<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
                                       OR

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission File No. 1-8815

                             EQK REALTY INVESTORS I
                             ----------------------
             (Exact name of Registrant as specified in its Charter)

            Massachusetts                                 23-2320360
---------------------------------           ------------------------------------
(State or other jurisdiction                 (I.R.S.Employer Identification No.)
of incorporation or organization)

5775 Peachtree Dunwoody Road, Suite 200D, Atlanta, GA             30342
-----------------------------------------------------          ----------
(Address of principal executive offices)                       (Zip Code)

       (Registrant's telephone number, including area code) (404) 303-6100
                                                            --------------
           Securities registered pursuant to Section 12(b)of the Act:


      Title of each class            Name of each exchange on which registered
-------------------------------      ------------------------------------------
Shares of Beneficial Interest                 New York Stock Exchange

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

         Indicate by checkmark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [ X ]

         Indicate by checkmark 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
                                             ---   ---
         The aggregate market value of Shares of Beneficial Interest held by
non-affiliates of the Registrant, based on the closing price of the Shares on
March 7, 1997 on the New York Stock Exchange of $1.50 per Share, is $11,359,560.
As of March 7, 1997, 9,264,344 Shares of Beneficial Interest were outstanding.
Officers and Trustees of the Trust (and certain of their family members) and
Equitable Realty Portfolio Management, Inc., Advisor to the Trust, are treated
as affiliates for the purposes of this computation, with no admission being made
that such people or entities are actually affiliates.

                      DOCUMENTS INCORPORATED BY REFERENCE.

         The Trust's Proxy Statement relating to its 1997 Annual Meeting of
Shareholders is incorporated in Part III, Items 10, 11, 12 and 13.

<PAGE>   2
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS





PART I                                                                   PAGE
<S>           <C>                                                         <C>
Item 1.       Business                                                     2
Item 2.       Properties                                                   7
Item 3.       Legal Proceedings                                           13
Item 4.       Submission of Matters to a Vote of Security Holders         14

PART II

Item 5.       Market for the Registrant's Common Equity and Related
                Stockholder Matters                                       16
Item 6.       Selected Financial Data                                     17
Item 7.       Management's Discussion and Analysis of Financial
                Condition and Results of Operations                       17
Item 8.       Financial Statements and Supplementary Data                 24
Item 9.       Changes in and Disagreements with Accountants
                on Accounting and Financial Disclosure                    24

PART III

Item 10.      Directors and Executive Officers of the Registrant          25
Item 11.      Executive Compensation                                      25
Item 12.      Security Ownership of Certain Beneficial Owners
                and Management                                            25
Item 13.      Certain Relationships and Related Transactions              25


PART IV

Item 14.      Exhibits, Financial Statement Schedules, and
                Reports on Form 8-K                                       26

</TABLE>


                                        1

<PAGE>   3



                                     PART I


ITEM 1.           BUSINESS.

General Development of Business

                  EQK Realty Investors I, a Massachusetts business trust (the
"Trust"), was formed pursuant to a Declaration of Trust dated October 8, 1984
(the "Declaration of Trust"). Equitable Realty Portfolio Management, Inc.
("ERPM," successor in interest to EQK Partners), acts as the "Advisor" to the
Trust. ERPM is a wholly owned subsidiary of Equitable Real Estate Investment
Management, Inc. ("Equitable Real Estate"), itself an indirect wholly owned
subsidiary of The Equitable Life Assurance Society of the United States
("Equitable"). The principal executive offices of the Trust and of the Advisor
are located at 5775 Peachtree Dunwoody Road, Suite 200D, Atlanta, Georgia,
30342, and their telephone number is (404) 303-6100.

                  The Trust has adopted a fiscal and taxable year ending
December 31. The Trust has transacted its affairs so as to qualify as, and has
elected to be treated as, a real estate investment trust under applicable
provisions of the Internal Revenue Code. Under the Internal Revenue Code, a real
estate investment trust that meets applicable requirements is not subject to
Federal income tax on that portion of its taxable income that is distributed to
its shareholders.

                  The Trust consummated the public offering of its Shares of
Beneficial Interest (the "Shares") on March 12, 1985. The net proceeds to the
Trust from such offering, net of underwriting discount, amounted to $170,856,000
before deducting offering expenses of $1,062,000. Certain of those proceeds
aggregating $167,032,000 were expended to acquire certain properties on March
13, 1985 (which were comprised of Harrisburg East Mall as described below under
"Narrative Description of Business," as well as two properties subsequently
sold: Castleton Park or "Castleton," an office park in Indianapolis, Indiana,
which was sold in 1995, and Peachtree Dunwoody Pavilion, or "Peachtree," an
office complex in Atlanta, Georgia, which was sold during the period 1992-1993).

                  The Declaration of Trust currently provides that actual
disposition of the remaining property, Harrisburg East Mall, may occur at any
time prior to March 1999. The precise timing of this disposition or an
alternative strategic transaction will be at the discretion of the Trustees,
depending on both the prevailing conditions in the relevant real estate market
and the ability of the Trust to extend or refinance its debt maturing in June
1998 (see Note 2 to the financial statements).

                  Since December 15, 1992, the Trust has had in place a
"Mortgage Note" with the Prudential Insurance Company of America, which had an
initial balance of $75,689,000, and an original maturity date of December 15,
1995. The interest rates on the Mortgage Note averaged 9.79% over its initial
three year term. However, the Mortgage Note agreement required monthly payments
of interest only at the rate of 8.54% per annum.

                                        2

<PAGE>   4



                  The additional interest charges were accrued and added to
principal over this initial term of the loan. Absent any prepayments of debt
arising from property dispositions, the amount of principal due on the original
maturity date of December 15, 1995 would have been $78,928,000. Under the terms
of the Mortgage Note agreement, the lender received warrants to purchase 367,868
shares of beneficial interest of the Trust for $.0001 per share, none of which
has been exercised.

                  The Trust also has had a "Term Loan" in place since December
15, 1992 bearing interest at 8.33% per annum and requiring payments at the same
annual rate of 8.54% as was required under the Mortgage Note agreement. The
payments made in excess of the interest rate were applied to the principal
balance of the loan such that the original principal balance of $2,859,000 would
have been reduced over its three year term to $2,839,000, absent any prepayments
arising from property dispositions.

                  On December 8, 1995, the Trust completed the sale of Castleton
Park ("Castleton"), its 44 building office park located in Indianapolis,
Indiana. The Trust used net proceeds of $35,990,000 (reduced by customary
prorations of $2,517,000) to retire $34,738,000 of the Mortgage Note and
$1,252,000 of the Term Loan. At the original expiration of the Mortgage Note and
Term Loan on December 15, 1995, the remaining balances of $44,125,000 and
$1,587,000, respectively, were extended for one year to December 15, 1996 under
terms substantially comparable to those previously in effect.

                  The principal balances outstanding under the Mortgage Note and
the Term Loan at December 15, 1996, $43,794,000 and $1,585,000, respectively,
were extended for 18 months through June 15, 1998. The Mortgage Note remains
collateralized by a first mortgage lien on Harrisburg East Mall, an assignment
of leases and rents, and certain cash balances. The Term Loan is collateralized
by a subordinate lien on Harrisburg East Mall. The Mortgage Note requires
payments of interest only at the rate of 8.88% per annum. The Term Loan reflects
the same pay rate of 8.88% that is applicable to the Mortgage Note, but also
bears interest at an accrual rate that re-sets periodically and is computed at
the Trust's discretion at either 2 5/8% above the Euro-Rate (as defined) or 1
1/8% above the Prime Rate (as defined). The accrual rate in effect through May
18, 1997 averaged 8.12%. The difference between the accrual rate and the pay
rate will be subtracted from the principal balance due at maturity.

                  In consideration for the fixed annual interest accrual rate on
the Mortgage Note, the Trust paid an up-front application fee of $165,000 and
agreed to pay a back end fee of $272,900, plus interest thereon at the contract
rate of 8.88%, at the maturity date of June 15, 1998, or the date at which all
or any part of the original principal amount is prepaid.

                  In connection with the December 15, 1992 debt financings, the
Trust issued 1,675,000 previously repurchased shares of its stock to its Advisor
for consideration of $6,700,000, or $4.00 per share. The Trust may, at its
discretion, reissue the remaining 791,211 Shares previously repurchased. Any
issuance of Shares in excess of the Shares previously repurchased would require
shareholder approval.


                                        3

<PAGE>   5



                  Apart from its initial investments in the Properties, and
subject to certain restrictions, the Trust is permitted to make additional real
estate investments involving the expansion of existing properties. The Trust has
no intentions of acquiring additional real estate interests, but will make
certain capital expenditures required to maintain or enhance the value of
Harrisburg, including tenant allowances associated with leasing activity.

                  The Trust may make secured or unsecured borrowings to make
distributions to its shareholders and for normal working capital needs,
including tenant alterations and/or allowances and the repair and maintenance of
properties in which it has invested. The Declaration of Trust prohibits the
Trust's aggregate borrowings from exceeding 75% of its total asset value, as
defined.

                  The Trust will not engage in any business not related to its
real estate investments and, in that connection, the Declaration of Trust
imposes certain prohibitions and investment restrictions on various investment
practices or activities of the Trust.

Narrative Description of Business


                  As stated above, the Trust has completed the disposition of
two of its three real estate investments. The office buildings comprising
Peachtree were sold in three separate transactions during the period 1992 to
1993. Two of the office buildings at Castleton were sold in 1991. The remaining
office buildings at Castleton were sold in 1995. The Trust's remaining real
estate investment is its regional mall located in Harrisburg, Pennsylvania. The
Trust intends to sell Harrisburg East Mall as conditions in the relevant real
estate market permit or enter into an alternative strategic transaction. Holding
Harrisburg East Mall is subject to the Trust's ability to extend or refinance
its mortgage debt that matures in June 1998, and to compliance with the
Declaration of Trust which currently requires disposition of all properties by
March 1999. The Trust anticipates making certain capital expenditures in order
to maintain or enhance the value of the property. The Trust anticipates making
1997 capital expenditures of $1,200,000, which include budgeted tenant
allowances of $670,000. Certain of these expenditures are discretionary in
nature and therefore may be deferred into future periods.

Harrisburg East Mall

                  Location and Area Overview. The Mall is located in Dauphin
County, Pennsylvania, near the intersection of Paxton Street (U.S. Route 322)
and Interstate 83. The property is adjacent to Pennsylvania Route 441,
approximately five miles from the Pennsylvania Turnpike and three miles from the
central business district of Harrisburg. Access to the site from Interstate 83,
the major north-south traffic corridor serving Harrisburg, is provided by the
Paxton Street interchange. Access from the Pennsylvania Turnpike, the major
east-west traffic corridor serving Harrisburg, is provided by the Interstate 283
interchange.

                  Tenants. At December 31, 1996, Harrisburg had 79 mall and
outparcel tenants (excluding anchor store tenants) occupying approximately
279,000 square feet of

                                        4

<PAGE>   6



gross leasable area, representing an occupancy rate of 84%. Other than the
anchor store spaces, which are occupied by JC Penney, Hecht's and Lord & Taylor,
only Toys 'R' Us, which occupies approximately 45,950 square feet of space as
the sole tenant in Harrisburg East Mall's outparcel building, occupies more than
five percent of the gross leasable area of the Mall.

                  Anchor Department Stores. Harrisburg East Mall has three
department stores, two of which are currently occupied by J.C. Penney and
Hecht's, a division of May Department Stores Co.("May Company"), which replaced
Hess' in November 1995. The third department store space was formerly occupied
by John Wanamaker, which closed in October 1995 following Woodward & Lothrop's
(the owner of John Wanamaker) sale of certain department stores in this retail
chain to May Company pursuant to an August 1995 bankruptcy court auction. Given
its existing presence at Harrisburg East Mall through its recently-opened
Hecht's department store, May Company initially pursued an assignment of this
leasehold interest to other retail operators before deciding in May 1996 to
instead open a Lord & Taylor (a division of May Company) department store in
this location. The execution of such lease agreement has resulted in, among
other things, the termination of the legal proceedings initiated by the Trust
against May Company in March 1996 following May Company's failure to open or
cause another retail operator to open for business once the John Wanamaker store
closed, which was a violation of a continuous operating covenant contained in
its lease agreement.

                  Lord & Taylor opened its newly renovated store on March 10,
1997. Initially, Lord & Taylor had projected an opening prior to the 1996
Holiday shopping season. However, issues affecting construction scheduling
delayed the opening date. This matter is discussed further under Item 7-
Management's Discussion and Analysis.



                                        5

<PAGE>   7



                 Competition. The following table provides selected information
with respect to Harrisburg East Mall's primary existing competitors. Each
property is located within eight miles of the Mall.

<TABLE>
<CAPTION>
                                                              Gross Leasable    Anchor
Shopping Center                     Type of Center            Area (Sq. Ft.)    Stores
---------------                     --------------            --------------    ------
<S>                                 <C>                       <C>               <C>

Colonial Park Plaza                 Enclosed one-               762,000         Sears
                                    level regional mall                         The Bon Ton
                                                                                Boscov's

Capital City Mall                   Enclosed one-               722,000         Sears
                                    level regional mall                         Hecht's
                                                                                JCPenney

Camp Hill Shopping                  Enclosed one-               505,000         Boscov's
 Center                             level mall                                  Montgomery Ward

Union Square                        Power Center                289,000         Dunham Sports
                                                                                Office Max
                                                                                Gabriel Bros.
                                                                                Weis

Colonial Commons                    Power Center                429,000         Giant, RX Place
                                                                                Service Merchandise
                                                                                Montgomery Ward
                                                                                TJ Maxx

Point Shopping Center               Strip Center                300,000         US Factory Outlet
                                                                                Burlington Coat

</TABLE>

                  Competition Analysis. The boundaries of the trade area for
Harrisburg East Mall are influenced by the existence of natural boundaries,
competing developments, and demographic characteristics. The Susquehanna River
splits the Harrisburg market in two, creating the East and West shores.
Harrisburg East Mall is located in Dauphin County in the East shore area. The
Mall's primary trade area consists of all of Dauphin County, while the secondary
trade area includes sections of Lebanon and Lancaster counties on the East shore
and sections of Perry and Cumberland counties on the West shore.

                  Primary competition for Harrisburg East Mall consists of
three regional centers located in the Harrisburg trade area: Colonial Park
Plaza, Capital City Mall, and Camp Hill Shopping Center.

                  Colonial Park Plaza, which opened in 1960, is located
approximately five miles north of Harrisburg East Mall in the primary trade
area, and contains 762,000 square

                                        6

<PAGE>   8



feet of gross leasable area. It is anchored by The Bon-Ton, Sears, and Boscov's,
contains 90 in-line specialty retailers and has an occupancy percentage of 90%.
In 1990, this one- level center was renovated and expanded to include a food
court and additional specialty shops. Colonial Center continues to be Harrisburg
East's primary competitor due to the strength of Boscov's and its tenant mix,
which is very similar to that found at Harrisburg.

                  Capital City Mall, a one-level center which opened in 1974, is
located eight miles west of Harrisburg East Mall in the secondary trade area.
The center contains approximately 722,000 square feet of gross leasable area and
is anchored by Hecht's, JC Penney, and Sears. It is currently 97.7% occupied,
with a strong concentration of boutique style retailers, and with the addition
of Hecht's and JC Penney in 1995, offers the same anchor appeal as Harrisburg
East Mall.

                  Camp Hill Shopping Center, a former community center
originally constructed in 1959, was completely enclosed and renovated in 1987.
Camp Hill is located approximately eight miles west of Harrisburg East Mall in
the secondary trade area, and contains approximately 505,700 square feet. The
center is anchored by Boscov's and Montgomery Ward, and also contains a 42,000
square foot Pathmark Superstore. The tenant mix is mostly comprised of local
retailers and occupancy is currently at 95.0%.


ITEM 2.           PROPERTIES.

Harrisburg East Mall

                  General. Harrisburg East Mall is a two-level enclosed regional
shopping mall located approximately three miles from the central business
district of Harrisburg, Pennsylvania, the state capitol. The Mall contains
approximately 869,000 gross leasable square feet and is currently anchored by
three major department stores: JCPenney, Hecht's, and Lord & Taylor which opened
March 10, 1997 in the space formerly occupied by John Wanamaker which vacated in
October 1995. The Mall is located on a site of approximately 64 acres with paved
surface parking for approximately 4,763 automobiles (5.5 spaces per 1,000 gross
leasable square feet).















                                        7

<PAGE>   9



                  The total building area of the Mall is allocated as shown in
the table below.


<TABLE>
<CAPTION>
                                                      Gross              % of
                                  Number of           Leasable           Total
                                 Store Spaces          Area             Building      Occupancy %
                                    3/15/97          (Sq.Ft.)             Area        at 3/15/97
                                 -----------------   ---------         ---------    -------------
<S>                                   <C>              <C>                <C>            <C>
  Gross leasable area
     Anchor Stores (1)                    3            534,013            52.6%          100.0 %
     Mall Stores                        104            283,532            27.9            82.1
     Free-standing building               3             51,381             5.1            89.4
                                        ---            -------            ----           -----

Total gross leasable area               110            868,926            85.6            92.9 %
                                        ---            -------            ----           =====

Common area                                            146,371            14.4
                                                       -------            ----

Total building area                                  1,015,297           100.0 %
                                                     =========           =====
</TABLE>


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

(1)      On March 10, 1997, Lord & Taylor opened for business in the space
         formerly occupied by John Wanamaker.


Capital Requirements

                  The Trust will make certain capital expenditures to maintain
or enhance the value of Harrisburg East Mall, including tenant allowances
associated with leasing activity. The Trust anticipates making 1997 capital
expenditures of $1,200,000, which include budgeted tenant allowances of
$670,000. Certain of these expenditures are discretionary in nature and
therefore may be deferred into future periods.

                  One of the conditions of the Mortgage Note was the
establishment of a capital reserve account, which is maintained by a third-party
escrow agent and from which expenditures must be approved by the lender. The
balance of this account at December 31, 1996 was $1,886,000. Management believes
the current cash balance in this account will be sufficient to fund Harrisburg
East Mall's capital expenditures requirements.


                                        8

<PAGE>   10



                  Occupancy Data and Average Effective Annual Rent. Information
regarding occupancy rates and average effective annual rent for the property,
including anchor and outparcel tenants, is set forth below:

<TABLE>

                            1996           1995            1994           1993           1992
                            ----           ----            ----           ----           ----
<S>                       <C>           <C>             <C>            <C>            <C>
Occupancy Rate (a)              93.7%         73.6%           94.3%          96.9%          97.5%
                                ====          ====            ====           ====           ====
Total Annual Minimum
Rent (b)                  $4,902,122    $5,110,162      $5,973,828     $5,943,748     $5,591,915

Total Percentage
Rent                         225,419       269,558         294,591        154,039        262,870
                          ----------    ----------      ----------     ----------     ----------
Total Annual Effective
Rent                      $5,127,541    $5,379,720      $6,268,419     $6,097,787     $5,854,785
                          ==========    ==========      ==========     ==========     ==========
Average Annual Rent
Per Square Foot: (c)

Mall Anchor Tenants           $ 1.37        $ 1.32(d)        $1.67          $1.71          $1.71


Outparcel Stores               $7.44         $6.91           $5.69          $6.30          $6.27

Mall Tenants                  $17.08        $16.46          $16.55         $15.48         $14.76

All Tenants                    $6.26         $6.44(d)        $7.49          $7.16          $6.88
</TABLE>


-------------------------------------
(a) Occupancy rate at December 31, 1995 reflects vacancy of the former John
Wanamaker anchor space. Excluding the effect of the vacancy, the occupancy rate
on a pro forma basis at December 31, 1995 was 95.8%. On May 13, 1996, the Trust
and May Company executed a lease agreement that provides for the opening of a
Lord & Taylor department store. The December 31, 1996 occupancy rate includes
the occupancy of Lord & Taylor, which opened for business on March 10, 1997.

(b) Total minimum annual rent and percentage rent represents actual tenant
rental income for each calendar year, and does not include adjustments for
stipulated rent increases in accordance with Generally Accepted Accounting
Principles.

(c) Anchor and outparcel rent per square foot data is based on actual leased
square footage during each calendar year presented. Mall tenant rent per square
foot data is based on leased square footage at December 31 of each year
presented.

(d) The decrease in mall anchor tenant rent per square foot in 1995 and rent per
square foot for all tenants is due to the replacement of the Hess department
store with Hecht's in November 1994, and Hecht's expansion into an adjacent
basement space. Hecht's now occupies 187,280 square feet at $1.07 per square
foot, whereas Hess formerly occupied

                                        9

<PAGE>   11



139,656 square feet at $2.18 per square foot.

          Lease Expirations. The lease expiration schedule for mall and
outparcel stores as of December 31, 1996 is shown below:

<TABLE>
<CAPTION>
                                                                            % of
                                                           1996             1996
                                           Gross          Minimum         Minimum
                    # of leases            Leased         Annual           Annual
                    expiring(1)        Area (Sq./Ft.)      Rent             Rent
                    -----------        --------------     --------        -------
<S>                      <C>                 <C>          <C>               <C>
month to
month                     4                   6,587       172,414           4.1%

1997                      7                  12,752       213,509           5.0%

1998                     14                  14,788       405,506           9.6%

1999                      4                   5,637       148,558           3.5%

2000                     10                  36,166       490,863          11.6%

2001                      8                  17,034       399,846           9.4%

2002                      5                  17,926       180,432           4.3%

2003                      8                  23,109       176,141           4.2%

2004                      5                   8,794       218,416           5.2%

2005                      7                  59,271       393,554           9.3%

2006 and
thereafter                7                  77,791       672,684          15.9%
                     ------              ----------    ----------        -------


TOTAL                    79                 279,855     3,471,923          81.9%
                   ========                 =======     =========      =========
</TABLE>


----------------
(1) Assumes no renewal options will be exercised in order to present the
earliest point of termination of the leases.

                                       10

<PAGE>   12




                  Anchor Tenants. The following chart presents tenants that
occupy more than 10% of the property's rentable square footage, along with
certain provisions contained in their leases:

<TABLE>
<CAPTION>
                         Leased Area           Rent                Lease
Tenant                    (Sq. Ft.)         per Annum         Expiration Date           Renewal Options
------                  ------------        ---------         ---------------           ----------------
<S>                       <C>                <C>                  <C>                   <C>
Hecht's                   187,280            $200,000             1/31/2007             3-10 Year Options

JCPenney                  153,770            $300,000             3/31/2001             6-5 Year Options

Lord & Taylor(1)          192,963            $150,000            10/31/2005             3-10 Year Options
</TABLE>

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

(1) During 1996, May Company paid rent of $201,080 in accordance with the terms
of the John Wanamaker lease and the terms of the new Lord & Taylor lease
executed on May 13, 1996.  Due to certain rent offsets that John Wanamaker would
have otherwise been entitled to, the revenue stream of the Lord & Taylor lease
is anticipated to be more favorable to the Trust than the old John Wanamaker
lease beginning in the fourth lease year.  In connection with the execution of
this lease agreement, the Trust received approval from May Company, on behalf of
its Hecht's and Lord & Taylor stores, to certain modifications to the Mall's
site plan which will give the Trust flexibility in future development planning.

                  Debt. As discussed under Item 1-Business, the Trust completed
an 18 month extension of its existing mortgage debt aggregating $45,379,000
effective December 1996 (maturity date of June 15, 1998). The following table
sets forth certain information regarding the outstanding debt. Both the
Prudential Insurance Company of America Mortgage Loan and the PNC Bank Term Loan
may be prepaid in full without penalty.


<TABLE>
<CAPTION>
                                      Principal                                         Principal
                                       Balance                                           Balance
                                        as of         Annual Debt                           at
                    Annual              1996            Service            Maturity      Maturity
Lender               Rate              (000's)           (000's)             Date        (000's)
------              --------          ---------       -----------          ---------     ---------
<S>                 <C>               <C>               <C>                <C>
Prudential          8.88%(1)          $43,794           $3,888             6/15/98       $43,794
PNC                 8.88%(2)            1,585              132             6/15/98         1,585(2)
</TABLE>


---------------------------
(1) The extended Mortgage Note agreement with Prudential Insurance Company of
America requires monthly interest only payments of $324,000, at 8.88%. In
consideration for the fixed annual interest accrual rate, the Trust paid an
up-front application fee of

                                       11

<PAGE>   13



$165,000 and agreed to pay a back end fee of $272,900, plus interest thereon at
the contract rate of 8.88%, at the maturity date of June 15, 1998, or the date
at which all or any part of the original principal amount is prepaid.

(2)The extended Term Loan agreement with PNC Bank provides for the accrual
interest rate to be re-set periodically, and is computed at the Trust's
discretion at either 2 5/8% above the Euro-Rate (as defined) or 1 1/8% above the
Prime Rate (as defined). The accrual rate in effect through May 18, 1997
averages 8.12%. The differential between the accrual rate and the pay rate of
8.88% will be added or subtracted to the principal balance due at maturity.


                  Depreciation. As of December 31, 1996, for Federal income tax
purposes, the Trust depreciates its assets under the Accelerated Cost Recovery
System (ACRS) and the Modified Accelerated Cost Recovery System (MACRS) as
follows:

<TABLE>

         <S>                                                  <C>
         Buildings:

         Gross Federal Income Tax Basis                       $49,953,000
         Accumulated Depreciation                             $14,151,000
         Depreciation Method                                  Straight Line
         Depreciable Life                                     40 Years

         Land Improvements:

         Gross Federal Income Tax Basis                       $ 2,363,000
         Accumulated Depreciation                             $   187,000
         Depreciation Method                                  Straight Line
         Depreciable Life                                     40 Years

         Personal Property:

         Gross Federal Income Tax Basis                       $   185,000
         Accumulated Depreciation                             $   102,000
         Depreciation Method                                  Straight Line*
         Depreciable Life                                     10 Years*
</TABLE>

         *Except for automobiles which are depreciated over a range of 3 to 7
         years using the double declining balance method.

                  Real Estate Taxes. Real estate taxes are levied for county and
township, and school tax purposes. County and township taxes are payable March 1
and school taxes are payable on September 1. Harrisburg paid $914,000 in real
estate taxes in 1996. The 1996 millage rate was 26.886. The county lowered the
assessed value of Harrisburg East in 1997. However, the decrease in tax expense
associated with the lower assessed value will be substantially offset by a rate
increase announced by the county of approximately 2 millage points. Real estate
taxes are substantially reimbursed by the

                                       12

<PAGE>   14



tenants through real estate tax recovery billings.

                  Physical Improvements. Since acquiring the Mall in 1985, the
Trust has undertaken several physical improvement programs. In 1987, the Trust
converted approximately 51,400 square feet of space in the basement of the
former Hess's department store space into mall tenant space, at which time it
was leased to Toys'R'Us. During 1988, a new food court with approximately
13,000 square feet of gross leasable area was added. In 1991, the Trust
completed the conversion of 47,960 square feet of space previously occupied by
JCPenney into approximately 31,500 square feet of new leasable area leased at
substantially higher rates.

                  In conjunction with the JCPenney conversion, the remaining
area of the JCPenney store was remodeled. In addition, the terms of the amended
JCPenney lease required the Trust to renovate the common areas and the exterior
facade of the Mall. This renovation was completed in 1993 for a cost of
approximately $4,000,000. The project included a complete refurbishment of the
property's interior common area, with new floors, finishes, and lighting
throughout.

                  Upon the expansion of Hecht's into the basement space
previously occupied by Toys'R'Us (approximately 51,400 square feet), the Trust
renovated Harrisburg East Mall's outparcel building (approximately 51,000 square
feet) to accommodate the relocation of Toys'R'Us for a cost of approximately
$3,440,000. In addition to the expansion of the anchor tenant space, Hecht's
performed an interior renovation of its new department store space.

                  In anticipation of the opening of Lord & Taylor in the former
John Wanamaker anchor space, May Company (Lord & Taylor's parent company)
completed a major renovation of this anchor store location. Management believes
that May Company has spent approximately $10,000,000 on renovations and
improvements.

ITEM 3.           LEGAL PROCEEDINGS.

                  On March 22, 1996, the Trust filed complaints of ejectment
(eviction) and monetary damages in the local jurisdiction against May Department
Stores Company ("May Company") to gain control of the department store space
formerly occupied by John Wanamaker. May Company had earlier acquired the
leasehold interest in the John Wanamaker store at Harrisburg East Mall from John
Wanamaker's owner, Woodward & Lothrop, in an August 1995 bankruptcy court
auction. Following this transaction, the John Wanamaker store at Harrisburg East
Mall closed in October 1995. May Company's failure to cause the store to reopen
(with either one of its department store divisions or with another retail
operator) represented a violation of a continuous operating covenant contained
in the lease agreement.

                  On May 13, 1996, the Trust and May Company executed a lease
agreement that provides for the opening of a Lord & Taylor department store (a
division of May Company ) in this vacant anchor department store space. The
execution of such lease agreement with May Company resulted in the termination
of these legal proceedings.

                                       13

<PAGE>   15





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

                  None.


ITEM 4A.          EXECUTIVE OFFICERS OF THE REGISTRANT.

                  The following table sets forth the names and positions of the
executive officers of the Trust. The term of office of each officer expires at
the annual meeting of the Board of Directors or when the respective successor is
elected and qualifies.

<TABLE>
<CAPTION>

         Name                                        Position
         <S>                                         <C>
         Phillip E. Stephens                         President
         Gregory R. Greenfield                       Executive Vice President and Treasurer
         William G. Brown, Jr.                       Vice President and Controller
         Scott M. Boggio                             Vice President
         Gary Werkheiser                             Vice President
         Don Henry                                   Vice President
         Linda K. Schear                             Secretary
</TABLE>

                  Phillip E. Stephens, age 49, has been Chairman and Chief
Executive Officer of Compass Retail, Inc., a subsidiary of Equitable Real
Estate, since February 1996, and was President and Chief Executive Officer from
January 1992 to January 1996. Mr. Stephens was Executive Vice President of the
Compass Retail division of Equitable Real Estate from January 1990 to December
1991. He has also served as President of ERPM since December 1989. Prior to that
date and since October 1987, he was President of EQK Partners, the predecessor
in interest to ERPM. Prior to that date and since its inception in September
1983, he was Senior Vice President of EQK Partners. Mr. Stephens is also a
managing trustee of Arbor Property Trust, successor in interest to EQK Green
Acres, L.P.

                  Gregory R. Greenfield, age 40, has been President and Chief
Operating Officer of Compass Retail, Inc. since February 1996, and was Executive
Vice President and Chief Operating Officer from January 1992 to January 1996.
Mr. Greenfield was Senior Vice President of the Compass Retail division of
Equitable Real Estate from January 1990 to December 1991. He has also served as
Vice President and Treasurer of ERPM since December 1989. Prior to that date and
since November 1988, he was Senior Vice President, General Counsel and Secretary
of EQK Partners. Mr. Greenfield joined EQK Partners in June 1984. From 1981 to
1984, he was associated with the law firm of Wolf, Block, Schorr and
Solis-Cohen.

                  William G. Brown, Jr., age 41, has been Executive Vice
President and Chief Financial Officer of Compass Retail, Inc. since February
1996, and was Senior Vice President and Chief Financial Officer from January
1992 through January 1996. Mr. Brown

                                       14

<PAGE>   16



was Vice President of the Compass Retail division of Equitable Real Estate from
March 1990 to December 1991. He has also served as a Vice President of ERPM
since March 1990. Prior to that date and since November 1988, he was Vice
President and Chief Financial Officer of Envirosafe Services, Inc., a hazardous
waste management company. Mr. Brown joined Envirosafe in July 1987. From 1981 to
1987, he held financial management positions with IU International Corporation,
and from 1978 to 1981, he was associated with the accounting firm of Coopers &
Lybrand.

                  Scott M. Boggio, age 37, has been Senior Vice President of
Compass Retail, Inc. since February 1996, and was Vice President from February
1992 through January 1996. Mr. Boggio was Director of Construction and
Development of the Compass Retail division of Equitable Real Estate from January
1990 to January 1992. He has also served as Assistant Vice President of ERPM
since December 1989. Prior to that date and since February 1989, he was Vice
President of Construction and Planning of EQK Partners. From 1986 until 1988, he
was employed by VMS Realty Management, Inc. as its Northeast Regional Manager.
From 1985 to 1986, he was employed by the Linpro Company in acquisitions and
site selection.

                  Gary L. Werkheiser, age 37, has been Vice President of Asset
Management and Acquisitions of Compass Retail, Inc. since February 1992 and was
Director of Asset Management of Equitable Real Estate from May 1990 to January
1992. Prior to that date and since August of 1986, he was a real estate analyst
for EQK Partners.

                  Don Henry, age 36, has been Vice President of Portfolio
Management with Compass Retail, Inc since January 1996, and was Director of
Financial Reporting from September 1993 to December 1995. Prior to that date,
and since June 1983, he was associated with the accounting firm of Deloitte &
Touche LLP.

                  Linda K. Schear, age 44, has been Senior Vice President and
General Counsel to Compass Retail, Inc. since February 1995, and was Vice
President and General Counsel from February 1992 to January 1995. Ms. Shear was
General Counsel to the Compass Retail division of Equitable Real Estate from
April 1990 to February 1992. She has also served as Counsel to ERPM and Vice
President of Equitable since April 1990. Prior to that date, she was first an
associate and then a partner with the Atlanta law firm of Merritt & Tenney,
specializing in commercial real estate.




                                       15

<PAGE>   17



                                     PART II


ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS.

                  The Trust's shares of beneficial interest are traded on the
New York Stock Exchange (symbol EKR). The Trust is listed in the stock tables as
"EQK Rt." As of February 28, 1997, the record number of shareholders of the
Trust was 271. Although the Trust does not know the exact number of beneficial
holders of its shares, it believes the number exceeds 1,500.

                  The following table presents the high and low prices of the
Trust's shares based on the New York Stock Exchange daily composite
transactions.

<TABLE>
<CAPTION>

                                       HIGH                        LOW
                                       ----                        ---
<S>                                  <C>                       <C>
Year ended December 31, 1996:

         First Quarter               $  1.500                  $ 1.125
         Second Quarter                 1.750                    1.250
         Third Quarter                  1.750                    1.375
         Fourth Quarter                 1.500                    1.250

Year ended December 31, 1995:

         First Quarter               $  2.250                  $ 1.625
         Second Quarter                 2.250                    1.500
         Third Quarter                  2.125                    1.375
         Fourth Quarter                 2.000                    1.375
</TABLE>


There were no distributions to shareholders during 1995 and 1996. It is the
Trust's current policy to reinvest all of its excess cash flow into its
remaining property to fund capital expenditures and leasing costs. The Trust
does not anticipate a change in this policy.



                                       16

<PAGE>   18



ITEM 6.           SELECTED FINANCIAL DATA.

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                               AS OF AND FOR THE YEARS ENDED DECEMBER 31,
                                                      1996         1995          1994         1993         1992
                                                      ----         ----          ----         ----         ----
<S>                                              <C>           <C>          <C>          <C>             <C>
Revenues from rental operations                  $    6,174    $   15,761   $   16,512   $   18,458      $20,900
Write down of investments in
     real estate (a)                                     --        (3,200)          --           --       (4,001)
Loss before gain on sales of
    real estate and extraordinary loss               (1,488)       (6,575)      (3,459)      (2,351)      (9,993)
Gain on sales of real estate (b)                         --           229           --          282        1,143
Loss before extraordinary loss                       (1,488)       (6,346)      (3,459)      (2,069)      (8,850)
Extraordinary loss from early
    retirement of debt                                   --            --           --       (1,711)          --
Net loss                                             (1,488)       (6,346)      (3,459)      (3,780)      (8,850)
Total assets                                         46,603        48,209       90,258       93,163      103,690
Long-term obligations:
    Mortgage notes payable, net of
      imputed interest and discount                  45,379        45,712       80,032       78,727       86,713
Shareholders' equity (deficit)                       (3,021)       (1,533)       4,813        8,176       11,559
Per share data (c):
    Loss per share:
      Loss before gain on sales of
        real estate and extraordinary
        loss                                     $    (0.16)   $    (0.71)  $    (0.37)  $    (0.25)   $   (1.31)
      Loss before extraordinary loss                  (0.16)        (0.68)       (0.37)       (0.22)       (1.16)
      Net loss                                        (0.16)        (0.68)       (0.37)       (0.41)       (1.16)
    Dividends declared                                 --              --           --           --           --
--------------------------------------------------
</TABLE>



(a)      To the extent that the net cost investment in any property exceeds its
         current market value, an allowance is recorded to adjust the net
         investment to management's estimate of net realizable value. The
         write-downs in 1992 and 1995 related to the Trust's investment in
         Castleton Park.

(b)      In 1995, the Trust sold Castleton Park and recognized a gain on the
         sale of $229,000. In 1993, the Trust sold its remaining two buildings
         at Peachtree Dunwoody Pavilion and recognized a gain on the sale of
         $282,000. In 1992, the Trust sold five buildings at Peachtree Dunwoody
         Pavilion and recognized a gain on the sale of $1,143,000.

(c)      Calculation is based on 9,264,344 weighted average shares outstanding
         during all periods presented except 1992, during which 7,653,415
         weighted average shares were outstanding.


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

                  This discussion should be read in conjunction with the
financial statements and notes that appear immediately following the Signatures
page.





                                       17

<PAGE>   19



FINANCIAL CONDITION

CAPITAL RESOURCES

Background

                  The Trust was formed pursuant to a Declaration of Trust dated
October 8, 1984 to acquire certain income-producing real estate investments. On
March 13, 1985, the Trust acquired Harrisburg East Mall ("Harrisburg" or the
"Mall"), a regional shopping mall located in Harrisburg, Pennsylvania; Castleton
Park ("Castleton"), an office park located in Indianapolis, Indiana; and
Peachtree Dunwoody Pavilion ("Peachtree"), an office park located in Atlanta,
Georgia.

                  As of December 31, 1996, the Trust has completed the
disposition of two of its three real estate investments. The office buildings
comprising Peachtree were sold in three separate transactions during 1992 and
1993. Two of the office buildings at Castleton were sold in 1991. The remaining
44 office buildings at Castleton were sold in December 1995.

                  The Declaration of Trust currently provides that actual
disposition of the remaining property, Harrisburg, may occur at any time prior
to March 1999. The precise timing of this disposition or an alternative
strategic transaction will be at the discretion of the Trustees, depending on
both the prevailing conditions in the relevant real estate market and the
ability of the Trust to extend or refinance its debt maturing in June 1998 (see
Note 2 to the financial statements).

                  Over the past several years, the retail industry has
experienced a large number of retail store mergers and bankruptcies.
Consolidations within the retail industry and the financial difficulties
experienced by individual retailers have, in turn, led to a high level of
unanticipated store closings and requests for rent relief within regional
shopping malls.

                  At Harrisburg, the current state of the retail industry has
impacted both its department stores and its smaller specialty stores. Two of
the department stores operating in 1994 have since closed, Hess's (November
1994) and John Wanamaker (October 1995). These department store spaces remained
"dark" for substantial periods of time pending the opening of their
replacements, Hecht's (October 1995) and Lord & Taylor (March 1997).

                  The temporary closure of these department stores permitted
certain tenants to exercise co-tenancy provisions pursuant to their leases,
which allowed them to pay a lower amount of rent based on a percentage of sales
volumes in lieu of fixed minimum rents. Additionally, certain other tenants
experienced financial difficulties which led to requests for rent relief and
unanticipated store closings. As a result of these matters, the aggregate
decline in rental revenues from amounts otherwise provided for under the related
lease agreements amounted to approximately $600,000, in total, for 1995 and
1996.


                                       18

<PAGE>   20



                  These factors, as well as competitive pressures within the
retail industry, have adversely affected the value and marketability of regional
shopping malls in general and of Harrisburg in particular, and there is no
assurance that such adverse effects will not continue or increase in the
future.


Mortgage Debt Extensions

                  On December 15, 1996 the Trust extended the maturity dates on
its Mortgage Note (remaining balance, $43,794,000) and its Term Loan (remaining
balance, $1,585,000) for a period of 18 months (extended maturity date, June 15,
1998). The terms of such debt facilities pursuant to the extensions are
substantially comparable to the terms in effect since the original issuance
date, December 15, 1992, except as described below. The Mortgage Note and Term
Loan were previously extended from their original maturity date on December 15,
1995 to December 15, 1996. The Mortgage Note remains collateralized by a first
mortgage lien on Harrisburg, an assignment of leases and rents, and certain cash
balances. The Term Loan is collateralized by a subordinate lien on Harrisburg.

                  The Mortgage Note agreement has been amended to provide for
monthly payments of interest only accruing at the rate of 8.88% per annum
($324,000 per month). This interest rate reflects an increase from the 8.54%
interest rate in effect during the previous extension period (December 16, 1995
to December 15, 1996). The average rate in effect during the initial three year
term of the debt was 9.79% per annum.

                  In consideration for the fixed annual interest accrual rate on
the Mortgage Note agreement, the Trust paid an up-front application fee of
$165,000 and agreed to pay a back end fee of $272,900, plus interest thereon at
the contract rate of 8.88%, at the maturity date of June 15, 1998, or the date
at which all or any part of the original principal amount is prepaid.

                  The Term Loan reflects the same pay rate of 8.88% that is
applicable to the Mortgage Note, but accrues interest at a rate that re-sets
periodically. The accrual rate is computed at the Trust's discretion at either 2
5/8% above the Euro-Rate (as defined) or 1 1/8% above the Prime Rate (as
defined). The accrual rate in effect through May 18, 1997 averaged 8.12%. The
difference between the accrual rate and the pay rate will be reflected in the
principal balance due at maturity.

                  In the event that the Trust does not sell Harrisburg before
the Mortgage Note and Term Loan mature on June 15, 1998, Management will explore
its external financing alternatives, including the refinancing of its debt with
the existing lenders. However, if the Trust is unable to refinance or replace
the existing debt at commercially reasonable terms or at all, Management's plans
with respect to liquidating Harrisburg will be accelerated to satisfy its debt
obligations.




                                       19

<PAGE>   21



Harrisburg East Mall

                  As discussed in Note 8 to the financial statements, on May 13,
1996, the Trust and May Department Stores Company ("May Company") executed a
lease agreement that provides for the opening of a Lord & Taylor department
store (a division of May Company) in the anchor space previously occupied by
John Wanamaker. The John Wanamaker location at Harrisburg has been closed since
October 1995 following Woodward & Lothrop's (the owner of John Wanamaker) sale
of certain department stores in this retail chain to May Company pursuant to an
August 1995 bankruptcy court auction. Given its existing presence at Harrisburg
through its recently opened Hecht's department store, May Company initially
pursued an assignment of this leasehold interest to other retail operators
before deciding instead to open a Lord & Taylor department store in this
location. The execution of such lease agreement has resulted in, among other
things, the termination of the legal proceedings initiated by the Trust against
May Company in March 1996 following May Company's failure to open or cause
another retail operator to open for business once the John Wanamaker store
closed, which was a violation of a continuous operating covenant contained in
its lease agreement.

                  The new lease agreement with May Company has an initial term
of nine years (October 31, 2005), with three renewal options of ten years each.
The new lease agreement has a longer committed lease term than the John
Wanamaker lease agreement, which stipulated an initial lease term expiration
date of October 31, 1999. The financial terms are comparable to those contained
in the John Wanamaker lease, although minimum rent payments during the first
three years of the lease are anticipated to be approximately $75,000 less per
annum. Due to certain rent offsets that John Wanamaker would have otherwise been
entitled to, the revenue stream after the third lease year is anticipated to be
more favorable to the Trust. In connection with the execution of this lease
agreement, the Trust received approval from May Company, on behalf of its
Hecht's and Lord & Taylor stores, to certain modifications to the Mall's site
plan which will give the Trust flexibility in future development planning. The
opening of a Lord & Taylor store is expected to have a positive impact on the
Trust's ability to lease space to new tenants and to renew leases with existing
tenants.

                  Lord & Taylor opened its newly renovated store on March 10,
1997. Initially, Lord & Taylor had projected an opening prior to the 1996
Holiday shopping season. However, issues affecting construction scheduling
delayed the opening date. Prior to the opening of the Lord & Taylor store,
certain tenants were permitted to pay, pursuant to co-tenancy provisions in
their leases, percentage rent in lieu of fixed minimum rentals. With the opening
of the Lord & Taylor store, it is anticipated that most tenants will revert to
payment of fixed minimum rent (see further discussion in Results of Operations).

                  One of the conditions of the Mortgage Note was the
establishment of a capital reserve account, which is maintained by a third-party
escrow agent and from which expenditures must be approved by the lender. The
cash balance of the Trust's capital reserve account at December 31, 1996 was
$1,886,000. Management believes the current cash balance in this account will be
sufficient to fund Harrisburg's capital expenditure requirements discussed
below.

                                       20

<PAGE>   22



LIQUIDITY

                  The comparability of the Statements of Cash Flows during 1994
to 1996 is affected by the property dispositions and debt repayments that
occurred during this time period.

                  During 1996, the Trust generated cash flows from operating
activities of $1,217,000, an increase of $94,000 from the prior year's operating
cash flows of $1,123,000. This increase in operating cash flows was primarily
attributable to a decline in cash paid for interest following the December 1995
partial repayment of mortgage debt ($2,816,000), an increase in Harrisburg's
cash flows from operations related to the receipt of lease termination fees
($451,000) and to accelerated collections of real estate tax recoveries
($150,000), and the receipt of a $268,000 refund of previously paid real estate
taxes related to reductions in the 1991 and 1992 assessed values of Peachtree
(see Note 9). These increases were partially offset by the loss of Castleton's
operating cash flow following the sale in December 1995 (which amounted to
$3,656,000 in 1995).

                  During 1995, the cash flow provided by operating activities
declined by $1,061,000 compared to 1994. The decline was primarily attributable
to the accelerated payment of $1,425,000 for Castleton's real estate taxes in
connection with sale of the property in December, and a $619,000 decrease in
rental revenues for Harrisburg as described below. This decline was partially
offset by a $400,000 real estate tax refund and a reduction in operating
expenses of $433,000 for Castleton and Harrisburg which are also described
below.

                  Cash flows used in investing and financing activities during
1996 were for routine capital expenditures ($195,000) and scheduled repayments
of debt ($333,000).

                  With respect to 1995, cash flows generated from investing
activities and cash flows used in financing activities were largely a function
of the sale of Castleton and the resulting repayment of mortgage debt in
December 1995. Net cash provided by investing activities in 1995, $33,145,000,
was due to the receipt of proceeds from the sale of Castleton, $38,507,000,
partially offset by additional investments in real estate, including $3,440,000
related to the redevelopment of the Harrisburg outparcel building. Net cash used
in financing activities in 1995, $35,997,000 primarily related to the
application of sales proceeds of $35,990,000 (net of customary prorations) to
retire a portion of the trust's mortgage indebtedness.

                  During 1994, the Trust used $3,192,000 in investing activities
and $7,000 in financing activities. Cash used in investing activities in 1994
primarily related to routine capital additions at the Properties, while cash
used in financing activities was for scheduled principal payments on the Trust's
term loan.

                  The Trust will make certain capital expenditures to maintain
or enhance the value of the property, including tenant allowances associated
with leasing activity. The Trust anticipates making 1997 capital expenditures of
up to $1,200,000, which include budgeted tenant allowances of $670,000. Certain
of these expenditures are discretionary

                                       21

<PAGE>   23



in nature and therefore may be deferred into future periods.

                  In addition to capital expenditure requirements described
above, liquidity requirements for 1997 will also include principal and interest
payments of $4,020,000 pursuant to existing loan agreements. These loan
agreements mature on June 15, 1998; the principal balance at maturity will be
approximately $45,379,000.

                  The Trust's cash management agreement stipulates that all
rental payments from tenants are to be made directly to a third party escrow
agent that also funds monthly operating expenses in accordance with a budget
approved by the lender. The Trust believes that its cash flow for 1997 will be
sufficient to fund its various operating requirements, including budgeted
capital expenditures and monthly principal and interest payments, although its
discretion with respect to cash flow management will be limited by the terms of
the cash management agreement. Management believes that the Trust's current cash
reserves, coupled with additional cash flow projected to be generated from
operations, will permit the Trust to meet its operating, capital and debt
service requirements.

                  As discussed above and in Note 1 to the financial statements,
the Trust records its investments in real estate in accordance with the
historical cost accounting convention. Accordingly, the Trust has not written up
the cost basis of its investment in Harrisburg to its substantially higher net
realizable value. Therefore, Management does not believe that its deficit in
shareholders' equity of $3,021,000 at December 31, 1996 is indicative of its
current liquidity or the net distribution that its shareholders will receive
upon liquidation.


RESULTS OF OPERATIONS

                  For the year ended December 31, 1996, the Trust reported a net
loss of $1,488,000 ($.16 per share) compared to net losses of $6,346,000 ($.68
per share) and $3,459,000 ($.37 per share) for the years ended December 31, 1995
and 1994, respectively. The year ended December 31, 1995 includes a write-down
of the investment in Castleton of $3,200,000 ($.35 per share) and the gain on
the sale of Castleton of $229,000 ($0.03 per share). The 1994 period was
impacted by a write-off of $429,000 of capitalized pre-development costs.

                The Trust's revenues for the year ended December 31, 1996 were
$6,174,000, which represented a $9,587,000 decrease from the 1995 amount of
$15,761,000.  This decline was primarily due to the sale of Castleton, which
accounted for revenues of $9,554,000 for the year ended December 31, 1995.  At
Harrisburg, rental revenues declined from amounts recognized in 1995 due to the
effects of tenant bankruptcies and short-term rent relief agreements ($216,000),
lower percentage rent due to decreases in certain tenants' sales volumes
($90,000) and a non-cash adjustment to the calculation of minimum rents
recognized on a straight-line basis over the terms of tenant leases ($300,000).
However, such decreases were substantially offset by collections of lease
termination fees of $450,000 and an increase of $135,000 in

                                       22

<PAGE>   24
temporary tenant rental revenues.

                  Given the opening of Lord & Taylor on March 10, 1997, it is
anticipated that revenues will increase by approximately $350,000 over 1996.
Such increase is expected to result from increased rent payments from certain
tenants whose payment obligations had been reduced pursuant to the exercise of
contenancy provisions and short-term rent relief agreements associated with
anchor store vacancies.  With the opening of Lord & Taylor, such provisions and
agreements will expire and these tenants will revert to paying fixed minimum
rent.

                  Revenue from rental operations of $15,761,000 during 1995
declined from $16,512,000 during 1994, primarily due to a decrease in rental
revenue of $584,000 from Harrisburg. This decline is primarily the result of
rental reductions pursuant to cotenancy provisions of certain tenant leases
which first became applicable upon the closure of Hess's Department Store in
November 1994 until its replacement, Hecht's, re-opened in October 1995. These
cotenancy provisions continued to be operable upon the October 1995 closure of
John Wanamaker. The decrease in Harrisburg rental revenues is also attributable
to the partial year vacancy of the outparcel building during its 1995
renovation, and to lower net utility income due to increased maintenance
expenses.

                  Operating expenses for the year ended December 31, 1996 were
$887,000, which declined from the related 1995 amounts of $5,403,000. The
decline is primarily due to the sale of Castleton, which accounted for expenses
of $4,600,000 for the year ended December 31, 1995. This decline in annual
expenses was offset by a net increase in Harrisburg operating expenses of
$77,000. The annual increase was due to an increase in bad debt expenses of
$151,000 due to tenant bankruptcies in 1996 and an increase in administrative
expenses of $50,000. These increases were offset by decreases in advertising
expenses of $94,000 and sales tax expenses of $53,000 attributable to
non-recurring items in 1995.

                  Operating expenses for the year ended December 31, 1995 were
$5,403,000, which declined from the related 1994 amounts of $5,836,000. The
annual declines were attributable to lower operating expenses for both
Harrisburg and Castleton. At Castleton, operating expenses decreased due to a
reduction in repairs and maintenance expenses and a reduction in real estate tax
expense resulting from both a valuation reassessment and the expense proration
effective with the 1995 sale. These declines were partially offset by an
increase in security costs. Harrisburg's operating expenses decreased in 1995
due to unexpected recoveries of previously recognized bad debts and reductions
in legal and consulting costs.

                  Interest expense for the years ended December 31, 1996, 1995,
and 1994 was $3,896,000, $8,302,000 and $8,132,000, respectively. The decrease
in interest expense in 1996 as compared to 1995 is primarily attributable to the
lower average debt balances outstanding in 1996 following the mortgage debt
repayment in December 1995, as well as decreases in the interest accrual rates
for both the Mortgage Note and Term Loan. The increase in interest expense in
1995 as compared to 1994 is due to an increase in the Mortgage Note principal
balance from accrued but not currently payable interest and the amortization of
non-cash expense arising from the issuance of warrants to the lender.


                                       23

<PAGE>   25



                  Other expenses consist of portfolio management fees, other
costs related to the operation of the Trust, and interest income earned on cash
balances. Other expenses decreased $227,000 in 1996 from 1995 balances. The
decrease is primarily attributable to a decrease in portfolio management and
other professional fees. There was no significant fluctuation in other expenses
between 1995 and 1994.

                  As discussed in the liquidity section above, Management
believes that its existing cash reserves and its anticipated cash flow generated
from operations will be sufficient to meet its capital and debt service
requirements. However, due to the effects of non-cash accounting adjustments
(principally depreciation and amortization), Management anticipates that the
Trust will continue to incur net losses.


ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                  The Registrant's financial statements and supplementary data
listed in Item 14(a) appear immediately following the signatures page.



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

                  None.

                                       24

<PAGE>   26



                                    PART III


ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

                  Incorporated by reference to the Trust's Proxy Statement
relating to its 1997 Annual Meeting of Shareholders.

ITEM 11.          EXECUTIVE COMPENSATION.

                  Incorporated by reference to the Trust's Proxy Statement
relating to its 1997 Annual Meeting of Shareholders.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.

                  Incorporated by reference to the Trust's Proxy Statement
relating to its 1997 Annual Meeting of Shareholders.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                  Incorporated by reference to the Trust's Proxy Statement
relating to its 1997 Annual Meeting of Shareholders.


                                       25

<PAGE>   27



                                     PART IV

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                  FORM 8K.

<TABLE>
<CAPTION>


                                                                                 Page
                                                                                Number
<S>      <C>                                                                    <C>
(a)      The following documents are filed as part of this
         report:
         1.       Financial Statements
                  Balance Sheets at December 31, 1996 and 1995
                  Statements of Operations for the years ended
                    December 31, 1996, 1995 and 1994
                  Statements of Shareholders' Equity
                    for the years ended December 31, 1996,
                    1995 and 1994
                  Statements of Cash Flows for the years ended
                    December 31, 1996, 1995 and 1994
                  Notes to financial statements, including
                    supplementary data
         2.       Financial Statement Schedule
                           Schedule III:   Real Estate and Accumulated
                                           Depreciation
                  Independent Auditors' Report All other schedules are omitted
                  as the required information is inapplicable or the information
                  is presented in the financial statements, or the related notes
                  thereto.
         3.       Exhibits
                  (2)      None.
                  (3)      (a)      Form of Amended and Restated
                                    Declaration of Trust, as amended.(2)
                           (b)      Trustees' Regulations, as amended.(2)
                  (4)      Form of certificate for Shares of
                           Beneficial Interest.(1)
                  (9)      None.
                  (10)     (a)      Form of Advisory Agreement between
                                    the Registrant and EQK Partners.(1)
                           (e)      Property management agreement
                                    between Salomon Brothers Peachtree
                                    Properties Inc. and Equitable Real
                                    Estate Investment Management, Inc.
                                    with respect to Peachtree-Dunwoody
                                    Pavilion.(1)
</TABLE>



                                       26

<PAGE>   28


<TABLE>
<CAPTION>

                                                                             Page
                                                                            Number
                                                                            ------
       <S>      <C>                                                         <C>
       (f)      Form of property management
                agreement between the Registrant
                and Castleway Management Corp.
                with respect to Castleton
                Commercial Park.(1)
       (k)      Mortgage encumbering Harrisburg
                East Mall in favor of Continental
                Assurance Company and related
                documents.(1)
       (m)      Mortgage encumbering Harrisburg East Mall in
                favor of The Philadelphia Savings Fund
                Society and related documents.(1)
       (n)      Amended and Restated Zero Coupon
                Mortgage Note due December 1992 in
                the principal amount of $45,000,000.(1)
       (o)      Mortgage encumbering Harrisburg East
                Mall in favor of Salomon Brothers
                Realty Corp.(2)
       (p)      Mortgages encumbering Peachtree-Dunwoody
                Pavilion in favor of Salomon Brothers Realty Corp.(2)
       (q)      Mortgages encumbering Castleton
                Commercial Park in favor of Salomon
                Brothers Realty Corp.(2)
       (r)      Zero Coupon Mortgage Note due
                December 1992 in the principal
                amount of $5,000,000.(3)
       (s)      Form of Amendments dated February 4,
                1988 to Exhibits 10(o), 10(p) and 10(q).(3)
       (t)      Form of Mortgages securing 10(r).(3)
       (u)      First Amendment to Advisory Agreement
                dated as of December 31, 1989.(4)
       (v)      Form of property management
                agreement between Registrant and
                Compass Retail, a division of
                Equitable Real Estate Investment
                Management, Inc.(5)
       (w)      Agreement of sale dated June 25, 1991
                between McCready and Keene, Inc.
                and the Registrant.(6)

</TABLE>





                                       27

<PAGE>   29


<TABLE>
<CAPTION>

                                                                            Page
                                                                            Number
         <S>      <C>                                                       <C>
         (x)      Agreement for release of collateral between
                  The Prudential Insurance Company of America
                  and the Registrant dated August 30, 1991.(6)
         (y)      Agreement of sale dated September 23, 1991
                  between the Wesleyan Church Corporation
                  and the Registrant.(6)
         (z)      Agreement of sale dated June 24, 1992
                  between Computer Generation Incorporated
                  and the Registrant.(7)
         (aa)     Purchase and Sale Agreement dated
                  October 21, 1992 between Minneapolis
                  Investment Associates L.P. and the Registrant(7)
         (bb)     Second Amended and Restated Note dated as of
                  December 16, 1992 from the Registrant to The
                  Prudential Insurance Company of America(7)
         (cc)     Cash Management and Security Agreement dated
                  as of December 15, 1992, among the
                  Registrant, The Prudential Insurance Company
                  of America and First Union National Bank of
                  Georgia(7)
         (dd)     Amended and Restated Deed to Secure Debt and
                  Security Agreement (Peachtree) dated as of
                  December 16, 1992 by Successor Trustees of
                  the Registrant as Debtor in favor of The
                  Prudential Insurance Company of America as
                  Secured Party(7)
         (ee)     Amended and Restated Open-End Mortgage and
                  Security Agreement (Harrisburg) dated as of
                  December 15, 1992 by Successor Trustees of
                  the Registrant as Debtor in favor of The
                  Prudential Insurance Company of America as
                  Secured Party(7)
         (ff)     Amended and Restated Mortgage and Security
                  Agreement (Castleton) dated as of December
                  15, 1992 by the Registrant as Debtor in
                  favor of The Prudential Insurance Company of
                  America as Secured Party(7)



</TABLE>



                                       28

<PAGE>   30


<TABLE>
<CAPTION>

                                                                                   Page
                                                                                   Number
          <S>       <C>                                             <C>
          (gg)      Absolute Assignment of Leases and Rents
                    and Rental Collection Agreement
                    (Peachtree) dated as of December 16,
                    1992 among Successor Trustees of the
                    Registrant as Assignor, The Prudential
                    Insurance Company of America as
                    Assignee and First Union National Bank
                    of Georgia as Rental Collection Agent(7)
           (hh)     Absolute Assignment of Leases and Rents
                    and Rental Collection Agreement
                    (Harrisburg) dated as of December 16,
                    1992 among Successor Trustees of the
                    Registrant as Assignor, The Prudential
                    Insurance Company of America as
                    Assignee and First Union National Bank
                    of Georgia as Rental Collection Agent(7)
           (ii)     Absolute Assignment of Leases and Rents and
                    Rental Collection Agreement (Castleton)
                    dated as of December 15, 1992 among the
                    Registrant as Assignor, The Prudential
                    Insurance Company of America as Assignee and
                    First Union National Bank of Georgia as
                    Rental Collection Agent(7)
           (jj)     Warrant Agreement dated as of December 18,
                    1992 between the Registrant and The
                    Prudential Insurance Company of America(7)
           (kk)     Subordination and Intercreditor Agreement
                    dated as of December 16, 1992 among
                    Provident National Bank, The Prudential
                    Insurance Company of America and the
                    Registrant(7)
           (ll)     Second Amended and Restated Loan Agreement
                    dated as of December 16, 1992 from the
                    Registrant to Provident National Bank(7)
           (mm)     Amended and Restated Note dated as of
                    December 16, 1992 from the Registrant to
                    Provident National Bank(7)
           (nn)     Mortgage and Security Agreement (Castleton)
                    dated as of December 16, 1992 between the
                    Registrant and Provident National Bank(7)
</TABLE>





                                       29

<PAGE>   31

<TABLE>
<CAPTION>


                                                                                    Page
                                                                                    Number
        <S>      <C>                                                                <C>
        (oo)     Deed to Secure Debt and Security
                 Agreement (Peachtree) dated as of December
                 16, 1992 between the Registrant and
                 Provident National Bank(7)
        (pp)     Open-End Mortgage and Security
                 Agreement (Harrisburg) dated as of December
                 16, 1992 between the Registrant and
                 Provident National Bank(7)
        (qq)     Assignment of Lessor's Interest in Leases
                 (Castleton) dated as of December 16, 1992
                 between the Registrant and Provident
                 National Bank(7)
        (rr)     Assignment of Lessor's Interest in Leases
                 (Peachtree) dated as of December 16, 1992
                 between the Registrant and Provident
                 National Bank(7)
        (ss)     Assignment of Lessor's Interest in Leases
                 (Harrisburg) dated as of December 16, 1992
                 between the Registrant and Provident
                 National Bank(7)
        (tt)     Assignment of Cash Collateral Account and
                 Security Agreement dated as of December 16,
                 1992 between the Registrant and Provident
                 National Bank(7)
        (uu)     Purchase and Sale Agreement dated
                 July 6, 1993 between Lawrence E.
                 Cooper and the Registrant(8)
        (vv)     Amendment dated October 1, 1993
                 to Exhibit 10(cc)(8)
        (ww)     Amendment dated December 3, 1993
                 to Exhibits 10(ll) and 10(mm)(8)
        (xx)     Purchase Agreement for Real Property and
                 Escrow Instructions (9)
        (yy)     Note, Mortgage, and Modification agreement
                 dated December 15, 1995 between the
                 Registrant and The Prudential
                 Insurance Company of America(10)
        (zz)     Mutual Estoppel and Modification Agreement
                 dated December 15, 1995 between the
                 Registrant and The Prudential Insurance
                 Company of America(10)



</TABLE>


                                       30

<PAGE>   32


<TABLE>
<CAPTION>

                                                                                                 Page
                                                                                                Number
                                                                                                ------
         <S>      <C>                                                                           <C>
         (aaa)    Amended Mutual Estoppel and Modification
                  Agreement dated December 15, 1995 between
                  the Registrant, PNC Bank, National Association,
                  and The Prudential Insurance Company of America(10)
         (bbb)    Extension and Partial Paydown of loan from
                  PNC Bank National Association, dated
                  December 15, 1995 to EQK Investors I(10)
         (ccc)    Second Amendment to Second Amended and Restated Loan
                  Agreement from PNC Bank National Association dated
                  December 15, 1996
         (ddd)    Third Amended and Restated Note from PNC Bank National
                  Association dated December 15, 1996
         (eee)    First Amended Note, Mortgage and Note Modification
                  Agreement from the Prudential Insurance Company of America
                  dated December 15, 1996
         (fff)    Mutual Estoppel and Modification Agreement dated December
                  15, 1996 between the Registrant and the Prudential Insurance
                  Company of America and PNC Bank National Association
     27           Financial Data Schedule (for SEC use only)

</TABLE>



<TABLE>
                   <S>     <C>
                  (11)     See Note 1 to the Financial Statements.
                  (12)     Inapplicable.
                  (13)     Inapplicable.
                  (16)     None.
                  (18)     None.
                  (21)     None.
                  (22)     None.
                  (23)     None.
                  (24)     None.
                  (27)     Included in EDGAR transmission only.
                  (28)     None.
</TABLE>


(b)      Reports on Form 8-K

         None

(c)      See paragraph (a) 3. above

(d)      See paragraph (a) 2. above



        (1)  Incorporated herein by reference to exhibit filed with
             Registrant's Registration Statement on Form S-11, File No.
             2-93936.

                                       31

<PAGE>   33



         (2)      Incorporated herein by reference to exhibit filed with
                  Registrant's Form 10-K dated for fiscal year ended December
                  31, 1985.

         (3)      Incorporated herein by reference to exhibit filed with
                  Registrant's Form 10-K dated for fiscal year ended December
                  31, 1987.

         (4)      Incorporated herein by reference to exhibit filed with
                  Registrant's Form 10-K for fiscal year ended December 31,
                  1989.

         (5)      Incorporated herein by reference to exhibit filed with
                  Registrant's Form 10-K for fiscal year ended December 31,
                  1990.

         (6)      Incorporated herein by reference to exhibit filed with
                  Registrant's Form 10-K for fiscal year ended December 31,
                  1991.

         (7)      Incorporated herein by reference to exhibit filed with
                  Registrant's Form 10-K for fiscal year ended December 31,
                  1992.

         (8)      Incorporated herein by reference to exhibit filed with
                  Registrant's Form 10-K for fiscal year ended December 31,
                  1993.

         (9)      Incorporated herein by reference to exhibit filed with
                  Registrant's Form 8-K dated November 22, 1995.

         (10)     Incorporated herein by reference to exhibit filed with
                  Registrant's Form 10-K for fiscal year ended December 31,
                  1995.

                                       32

<PAGE>   34



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 31st day of
March, 1997.

                                                   EQK Realty Investors I



                                                   By:  /s/Phillip E. Stephens
                                                      --------------------------
                                                           Phillip E. Stephens
                                                           President and Trustee

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on March 31, 1997 by the following persons on behalf
of the Registrant and in the capacities indicated.

<TABLE>
<CAPTION>

Signatures                                                    Title
----------                                                    -----
<S>                                                           <C>
/s/Phillip E. Stephens                                        President (Principal Executive
----------------------------------                             Officer) and Trustee
Phillip E. Stephens


/s/Gregory R. Greenfield                                      Executive Vice President and Treasurer
----------------------------------                             (Principal Financial Officer)
Gregory R. Greenfield


/s/William G. Brown, Jr.                                      Vice President and Controller
----------------------------------
William G. Brown, Jr.


/s/Sylvan M. Cohen                                            Trustee
----------------------------------
Sylvan M. Cohen


/s/Alton G. Marshall                                          Trustee
----------------------------------
Alton G. Marshall


/s/George R. Peacock                                          Trustee
----------------------------------
George R. Peacock


/s/Robert C. Robb, Jr.                                        Trustee
----------------------------------
Robert C. Robb, Jr.

</TABLE>

<PAGE>   35
INDEPENDENT AUDITORS' REPORT

Board of Trustees and Shareholders
EQK Realty Investors I:

We have audited the accompanying balance sheets of EQK Realty Investors I (a
Massachusetts business trust) as of December 31, 1996 and 1995 and the related
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996.  Our audits also included
the financial statement schedule listed in the Index at Item 14.  These
financial statements and the financial statement schedule are the
responsibility of the Trust's management.  Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of EQK Realty Investors I as of December 31,
1996 and 1995 and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.  Also, in our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements, presents fairly, in all material respects, the information set
forth therein.

/s/DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP

Atlanta, Georgia
March 14, 1997
<PAGE>   36
                             EQK REALTY INVESTORS I

                                 BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
<CAPTION>


                                                                            December 31,  December 31,
                                                                                1996          1995
                                                                            ------------  ------------
<S>                                                                          <C>          <C>
ASSETS


Investment in Harrisburg East Mall, at cost                                  $  52,228    $  52,033

        Less accumulated depreciation                                           15,338       13,446
                                                                             ---------    ---------
                                                                                36,890       38,587

Cash and cash equivalents:
    Cash Management Agreement                                                    2,667        2,360
    Other                                                                          994          612

Deferred leasing costs (net of accumulated amortization of                       4,041        4,331
        $1,629 and $1,361, respectively)

Accounts receivable and other assets                                             2,011        2,319
                                                                             ---------    ---------
TOTAL ASSETS                                                                 $  46,603    $  48,209
                                                                             =========    =========


LIABILITIES AND DEFICIT IN SHAREHOLDERS' EQUITY

Liabilities:

        Mortgage Note payable                                                $  43,794    $  44,125

        Term Loan payable to bank                                                1,585        1,587

        Accounts payable and other liabilities (including amounts due
                affiliates of $2,940 and $2,765, respectively)                   4,245        4,030
                                                                             ---------    ---------


                                                                                49,624       49,742

Deficit in Shareholders' Equity:

        Shares of beneficial interest, without par value:  10,055,555 shares
                authorized, 9,264,344 shares issued and outstanding            135,875      135,875

        Accumulated deficit                                                   (138,896)    (137,408)
                                                                             ---------    ---------
                                                                                (3,021)      (1,533)
                                                                             ---------    ---------
TOTAL LIABILITIES AND DEFICIT IN SHAREHOLDERS' EQUITY                        $  46,603    $  48,209
                                                                             =========    =========
</TABLE>

                SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>   37
                            EQK REALTY INVESTORS I
                           STATEMENTS OF OPERATIONS
                   (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                         Years ended December 31,
------------------------------------------------------------------------------------
                                                       1996        1995        1994
------------------------------------------------------------------------------------
<S>                                                <C>         <C>         <C>
Revenues from rental operations                    $  6,174    $ 15,761    $ 16,512

Operating expenses, net of tenant
  reimbursements (including property
  management fees earned by an affiliate
  of $297, $291 and $314, respectively)                 887       5,403       5,836

Depreciation and amortization                         2,391       4,848       4,612

Other income                                           (268)       (400)       --

Write-off of capitalized predevelopment costs          --          --           429

Write-down of investment in real estate                --         3,200        --
-----------------------------------------------------------------------------------
Income from rental operations                         3,164       2,710       5,635

Interest expense                                      3,896       8,302       8,132

Other expenses, net of interest income
(including portfolio management fees
 earned by an affiliate of $250, $403 and $430,
 respectively)                                          756         983         962
-----------------------------------------------------------------------------------
Loss before gain on sale of real estate              (1,488)     (6,575)     (3,459)

Gain on sale of real estate                            --           229        --
-----------------------------------------------------------------------------------
Net loss                                           ($ 1,488)   ($ 6,346)   ($ 3,459)
===================================================================================
Loss per share:
   Loss before gain on sale of real estate         ($  0.16)   ($  0.71)   ($  0.37)

   Gain on sale of real estate                         --      $   0.03        --
-----------------------------------------------------------------------------------
Net loss                                           ($  0.16)   ($  0.68)   ($  0.37)
===================================================================================
</TABLE>


                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS












<PAGE>   38
                             EQK REALTY INVESTORS I
                  STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                       (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                  Shares of
                                                  Beneficial  Accumulated
                                                  Interest      Deficit        Total
-------------------------------------------------------------------------------------
<S>                                              <C>         <C>          <C>
Balance, December 31, 1993                       $ 135,779   ($127,603)   $   8,176

Net loss                                              --        (3,459)      (3,459)

Issuance of 51,226 warrants in
     connection with financing                          96        --             96
------------------------------------------------------------------------------------
Balance, December 31, 1994                         135,875    (131,062)       4,813
------------------------------------------------------------------------------------
Net loss                                              --        (6,346)      (6,346)

Balance, December 31, 1995                         135,875    (137,408)      (1,533)
------------------------------------------------------------------------------------
Net loss                                              --        (1,488)      (1,488)

BALANCE, DECEMBER 31, 1996                       $ 135,875   ($138,896)   ($  3,021)
====================================================================================
</TABLE>


                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>   39
                             EQK REALTY INVESTORS I
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                          Years ended December 31,
                                                       1996        1995        1994
-----------------------------------------------------------------------------------------
<S>                                                <C>         <C>         <C>
Cash flows from operating activities:
  Net loss                                         ($ 1,488)   ($ 6,346)   ($ 3,459)
  Adjustments to reconcile net loss to net
    cash provided by operating activities:
      Write-down of investment in real estate          --         3,200        --
      Depreciation and amortization                   2,391       4,848       4,612
      Amortization of debt discount                    --           460         334
      Imputed and deferred interest                     302       1,494       1,320
      Gain on sale of real estate                      --          (229)       --
      Changes in assets and liabilities:
      Decrease in accounts
          payable and other liabilities                 (87)     (1,661)       (388)
      (Increase) decrease in accounts receivable
         and other assets                                99        (643)       (235)
-----------------------------------------------------------------------------------------
Net cash provided by operating activities             1,217       1,123       2,184
-----------------------------------------------------------------------------------------
Cash flows from investing activities:
  Proceeds from sale of real estate                    --        38,507        --
  Additions to real estate investments                 (195)     (5,362)     (2,976)
  Payment of real estate disposition fee               --          --          (216)
-----------------------------------------------------------------------------------------
Net cash provided by (used in)
  investing activities                                 (195)     33,145      (3,192)
-----------------------------------------------------------------------------------------
Cash flows from financing activities:
   Scheduled repayments of debt                        (333)         (7)         (7)
   Repayments of debt due to sale of property          --       (35,990)       --
-----------------------------------------------------------------------------------------
Net cash used in financing activities                  (333)    (35,997)         (7)
-----------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents        689      (1,729)     (1,015)
Cash and cash equivalents
  beginning of year                                   2,972       4,701       5,716
-----------------------------------------------------------------------------------------
Cash and cash equivalents
  end of year                                      $  3,661    $  2,972    $  4,701
=========================================================================================
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>   40
                             EQK REALTY INVESTORS I
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1:           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS:

         EQK Realty Investors I, a Massachusetts business trust (the "Trust"),
was formed pursuant to a Declaration of Trust dated October 8, 1984 to acquire
certain income-producing real estate investments. Commencing with the period
beginning April 1, 1985, the Trust qualified for and elected real estate
investment trust ("REIT") status under the provisions of the Internal Revenue
Code.

         At December 31, 1996, the Trust's remaining real estate investment is
Harrisburg East Mall ("Harrisburg" or the "Mall"), a regional shopping center in
Harrisburg, Pennsylvania. On December 8, 1995, the Trust sold its interest in
Castleton Park ("Castleton"), an office park in Indianapolis, Indiana (see Note
3). During 1993, the Trust sold its two remaining office buildings within its
office complex located in Atlanta, Georgia, formerly known as Peachtree-
Dunwoody Pavilion or "Peachtree" (see Note 3). Prior to 1993, the Trust
completed the sale of two office buildings at Castleton (1991) and five office
buildings at Peachtree (1992).

                  The Declaration of Trust currently provides that actual
disposition of the remaining property, Harrisburg, may occur at any time prior
to March 1999. The precise timing of this disposition or an alternative
strategic transaction will be at the discretion of the Trustees, depending on
both the prevailing conditions in the relevant real estate market and the
ability of the Trust to extend or refinance its debt maturing in June 1998 (see
Note 2 to the financial statements).

CAPITALIZATION, DEPRECIATION AND AMORTIZATION:

         Property additions are recorded at cost. Costs directly associated with
major renovations and improvements, including interest on funds borrowed to
finance construction, are capitalized to the point of substantial completion.

         Depreciation of real estate investments is provided on a straight-line
basis over the estimated useful lives of the related assets, ranging generally
from 5 to 40 years. Tenant improvements are amortized over their estimated
useful lives, which do not exceed the terms of the respective tenant leases.
Intangible assets are amortized on a straight-line basis over their estimated
useful lives.

VALUATION OF REAL ESTATE:

In accordance with SFAS 121, the Company reviews for impairment, on a quarterly
basis, real estate investments whenever events or changes in circumstances
indicate that the carrying amount may not be reasonable based on estimates of
future undiscounted cash flows without interest expense.  In the event of an
impairment, the real estate investment is written down to its fair market
value.  Real estate investments to be disposed of are recorded at the lower of
net book value or fair market value less cost to sell at the date management
commits to a plan of disposal.

DEFERRED LEASING COSTS:

     Costs incurred in connection with the execution of a new lease including
leasing commissions, costs associated with the acquisition or buyout of existing
leases, and legal fees are deferred and amortized over the
<PAGE>   41


                             EQK REALTY INVESTORS I
                          NOTES TO FINANCIAL STATEMENTS


term of the new lease. Included in deferred leasing costs is the unamortized
portion of a 1990 payment of $5,500,000 made to an anchor tenant at Harrisburg
in exchange for the tenant relinquishing space that was subsequently converted
into leasable area for mall shops.

REVENUE RECOGNITION:

         Minimum rents are recognized on a straight-line basis over the term of
the related leases. Percentage rents are recognized on an accrual basis.

NET LOSS PER SHARE:

         The net loss per share calculation is based on the weighted average
number of shares outstanding during the year, which was 9,264,344 for all years
presented.

         Share warrants issued in connection with the Trust's 1992 debt
restructuring (see Note 2) are considered common share equivalents. However, the
warrants have not been included in the net loss per share calculation since the
effect on such calculation would be anti-dilutive.

INCOME TAXES:

         The Trust has complied with all applicable provisions established by
the Internal Revenue Code for maintaining its REIT status. Accordingly, no
income tax provision or benefit has been recognized in the accompanying
financial statements.

STATEMENTS OF CASH FLOWS:

         Cash equivalents include short-term investments with an original
maturity of three months or less. Included in the statements of cash flows are
cash payments for interest of $3,886,000, $6,703,000, and $6,746,000 in 1996,
1995 and 1994, respectively. Such amounts are net of interest costs of $69,000
capitalized in 1995.

         As of December 31, 1993, the Trust accrued additions to investments in
real estate and a real estate disposition fee payable to the Advisor in the
amounts of $489,000 and $216,000, respectively. Such amounts were paid in 1994.

         As a condition of the Trust's debt restructuring (see Note 2), the
Trust issued a total of 367,868 share warrants to its primary mortgage lender
during 1992 to 1994. The value of the warrants at the time of issuance was
recorded as a debt discount and an increase in Shareholders' Equity.



<PAGE>   42


                             EQK REALTY INVESTORS I
                          NOTES TO FINANCIAL STATEMENTS


FAS 107:

         The Trust values its financial instruments as required by FAS No. 107,
"Disclosures about Fair Values of Financial Instruments". Based on rates
currently available to the Trust for comparable financial instruments, the Trust
believes, the carrying amounts of cash and cash equivalents, the Mortgage Note,
and the Term Loan approximate fair value.

RECLASSIFICATIONS:

         Certain amounts in the prior year have been reclassified from
previously issued financial statements to conform with the 1996 presentation.

MANAGEMENT ESTIMATES:

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.


NOTE 2:           MORTGAGE DEBT AND RESTRUCTURING ACTIVITIES

         On December 15, 1992, the Trust completed a restructuring of its
existing mortgage debt through the issuance of a "Mortgage Note" and a "Term
Loan", both due December 15, 1995, with original principal balances of
$75,689,000 and $2,859,000, respectively. The Mortgage Note bore interest at an
average rate of 9.79% per annum during its three year term, although interest
was payable at 8.54% per annum. The Term Loan bore interest at 8.33% and was
subject to the same pay rate of 8.54%. The differences between the accrual and
pay rates of interest under both debt instruments were reflected in the
principal balances due at maturity. Absent prepayments due to property
dispositions, the scheduled amount of principal due under the Mortgage Note and
the Term Loan on the original maturities date would have been $78,928,000 and
$2,839,000, respectively. However, on December 8, 1995, the Trust completed the
sale of Castleton Park (see Note 3) and used the net proceeds of $35,990,000


<PAGE>   43


                             EQK REALTY INVESTORS I
                          NOTES TO FINANCIAL STATEMENTS


(reflecting reductions of $2,517,000 for customary prorations) to prepay such
debt obligations in the amounts of $34,738,000 and $1,252,000, respectively.
These debt instruments were subsequently extended for a period of one year to
December 15, 1996, and again for a period of eighteen months to June 15, 1998 as
described below.

         Pursuant to its Mortgage Note agreement, the Trust issued the lender
warrants to purchase 367,868 of its shares of beneficial interest at $.0001 per
share. As of December 31, 1996, all such warrants remain outstanding and
exercisable.

         As part of the 1992 restructuring, the Trust entered into a Cash
Management Agreement with the mortgage lender and assigned all lease and rent
receipts to the lender as additional collateral. Pursuant to this agreement, a
third-party escrow agent has been appointed to receive all rental payments from
tenants and to fund monthly operating expenses in accordance with a budget
approved by the lender. As of December 31, 1996, a balance of $781,000 was held
by the third-party escrow agent in accordance with the Cash Management
Agreement. The agreement also provides for the establishment of a capital
reserve account, which is maintained by the escrow agent. Disbursements from
this account, which is funded each month with any excess operating cash flow,
are limited to capital expenditures approved by the lender. As of December 31,
1996 the balance of the capital reserve account was $1,886,000.

EXTENSIONS OF DEBT

         The remaining principal balances outstanding under the Mortgage Note
and the Term Loan at December 15, 1996, $43,794,000 and $1,585,000,
respectively, were extended for eighteen months through June 15, 1998, under
terms substantially comparable from those previously in effect, except as
described below. Previously, principal balances of $44,125,000 and $1,587,000,
respectively, were extended from their original maturity date of December 15,
1995 to December 15, 1996. The Mortgage Note remains collateralized by a first
mortgage lien on Harrisburg, an assignment of leases and rents, and certain cash
balances. The Term Loan remains collateralized by a subordinate lien on
Harrisburg.

         The Mortgage Note agreement has been amended to provide for monthly
payments of interest only accruing at the rate of 8.88% per annum ($324,000 per
month). Previously, in connection with the December 15, 1995 extension, the
Mortgage Note agreement was amended to provide for monthly payments of principal
(assuming a 30 year amortization) and interest (at an accrual rate equal to the
former pay rate of 8.54%) in the aggregate amount of $341,000. The Term Loan
agreement was amended to provide for an accrual rate that resets periodically
and is computed at the Trust's discretion at either 2 5/8% above the Euro-Rate
(as defined) or 1 1/8% above the Prime Rate (as defined). The accrual rate in
effect through May 18, 1997 averages 8.12%.



<PAGE>   44


                             EQK REALTY INVESTORS I
                          NOTES TO FINANCIAL STATEMENTS


         In consideration for the fixed annual interest accrual rate on the
Mortgage Note agreement, the Trust paid an upfront application fee of $165,000
and agreed to pay a back end fee of $272,900, plus interest thereon at the
contract rate of 8.88%, at the maturity date of June 15, 1998, or the date at
which all or any part of the original principal amount is prepaid. At December
31, 1996, the $272,900 application fee is included in accounts payable and other
liabilities on the balance sheet.

NOTE 3:           SALES OF REAL ESTATE

     During 1995, Management recorded a write-down of its investment in
Castleton of $3,200,000 in order to reflect its then current estimate of net
realizable value.  In December 1995, the Trust completed the sale of its
remaining forty-four buildings at Castleton. The Trust received net sales
proceeds of $38,507,000 before reduction for customary prorations of $2,517,000,
and recognized a gain on sale of $229,000. The net proceeds were used to repay a
portion of outstanding mortgage indebtedness (see Note 2).

NOTE 4:           LEASING ARRANGEMENTS

     The Trust leases shopping center space generally under noncancelable
operating leases, some of which contain renewal options. The shopping center
leases generally provide for minimum rentals, plus percentage rentals based upon
the retail stores' sales volume. Percentage rentals amounted to $179,000,
$270,000 and $295,000 for the years ended December 31, 1996, 1995, and 1994,
respectively. In addition, the tenants pay certain utility charges to the Trust
and, in most leases, reimburse their proportionate share of real estate taxes
and common area expenses. Recoveries of common area and real estate tax expenses
amounted to $2,313,000, $2,355,00 and $2,311,000 for the years ended December
31, 1996, 1995, and 1994, respectively.



<PAGE>   45


                             EQK REALTY INVESTORS I
                          NOTES TO FINANCIAL STATEMENTS



         Future minimum rentals under existing, non-cancelable leases at
December 31, 1996 are as follows:

<TABLE>
<CAPTION>

                  Years ending December 31,                                            Amount
                  ------------------------                                             ------
                  <S>                                                              <C>
                           1997                                                    $    4,485,000
                           1998                                                         4,536,000
                           1999                                                         4,234,000
                           2000                                                         4,023,000
                           2001                                                         3,306,000
                           Thereafter                                                  12,842,000
                                                                                    -------------

                                                                                   $   33,426,000
                                                                                    =============
</TABLE>

         Due to a department store vacancy discussed in Note 8, certain tenants
at Harrisburg have exercised the right, as provided for under cotenancy
provisions set forth in their respective leases, to pay percentage rent in lieu
of fixed minimum rents which amounted to $663,000, $702,000, and $209,000 for
the years ended December 31, 1996, 1995, and 1994, respectively. Future minimum
rentals for these tenants have been included in the above schedule beginning in
March 1997, the month in which the rental payment obligations of these tenants
reverts to fixed minimum rent due to the March 10, 1997 opening of Lord & Taylor
in the vacant department store location.


NOTE 5:           INVESTMENTS IN REAL ESTATE

         The Trust's investments in real estate at December 31, 1996 and 1995
consisted of the following:

<TABLE>
<CAPTION>
                                                                         1996                     1995
                                                                    --------------          -----------
         <S>                                                           <C>                  <C>
         Land                                                          $ 4,700,000          $ 4,700,000
         Buildings and improvements                                     45,033,000           44,975,000
         Tenant improvements                                             2,332,000            2,195,000
         Personal property                                                 163,000              163,000
                                                                        ----------           ----------

                                                                       $52,228,000          $52,033,000
                                                                        ==========           ==========
</TABLE>


         During 1995, the Trust renovated Harrisburg's outparcel building to
accommodate the relocation of Toys'R'Us. The final cost of the renovation
project was approximately $3,440,000. Additional real estate investments in 1996
consisted of minor building and tenant


<PAGE>   46


                             EQK REALTY INVESTORS I
                          NOTES TO FINANCIAL STATEMENTS


improvements to Harrisburg.

NOTE 6:    ADVISORY AND MANAGEMENT AGREEMENTS

ADVISORY AGREEMENT

         The Trust has entered into an agreement with Equitable Realty Portfolio
Management, Inc. (successor in interest to EQK Partners), a wholly owned
subsidiary of Equitable Real Estate Investment Management, Inc. ("Equitable Real
Estate"), to act as its "Advisor". The Advisor makes recommendations to the
Trust concerning investments, administration and day-to-day operations.

         Under the terms of the advisory agreement, as amended in December 1989,
the Advisor receives a management fee that is based upon the average daily per
share price of the Trust's shares plus the average daily balance of outstanding
mortgage indebtedness. Such fee is calculated using a factor of 42.5 basis
points (0.425%) and generally has been payable monthly without subordination.
Commencing with the December 1995 extension of debt and continuing with the
December 1996 debt extension (see Note 2), the Mortgage Note lender has
requested, and the Advisor has agreed to, a partial deferral of payment of its
fee. Whereas the fee continues to be computed as described above, payments to
the Advisor are limited to $37,500 per quarter. Accrued but unpaid amounts will
be eligible for payment upon the repayment of the Mortgage Note. For the years
ended December 31, 1996, 1995 and 1994, portfolio management fees were $250,000,
$403,000, and $430,000, respectively. The balance of accrued but unpaid advisory
fees at December 31, 1996 was $125,000.

         As of December 31, 1989, portfolio management fees of $5,440,000
payable to the Advisor were deferred in accordance with subordination provisions
contained in the original advisory agreement. Pursuant to the amended advisory
agreement, the Advisor forgave one-half, or $2,720,000, of the deferred balance.
The remaining deferred fees are to be paid upon the disposition of the Trust's
properties. As of December 31, 1996, the liability for deferred management fees
was $2,720,000.

         Upon the sale of all or any portion of any real estate investment of
the Trust, the Advisor will receive a disposition fee equal to 2% of the gross
sale price (including outstanding indebtedness taken subject to or assumed by
the buyer and any purchase money indebtedness taken back by the Trust). The
disposition fee will be reduced by the amount of any brokerage commissions and
legal expenses incurred by the Trust in connection with such sales. During 1995,
disposition fees earned by the Advisor were $788,000.

         In connection with the December 15, 1996 extension of debt (see Note
2), the Advisor will receive a refinancing fee of $50,000, which will be paid
upon the retirement of the debt.






<PAGE>   47


                             EQK REALTY INVESTORS I
                          NOTES TO FINANCIAL STATEMENTS


PROPERTY MANAGEMENT AGREEMENTS

     The Trust has also entered into agreements for the on-site management of
each of its properties. Harrisburg East Mall is managed by Compass Retail, Inc.
("Compass"), an affiliate of Equitable Real Estate. Castleton Park was managed
by an unaffiliated third-party management company up until the time of its sale.

     Management fees paid to Compass are generally based upon a percentage of
rents and certain other charges. The Trust believes that such fees are
comparable to those charged by unaffiliated third-party management companies
providing comparable services. For the years ended December 31, 1996, 1995 and
1994, management fees to Compass were $297,000, $291,000, and $314,000,
respectively.

     In connection with the redevelopment of Harrisburg's outparcel building as
described in Note 5, Compass received a $150,000 development fee in 1995.

SHARE OWNERSHIP

     In connection with a debt restructuring in December 1992, the Trust issued
1,675,000 previously repurchased shares to its Advisor for $6,700,000, or $4.00
per share. In total, the Advisor owns 1,685,556 shares, or 18.2% of the total
shares outstanding. The Advisor earned a $500,000 fee in connection with this
refinancing, which was paid in 1993-1994.

NOTE 7:    RELATED PARTY TRANSACTIONS

         As a condition of the Term Loan issuance in December 1992 (Note 2), an
escrow deposit of $300,000 was required as additional collateral. The Trust
borrowed this amount from its Advisor. In connection with the December 15, 1995
extension of this debt, the escrow deposit was released and the Advisor was
repaid in 1996.

NOTE 8:  COMMITMENTS AND CONTINGENCIES

ANCHOR DEPARTMENT STORE VACANCY

         On March 10, 1997, May Department Stores Company ("May Company") opened
a Lord & Taylor department store at Harrisburg, pursuant to a lease agreement
with the Trust dated May 16, 1996. The new Lord & Taylor store is located in the
anchor space previously occupied by John Wanamaker. The John Wanamaker location
at Harrisburg had been closed since October 1995 following Woodward & Lothrop's
(the owner of John Wanamaker) sale of certain department stores in this retail
chain to May Company pursuant to an August 1995 bankruptcy court auction. Given
its existing presence at Harrisburg through its recently-opened Hecht's
department store, May Company initially pursued an assignment of this


<PAGE>   48


                             EQK REALTY INVESTORS I
                          NOTES TO FINANCIAL STATEMENTS


leasehold interest to other retail operators before deciding instead to open a
Lord & Taylor department store in this location. The execution of such lease
agreement has resulted in, among other things, the termination of the legal
proceedings initiated by the Trust against May Company in March 1996 following
May Company's failure to open or cause another retail operator to open for
business once the John Wanamaker store closed, which was a violation of a
continuous operating covenant contained in its lease agreement.

         The new lease agreement with May Company has an initial term of nine
years (October 31, 2005), with three renewal options of ten years each. The new
lease agreement has a longer committed lease term than the John Wanamaker lease
agreement, which stipulated an initial lease term expiration date of October 31,
1999. The financial terms are comparable to those contained in the John
Wanamaker lease, although minimum rent payments during the first three years of
the lease are anticipated to be approximately $75,000 less per annum. Due to
certain rent offsets that John Wanamaker would have otherwise been entitled to,
the revenue stream after the third lease year is anticipated to be more
favorable to the Trust. In connection with the execution of this lease
agreement, the Trust received approval from May Company, on behalf of its
Hecht's and Lord & Taylor stores, of certain modifications to the Mall's site
plan which will give the Trust flexibility in future development planning. The
opening of a Lord & Taylor store is expected to have a positive impact on the
Trust's ability to lease space to new tenants and to renew leases with existing
tenants.

NOTE 9:    SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

         The following is a summary of selected quarterly financial data for the
years ended December 31, 1996 and 1995:

<TABLE>
<CAPTION>


                                                              (in thousands, except per share amounts)
                                                                             Quarter Ended
                                                   ----------------------------------------------------------------
1996                                                March 31             June 30         Sept. 30           Dec. 31
<S>                                                <C>                 <C>              <C>               <C>
Revenues from rental operations                    $   1,714           $   1,412        $   1,576         $   1,472
Income from rental operations                            968                 695              868               633
Net loss                                                (193)               (475)            (261)             (559)
Net loss per share                                      (.02)               (.05)            (.03)             (.06)
</TABLE>



<PAGE>   49


                             EQK REALTY INVESTORS I
                          NOTES TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                              (in thousands, except per share amounts)
                                                                         Quarter Ended
                                                    ---------------------------------------------------------------
1995                                                March 31             June 30         Sept. 30           Dec. 31
<S>                                                 <C>                 <C>              <C>              <C>

Revenues from rental operations                     $  3,966            $  4,113         $ 3,990          $  3,692
Write down of investment in real estate                   --                  --          (3,200)               --
Income (loss) from rental operations                   1,286               1,487          (1,388)            1,325
Loss before gain on sale of real estate               (1,128)               (890)         (3,802)             (755)
Gain on sale of real estate                               --                  --              --               229
Net loss                                              (1,128)               (890)         (3,802)             (526)
Net loss per share before write down
   of investment in real estate                         (.12)               (.10)           (.06)             (.08)
Net loss per share before gain on sale
   of real estate                                       (.12)               (.10)           (.06)             (.08)
Net loss per share                                      (.12)               (.10)           (.41)             (.06)
</TABLE>



         During the first and second quarters of 1996, the Trust was notified by
the Fulton County (Georgia) Tax Commissioner's office of a reduction in the
assessed value of the real estate underlying Peachtree Dunwoody Pavilion for tax
years prior to the Trust's sale of this property. Such reduction in assessed
value resulted in a refund of previously paid real estate taxes in the amount of
$268,000, which the Trust recognized as other income.

         During the third quarter of 1995, as a result of a successful valuation
appeal, the Trust received and recognized a $400,000 refund of Castleton real
estate taxes relating to years 1989 to 1994. Also in the third quarter of 1995,
in contemplation of completing the sale of Castleton, Management wrote down its
investment in Castleton by $3,200,000 to its estimate of net realizable value.
In the fourth quarter of 1995, the Trust completed the sale of Castleton and
recognized a gain on the sale of $229,000 (see Note 3). The sum of the net loss
per share for the four quarters in 1995 does not equal net loss per share due to
rounding differences.





<PAGE>   50



<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
                                               FINANCIAL STATEMENT SCHEDULE
                                                     December 31, 1996
                                                      (in thousands)
-------------------------------------------------------------------------------------------------------------------
                                   SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------------------------------------------------------------------




                                                    Cost Capitalized
                                    Initial Cost      Subsequent to
                                                       Acquisition
                                    --------------- ---------------


                                             Bldg &
    Description       Encumbrance   Land    Improve.  Improvements
------------------------------------------------------------------
<S>                    <C>        <C>       <C>        <C>
Harrisburg East Mall...$45,379(1) $4,700(2) $31,287(2) $16,241
    Harrisburg, PA
Totals                 $45,379    $4,700    $31,287    $16,241
------------------------------------------------------------------

<CAPTION>
                                    Gross Amount
                                   at which Carried
                                 at Close of Period (3)
                              -------------------------
                                                                                         Life on which
                                                                                         Depreciation
                                                                                           in Latest
                                       Bldg &             Accum  Date of        Date      Income Stmt.
    Description              Land     Improve.    Total    Depr  Construction  Acquired   is Computed
-----------------------------------------------------------------------------------------------------
<S>                         <C>       <C>        <C>     <C>       <C>          <C>        <C>
Harrisburg East Mall.      $4,700(2)  $47,528(2) $52,228 $15,338   1969(4)      3/13/85    30 yrs.
    Harrisburg, PA
Totals                     $4,700     $47,528    $52,228 $15,338
-----------------------------------------------------------------------------------------------------


(1)   Encumbrance is a mortgage note payable constituting first lien on the Harrisburg real estate and a term loan payable to a
      bank constituting subordinated lien on the property.
(2)   Initial cost is net of imputed interest of $5,280 at date of acquisition.
(3)   The aggregate tax basis of the Trust's property is $53 million as of December 31, 1996.
(4)   Renovation of Harrisburg was completed in 1993.


RECONCILIATION OF GROSS CARRYING AMOUNT OF REAL ESTATE:                   RECONCILATION OF ACCUMULATED DEPRECIATION:
Balance, December 31, 1993                               $ 107,082
                                                                          Balance, December 31, 1993                        $28,118

     Improvements and Additions                              2,487          Depreciation expense                              3,719

     Deductions -- Reversal of net book value of                            Deductions -- Reversal of net book value

          fully depreciated assets                             (44)                of fully depreciated assets                  (44)
                                                      ------------                                                          -------
Balance, December 31, 1994                                 109,525        Balance, December 31, 1994                         31,793

     Improvements and Additions                              2,823          Depreciation Expense                              4,016

     Deductions--Sale of  Castleton Commercial Par         (60,315)         Deductions--Sale of Castelton Commercial Park   (22,363)
                                                         ---------                                                         --------

Balance, December 31, 1995                                  52,033        Balance, December 31, 1995                         13,446

     Improvements and Additions                                 19          Depreciation Expense                              1,892
                                                          --------                                                        ---------

Balance, December 31, 1996                                $ 52,228        Balance, December 31, 1996                        $15,338
                                                          ========                                                        =========
</TABLE>