT APPLICABLE
            ---------------------------------------------------
           (Former name, former address, and former fiscal year
                       if changed since last report)

         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.

                         (1)     Yes X    No __
                         (2)     Yes X    No __

         As of August 14, 2000, 25,135,986, shares of voting common stock
($.001 par value) were outstanding.



                         ANTHRACITE CAPITAL, INC.,
                                 FORM 10-Q
                                   INDEX

PART I - FINANCIAL INFORMATION                                           Page
                                                                         ----

Item 1.  Interim Financial Statements.......................................3

         Consolidated Statements of Financial Condition
         At June 30, 2000 (Unaudited) and December 31, 1999.................3

         Consolidated Statements of Operations
         For the Three Months Ended June 30, 2000 and 1999
         (Unaudited), and For the Six Months Ended June 30, 2000 and
         1999 (Unaudited)...................................................4

         Consolidated Statement of Changes in Stockholders' Equity
         For the Six Months Ended June 30, 2000 (Unaudited).................5

         Consolidated Statements of Cash Flows
         For the Six Months Ended June 30, 2000 and 1999 (Unaudited)........6

         Notes to Consolidated Financial Statements (Unaudited).............7

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.........................................28

Item 3.  Quantitative and Qualitative Disclosures about Market Risk........44

Part II - OTHER INFORMATION

Item 1.  Legal Proceedings.................................................49

Item 2.  Changes in Securities and Use of Proceeds.........................49

Item 3.  Defaults Upon Senior Securities...................................49

Item 4.  Submission of Matters to a Vote of Security Holders...............49

Item 5.  Other Information.................................................50

Item 6.  Exhibits and Reports on Form 8-K..................................50

SIGNATURES.................................................................51

Financial Data Schedule....................................................52




Part I - FINANCIAL INFORMATION
Item 1.  Consolidated Financial Statements
<TABLE>
<CAPTION>

                                                  ANTHRACITE CAPITAL, INC. AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)

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


                                                                              June 30, 2000             December 31, 1999
                                                                              -------------             -----------------
                                                                               (Unaudited)
ASSETS
<S>                                                                           <C>            <C>          <C>              <C>
Cash and cash equivalents                                                                $  10,578                   $  22,265
Restricted cash                                                                              3,869                           -
Securities available for sale, at fair value
     Subordinated commercial mortgage-backed securities (CMBS)              $279,973                    $272,733
     Investment grade securities                                             757,598                     304,462
                                                                             ---------                   -------
Total securities available for sale                                                      1,037,571                     577,195
Mortgage loans held for sale                                                                87,195                           -
Commercial mortgage loans, net                                                              98,014                      69,611
Other assets                                                                                24,030                      10,591
                                                                                     --------------             ---------------
     Total Assets                                                                      $ 1,261,257                    $679,662
                                                                                     ==============             ===============


LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Borrowings:
    Secured by pledge of subordinated CMBS                                  $153,516                   $162,738
    Secured by pledge of other securities available for sale
      and cash equivalents                                                   678,672                    272,289
    Secured by pledge of mortgage loans held for sale                         73,984                          -
    Secured by pledge of commercial mortgage loans                            58,040                     36,506
                                                                             -------                    -------
Total borrowings                                                                         $ 964,212                    $471,533
Distributions payable                                                                        7,289                       6,079
Other liabilities                                                                           19,055                       3,767
                                                                                     --------------             ---------------
     Total Liabilities                                                                     990,556                     481,379
                                                                                     --------------             ---------------

10.5% Series A preferred stock, redeemable convertible                                      30,188                      30,022
                                                                                     --------------             ---------------

Commitments and Contingencies

Stockholders' Equity:
Common stock, par value $0.001 per share; 400,000 shares authorized;
     25,136 shares issued and outstanding in 2000; and
     20,961 shares issued and outstanding in 1999                                               25                          21
10% Series B Preferred stock, liquidation preference $56,525                                43,004                           -
Additional paid-in capital                                                                 315,532                     287,486
Distributions in excess of earnings                                                        (16,649)                    (18,107)
Accumulated other comprehensive loss                                                      (101,399)                   (101,139)
                                                                                     --------------              ---------------
      Total Stockholders' Equity                                                           240,513                     168,261
                                                                                     --------------              ---------------
      Total Liabilities and Stockholders' Equity                                        $1,261,257                    $679,662
                                                                                     ==============              ===============

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

</TABLE>



<TABLE>
<CAPTION>
ANTHRACITE CAPITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
=================================================================================================================================
                                                   For the Three Months Ended              For the Six Months Ended
                                                             June 30,                              June 30,
                                                  --------------------------------------------------------------------
                                                        2000              1999              2000               1999
                                                    ---------          ---------          --------          ---------
OPERATING PORTFOLIO
Interest Income:
<S>                                                  <C>                <C>               <C>               <C>
    Securities available for sale                    $ 19,186           $ 11,622          $ 33,528          $  22,948
    Commercial mortgage loans                           2,989              1,135             4,977              2,043
    Mortgage loans held for sale                        3,465                  -             3,465                  -
    Trading securities                                      -              1,136                 -              2,619
    Cash and cash equivalents                             363                 58               655                300
                                                    ---------          ---------          --------          ---------
        Total interest income                          26,003             13,951            42,625             27,910
                                                    ---------          ---------          --------          ---------

Expenses:
    Interest                                           15,096              6,011            22,563             13,134
    Management fee                                      1,700              1,073             2,990              2,123
    Other expenses - net                                  548                734             1,435              1,034
                                                    ---------          ---------          --------          ---------
        Total expenses                                 17,344              7,818            26,988             16,291
                                                    ---------          ---------          --------          ---------

OTHER GAIN (LOSSES):
Gain on sale of securities available for sale             682                  7               705                142
Gain on securities held for trading                         -              1,072               328              2,253
Foreign currency (loss)                                    (7)               (16)              (11)               (83)
                                                    ---------          ---------          --------          ---------
Net Income                                              9,334              7,196            16,659             13,931
                                                    ---------          ---------          --------          ---------

Dividends and accretion on
    Preferred stock                                     1,575                  -             2,441                  -
                                                    ---------          ---------          --------          ---------
Net Income Available to Common
   Shareholders                                        $7,759           $  7,196           $14,218          $  13,931
                                                    ---------          ---------          --------          ---------

Net income per share:
    Basic                                               $0.34              $0.34             $0.65              $0.67
    Diluted                                              0.32               0.34              0.61               0.67

Weighted average number of shares outstanding:
    Basic                                              23,115             20,998            22,029             20,641
    Diluted                                            27,196             20,998            26,111             20,641

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


<TABLE>
<CAPTION>

ANTHRACITE CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS)


                                                                                           Accumulated                     Total
                                            Common             Additional  Distributions      Other                        Stock-
                                            Stock,   Preferred   Paid-In     In Excess    Comprehensive  Comprehensive     holders'
                                          Par Value    Stock     Capital    Of Earnings        Loss          Income        Equity
                                          -----------------------------------------------------------------------------------------

<S>                                      <C>                  <C>         <C>            <C>                 <C>         <C>
Balance at December 31, 1999              $      21            $ 287,486   $  (18,107)    $  (101,139)                  $ 168,261

   Net income                                                                  16,659                      $ 16,659        16,659

   Other comprehensive income:

    Unrealized loss on securities,                                                               (260)         (260)         (260)
    net of reclassification
    adjustment

                                                                                                           ----------
   Other comprehensive income (loss)                                                                           (260)

Comprehensive income                                                                                         16,399
                                                                                                           ==========

Distributions declared on common
  stock                                                                       (12,760)                                    (12,760)

Repurchase of common shares                                          (39)                                                     (39)

Issuance of Common Stock                          4               28,085                                                   28,089

Issuance of Series B Preferred Stock
                                                     43,004                                                                43,004

Dividends to Preferred Shareholders                                            (2,441)                                     (2,441)
                                          --------------------------------------------------------------                ----------
Balance at June 30, 2000                   $     25 $43,004      $315,532    $(16,649)    $  (101,399)                  $ 240,513

                                          ==============================================================                ==========


DISCLOSURE OF RECLASSIFICATION AMOUNT:
Unrealized holding gains arising during the period                                                            $ 445
Less: reclassification adjustment for gains included in net income                                             (705)
                                                                                                            ---------
Net unrealized losses on securities                                                                           $(260)
                                                                                                            =========

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

</TABLE>


<TABLE>
<CAPTION>

ANTHRACITE CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)

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

                                                                                    For the Six            For the Six
                                                                                   Months Ended           Months Ended
                                                                                   June 30, 2000          June 30, 1999
                                                                                   -------------          -------------


Cash flows from operating activities:
<S>                                                                                  <C>                    <C>
     Net income                                                                      $  16,659              $  13,931

Adjustments to reconcile net income to net cash provided by operating
activities:
        Net sale of trading securities and securities sold short                           328                170,181
        Amortization on negative goodwill                                                 (212)                     -
        Premium amortization (discount accretion), net                                      76                    216
        Noncash portion of net foreign currency loss                                       (11)                    83
        Net loss (gain) on sale of securities                                              705                 (2,395)
        (Increase) decrease  in other assets                                           (13,401)                 2,110
        Increase (Decrease) in other liabilities                                        11,532                 (5,380)
                                                                                  ------------            -----------
Net cash provided by operating activities                                               15,676                178,746
                                                                                  ------------            -----------

Cash flows from investing activities:
     Purchase of securities available for sale                                        (642,195)               (79,325)
     Funding of commercial mortgage loan                                               (30,600)               (14,566)
     Maturities of restricted cash equivalents                                               -                  3,242
     Net payments from hedging securities                                               (2,770)                     -
     Principal payments received on securities available for sale                       37,588                 48,675
     Proceeds from sales of securities available for sale                            1,310,456                 21,513
     Payable for securities purchased                                                        -                 19,712
                                                                                  ------------            -----------
Net cash provided by (used in) investing activities                                    672,479                   (749)
                                                                                  ------------            -----------

Cash flows from financing activities:
     Net decrease in borrowings                                                       (713,647)              (164,579)
     Proceeds from issuance of common stock                                                  -                  6,726
     Distributions on common stock                                                     (12,156)               (11,885)
     Distributions on preferred stock                                                   (3,251)                     -
     Net proceeds from merger                                                           33,380                      -
     Acquisition costs against goodwill                                                 (4,129)                     -
     Repurchase of common shares                                                           (39)                     -
                                                                                  ------------            -----------
Net cash used in financing activities                                                 (699,842)              (169,738)
                                                                                  ------------            -----------

Net (decrease) increase in cash and cash equivalents                                   (11,687)                 8,259
Cash and cash equivalents, beginning of period                                          22,265                  1,087
                                                                                  ------------            -----------
Cash and cash equivalents, end of period                                             $  10,578               $  9,346
                                                                                  ============            ============


Supplemental disclosure of cash flow information:
     Interest paid                                                                   $  23,342               $ 15,795
</TABLE>


<TABLE>
<CAPTION>
Supplemental schedule of non-cash investing and financing
activities: The Company purchased all of the assets of CORE Cap.,
Inc during the quarter ended June 30, 2000 primarily through
issuance of the Company's common and preferred stock, as follows:

<S>                                                                    <C>
         Fair value of assets acquired                                 $ 1,281,070
         Cash included in acquired assets                                   21,351
         Liabilities assumed                                             1,216,967
Common stock issued in connection with acquisition                          28,089
Preferred stock issued in connection with the acquisition                   43,004

</TABLE>


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





ANTHRACITE CAPITAL, INC. AND SUBSIDIARIES
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
---------------------------------------------------------

   NOTE 1    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

   Anthracite Capital, Inc. (the "Company") was incorporated in Maryland in
   November, 1997 and commenced operations on March 24, 1998. The Company's
   principal business activity is to invest in a diversified portfolio of
   multifamily, commercial and residential mortgage loans, mortgage-backed
   securities and other real estate related assets in the U.S. and non-U.S.
   markets. The Company is organized and managed as a single business
   segment.

   The accompanying unaudited financial statements have been prepared in
   conformity with the instructions to Form 10-Q and Article 10, Rule 10-01
   of Regulation S-X for interim financial statements. Accordingly, they do
   not include all of the information and footnotes required by generally
   accepted accounting principles for complete financial statements. These
   financial statements should be read in conjunction with the annual
   financial statements and notes thereto included in the Company's annual
   report on Form 10-K for 1999 filed with the Securities and Exchange
   Commission.

   In the opinion of management, the accompanying financial statements
   contain all adjustments, consisting of normal and recurring accruals,
   necessary for a fair presentation of the results for the interim
   periods. Operating results for interim periods are not necessarily
   indicative of the results that may be expected for the entire year.

   In preparing the financial statements, management is required to make
   estimates and assumptions that affect the reported amounts of assets and
   liabilities and disclosure of contingent assets and liabilities at the
   dates of the statements of financial condition and revenues and expenses
   for the periods covered. Actual results could differ from those
   estimates and assumptions. Significant estimates in the financial
   statements include the valuation of the Company's mortgage-backed
   securities and certain other investments.

   A summary of the Company's significant accounting policies follows:

   PRINCIPLES OF CONSOLIDATION

   The consolidated financial statements include the financial statements
   of the Company and its wholly owned subsidiaries. All significant
   balances and transactions have been eliminated in consolidation.

   CASH AND CASH EQUIVALENTS

   All highly liquid investments with original maturities of three months
   or less are considered to be cash equivalents.

   RESTRICTED CASH

   At June 30, 2000, $3,869 of the Company's cash equivalents was pledged
   to secure its commitment under its swap agreements and was classified as
   restricted cash on the statement of financial condition. At December 31,
   1999, none of the Company's cash equivalents were pledged.

   SECURITIES AVAILABLE FOR SALE

   The Company has designated its investments in mortgage-backed
   securities, mortgage-related securities and certain other securities as
   assets available for sale because the Company may dispose of them prior
   to maturity. Securities available for sale are carried at estimated fair
   value with the net unrealized gains or losses reported as a component of
   accumulated other comprehensive income (loss) in stockholders' equity.
   Unrealized losses on securities that reflect a decline in value which is
   judged by management to be other than temporary, if any, are charged to
   earnings. At disposition the realized net gain or loss is included in
   income on a specific identification basis. The amortization of premiums
   and accretion of discounts are computed using the effective yield method
   after considering actual and estimated prepayment rates, if applicable,
   and credit losses. Actual prepayment and credit loss experience is
   reviewed quarterly and effective yields are recalculated when
   differences arise between prepayments and credit losses originally
   anticipated and amounts actually received plus anticipated future
   prepayments and credit losses.

   The Company may, in the future, acquire similar securities that it
   intends to hold to maturity, or change its intent with respect to
   certain securities currently in its portfolio, and designate such
   securities as "held to maturity." Securities so designated would be
   carried at amortized cost, subject to an impairment test.

   SECURITIES HELD FOR TRADING

   The Company has designated certain securities as assets held for trading
   because the Company intends to hold them for short periods of time.
   Securities held for trading are carried at estimated fair value with net
   unrealized gains or losses included in income.

   MORTGAGE LOANS

   The Company purchases and originates certain commercial mortgage loans
   to be held as long-term investments. Loans held for long-term investment
   are recorded at cost at the date of purchase. Premiums and discounts
   related to these loans are amortized over their estimated lives using
   the effective interest method. Any origination fee income, application
   fee income and direct costs associated with originating or purchasing
   commercial mortgage loans are deferred and the net amount is included in
   the basis of the loans on the statement of financial condition. The
   Company recognizes impairment on the loans when it is probable that the
   Company will not be able to collect all amounts due according to the
   contractual terms of the loan agreement. The Company measures impairment
   based on the present value of expected future cash flows discounted at
   the loan's effective interest rate or the fair value of the collateral
   if the loan is collateral dependent.

   The Company acquired certain residential mortgage loans in the CORE Cap
   merger (Note 2). These loans may be sold in the near term and are
   classified as held for sale and carried at the lower of amortized cost
   or market.

   SHORT SALES

   As part of its short-term trading strategies (see Note 4), the Company
   may sell securities that it does not own ("short sales"). To complete a
   short sale, the Company may arrange through a broker to borrow the
   securities to be delivered to the buyer. The proceeds received by the
   Company from the short sale are retained by the broker until the Company
   replaces the borrowed securities, generally within a period of less than
   one month. In borrowing the securities to be delivered to the buyer, the
   Company becomes obligated to replace the securities borrowed at their
   market price at the time of the replacement, whatever that price may be.
   A gain, limited to the price at which the Company sold the security
   short, or a loss, unlimited as to dollar amount, will be recognized upon
   the termination of a short sale if the market price is less than or
   greater than the proceeds originally received. The Company's liability
   under the short sales is recorded at fair value, with unrealized gains
   or losses included in net gain or loss on securities held for trading in
   the statement of operations and comprehensive income (loss).

   The Company is exposed to credit loss in the event of nonperformance by
   any broker that holds a deposit as collateral for securities borrowed.
   However, the Company does not anticipate nonperformance by any broker.

   FAIR VALUE OF FINANCIAL INSTRUMENTS

   The fair values of the Company's securities available for sale,
   securities held for trading, and securities sold short are based on
   market prices provided by certain dealers who make markets in these
   financial instruments. The fair values reported reflect estimates and
   may not necessarily be indicative of the amounts the Company could
   realize in a current market exchange.

   FORWARD COMMITMENTS

   As part of its short-term trading strategies (see Note 4), the Company
   may enter into forward commitments to purchase or sell U.S. Treasury or
   agency securities, which obligate the Company to purchase or sell such
   securities at a specified date at a specified price. When the Company
   enters into such a forward commitment, it will, generally within sixty
   days or less, enter into a matching forward commitment with the same or
   a different counterparty which entitles the Company to sell (in
   instances where the original transaction was a commitment to purchase)
   or purchase (in instances where the original transaction was a
   commitment to sell) the same or similar securities on or about the same
   specified date as the original forward commitment. Any difference
   between the specified price of the original and matching forward
   commitments will result in a gain or loss to the Company. Changes in the
   fair value of open commitments are recognized on the statement of
   financial condition and included among assets (if there is an unrealized
   gain) or among liabilities (if there is an unrealized loss). A
   corresponding amount is included as a component of net gain or loss on
   securities held for trading in the statement of operations and
   comprehensive income (loss).

   The Company is exposed to interest rate risk on these commitments, as
   well as to credit loss in the event of nonperformance by any other party
   to the Company's forward commitments. However, the Company does not
   anticipate nonperformance by any counterparty.

   FINANCIAL FUTURES CONTRACTS - TRADING

   As part of its short-term trading strategies (see Note 4), the Company
   may enter into financial futures contracts, which are agreements between
   two parties to buy or sell a financial instrument for a set price on a
   future date. Initial margin deposits are made upon entering into futures
   contracts and can be either cash or securities. During the period that
   the futures contract is open, changes in the value of the contract are
   recognized as gains or losses on securities held for trading by
   "marking-to-market" on a daily basis to reflect the market value of the
   contract at the end of each day's trading. Variation margin payments are
   received or made, depending upon whether gains or losses are incurred.

   The Company is exposed to interest rate risk on the contracts, as well
   as to credit loss in the event of nonperformance by any other party to
   the contract. However, the Company does not anticipate nonperformance by
   any counterparty.

   HEDGING INSTRUMENTS

   As part of its asset/liability management activities, the Company may
   enter into interest rate swap agreements, forward currency exchange
   contracts and other financial instruments in order to hedge interest
   rate and foreign currency exposures or to modify the interest rate or
   foreign currency characteristics of related items in its statement of
   financial condition. The Company's portfolio of interest rate swap
   agreements involves the exchange of fixed interest payments for floating
   interest payments.

   Income and expenses from interest rate swap agreements that are, for
   accounting purposes, designated as hedging securities available for sale
   are recognized as a net adjustment to the interest income of the hedged
   item. During the term of the interest rate swap agreement, changes in
   fair value are recognized on the statement of financial condition and
   included among assets (if there is an unrealized gain) or among
   liabilities (if there is an unrealized loss). A corresponding amount is
   included as a component of accumulated other comprehensive income (loss)
   in stockholders' equity. The Company accounts for revenues and expenses
   from the interest rate swap agreements under the accrual basis over the
   period to which the payment relates. Amounts paid to acquire these
   instruments are capitalized and amortized over the life of the
   instrument. Amortization of capitalized fees paid as well as payments
   received under these agreements are recorded as an adjustment to
   interest income. If the underlying hedged securities are sold, the
   amount of unrealized gain or loss in accumulated other comprehensive
   income (loss) relating to the corresponding interest rate swap agreement
   is included in the determination of gain or loss on the sale of the
   securities. If interest rate swap agreements are terminated, the
   associated gain or loss is deferred over the remaining term of the
   agreement, provided that the underlying hedged item still exists.

   Revenues and expenses from forward currency exchange contracts are
   recognized as a net adjustment to foreign currency gain or loss. During
   the term of the forward currency exchange contracts, changes in fair
   value are recognized on the statement of financial condition and
   included among assets (if there is an unrealized gain) or among
   liabilities (if there is an unrealized loss). A corresponding amount is
   included as a component of net foreign currency gain or loss in the
   statement of operations and comprehensive income (loss).

   Financial futures contracts that are, for accounting purposes,
   designated as hedging securities available for sale, are carried at fair
   value, with changes in fair value included in other comprehensive income
   (loss). Realized gains and losses on closed contracts are deferred and
   recognized in the basis of the hedged available for sale security, and
   amortized as a yield adjustment over the security's remaining term. See
   Note 11 for a description of the financial futures contracts open as of
   June 30, 2000.

   The Company monitors its hedging instruments throughout their terms to
   ensure that they remain effective at their intended purpose. The Company
   is exposed to interest rate and/or currency risk on these hedging
   instruments, as well as to credit loss in the event of nonperformance by
   any other party to the Company's hedging instruments. However, the
   Company does not anticipate nonperformance by any counterparty.

   FOREIGN CURRENCIES

   Assets and liabilities denominated in foreign currencies are translated
   at the exchange rate in effect on the date of the statement of financial
   condition. Revenues, costs, and expenses denominated in foreign
   currencies are translated at average rates of exchange prevailing during
   the period. Foreign currency gains and losses resulting from this
   process are recognized in earnings.

   NEGATIVE GOODWILL

   Negative goodwill reflects the excess of the estimated fair value of the
   net assets acquired in the Core-Cap Inc. merger (Note 2) over the
   purchase price for such assets. Negative goodwill is amortize using the
   straight-line method from the date of acquisition over approximately 5.7
   years, the weighted average lives of the assets acquired in the merger
   that the Company currently intends to retain. This amortization is
   included in other expenses. Negative goodwill, net, was $9,475 at June
   30, 2000, and is included in other liabilities.

   NET INCOME (LOSS) PER SHARE

   Net income per share is computed in accordance with Statement of
   Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share.
   Basic income (loss) per share is calculated by dividing net income
   (loss) available to common shareholders by the weighted average number
   of common shares outstanding during the period. Diluted income (loss)
   per share is calculated using the weighted average number of common
   shares outstanding during the period plus the additional dilutive effect
   of common stock equivalents. The dilutive effect of outstanding stock
   options is calculated using the treasury stock method, and the dilutive
   effect of preferred stock is calculated using the "if converted" method.

<TABLE>
<CAPTION>

                                                                  For the Three Months Ended June 30, 2000
                                                ---------------------------------------------------------------------------------
                                                        Income                      Shares                    Per-Share
                                                     (Numerator)                 (Denominator)                  Amount
<S>                                                     <C>                             <C>                         <C>
   Net income available to common                       $7,759
   shareholders
                                                -------------------
   Basic net income per share                           $7,759                    23,114,621                    $0.34
                                                                                                         ========================

   Effect of dilutive securities:
   10.5% Series A Senior Cumulative
   Redeemable Preferred Stock                             868                      4,081,680
                                                --------------------------------------------------
   Diluted net income per share                          $8,627                   27,196,301                    $0.32
                                                ==================================================       ========================
</TABLE>


<TABLE>
<CAPTION>

                                                                   For the Six Months Ended June 30, 2000
                                                ---------------------------------------------------------------------------------
                                                        Income                      Shares                    Per-Share
                                                     (Numerator)                 (Denominator)                  Amount
<S>                                                    <C>                            <C>                     <C>
   Net income available to common                      $14,218
   shareholders
                                                --------------------
   Basic net income per share                          $14,218                    22,029,294                    $0.65
                                                                                                         ========================
   Effect of dilutive securities:
   10.5% Series A Senior Cumulative
   Redeemable Preferred Stock                           $1,734                     4,081,680
                                                --------------------       -----------------------
   Diluted net income per share                         $15,952                   26,110,974                    $0.61
                                                ====================        =======================      ========================
</TABLE>

   The Company's stock options outstanding were antidilutive for all
   periods presented. For the three and six months ended June 30, 1999, the
   Company had no preferred stock outstanding, so basic and diluted
   earnings per share are the same.


   INCOME TAXES

   The Company has elected to be taxed as a Real Estate Investment Trust
   ("REIT") and to comply with the provisions of the Internal Revenue Code
   of 1986, as amended, with respect thereto. Accordingly, the Company
   generally will not be subject to Federal income tax to the extent of its
   distributions to stockholders and as long as certain asset, income and
   stock ownership tests are met. As of December 31, 1999, the Company had
   a capital loss carryover of $13,165 available to offset future capital
   gains.


   COMPREHENSIVE INCOME

   SFAS No. 130, Reporting Comprehensive Income, requires the Company to
   classify items of "other comprehensive income", such as unrealized gains
   and losses on securities available for sale, by their nature in the
   financial statements and display the accumulated balance of other
   comprehensive income (loss) separately from retained earnings and
   additional paid-in capital in the stockholders' equity section of the
   statement of financial condition. In accordance with SFAS No. 130,
   cumulative unrealized gains and losses on securities available for sale
   are classified as accumulated other comprehensive income (loss) in
   stockholders' equity and current period unrealized gains and losses are
   included as a component of comprehensive income (loss).

   RECENT ACCOUNTING PRONOUNCEMENTS

   During 1998, the Financial Accounting Standards Board issued SFAS No.
   133, Accounting for Derivative Instruments and Hedging Activities. This
   statement establishes accounting and reporting standards for derivative
   instruments including certain derivative instruments embedded in other
   contracts, and for hedging activities. It requires that the Company
   recognize all derivatives as either assets or liabilities in the
   statement of financial condition and measure those instruments at fair
   value. If certain conditions are met, a derivative may be specifically
   designated as a hedge of the exposure to changes in the fair value of a
   recognized asset or liability, or a hedge of the exposure to variable
   cash flows. The accounting for changes in the fair value of a derivative
   (e.g., through earnings or outside of earnings, through comprehensive
   income) depends on the intended use of the derivative and the resulting
   designation.

   The Company is required to implement SFAS 133 (as amended by SFAS No.
   138) by January 1, 2001. Company management is evaluating the impact
   that this statement will have on its hedging strategies and use of
   derivative instruments and is currently unable to predict the effect, if
   any, it will have on the Company's financial statements.

   In December of 1999, the staff of the Securities and Exchange Commission
   issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
   Financial Statements." This bulletin summarizes certain of the staff's
   views in applying generally accepted accounting principles to revenue
   recognition in financial statements. The Company's management believes
   that the guidance expressed in the bulletin does not affect the
   Company's current revenue recognition policies.

   RECLASSIFICATIONS

   Certain amounts from 1999 have been reclassified to conform to the 2000
   presentation.

   NOTE 2  ACQUISITION OF CORE CAP, INC.

   On May 15, 2000, the Company acquired all of the outstanding capital
   stock of CORE Cap, Inc. ("CORE Cap"), a private real estate investment
   trust investing in mortgage loans and mortgage-backed securities, in
   exchange for 4,180,553 of the Company's common shares and 2,261,000
   Series B preferred shares. The common and preferred shares issued by the
   Company were valued at approximately $71,092 on May 15, 2000. The
   acquisition was accounted for under the purchase method. Application of
   purchase accounting resulted in an excess of the value of the acquired
   net assets over the value of the Company's common and preferred shares
   issued in the acquisition, plus transaction costs. This deferred credit
   totaled $9,687 and is being amortized as described in "Negative
   Goodwill" above. The operations of CORE Cap are included in the
   Company's financial statements from May 15, 2000.

   The following unaudited consolidated proforma results of operations for
   the six months ended June 30, 2000 and 1999 assume the CORE Cap
   acquisition occurred as of the beginning of each period presented:

                                                   2000           1999
                                    --------------------------------------
Net Interest Income                              $76,684        $95,765

Net Income                                        25,513         25,010

Net Income available to common                    17,206         22,184
shareholders

Earnings per share:
Basic                                              0.68           0.89
Diluted                                            0.65           0.89

<TABLE>
<CAPTION>

   NOTE 3  SECURITIES AVAILABLE FOR SALE

   The Company's securities available for sale are carried at estimated
   fair value. The amortized cost and estimated fair value of securities
   available for sale as of June 30, 2000 are summarized as follows:
                                                                                      Gross           Gross          Estimated
                                                                    Amortized       Unrealized      Unrealized         Fair
                      Security Description                             Cost            Gain            Loss            Value
----------------------------------------------------------------------------------------------------------------------------------
Commercial mortgage-backed securities ("CMBS"):
<S>                                                                 <C>              <C>                <C>               <C>
Investment grade rated securities                                   $ 167,692        $ 5,129            -            $172,821
Non-investment grade rated subordinated securities                    339,423              -         (86,576)         252,847
Non-rated subordinated securities                                      36,968              -          (9,842)          27,126
                                                                  --------------- --------------- --------------- ----------------
     Total CMBS                                                       544,083          5,129         (96,418)         452,794
                                                                  --------------- --------------- --------------- ----------------
Single-family residential mortgage-backed securities ("RMBS"):
Agency adjustable rate securities                                     140,452             -               (2)         140,450
Agency fixed rate securities                                          349,441            517              -           349,958
Privately issued investment grade rated fixed rate securities          95,516             -           (1,147)          94,369
                                                                  --------------- --------------- --------------- ----------------
Total RMBS                                                            585,409            517          (1,149)         584,777
                                                                  --------------- --------------- --------------- ----------------
     Total securities available for sale                           $1,129,492         $5,646        $(97,567)      $1,037,571
                                                                  =============== =============== =============== ================
</TABLE>

   As of June 30, 2000, an aggregate of $945,251 in estimated fair value of
   the Company's securities available for sale was pledged to secure its
   borrowings.




   The amortized cost and estimated fair value of securities available for
sale as of December 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>

                                                                                     Gross           Gross          Estimated
                                                                   Amortized       Unrealized     Unrealized           Fair
                     Security Description                            Cost             Gain            Loss            Value
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>              <C>
Commercial mortgage-backed securities ("CMBS"):
Non-investment grade rated subordinated securities                 $ 334,162           -           $ (90,454)       $ 243,708
Non-rated subordinated securities                                     38,882           -              (9,857)          29,025
                                                                 -------------- ---------------- --------------- ----------------
     Total CMBS                                                      373,044           -            (100,311)         272,733
                                                                 -------------- ---------------- --------------- ----------------
Single-family residential mortgage-backed securities ("RMBS"):
Agency adjustable rate securities                                     57,826       $ 1,032               -             58,858
Agency fixed rate securities                                         166,323           -                (498)         165,825
Privately issued investment grade rated fixed rate securities         78,091           -              (1,270)          76,821
                                                                 -------------- ---------------- --------------- ----------------
     Total RMBS                                                      302,240         1,032            (1,768)         301,504
                                                                 -------------- ---------------- --------------- ----------------
Agency insured project loan                                            3,050           -                 (92)           2,958
                                                                 -------------- ---------------- --------------- ----------------
     Total securities available for sale                           $ 678,334       $ 1,032         $(102,171)       $ 577,195
                                                                 ============== ================ =============== ================
</TABLE>

   At December 31, 1999, an aggregate of $392,831 in estimated fair value
   of the Company's securities available for sale was pledged to secure its
   borrowings.

   The aggregate estimated fair value by underlying credit rating of the
   Company's securities available for sale at June 30, 2000 is as follows:
<TABLE>
<CAPTION>

                                                     June 30, 2000                    December 31, 1999
                                              Estimated                          Estimated
              Security Rating                 Fair Value        Percentage        Fair Value      Percentage
   -------------------------------------------------------------------------------------------------------------
<S>                                               <C>              <C>               <C>              <C>
   Agency and agency insured securities           $ 490,408        47.2%             $ 227,641        39.5%
   AAA                                               94,369         9.1                 76,821        13.3
   BBB                                              172,821        16.7                      -          -
   BB+                                               25,170         2.4                 23,103         4.0
   BB                                                24,835         2.4                 22,051         3.8
   BB-                                               52,424         5.1                 50,412         8.7
   B+                                                14,567         1.4                 14,173         2.5
   B                                                 87,220         8.4                 84,830        14.7
   B-                                                34,002         3.3                 32,770         5.7
   CCC                                               14,629         1.4                 16,368         2.8
   Not rated                                         27,126         2.6                 29,026         5.0
                                            ----------------- ----------------- ---------------- ---------------
   Total securities available for sale          $ 1,037,571       100.0%             $ 577,195        100.0%
                                            ================= ================= ================ ===============
</TABLE>


   As of June 30, 2000, there were 1,766 loans underlying the subordinated
   CMBS held by the Company with an original principle balance of
   $9,240,165.

   As of June 30, 2000 the mortgage loans underlying the subordinated CMBS
   held by the Company were secured by properties of the types and at the
   locations identified below:
<TABLE>
<CAPTION>

      Property Type       Percentage (1)       Geographic Location        Percentage (1)
   ----------------------------------------------------------------------------------------
<S>                                  <C>            <C>                                 <C>
   Multifamily                       30.6%      California                           12.6%
   Retail                             26.5      Texas                                 11.2
   Office                             16.5      New York                               9.6
   Lodging                             9.4      Florida                                6.4
   Other                              17.0      Other (2)                             60.2
                        -------------------                             -------------------
   Total                            100.0%      Total                                100.0%
                        ===================                             ===================

(1)      Based on a percentage of the total unpaid principal balance of the underlying loans.
(2)      No other individual state comprises more than 5% of the total.
</TABLE>

   The following table sets forth certain information relating to the
   aggregate principal balance and payment status of delinquent mortgage
   loans underlying the subordinated CMBS held by the company as of June
   30, 2000 and December 31, 1999:

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------------
                                                    JUNE 30, 2000                               DECEMBER 31, 1999
--------------------------------------------------------------------------------------------------------------------------------
                                                      NUMBER OF         % OF                        NUMBER OF         % OF
                                       PRINCIPAL        LOANS        COLLATERAL     PRINCIPAL         LOANS        COLLATERAL
--------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>              <C>           <C>        <C>                  <C>           <C>
Past due 30 days to 60 days             $21,355           4             0.23%       $ 2,936             2             0.03%
--------------------------------------------------------------------------------------------------------------------------------
Past due 60 days to 90 days               5,262           3             0.06%        13,522             3             0.14%
--------------------------------------------------------------------------------------------------------------------------------
Past due 90 days or more                 17,487           4             0.19%        34,631             6             0.36%
--------------------------------------------------------------------------------------------------------------------------------
REO                                      10,214           2             0.11%        10,248             0             0.0%
--------------------------------------------------------------------------------------------------------------------------------
Total                                   $54,318          13             0.59%       $51,089            11             0.71%
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

   The Company's delinquency experience of 0.59% is in line with directly
   comparable collateral experience shown in the Lehman Brothers 1998 CMBS
   index at 0.53%.

   To the extent that realized losses, if any, or such resolutions differ
   significantly from the Company's original loss estimates, it may be
   necessary to reduce the projected yield on the applicable CMBS
   investment to better reflect such investment's expected earnings net of
   expected losses, from the date of purchase. While realized losses on
   individual assets may be higher or lower than original estimates, the
   Company currently believes its aggregate loss estimates and yields are
   appropriate.

   The CMBS held by the Company consist of subordinated securities
   collateralized by adjustable and fixed rate commercial and multifamily
   mortgage loans. The RMBS held by the Company consist of adjustable rate
   and fixed rate residential pass-through or mortgage-backed securities
   collateralized by adjustable and fixed rate single-family residential
   mortgage loans. Agency RMBS were issued by Federal Home Loan Mortgage
   Corporation (FHLMC), Federal National Mortgage Association (FNMA) or
   Government National Mortgage Association (GNMA). Privately issued RMBS
   were issued by entities other than FHLMC, FNMA or GNMA. The Company's
   securities available for sale are subject to credit, interest rate
   and/or prepayment risks.

   The CMBS owned by the Company provide credit support to the more senior
   classes of the related commercial securitization. Cash flow from the
   mortgages underlying the CMBS generally is allocated first to the senior
   classes, with the most senior class having a priority entitlement to
   cash flow. Then, any remaining cash flow is allocated generally among
   the other CMBS classes in order of their relative seniority. To the
   extent there are defaults and unrecoverable losses on the underlying
   mortgages, resulting in reduced cash flows, the most subordinated CMBS
   class will bear this loss first. To the extent there are losses in
   excess of the most subordinated class' stated entitlement to principal
   and interest, then the remaining CMBS classes will bear such losses in
   order of their relative subordination.

   As of June 30, 2000, the anticipated weighted average unleveraged yield
   to maturity based upon adjusted cost of the Company's subordinated CMBS
   was 9.72% per annum, and of the Company's other securities available for
   sale was 8.0% per annum. The Company's anticipated yields to maturity on
   its subordinated CMBS and other securities available for sale are based
   upon a number of assumptions that are subject to certain business and
   economic uncertainties and contingencies. Examples of these include,
   among other things, the rate and timing of principal payments (including
   prepayments, repurchases, defaults and liquidations), the pass-through
   or coupon rate and interest rate fluctuations. Additional factors that
   may affect the Company's anticipated yields to maturity on its
   subordinated CMBS include interest payment shortfalls due to
   delinquencies on the underlying mortgage loans, and the timing and
   magnitude of credit losses on the mortgage loans underlying the
   subordinated CMBS that are a result of the general condition of the real
   estate market (including competition for tenants and their related
   credit quality) and changes in market rental rates. As these
   uncertainties and contingencies are difficult to predict and are subject
   to future events, which may alter these assumptions, no assurance can be
   given that the anticipated yields to maturity, discussed above and
   elsewhere, will be achieved.

   The agency adjustable rate RMBS held by the Company are subject to
   periodic and lifetime caps that limit the amount such securities'
   interest rates can change during any given period and over the life of
   the loan.

   As of June 30, 2000, the unamortized net discount on securities
   available for sale was $326,000 which represented 81.6% of the then
   remaining face amount of such securities.

   During the six months ended June 30, 2000, the Company sold securities
   available for sale for total proceeds of $1,309,203 resulting in a
   realized gain of $705. Of the securities sold, $1,052,462 of sales
   proceeds represents securities acquired in the CORE Cap merger. Any gain
   on the sale of securities acquired in the CORE Cap merger was
   attributable to market movements subsequent to the acquisition of such
   securities.

   NOTE 4  SECURITIES HELD FOR TRADING

   Securities held for trading reflect short-term trading strategies, which
   the Company employs from time to time, designed to generate economic and
   taxable gains. As part of its trading strategies, the Company may
   acquire long or short positions in U.S. Treasury or agency securities,
   forward commitments to purchase such securities, financial futures
   contracts and other fixed income or fixed income derivative securities.
   Any taxable gains from such strategies will be applied as an offset
   against the tax basis capital loss carry forward that the Company
   incurred during 1998 as a result of the sale of a substantial portion of
   its securities available for sale.

   The Company's securities held for trading are carried at estimated fair
   value. As of June 30, 2000 and December 31, 1999, the Company did not
   have any long or short positions in securities held for trading.

   During the six months ended June 30, 2000 and June 30, 1999, aggregate
   net realized gains on securities held for trading were $328 and $1,072,
   respectively.

   The Company's trading strategies are subject to the risk of
   unanticipated changes in the relative prices of long and short positions
   in trading securities, but are designed to be relatively unaffected by
   changes in the overall level of interest rates.

   NOTE 5  COMMERCIAL MORTGAGE LOANS

   In August 1998, the Company along with a syndicate of other lenders
   originated a loan secured by a second lien on five luxury hotels in
   London, England and the surrounding vicinity (The "London Loan"). The
   loan has a five-year maturity and may be prepaid at any time. The London
   Loan is denominated in pounds sterling and bears interest at a rate
   based upon the London Interbank Offered Rate (LIBOR) for pounds sterling
   plus approximately 4%. The Company's investment in the London Loan is
   carried at amortized cost and translated into U.S. dollars at the
   exchange rate in effect on the reporting date. The amortized cost and
   certain additional information with respect to the Company's investment
   in the London Loan as of June 30, 2000, and December 31, 1999 (at the
   exchange rates in effect on such dates) are summarized as follows:

<TABLE>
<CAPTION>

                        June 30, 2000                                                  December 31, 1999
------------------------------------------------------------------------------------------------------------------------------
   Interest       Principal     Unamortized      Amortized       Interest      Principal       Unamortized       Amortized
     Rate          Balance        Discount          Cost            Rate        Balance         Discount            Cost
---------------- ------------- --------------- --------------- -------------- ------------- ------------------ ---------------
<S>                <C>              <C>           <C>             <C>         <C>                <C>            <C>
    10.25%          $32,469          $55           $32,414         10.11%      $ 34,680           $67            $34,613
</TABLE>


   The exchange rate for the British pound at June 30, 2000 was
   (pound)0.660895 to US $1.00; at December 31, 1999 the exchange rate was
   (pound)0.61908. The entire principal balance of the Company's investment
   in the London Loan is pledged to secure line of credit borrowings. The
   borrower has made all payments when due.

   Toward the end of the first quarter of 2000, the Company funded a
   $30,600 subordinated participation in a first mortgage secured by a
   commercial office building located in New York City (the "Commercial
   Office Building Loan"). The Commercial Office Building Loan matures
   December, 2001, and payments are interest only based upon LIBOR plus
   approximately 6.5%. The Company will receive a 50 basis point exit fee
   related to the Commercial Office Building Loan, which is being amortized
   into interest income over the life of such loan. The entire principal
   balance of the Company's investment in the Commercial Office Building
   Loan is pledged to secure line of credit borrowings. As of June 30,
   2000, the interest rate on the Commercial Office Building Loan was
   13.24%, and the borrower has made all payments when due.

   During 1999, the Company funded its entire commitment, $35,000, under a
   floating rate commercial real estate construction loan secured by a
   second mortgage on an office complex located in Santa Monica, California
   (the "California Loan"). The California Loan matures August 2001, and
   payments are interest only, based upon LIBOR plus approximately 6.5%.
   The California Loan provides for two one-year extensions through August
   2003 at the borrower's option, based upon property performance. The
   Company received a $175 commitment fee relating to the commitment, which
   is being amortized into income over the expected two-and-one-half year
   life of such loan. The entire principal balance of the California Loan
   is pledged to secure borrowings under a term financing agreement. As of
   June 30, 2000, the interest rate on amounts funded under the commitment
   was 13.24% and the borrower had made all payments when due.

   NOTE 6   COMMON STOCK

   On January 5, 2000, the Company repurchased 6,100 shares of its common
   stock for $39 in open market transactions. This purchase was made at a
   price of $6.42 per share (including commissions). The remaining number
   of shares authorized for repurchase is 2,713,519. In accordance with
   Maryland corporate regulations, all repurchased shares are retired.

   On March 31, 1999 the Company filed a $200,000 shelf registration
   statement with the SEC. The shelf registration statement will permit the
   Company to issue a variety of debt and equity securities in the public
   markets should appropriate opportunities arise.

   On March 16 and May 22, 2000, the Company declared distributions to its
   shareholders of $0.29 per share, payable on April 28, 2000 and July 28,
   2000 to stockholders of record on March 31, 2000 and June 30, 2000. For
   U.S. Federal income tax purposes, the dividends are ordinary income to
   the Company's stockholders.

   As part of the CORE Cap merger, the Company issued 4,180,552 shares of
   its common stock to CORE Cap shareholders.

   NOTE 7   PREFERRED STOCK

   On December 2, 1999 the Company authorized and issued 1,200,000 shares
   of 10.5% Series A Senior Cumulative Redeemable Preferred Stock ("Series
   A Preferred Stock"), $0.001 par value per share, for aggregate proceeds
   of $30,000. The new series of preferred stock carries a 10.5% coupon and
   is convertible into the Company's common stock at a price of $7.35. The
   Series A Preferred Stock has a seven-year maturity at which time, at the
   option of the holders, the shares may be converted into common shares or
   liquidated ("Liquidation Preference") for $28.50 per share. If
   converted, the Series A Preferred Stock would convert into approximately
   4 million shares of the Company's common stock. The difference between
   the liquidation price and the proceeds received totals $4,200, and is
   being accreted to the carrying value of the Series A Preferred Stock
   over its seven-year life.

   The Series A Preferred Stock was privately placed by the Company, and
   there was no underwriting discount paid. At the closing of the CORE Cap
   merger, the Liquidation Preference was increased from $27.75 to $28.50
   per share.

   As part of the CORE Cap merger, the Company authorized and issued
   2,261,000 shares of 10% Series B Cumulative Redeemable Convertible
   Preferred Stock ("Series B Preferred Stock"), $0.001 par value per share
   to CORE Cap shareholders. The Series B Preferred Stock is perpetual,
   carries a 10% coupon, has a preference in liquidation of $56,525, and is
   convertible into the Company's common stock at a price of $17.09 per
   share, subject to adjustment. As of June 30, 2000, the Company has
   authorized and unissued Preferred Stock of 96,539,003 shares.

   NOTE 8  TRANSACTIONS WITH AFFILIATES

   The Company has a Management Agreement (the "Management Agreement") with
   BlackRock Financial Management, Inc. (the "Manager"), a majority owned
   indirect subsidiary of PNC Bank Corp. ("PNC") and the employer of
   certain directors and officers of the Company, under which the Manager
   manages the Company's day-to-day operations, subject to the direction
   and oversight of the Company's Board of Directors. The initial two year
   term of the Management Agreement was to expire on March 20, 2000; on
   March 16, 2000, the Management Agreement was extended for an additional
   two years, with the approval of a majority of the unaffiliated
   directors, on terms similar to the prior agreement. The Company pays the
   Manager an annual base management fee equal to a percentage of the
   average invested assets of the Company as defined in the Management
   Agreement. The base management fee is equal to 1% per annum of the
   average invested assets rated less than BB- or not rated, 0.75% of
   average invested assets rated BB- to BB+, and 0.35% of average invested
   assets rated above BB+.

   The Company accrued $2,990 and $1,073 in base management fees in
   accordance with the terms of the Management Agreement for the six months
   ended June 30, 2000 and June 30, 1999 respectively. In accordance with
   the provisions of the Management Agreement, the Company will reimburse
   the Manager for certain expenses incurred on behalf of the Company by
   the Manager. No reimbursement expenses were incurred during the six
   months ended June 30, 2000 and 1999, respectively.

   The Company will also pay the Manager, as incentive compensation, an
   amount equal to 25% of the funds from operations of the Company (as
   defined) plus gains (minus losses) from debt restructuring and sales of
   property, before incentive compensation, in excess of the amount that
   would produce an annualized return on equity equal to 3.5% over the
   Ten-Year U.S. Treasury Rate as defined in the Management Agreement. For
   purposes of the incentive compensation calculation, equity is generally
   defined as proceeds from issuance of common stock before underwriting
   discounts and commissions and other costs of issuance. The Company has
   not accrued for or paid the Manager any incentive compensation since it
   commenced operations.

   On March 17, 1999, the Company's Board of Directors approved an
   administration agreement with the Manager and the termination of a
   previous agreement with an unaffiliated third party. Under the terms of
   the administration agreement, the Manager provides financial reporting,
   audit coordination and accounting oversight services. The Company pays
   the Manager a monthly administrative fee at an annual rate of 0.06% of
   the first $125 million of average net assets, 0.04% of the next $125
   million of average net assets and 0.03% of average net assets in excess
   of $250 million subject to a minimum annual fee of $120. The terms of
   the administrative agreement are substantially similar to the terms of
   the previous third-party agreement. For both the six months ended June
   30, 2000 and June 30, 1999, the administration fee was $60.

   During the six months ended June 30, 2000, the Company purchased
   certificates representing a 1% interest in Midland Commercial Mortgage
   Owner Trust IV, Midland Commercial Mortgage Owner Trust V and Midland
   Commercial Mortgage Owner Trust VI for a total of $1,649, $851 and $557,
   respectively. These Trusts were purchased from Midland Loan Services,
   Inc. ("Midland"), a wholly owned indirect subsidiary of PNC and the
   depositor to the Trusts. The assets of the Trusts consist of commercial
   mortgage loans originated or acquired by Midland. In connection with
   these transactions, the Company entered into a $4,500 committed line of
   credit from PNC Funding Corp., a wholly owned indirect subsidiary of
   PNC, to borrow up to 90% of the fair market value of the Company's
   interest in the Trusts. Outstanding borrowings against this line of
   credit bear interest at a LIBOR based variable rate. The Company earned
   $135 and $33 from the Trusts and paid interest of approximately $76 and
   $28 to PNC Funding Corp. during the six and three months ended June 30,
   2000, respectively.

   NOTE 9  STOCK OPTIONS

   The Company has adopted a stock option plan (the "1998 Stock Option
   Plan") that provides for the grant of both qualified incentive stock
   options that meet the requirements of Section 422 of the Code, and
   non-qualified stock options, stock appreciation rights and dividend
   equivalent rights. Stock options may be granted to the Manager,
   directors, officers and any key employees of the Company, directors,
   officers and key employees of the Manager and to any other individual or
   entity performing services for the Company.

   The exercise price for any stock option granted under the 1998 Stock
   Option Plan may not be less than 100% of the fair market value of the
   shares of common stock at the time the option is granted. Each option
   must terminate no more than ten years from the date it is granted.
   Subject to anti-dilution provisions for stock splits, stock dividends
   and similar events, the 1998 Stock Option Plan authorizes the grant of
   options to purchase an aggregate of up to 2,470,453 shares of common
   stock.

   Pursuant to the 1998 Stock Option Plan, during 1998 certain officers,
   directors and employees of the Company and the Manager were granted
   options to purchase 1,163,967 shares of the Company's common stock and
   PNC Investment Corp., a wholly owned indirect subsidiary of PNC, was
   granted options to purchase 324,176 shares of the Company's common
   stock. The exercise price of these options is $15 per share. The
   remaining contractual life of each option is approximately 7.7 years at
   June 30, 2000. One half of these options, representing 744,072 shares,
   vested on March 31, 2000; the remaining options vest in equal
   installments on March 27, 2001 and March 27, 2002. 125,000 of these
   options have been terminated and none have been exercised as of June 30,
   2000.

   During 1999 pursuant to the 1998 Stock Option Plan, options to purchase
   270,000 shares of the Company's common stock were granted to certain
   officers of the Company and employees of the Manager who provide
   services to the Company. The exercise price of these options is $8.44
   per share. The remaining contractual life of each option is
   approximately 8.7 years at June 30, 2000. One half of these options
   vested on March 31, 2000 and the remainder will vest on March 31, 2001.
   240,000 of these options were terminated and none have been exercised as
   of June 30, 2000.

   In addition to the foregoing, in 2000 pursuant to the 1998 Stock Option
   Plan, options to purchase 70,000 shares of the Company's common stock
   were granted to certain officers of the Company and employees of the
   Manager who provide services to the Company. The exercise price of these
   options is $8.02 per share. The remaining contractual life of each
   option is approximately 9.7 years at June 30, 2000. The options vest in
   two equal installments on March 31, 2001 and March 31, 2002. 50,000 of
   these options were terminated as of June 30, 2000.

   In addition to the foregoing, on May 15, 2000 pursuant to the
   acquisition of CORE Cap, the Company granted stock options on the
   Company's stock to the directors of CORE Cap similar in term and vesting
   to the stock options the directors held immediately prior to the date of
   acquisition. The strike price was adjusted for the effect of the
   acquisition. The options granted were as follows:

  Number of Options           Exercise           %
       Granted                 Price          Vested
------------------------------------------------------------
76,998                         15.58            66%
15,400                         15.84           100%
15,400                          9.11           100%
15,400                          7.82           100%


   The fair value of the option grants at the grant date was estimated by
   the Company using the Black-Scholes option-pricing model; the resulting
   valuation was negligible. None of these options have been terminated or
   exercised as of June 30, 2000.

   NOTE 10   BORROWINGS

   The Company's borrowings consist of lines of credit borrowings and
   reverse repurchase agreements.

   The Company has an agreement with Merrill Lynch Mortgage Capital Inc.
   ("Merrill Lynch"), which permits the Company to borrow up to $200,000.
   As of June 30, 2000 and December 31, 1999, the outstanding borrowings
   under this line of credit were $61,284 and $64,575, respectively. The
   agreement requires assets to be pledged as collateral, which may consist
   of rated CMBS, rated RMBS, residential and commercial mortgage loans,
   and certain other assets. Outstanding borrowings under this line of
   credit bear interest at a LIBOR based variable rate. This facility
   matures on August 20, 2000. Subsequent to June 30, 2000, the Company
   obtained an agreement in principal from Merill Lynch to renew the
   facility for another year.

   In June 1999, the Company closed a $17,500, three year term financing
   secured by the Company's $35,000 California Loan. As of June 30, 2000
   and December 31, 1999, the Company had drawn $14,131 under this loan.
   Outstanding borrowings under this term financing bear interest at a
   LIBOR based variable rate.

   On July 19, 1999, the Company entered into a $185,000 committed credit
   facility with Deutsche Bank, AG (the "Deutsche Bank Facility"). The
   Deutsche Bank Facility has a two-year term and provides for a one-year
   extension at the Company's option. The Deutsche Bank Facility can be
   used to replace existing reverse repurchase agreement borrowings and to
   finance the acquisition of mortgage-backed securities and loan
   investments, which will be used to collateralize borrowings under the
   Deutsche Bank Facility. As of June 30, 2000 and December 31, 1999, the
   outstanding borrowings under this facility were $27,972 and $5,022,
   respectively. Outstanding borrowings under the Deutsche Bank Facility
   bear interest at a LIBOR based variable rate.

   In December 1999 the Company entered into a two-year $50,000 credit
   facility with an institutional lender. This facility can be used to
   finance the acquisition of mortgage-backed securities and loan
   investments. As of June 30, 2000 and December 31, 1999, the Company
   borrowed $8,910 under this facility. Outstanding borrowings under this
   term financing bear interest at a LIBOR based variable rate.

   At the time of the CORE Cap acquisition, there were commercial paper
   facility agreements with each of ABN Amro and Societe Generale, which
   were used to finance residential and commercial loans. The Company has
   elected to renew the facility with ABN Amro, which facility is in the
   amount of $200,000, matures on June 18, 2001, and bears interest at a
   variable based LIBOR rate. The Company did not renew the facility with
   Societe Generale.

   The Company is subject to various covenants in its lines of credit,
   including maintaining a minimum GAAP net worth of $140,000, a
   debt-to-equity ratio not to exceed 4.5 to 1, a minimum cash requirement
   based upon certain debt to equity ratios, a minimum debt service
   coverage ratio of 1.5, and a minimum liquidity reserve of $10,000.
   Additionally, the Company's GAAP net worth cannot decline by more than
   37% during the course of any two consecutive fiscal quarters. As of June
   30, 2000 and December 31, 1999, the Company was in compliance with all
   such covenants.

   The Company has entered into reverse repurchase agreements to finance
   most of its securities available for sale that are not financed under
   its lines of credit. The reverse repurchase agreements are
   collateralized by most of the Company's securities available for sale
   and bear interest at a LIBOR based variable rate.

   Certain information with respect to the Company's collateralized
   borrowings at June 30, 2000 is summarized as follows:

<TABLE>
<CAPTION>


                                                Lines of                Reverse                   Total
                                               Credit and             Repurchase              Collateralized
                                               Term Loans             Agreements                Borrowings
                                             -------------------- ----------------------- --------------------------
<S>                                              <C>                      <C>                        <C>
   Outstanding borrowings                        $ 187,548                $776,664                   $964,212
   Weighted average borrowing rate                   7.40%                   6.83%                      6.94%
   Weighted average remaining maturity            274 days                 21 days                    70 days
   Estimated fair value of assets pledged         $271,380                $859,366                 $1,130,746
</TABLE>

   As of June 30, 2000, $32,469 of borrowings outstanding under the lines
   of credit were denominated in pounds sterling and interest payable is
   based on sterling LIBOR.

   As of June 30, 2000, the Company's collateralized borrowings had the
   following remaining maturities:

<TABLE>
<CAPTION>

                                                      Lines of                Reverse                     Total
                                                     Credit and              Repurchase              Collateralized
                                                      Term Loan              Agreements                Borrowings
                                                 ---------------------- ----------------------- -----------------------
<S>       <C>                                            <C>                     <C>                     <C>
   Within 30 days                                        $137,349                $773,079                $910,428
   31 to 59 days                                           20,960                   3,585                  24,545
   Over 60 days                                            29,239                       -                  29,239
                                                 ---------------------- ----------------------- -----------------------
                                                         $187,548                $776,664                $964,212
                                                 ====================== ======================= =======================
</TABLE>

   Certain information with respect to the Company's collateralized
   borrowings as of December 31, 1999 is summarized as follows:

<TABLE>
<CAPTION>


                                                           Lines of                Reverse                    Total
                                                          Credit and              Repurchase             Collateralized
                                                          Term Loans              Agreements               Borrowings
                                                       --------------------- ----------------------- --------------------
<S>                                                           <C>                    <C>                   <C>
   Outstanding borrowings                                     $ 94,035               $ 377,498             $ 471,533
   Weighted average borrowing rate                               7.25%                   6.32%                 6.50%
   Weighted average remaining maturity                        360 Days                 36 Days              101 Days
   Estimated fair value of assets pledged                     $133,301               $ 412,983             $ 546,284
</TABLE>

   As of December 31, 1999, $22,375 of borrowings outstanding under the
   line of credit were denominated in pounds sterling.

   As of December 31, 1999, the Company's collateralized borrowings had the
   following remaining maturities:

<TABLE>
<CAPTION>

                                                          Lines of            Reverse                     Total
                                                      Credit and Term        Repurchase              Collateralized
                                                           Loans             Agreements                Borrowings
                                                 ---------------------- ----------------------- ----------------------------
<S>       <C>                                                 <C>                 <C>                          <C>
   Within 30 days                                               -               $ 157,918                    $ 157,918
   31 to 59 days                                                -                 219,580                      219,580
   Over 60 days                                           $94,035                       -                       94,035
                                                 ===========================================================================
                                                          $94,035               $ 377,498                    $ 471,533
                                                 ===========================================================================
</TABLE>

   Under the lines of credit and the reverse repurchase agreements, the
   respective lender retains the right to mark the underlying collateral to
   estimated market value. A reduction in the value of its pledged assets
   will require the Company to provide additional collateral or fund margin
   calls. From time to time, the Company expects that it will be required
   to provide such additional collateral or fund margin calls.

   NOTE 11   HEDGING INSTRUMENTS

   As of June 30, 2000 the Company has entered into forward currency
   exchange contracts pursuant to which it has agreed to exchange
   (pound)8,000 (pounds sterling) for $13,152 (U.S. dollars) on July 21,
   2000. On July 21, 2000 the Company entered into a forward exchange
   contract pursuant to which it agreed to exchange (pound)8,000 (pounds
   sterling) for $12,100 (U.S. dollars) on January 13, 2000. In certain
   circumstances, the Company may be required to provide collateral to
   secure its obligations under the forward currency exchange contracts, or
   may be entitled to receive collateral from the counter party to the
   forward currency exchange contracts. At June 30, 2000, no collateral was
   required under the forward currency exchange contracts. The estimated
   fair value of the forward currency exchange contracts was $1,042 as of
   June 30, 2000, which was recognized as part of net foreign currency
   gain.

   As of June 30, 2000, the Company had outstanding a short position of 93
   thirty-year U.S. Treasury Bond future contracts, 98 five-year, and 913
   ten-year U.S. Treasury Note future contracts expiring on September 30,
   2000, which represented $9,300 and $101,100 in face amount of U.S.
   Treasury Bonds and Notes, respectively. These contracts are designated
   as hedging certain of the Company's available-for-sale securities. The
   unrealized loss of these contracts was approximately $2,877 as of June
   30, 2000 and is included in the carrying value of the hedged
   available-for-sale securities. During the six months ended June 30, 2000
   the Company had $1,912 of realized losses from futures contracts in US
   Treasury securities, which reduced the basis of the hedged
   available-for-sale securities.

   Interest rate swap agreements involve the exchange of fixed interest for
   floating interest payments. The Company pays fixed interest payments to
   the counterparty on a quarterly or semi-annual basis, in exchange for
   receiving floating interest payments on a quarterly basis from the
   counterparty. The Company has designated these swap agreements as
   hedging certain of the Company's available-for-sale securities. The
   Company acquired these positions through the CORE Cap merger and
   assigned a cost to each contract equal to the fair market value of each
   contract. The amortized cost of these agreements was $18,217 at June 30,
   2000, and their fair value included in other assets was $7,081. The cost
   of the swaps will be amortized into interest income over the remaining
   life of the swaps. At June 30, 2000 accrued net interest payable equaled
   $1,665. As of June 30, the weighted average interest rate receivable and
   payable is 6.49% and 6.37%, respectively.

   Occasionally, counterparties will require the Company or the Company
   will require counterparties to provide collateral for the interest rate
   swap agreements in the form of margin deposits. Net deposits are
   recorded as a component of accounts receivable or other liabilities.
   Should the counterparty fail to return deposits paid, the Company would
   be at risk for the fair market value of that asset. At June 30, 2000 the
   balance of such net margin deposits received from counterparties as
   collateral under these agreements totaled $3,869.


   NOTE 12   INTEREST RATE AGREEMENTS

   Interest rate agreements as of June 30, 2000 consist of the following:
<TABLE>
<CAPTION>

                                          Notional      Estimated Fair
                                            Value           Value        Unamortized Cost   Remaining Term    Strike Rate
                                        -------------- ----------------- ----------------- ----------------- --------------
<S>                                       <C>                <C>               <C>             <C>               <C>
 Interest rate cap agreement -            $ 120,000          $433              $325             63 days          5.25%
 purchased options
 Interest rate floor agreement -            200,000            0                 0             167 days          5.50%
 purchased options
 Interest rate swap agreements              502,000          7,081           18,217           6.19 years          n/a
</TABLE>

   For the quarter ended June 30, 2000, the Company's interest rate cap
   agreement consisted of $120,000 (notional value) of purchased interest
   rate cap agreement, recorded at estimated fair value. Amortization
   expense is recorded as an adjustment to interest expense. For the
   quarter ended June 30, 2000 the Company recorded amortization expense of
   $243. The Company receives cash payments under this agreement should
   one-month LIBOR exceed the contract strike rate of the cap agreement.
   These payments are recorded as an adjustment to interest expense. For
   the quarter ended June 30, 2000 the Company received cash payments of
   $196 under this agreement.

   For the quarter ended June 30, 2000, the Company owned a $200,000
   (notional value) interest rate floor agreement. There was no cost
   associated with this agreement. The Company will receive cash payments
   should one-month LIBOR drop below the contract strike rate. These
   payments, if any, will be recorded as an adjustment to interest expense.
   For the quarter ended June 30, 2000 the Company did not receive cash
   payments under this agreement.

   Interest rate agreements contain an element of risk in the event that
   the counterparties to the agreements do not perform their obligations
   under the agreements. The Company minimizes its risk exposure by
   entering into agreements with parties rated at least A+ by Standard &
   Poor's Rating Services. Furthermore, the Company has interest rate
   agreements established with several different counterparties in order to
   reduce the risk of credit exposure to any one counterparty. Management
   does not expect any counterparty to default on their obligations and,
   therefore, does not expect to incur a loss.

   ITEM 2.  Management's Discussion and Analysis of Financial Condition and
            Results of Operations

   GENERAL: The Company was organized in November 1997 to invest in a
   diversified portfolio of multifamily, commercial and residential
   Mortgage Loans, MBS and other real estate related assets in the U.S. and
   non-U.S. markets. In March 1998, the Company received $296.9 million of
   net proceeds from the initial public offering of 20,000,000 shares and
   the private placement of 1,365,198 shares of its Common Stock, which the
   Company used to acquire its initial portfolio of investments. The
   Company commenced operations on March 24, 1998.

   The Company is a real estate finance company that generates income based
   on the spread between the interest income on its investments and the
   interest expense from borrowings used to finance its investments.
   Because the Company has elected to be taxed as a REIT its income is
   largely exempt from corporate taxation and the Company is able to
   generate a higher level of net interest earnings than otherwise
   obtainable by a taxable corporation making similar investments. The
   principal risks that the Company faces are (i) credit risk on the high
   yield real estate loans and securities it underwrites, (ii) interest
   rate risk on the spread between the rates (typically one month LIBOR) at
   which the Company borrows and the generally longer term rates (as
   represented by the U.S. Ten Year Treasury) at which the Company lends;
   and (iii) funding risk in the amount and cost of debt financing employed
   by the Company over time versus the level of such funding that is
   sustainable by the financing markets. These risks are discussed in more
   detail below, under the heading, "Quantitative and Qualitative
   Disclosures About Market Risk and under Capital Resources and
   Liquidity".

   The following discussion should be read in conjunction with the
   financial statements and related notes. Dollar amounts are expressed in
   thousands, other than per share amounts.

   MARKET CONDITIONS:
   Credit: The Company considers The Lehman Brothers delinquency statistics
   for 1998 conduit transactions to be the most relevant for its CMBS
   holdings, because most of the Company's CMBS were originated during
   1998. Pursuant to these statistics as of June 30, 2000, 41 different
   securitizations were being monitored by the index and 0.53% of principal
   balances were delinquent. As of March 31, 2000, these 41 securitizations
   had 0.67% of principal balances delinquent. The broader Lehman Brothers
   CMBS collateral delinquency statistics representing all CMBS conduit
   deals dates back to 1993 originations. As of June 30, 2000, 161
   securitizations were being monitored among the larger universe and 0.61%
   of outstanding balances were delinquent, compared to 152 securitizations
   monitored as of March 31, 2000 and 0.67% delinquent. The indices show a
   slight improvement in delinquencies but not significant enough to
   indicate a change in credit outlook.

   Morgan Stanley Dean Witter (MSDW) also tracks CMBS loan delinquencies
   using a slightly smaller universe. Their index tracks all CMBS
   transactions with more than $200,000 of collateral that have been
   seasoned for at least one year. This will generally adjust for the lower
   delinquencies that occur in newly originated collateral. As of June 30,
   2000, MSDW delinquencies on 120 securitizations were 0.83%. As of March
   31, 1999 this same index tracked 117 securitizations with delinquencies
   of 0.89%.

   Real Estate: The commercial real estate market in the U.S. is in a
   healthy equilibrium. Consistent GDP growth continues to generate demand
   for commercial space that has met the supply of new construction. While
   construction activity remains strong, most markets remain in balance
   with only some fast-growth Southern markets posing a concern. Exposure
   to store closings in the retail sector have posed litte risk to CMBS due
   to relatively low loan exposure to KMart, J.C. Penney, Winn Dixie
   closing. Overall retail demand has been supported by high levels of
   employment and growth in personal income.

   Interest Rates: Action by the Federal Reserve and buybacks of Treasury
   bonds have impacted both the shape of the Treasury curve and the level
   of interest-rate swap spreads. Mortgage rates and CMBS market prices are
   impacted by both Treasury yields and swap spreads. While interest rates
   generally rose in 1999, the second quarter of 2000 saw rising short-term
   interest rates and just modestly higher long-term rates. One month LIBOR
   increased by 51 basis points from 6.13% at March 31, 2000 to 6.64% at
   June 30, 2000. Yields on ten-year Treasury bonds increased by 1 basis
   point and on thirty-year bonds by 6 basis points to yields of 6.02% and
   5.90% respectively. With the recent data indicating a slowing economy
   the Federal Reserve is expected to maintain the level of short-term
   rates but could move them higher if this trend does not continue. See
   below the section titled, "Quantitative and Qualitative Disclosures
   About Market Risk" for a detailed discussion of how interest rates and
   spreads affect the Company.

   Real Estate Capital Markets: Liquidity and capital allocated to CMBS and
   commercial loans remains at the levels which prevailed at the beginning
   of 2000. Credit spreads widened modestly from 1999 year-end levels in
   sympathy with wider swap spread levels and wider spreads on high yield
   corporate bonds. CMBS spreads remain at historically wide levels despite
   growth in net operating income at the property level. Capital flows into
   the public real estate equity market turned positive in the second
   quarter with $389 million of inflows. This follows net outflows of $418
   million in the first quarter and outflows of $1.22 billion in 1999. This
   channel for investment in real estate equity has had difficulty
   attracting new investor interest relative to direct equity purchases.
   This has led to significant reinvestment opportunities as public and
   private real estate companies are forced to look to alternative sources
   of financing. As an example of the relative opportunity in real estate,
   evidence shows that investors continue to demand greater compensation
   for real estate related high yield paper, albeit at a narrower margin,
   than similarly rated corporate high yield paper in other industries. The
   chart below compares the credit spreads for high yield CMBS to high
   yield corporate bonds.

<TABLE>
<CAPTION>

                                     Average Credit Spreads (in basis points)*
                                     -----------------------------------------
                                     BB CMBS            BB Corporate        Difference
<S>                                   <C>                <C>                 <C>
   As of June 30, 2000                  588                454                 134
   As of March 31, 2000                 571                438                 133

                                     B CMBS             B Corporate         Difference
   As of June 30, 2000                  977                630                 347
   As of March 31, 2000                 931                646                 285
</TABLE>

   *Source - Lehman Brothers CMBS High Yield Index & Lehman Brothers High Yield
   Index


   EFFECT OF MARKET CONDITIONS ON COMPANY PERFORMANCE:
   The increase in credit spreads during the second quarter of 2000 led to
   a slight decrease in the value of the Company's investment portfolio.
   The unrealized loss on the Company's holdings of CMBS increased from
   $101,139 at March 31, 2000 to $101,399 at June 30, 2000. The Company
   performs a detailed review of its loss assumptions on a quarterly basis.
   As of June 30, 2000 the Company determined that there has been no
   material change in the credit quality of its portfolio.

   The capital raising opportunities remain a challenge despite the first
   sign of positive fund flows into the sector. During the second quarter
   the Company was able to raise a significant amount of liquid capital at
   very favorable terms through its acquisition of CORE Cap, Inc. The most
   significant aspect of the transaction was the issuance of the Series B
   10% perpetual, convertible preferred stock. The conversion price is
   $17.09 per share of the Company's common stock. This represents
   permanent fixed rate capital at well below what would otherwise be
   available in the capital markets. While the liquidation preference of
   the stock is $56,525 the market value of this instrument is
   approximately 76% of that amount, or $43,004. This $13,521 discount
   accrues to the benefit of the Company's common shareholders. The market
   value of the assets purchased was determined based on market bids and
   validated by significant sales. Therefore, the net asset value of the
   CORE Cap portfolio exceeded the value of the consideration paid.

   The preferred stock is perpetual, so the benefit of the discount remains
   with the Company indefinitely. After reducing that benefit for
   transaction costs and a small premium paid for the common stock the net
   amount of the benefit is approximately 4% of the net asset value of the
   Company's common equity prior to the merger.

   The portfolio acquired from CORE Cap was comprised of highly liquid
   investment grade quality residential and commercial mortgage backed
   securities. The Company's post acquisition strategy has been to
   liquidate these assets and redeploy the capital into higher yielding
   real estate assets to improve earnings. The portfolio was acquired with
   significant swap positions that are designed to act as a hedge on the
   related assets held. Through June 30, 2000 the Company liquidated
   approximately $465,000 of assets and reduced borrowings and hedge
   positions accordingly. This strategy will continue through the third
   quarter.

   The Company's earnings depend, in part, on the relationship between
   long-term interest rates and short-term interest rates. A significant
   part of Company's investments bear interest at fixed rates determined by
   reference to the yields of medium or long-term U.S. Treasury securities
   or at adjustable rates determined by reference (with a lag) to the
   yields on various short-term instruments. Approximately $100,000 of the
   Company's assets earns interest at rates that are determined with
   reference to LIBOR. All of the Company's borrowings bear interest at
   rates that are determined with reference to LIBOR. To the extent that
   interest rates on the Company's borrowings increase without an
   offsetting increase in the interest rates earned on the Company's
   investments, the Company's earnings could be negatively affected. As a
   consequence of the CORE Cap merger, the Company was more aggressive in
   hedging short-term rate risk. At June 30, 2000 the company had $502,000
   of notional amount of swaps where the company pays fixed rates and
   receives a LIBOR based floating rate. This effectively converts fixed
   rate assets into floating rate assets thereby protecting against
   short-term rate increases. The chart below compares the rate for the
   ten-year U.S. Treasury securities to the one-month LIBOR rate.


                              Ten Year
                              U.S Treasury         One month
                              Securities             LIBOR          Difference
                              ------------         ----------       -----------
   June 30, 2000              6.03%                   6.66%          (0.63%)
   March 31, 2000             6.02%                   6.13%          (0.11%)
   June 30, 1999              5.81%                   5.22%           0.59%

   The increase in LIBOR from March 31, 2000 to June 30, 2000 had a
   negative impact on the Company's financing costs. At the end of July
   2000, the ten-year U.S. Treasury yield had increased from its June 30,
   2000 level to 6.04%, and one month LIBOR decreased to 6.62% during the
   same period.

   The Company purchased its CMBS portfolio at prices that reflect the
   assumption that credit losses will occur. The adjusted purchase price of
   the Company's CMBS portfolio as of June 30, 2000 represents 62% of its
   par amount, while the market value is 46% of par. As the portfolio
   matures the Company expects to recoup this difference provided that the
   credit losses experienced are not greater than the credit losses assumed
   in the purchase analysis.

   The Company's CMBS represents approximately $600,000 of par
   collateralized by underlying pools of commercial mortgages with an
   original principal balance of over $9.2 billion as of June 30, 2000. The
   Company is in a first loss position with respect to these loans. The
   Company manages its credit risk through conservative underwriting at
   time of purchase, diversification, active monitoring of loan
   performance, and exercise of its right to control the workout process as
   early as possible. All of these processes are based on the extensive
   intranet-based analytic systems developed by BlackRock.

   In underwriting loans, the Company performs site inspections and/or
   desktop reviews of all loans in the pools. This process includes
   detailed analysis of regional economic factors, industry outlooks,
   project viability and documentation. Unacceptable risks are removed from
   the pool. An assumption of expected losses is developed and the
   securities are priced accordingly.

   Active monitoring of loan performance is a critical function that is
   performed via electronic uploads of information gathered from the master
   and special servicers of each deal, PNC Bank and external data
   providers. This internet based system allows the Company to monitor
   payments, debt service coverage ratios, regional economic statistics,
   general real estate market trends and other relevant factors.

   The Company also uses the internet system to monitor delinquencies. The
   Company updates this information monthly allowing for more detailed
   analysis of loans before problems develop. The following table shows the
   comparison of delinquencies:


<TABLE>
<CAPTION>

                                                        06/30/00                                         3/31/00
                                                        NUMBER OF           % OF                         NUMBER OF         % OF
                                        PRINCIPAL       LOANS/REO        COLLATERAL      PRINCIPAL         LOANS         COLLATERAL
                                        ---------       ---------        ----------      ---------       ---------       ----------
<S>                                      <C>                <C>            <C>           <C>                 <C>            <C>
Past due 30 days to 60 days               $21,355           4              0.23%         $14,567             6              0.16%
Past due 60 days to 90 days                 5,262           3              0.06           12,646             5              0.14
Past due 90 days or more                   17,487           4              0.19           27,940             6              0.30
REO                                        10,214           2              0.11           10,298             2              0.11
                                       ------------- ----------------- --------------- -------------- ---------------- ------------
TOTAL                                      54,318          13              0.59%         $65,451            19              0.71%
                                       ============= ================= =============== ============== ================ ============
</TABLE>

   Of the 13 delinquent loans at June 30, 2000, one is delinquent due to
   technical reasons and six are in foreclosure proceedings or workout
   negotiations. Regarding one of the loans, the party which originally
   contributed the loan to the CMBS trust has indemnified the trust against
   a loss of up to $1,300. This loan has a principal balance of $8,984.

   At March 31, 2000 the Company showed a resolved loan of $22,434 on its
   delinquency table. A resolved loan is technically not delinquent but the
   Company left it on the table because the Lehman index used to measure
   Company performance had not removed the loan from its delinquency
   report. The loan has since been reclassified in the Lehman index as
   current and therefore is removed from the Company's delinquency table.

   The Company's delinquency experience of 0.59% is in line with directly
   comparable collateral experience shown in the Lehman Brothers 1998 CMBS
   index at 0.53%.

   During the second quarter of 2000 the Company also experienced early
   payoffs of $5,433 representing 0.06% of the existing pool balance. These
   loans were paid at par with no loss. The anticipated losses attributable
   to these loans will be reallocated to the loans remaining in the pools,
   and no increase to loss adjusted yields will be made.

   The Company also owns three mezzanine whole loans. The California Loan
   is a $35 million second mortgage on an office construction project in
   Santa Monica, California. The building is expected to be completed on
   time during the third quarter. The building is currently 80% pre-leased
   at rents of approximately $40 per square foot. This is higher than the
   base case expectations at the time the Company originated the loan.
   Furthermore, the real estate values for this class of office space in
   Santa Monica have increased significantly since origination.

   The London Loan is a (pound) 21,459 Sterling denominated loan that was
   funded in August of 1998. It is secured by five luxury hotel properties
   in and around London, England. The operations of the hotels continue to
   meet expectations. While the underlying properties have performed well,
   the loan's estimated liquidation value as of June 30, 2000 was 96% of
   par.

   The Commercial Office Building Loan is a $30.6 million subordinated
   participation in a first mortgage secured by a 545 thousand square foot,
   100% leased, class A office building in Midtown Manhattan. The loan was
   originated at the end of the first quarter and is scheduled to mature in
   December, 2001.

   RECENT EVENTS: Subsequent to quarter-end, the Company applied a portion
   of its cash on hand to acquire, in related transactions, interests in
   two partnerships which each own a Class B suburban office building. The
   office buildings total 99 thousand and 120 thousand square feet and are
   located in Paoli and Newtown Pennsylvania. The properties are encumbered
   by first lien non-recourse mortgages of $20,457. The Company contributed
   approximately $5,200 of capital to the partnerships and will earn a
   return that is preferential to the other partners.

   Subsequent to quarter-end, the Company commenced documentation on a new
   $200 million one-year financing facility to provide additional
   flexibility for funding public and private single-family residential
   mortgage loan issues.

   As of June 30, 2000, $157,028 was available for future borrowings under
   the $185,000 Deutsche Bank Facility, $41,090 was available for future
   borrowings under the Company's $50,000 credit facility, $3.369 was
   available for future borrowings under the Company's term financing
   secured by the California Loan, and $126,016 was available for future
   borrowings under the Company's facility with ABN Amro Bank.

   FUNDS FROM OPERATIONS (FFO): Most industry analysts, including the
   Company, consider FFO an appropriate supplementary measure of operating
   performance of a REIT. In general, FFO adjusts net income for non-cash
   charges such as depreciation, certain amortization expenses and gains or
   losses from debt restructuring and sales of property. However, FFO does
   not represent cash provided by operating activities in accordance with
   GAAP and should not be considered an alternative to net income as an
   indication of the results of the Company's performance or to cash flows
   as a measure of liquidity.

   The Company computes FFO in accordance with the definition recommended
   by the National Association of Real Estate Investment Trusts. The
   Company believes that the exclusion from FFO of gains or losses from
   sales of property was not intended to address gains or losses from sales
   of securities as they apply to the Company. Accordingly, the Company
   includes gains or losses from sales of securities in its calculation of
   FFO.

   The Company's FFO for the three months ended June 30, 2000 and 1999 was
   $9,334 and $7,196, respectively, and $16,659 and $13,931 for the six
   months ended June 30, 2000 and 1999, respectively. FFO was the same as
   its GAAP net income for all periods reported.  The Company reported cash
   flows provided by operating activities of $19,586 and $178,746, cash
   flows provided by (used in) investing activities of $672,438 and $(749)
   and cash flows used in financing activities of $699,842 and $169,738 in
   its statement of cash flows for the six months ended June 30, 2000 and
   1999, respectively.

   RESULTS OF OPERATIONS

   Net income for the three and six months ended June 30, 2000 was $9,334,
   or $0.34 per share ($0.32 diluted) and $16,659, or $0.65 per share
   ($0.61 diluted), respectively. Further details of the changes are set
   forth below.

   Net income for the three and six months ended June 30, 1999 was $7,196,
   or $0.34 per share (basic and diluted) and $13,931, or $0.67 per share
   (basic and diluted), respectively. Further details of the changes are
   set forth below.

   INTEREST INCOME: The following tables sets forth information regarding
   the total amount of income from certain of the Company's
   interest-earning assets and the resulting average yields. Information is
   based on monthly average balances during the period.

<TABLE>
<CAPTION>

                                                                For the Three Months Ended June 30, 2000
                                                    ------------------------------------------------------------------
                                                          Interest               Average              Annualized
                                                           Income                Balance                Yield
                                                    ---------------------- --------------------- ---------------------
<S>                                                         <C>                 <C>                      <C>
CMBS                                                        $9,333              $375,288                 9.95%
Securities available for sale                                9,853               457,279                 8.62%
Commercial mortgage loans                                    2,989               100,746                11.87%
Mortgage loans held for sale                                 3,465               162,495                 8.53%
Cash and cash equivalents                                      363                21,000                 6.91%
                                                    ---------------------- --------------------- ---------------------
Total                                                      $26,003            $1,116,808                 9.31%
                                                    ====================== ===================== =====================


                                                                 For the Six Months Ended June 30, 2000
                                                    ------------------------------------------------------------------
                                                          Interest               Average              Annualized
                                                           Income                Balance                Yield
                                                    ---------------------- --------------------- ---------------------
CMBS                                                        $18,426              $374,399                9.84%
Securities available for sale                                15,103               388,583                7.77%
Commercial mortgage loans                                     4,977                87,634               11.36%
Mortgage loans held for sale                                  3,465                81,249                8.53%
Cash and cash equivalents                                       655                22,000                5.95%
                                                    ---------------------- --------------------- ---------------------
Total                                                       $42,625              $953,865                8.94%
                                                    ====================== ===================== =====================


                                                                For the Three Months Ended June 30, 1999
                                                    ---------------------- --------------------- ---------------------
                                                          Interest               Average              Annualized
                                                           Income                Balance                Yield
                                                    ---------------------- --------------------- ---------------------
CMBS                                                        $8,382              $353,403                 9.49%
Securities available for sale                                3,240               199,941                 6.48%
Commercial mortgage loan                                     1,135                45,374                10.00%
                                                    ---------------------- --------------------- ---------------------
Total                                                      $12,757              $598,718                 8.52%
                                                    ====================== ===================== =====================


                                                                 For the Six Months Ended June 30, 1999
                                                    ------------------------------------------------------------------
                                                          Interest               Average              Annualized
                                                           Income                Balance                Yield
                                                    ---------------------- --------------------- ---------------------
CMBS                                                       $16,739              $352,779                 9.49%
Other securities available for sale                          6,209               198,680                 6.25%
Commercial mortgage loans                                    2,043                41,200                 9.92%
                                                    ---------------------- --------------------- ---------------------
Total                                                      $24,991              $592,659                 8.43%
                                                    ====================== ===================== =====================
</TABLE>

   In addition to the foregoing, the Company earned $1,136 and $2,619 in
   interest income from securities held for trading during the three and
   six months ended June 30, 1999.

   INTEREST EXPENSE: The following table sets forth information regarding
   the total amount of interest expense from certain of the Company's
   collateralized borrowings. Information is based on daily average
   balances during the period.

<TABLE>
<CAPTION>

                                                                For the Three Months Ended June 30, 2000
                                                    ------------------------------------------------------------------
                                                          Interest               Average              Annualized
                                                           Expense               Balance                 Rate
                                                    ---------------------- --------------------- ---------------------
<S>                                                          <C>                 <C>                     <C>
Reverse repurchase agreements                               $4,807              $275,921                 6.97%
Lines of credit and term loan                               10,289               580,468                 7.09%
                                                    ---------------------- --------------------- ---------------------
Total                                                      $15,096              $856,389                 7.05%
                                                    ====================== ===================== =====================


                                                                 For the Six Months Ended June 30, 2000
                                                    ------------------------------------------------------------------
                                                          Interest               Average              Annualized
                                                           Expense               Balance                 Rate
                                                    ---------------------- --------------------- ---------------------
Reverse repurchase agreements                              $10,609              $327,230                 6.48%
Lines of credit and term loan                               11,954               334,631                 7.14%
                                                    ---------------------- --------------------- ---------------------
Total                                                      $22,563              $661,861                 6.82%
                                                    ====================== ===================== =====================


                                                                For the Three Months Ended June 30, 1999
                                                    ------------------------------------------------------------------
                                                          Interest               Average              Annualized
                                                           Expense               Balance                 Rate
                                                    ---------------------- --------------------- ---------------------
Reverse repurchase agreements                              $3,831              $299,532                  5.11%
Lines of credit borrowings                                    806                53,133                  6.07%
                                                    ---------------------- --------------------- ---------------------
Total                                                      $4,637              $352,665                  5.26%
                                                    ====================== ===================== =====================


                                                                 For the Six Months Ended June 30, 1999
                                                    ------------------------------------------------------------------
                                                          Interest               Average              Annualized
                                                           Expense               Balance                 Rate
                                                    ---------------------- --------------------- ---------------------
Reverse repurchase agreements                              $6,881              $244,690                  5.62%
Lines of credit borrowings                                  2,753                89,594                  6.15%
                                                    ---------------------- --------------------- ---------------------
Total                                                      $9,634              $334,284                  5.76%
                                                    ====================== ===================== =====================
</TABLE>

   In addition to the foregoing, the Company incurred $1,374 and $3,500 in
   interest expense from short-term borrowings relating to its securities
   held for trading and securities sold short during the three months and
   six months ended June 30, 1999, respectively.

   NET INTEREST MARGIN AND NET INTEREST SPREAD FROM THE PORTFOLIO: The
   Company considers its portfolio to consist of its securities available
   for sale, its mortgage loans held for sale, its commercial mortgage
   loans and its cash and cash equivalents because these assets relate to
   its core strategy of acquiring and originating high yield loans and
   securities backed by commercial real estate, while at the same time
   maintaining a portfolio of liquid investment grade securities to enhance
   the Company's liquidity.

   Net interest margin from the portfolio is annualized net interest income
   from the portfolio divided by the average market value of
   interest-earning assets in the portfolio. Net interest income from the
   portfolio is total interest income from the portfolio less interest
   expense relating to collateralized borrowings. Net interest spread from
   the portfolio equals the yield on average assets for the period less the
   average cost of funds for the period. The yield on average assets is
   interest income from the portfolio divided by average amortized cost of
   interest earning assets in the portfolio. The average cost of funds is
   interest expense from the portfolio divided by average outstanding
   collateralized borrowings.

   The following chart describes the interest income, interest expense, net
   interest margin, and net interest spread for the Company's portfolio.

                              For the Three Months         For the Three Months
                                      Ended                        Ended
                                  June 30, 2000                June 30, 1999
                           ----------------------------- ----------------------
  Interest Income                    $26,003                      $13,951
  Interest Expense                   $15,096                       $6,011
  Net Interest Margin                 4.11%                         5.35%
  Net Interest Spread                 2.74%                         4.61%

   OTHER EXPENSES: Expenses other than interest expense consist primarily
   of management fees and general and administrative expenses. Management
   fees of $1,700 and $2,990 for the three and six months ended June 30,
   2000, and $1,073 and $2,123 for the three and six months ended June 30,
   2000, respectively, were comprised solely of the base management fee
   paid to the Manager for such periods (in accordance with the management
   agreement between the Manager and the Company), as the Manager earned no
   incentive fee for such periods. Other expenses of $548 and $1,435 for
   the three and six months ended June 30, 2000 and $734 and $1,034 for the
   three and six months ended June 30, 1999, respectively, were comprised
   of accounting agent fees, custodial agent fees, directors' fees, fees
   for professional services, insurance premiums, broken deal expenses, due
   diligence costs, amortization of prepaid expenses, and other
   miscellaneous expenses. Other expenses for 2000 include the amortization
   of negative goodwill. The increase in other expenses in 2000 is
   primarily due to amortization of the costs of new credit facilities
   entered into in 1999, and the write-off of additional broken deal
   expenses.

   OTHER GAINS (LOSSES): During the three and six months ended June 30,
   2000 the Company sold a portion of its securities available-for-sale for
   total proceeds of $1,293,491, and $1,310,456 resulting in a realized
   gain of $682 and $705. For the three months ended June 30, 1999, the
   Company sold securities available-for-sale for total proceeds of $1,400,
   resulting in realized gain of $7. The (losses) gains on securities held
   for trading were $0 and $1,072 for the three months ended June 30, 2000
   and 1999, respectively, and $328 and $2,253 for the six months ended
   June 30, 2000 and 1999, respectively. The foreign currency losses of $7
   and $11 for the three and six months ended June 30, 2000 relate to the
   Company's net investment in a commercial mortgage loan denominated in
   pounds sterling and associated hedging.

   DIVIDENDS DECLARED: On May 22, 2000, the Company declared a dividend to
   its stockholders of $0.29 per share, payable on July 28, 2000 to
   stockholders of record on June 30, 2000. For U.S. Federal income tax
   purposes, the dividends are ordinary income to the Company's
   stockholders.

   On March 17, 1999, the Company declared a dividend to its stockholders
   of $0.29 per share, payable on April 15, 1999 to stockholders of record
   on March 31, 1999.

   TAX BASIS NET INCOME AND GAAP NET INCOME: Net income as calculated for
   tax purposes (tax basis net income) was estimated at $7,692 or $0.33
   ($0.28 diluted) per share and $16,010 or $0.73 ($0.61 diluted), for the
   three and six months ended June 30, 2000, respectively, compared to net
   income as calculated in accordance with generally accepted accounting
   principles (GAAP) of $9,334, or $0.34 ($0.32 diluted) per share, and
   $16,659 or $0.65 ($0.61 diluted), respectively.

   Net income as calculated for tax purposes (tax basis net income) was
   $7,751 and $15, 604, or $0.37 and $0.76 per share (basic and diluted),
   for the three months and six months ended June 30, 1999, respectively,
   compared to net income as calculated in accordance with generally
   accepted accounting principles of $7,196 and $13,931, or $0.34 and $0.67
   per share (basic and diluted), for the three months and six months ended
   June 30, 1999, respectively.

   For tax purposes the fourth quarter 1998 dividend of $0.29 is treated as
   a 1999 distribution. Thus, for tax purposes the total dividends paid
   year to date in 2000 and 1999 were $0.58 and $0.87 respectively.

   Differences between tax basis net income and GAAP net income arise for
   various reasons. For example, in computing income from its subordinated
   CMBS for GAAP purposes, the Company takes into account estimated credit
   losses on the underlying loans whereas for tax basis income purposes,
   only actual credit losses are taken into account. As there were no
   actual credit losses incurred in the three months ended June 30, 2000,
   tax basis income is higher than GAAP income. Certain general and
   administrative expenses may differ due to differing treatment of the
   deductibility of such expenses for tax basis income. Also, differences
   could arise in the treatment of premium and discount amortization on the
   Company's securities available for sale.

   A reconciliation of GAAP net income to tax basis net income is as
   follows:

<TABLE>
<CAPTION>

                                                   For the Three                 For the Six
                                                   Months Ended                  Months Ended
                                                   June 30, 1999                 June 30, 1999
                                                   -------------------------------------------------
<S>                                                        <C>                     <C>
GAAP net income                                            $9,334                  $16,659
Subordinate CMBS income differences                           658                    1,651
Core Cap merger expenses                                   (2,300)                  (2,300)
                                                   -------------------------------------------------
Tax basis net income                                      $ 7,692                $  16,010
                                                   =================================================


                                                   For the Three                 For the Six
                                                   Months Ended                  Months Ended
                                                   June 30, 1999                 June 30, 1999
                                                   -------------------------------------------------
GAAP net income                                        $7,196                       $13,931
Subordinate CMBS income differences                       942                         2,044
General and administrative expense differences           (387)                         (371)
                                                   -------------------------------------------------
Tax basis net income                                    $7,751                      $15,604
                                                   =================================================
</TABLE>


   CHANGES IN FINANCIAL CONDITION

   SECURITIES AVAILABLE FOR SALE: At June 30, 2000 and December 31, 1999,
   an aggregate of $101,399 and $101,139, respectively, in unrealized
   losses on securities available for sale was included as a component of
   accumulated other comprehensive income (loss) in stockholders' equity.



   The Company's securities available-for-sale, which are carried at
   estimated fair value, included the following at June 30, 2000:

<TABLE>
<CAPTION>

                                                                                  Estimated
                                                                                     Fair
           Security Description                                                     Value       Percentage
--------------------------------------------------------------------------------------------------------------
Commercial mortgage-backed securities:
<S>                                                                                 <C>             <C>
Investment grade rated securities                                                   $172,821        16.7%
Non-investment grade rated subordinated securities                                   252,847        24.4
Non-rated subordinated securities                                                     27,126         2.6
                                                                            ----------------------------------
                                                                                     452,794        43.7%
                                                                            ----------------------------------
Single-family residential mortgage-backed securities:
Agency adjustable rate securities                                                    140,450        13.5%
Agency fixed rate securities                                                         349,958        33.7
Privately issued investment grade rated fixed rate securities                         94,369         9.1
                                                                            ----------------- ----------------
                                                                                     584,777       56.3%
                                                                            ----------------- ----------------
                                                                                  $1,037,571       100.0%
                                                                            ================= ================

   The Company's securities available-for-sale included the following at
   December 31, 1999:

                                                                                 Estimated
                                                                                    Fair
           Security Description                                                     Value        Percentage
------------------------------------------------------------------------- ------------------- ----------------
Commercial mortgage-backed securities:
Non-investment grade rated subordinated securities                                  $243,708       42.7%
Non-rated subordinated securities                                                     29,025        4.6
                                                                          ------------------- ----------------
                                                                                     272,733       47.3
                                                                          ------------------- ----------------
Single-family residential mortgage-backed securities:
Agency adjustable rate securities                                                     58,858       10.2
Agency fixed rate securities                                                         165,825       28.7
Privately issued investment grade rated fixed rate securities                         76,821       13.3
                                                                          ------------------- ----------------
                                                                                     301,504       52.2
                                                                          ------------------- ----------------
Agency insured project loan                                                            2,958        0.5
                                                                          ------------------- ----------------
                                                                                    $577,195       100.0%
                                                                          =================== ================
</TABLE>

   BORROWINGS: As of June 30, 2000, the Company's debt has consisted of
   line-of-credit borrowings, term loans and reverse repurchase agreements,
   which have been collateralized by a pledge of most of the Company's
   securities available for sale, securities held for trading and its
   commercial mortgage loans. The Company's financial flexibility is
   affected by its ability to renew or replace on a continuous basis its
   maturing short-term borrowings. As of June 30, 2000, the Company has
   obtained financing in amounts and at interest rates consistent with the
   Company's short-term financing objectives.

   Under the lines of credit, term loans, and the reverse repurchase
   agreements, the lender retains the right to mark the underlying
   collateral to market value. A reduction in the value of its pledged
   assets will require the Company to provide additional collateral or fund
   margin calls. From time to time, the Company expects that it will be
   required to provide such additional collateral or fund margin calls.

   The following tables set forth information regarding the Company's
collateralized borrowings.
<TABLE>
<CAPTION>

                                                                           For the Six Months Ended
                                                                                June 30, 2000
                                                      -------------------------------------------------------------------
                                                            June 30,
                                                              2000                 Maximum               Range of
                                                             Balance               Balance              Maturities
                                                      ---------------------- --------------------- ----------------------
<S>                                                          <C>                 <C>                    <C>  <C>
Reverse repurchase agreements                                $776,664            $1,206,696             5 to 31 days
Line of credit and term loan borrowings                       187,548              $453,841            49 to 525 days
                                                      ---------------------- --------------------- ----------------------
</TABLE>

   HEDGING INSTRUMENTS: The Company's hedging policy with regard to its
   sterling denominated commercial mortgage loan is to minimize its
   exposure to fluctuations in the sterling exchange rate. At June 30,
   2000, the Company's hedging transactions outstanding consisted of
   forward currency exchange contracts pursuant to which the Company agreed
   to exchange (pound)8,000 (pounds sterling) for U.S. $13,152 on July 21,
   2000. On July 21, 2000 the Company entered into a forward exchange
   contract pursuant to which it agreed to exchange (pound)8,000 (pounds
   sterling) for $12,100 (U.S. dollars) on January 13, 2000. These
   contracts are intended to hedge currency risk in connection with the
   Company's investment in a commercial mortgage loan denominated in pounds
   sterling. The estimated fair value of the forward currency exchange
   contracts was $1,042 at June 30, 2000, which was recognized as a
   reduction of net foreign currency gains (losses).

   From time to time the Company may reduce its exposure to market interest
   rates by entering into various financial instruments that shorten
   portfolio duration. These financial instruments are intended to mitigate
   the effect of interest rates on the value of certain assets in the
   Company's portfolio. At June 30, 2000, the Company had outstanding a
   short position of 93 thirty-year U.S. Treasury Bond future contracts, 98
   five-year, and 513 ten-year U.S. Treasury Note future contracts expiring
   in September 30, 2000, which represented $9,300 and $101,100 in face
   amount of U.S. Treasury Bonds and Notes, respectively. The estimated
   unrealized loss of these contracts was approximately $2,877 at June 30,
   2000.

   The Company acquired interest rate swap agreements through the CORE Cap
   merger and assigned a cost to each contract equal to the fair market
   value of each contract. The amortized cost of these agreements was
   $18,217 at June 30, 2000, and their fair value included in other assets
   was $7,081. The cost of the swaps will be amortized into interest income
   over the remaining life of the swaps. At June 30, 2000 accrued net
   interest payable equaled $1,665. As of June 30, the weighted average
   interest rate receivable and payable is 6.49% and 6.37%, respectively.

   CAPITAL RESOURCES AND LIQUIDITY: Liquidity is a measurement of the
   Company's ability to meet potential cash requirements, including ongoing
   commitments to repay borrowings, fund investments, loan acquisition and
   lending activities and for other general business purposes. The primary
   sources of funds for liquidity consist of collateralized borrowings,
   principal and interest payments on and maturities of securities
   available for sale, securities held for trading and commercial mortgage
   loans, and proceeds from sales thereof.

   If the Company is unable to maintain its borrowings at their current
   level due to changes in the financing markets for the Company's assets,
   then the Company may be required to sell assets in order to achieve
   lower borrowings levels. In this event, the Company's level of net
   earnings would decline. The Company's principal strategies for
   mitigating this risk are to maintain portfolio leverage at levels it
   believes are sustainable and to diversify the sources and types of
   available borrowing and capital. The Company has utilized committed bank
   facilities and preferred stock, and will consider resecuritization or
   other achievable term funding of existing assets to diversify its
   existing capital base.

   On March 31, 1999, the Company filed a $200,000 shelf registration
   statement with the SEC. The shelf registration statement will permit the
   Company to issue a variety of debt and equity securities in the public
   markets. There can be no certainty, however, that the Company will be
   able to issue, on terms favorable to the Company, or at all, any of the
   securities so registered.

   As of June 30, 2000, $157,028 was available for future borrowings under
   the $185,000 Deutsche Bank Facility, $41,090 was available for future
   borrowings under the Company's $50,000 credit facility, $3,369 was
   available for future borrowings under the Company's term financing
   secured by the California Loan, and $126,016 was available for future
   borrowings under the Company's facility with ABN Amro Bank.

   On May 15, 2000 as part of the CORE Cap acquisition the Company issued
   4,180,552 shares of common stock and 2,260,997 shares of Series B
   Preferred Stock.

   The Company's operating activities provided cash of $19,586 and $178,746
   during the six months ended June 30, 2000, and 1999, respectively,
   primarily through sales of trading securities in excess of purchases in
   1999 and primarily through net income in 2000.

   The Company's investing activities provided (used) cash totaling
   $672,438 and $(749) during the six months ended June 30, 2000, and 1999,
   respectively, primarily to purchase securities available-for-sale and to
   fund commercial mortgage loans, offset by principal payments received on
   securities available-for-sale and proceeds from sales of securities
   available-for-sale.

   The Company's financing activities used cash of $699,842 during the six
   months ended June 30, 2000 primarily to reduce the level of borrowings
   assumed in the CORE Cap merger and to pay distributions. The Company's
   financing activities used cash of $169,738 during the six months ended
   June 30, 1999 primarily to reduce the level of short-term borrowings and
   to pay distributions.

   Although the Company's portfolio of securities available-for-sale was
   acquired at a net discount to the face amount of such securities, the
   Company has received to date and expects to continue to receive
   sufficient cash flows from these securities to fund distributions to the
   Company's stockholders.

   The Company is subject to various covenants in its lines of credit,
   including maintaining a minimum GAAP net worth of $140,000, a
   debt-to-equity ratio not to exceed 4.5 to 1, a minimum cash requirement
   based upon certain debt to equity ratios, a minimum debt service
   coverage ratio of 1.5, and a minimum liquidity reserve of $10,000.
   Additionally, the Company's GAAP net worth cannot decline by more than
   37% during the course of any two consecutive fiscal quarters. As of June
   30, 2000 and December 31, 1999, the Company was in compliance with all
   such covenants.

   The Company's ability to execute its business strategy depends to a
   significant degree on its ability to obtain additional capital. Factors
   which could affect the Company's access to the capital markets, or the
   costs of such capital, include changes in interest rates, general
   economic conditions and perception in the capital markets of the
   Company's business, covenants under the Company's current and future
   credit facilities, results of operations, leverage, financial conditions
   and business prospects. Current conditions in the capital markets for
   REITs such as the Company have made permanent financing transactions
   more difficult and more expensive than at the time of the Company's
   initial public offering. Consequently, there can be no assurance that
   the Company will be able to effectively fund future growth through the
   capital markets. Except as discussed herein, management is not aware of
   any other trends, events, commitments or uncertainties that may have a
   significant effect on liquidity.

   REIT STATUS: The Company has elected to be taxed as a REIT and to comply
   with the provisions of the Internal Revenue Code of 1986, as amended,
   with respect thereto. Accordingly, the Company generally will not be
   subject to Federal income tax to the extent of its distributions to
   stockholders and as long as certain asset, income and stock ownership
   tests are met. The Company may, however, be subject to tax at corporate
   rates or at excise tax rates on net income or capital gains not
   distributed.

   INVESTMENT COMPANY ACT: The Company intends to conduct its business so
   as not to become regulated as an investment company under the Investment
   Company Act of 1940, as amended (the "Investment Company Act"). Under
   the Investment Company Act, a non-exempt entity that is an investment
   company is required to register with the Securities and Exchange
   Commission ("SEC") and is subject to extensive, restrictive and
   potentially adverse regulation relating to, among other things,
   operating methods, management, capital structure, dividends and
   transactions with affiliates. The Investment Company Act exempts
   entities that are "primarily engaged in the business of purchasing or
   otherwise acquiring mortgages and other liens on and interests in real
   estate" ("Qualifying Interests"). Under current interpretation by the
   staff of the SEC, to qualify for this exemption, the Company, among
   other things, must maintain at least 55% of its assets in Qualifying
   Interests. Pursuant to such SEC staff interpretations, certain of the
   Company's interests in agency pass-through and mortgage-backed
   securities and agency insured project loans are Qualifying Interests. In
   general, the Company will acquire subordinated interests in commercial
   mortgage-backed securities ("subordinated CMBS") only when such mortgage
   securities are collateralized by pools of first mortgage loans, when the
   Company can monitor the performance of the underlying mortgage loans
   through loan management and servicing rights, and when the Company has
   appropriate workout or foreclosure rights with respect to the underlying
   mortgage loans. When such arrangements exist, the Company believes that
   the related subordinated CMBS constitute Qualifying Interests for
   purposes of the Investment Company Act. Therefore, the Company believes
   that it should not be required to register as an "investment company"
   under the Investment Company Act as long as it continues to invest
   primarily in such subordinated CMBS and/or in other Qualifying
   Interests. However, if the SEC or its staff were to take a different
   position with respect to whether the Company's subordinated CMBS
   constitute Qualifying Interests, the Company could be required to modify
   its business plan so that either (i) it would not be required to
   register as an investment company or (ii) it would comply with the
   Investment Company Act and be able to register as an investment company.
   In such event, (i) modification of the Company's business plan so that
   it would not be required to register as an investment company would
   likely entail a disposition of a significant portion of the Company's
   subordinated CMBS or the acquisition of significant additional assets,
   such as agency pass-through and mortgage-backed securities, which are
   Qualifying Interests or (ii) modification of the Company's business plan
   to register as an investment company would result in significantly
   increased operating expenses and would likely entail significantly
   reducing the Company's indebtedness (including the possible prepayment
   of the Company's short-term borrowings), which could also require it to
   sell a significant portion of its assets. No assurances can be given
   that any such dispositions or acquisitions of assets, or deleveraging,
   could be accomplished on favorable terms. Consequently, any such
   modification of the Company's business plan could have a material
   adverse effect on the Company. Further, if it were established that the
   Company were an unregistered investment company, there would be a risk
   that the Company would be subject to monetary penalties and injunctive
   relief in an action brought by the SEC, that the Company would be unable
   to enforce contracts with third parties and that third parties could
   seek to obtain rescission of transactions undertaken during the period
   it was established that the Company was an unregistered investment
   company. Any such results would be likely to have a material adverse
   effect on the Company.

   ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   MARKET RISK: Market risk is the exposure to loss resulting from changes
   in interest rates, credit curve spreads, foreign currency exchange
   rates, commodity prices and equity prices. The primary market risks to
   which the Company is exposed are interest rate risk and credit curve
   risk. Interest rate risk is highly sensitive to many factors, including
   governmental, monetary and tax policies, domestic and international
   economic and political considerations and other factors beyond the
   control of the Company. Credit risk is highly sensitive to dynamics of
   the markets for commercial mortgage securities and other loans and
   securities held by the Company. Excessive supply of these assets
   combined with reduced demand will cause the market to require a higher
   yield. This demand for higher yield will cause the market to use a
   higher spread over the U.S. Treasury securities yield curve, or other
   benchmark interest rates, to value these assets. Changes in the general
   level of the U.S. Treasury yield curve can have significant effects on
   the market value of the Company's portfolio. The majority of the
   Company's assets are fixed rate securities valued based on a market
   credit spread to U.S. Treasuries. As U.S. Treasury securities are priced
   to a higher yield and/or the spread to U.S. Treasuries used to price the
   Company's assets is increased, the market value of the Company's
   portfolio may decline. Conversely, as U.S. Treasury securities are
   priced to a lower yield and/or the spread to U.S. Treasuries used to
   price the Company's assets is decreased, the market value of the
   Company's portfolio may increase. Changes in the market value of the
   Company's portfolio may affect the Company's net income or cash flow
   directly through their impact on unrealized gains or losses on
   securities held for trading or indirectly through their impact on the
   Company's ability to borrow. Changes in the level of the U.S. Treasury
   yield curve can also affect, among other things, the prepayment
   assumptions used to value certain of the Company's securities and the
   Company's ability to realize gains from the sale of such assets. In
   addition, changes in the general level of the LIBOR money market rates
   can affect the Company's net interest income. The majority of the
   Company's liabilities are floating rate based on a market spread to U.S.
   LIBOR. As the level of LIBOR increases or decreases, the Company's
   interest expense will move in the same direction.

   The Company may utilize a variety of financial instruments, including
   interest rate swaps, caps, floors and other interest rate exchange
   contracts, in order to limit the effects of fluctuations in interest
   rates on its operations. The use of these types of derivatives to hedge
   interest-earning assets and/or interest-bearing liabilities carries
   certain risks, including the risk that losses on a hedge position will
   reduce the funds available for payments to holders of securities and,
   indeed, that such losses may exceed the amount invested in such
   instruments. A hedge may not perform its intended purpose of offsetting
   losses or increased costs. Moreover, with respect to certain of the
   instruments used as hedges, the Company is exposed to the risk that the
   counterparties with which the Company trades may cease making markets
   and quoting prices in such instruments, which may render the Company
   unable to enter into an offsetting transaction with respect to an open
   position. If the Company anticipates that the income from any such
   hedging transaction will not be qualifying income for REIT income test
   purposes, the Company may conduct part or all of its hedging activities
   through a to-be-formed corporate subsidiary that is fully subject to
   federal corporate income taxation. The profitability of the Company may
   be adversely affected during any period as a result of changing interest
   rates.

   The following tables quantify the potential changes in the Company's net
   portfolio value and net interest income under various interest rate and
   credit spread scenarios. Net portfolio value is defined as the value of
   interest-earning assets net of the value of interest-bearing
   liabilities. It is evaluated using an assumption that interest rates, as
   defined by the U.S. Treasury yield curve, increase or decrease up to 300
   basis points and the assumption that the yield curves of the rate shocks
   will be parallel to each other.

   Net interest income is defined as interest income earned from
   interest-earning assets net of the interest expense incurred by the
   interest bearing liabilities. It is evaluated using the assumptions that
   interest rates, as defined by the U.S. LIBOR curve, increase or decrease
   by 200 basis points and the assumption that the yield curve of the LIBOR
   rate shocks will be parallel to each other. Market value in this
   scenario is calculated using the assumption that the U.S. Treasury yield
   curve remains constant.

   All changes in income and value are measured as percentage changes from
   the respective values calculated in the scenario labeled as "Base Case".
   The base interest rate scenario assumes interest rates as of June 30,
   2000. Actual results could differ significantly from these estimates.


        PROJECTED PERCENTAGE CHANGE IN PORTFOLIO NET MARKET VALUE
                 GIVEN U.S. TREASURY YIELD CURVE MOVEMENTS


        --------------------------------------------------------
                  Change in               Projected Change in
            Treasury Yield Curve,              Portfolio
               +/- Basis Points            Net Market Value
        ------------------------------- ------------------------
                     -300                        17.1%
                     -200                        12.2%
                     -100                         6.5%
                  Base Case                        0
                     +100                        (7.3)%
                     +200                       (15.5)%
                     +300                       (24.4)%



         PROJECTED PERCENTAGE CHANGE IN PORTFOLIO NET MARKET VALUE
                       GIVEN CREDIT SPREAD MOVEMENTS


         --------------------------------------------------------
                   Change in               Projected Change in
                Credit Spreads,                 Portfolio
                +/- Basis Points            Net Market Value
         ------------------------------- ------------------------
                      -300                        67.0%
                      -200                        43.8%
                      -100                        21.5%
                   Base Case                        0
                      +100                       (20.6)%
                      +200                       (40.4)%
                      +300                       (59.4)%


        PROJECTED PERCENTAGE CHANGE IN PORTFOLIO NET INTEREST INCOME
                           GIVEN LIBOR MOVEMENTS


        ---------------------------------------------------------
                                          Projected Change in
               Change in LIBOR,                Portfolio
               +/- Basis Points           Net Interest Income
        ------------------------------- -------------------------
                     -200                        17.6%
                     -100                         8.8%
                  Base Case                        0
                     +100                        (8.8)%
                     +200                       (17.6)%

   CREDIT RISK: Credit risk is the exposure to loss from loan defaults.
   Default rates are subject to a wide variety of factors, including, but
   not limited to, property performance, property management, supply and
   demand factors, construction trends, consumer behavior, regional
   economics, interest rates, the strength of the American economy, and
   other factors beyond the control of the Company.

   All loans are subject to a certain probability of default. The nature of
   the CMBS assets owned are such that all losses experienced by a pool of
   mortgages will be borne by the Company. Changes in the expected default
   rates of the underlying mortgages will significantly affect the value of
   the Company, the income it accrues and the cash flow it receives. An
   increase in default rates will reduce the book value of the Company's
   assets and the Company's earnings and cash flow available to fund
   operations and pay dividends.

   The Company manages credit risk through the underwriting process,
   establishing loss assumptions, and careful monitoring of loan
   performance. Before acquiring a security that represents a pool of
   loans, the Company will perform a rigorous analysis of the quality of
   substantially all of the loans proposed for that security. As a result
   of this analysis, loans with unacceptable risk profiles will be removed
   from the proposed security. Information from this review is then used to
   establish loss assumptions. The Company will assume that a certain
   portion of the loans will default and calculate an expected, or loss
   adjusted yield, based on that assumption. After the securities have been
   acquired, the Company monitors the performance of the loans, as well as
   external factors that may affect their value. Factors that indicate a
   higher loss severity or timing experience is likely to cause a reduction
   in the expected yield, and therefore reduce the earnings of the Company
   and may require a significant write down of assets.

   For purposes of illustration, a doubling of the losses in the Company's
   credit sensitive portfolio, without a significant acceleration of those
   losses would reduce the expected yield from approximately 9.84% to
   8.40%. This would reduce GAAP income going forward and cause a
   significant write down in assets at the time the loss assumption is
   changed.

   ASSET AND LIABILITY MANAGEMENT: Asset and liability management is
   concerned with the timing and magnitude of the repricing and/or maturing
   of assets and liabilities. It is the objective of the Company to attempt
   to control risks associated with interest rate movements. In general,
   management's strategy is to match the term of the Company's liabilities
   as closely as possible with the expected holding period of the Company's
   assets. This is less important for those assets in the Company's
   portfolio considered liquid, as there is a very stable market for the
   financing of these securities.

   The Company uses interest rate duration as its primary measure of
   interest rate risk. This metric, expressed when considering any existing
   leverage, allows the Company's management to approximate changes in the
   net market value of the Company's portfolio given potential changes in
   the U.S. Treasury yield curve. Interest rate duration considers both
   assets and liabilities. As of June 30, 2000, the Company's duration on
   equity was approximately 6.9 years. This implies that a parallel shift
   of the U.S. Treasury yield curve of 100 basis points would cause the
   Company's net asset value to increase or decrease by approximately 6.9%.
   Because the Company's assets, and their markets, have other, more
   complex sensitivities to interest rates, the Company's management
   believes that this metric represents a good approximation of the change
   in portfolio net market value in response to changes in interest rates,
   though actual performance may vary due to changes in prepayments, credit
   spreads and the cost of increased market volatility.

   Other methods for evaluating interest rate risk, such as interest rate
   sensitivity "gap" (defined as the difference between interest-earning
   assets and interest-bearing liabilities maturing or repricing within a
   given time period), are used but are considered of lesser significance
   in the daily management of the Company's portfolio. The majority of the
   Company's assets pay a fixed coupon and the income from such assets are
   relatively unaffected by interest rate changes. The majority of the
   Company's liabilities are borrowings under its line of credit or reverse
   repurchase agreements that bear interest at variable rates that reset
   monthly. Given this relationship between assets and liabilities, the
   Company's interest rate sensitivity gap is highly negative. This implies
   that a period of falling short-term interest rates will tend to increase
   the Company's net interest income while a period of rising short-term
   interest rates will tend to reduce the Company's net interest income.
   Management considers this relationship when reviewing the Company's
   hedging strategies. Because different types of assets and liabilities
   with the same or similar maturities react differently to changes in
   overall market rates or conditions, changes in interest rates may affect
   the Company's net interest income positively or negatively even if the
   Company were to be perfectly matched in each maturity category.

   The Company currently has positions in forward currency exchange
   contracts to hedge currency exposure in connection with its commercial
   mortgage loan denominated in pounds sterling. The purpose of the
   Company's foreign currency-hedging activities is to protect the Company
   from the risk that the eventual U.S. dollar net cash inflows from the
   commercial mortgage loan will be adversely affected by changes in
   exchange rates. The Company's current strategy is to roll these
   contracts from time to time to hedge the expected cash flows from the
   loan. Fluctuations in foreign exchange rates are not expected to have a
   material impact on the Company's net portfolio value or net interest
   income.

   FORWARD-LOOKING STATEMENTS: Certain statements contained herein are not,
   and certain statements contained in future filings by the Company with
   the SEC, in the Company's press releases or in the Company's other
   public or shareholder communications may not be, based on historical
   facts and are "Forward-looking statements" within the meaning of the
   Private Securities Litigation Reform Act of 1995. Forward-looking
   statements which are based on various assumptions (some of which are
   beyond the Company's control), may be identified by reference to a
   future period or periods, or by the use of forward-looking terminology,
   such as "may," "will," "believe," "expect," "anticipate," "continue," or
   similar terms or variations on those terms, or the negative of those
   terms. Actual results could differ materially from those set forth in
   forward-looking statements due to a variety of factors, including, but
   not limited to, those related to the economic environment, particularly
   in the market areas in which the Company operates, competitive products
   and pricing, fiscal and monetary policies of the U.S. Government,
   changes in prevailing interest rates, acquisitions and the integration
   of acquired businesses, credit risk management, asset/liability
   management, the financial and securities markets and the availability of
   and costs associated with sources of liquidity. Additional information
   regarding these and other important factors that could cause actual
   results to differ from those in the Company's forward looking statements
   are contained under the section entitled "Risk Factors" in the Company's
   Registration Statement on Form S-3 (File No. 333-32155), as filed with
   the SEC on March 10, 2000 and in the Company's Registration Statement on
   Form S-4 (File No.333-3596), as filed with the SEC on March 30, 2000, as
   amended by Amendment No.1 to the Company's Registration Statement on
   Form S-4, as filed with the SEC on April 11, 2000. The Company hereby
   incorporates by reference those risk factors in this Form 10-Q. The
   Company does not undertake, and specifically disclaims any obligation,
   to publicly release the result of any revisions which may be made to any
   forward-looking statements to reflect the occurrence of anticipated or
   unanticipated events or circumstances after the date of such statements.




   Part II - OTHER INFORMATION

   Item 1.      Legal Proceedings

   At June 30, 2000 there were no pending legal proceedings to which the
   Company was a party or of which any of its property was subject.

   Item 2.      Changes in Securities and Use of Proceeds

   Upon completion of the CORE Cap merger, the liquidation preference
   payable on shares of the Company's Series A Preferred Stock was
   increased from $27.75 to $28.50 per share.

   Upon completion of the CORE Cap merger, the Company issued 2,260,997,
   shares of Series B Preferred Stock, which are convertible into the
   Company's common stock at a conversion price of $17.09 per share,
   subject to adjustments.

   Item 3.     Defaults Upon Senior Securities

   Not applicable

   Item 4.     Submission of Matters to a Vote of Security Holders

   On May 22, 2000, the Company held its annual meeting of shareholders.
   The shareholders voted, in person or by proxy, for (i) the election of
   three nominees to serve on the Board of Directors for a term of three
   years or until their respective successors are duly elected and qualify,
   (ii) the ratification of the appointment of Deloitte & Touche LLP as the
   independent auditors of the Company for the fiscal year ending December
   31, 2000 and (iii) the approval of the issuance of the Company's common
   stock upon conversion of shares of the Company's Series B Preferred
   Stock, which Series B Preferred Stock was subsequently issued pursuant
   to an agreement and plan of merger between the Company, Anthracite
   Acquisition Corporation, a Delaware corporation and a wholly owned
   subsidiary of the Company, and CORE Cap, Inc. The results of the voting
   are shown below:


<TABLE>
<CAPTION>

               Director                     Votes Cast For       Votes Cast Against or Withheld
 ------------------------------------------------------------------------------------------------
<S>                                           <C>                            <C>
 Laurence D. Fink                             19,660,519                     352,940
 Kendrick R. Wilson                           19,653,594                     392,312
 Andrew P. Rifkin                             19,621,147                     359,865

          Independent Auditor
 ------------------------------------
 Deloitte & Touche                            19,934,760                     78,699

 Issuance of Common Stock upon
 conversion of Series B Preferred
 Stock                                        13,487,201                     181,435
</TABLE>


   Item 5.     Other Information

   None

   Item 6.     Exhibits and Reports on Form 8-K

(a)      Exhibits

       None.

(b)      Reports on Form 8-K

       The Company filed a current report on Form 8-K (the "8-K") with the
       SEC on May 30, 2000. The Company reported in the 8-K that the
       Company and CORE Cap had completed the merger of a wholly owned
       subsidiary of the Company with and into CORE Cap on May 15, 2000.
       The Company also reported in the 8-K that on May 22, 2000, the
       Company held its annual meeting of stockholders at which the
       proposal to permit conversion of the Company's Series B Preferred
       Stock was approved by the Company's stockholders. The Company did not
       file any financial statements as part of the 8-K.



                                 SIGNATURES

   Pursuant to the requirements 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.




                                 ANTHRACITE CAPITAL, INC.



   Dated:  August 14, 2000        By: /s/ Hugh R. Frater
                                      ---------------------------------
                                      Name: Hugh R. Frater
                                      Title: President and Chief Executive
                                      Officer (authorized officer of
                                      registrant)




   Dated:  August 14, 2000         By: /s/ Richard M. Shea
                                       ------------------------------
                                       Name: Richard M. Shea
                                       Title: Chief Operating Officer and Chief
                                       Financial Officer (principal accounting
                                        officer)