**Exhibit 99.1**

 

REAL ESTATE INVESTMENT RISKS

 

Statementsin this document filed with the SEC include forward looking statements underthe federal securities laws. Statements that are not historical in nature,including the words “anticipate,” “estimate,” “should,” “expect,” “believe,”“intend,” and similar expressions, are intended to identify forward-lookingstatements. While these statements reflect our good faith belief based oncurrent expectations, estimates and projections about (among other things) theindustry and the markets in which we operate, they are not guarantees of futureperformance, involve known and unknown risks and uncertainties that could causeactual results to differ materially from those in the forward lookingstatements, and should not be relied upon as predictions of future events. Inmaking these cautionary statements, we are not committed to addressing orupdating each factor in future filings or communications regarding our businessor results, or addressing how any of these factors may have caused results todiffer from discussions or information contained in previous filings orcommunications. The following is a discussion of factors that could impactfuture results:

 

Company Risks

 

Ourperformance depends on the economic conditions of the Middle Atlantic Areawhere most of our properties are located.

 

Our performance depends on the economicconditions in markets in which our properties are concentrated.  Since our properties are located in theMiddle Atlantic area, our results could be adversely affected by adverseeconomic conditions in the Middle Atlantic region or by adverse commercial realestate conditions, such as an oversupply of space or a reduction in demand forour real estate, in the Middle Atlantic area. These conditions could have agreater adverse impact on us than if we owned properties in a number ofdifferent geographic markets.

 

Ourorganizational documents do not place limits on the incurrence of debt.

 

Our organizational documents donot limit the amount of indebtedness that we may incur.  Although our board of trustees attempts tomaintain a balance between total outstanding indebtedness and the value of ourportfolio (i.e., a ratio of secured debt to real estate value of 50% or less),it could alter this balance at any time without shareholder approval. If webecome more highly leveraged, then the resulting increase debt service coulddiminish our ability to make expected distributions to shareholders and makepayments outstanding indebtedness. If we default on our obligations under anyoutstanding indebtedness, we could lose our interest in any properties thatsecure that indebtedness.

 

Manyof our leases contain covenants that restrict the use of other space at aproperty and may prevent us from re-leasing the property.

 

Many leases with existing tenants havecovenants that restrict the use of other space at a property. For example, manyshopping center leases have covenants that provide for a specified tenant mixor balance the shopping center.

 

Wemay need to borrow money to qualify as a REIT.

 

**Our ability to makedistributions to shareholders could be diminished by increased debt serviceobligations if we need to borrow money in order to maintain our REITqualification. For example, differences in timing between when we receiveincome and when we have to pay expenses could require us to borrow money tomeet requirement that we distribute to shareholders at least 90% of our nettaxable income excluding net capital gain each year. The incurrence of forthese purposes even if we believe that market conditions are not favorable forsuch borrowings. In words, we may have to borrow money on unfavorable terms.**

 

Weare subject to risks inherent in development and acquisition activities.

 

**Developing or expanding existingproperties in our real estate portfolio is an integral part of our strategy formaintaining and enhancing the value of our portfolio. We may also choose toacquire additional properties in the future. While our policies with respect todeveloping and expanding properties are intended to limit some of the risksotherwise associated with property acquisition such as not startingconstruction on a project prior to obtaining a commitment from an anchortenant, we nevertheless will incur risks, including risks related to delays inconstruction and lease-up, costs of materials, cost overruns, financingavailability, volatility in interest rates and labor availability.**

 

**In addition, once a property isacquired, the renovation and improvement costs we incur in bringing an acquiredproperty up to market standards may exceed our estimates, and the property mayfail to perform expected.**

 

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**Marylandlaw may present or discourage a change in control.**

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**The Maryland General CorporationLaw establishes special restrictions against “business combinations” between aMaryland corporation and “interested shareholders” or their affiliates unlessan exemption is applicable. The business combination statute could have theeffect of discouraging offers to acquire us and of increasing the difficulty ofconsummating any offers to acquire us, even if our acquisition would be in ourshareholders’ best interests.**

 

**Maryland law also provides that“control shares” of a Maryland corporation acquired in a “control shareacquisition” have no voting rights except to the extent approved by a vote oftwo-thirds of the votes entitled to be cast on the matter, excluding shares ofbeneficial interest owned by the acquiror, by officers or by trustees who areemployees of the corporation. The control share statute could have the effectof discouraging offers to acquire us and of increasing the difficulty ofconsummating any control share acquisitions, even if our acquisition would bein our shareholders’ best interests.**

 

Ourboard of trustees adopted a cash bonus plan for our senior management, trusteesand certain officers employees that could have an anti-takeover effect

 

InMay 2001, our board of trustees adopted a cash bonus plan pursuant to which, inthe event of an extraordinary transaction involving a sale or other change ofcontrol of the company, cash payments totaling 1% of the total consideration ofthe transaction, including any assumed debt, would be paid to members of oursenior management, trustees and other officers and employees. This plan couldhave an adverse effect on our ability to negotiate and consummate a transactioninvolving a sale or other change of control of the company and could deterthird parties from making an offer to effect such a transaction.

 

 

Increasedmarket interest rates could reduce share prices.

 

**The annual dividend rate on ourshares as a percentage of its market price may influence the trading price ofstock. Also, an increase in market interest rates may lead purchasers to demanda higher annual dividend rate, which could lower the market price of theshares. A decrease in the market price of the shares could reduce our abilityto raise additional equity in the public markets or could result in a dilutionof our existing shareholders.**

 

Salesof a substantial number of our shares could adversely affect the market price.

 

**Sales of a substantial number ofour common shares, or the perception that such sales could occur, couldadversely affect prevailing market prices for our common shares. In addition tothe possibility that we sell common shares in public offerings at any time, wemay also issue common shares upon redemption of Units, as well as upon exerciseof stock options that we grant to our employees and others. All of these shareswill be available for sale in the public markets from time to time.**

 

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Industry Risks

 

Realproperty investments are subject to changes in general economic conditions.

 

Real property investments are subject tovarying types and degrees of risk that may hinder or otherwise affect ourability to generate income. These risks could reduce the amount of cashavailable for distributions to shareholders.

 

Anyof the following factors could adversely affect the value of our real estate andour ability to generate revenues:

 

•                  adverse changes ingeneral economic conditions;

 

•                  adverse localconditions (such as increases in leasable space or a reduction in demand forreal estate in an area);

 

•                  competition fromother shopping centers, properties, developers or real estate owners;

 

•                  increases inoperating costs;

 

•                  governmentregulations;

 

•                  increases ininterest rates;

 

•                  reduction inavailable financing; and

 

•                  liability due toenvironmental and other laws.

 

 

Realestate investments are relatively illiquid.

 

Real estate investments are relativelyilliquid and, therefore, our ability to react promptly in response to changesin economic or other conditions is limited. In addition, in some cases theInternal Revenue Code may limit our ability to sell property held for less thanfour years.

 

**We maynot be able to re-lease properties upon the expiration of existing leases.**

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Upon the expiration of leases, tenants maynot renew leases and we may not be able to re-lease properties the terms of therenewal or re-lease (including the costs of required renovations or concessionsto tenants) may be less favorable than current lease terms. Our operating cashflow would decrease if we were unable promptly re-lease all or a substantialportion of this space, if the rental rates upon such re-lease weresignificantly lower than expected, or if reserves for costs of the re-leasingprove inadequate.

 

If tenants areunable to meet their obligations to us, our cash flow would be adverselyaffected.

 

If a significant number of tenants are unableto meet their obligations to us, our cash receipts and cash available fordistribution will decrease. Also, a tenant may experience a downturn in itsbusiness which may weaken its financial condition and result in a reduction inor failure to make rental payments when due. If a tenant defaults in itsobligations to us, we may be delayed in enforcing our rights as landlord. Inaddition, we may incur substantial costs and experience significant delaysassociated with protecting our investment, including costs incurred inrenovating and re-leasing the property.

 

**At any time, one or more of ourtenants may seek the protection of the bankruptcy laws, which could result inthe rejection and termination of their lease. We are subject to risks that:**

 

•                  any present tenantthat has filed for bankruptcy protection will not continue making paymentsunder its lease;

 

•                  any tenant may filefor bankruptcy protection in the future; or

 

•                  any tenants thatfile for bankruptcy protection may not continue to make rental payments in atimely manner.

 

**Losses from earthquakes andother natural disasters and terrorist attacks are uninsurable or insurable atcosts that are not economically justifiable.**

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**We carry comprehensiveliability, fire, flood, extended coverage and rental loss insurance with policyspecifications and insured limits that are customary for similar properties.Losses from catastrophic events and natural disasters like wars or earthquakes,however, are uninsurable or insurable only at costs that are not economicallyjustifiable. If an uninsured loss occurs, we may lose both our invested capitaland anticipated profits from the property. Nevertheless, we would still beobligated to repay any recourse mortgage indebtedness on the property.**

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**Insurance payouts resulting fromthe terrorist attacks occurring on September 11, 2001 will significantly reducethe insurance industry’s reserves. Moreover, the demand for higher levels ofinsurance coverage will likely increase because of these attacks. As a result,we expect our insurance premiums to increase significantly in the future, whichmay have a materially adverse impact on our cash flow.  Furthermore, we may not be able to purchasepolicies in the future with coverage limits and deductibles similar to thosethat were available before the attacks. Because it is impossible to determinewhat kind of policies will be available in the future and at what prices, weare unable to determine whether we will be able to maintain our pre-September11, 2001 insurance coverage levels. Our real property insurance policies putinto effect before September 11, 2001 do not expressly exclude from coveragehostile acts, except for acts of war. Following the terrorist acts of September11, 2001, however, our insurance policies purchased by us may expressly excludehostile acts, and it may be impossible or very expensive to obtain insurancecovering terrorist attacks.**

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We are subject to risks associated with debt financing and existing debtmaturities.

 

We are subject to a variety ofrisks associated with debt financing. Examples of these risks include the following:

 

•                  our cash fromoperating activities may be insufficient to meet required payments;

 

•                  we may be unable topay or refinance indebtedness on our properties;

 

•                  increases ininterest rates increase our debt service obligations, expose us to risks ofrefinancing our existing debt, diminish our returns on development andredevelopment activities, reduce cash from operating activities, and hamper ourability to make distributions to shareholders;

 

•                  if we are unable tosecure refinancing of indebtedness on acceptable terms, we may be forced todispose of properties upon disadvantageous terms, which may cause losses andaffect our funds from operations; and

 

•                  if properties aremortgaged to secure payment of indebtedness and we are unable to meet payments,the mortgagee may foreclose upon the properties, resulting in a loss of incomeand a valuable asset to us.

 

**Because many of our competitorshave greater capital resources, we may be at a disadvantage with regardexploiting land development, property acquisition and tenant opportunities.**

 

**Based on total assets and annualrevenues, we are smaller than many of the numerous commercial developers, realestate companies and other owners of real estate that compete with us inseeking land for development, properties for acquisition and tenants forproperties. Many of these competitors may have greater capital and otherresources than us, and this fact could impair our ability to acquire propertiesand tenants in future.**

 

We may becomeliable for the costs of removal or remediation of certain environmentalhazardous or toxic substances under federal, state or local laws.

 

**Undervarious federal, state and local laws, ordinances and regulations, we maybecome liable for the cost of removal or remediation of certain hazardous ortoxic substances on or in our real property. Liability may be imposedregardless of whether we or the tenant knew of, or was responsible for, thepresence of such hazardous or toxic substances. The costs of any requiredremediation or removal of substances may be substantial, and our liability asto any property is generally not limited under those laws, ordinances andregulations. The liability could exceed the value of our property and/oraggregate assets. The presence of, or the failure to properly remediatesubstances when released may adversely affect our ability to sell the affectedreal estate or to borrow using the real estate as collateral.  While we have not been notified by anygovernmental authority of any non-compliance, liability or other with respectto any of the our portfolio properties that we believe would have a materialadverse effect our business, assets or results of operations, we cannot assurethat there are no potential environmental liabilities, that no environmentalliabilities may develop, that no prior owner created any material environmentalcondition not known to us, or that future uses or conditions, including,without limitation, changes in applicable environmental laws and regulations,will not result in liability to us.**

 

 

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**We mayincur significant costs complying with the Americans with Disabilities Act.**

 

**We must comply with Title III ofthe Americans with Disabilities Act. To comply with the ADA’s requirements, wemay be required to incur costs to remove structural, architectural orcommunication barriers to handicapped access and utilization in certain publicareas of our properties. Noncompliance could result injunctive relief,imposition of fines or an award of damages to private litigants.**

 

Theownership limitations on REITs create an anti-takeover effect.

 

Tomaintain our qualification as a REIT, not more than 50% in value of ouroutstanding shares may be owned, actually or constructively, by five or fewerindividuals. In addition, the Internal Revenue Code imposes certain otherlimitations on the ownership of the shares of a REIT. For the purpose ofpreserving our tax status as a REIT, our charter prohibits actual orconstructive ownership of more than 9.9% of the outstanding shares, either inthe aggregate or of any class, by any person, unless waived by the board oftrustees. The rules addressing constructive ownership are complex and may causeshares owned, actually or constructively, by a group of related individualsand/or entities to be deemed to be constructively owned by one individual orentity. As a result, the acquisition of less than 9.9% of the outstandingshares, either in the aggregate or of any class, by an individual or entitycould cause that individual or entity (or another individual or entity) toconstructively own more than 9.9% of the outstanding shares. This situationwould subject such shares to the beneficial ownership limitations. Actual orconstructive ownership of shares in excess of such limits would either causethe violative transfer or ownership to be void or cause such shares to be convertedto excess shares pursuant to our charter. Excess shares are common sharesautomatically transferred to a special trust to be maintained by us to theextent necessary to ensure that the purported transfer does not result incommon share ownership in violation of the beneficial ownership limitations. Apurported holder or transferee of common shares converted to excess shares isnot entitled to voting rights, except to the extent required by law, or to anydividends, distributions or other rights as a shareholder. Our charter containsprovisions that are designed to ensure that the purported transferee or otherpurported holder of excess shares may not receive in return for such a transferan amount that reflects any appreciation in the common shares for which theexcess shares were converted during the period that the excess shares wereoutstanding.

 

The ownership restrictions have the effect ofdeterring non-negotiated acquisitions of, and proxy fights for, our company bythird parties. Limiting the ownership of our shares may discourage a change ofcontrol and may also:

 

•                  deter tender offersfor our shares, which offers may be attractive to our shareholders,

 

•                  limit theopportunity for our shareholders to receive a premium for their shares thatmight otherwise exist if an investor attempted to assemble a block of shares inexcess of the 9.9% beneficial ownership limitation, or

 

•                  limit theopportunity for our shareholders to effect a change in control of our company.

 

We may notqualify as a REIT in the future causing us to be taxed at regular corporaterates and reducing the amount of cash available for distribution.

 

We believe that we have operated in a mannerthat permits us to qualify as a REIT under the Internal Revenue Code for eachtaxable year since our formation in 1993. Qualification as a REIT, however,involves the application of highly administrative interpretations. In addition,REIT qualification involves the determination of various factual matters andcircumstances not entirely within our control. For example, in order to qualifyas REIT, at least 95% of our gross income in any year must be derived fromqualifying sources, and we must distribute annually to shareholders 90% of ourREIT taxable income (excluding net capital gains). Therefore, although webelieve that we are organized and operating in a manner that permits us toremain qualified REIT, we cannot guarantee that we will be able to continue tooperate in such a manner. In addition, if are ever audited by the InternalRevenue Service with respect to any past year, the Internal Revenue Service maychallenge our qualification as a REIT for such year.

 

Similarly, new legislation, regulations,administrative interpretations or court decisions may change the tax laws withrespect to qualification as a REIT or the federal income tax consequences ofsuch qualification. We are not aware, however, of any currently pending taxlegislation that would adversely affect our ability to continue to operate as aREIT.

 

If we fail to qualify as a REIT, we will besubject to federal income tax on taxable income at regular corporate rates.Such increased tax liability in a given year could significantly reduce, orpossibly eliminate, the amount of cash we have available for investment ordistribution to shareholders for that year. In addition, we will also bedisqualified from treatment as a REIT for the next four taxable years, unlesswe are entitled to relief under other statutory provisions.

 

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If we do not qualify as a REIT, we will nolonger be required to make annual distributions to shareholders. To the extentthat we made distributions to shareholders in anticipation of our qualifying asa REIT, we might be required to borrow funds or to liquidate some of ourinvestments to pay the applicable tax. Our failure to qualify as a REIT would also constitute a default undercertain of our debt obligations and would significantly reduce the market valueof our shares.

 

Failureto make required distributions would subject us to tax.

 

Each year, we must pay to our shareholders atleast 90% of our taxable income, other than any net capital gain. To the extentthat we satisfy the distribution requirement, but distribute less than 100% ofour taxable income, we will be subject to federal corporate income tax on ourundistributed taxable income. In addition, we will be subject to a 4%nondeductible excise tax if the actual amount we pay out to our shareholders ina calendar year is less than a minimum amount specified under the federal taxlaws. We may be required to borrow money or sell assets to make distributionssufficient to enable us to pay out enough of our taxable income to satisfy thedistribution requirement and to avoid corporate income tax and the 4% tax in aparticular year.

 

Failureto have distributed earnings and profits of BTR Realty, Inc. in 1993 wouldcause us to fail to qualify as a REIT.

 

At the end of any taxable year, a REIT maynot have any accumulated earnings and profits, described generally for federalincome tax purposes as cumulative undistributed net income, from a non-REITcorporation. In connection with the merger of BTR Realty, Inc. into ourcompany, BTR Realty, Inc. made a corresponding special one-time distribution toits shareholders. However, the determination of accumulated earnings andprofits for federal income tax purposes is extremely complex. Should theInternal Revenue Service successfully assert that BTR Realty, Inc.’saccumulated earnings and profits were greater than the amount so distributed,we may fail to qualify as a REIT. Alternatively, the Internal Revenue Servicemay permit us to avoid losing our REIT status by paying a deficiency dividendto eliminate any remaining accumulated earnings and profits of BTR Realty, Inc.We may need to borrow money or sell assets to pay such a deficiency dividend.

 

Asale of assets acquired from BTR Realty, Inc. within ten years after ourformation will result in corporate income tax.

 

If we sell any asset that we acquired fromBTR Realty, Inc. within ten years after our formation in a taxable transaction,we will be taxed at the highest corporate rate on an amount equal to the lesserof (1) the amount of gain that we recognize at the time of the sale, or (2) theamount of gain that we would have recognized if we had sold the asset at thetime that we acquired the asset from BTR Realty, Inc. for its then fair marketvalue. In addition, the 10-year built-in gain tax period will end in 2003.

 

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