<PAGE>   1

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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                   ----------


For Quarter Ended June 30, 1998                 Commission File Number 1-6249
                  -------------                                        ------

             First Union Real Estate Equity and Mortgage Investments
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            Ohio                                                 34-6513657
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

  Suite 1900, 55 Public Square
        Cleveland, Ohio                                           44113-1937  
---------------------------------------------------           ------------------
(Address  of  principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code:              (216) 781-4030
                                                              -----------------

--------------------------------------------------------------------------------
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.

                             Yes [X]         No [ ]


         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

  31,431,326 Shares of Beneficial Interest outstanding as of June 30, 1998
  ------------------------------------------------------------------------

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



               Total number of pages contained in this report: 13
                                                               --

<PAGE>   2



PART I - FINANCIAL INFORMATION
------------------------------

Item 1.  Financial Statements.
-------  ---------------------

         The combined financial statements included herein have been prepared by
the registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the registrant believes that the disclosures
contained herein are adequate to make the information presented not misleading.
It is suggested that these combined financial statements be read in conjunction
with the combined financial statements and the notes thereto included in the
registrant's latest annual report on Form 10-K.

         The "Combined Balance Sheets" as of June 30, 1998 (unaudited) and
December 31, 1997 (audited) and "Combined Statements of Income and Combined 
Statements of Changes in Cash" for the periods ended June 30, 1998 and 1997, of
the registrant, and "Notes to Combined Financial Statements," are included
herein. These financial statements reflect, in the opinion of the registrant,
all adjustments (consisting of normal recurring accruals) necessary to present
fairly the combined financial position and results of operations for the
respective periods in conformity with generally accepted accounting principles
consistently applied.

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

Financial Condition
-------------------

         In January 1998, the registrant acquired two parking garages for $44.8
million in cash, the assumption of $.7 million in mortgage debt and the issuance
of a $.9 million mortgage note payable. The parking garages are located in
Chicago, IL and Columbus, OH. Additionally, in February 1998, the registrant
acquired a parking garage in Richmond, VA for $9.1 million in cash and a
development site in Cleveland, OH for $3.3 million in cash. The development site
is leased on a short-term basis to the former owner until construction of a
parking garage commences. In March 1998, the registrant acquired a surface
parking lot adjacent to the Ballpark at Arlington in Arlington, TX for $3
million in cash. The cash required for these acquisitions was funded with
proceeds from the registrant's bank credit facilities.

         The registrant in January 1998 received $6.2 million in cash as full
repayment of a mortgage investment secured by a property in Middletown, WV. In
May 1998, the registrant received $18.8 million in cash as full repayment of a
mortgage investment secured by an office building in Cleveland, OH. The proceeds
were used to repay bank loans under the registrant's bank credit facilities.

         In February 1998, 951,000 preferred shares of beneficial interest were
converted into approximately 3,144,000 shares of beneficial interest.

         The registrant in May 1998, sold its investment in the land beneath an
office building in Cleveland, Ohio for $6 million resulting in a capital gain of
$1.7 million. The proceeds were used to reduce short-term borrowings.

         In May 1998, the registrant obtained a $30 million non-recourse
mortgage secured by its parking garage in Chicago, IL. The mortgage is for three
years at an interest rate of LIBOR plus 175 basis points and is interest only.

         On June 1, 1998, the registrant's affiliated management company,
purchased the remaining non-voting common shares of Impark for $11.2 million
from Impark's former owner. The non-voting common stock was recorded as an other
liability in the Combined Financial Statements. The registrant, for a fee from
the former owner of Impark, had provided a 



                                       2
<PAGE>   3

financial guarantee that the shares would be redeemed. Upon completion of the
redemption, the registrant sold $11.4 million of U.S. Treasury bills which had
collateralized the financial guarantee.

         In June 1998, Impark terminated its systems project to integrate all
reporting functions and bring all systems to year 2000 compliance. Impark is
currently reviewing other software solutions which will provide year 2000
compliance. The cost of this project is estimated to be immaterial to the
registrant and will be expensed as incurred. The registrant's systems are year
2000 compliant.

         The registrant in June 1998 obtained waivers on its bank covenants in
exchange for a fee of $625,000. The waivers were required due to the election
of nine new board members to fill three existing board seats and the six, newly
created board seats which were added in the May 19, 1998 special shareholders
meeting. The aforementioned action created a change of control as defined in the
bank loan covenants and created a covenant violation which allowed the bank
loans to be called by their lenders. The bank covenant waiver also allowed the
registrant to exclude certain one-time expenses resulting from the change of
control and proxy and litigation expenses from causing additional defaults
under the bank covenants. The waiver covers the second quarter of 1998.
Additionally, Impark received a waiver under its bank loans for $100,000 U.S. 
which resulted from the registrant's change of control and from losses 
resulting from its manufacturing subsidiary in the first quarter of 1998.

         In July 1998, legislation was signed into law that revoked the
"grandfathered paired-share structure status" for real property interests
acquired or not under binding contract as of March 26, 1998. The effect of this
legislation is to treat acquired real property interests together with the
paired operating entity for purposes of applying real estate investment trust
(REIT) provisions under the Internal Revenue Code. The registrant is exploring
the impact that this legislation will have on its future operations, but does
not believe that this legislation will have a material adverse impact on the
current operations of the registrant.

Liquidity and Capital Resources
-------------------------------

         Net cash provided by operations was $5.6 million as compared to cash
provided of $13.1 million when comparing the first six months of 1998 to the
same period of 1997. The decrease in cash provided from operations is primarily
the result of a net loss of $12.3 million offset by an increase in accrued
liabilities in the first six months of 1998. The net loss was primarily caused
by several one-time charges triggered by the registrant's change of control as
detailed in the following section "Results of Operations". Dividends to shares
of beneficial interest paid in 1998 of $6.6 million represented 118% of net cash
for operations.

         The registrant received $25 million in full repayment of two mortgage
investments secured by a mall in Middletown, WV and an office building in
Cleveland, OH during the first six months of 1998. The proceeds were used to
repay borrowings under the registrant's bank credit facilities. Additionally,
the registrant in May 1998 sold land in Cleveland, OH for $6 million which was
also used to repay bank credit facilities.

         As noted previously, the registrant acquired four parking facilities
and a development site for $60.2 million. The properties were acquired by
borrowing under the bank credit facilities, assumption of a $.7 million mortgage
and the issuance of a $.9 million second mortgage.

         The registrant invested $14.2 million in its existing portfolio
primarily to construct the first phase of a shopping center in Abilene, TX and
continue to tenant the former retail center in Denver, CO, which has been
converted into an office technology center.

         As noted previously, the registrant's affiliated management company
purchased the remaining non-voting common stock of Impark that it did not own in
June 1998 for $11.2 million.

         During the second quarter of 1998, the registrant sold $2.1 million of
stock of another REIT and $11.4 in U.S. Treasury bills. The U.S. Treasury bills
were collateral for a financial guarantee that the registrant had made in
conjunction with the registrant's affiliated management company's acquisition of
Impark.

         In May 1998, the registrant obtained a $30 million mortgage loan on its
Chicago, IL parking garage. The proceeds were used to repay bank lines of
credit.

         In June 1998, the registrant suspended its quarterly dividend to
shareholders of beneficial interest and adopted a policy of making only the
minimum required distributions 


                                       3
<PAGE>   4
to maintain its tax status as a REIT. Additionally, the registrant has adopted a
policy of making dividend distributions on an annual basis. Based on current
estimates of 1998 taxable income, the registrant does not anticipate additional 
dividends for shareholders of beneficial interest for 1998. The registrant 
intends to pay the Series A Cumulative Convertible Preferred Share dividend.


         The registrant has approximately $50 million available under its bank
line of credit as of June 30, 1998. The registrant has approximately $10 million
in planned capital expenditures and, approximately $2 million of mortgage
principal payments and $2 million to fund in property acquisitions over the last
six months of 1998. 

         In July 1998, the registrant announced a tender offer to purchase for
cash all of its outstanding $100 million, 8 7/8% Senior Notes due 2003 at $970
plus accrued interest per $1000 note. Concurrent with the tender offer, the
registrant conducted a consent solicitation in order to effect certain changes
to the indenture of the Senior Notes and to terminate the listing of the 8 7/8%
Senior Notes on the New York Stock Exchange in exchange for $3 per $1000 note. 
As of the end of the solicitation period, holders of 88% of the Senior Notes had
tendered and consented to the indenture modification. On August 11, 1998,
registrant repurchased approximately $88 million of its senior notes with the
proceeds of a $90 million six-month loan that has two three month extension 
periods and bears interest at 9 7/8% per annum. The lenders consisted of a 
syndicate led by Bankers Trust Company, and included in equal participations 
Bankers Trust Company, BankBoston, N.A., Blackacre Bridge Capital, Elliot 
Associates, Gotham Partners and Wellsford Capital. The registrant intends to 
repay this loan from the proceeds of a rights offering which the registrant 
will conduct as soon as practicable. To fund the loan, the lenders required 
standby purchase commitments under the planned rights offering for the amount 
of the loan. Gotham Partners and Elliott Associates have provided such 
commitments. Any rights offering will be made only by means of a prospectus 
filed with the Securities and Exchange Commission.

         The registrant in July 1998 began to market its assets as well as
Impark. Based on the results of the efforts, all or part of the asset portfolio
may be sold in addition to Impark. Proceeds realized would be reinvested into
higher yielding real estate businesses and to reduce debt.


Results of Operations
---------------------

         Net loss applicable to shares of beneficial interest for the second
quarter of 1998 was $10.6 million as compared to net income of $.7 million for
the second quarter of 1997. Net loss applicable to shares of beneficial interest
for the six months ended June 30, 1998 was $13.9 million as compared to net
income of $1.7 million for the six-month period ended June 30, 1997. The net
loss included a $2.3 million reserve on a property acquisition deposit, a $3.4
million payment to the registrant's former Chairman and Chief Executive Officer,
a $5.3 million expense due to lifting of restrictions on restricted shares which
followed the change of control of the registrant, $2.5 million in other
professional fees relating to the change of control, and $3.9 million and $4.8
million in proxy and litigation expenses for the three and six months periods
ended June 30, 1998, respectively. Net income applicable to shares of beneficial
interest for 1997 included $.7 million of income from the repayment of a
wraparound mortgage investment, as the proceeds of $18 million exceeded the
registrant's basis in the wraparound mortgage investment and $.5 million
resulting from a casualty loss at one of the registrant's shopping centers. In
February 1998, 951,000 preferred shares of beneficial interest were converted
into common shares of beneficial interest resulting in a decreased accrued
preferred divided when comparing 1998 to 1997.

         Net loss for the second quarter and six months of 1998 included $8.6
million of capital gains. The registrant sold its land beneath a building in
Cleveland, Ohio resulting in a capital gain of $1.7 million. An additional
capital gain of $7.7 million was recognized when a mortgage investment was
repaid. This capital gain had been deferred from a property sale in 1982 since
the registrant received the mortgage note as purchase consideration. The
registrant also realized a capital loss from the sale of a forward exchange
contract of $.8 million in the second quarter of 1998.

         Mortgage loan interest income declined by $.3 million and $.6 million
when comparing the second quarter and six months of 1998 to the same periods of
1997. The decline in interest income when comparing the second quarter of 1998
to 1997 was caused by the repayment of a wraparound mortgage investment secured
by a shopping mall in Middletown, WV in January 1998 and the repayment of a
mortgage investment secured by an office building in Cleveland, OH in May 1998.
The decline in interest income when comparing the six 


                                       4
<PAGE>   5

months of 1998 to that of 1997 was caused by the aforementioned mortgage
repayments and the repayment of a wraparound mortgage investment secured by an
apartment complex in Atlanta, GA in February 1997.

         The registrant had approximately $11.4 million invested in U.S.
Treasury bills and approximately $2.1 million invested in the stock of another
REIT for the first 5 months of 1998. The U.S. Treasury bills were purchased in
April 1997 to secure the registrant's obligation under an agreement with the
former owners of Impark to collateralize the $10.5 million in non-voting stock
and accrued interest which it received when the registrant's affiliated
management company purchased voting control of Impark in April 1997. The REIT
stock was acquired in the third and fourth quarter of 1997 as a long term
investment. As noted previously, the non-voting common stock of Impark was
purchased in June 1998 allowing the registrant to liquidate the investment. The
registrant liquidated its holdings in the REIT stock as a result of its change
in investment strategy.

         In September 1996, the registrant invested in a joint venture that
owned eight shopping malls and 50% of another mall. The registrant in September
1997 purchased the interests of its joint venture partners. Consequently, the
registrant's investment income and management fees for the registrant's
affiliated management company declined when comparing 1998 to 1997.

         Property net operating income, which is rental and parking revenues
less property operating expenses and real estate taxes was $9.5 million greater
when comparing the three months ended June 30, 1998 to the same period of 1997,
on a non-comparable property basis. Property net operating income for the
comparable portfolio was consistent when comparing the second quarter of 1998 to
1997. The acquisition of the former joint venture properties in September 1997
produced $8.3 million of property net operating income when comparing the second
quarter of 1998 to that of 1997. As Impark was acquired on April 17, 1997, 1998
includes a full quarter of results of $2.0 million of property net operating
income as compared to $1.5 million for 75 days in 1997. The registrant's
acquisition of four parking garages and a development site in the first quarter
of 1998 and the Canadian parking facilities acquired in May 1997 resulted in
$1.2 million in additional property net operating income which was partially
offset by the loss of $.5 million in property net operating income from the sale
of an office complex and apartment complex in the last four months of 1997.

         Property net operating income for the six months of 1998 increased
$18.5 million when compared to the first six months of 1998 as compared to the
same period of 1997 on a non-comparable property basis. Property net operating
income for the comparable portfolio was consistent when comparing the first six
months to the same period of 1997. The acquisition of four parking facilities, a
development site and the Canadian parking facilities produced $1.8 million in
property net operating income which was partially offset by the loss of $.9
million in property operating income from the sale of an office complex and an
apartment complex in the last four months of 1997.

         Mortgage interest expense increased when comparing the second quarter
and six months of 1998 to that of 1997 due to the $203 million in mortgage debt
assumed in September 1997 in conjunction with the purchase of the remaining
interest in the registrant's joint venture and the $30 million mortgage obtained
in May 1998.

         Bank loan interest expense increased when comparing the second quarter
and six months of 1998 to the same period of the prior year, exclusive of the
bank debt assumed in the April 1997 acquisition of Impark due to increased
borrowing. The average balance outstanding for the second quarter and six months
of 1998 was $105 million and $93 million, respectively. The average balance
outstanding for the second quarter and six months of 1997 was $15 million and
$11 million, respectively. The bank loans increased when comparing 1998 to 1997
primarily due to borrowings to fund the parking garage acquisitions and
development site, partially fund the purchase of the registrant's partners'
interest in a joint venture and to fund tenant and capital improvements during



                                       5
<PAGE>   6
1997 and 1998. Additionally, the bank covenant waiver fees were recorded as
bank loan interest expense in June 1998. Offsetting the increase in the bank
credit facilities was the proceeds from property sales during the last four
months of 1997 and in May 1998, the repayment of mortgage investments in the
first and second quarter of 1998 and the $30 million mortgage obtained in May
1998. Additionally, the assumption of approximately $25 million in bank debt in
conjunction with the acquisition of Impark and the accrual of a liability
associated with a put-right which was attached to the Impark common shares
issued to its former owners as acquisition consideration, added $1.1 million in
interest expense when comparing the first six months of 1998 to the same period
of 1997.

         Depreciation and amortization expense for 1998 increased over 1997
primarily due to the amortization of goodwill and management contracts
associated with the acquisition of Impark in April 1997, the depreciation from
the eight shopping malls acquired in September 1997 when the registrant acquired
the interests of its joint venture partners' interest in the malls and the
depreciation from the four parking facilities which were obtained in the first
quarter of 1998.

         General and administrative expenses increased when comparing the second
quarter of 1998 to the same period of 1997. As noted earlier, in the second
quarter of 1998, the registrant recorded several one-time charges as a result of
the change in control and professional fees resulting from the proxy contest
prior to the change in control. The one-time charges in the second quarter
included $3.4 million resulting from the termination of the former Chairman and
Chief Executive Officer, $5.3 million for the vesting of restricted shares which
occurred upon the change in control, and $2.5 million in additional professional
fees resulting from the proxy contest. Impark's general and administrative
expenses increased over 1997 due to their inclusion in results for a full
quarter in 1998 versus 75 days in 1997, approximately $.7 million in expansion
costs into U.S. markets incurred in 1998 and a $.4 million reserve for the
termination of a contract to replace its computer system. The registrant also
recorded a $2.3 million provision for the potential loss of an earnest money
deposit relating to a property acquisition which may not be consummated.

         General and administrative expenses for the six months of 1998
increased over the same period of 1997. The increase in general and
administrative expenses in 1998 was primarily caused by the one-time items
described above relating to the proxy contest and change in control.
Additionally, the inclusion of Impark for six months in 1998 versus 75 days in
1997 increased general and administrative expenses by $2.2 million.

         The registrant has accrued $3.9 million of expense related to
litigation and proxy solicitation in the second quarter of 1998 and $4.8 million
in the first six months of 1998. In June 1998, the registrant accrued the proxy
expenses of Gotham Partners L.P. of $3.1 million (see Item 1 - legal
proceedings).

PART II - OTHER INFORMATION
---------------------------

Item 1.  Legal Proceedings.
-------  ------------------

A.       REGISTRANT VS. GOTHAM PARTNERS, L.P.
         CUYAHOGA COUNTY COURT OF COMMON PLEAS, CASE NO. 347063

         Reference is made to the description of legal proceedings with respect
to the captioned case in Item 1 of Part II of the registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998.

         On March 27, 1998, following an evidentiary hearing, the court issued a
judgment entry denying the registrant's motions and stating, among other things,
that: (i) the proposal and nominations of Gotham Partners, L.P. ("Gotham") do
not violate the provisions in the Declaration of Trust concerning the
classification of its Board of Trustees; (ii) "Gotham appears to have made
reasonable attempts to comply with all of First Union's demands for information
and there is no credible evidence that Gotham then or now endangered First
Union's REIT status"; (iii) the registrant's allegation that Gotham threatened
the registrant's REIT status, "like the other [issues] raised by First Union,


                                       6
<PAGE>   7

[were] simply pretextual"; (iv) the registrant's demand for information exceeded
the requirements of the Internal Revenue code, the registrant's Declaration of
Trust and its By-laws; and (v) the registrant's management's efforts to
disenfranchise Gotham "were primarily motivated by a desire to derail Gotham's
efforts to change the registrant's course and replace top management" and did
"not appear to be designed to protect First Union's REIT status but rather
management."

         On March 27, 1998, following issuance of the judgment entry, the
registrant issued a press release stating, among other things, that it intended
to postpone the registrant's annual meeting from April 14, 1998 to an
undisclosed date, and to reset the record date from February 13, 1998 to an
unspecified date.

         On March 30, 1998, Gotham filed a motion for a preliminary injunction
seeking to enjoin the company from, among other things, (i) taking any steps to
postpone or delay the annual meeting or to change the record date for
determining shareholders entitled to vote at that meeting; (ii) taking or
authorizing any action outside the ordinary course of business pending the
conclusion of the annual meeting and the seating of trustees following that
meeting; and (iii) taking any action to effectuate any decisions made by the
registrant's trustees since January 8, 1998 that would have the purpose or
effect of bestowing any benefits upon any trustee, officer, or employee,
including amending Mr. Mastandrea's employment agreements or any policies
concerning employee severance and accelerated vesting of stock options and
restricted stock. 

         On March 31, 1998, the court convened a hearing on Gotham's
preliminary injunction motion. Following the testimony of a Gotham witness, it
was agreed by the registrant and Gotham and ordered by the Court that: (i) the
registrant would hold a special meeting on May 19, 1998 in lieu of the annual
meeting previously scheduled for April 14, 1998; (ii) the registrant would set
the record date for such meeting as April 28, 1998; (iii) the registrant would 
mail Gotham's proxy materials to the extent required by federal proxy rules, 
which the registrant had previously refused to do; (iv) the registrant would 
not provide any new employment benefits or compensation outside the ordinary 
course of business and would not transfer assets except for fair value prior to
the election and seating of trustees; and (v) the change in the 
characterization of the annual meeting to a special meeting would be without 
prejudice to Gotham's proposal and nominations.

         On April 1, 1998, the registrant filed a motion seeking an order
certifying the judgment entry as final under Rule 54(b) of the Ohio Rules of
Civil Procedure so as to permit an appeal of that entry and Gotham filed a brief
opposing registrant's motion. The court denied registrant's motion on April 14,
1998. The registrant filed a Notice of Appeal to the Eighth District Court of
Appeals on May 1, 1998, which was dismissed sua sponte by the Court of Appeals
on May 6, 1998. The registrant filed a motion for reconsideration in the Court
of Appeals on May 14, 1998, which was denied on May 21, 1998.



                                       7
<PAGE>   8


         At a case management conference on June 3, 1998, in response to a
motion made by Gotham and with respect to a certain Escrow Agreement entered
into between the registrant and National City Bank dated May 22, 1998, the court
ordered that National City Bank shall make disbursements from the escrow only
after giving prior written five (5) day notice thereof and a description of the
claims underlying such proposed disbursement to the registrant. Service of such
order was made on National City Bank.

B.       GOTHAM PARTNERS, L.P. VS. REGISTRANT
         UNITED STATES DISTRICT COURT, NORTHERN DISTRICT OF OHIO, CASE NO. 
         1:98V0272

         Reference is made to the description of legal proceedings with respect
to the captioned case in Item 1 of Part II of the registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 1998. [By agreement of the 
parties this action was dismissed without prejudice on July 7, 1998.]

Item 2.  Changes in Securities.
-------  ----------------------
              None.



                                       8
<PAGE>   9



Item 3.  Defaults Upon Senior Securities.
-------  --------------------------------
              None.

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

              The following matters were considered at the Special Meeting of
Beneficiaries on May 19, 1998.

              a)        PROPOSAL OF THE REGISTRANT TO FIX THE NUMBER OF TRUSTEES
                        AT TWELVE WITH ONE VACANCY TO BE ADDED TO EACH EXISTING
                        CLASS OF TRUSTEES:

                                          Number of Votes

                        For 4,678,778    Against 17,625,713    Abstain 179,738
                            20.80%             78.39%                 .81%

              b)        PROPOSAL TO ELECT THE FOLLOWING MEMBERS TO THE BOARD OF
                        TRUSTEES:

                        CLASS II                 NUMBER OF VOTES
                        --------                 ---------------

                Herman J. Russell      For  4,616,069       Withheld  499,176
                                               20.53%                   2.23%

                William A. Ackman      For 17,243,266       Withheld  125,719
                                               76.69%                    .55%

                David P. Berkowitz     For 17,243,266       Withheld  125,719
                                               76.69%                    .55%

                James A. Williams      For 17,243,355       Withheld  125,630
                                               76.69%                    .55%

              c)        PROPOSAL OF GOTHAM PARTNERS L.P. TO INCREASE THE SIZE OF
                        THE BOARD FROM NINE MEMBERS TO FIFTEEN MEMBERS, WITH TWO
                        NEW SEATS IN EACH OF THE THREE CLASSES ON THE BOARD, AND
                        TO HOLD AN ELECTION FOR SIX NEWLY CREATED SEATS, IF
                        APPLICABLE AND PROPERLY PRESENTED:

                        For 17,460,166   Against 4,910,962     Abstain 113,103
                            77.65%             21.84%                 .51%

              d)        PROPOSAL OF GOTHAM PARTNERS L.P. TO ELECT THE FOLLOWING 
                        MEMBERS TO THE BOARD OF TRUSTEES:

                        CLASS I                      NUMBER OF VOTES
                        -------                      ---------------

                Daniel Shuchman        For 17,339,405       Withheld 5,144,825
                                               77.11%                   22.89%

                Steven S. Snider       For 17,334,405       Withheld 5,149,498
                                               77.09%                    22.91%

                        CLASS II                     NUMBER OF VOTES
                        --------                     ---------------
                Mary Ann Tighe         For 17,335,494       Withheld 5,148,736
                                               77.10%                   22.90%

                Steven J. Garchik      For 17,339,494       Withheld 5,144,736
                                               77.11%                   22.89%

                        CLASS III                     NUMBER OF VOTES
                        ---------                     ---------------
                David S. Klafter       For 17,339,405       Withheld 5,144,736
                                               77.11%                   22.89%

                Daniel J. Altobello    For 17,339,494       Withheld 5,144,736
                                               77.11%                   22.89%


                                       9
<PAGE>   10

Item 5.  Other Information.
-------  ------------------

              None.

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

         (a)  Exhibits:
              ---------

              Exhibit (20)   -  Financial Statements
                                  Combined Balance Sheets as of June 30, 1998
                                  (unaudited) and December 31, 1997 (audited)

                                  Combined Statements of Income for the Six
                                  Months ended June 30, 1998 and 1997
                                  (unaudited)

                                  Combined Statements of Changes in Cash for the
                                  Six Months ended June 30, 1998 and 1997
                                  (unaudited)

                                  Notes to Combined Financial Statements

              Exhibit (27)   -  Financial Data Schedule
                                  Six Months ended June 30, 1998

                                  Six Months ended June 30, 1997, restated for
                                  SFAS 128.

         (b) Reports on Form 8-K:

                             May 6, 1998    -  Registrant's supplemental
                                               memorandum in support of its
                                               motion for a preliminary
                                               injunction in Case No. 1:98CV
                                               0272.

                             May 18, 1998   -  Termination of Chairman,
                                               President and Chief Executive
                                               Officer, James C. Mastandrea.

                             June 9, 1998   -  Change in control of registrant.

                             June 17, 1998  -  Press release regarding certain
                                               anticipated financial events and
                                               actions taken by the registrant's
                                               Board of Trustees.




                                       10
<PAGE>   11


                                   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.


                             First Union Real Estate Equity and
                             Mortgage Investments
                             ----------------------------------------
                                      (Registrant)





Date: August 13, 1998        By: /s/ Steven M. Edelman
                                 ------------------------------------
                                 Steven M. Edelman, Executive Vice
                                 President, Chief Financial Officer




Date: August 13, 1998        By: /s/ Gregory C. Scott
                                 ------------------------------------
                                 Gregory C. Scott
                                 Controller



                                       11
<PAGE>   12
                                Index to Exhibits
                                -----------------



                                                                           Page
                                                                          Number
                                                                          ------

Exhibit (20) - Financial Statements
                 Combined Balance Sheets as of June 30, 1998 (unaudited) 
                 and December 31, 1997 (audited)........................    ____
                                                                         
                 Combined Statements of Income for the Six               
                 Months ended June 30, 1998 and 1997 (unaudited)........    ____
                                                                         
                 Combined Statements of Changes in Cash for the          
                 Six Months ended June 30, 1998 and 1997 (unaudited)....    ____
                                                                         
                 Notes to Combined Financial Statements.................    ____
                                                                         
Exhibit (27) - Financial Data Schedule                                      ____
                 Six Months ended June 30, 1998

                 Six Months ended June 30, 1997, restated for
                 SFAS 128.
                                                                        



                                       12