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

FORM 10-Q

|ý                                                 | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|------------------------------------------------- | ---------------------------------------------------------------------------------------
|For the quarterly period ended September 30, 2004

Commission file number 0-16249

FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS(Exact name of registrant as specified in its charter)

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

P.O. Box 9507, 7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114(Address of principal executive offices)

(617) 570-4614(Registrant's telephone number, including area code)

Indicate
by check 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

Indicated
by check whether registrant is an accelerated filer (as identified in Rule 12b-2 of the Exchange Act). Yes 
No X

As
of November 12, 2004, there were 31,058,913 shares of common stock outstanding.



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FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS  FORM 10-QSEPTEMBER 30, 2004

INDEX

|              |         |                                                                                                                                                 |                                                                                       | Page
|------------- | ------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----
|Part I.       |         | Financial Information                                                                                                                           |                                                                                       |     
|              | Item 1. |                                                                                                                                                 | Combined Financial Statements (Unaudited):                                            |     
|              |         | Combined Balance Sheets as of September 30, 2004 and December 31, 2003                                                                          |                                                                                       | 3   
|              |         | Combined Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2004 and September 30, 2003 |                                                                                       | 4   
|              |         | Combined Statements of Cash Flows for the Nine Months Ended September 30, 2004 and September 30, 2003                                           |                                                                                       | 5   
|              |         | Notes to Combined Financial Statements                                                                                                          |                                                                                       | 6   
|              | Item 2. |                                                                                                                                                 | Management's Discussion and Analysis of Financial Condition and Results of Operations |     
|              | Item 3. |                                                                                                                                                 | Quantitative and Qualitative Disclosure about Market Risk                             |     
|              | Item 4. |                                                                                                                                                 | Controls and Procedures                                                               |     
|Part II.      |         | Other Information:                                                                                                                              |                                                                                       |     
|              | Item 6. |                                                                                                                                                 | Exhibits                                                                              |     
|Signatures    |         | 27                                                                                                                                             
|Exhibit Index |         | 28                                                                                                                                             

2

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FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS  FORM 10-QSEPTEMBER 30, 2004    COMBINED BALANCE SHEETS

|                                                                                                                                                                                               |                                                                                      | September 30, 2004              |          | December 31, 2003 |      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------------- | -------- | ----------------- | -----
|
|
|ASSETS                                                                                                                                                                                         |                                                                                      |                                 |          |                   |      
|Investments in real estate, at cost                                                                                                                                                            |                                                                                      |                                 |          |                   |      
|                                                                                                                                                                                               | Land                                                                                 |                                 | $        | 1,718             |      
|                                                                                                                                                                                               | Buildings and improvements                                                           |                                 |          | 6,274             |      
|                                                                                                                                                                                               |                                                                                      |                                 |          |                   |      
|                                                                                                                                                                                               |                                                                                      |                                 | 7,992    |                   |      
|                                                                                                                                                                                               | LessAccumulated depreciation                                                        |                                 |          | (4,405            | )    
|                                                                                                                                                                                               |                                                                                      |                                 |          |                   |      
|                                                                                                                                                                                               |                                                                                      | Investments in real estate, net |          |                   | 3,587
|                                                                                                                                                                                               | Cash and cash equivalents                                                            |                                 |          | 1,451             |      
|                                                                                                                                                                                               | Restricted cash                                                                      |                                 |          | 33,980            |      
|                                                                                                                                                                                               | Loans receivable                                                                     |                                 |          | 5,645             |      
|                                                                                                                                                                                               | Accounts receivable and prepayments, net of allowance of $129 and $223, respectively |                                 |          | 1,416             |      
|                                                                                                                                                                                               | Investmentsavailable for sale                                                       |                                 |          | 68,711            |      
|                                                                                                                                                                                               | Real estate securitiesavailable for sale                                            |                                 |          | 9,685             |      
|                                                                                                                                                                                               | Inventory, net of reserve                                                            |                                 |          |                  |      
|                                                                                                                                                                                               | Unamortized debt issue costs, net                                                    |                                 |          |                  |      
|                                                                                                                                                                                               | Other                                                                                |                                 |          | 588               |      
|                                                                                                                                                                                               |                                                                                      |                                 |          |                   |      
|Total Assets                                                                                                                                                                                   |                                                                                      | $                               | 125,063  |                   | $    
|                                                                                                                                                                                               |                                                                                      |                                 |          |                   |      
|LIABILITIES                                                                                                                                                                                    |                                                                                      |                                 |          |                   |      
|                                                                                                                                                                                               | Mortgage loan                                                                        |                                 | $        |                  |      
|                                                                                                                                                                                               | Note payable                                                                         |                                 |          | 49                |      
|                                                                                                                                                                                               | Accounts payable and accrued liabilities                                             |                                 |          | 6,331             |      
|                                                                                                                                                                                               | Dividends payable                                                                    |                                 |          | 516               |      
|                                                                                                                                                                                               | Deferred items                                                                       |                                 |          | 48                |      
|                                                                                                                                                                                               | Liabilities of discontinued operations                                               |                                 |          | 379               |      
|                                                                                                                                                                                               |                                                                                      |                                 |          |                   |      
|Total Liabilities                                                                                                                                                                              |                                                                                      |                                 | 7,323    |                   |      
|                                                                                                                                                                                               |                                                                                      |                                 |          |                   |      
|SHAREHOLDERS' EQUITY                                                                                                                                                                           |                                                                                      |                                 |          |                   |      
|Convertible Preferred Shares of Beneficial Interest, $25 per share liquidation preference, 2,300,000 shares authorized, 983,082 shares outstanding at September 30, 2004 and December 31, 2003 |                                                                                      |                                 | 23,131   |                   |      
|Shares of Beneficial Interest, $1 par, unlimited authorized, 31,058,913 outstanding at September 30, 2004 and December 31, 2003                                                                |                                                                                      |                                 | 31,059   |                   |      
|Additional paid-in capital                                                                                                                                                                     |                                                                                      |                                 | 207,968  |                   |      
|Accumulated other comprehensive income                                                                                                                                                         |                                                                                      |                                 | 610      |                   |      
|Accumulated distributions in excess of net income                                                                                                                                              |                                                                                      |                                 | (145,028 | )                 |      
|                                                                                                                                                                                               |                                                                                      |                                 |          |                   |      
|Total Shareholders' Equity                                                                                                                                                                     |                                                                                      |                                 | 117,740  |                   |      
|                                                                                                                                                                                               |                                                                                      |                                 |          |                   |      
|Total Liabilities and Shareholders' Equity                                                                                                                                                     |                                                                                      | $                               | 125,063  |                   | $    
|                                                                                                                                                                                               |                                                                                      |                                 |          |                   |      

See Notes to Combined Financial Statements.

3

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FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS  FORM 10-QSEPTEMBER 30, 2004        COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)  (Unaudited)

|                                                                     |                                               | Three Months Ended
September 30, |        | Nine Months Ended
September 30, |  
|-------------------------------------------------------------------- | --------------------------------------------- | -------------------------------- | ------ | ------------------------------- | -
|
|
|REVENUES                                                             |                                               |                                  |        |                                 |  
|                                                                     | Rents                                         |                                  | $      | 357                             |  
|                                                                     | Sales                                         |                                  |        | 210                             |  
|                                                                     | Interest and dividends                        |                                  |        | 993                             |  
|                                                                     | Insurance recoveries                          |                                  |        | 1,244                           |  
|                                                                     | Gain on sale of securities available for sale |                                  |        | 764                             |  
|                                                                     |                                               |                                  |        |                                 |  
|                                                                     |                                               |                                  | 3,568  |                                 |  
|                                                                     |                                               |                                  |        |                                 |  
|EXPENSES                                                             |                                               |                                  |        |                                 |  
|                                                                     | Property operating                            |                                  |        | 222                             |  
|                                                                     | Cost of goods sold                            |                                  |        | 282                             |  
|                                                                     | Real estate taxes                             |                                  |        | 20                              |  
|                                                                     | Depreciation and amortization                 |                                  |        | 109                             |  
|                                                                     | Interest                                      |                                  |        | 3                               |  
|                                                                     | General and administrative                    |                                  |        | 831                             |  
|                                                                     |                                               |                                  |        |                                 |  
|                                                                     |                                               |                                  | 1,467  |                                 |  
|                                                                     |                                               |                                  |        |                                 |  
|Income (loss) from continuing operations                             |                                               |                                  | 2,101  |                                 |  
|Discontinued operations:                                             |                                               |                                  |        |                                 |  
|                                                                     | Income (loss) from discontinued operations    |                                  |        |                                |  
|                                                                     | Gain (loss) on disposal of real estate        |                                  |        | (383                            | )
|                                                                     |                                               |                                  |        |                                 |  
|Income (loss) from discontinued operations                           |                                               |                                  | (383   | )                               |  
|                                                                     |                                               |                                  |        |                                 |  
|Net income (loss)                                                    |                                               |                                  | 1,718  |                                 |  
|                                                                     | Preferred dividend                            |                                  |        | (516                            | )
|                                                                     |                                               |                                  |        |                                 |  
|Net income (loss) applicable to Common Shares of Beneficial Interest |                                               |                                  | 1,202  |                                 |  
|Other comprehensive income                                           |                                               |                                  |        |                                 |  
|Unrealized gain (loss) on available for sale securities              |                                               |                                  | (162   | )                               |  
|                                                                     |                                               |                                  |        |                                 |  
|Comprehensive income (loss)                                          |                                               | $                                | 1,040  |                                 | $
|                                                                     |                                               |                                  |        |                                 |  
|Per share dataBasic:                                                |                                               |                                  |        |                                 |  
|Income (loss) from continuing operations                             |                                               | $                                | 0.05   |                                 | $
|Income (loss) from discontinued operations                           |                                               |                                  | (0.01  | )                               |  
|                                                                     |                                               |                                  |        |                                 |  
|Net income (loss) applicable to Common Shares of Beneficial Interest |                                               | $                                | 0.04   |                                 | $
|                                                                     |                                               |                                  |        |                                 |  
|Diluted:                                                             |                                               |                                  |        |                                 |  
|Income (loss) from continuing operations                             |                                               | $                                | 0.04   |                                 | $
|Income (loss) from discontinued operations                           |                                               |                                  | (0.01  | )                               |  
|                                                                     |                                               |                                  |        |                                 |  
|Net income (loss) applicable to Common Shares of Beneficial Interest |                                               | $                                | 0.03   |                                 | $
|                                                                     |                                               |                                  |        |                                 |  
|Basic weighted average Common Shares                                 |                                               |                                  | 31,059 |                                 |  
|Convertible Preferred Shares                                         |                                               |                                  | 4,837  |                                 |  
|Stock Options                                                        |                                               |                                  | 28     |                                 |  
|                                                                     |                                               |                                  |        |                                 |  
|Diluted weighted average Common Shares                               |                                               |                                  | 35,924 |                                 |  
|                                                                     |                                               |                                  |        |                                 |  

See Notes to Combined Financial Statements.

4

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FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS  FORM 10-QSEPTEMBER 30, 2004    COMBINED STATEMENTS OF CASH FLOWS  (Unaudited)

|                                                                       |                                                                                                   | Nine Months Ended September 30,                       |                                                    
|---------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ---------------------------------------------------
|
|
|Cash flows from operating activities                                   |                                                                                                   |                                                       |                                                    
|                                                                       | Net income (loss)                                                                                 |                                                       | $                                                  
|                                                                       | Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities |                                                       |                                                    
|                                                                       |                                                                                                   | Depreciation and amortization                         |                                                    
|                                                                       |                                                                                                   | Gain on disposal of real estate                       |                                                    
|                                                                       |                                                                                                   | Gain on sale of securities available for sale         |                                                    
|                                                                       |                                                                                                   | Impairment charge                                     |                                                    
|                                                                       |                                                                                                   | Net changes in other operating assets and liabilities |                                                    
|                                                                       |                                                                                                   | Decrease in deferred items                            |                                                    
|                                                                       |                                                                                                   | Interest receivable on loans                          |                                                    
|                                                                       |                                                                                                   |                                                       |                                                    
|                                                                       |                                                                                                   |                                                       | Net cash provided by (used in) operating activities
|                                                                       |                                                                                                   |                                                       |                                                    
|Cash flows from investing activities                                   |                                                                                                   |                                                       |                                                    
|                                                                       | Purchase of investments available for sale                                                        |                                                       |                                                    
|                                                                       | Purchase real estate securities available for sale                                                |                                                       |                                                    
|                                                                       | Proceeds from maturity of investments available for sale                                          |                                                       |                                                    
|                                                                       | Proceeds from real estate securities available for sale                                           |                                                       |                                                    
|                                                                       | Proceeds from sale of real estate                                                                 |                                                       |                                                    
|                                                                       | Increase in restricted cash                                                                       |                                                       |                                                    
|                                                                       | Purchase of loans receivable                                                                      |                                                       |                                                    
|                                                                       | Paydown of loan receivable                                                                        |                                                       |                                                    
|                                                                       | Net proceeds from sale of Ventek parking business                                                 |                                                       |                                                    
|                                                                       | Investments in real estate                                                                        |                                                       |                                                    
|                                                                       |                                                                                                   |                                                       |                                                    
|                                                                       |                                                                                                   |                                                       | Net cash (used in) provided by investing activities
|                                                                       |                                                                                                   |                                                       |                                                    
|Cash flows from financing activities                                   |                                                                                                   |                                                       |                                                    
|                                                                       | Decrease in note payable                                                                          |                                                       |                                                    
|                                                                       | Repayment of mortgage loanprincipal payments                                                     |                                                       |                                                    
|                                                                       | Repurchase of shares of Beneficial Interest                                                       |                                                       |                                                    
|                                                                       | Dividends paid on Preferred Shares of Beneficial Interest                                         |                                                       |                                                    
|                                                                       |                                                                                                   |                                                       |                                                    
|                                                                       |                                                                                                   |                                                       | Net cash (used in) financing activities            
|                                                                       |                                                                                                   |                                                       |                                                    
|Net increase (decrease) in cash and cash equivalents                   |                                                                                                   |                                                       | (13,473                                            
|Cash and cash equivalents at beginning of period                       |                                                                                                   |                                                       | 14,924                                             
|                                                                       |                                                                                                   |                                                       |                                                    
|Cash and cash equivalents at end of period                             |                                                                                                   | $                                                     | 1,451                                              
|                                                                       |                                                                                                   |                                                       |                                                    
|Supplemental Disclosure of Cash Flow Information                       |                                                                                                   |                                                       |                                                    
|                                                                       | Interest Paid                                                                                     |                                                       | $                                                  
|                                                                       |                                                                                                   |                                                       |                                                    
|Supplemental Disclosure of Non-Cash Investing and Financing Activities |                                                                                                   |                                                       |                                                    
|                                                                       | Dividends accrued on Preferred Shares of Beneficial Interest                                      |                                                       | $                                                  
|                                                                       |                                                                                                   |                                                       |                                                    
|                                                                       | Mortgage loan assumed by purchaser of property                                                    |                                                       |                                                    
|                                                                       |                                                                                                   |                                                       |                                                    
|                                                                       | Loan receivable in connection with the sale of Ventek parking business                            |                                                       |                                                    
|                                                                       |                                                                                                   |                                                       |                                                    
|                                                                       | Transfer of inventory in connection with the sale of Ventek parking business                      |                                                       |                                                    
|                                                                       |                                                                                                   |                                                       |                                                    
|                                                                       | Net transfer of receivables and payables in connection with the sale of Ventek parking business   |                                                       |                                                    
|                                                                       |                                                                                                   |                                                       |                                                    
|                                                                       |                                                                                                   | $                                                     | 41,829                                             
|                                                                       |                                                                                                   |                                                       |                                                    

See Notes to Combined Financial Statements.

5

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FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS  FORM 10-QSEPTEMBER 30, 2004    NOTES TO COMBINED FINANCIAL STATEMENTS

1.General

The accompanying financial statements represent the combined results of the registrant, First Union Real Estate Equity and Mortgage Investments (the "Trust"), and
First Union Management Inc. ("FUMI"). Under a trust agreement, all of the outstanding shares of stock of FUMI are held for the benefit of the shareholders of the Trust. Accordingly, the
financial statements of FUMI and the Trust have been combined.

The
combined financial statements included herein have been prepared by the Trust, 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 accounting principles generally accepted in the United States of America have been condensed
or omitted pursuant to such rules and regulations, although the Trust believes that the disclosures contained herein are adequate to make the information presented not misleading. These combined
financial statements should be read in conjunction with the combined financial statements and the notes thereto included in the Trust's most recent annual report on Form 10-K.

The
combined financial statements reflect, in the opinion of the Trust, all adjustments (consisting of normal recurring adjustments) necessary to present fairly the combined financial
position, results of operations and cash flows for the respective periods in conformity with accounting principles generally accepted in the United States of America consistently applied. The results
of operations for the nine months ended September 30, 2004 are not necessarily indicative of results expected for the full year.

2.Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and the disclosure of contingent assets and liabilities. Such estimates that are particularly susceptible to change relate to management's estimate of the impairment of real estate. In
addition, estimates are used when accounting for the allowance for doubtful accounts, potentially excess and obsolete inventory, product warranty reserves and contingencies, among others. Actual
results could differ from these estimates.

Investment in Real Estate

Real estate assets are stated at cost. Expenditures for repairs and maintenance are expensed as incurred. Significant renovations that extend the useful life of
the properties are capitalized. Depreciation for financial reporting purposes is computed using the straight-line method. Building and building improvements are depreciated over their
estimated useful lives of 10 to 40 years, based on the property's age, overall physical condition, type of construction materials and intended use. Improvements to the buildings are depreciated
over the remaining useful life of the building at the time the improvement is completed. Tenant improvements are depreciated over the life of the lease. The Trust annually reviews all of its assets
for any impairment losses. The Trust records impairment losses when indicators of impairment are present and the undiscounted cash flows are not sufficient to recover the asset's carrying amount. The
impairment loss is measured by comparing the fair value of the asset to its carrying amount.

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Cash and Cash Equivalents

Cash and cash equivalents include checking and money market accounts.

Restricted Cash

Restricted cash consists primarily of cash to be used in connection with the purchase of real property that qualifies as a "like kind" exchange pursuant to
section 1031 of the Internal Revenue Code.

Trade Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Trust's best estimate of the
amount of probable credit losses in the Trust's existing accounts receivable. The Trust reviews its allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified
amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is
considered remote. The Trust does not have any off-balance sheet credit exposure related to its tenants.

Investments Available for Sale

The Trust holds US Government Treasury Bills with a maturity of less than one year ($58.8 million) and Government National Mortgage Association notes
($9.9 million) with an assumed weighted average life of less than three years.

The
Trust's investments in US government securities are accounted for as available-for-sale based on the Trust's intent with respect to those securities.
Accordingly, the Trust records these investments at fair value, and unrealized gains and losses are recognized through shareholders' equity, as a component of other comprehensive income. Realized
gains and losses and charges for other-than-temporary impairments are included in net income.

Investment in Real Estate Securities Available for Sale

The Trust classifies investments in real estate equity securities with readily determinable fair values on the balance sheet as
available-for-sale, based on the Trust's intent with respect to those securities. Specifically, the Trust's investments in equity securities with readily
determinable fair values are accounted for as available-for-sale because these securities are held principally for investment purposes and not for sale in the short term.
Accordingly, the Trust records these investments at fair value, and unrealized gains and losses are recognized through shareholders' equity, as a component of other comprehensive income. Realized
gains and losses and changes for other-than-temporary impairments are included in net income.

Loans Receivable

The loans receivable are carried at cost and are collateralized by real estate. The interest rates on the loans receivable are 5.36% to 11.3%. Interest income is
recognized on an accrual basis.

7

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Product Warranty Policy

VenTek International Inc. ("VenTek"), an operating subsidiary of FUMI, provides product warranties for its installed transit ticket equipment. The warranty
policy for transit ticket equipment generally provided for two to two and a half years of coverage. VenTek's policy is to accrue the estimated cost of warranty coverage at the time the sale is
recorded. All existing product warranties are scheduled to expire in the fourth quarter of 2004.

Revenue Recognition

The Trust accounts for its leases with tenants as operating leases with rental revenue recognized on a straight line basis over the lease term. Tenant leases
generally provide for (i) billings of fixed minimum rental and (ii) billings of certain operating costs. The Trust accrues the recovery of operating costs based on actual costs incurred.

Revenue
from transit ticket vending equipment and maintenance contracts is recognized by either the completed contract method or the percentage completion method as units are delivered.
Revenues from the sales of parking equipment were recognized upon delivery. As of September 30, 2004, all transit ticket equipment that customers had committed to purchase had been delivered
and the related revenues have been recognized.

Income Taxes

The Trust operates in a manner intended to enable it to continue to qualify as a real estate investment trust ("REIT") under Sections 856-860 of the
Internal Revenue Code of 1986, as amended. In order to qualify as a REIT, the Trust is generally required each year to distribute to its shareholders at least 90% of its taxable income (excluding any
net capital gain). The Trust intends to comply with the foregoing minimum distributions requirements; however, due to significant net operating loss carryforwards and capital loss carryforwards, the
Trust does not anticipate that any distributions will be required in the foreseeable future. The Trust's has net operating loss carryforwards of $47.3 million which will begin to expire in
2019. The Trust also has capital loss carryforwards of $12.3 million which will begin to expire in 2006.

The
Trust owns stock in a corporation that has elected to be treated for Federal income tax purposes as a taxable REIT subsidiary ("TRS"). To continue to qualify as a REIT the value of
the combined TRS stock cannot exceed 20% of the value of the Trust's total assets; at September 30, 2004 the TRS did not exceed 20% of the value of the Trust's total assets. A TRS is taxable on
its net income at regular corporate tax rates.

Current
income taxes are recognized during the period in which transactions enter into the determination of financial statement income, with deferred income taxes being provided for
temporary differences between the carrying values of assets and liabilities for financial reporting purposes and such values as measured by income tax laws. Changes in deferred income taxes
attributable to these temporary differences are included in the determination of income. A valuation allowance has been provided for the entire amount of deferred tax assets, which consists of FUMI's
net operating loss carryforwards, due to the uncertainty of realization of the deferred tax assets. FUMI has net operating loss carryforwards of $10.1 million which will begin to expire in
2005. The Trust is currently exploring a

8

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business
combination with FUMI which would enable the Trust to utilize all or a portion of these loss carryforwards.

Earnings Per Share

The computation of basic and diluted earnings per Common Share of Beneficial Interest in the Trust ("Common Share") is as follows:

|                                              |  | Three Months Ended
September 30, |        | Nine Months Ended
September 30, |  
|--------------------------------------------- |  | -------------------------------- | ------ | ------------------------------- | -
|
|
|Basic                                         |  |                                  |        |                                 |  
|Income (loss) from continuing operations      |  | $                                | 2,101  |                                 |  
|Preferred dividend                            |  |                                  | (516   | )                               |  
|                                              |  |                                  |        |                                 |  
|Income (loss) from continuing operations      |  |                                  | 1,585  |                                 |  
|Income (loss) from discontinued operations    |  |                                  | (383   | )                               |  
|                                              |  |                                  |        |                                 |  
|Net income (loss) applicable to Common Shares |  | $                                | 1,202  |                                 | $
|                                              |  |                                  |        |                                 |  
|Basic weighted average Common Shares          |  |                                  | 31,059 |                                 |  
|                                              |  |                                  |        |                                 |  
|Income (loss) from continuing operations      |  |                                  | 0.05   |                                 |  
|Income (loss) from discontinued operations    |  |                                  | (0.01  | )                               |  
|                                              |  |                                  |        |                                 |  
|Net income (loss) per Common Share            |  | $                                | 0.04   |                                 | $
|                                              |  |                                  |        |                                 |  
|Diluted                                       |  |                                  |        |                                 |  
|Income (loss) from continuing operations      |  | $                                | 2,101  |                                 |  
|Preferred dividend                            |  |                                  | (516   | )                               |  
|                                              |  |                                  |        |                                 |  
|Income (loss) from continuing operations      |  |                                  | 1,585  |                                 |  
|Income (loss) from discontinued operations    |  |                                  | (383   | )                               |  
|                                              |  |                                  |        |                                 |  
|Net income (loss) applicable to Common Shares |  | $                                | 1,202  |                                 | $
|                                              |  |                                  |        |                                 |  
|Basic weighted average Common Shares          |  |                                  | 31,059 |                                 |  
|Convertible Preferred Shares                  |  |                                  | 4,837  |                                 |  
|Stock Options                                 |  |                                  | 28     |                                 |  
|                                              |  |                                  |        |                                 |  
|Diluted weighted average Common Shares        |  |                                  | 35,924 |                                 |  
|                                              |  |                                  |        |                                 |  
|Income (loss) from continuing operations      |  |                                  | 0.04   |                                 |  
|Income (loss) from discontinued operations    |  |                                  | (0.01  | )                               |  
|                                              |  |                                  |        |                                 |  
|Net income (loss) per Common Share            |  | $                                | 0.03   |                                 | $
|                                              |  |                                  |        |                                 |  

Stock Options

The Trust accounts for stock option awards in accordance with APB No. 25, "Accounting for Stock Issued to Employees" and has adopted the
disclosure-only provisions of SFAS No. 123, "Accounting for

9

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Stock-Based
Compensation." Consequently, compensation cost has not been recognized for the share option plans except for the options granted in 1999 which had an exercise price that was less than the
grant date per share market price. Had the Trust applied the expense recognition provisions of
SFAS No. 123, there would have been no impact on the net income per share for the periods ended September 30, 2004 and 2003 on a basic and diluted basis.

Dividends

The Trust declared a dividend of $0.5 million ($0.525 per share) on the Trust's Series A Cumulative Preferred Shares of Beneficial Interest
("Preferred Shares") in the first, second and third quarters of 2004. The first quarter dividend was paid April 30, 2004 to beneficiaries of record at the close of business on March 31,
2004. The second quarter dividend was paid July 31, 2004 to beneficiaries of record at the close of business on June 30, 2004. The third quarter dividend was paid October 31, 2004
to beneficiaries of record at the close of business on September 30, 2004. No dividend was declared or paid during the nine months ended September 30, 2004 or 2003 on the Common Shares.

Recently Issued Accounting Standards

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN46") which was amended and interpreted
through issuance of FIN46(R) in December. This Interpretation, as amended, clarifies the application of existing accounting pronouncements to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other
parties. The Trust has determined that it has no interest in variable interest entities requiring consolidation under FIN46 or FIN46(R).

3.Related Party Transactions

The affairs of the Trust and its subsidiaries are administered by FUR Advisors, LLC ("FUR Advisors") pursuant to the terms of an Advisory Agreement (the "Advisory
Agreement") dated December 31, 2003 between the Trust and FUR Advisors, which agreement was negotiated and approved by the Board of Trustees of the Trust prior to the acquisition by FUR
Investors, LLC (an affiliate of FUR Advisors) of its interest in the Trust. FUR Advisors is controlled by and partially owned by the executive officers of the Trust. Pursuant to the terms of the
Advisory Agreement, FUR Advisors is responsible for providing, or arranging for the provision of, asset management services to the Trust and coordinating with the Trust's shareholder transfer agent
and property managers. Pursuant to the terms of the Advisory Agreement, for providing these services, FUR Advisors is entitled to the following fees: (i) an asset management fee of 1% of the
gross asset value of the Trust up to $100 million, .75% of the gross asset value of the Trust between $100 million and $250 million, .625% of the gross asset value of the Trust
between $250 million and $500 million and .50% of the gross asset value of the Trust in excess of $500 million; (ii) property and construction management fees at

10

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commercially
reasonable rates as determined by a majority of independent Trustees of the Board; (iii) loan servicing fees not exceeding commercially reasonable rates (approved by a majority of
the independent Trustees) for providing administrative and clerical services with respect to loans made by the Trust to third parties; and (iv) an incentive fee equal to 20% of all
distributions to holders of Common Shares after December 31, 2003 in excess of (x) $71.3 million, increased by the net issuance price of all shares issued after
December 31, 2003, and decreased by the redemption price of all shares redeemed after December 31, 2003, plus (y) a return on the amount, as adjusted, set forth in
(x) equal to 7% per annum compounded annually. In addition, FUR Advisors is entitled to be reimbursed for up to $100,000 per annum for the costs associated with the employment of one or more
asset managers.

Effective
February 1, 2004, Kestrel Management L.P., an affiliate of FUR Advisors and the Trust's executive officers, assumed property management responsibilities for Circle
Tower. Pursuant to the terms of the property management agreement, Kestrel Management L.P. receives a fee equal to 3% of the monthly revenues of Circle Tower, which fee has been approved by the
independent members of the Board of Trustees, and is less than the amount paid to the prior property management company.

The
following table sets forth the fees and reimbursements paid by the Trust for the three and nine months ended September 30, 2004 to FUR Advisors and Kestrel Management L.P.:

Three Months Ended
September 30, 2004

Nine Months Ended
September 30, 2004Asset Management Fee(1)

$
301,365

$
988,344Loan Servicing Fee(1)


1,406


6,359Property Management Fee(2)


12,503


30,450Reimbursement(1)


48,540


78,367


---

In
addition, the Trust and FUMI paid fees of $69,302 and $132,394 for the three months ending September 30, 2004 and 2003, and $167,028 and $343,770 for the nine months ended
September 30, 2004 and 2003 respectively, to the Real Estate Systems Implementations Group, LLC ("RE Systems") for financial reporting and advisory services. The managing member of this firm
assumed the position of Interim Chief Financial Officer of the Trust on August 18, 2000, and Interim Chief Executive Officer in January 2003. In addition, he became a Trustee of the
Trust in June 2003 and resigned as Interim Chief Executive Officer and Interim Chief Financial Officer on December 31, 2003. He resigned as a Trustee of the Trust on April 15,
2004. Effective February 1, 2004, the Trust retained RE Systems on a month-to-month basis to provide services to FUMI at a cost of $10,000 per month and to provide
advisory services as needed to the Trust. The Trust paid RE Systems $39,302 for assistance in completing prior year transition obligations during the quarter ended September 30, 2004.

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4.Share Repurchase

The Trust authorized a share repurchase plan in July 2003. The plan allows for the Trust to purchase up to $10.0 million of its Common and Preferred
Shares in the market or through private transactions. No Common or Preferred Shares were purchased during the nine months ended September 30, 2004. During the third and fourth quarters of 2003,
the Trust repurchased and retired 2,914,215 Common Shares for an aggregate cost of $5.3 million.

5.Termination of the Gotham Transaction

On February 13, 2002, the Trust entered into a definitive agreement pursuant to which the Trust agreed to merge with and into Gotham Golf Corp. ("Gotham
Golf"), a Delaware corporation controlled by Gotham Partners, L.P. ("Gotham Partners"), at that time the beneficial owner of 16.8% of the Trust's outstanding Common Shares.

The
proposed transaction was subject to several conditions, including the approval of the Trust's Common Shareholders and the obtaining of certain third party consents. The Trust's
Common Shareholders approved the proposed transaction by the requisite majority vote at a November 27, 2002 meeting of shareholders. However, litigation was brought with respect to the proposed
transaction, resulting in the granting of an injunction preventing the proposed transaction from going forward.

On
June 25, 2003 the Trust entered into a Settlement, Termination and Standstill Agreement (the "Agreement") with, among others, Gotham Partners. The Agreement provided for the
termination of the merger agreement regarding the merger of the Trust with Gotham Golf, the purchase by the Trust of 5,841,233 Common Shares of the Trust owned by Gotham Partners and its affiliates
for approximately $11.1 million and a termination payment to Gotham Partners of $2.4 million. The Agreement also provides that neither Gotham Partners nor any affiliate will enter into
or agree to enter into any form of business combination, acquisition or other transaction involving the Trust or any majority-owned affiliate for a period of five years from the date of the Agreement.
The termination payment was recognized as a general and administrative expense during the year ended December 31, 2003.

6.The FUR Investors Transaction

On November 26, 2003, the Trust entered into a Stock Purchase Agreement with FUR Investors, LLC, an entity controlled by and partially owned by the
executive officers of the Trust. On December 31, 2003, FUR Investors LLC acquired 5,000,000 Common Shares pursuant to a tender offer at a price of $2.30 per share and purchased pursuant to the
terms of the Stock Purchase Agreement an additional 5,000,000 newly issued Common Shares pursuant to the terms of the Stock Purchase Agreement for a price of $2.60 per share. As a result of these
purchases, FUR Investors LLC acquired a total of 10,000,000 of the outstanding Common Shares representing 32.2% of the total outstanding Common Shares.

Pursuant
to the Stock Purchase Agreement, (i) Michael L. Ashner was appointed the Chief Executive Officer of the Trust, (ii) the Trust entered into the Advisory Agreement
(iii) Mr. Ashner entered into an exclusivity agreement, and (iv) FUR Investors, LLC entered into a covenants agreement pursuant to which it agreed not to take certain action
which, among other things, would adversely impact the Trust's status as a REIT or its listing on the New York Stock Exchange. In

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addition,
Daniel J. Altobello and Jeffrey Citrin resigned as members of the Board of Trustees, and three new trustees were appointed to the Board of Trustees. As a result, the Board of Trustees
presently consists of six members.

In
January 2004, the Board of Trustees approved a waiver to the ownership limitations set forth in the Trust's By-laws to permit Michael L. Ashner, the Chief Executive
Officer of the Trust, to acquire up to 30,000 shares of the Trust's Preferred Shares so long as the acquisition thereof (i) is not otherwise in violation of the ownership limitations set forth
in the Trust's By-laws whose purpose is to protect REIT status of the Trust and (ii) does not reduce the existing viability of the net operating loss benefits available to the
Trust.

7.NorthStar Loan

On March 3, 2004, the Trust acquired from Bank of America, N.A. a loan receivable from NorthStar Partnership, L.P. ("NorthStar") in the principal amount of
approximately $16.9 million (the "NorthStar Loan"). The NorthStar Loan was evidenced by a Credit Agreement, Promissory Note and collateral documents. The NorthStar Loan was secured by a first
priority lien on all or a portion of NorthStar's interest in Morgans Hotel Group LLC, Emmes & Company LLC and Presidio Capital Investment Company, LLC as well as certain other assets of
NorthStar. NorthStar prepaid the loan in its entirety on August 4, 2004. Due to the nature and amount of the NorthStar Loan, in order to comply with the rules applicable to REITs, portions of
the NorthStar Loan were held by a wholly-owned subsidiary of the Trust that elected to be treated as a TRS. Accordingly, the portion of income allocated to the amount of the NorthStar Loan held by the
taxable REIT subsidiary will be subject to corporate level tax. Federal and state income tax expense of $48,576 incurred in connection with the North Star loan has been included in general and
administrative expenses.

8.West Side Loan

On May 19, 2004, the Trust purchased a 25% participation interest in a loan (the "West Side Loan") a loan secured by a first mortgage on a commercial
property located in New York City's Chelsea area. The total outstanding principal balance of the loan is $10.7 million of which the Trust's share is $2.6 million. The purchase price for
the participation interest was the face amount of the Trust's share of the loan. The loan bears interest at LIBOR plus 9.5% per annum and is scheduled to mature in April 2009. The interest rate
was 11.3% as of September 30, 2004.

9.West 38th Street Loan

On August 4, 2004, the Trust acquired a 50% participation ("West 38th Street Loan") in a $20 million first mortgage loan secured by a
property located at 63 West 38th Street, New York, New York. The loan bears interest at LIBOR plus 4% (with a minimum rate of 5.42%), has a three year term and requires payments of
interest only. The Trust indirectly obtained $7 million of financing in connection with this investment that bears interest at LIBOR plus 1.75% and requires payments of interest only. The
interest rate was 5.36% as of September 30, 2004.

13

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10.Atlantic Realty

The Trust had previously acquired 267,000 shares in Atlantic Realty Trust ("Atlantic Realty") (NASD:ATLRS) representing 7.5% of the outstanding shares in Atlantic
Realty. On January 12, 2004, the Trust contacted Atlantic Realty to discuss a possible business combination between Atlantic Realty and the Trust. The Trust made a proposal to Atlantic Realty
which proposal was modified in April, 2004 and was ultimately rejected by Atlantic Realty in May, 2004 as Atlantic Realty elected to market its remaining property for sale. On May 19, 2004,
Atlantic Realty paid a distribution of $3.25 per share to holders of record on May 10, 2004. Following the distribution, the Trust began selling its shares in Atlantic Realty and, effective
August 3, 2004, the Trust had sold its entire interest in Atlantic Realty and realized a gain of $1.1 million.

11.Sizeler Property Investors, Inc.

Beginning in August 2004, the Trust began acquiring shares of common stock in Sizeler Property Investors, Inc. (NYSE:SIZ), a real estate investment
trust that primarily is in the business of owning and operating income producing retail shopping centers and apartment communities in the southeastern United States. As of September 30, 2004,
the Trust had acquired a total of 670,000 shares of common stock of Sizeler which represents 5.0% of all of the outstanding shares of common stock of Sizeler for an aggregate purchase price of
$5.6 million. The shares are classified in the balance sheet as "Real estate securities available for sale." During October 2004, the Trust acquired an additional 118,200 shares of
common stock of Sizeler, representing approximately 1.0% of the total outstanding shares of common stock. The aggregate purchase price of the additional shares was $1.1 million.

12.Park Plaza Mall

On June 22, 2004, the Trust sold its Park Plaza Mall property located in Little Rock, Arkansas for a gross sales price of $77.5 million to a
subsidiary of CBL & Associates Properties, Inc. In connection with this transaction, the purchaser assumed the existing indebtedness encumbering the property of approximately
$41.3 million. Accordingly, net proceeds to the Trust after giving effect to the loan assumption and closing costs were approximately $33.5 million. The Trust deposited the proceeds with
a qualified intermediary, and it is expected that the proceeds will be utilized in connection with the portfolio acquisition in connection with a "like kind" exchange pursuant to Section 1031
of the Internal Revenue Code. There can be no assurance, however, that the purchase of the replacement properties identified in Note 13 below will be consummated. In the event that the "like
kind" exchange cannot be consummated, the estimated taxable gain from the sale of this property will be approximately $20.5 million. After giving effect to post-closing adjustments,
the gain on disposal for financial statement purposes is approximately $19.3 million. The liabilities related to post-closing adjustments to the sale are included in Liabilities of
discontinued operations.

13.Portfolio Acquisition

On September 16, 2004 the Trust entered into a contract to acquire up to 16 triple-net leased properties containing approximately
2.5 million gross square feet for a gross purchase price of approximately $91 million. The funds required for this acquisition will be provided from (i) approximately
$31 million of existing debt on the properties which will be assumed, (ii) approximately $33.5 million from the proceeds of the Park Plaza Mall sale that are being held by a

14

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qualified
intermediary which will enable the Trust to make a "like kind" exchange pursuant to Section 1031 of the Internal Revenue Code, and (iii) the balance from the Trust's cash
reserves. It is expected that after the consummation of this transaction, the Trust will obtain additional financing in the amount of approximately $53 million which will be secured by the
Trust's interest in the entities formed to acquire the properties. This acquisition is expected to close in November 2004.

14.Legal Proceedings

Peach Tree Mall Litigation

The Trust, as one plaintiff in a class action composed of numerous businesses and individuals, has pursued legal action against the State of California associated
with the 1986 flood of Sutter Buttes Center, formerly Peach Tree Mall. In September 1991, the court ruled in favor of the plaintiffs on the liability portion of the suit, which the State of
California appealed. In the third quarter of 1999, the 1991 ruling in favor of the Trust and the other plaintiffs was reversed by the State of California Appeals Court and the case was remanded to the
trial court for further proceedings. The Trust and the other plaintiffs pursued a retrial before the court which commenced February 2001 and was completed July 2001. In
November 2001, the trial court issued a decision that generally held in favor of the State of California. In February 2002, the plaintiffs appealed to the California Court of Appeals and
on November 26, 2003, the Court of Appeals reversed the decision of the trial court. The Court held that the State was liable for the damages caused by the flood and remanded the case to the
trial court for a determination of the damages to plaintiffs and for an award of attorney's fees and costs. The State filed a petition for rehearing in the Court of Appeals, which was denied on
December 24, 2003. On January 2, 2004, the State filed a petition for review with the California Supreme Court. Plaintiffs, including the Trust, filed an opposition to the petition and
the California Supreme Court ruled in the plaintiff's favor during the first quarter of 2004 and remanded the case for a new trial solely on the issue of damages.
The Trust is currently in negotiations with the State of California in an effort to settle the damages claim. Presently, the parties are negotiating a potential settlement that, if finalized by the
parties, would result in a recovery by the Trust of approximately $11.0 million. Any acceptance of the settlement by the State of California would be subject to State of California legislative
and other agency approvals. Accordingly, even if a settlement is reached there is no assurance it will become final or, if finalized, when such amount will be received.

Indemnity to Imperial Parking Limited

In 1999, Newcourt Financial Ltd. ("Newcourt") brought a claim in Ontario, Canada against FUMI and Imperial Parking Limited, a then subsidiary of FUMI,
alleging a breach of a contract between FUMI and Newcourt's predecessors-in-interest, Oracle Credit Corporation and Oracle Corporation Canada, Inc. The Trust's affiliate
and Imperial Parking Limited brought a separate action in British Columbia, Canada against Newcourt, Oracle Credit Corporation and Oracle Corporation Canada claiming, among other things, that the
contract at issue was not properly authorized by the Trust's Board of Trustees and the Imperial Parking Limited's Board of Directors. On March 27, 2000, in connection with the
spin-off of Imperial Parking Corp. of Canada ("Imperial Parking") (the successor in interest to Imperial Parking Limited) to the Trust's shareholders, the Trust gave an indemnity to
Imperial Parking Corporation in respect to damages arising from the outstanding actions.

15

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Numerous
attempts to settle this matter have been unsuccessful. If Newcourt is successful on its claim, the Trust could be liable for interest on the original claim amount ($600,000) at
a rate of 18% per annum, compounded monthly. The trial has been scheduled for January 2005. The Trust intends a vigorous defense against the claims and to pursue its separate claims with
respect to this matter.

Revenue Canada Contingency

Revenue Canada has commenced a tax audit of Imperial Parking. Imperial Parking has communicated to the Trust that it expects that Revenue Canada will disallow
deductions previously taken by Imperial Parking. The Trust has reserved certain amounts for expenses related to this matter. These amounts are included in contingency reserve.

Legal Proceedings and Contingency Reserve

The Trust has accrued, as its best estimate, $1,300,000 for financial reporting purposes related to the foregoing loss contingencies and litigation matters,
although there can be no assurance as to the ultimate outcome of any litigation matter or the adequacy of the loss contingency accrual.

15.Business Segments

The Trust's and FUMI's business segments include ownership of an office building, loans and VenTek, a transit equipment and parking ticket equipment manufacturing
company. In addition, prior to June 22, 2004 the Trust owned a shopping mall, the operations of which are classified as discontinued operations. Management evaluates property and VenTek
performance based upon net operating income. With respect to property assets, net operating income is property rent less property operating expense, and real estate taxes. With respect to VenTek, net
operating income is sales revenue less cost of goods sold. Corporate assets consist of cash and cash equivalents, real estate securities and investments in US Treasury Bills and Government National
Mortgage Association Notes. The parking ticket equipment business was sold on August 1, 2003.

As
of September 30, 2004, VenTek had no backlog. Backlog represents products or services that VenTek's customers have committed by contract to purchase. VenTek is not actively
seeking new contracts. VenTek currently performs any requisite obligations under its remaining warranty bond guarantee. It is expected that upon completion of the warranty period, which is expected to
be in the fourth quarter of 2004, the remaining assets of VenTek will be disposed of and operations will cease.

All
intercompany transactions between segments have been eliminated (see table of business segments).

16

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|                                                |                                | Three Months Ended
September 30, |       | Nine Months Ended
September 30, |  
|----------------------------------------------- | ------------------------------ | -------------------------------- | ----- | ------------------------------- | -
|
|
|Rents, Sales and Interest on Loans              |                                |                                  |       |                                 |  
|                                                | Office Building                |                                  | $     | 357                             |  
|                                                | VenTek                         |                                  |       | 210                             |  
|                                                | Loans                          |                                  |       | 321                             |  
|                                                |                                |                                  |       |                                 |  
|                                                |                                |                                  | 888   |                                 |  
|LessOperating Expenses and Costs of Goods Sold |                                |                                  |       |                                 |  
|                                                | Office Building                |                                  |       | 222                             |  
|                                                | VenTek                         |                                  |       | 282                             |  
|                                                |                                |                                  |       |                                 |  
|                                                |                                |                                  | 504   |                                 |  
|LessReal Estate Taxes                          |                                |                                  |       |                                 |  
|                                                | Office Building                |                                  |       | 20                              |  
|                                                |                                |                                  |       |                                 |  
|                                                |                                |                                  | 20    |                                 |  
|Operating Income (Loss)                         |                                |                                  |       |                                 |  
|                                                | Office Building                |                                  |       | 115                             |  
|                                                | VenTek                         |                                  |       | (72                             | )
|                                                | Loans                          |                                  |       | 321                             |  
|                                                |                                |                                  |       |                                 |  
|                                                |                                |                                  | 364   |                                 |  
|LessDepreciation and Amortization              |                                |                                  | 109   |                                 |  
|LessInterest Expense                           |                                |                                  | 3     |                                 |  
|Corporate Income (Expense)                      |                                |                                  |       |                                 |  
|                                                | Interest and Dividends         |                                  |       | 672                             |  
|                                                | Insurance recoveries           |                                  |       | 1,244                           |  
|                                                | Gain on the sale of securities |                                  |       | 764                             |  
|                                                | General and administrative     |                                  |       | (831                            | )
|                                                |                                |                                  |       |                                 |  
|Income (Loss) from continuing operations        |                                | $                                | 2,101 |                                 | $
|                                                |                                |                                  |       |                                 |  
|Capital Expenditures                            |                                |                                  |       |                                 |  
|                                                | Office Building                |                                  | $     | 1,022                           |  
|                                                | VenTek                         |                                  |       |                                |  
|                                                |                                |                                  |       |                                 |  
|                                                |                                | $                                | 1,022 |                                 | $
|                                                |                                |                                  |       |                                 |  

|                    |                 |  |  |  |  | Sept. 30,
2004 |         | Dec. 31,
2003
|------------------- | --------------- |  |  |  |  | -------------- | ------- | -------------
|Identifiable Assets |                 |  |  |  |  |                |         |              
|                    | Shopping Center |  |  |  |  |                | $       |             
|                    | Office Building |  |  |  |  |                |         | 3,587        
|                    | VenTek          |  |  |  |  |                |         | 17           
|                    | Loans           |  |  |  |  |                |         | 5,645        
|                    | Corporate       |  |  |  |  |                |         | 115,814      
|                    |                 |  |  |  |  |                |         |              
|Total Assets        |                 |  |  |  |  | $              | 125,063 |              
|                    |                 |  |  |  |  |                |         |              

17

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Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

CAUTIONARY
STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

Statements
contained herein may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Any statements contained herein which are not statements of historical facts and that address activities, events or developments that First Union Real
Estate Equity and Mortgage Investments (the "Trust") expects, believes or anticipates will or may occur in the future shall be deemed to be forward-looking statements. Forward-looking statements are
inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events, actual results and performance, financial
and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements herein. Factors that could cause actual results to differ materially from those in
forward-looking statements include the terms of future property sales, investments and financings, general economic and business conditions and various other risk factors listed in the registration
statement of the Trust filed with the Securities and Exchange Commission.

This
item should be read in conjunction with the financial statements, footnotes thereto and other items contained elsewhere in the report.

General

The Trust is a real estate investment trust ("REIT") engaged in the business of owning real property and real estate related assets. As of September 30,
2004, the Trust held, in addition to its cash reserves, the following assets: (1) an office building located in Indianapolis, Indiana (Circle Tower); (2) a loan participation, referred
to as the West 38th Street Loan, with a principal balance of $3.0 million at September 30, 2004; (3) a loan participation, referred to as the West Side Loan with a
principal balance of $2.6 million at September 30, 2004, which is described below; (4) real estate securities available for
sale; and (5) U.S. Treasury Bills and Government Nation Mortgage Association Notes. Further, the Trust has deposited with a qualified intermediary the sum of $33,500,000 to be used in
connection with the purchase of real property that qualifies as a Section 1031 exchange (see "Portfolio Acquisition" below).

As
a result of the sale of the Park Plaza Mall property in June 2004 and the acquisition by the Trust of securities of other REIT's, the Trust has made an election to avail itself
of the safe-harbor provided in Rule 3a-2 under the Investment Company Act of 1940 in order to avoid being classified as an investment company under the Investment
Company Act of 1940.

The
average occupancy rate at Circle Tower for the nine months ended September 30, 2004 and September 30, 2003 was 89% and 88% respectively.

Investment Policy

Rather than focus on a particular type of real estate asset or a specific geographic sector, the Trust's investments will be based, at least for the foreseeable
future, on its assessment that a potential investment is significantly undervalued or presents an opportunity to outperform the marketplace. Additionally, the Trust will make investments in assets
believed to be underperforming and in which it believes through an infusion of capital and improved management an appropriate return on investment can be realized. Consequently, with certain
limitations, the Trust will seek to invest or acquire most types of real estate assets or securities. Moreover, except as limited by the restrictions placed on the Trust in order to meet its
requirements to maintain REIT status, the Trust's investment decisions will

18

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not
be materially affected by the nature of an investment or where that investment falls in an entity's capital structure. The Trust will acquire entities that own real estate, invest directly in the
equity of a real estate asset exclusively or through a venture, acquire preferred equity, mezzanine debt or, if priced appropriately, the first mortgage debt of a real estate asset. In general, it is
not expected that the Trust will invest in an entity in which the Trust does not own 100% of the equity unless the Trust controls, has the means to acquire control of, or the investment or has a
mechanism in place to exit the investment for a price consistent with fair value. In order to fund future acquisitions, the Trust will utilize its cash reserves, obtain debt financing and/or sell
additional equity.

In
view of the foregoing, the Trust's near-term investment strategy will be to identify and invest in discrete real estate investments consistent with the foregoing criteria.
As appropriate investment opportunities arise, the Trust will aggressively pursue such opportunities. For the long-term, as investments mature in value to the point where the Trust is
unlikely to
achieve better than a market return on their then enhanced value, it is likely the Trust will exit the investment and seek to redeploy the capital to higher yielding opportunities.

Investments
and dispositions made by the Trust during the nine months ended September 30, 2004 included the following:



On March 3, 2004, the Trust acquired from Bank of America, N.A. a loan receivable from NorthStar Partnership, L.P. ("NorthStar") in the principal amount of
approximately $16.9 million (the "NorthStar Loan"). The NorthStar Loan was evidenced by a Credit Agreement, Promissory Note and collateral documents. The NorthStar Loan was secured by a first
priority lien on all or a portion of NorthStar's interest in Morgans Hotel Group LLC, Emmes & Company LLC and Presidio Capital Investment Company, LLC as well as certain other assets of
NorthStar. NorthStar prepaid the loan in its entirety on August 4, 2004. Due to the nature and amount of the NorthStar Loan, in order to comply with the rules applicable to REITs, portions of
the NorthStar Loan were held by a wholly-owned subsidiary of the Trust that elected to be treated as a TRS. Accordingly, the portion of income allocated to the amount of the NorthStar Loan held by the
taxable REIT subsidiary will be subject to corporate level tax. Federal and state income tax expense of $48,576 incurred in connection with the North Star loan has been included in general and
administrative expenses.



On May 19, 2004, the Trust purchased a 25% participation interest in a loan (the "West Side Loan") a loan secured by a first mortgage on a commercial
property located in New York City's Chelsea area. The total outstanding principal balance of the loan is $10.7 million of which the Trust's share is $2.6 million. The purchase price for
the participation interest was the face amount of the Trust's share of the loan. The loan bears interest at LIBOR plus 9.5% per annum and is scheduled to mature in April 2009. The interest rate
was 11.3% as of September 30, 2004.



On August 4, 2004, the Trust acquired a 50% participation ("West 38th Street Loan") in a $20 million first mortgage loan secured by a
property located at 63 West 38th Street, New York, New York. The loan bears interest at LIBOR plus 400 basis points (with a minimum rate of 5.42%), has a three year term and requires
payments of interest only. The Trust indirectly obtained $7 million of financing in connection with this investment that bears interest at LIBOR plus 175 basis points and requires payments of
interest only. The interest rate was 5.36% as of September 30, 2004.

19

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The Trust had previously acquired 267,000 shares in Atlantic Realty Trust ("Atlantic Realty") (NASD:ATLRS) representing 7.5% of the outstanding shares in Atlantic
Realty. On January 12, 2004, the Trust contacted Atlantic Realty to discuss a possible business combination between Atlantic Realty and the Trust. The Trust made a proposal to Atlantic Realty
which proposal was modified in April, 2004 and was ultimately rejected by Atlantic Realty in May, 2004 as Atlantic Realty elected to market its remaining property for sale. On May 19, 2004,
Atlantic Realty paid a distribution of $3.25 per share to holders of record on May 10, 2004. Following the distribution, the Trust began selling its shares in Atlantic Realty and, effective
August 3, 2004, the Trust had sold its entire interest in Atlantic Realty and realized a gain of $1.1 million.



Beginning in August 2004, the Trust began acquiring shares of common stock in Sizeler Property Investors, Inc. (NYSE:SIZ), a real estate investment
trust that primarily is in the business of owning and operating income producing retail shopping centers and apartment communities in the southeastern United States. As of September 30, 2004,
the Trust had acquired a total of 670,000 shares of common stock of Sizeler which represents 5.0% of all of the outstanding shares of common stock of Sizeler for an aggregate purchase price of
$5.6 million. The shares are classified in the balance sheet as "Real estate securities available for sale." During October 2004, the Trust acquired an additional 118,200 shares of
common stock of Sizeler, representing approximately 1.0% of the total outstanding shares of common stock. The aggregate purchase price of the additional shares was $1.1 million.



On June 22, 2004, the Trust sold its Park Plaza Mall property located in Little Rock, Arkansas for a gross sales price of $77.5 million to a
subsidiary of CBL & Associates Properties, Inc. In connection with this transaction, the purchaser assumed the existing indebtedness encumbering the property of approximately
$41.3 million. Accordingly, net proceeds to the Trust after giving effect to the loan assumption and closing costs were approximately $33.5 million. The Trust deposited the proceeds with
a qualified intermediary, and it is expected that the proceeds will be utilized in connection with the portfolio acquisition in connection with a "like kind" exchange pursuant to Section 1031
of the Internal Revenue Code. There can be no assurance, however, that the purchase of the replacement properties identified will be consummated. In the event that the "like kind" exchange cannot be
consummated, the estimated taxable gain from the sale of this property will be approximately $20.5 million.



On September 16, 2004 the Trust entered into a contract to acquire up to 16 triple-net leased properties containing approximately
2.5 million gross square feet for a gross purchase price of approximately $91 million. The funds required for this acquisition will be provided from (i) approximately
$31 million of existing debt on the properties which will be assumed, (ii) approximately $33.5 million from the proceeds of the Park Plaza Mall sale that are being held by a
qualified intermediary which will enable the Trust to make a "like kind" exchange pursuant to Section 1031 of the Internal Revenue Code, and (iii) the balance from the Trust's cash
reserves. It is expected that after the consummation of this transaction, the Trust will obtain additional financing in the amount of approximately $53 million which will be secured by the
Trust's interest in the entities formed to acquire the properties.    This acquisition is expected to close in November 2004.

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Circle Tower, the Trusts' wholly owned operating property located in Indiana, completed the acquisition of a 100% interest in the land for an aggregate purchase
price of $1.7 million effective October 2004. As a result, the Trust now holds a 100% interest in both the land and the improvements which comprise the Circle Tower property.

Liquidity and Capital Resources

General

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments
and other general business needs. Additionally, to maintain our status as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT taxable income. However, due to
significant net operating losses for federal tax purposes, the Trust does not anticipate that any distributions will be required in the foreseeable future.

Our
primary sources of funds for liquidity consist of cash reserves, net cash provided by operating activities, payments received on the West 38thStreet Loan, the West Side
Loan and the maturities of U.S. Treasury Bills and Government National Mortgage Association Notes. In the future we may raise additional funds through debt financing and/or equity offerings.

Our
ability to execute our business strategy, particularly the growth of our investment portfolio, depends to a significant degree on our ability to implement our investment policy as
described above. We compete with several other companies for investments, including other REITs, insurance companies and other investors. Some of our competitors have greater resources than we do and
for this and other reasons, we may not be able to compete successfully for investments.

The
Trust had cash and cash equivalents of $1.5 million at September 30, 2004. In addition, at September 30, 2004, the Trust owned $68.5 million in face value
of U.S. Treasury Bills and Government National Mortgage Association Notes and had restricted cash of $34.0 million. The Trust's investments in U.S. Treasury Bills ($58.8 million) mature
in less than 90 days and are classified as available for sale. Additionally, the Trust's investments in Government National Mortgage Association Notes ($9.9 million) with an assumed
weighted average life of less than three years and are classified as available for sale. The average annual yields on the U.S. Treasury Bills were 1.20% and 1.06% for the three months ended
September 30, 2004 and 2003, respectively.

The
Trust's level of liquidity based upon cash and cash equivalents decreased by approximately $13.5 million for the nine months ended September 30, 2004. The decrease
resulted from $13.3 million of cash used by investing activities, $1.7 million used in financing activities, which was partially offset by $1.5 million of cash provided by
operating activities.

Investing
activities generated $33.6 million of proceeds from the sale of the Park Plaza property, net of loan assumption. In addition, during the nine months ended
September 30, 2004 the Trust received repayment of loan advances of $16.1 million and proceeds from the sale of real estate securities of $9.4 million. These investing proceeds
were offset by an increase in restricted cash of $31.2 million, which was due to the funds deposited with a qualified intermediary as required to implement a Section 1031 "like kind"
exchange. In addition, the Trust used (i) $21.7 million to make loans to third parties, (ii) $17.4 million to purchase real estate securities, and
(iii) $2.4 million for land acquisitions and building and tenant improvements.

Cash
used in financing activities included $1.5 million of cash dividends to holders of the Trust's Series A Cumulative Preferred Shares of Beneficial Interest ("Preferred
Shares"), and $0.1 million of mortgage loan payments.

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The
Trust declared a dividend of $0.5 million ($0.525 per share) on the Trust's Preferred Shares in the first, second and third quarters of 2004. The first quarter dividend was
paid April 30, 2004 to beneficiaries of record at the close of business on March 31, 2004. The second quarter dividend was paid July 31, 2004 to beneficiaries of record at the
close of business on June 30, 2004. The third quarter dividend was paid October 31, 2004 to beneficiaries of record at the close of business on September 30, 2004.

In
1999, Newcourt Financial Ltd. ("Newcourt") brought a claim in Ontario, Canada against FUMI and Imperial Parking Limited, a then subsidiary of FUMI, alleging a breach of a
contract between FUMI and Newcourt's predecessors-in-interest, Oracle Credit Corporation and Oracle Corporation Canada, Inc. The Trust's affiliate and Imperial Parking
Limited brought a separate action in British Columbia, Canada against Newcourt, Oracle Credit Corporation and Oracle Corporation Canada claiming, among other things, that the contract at issue was not
properly authorized by the Trust's Board of Trustees and the Imperial Parking Limited's Board of Directors. On March 27, 2000, in connection with the spin-off of Imperial Parking
Corp. of Canada ("Imperial Parking") (the successor in interest to Imperial Parking Limited) to the Trust's shareholders, the Trust gave an indemnity to Imperial Parking Corporation in respect to
damages arising from the outstanding actions. Numerous attempts to settle this matter have been unsuccessful. If Newcourt is successful on its claim, the Trust could be liable for interest on the
original claim amount ($600,000) at a rate of 18% per annum, compounded monthly. The trial has been scheduled for January 2005. The Trust intends a vigorous defense against the claims and to
pursue its separate claims with respect to this matter.

Revenue
Canada has commenced a tax audit of Imperial Parking. Imperial Parking has communicated to the Trust that it expects that Revenue Canada will disallow deductions previously taken
by Imperial
Parking. The Trust has reserved certain amounts for expenses related to this matter. These amounts are included in contingency reserve.

The
Trust has accrued, as its best estimate, $1,300,000 for financial reporting purposes related to the foregoing loss contingencies and litigation matters, although there can be no
assurance as to the ultimate outcome of any litigation matter or the adequacy of the loss contingency accrual.

Results of Operations

Nine Months Ended September 30, 2004 vs. September 30, 2003

Net income applicable to Common Shares for the nine months ended September 30, 2004 was $20.4 million as compared to a net loss of
$6.4 million for the nine months ended September 30, 2003. The primary reason for the increased net income was the gain of $19.3 million on sale of the Park Plaza Mall property on
June 22, 2004 and an increase in income from continuing operations of $8.5 million.

Income
from continuing operations for the nine months ended September 30, 2004 was $2.2 million as compared to a net loss of $6.3 million for the same period in
2003, which as discussed further below, was primarily due to a $3.7 million reduction in the Trust's expenses and an increase of $4.8 million in the Trust's revenues.

VenTek
had revenue of $3.2 million for the nine months ended September 30, 2004 compared to $1.8 million for the same period during 2003. VenTek's costs of goods
sold for the nine months ended September 30, 2004 and for the nine months ended September 30, 2003 were $2.4 million and $2.8 million, respectively. As of
September 30, 2004, VenTek had no backlog. Backlog represents products or services that VenTek's customers have committed by contract to purchase. VenTek is not actively seeking new contracts.
Ventek currently performs any requisite obligations under its remaining warranty bond guarantee. It is expected that upon completion of the warranty period, which is expected

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to
be in the fourth quarter of 2004, the remaining assets of VenTek will be disposed of and operations will cease.

Property
operating income, which is rent less property operating expenses and real estate taxes, decreased from $489,000 for the nine months ended September 30, 2003 to $485,000
for the nine months ended September 30, 2004 reflecting operating results at Circle Tower. The decrease in property operating income consists of an $83,000 decrease in rental income, which was
partially offset by a $57,000 decrease in property operating expenses and a $22,000 decrease in real estate tax expense.

Interest
and dividend income for the nine months ended September 30, 2004 increased to $1.9 million from $0.7 million for the same period in 2003 due to a
$0.9 million increase in interest income received on loans receivable and, a $0.3 million increase in interest received on government securities.

Insurance
recoveries amounted to $1.2 million for the nine months ended September 30, 2004. The insurance proceeds were recoverable under the directors' and officer's
policy for reimbursement of legal fees expended in connection with the Kimeldorf preferred shareholder litigation.

Gain
on the sale of securities available for sale increased by $1.0 million primarily due to the sale of Atlantic Realty Trust stock.

General
and administrative expenses decreased by $2.3 million to $3.0 million for the nine months ended September 30, 2004. During the first nine months of 2003 the
largest components of the Trust's general and administrative expenses were legal fees relating to the Kimeldorf preferred shareholder litigation ($0.3 million), legal fees related to the Gotham
Transaction ($2.9 million), other legal and accounting fees ($0.6 million), and directors and officers insurance ($0.5 million). The balance of the general and administrative
costs ($1.0 million) for the first nine months of 2003 related to management fees, costs associated with shareholder relations and communications, trustee fees, and other administrative costs
incurred in connection with the operation and management of the Trust. During the first nine months of 2004 the largest components of the Trust's general and administrative expenses were legal and
accounting fees ($0.7 million), directors and officers insurance ($0.5 million), a termination fee paid to the Trust's former asset management provider, Radiant Partners LLC
($0.1 million), the asset management fee that is paid to FUR Advisors LLC ($1.1 million) which, as described further in the footnotes to the combined financial statements included in
this report and is based upon a percentage of the Trust's Gross Asset Value (as defined in the Advisory Agreement). The balance of the general and administrative expenses ($0.5 million) was for
costs associated with shareholder relations and communications, trustee fees, and other miscellaneous costs associated with the operations of the Trust.

Interest
expense declined from $0.9 million during the nine months ended September 30, 2003 to $0.002 million for the same period in 2004 due to the full
satisfaction of the Trust's senior notes on October 1, 2003.

Income
from discontinued operations represents income attributable to the Park Plaza Mall, which was sold in June 2004. During the nine months ended September 30, 2003
income from the property was
$1.4 million and during the nine months ended September 30, 2004, income derived from the property was $0.1 million.

Three Months Ended September 30, 2004 vs. September 30, 2003

Net income applicable to Common Shares for the three months ended September 30, 2004 was $1.7 million as compared to a net loss of
$1.2 million for the three months ended September 30, 2003. The primary reason for the increased net income was the $0.8 million of interest and dividend income earned during
2004, a $0.8 million gain on the sale of real estate securities, and $1.2 million increase in insurance recoveries.

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Income from continuing operations for the three months ended September 30, 2004 was $2.1 million as compared to a net loss of $1.3 million for the same period in
2003, which was due to an increase of $0.8 million in interest and dividend income, $0.8 million gain on the sale of real estate securities, and a $1.2 million increase in
insurance recoveries.

VenTek
had revenue of $0.2 million for the three months ended September 30, 2004 compared to $0.4 million for the same period during 2003. VenTek's costs of goods
sold for the three months ended September 30, 2004 was $0.3 million and for the three months ended September 30, 2003 was $0.8 million.

Property
operating income, which is rent less property operating expenses and real estate taxes, for the three months ended September 30, 2004 was $0.1 million compared to
property operating income of $0.2 million for the three months ended September 30, 2003. The decrease in property operating income reflects a $0.05 million increase in property
operating expenses related to the Circle Tower office building.

Interest
and dividend income for the three months ended September 30, 2004 increased to $1.0 million from $0.2 million for the same period in 2003 due to a
$0.3 million increase in interest income received on loans receivable, a $0.5 increase in interest and dividend income received on government securities.

Insurance
recoveries amounted to $1.2 million for the nine months ended September 30, 2004. The insurance proceeds were recoverable under the directors' and officer's
policy for reimbursement of legal fees expended in connection with the prior period Kimeldorf preferred shareholder litigation.

General
and administrative expenses remained constant at $0.8 million for the three months ended September 30, 2004 and September 30, 2003. During the three months
ended September 30, 2003 the Trust's general and administrative expenses consisted of legal fees relating to the Kimeldorf preferred shareholder litigation ($0.1 million), other legal
and accounting fees ($0.1 million), directors and officers insurance ($0.2 million) and ($0.4 million) related to management fees, costs associated with shareholder relations and
communications, trustee fees, and other administrative costs incurred in connection with the operation and management of the Trust. During the three months ended September 30, 2004 the largest
components of the Trust's general and administrative expenses were legal and accounting fees ($0.2 million), directors and officers insurance ($0.1 million), the asset management fee
that is charged by FUR Advisors LLC ($0.4 million) which, as described further in the footnotes to the combined financial statements included in this report, is based upon a percentage of the
Trust's Gross Asset Value (as defined in the Advisory Agreement). The balance of the general and administrative expenses
($0.1 million) was for costs associated with shareholder relations and communications, trustee fees, and other miscellaneous costs associated with the operations of the Trust.

Interest
expense declined from $0.3 million during the three months ended September 30, 2003 to $0.003 million for the same period in 2004 due to the full
satisfaction of the senior notes on October 1, 2003.

Income
from discontinued operations represents income attributable to the Park Plaza Mall which was sold in June 2004. During the three months ended September 30, 2003
income from the property was $0.5 million and during the three months ended September 30, 2004, the loss derived from the sold property was $0.4 million due to the wrap up of
property operations.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK

Interest Rate Risk

The Trust's debt outstanding at September 30, 2004 has a fixed interest rate. The Trust's investments in U.S. Treasury Bills ($58.8 million) mature
in less than 90 days. Additionally, the Trust

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has
investments in Government National Mortgage Association Notes ($9.9 million). The Trust believes there would not be a material change in the fair values of these insured mortgage securities
if we assumed that the discount rate used to determine the fair values increased by 100 basis points and 200 basis points as of September 30, 2004 since the underlying mortgages are generally
prepayable and have an assumed weighted average life of less than three years.

At
September 30, 2004, the Trust has two loans receivable totaling $5,645,000 which have variable interest rates based upon the Libor rate. A 1% increase in the Libor rate would
increase interest income by approximately $57,000, while a 1% decrease in the Libor rate would decrease interest income by approximately $38,000.

Item 4.CONTROLS AND PROCEDURES

The registrant's principal executive and financial officer have, within 90 days of the filing date of this quarterly report, evaluated the effectiveness of
the registrant's disclosure controls and procedures (as defined in Exchange Act Rules 13a14(c)) and have determined that such disclosure controls and procedures are adequate to
ensure that information required to be disclosed by the registrant in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified by the Securities and Exchange Commission. There have been no significant changes in the registrant's internal controls or in other factors that could significantly and adversely affect such
internal controls since the date of evaluation. Accordingly, no corrective actions have been taken with regard to significant deficiencies or material weaknesses.

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PART IIOTHER INFORMATION

Item 6.EXHIBITS.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Trust 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
|----------------------- |  | -------------------------------------------------------
|Date: November 12, 2004 |  | By:                                                    
|Date: November 12, 2004 |  | By:                                                    

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EXHIBIT INDEX

|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Page
Number |  
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | -
|(2)(a)  |  | Agreement and Plan of Merger and Contribution by and among First Union Real Estate Equity and Mortgage Investments, that certain Ohio Trust, declared as of October 1, 1996, by Adolph Posnick, Trustee, First Union Management, Inc., GGC Merger Sub,
Inc., Gotham Partners, L.P., Gotham Golf Partners, L.P., Florida Golf Associates, L.P., Florida Golf Properties, Inc., and Gotham Golf Corp.                                                                                                                 |  | (a          | )
|2(a)(1) |  | Amendment No. 1 dated as of April 30, 2002 to the Agreement and Plan of Merger and Contribution by and among First Union Real Estate Equity and Mortgage Investments, that certain Ohio Trust, declared as of October 1, 1996, by Adolph Posnick, Trustee,
First Union Management, Inc., GGC Merger Sub, Inc., Gotham Partners, L.P., Gotham Golf Partners, L.P., Florida Golf Associates, L.P., Florida Golf Properties, Inc., and Gotham Golf Corp.                                                               |  | (b          | )
|2(a)(2) |  | Amendment and Restatement dated as of October 30, 2002 of Amendment No. 2 dated as of September 27, 2002 to the Agreement and Plan of Merger and Contribution by and among First Union Real Estate Equity and Mortgage Investments, that certain Ohio
Trust, declared as of October 1, 1996, by Adolph Posnick, Trustee, First Union Management, Inc., GGC Merger Sub, Inc., Gotham Partners, L.P., Gotham Golf Partners, L.P., Florida Golf Associates, L.P., Florida Golf Properties, Inc., and Gotham Golf
Corp. |  | (c          | )
|2(a)(3) |  | Amendment No. 3 dated as of October 24, 2002 to the Agreement and Plan of Merger and Contribution by and among First Union Real Estate Equity and Mortgage Investments, that certain Ohio Trust, declared as of October 1, 1996, by Adolph Posnick,
Trustee, First Union Management, Inc., GGC Merger Sub, Inc., Gotham Partners, L.P., Gotham Golf Partners, L.P., Florida Golf Associates, L.P., Florida Golf Properties, Inc., and Gotham Golf Corp.                                                             |  | (d          | )
|3(a)    |  | By-laws of Trust as amended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | (e          | )
|3(b)    |  | Certificate of Amendment to Amended and Restated Declaration of Trust as of March 6, 2001                                                                                                                                                                                                                                                                                                                                                                                                                           |  | (f          | )
|3(c)    |  | Amendments to Amended and Restated Declaration of Trust dated April 15, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | (k          | )
|4(a)    |  | Form of certificate for Shares of Beneficial Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | (g          | )
|4(e)    |  | Certificate of Designations relating to Trust's Series A Cumulative Redeemable Preferred Shares of Beneficial Interest                                                                                                                                                                                                                                                                                                                                                                                              |  | (h          | )
|4(f)    |  | Warrant to purchase 500,000 shares of Beneficial Interest of Trust                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | (e          | )
|10(a)   |  | 1999 Trustee Share Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | (i          | )
|10(b)   |  | 1999 Long Term Incentive Performance Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | (i          | )
|10(c)   |  | Registration Rights Agreement as of November 1, 1999 by and among First Union Equity and Mortgage Investments and Gotham Partners, L.P., Gotham Partners III, L.P., and Gotham Partners International, Ltd.                                                                                                                                                                                                                                                                                                         |  | (j          | )
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |             |  

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|10(d) |  | Indemnification Agreement with Neil Koenig, dated as of April 29, 2002                                                                                                                                                                             |  | (l | )
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -- | -
|10(e) |  | Stock Purchase Agreement between First Union Real Estate Equity and Mortgage Investments and FUR Investors, LLC, dated as of November 26, 2003 ("Stock Purchase Agreement"), including Annex A thereto, being the list of Conditions to the
Offer. |  | (m | )
|10(f) |  | Guaranty of Michael L. Ashner, Guarantor, dated November 26, 2003, in favor of First Union Real Estate Equity and Mortgage Investments, Guarantee, in the form provided as Annex F to the Stock Purchase Agreement.                                |  | (m | )
|10(g) |  | Advisory Agreement between First Union Real Estate Equity and Mortgage Investments and FUR Advisors, LLC.                                                                                                                                          |  | (m | )
|10(h) |  | Exclusivity Services Agreement between First Union Real Estate Equity and Mortgage Investments and Michael L. Ashner.                                                                                                                              |  | (m | )
|10(i) |  | Covenant Agreement between First Union Real Estate Equity and Mortgage Investments and FUR Investors, LLC.                                                                                                                                         |  | (m | )
|16    |  | Letter from KPMG                                                                                                                                                                                                                                   |  | (n | )
|31    |  | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                           |  |    |  
|32    |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                            |  |    |  

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