<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED December 31, 2001

                                       OR

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

          FOR THE TRANSITION PERIOD FROM             TO
                                         -----------    --------------

                                       0-11777
                COMMISSION FILE NUMBER --------

                          FIRST EQUITY PROPERTIES, INC.

             (Exact name of registrant as specified in its charter)

                     Nevada                                      95-6799846

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

         1800 Valley View Lane, Suite 100                           75234

     (Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code    214 750-5800

Securities registered pursuant to Section 12(b) of the Act:

        Title of each class           Name of each exchange on which registered
               None


           Securities registered pursuant to section 12(g) of the Act:
                     Common Stock, par value $0.01 per share

                                (Title of class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of 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. [ ]

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

         Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES [X] No [ ]

         As of March 22, 2002, registrant had 10,570,944 shares of common stock
issued and outstanding. Of the total shares outstanding, 2,642,736 shares were
held by other than those who may be deemed to be affiliated, but the aggregate
market value of such shares held by non-affiliates is not ascertainable since no
trading market presently exists for the shares of common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


<PAGE>


ITEM 1. BUSINESS.

         First Equity Properties, Inc. ("We" or "FEPI" or the "Company") was
incorporated by the filing of Articles of Incorporation in the State of Nevada
on December 19, 1996. Its fiscal year ends December 31 of each year.

         Prior to January 1, 1997, the Company's only business consisted of the
management and operation of three motel properties in the Spokane, Washington
area. Until June 30, 1998, the Company, through its own operations, was engaged
in the hospitality business (management and operation of three motel properties,
one of which was exchanged for a residential property and two of such properties
have been sold under a contract for deed). During the fiscal years ended
December 31, 1998 and 1999, the Company, through its subsidiaries was engaged in
property management (management of commercial real property, including retail
centers, office buildings, industrial properties and hotels), and real estate
brokerage (services in locating, leasing and purchasing real estate). Since
October 1999, the Company and its subsidiaries have conducted no substantial
business, but are available to engage in property management and real estate
brokerage activities. See the Notes to the Consolidated Financial Statements for
a break out of revenues, expenses and earnings contributions of each separate
line of business.

TRANSACTION OF SUCCESSION.

         FEPI is the successor-in-interest to Wespac Investors Trust III, a
California real estate investment trust ("WESPAC") originally established August
22, 1983 which had its shares of beneficial interest, no par value, registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934. Wespac was the
subject of two filings for protection under Chapter 11 of the United States
Bankruptcy Code, one filed April 13, 1988 (the "1988 Reorganization") which
resulted in a plan of reorganization approved and confirmed by the court on
March 29, 1989 with certain amendments, and which was closed by the court on
August 21, 1992 and a filing made January 27, 1994 in the case styled IN RE:
WESPAC INVESTORS TRUST III, Case No. 94-00228-K11, in the United States
Bankruptcy Court for the Eastern District of Washington (the "1994
Reorganization"). A plan of reorganization dated March 22, 1996 (as modified)
was confirmed by Order Confirming Plan of Reorganization dated May 15, 1996,
entered May 20, 1996, as amended by order entered October 29, 1996 approving
First Modification to Plan of Reorganization (the " Modified Plan"). Pursuant to
the Modified Plan, and shareholders' approval, Wespac was converted from a
California business trust into a Nevada corporation, coupled with a change of
the name of the resulting entity. Pursuant to such transaction, persons deemed
to be prior holders of shares of beneficial interest, no par value, of Wespac
became holders of FEPI Common Stock on a one-for-one exchange basis. On February
11, 1997, the Court entered its final decree which closed the 1994
Reorganization. See "Item 3. Legal Proceedings."


                                      -1-
<PAGE>


HOSPITALITY BUSINESS

         Prior to December 31, 1996, the Company's only business consisted of
ownership and operation of two Comfort Inn hotels and one Rodeway Inn hotel
(sold June 1, 1997 and foreclosed on by the Company in January 1998) located in
Spokane, Washington. The two Comfort Inn hotels are The Comfort Inn-Valley (a
76-room hotel located at N. 905 Sullivan Road, Spokane Valley, Washington) and
The Comfort Inn-North (a 96-room hotel located at N. 7111 Division Street,
Spokane, Washington). Such properties are collectively referred to as the
"Spokane Properties."

         During June 1998, FEPI entered into a contract for deed to sell the two
Comfort Inn hotels (Comfort Inn North and Comfort Inn Valley) to an unaffiliated
Washington corporation for a total of $4,000,000 with a small down payment and
an all inclusive wrap-around note which "wraps" certain existing underlying
indebtedness. As a part of the transaction, FEPI ceded the management of the
properties to the unaffiliated Washington corporation and it assumed the
underlying indebtedness due to US Bank. During March 2001, the underlying
indebtedness to U.S. Bank was paid in full through a refinancing of the
properties and the contract for deed satisfied; at that time, FEPI ceased to
hold any record title to the real property and received second lien notes for
the balances owed.

         Also during June, 1998, FEPI exchanged the Rodeway Inn hotel to an
unaffiliated party for a residential property in Couer d'Alene, Idaho which has
since been sold. Such Rodeway Inn had previously been sold on June 1, 1997 to a
corporation owned by a former director and officer of the Company. The Rodeway
Inn is a 90-room hotel located at W. 4301 Sunset Boulevard, Spokane, Washington.
See "Item 13. Certain Relationships and Related Transactions." During January
1998, the Company foreclosed on the Spokane Rodeway following a failure of
performance by the purchaser on the related note receivable. See the Notes to
the Consolidated Financial Statements.

         Such dispositions ended the Company's direct ownership in the
hospitality line of business.

PROPERTY MANAGEMENT

         Effective January 1, 1997, the Company acquired all of the issued and
outstanding Common Stock of Carmel Realty, Inc., a Texas Corporation ("Carmel"),
and an 81.6% limited partnership interest in Carmel Realty Services, Ltd., a
Texas limited partnership ("CRSL"). In 2001, the Company acquired another 17.4%
interest in CRSL for $4,225,879. The general partner of CRSL is Basic Capital
Management, Inc., a Nevada corporation ("BCM") which is the contractual advisor
to and for performs administrative services for three other publicly held
entities which are engaged in the real estate business. See also "Item 12.
Certain Relationships and Related Transactions." Carmel is


                                      -2-
<PAGE>


engaged in the management and direction of various portfolios of commercial real
property including retail centers, office buildings, industrial properties and
hotels. Carmel maintained the management responsibility for five hotels totaling
1,000 rooms and approximately 15,000,000 square feet of commercial real estate
through September 30, 1999. CRSL managed multi-family portfolios which included
over 32,000 multi-family units through seven third-party regional management
companies through September 30, 1999.

         Both Carmel and CRSL provided management services primarily to four
publicly-traded real estate entities throughout the continental United States
through September 30, 1999. Under such arrangements Carmel or CRSL received a
fee of 5% or less of the monthly gross rents collected on the properties under
Management. CRSL subcontracted with other entities for the provision of property
level services. All property management contracts pursuant to which Carmel and
CRSL provided management services to the four publicly-traded real estate
entities are subject to cancellation on 30 days' written notice. Carmel and CRSL
have not expended any significant sum during each of the last two fiscal years
on research and development activities. Effective October 1, 1999, the four
publicly traded real estate entities transferred management of substantially all
of their properties to another entity.

         The real estate business overall, including management of real estate,
is highly competitive and Carmel and CRSL compete with numerous entities engaged
in similar activities, some of which may have greater financial resources than
those of Carmel and/or CRSL. Management of Carmel and CRSL believe that success
against such competition is dependent upon the geographic location of the
properties, the performance of the property managers in areas such as marketing,
collections and the ability to control operating expenses, the amount of new
construction in the area and maintenance and appearance of each individual
property. Additional competitive factors with respect to commercial industrial
properties are the ease of access to the property, adequacy of related
facilities such as parking, and sensitivity to market conditions in setting rent
levels. With respect to multi-family residential units, competition is also
based upon the design and mix of the units and the ability to provide a
community atmosphere for tenants. Management of Carmel and CRSL also believe
that general economic circumstances and trends and new properties in the
vicinity of each of the properties managed by Carmel and CRSL are also
competitive factors.

         At March 22, 2002, Carmel and CRSL had no employees.


                                      -3-
<PAGE>

REAL ESTATE BROKERAGE

         Carmel also provides real estate brokerage services (on a nonexclusive
basis) to four publicly-traded real estate entities and a number of other
entities and individuals and receives brokerage commissions under varying
arrangements from a fixed amount to a sliding scale on a percentage basis. In
general, such services include assistance in locating, leasing or purchasing
real estate. Carmel receives fees equal to the lesser of (i) a percentage of the
cost of acquisition, inclusive of commissions, if any, paid to nonaffiliated
brokers, or (ii) the compensation customarily charged in arm's-length
transactions by others rendering similar property acquisition services as an
ongoing public activity in the same geographical location and for comparable
property. During the fourth quarter of 1999, the four publicly-traded real
estate entities transferred their brokerage operations to another entity.

ITEM 2. PROPERTIES.

         The Company's principal offices are located at 1800 Valley View Lane,
Suite 100, Dallas, Texas 75234. In the opinion of the Company's management, the
Company's offices are suitable and adequate for its present operations.

         Prior to December 31, 1996, the Company's only business consisted of
ownership and operation of two Comfort Inn hotels and one Rodeway Inn hotel
(sold effective June 1, 1997 and foreclosed upon during January 1998) located in
Spokane, Washington, all of which were disposed of during 1998.

ITEM 3. LEGAL PROCEEDINGS.

         During January 1988, four of the elected Trustees of Wespac resigned
pursuant to an agreement with U.S. Real Estate Advisors, Inc. ("USREA"), a
privately held California corporation, and four new trustees were elected, all
of whom were officers of USREA. Also, during January 1988 Wespac entered into
certain financing arrangements with USREA and on April 13, 1988 the Trustees who
were also officers of USREA caused Wespac to file for protection under Chapter
11 of the United States Bankruptcy Code in the United States Bankruptcy Court
for the Central District of California under case No. 88-02222-JR which resulted
in a plan of reorganization approved and confirmed by the Court on March 29,
1989 with certain amendments. The 1988 Reorganization was closed by the
Bankruptcy Court on August 21, 1992.

         Wespac acted as a Debtor-in-Possession in the 1988 reorganization which
concluded in the Third Amended Plan of Reorganization dated January 24, 1989
(the "1989 Plan"), confirmation of which served to re-vest all assets of the
Estate in Wespac, free and clear of all liabilities except those payable under
the 1989 Plan. As provided for by that 1989 Plan, USREA exercised its warrants
by purportedly


                                      -4-
<PAGE>


forgiving $715,586.50 which Wespac allegedly owed under an Amended Financing
Agreement. Wespac then liquidated all real estate assets except a shopping
center in Ogden, Utah (later sold) and three hotels located in Spokane,
Washington consisting of The Rodeway Inn-Spokane House, The Comfort Inn Valley,
and The Comfort Inn North. The 1988 Reorganization was closed by the Court on
August 21, 1992.

         On January 27, 1994, Wespac again instituted a Chapter 11 bankruptcy
proceeding styled IN RE: WESPAC INVESTORS TRUST III, Case No. 94-00228-K11, in
the United States Bankruptcy Court for the Eastern District of Washington, to
seek a restructuring of the assets and liabilities of Wespac, in response to
certain litigation that resulted in at least one judgment. A plan of
reorganization dated March 22, 1996 (as modified) was confirmed by Order
Confirming Plan of Reorganization dated May 15, 1996, entered May 20, 1996 (the
"Confirmed Plan"). During the process of consummation of the Confirmed Plan, and
on the eve of issuance of the final decree with respect to the Confirmed Plan,
and emergence from the 1994 Reorganization, the Board of Trustees of Wespac by
motion filed October 29, 1996 sought a modification of the Confirmed Plan which
resulted in the entry of an Order from the Court approving the First
Modification to Plan of Reorganization (as modified) (the "Modification").

         Pursuant to the Confirmed Plan, Class 6 consisted of the Allowed
Interest of former public shareholders in "Old Common Stock," all of which was
canceled on the Effective Date of the Confirmed Plan (June 15, 1996) with one
share of beneficial interest of Wespac deemed to be exchanged for each share of
Allowed Interest, other than Greenbriar Corporation who were then to hold in the
aggregate 25% of the New Shares of Beneficial Interest. After objections to
proofs of interest demonstrating an interest in another entity, it was
determined that the Allowed Interest of such holders were equivalent to
2,642,236 Shares of Beneficial Interest.

         Also, pursuant to the Confirmed Plan, upon the Effective Date,
Greenbriar Corporation reduced its claim to the so-called "USREA Shares"
acquired from Zimco to equal 25% of the Allowed Interest (a total of 2,642,736
Shares of Beneficial Interest) and Nevada Sea Investments, Inc. ("Nevada Sea")
was deemed to exercise an option to receive all such Shares of Beneficial
Interest. In addition, in the compromise of the Wespac Creditors' Claim,
Greenbriar Corporation was to receive, pursuant to the Confirmed Plan, 50% of
the issued and outstanding Shares of Beneficial Interest, but prior to the
Effective Date of the Confirmed Plan, by agreement, Greenbriar Corporation
entered into an arrangement pursuant to which Greenbriar Corporation conveyed to
Nevada Sea an undivided 50% in and to the creditors' claim resulting in an
undivided 25% out of an aggregate of 50% of New Shares of Beneficial Interest of
Wespac to be issued, on a "when issued" basis, to Nevada Sea in consideration of
cancellation of certain indebtedness. As a result, prior to the implementation
of the procedures set forth in the Modification and as of November 29, 1996,


                                      -5-
<PAGE>


there were deemed to be 10,570,944 Shares of Beneficial Interest, no par value
of Wespac, available for issuance to Shareholders, of which 2,642,736 Shares
were issuable to public shareholders (an aggregate of 25% of such Shares),
2,642,736 Shares were issuable to Greenbriar Corporation (an aggregate of 25% of
such Shares) and 5,285,472 Shares of Beneficial Interest were issuable to Nevada
Sea (an aggregate of 50% of such Shares).

         Confirmation of the Confirmed Plan (as modified) served to re-vest all
assets of the estate in Wespac free and clear of all liabilities except those
payable pursuant to the Confirmed Plan. Under the Confirmed Plan, Wespac
retained the Spokane Properties and all allowed claims have been provided for or
paid. The effect of the Modification was to distribute to the shareholders of
Wespac a proposal to convert Wespac from a California business trust into a
Nevada corporation through the "Incorporation Procedure" described therein,
coupled with a change of the name of Wespac. Such proposal was distributed to
the shareholders of Wespac who, by November 29, 1996, approved the proposal by a
vote in excess of 84% in favor. The Incorporation Procedure was implemented.
Following completion of the Incorporation Procedure Wespac submitted to the
Court a Certificate of Substantial Consummation and requested the entry of a
Final Decree on January 24, 1997 to close the 1994 Reorganization. The Final
Decree was entered by the Court February 11, 1997.

         The Company's subsidiaries are involved in certain legal actions
arising in the ordinary course of business. Management of the Company believes
that such litigation and claims, individually and in the aggregate, will be
resolved without material effect upon the Company's financial position or
results of operations.

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

         During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of security holders of the Company.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         FEPI's shares of Common Stock, par value $0.01 per share, are available
for trading in the over-the-counter market, but to the knowledge of management
of FEPI, no shares have traded since their issuance. The CUSIP Number is
320097-10-8. The shares of Beneficial Interest of WESPAC traded through the
first quarter of 1988 and, at one time, were quoted on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"). Since cessation of
trading on NASDAQ, there has been no established, independent trading market for
the shares of Beneficial Interest of WESPAC or the shares of Common Stock of
FEPI as the successor.


                                      -6-
<PAGE>


         No cash dividends have been declared or paid during the period from
January 1, 1994 to the present on either the shares of Beneficial Interest of
the Trust or the shares of Common Stock of FEPI as the successor.

         As of March 22, 2002, the 10,570,944 shares of Common Stock of FEPI
issued and outstanding were held by approximately 2,400 holders of record.

ITEM 6. SELECTED FINANCIAL DATA.

         The selected consolidated historical financial data presented below for
the five fiscal years ended December 31, 2001 and the period from June 15, 1996
(fresh start) through December 31, 1996 are derived from the audited
consolidated financial statements and reflect (i) the adoption of fresh start
reporting in accordance with AICPA Statement of Position 90-7, (ii) confirmation
and consummation of the Modified Plan, (iii) the transaction of succession, and
(iv) the acquisition by the Company of Carmel Realty, Inc. and an 81.6% limited
partnership interest in Carmel Realty Services, Ltd. In 2001, the Company
acquired another 17.4% interest in CRSL for $4,225,879. The following data
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto included elsewhere herein and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."


<Table>
<Caption>
                                                                     Year Ended                                      Period June
                                                                    December 31,                                     15, 1996 to
CONSOLIDATED STATEMENT OF             --------------------------------------------------------------------------      December
OPERATIONS DATA:                          2001           2000           1999            1998           1997           31, 1996
                                      -----------   ------------    ------------    ------------    ------------    ------------
<S>                                   <C>           <C>             <C>             <C>             <C>             <C>
Revenues                              $   153,614   $    285,733    $ 19,638,650    $ 35,563,209    $ 33,370,720    $  1,475,831
Operating Costs                                --             --      15,234,044      16,300,214       8,381,325       1,484,023
General and Administrative                121,420         70,554       1,655,537       1,472,368       1,658,681         101,554
Loss on sale of assets                         --             --         (97,128)     (1,152,206)             --              --
Interest Expense                           29,107        326,471         448,477         486,730         399,368         209,946
Earnings (loss) before income taxes         3,087       (111,292)      2,203,464      16,151,691      22,931,346        (319,692)
Income tax expense (current)                   --             --         200,906         (93,623)       (596,215)             --
Income tax (expense) benefit
(deferred)                                     --             --              --      (5,300,000)      5,300,000              --
                                      -----------   ------------    ------------    ------------    ------------    ------------

Net Earnings (loss)                   $     3,087   $   (111,292)   $  2,002,558    $ 10,758,068    $ 27,635,131    $   (319,692)
                                      -----------   ------------    ------------    ------------    ------------    ------------
Net Earnings (loss) per share         $      0.00   $      (0.01)   $       0.19    $       1.02    $       2.61    $      (0.03)
                                      -----------   ------------    ------------    ------------    ------------    ------------
Weighted Average Shares
Outstanding                            10,570,944     10,570,944      10,570,944      10,570,944      10,570,944      10,570,944
</Table>



                                      -7-
<PAGE>


<Table>
<Caption>
                                                                     Year Ended                                      Period June
                                                                    December 31,                                     15, 1996 to
CONSOLIDATED BALANCE                  --------------------------------------------------------------------------      December
SHEET DATA:                               2001           2000           1999            1998           1997           31, 1996
                                      -----------   ------------    ------------    ------------    ------------    ------------
<S>                                   <C>           <C>             <C>             <C>             <C>             <C>
Total Assets                          $47,282,650   $ 55,259,416    $ 58,970,877    $ 51,698,791    $ 74,148,980    $  5,822,865
Short Term Debt                         9,171,201      7,624,105      11,224,274       4,336,145       3,951,906         879,761
Long Term Debt                                 --             --              --       2,776,336       2,830,913       3,875,538
Stockholders' Equity                   37,563,951     37,560,864      37,672,156      35,669,598      61,202,697       1,067,566
Minority Interest in Subsidiary           547,498     10,074,447      10,074,447       8,916,712       6,163,464              --
</Table>


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

         The following discussion and analysis provide information which
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. The discussion should
be read in conjunction with the financial statements and notes thereto.


YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2001, the Company had total assets of $47,282,650. Of
that amount $8,985 was held in cash. The Company had no long-term debt at
December 31, 2001.

RESULTS OF OPERATIONS

         Net earnings was $3,087 in 2001 compared to prior year loss of
$111,292. The improvement resulted from lower interest expense due to mortgage
loan payoffs.


ENVIRONMENTAL MATTERS

         Under various federal, state and local environmental laws, ordinances
and regulations, the Company may be potentially liable for removal or
remediation costs, as well as certain other potential costs, relating to
hazardous or toxic substances (including governmental fines and injuries to
persons and property) where any property-level manager in the employee of a
subsidiary of the Company may have arranged for the removal, disposal or
treatment of hazardous or toxic substances. Management is not aware of any
environmental liability relating to the above matters that would have a material
adverse effect on the Company's business, assets or results of operations.


                                      -8-
<PAGE>


INFLATION

         The effects of inflation on the Company's operations are not
quantifiable. To the extent that inflation affects interest rates, the Company's
earnings from any short-term investments and the cost of new financings as well
as the cost of variable rate financing will be affected.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company is exposed to market risk from changes in interest rates
which may adversely affect its financial position, results of operations and
cash flows. In seeking to minimize the risks from interest rate fluctuations,
the Company manages exposures through its regular operating activities. The
Company does not use financial instruments for trading or other speculative
purposes and is not a party to any leveraged financial instruments.

         Based upon the Company's market risk sensitive instruments (including
variable rate debt) outstanding at December 31, 2001, the Company has determined
that there was no material market risk exposure to the Company's financial
position, results of operations or cash flows as of such date.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The Financial Statements, together with an index thereto, are attached
hereto following the signature page to this report.

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

         Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

DIRECTORS

         The business affairs of the Company are managed by, or under the
direction of, the Board of Directors. The Board of Directors is responsible for
the general investment policies of the Company and for such general supervision
of the business of the Company conducted by its officers, agents, employees,
advisors or independent contractors as may be necessary to insure that such
business conforms to policies adopted by the Board of Directors. Pursuant to
Article III, Section 3.1, of the Bylaws of the Company, there shall not be less
than three (3) nor more than fifteen (15) directors of the Company. The number
of directors shall be determined from time to time by resolution of the
directors and the last fixing of that number of directors was at three (3) at
the time of creation of the Company. The initial three


                                      -9-
<PAGE>


directors were the three members of the Board of Trustees of the Trust. The term
of office of each director is one year and until the election and qualification
of his or her successor. Directors may succeed themselves in office and are to
be elected at the annual meeting of stockholders or appointed by the Company's
incumbent Board of Directors.

         The current directors of the Company (both of whom are also executive
officers) are listed below, together with their ages, all positions and offices
with the Company, their principal occupation, business experience and
directorship with other companies during the last five years or more. Each of
the following individuals was named as a director within the last twelve months
and was elected by the Board of Directors to fill a vacancy created by a prior
resignation. None of the Directors originally named in the Articles of
Incorporation of the Company filed December 19, 1996 are currently Directors. A
vacancy existed on the Board of Directors following the resignation effective
March 1, 1997 of Georgie Liebelt. See "Item 13. Certain Relationships and
Related Transactions." On April 5, 2001, F. Terry Shumate, a Director since
inception, resigned creating a second vacancy. On February 1, 2002, acting in
his capacity as the sole remaining Director, Karl Blaha, then President and a
Director, elected Ronald E. Kimbrough to fill the vacancy created by the
resignation of Georgie Liebelt and elected Ken Joines to fill the vacancy
created by the resignation of F. Terry Shumate. Such action filled all three
positions on the Board of Directors with Messrs. Kimbrough, Joines and Blaha.
Kimbrough was also elected Vice President and Treasurer, and Joines was elected
Secretary. On February 7, 2002, Karl L. Blaha resigned as a member of the Board
of Directors and President of the Company. A vacancy exists on the Board of
Directors following the resignation effective February 7, 2002 of Karl Blaha.


<Table>
<Caption>
      NAME                       AGE         POSITION WITH THE COMPANY
<S>                             <C>         <C>
Ronald E. Kimbrough              49         Vice President and Treasurer
Ken Joines                       34         Secretary
</Table>

         Ronald E. Kimbrough is acting Principal Executive Officer (since
February 2002), and Executive Vice President and Chief Financial Officer (since
January 2002) of American Realty Investors, Inc. ("ARL"), a New York Stock
Exchange listed entity engaged in real estate; Executive Vice President and
Chief Financial Officer (since January 2002) of Basic Capital Management, Inc.
("BCM"), a contractual advisor to many entities engaged in the real estate
business, Income Opportunity Realty Investors, Inc. ("IORI"), a publicly-held
REIT, Transcontinental Realty Investors, Inc. ("TCI"), a publicly-held company;
Controller (September 2001 - January 2002) of BCM; Vice President and Treasurer
(January 1998 - September 2001) of Syntek West, Inc., a real estate company, and
One Realco Corporation ("One Realco") a real estate company.


                                      -10-
<PAGE>


         Ken Joines is Vice President and Director (since April 2001) of Syntek
West, Inc., a real estate company based in Dallas, Texas; for more than five
years prior thereto through March 2001, Mr. Joines was employed by Whitson
Management Group, a fee-only financial planning and business consulting firm
based in Phoenix, Arizona, in various financial advisory capacities, the last of
which was as Vice President and Chief Financial Officer.

         There are no family relationships among the directors or executive
officers of the Company.

MEETINGS AND COMMITTEES OF DIRECTORS

         The Company's Board of Directors acted upon five matters by unanimous
written consent since December 19, 1996 and has held no formal meetings. The
Board of Directors has no standing audit, nominating or compensation committee.

COMPLIANCE WITH SECTION 16(a) OF THE 1934 ACT.

         Under the securities laws of the United States, the Company's
directors, executive officers, and any person holding more than 10% of the
Company's shares of common stock are required to report their ownership of the
Company's shares and any changes in ownership to the Commission. Specific due
dates for these reports have been established and the Company is required to
report any failure to file by the date. All the filing requirements were
satisfied by the Company's directors, executive officers and 10% holders during
1996. In making these statements, the Company has relied on the written
representations of its directors and executive officers and its 10% holders and
copies of the reports that they filed with the Commission, both with respect to
the Trust, as a predecessor to the Company, and the Company.

ITEM 11. EXECUTIVE COMPENSATION.

         Neither the executive officers nor directors received salaries or cash
compensation from the Company or its predecessor, Wespac, for acting in such
capacity during the two years ended December 31, 2001, in an amount required to
be disclosed under this item. The only director or executive officer who
received salaried compensation from the Company or its predecessor, Wespac, was
Georgie Liebelt whose compensation until her resignation effective March 1, 1997
was $59,000 per year plus a $6,000 per year car allowance. The Company has no
retirement, annuity or pension plan covering its directors or executive
officers.



                                      -11-
<PAGE>


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

         The Company's voting securities consist of the shares of common stock,
par value $0.01 per share. As of March 15, 2001, according to the stock transfer
records of the Company and other information available to the Company, the
following persons were known to be the beneficial owners of more than five
percent (5%) of the outstanding shares of common stock of the Company:


<Table>
<Caption>
                                                                 AMOUNT AND
                                                                 NATURE OF
                                                                 BENEFICIAL        PERCENT OF
 TITLE OF CLASS      NAME AND ADDRESS OF BENEFICIAL OWNER        OWNERSHIP            CLASS
<S>                  <C>                                      <C>                  <C>
Shares of Common         Nevada Sea Investments, Inc.         5,285,472 shares          50%
Stock, par value         1800 Valley View Lane
$0.01 per share          Suite 100
                         Dallas, Texas 75234

Shares of Common         Greenbriar Corporation               2,642,736 shares          25%
Stock, par value         4265 Kellway Circle
$0.01 per share          Dallas, Texas 75248
</Table>

---------
(1) Based on 10,570,944 shares of common stock outstanding on March 22, 2002.

         As of March 15, 2002, according to the stock transfer records of the
Company and other information available to the Company, each of the directors
and executive officers of the Company, and all present executive officers and
directors as a group, beneficially own the following shares:


<Table>
<Caption>
                                                                 AMOUNT AND
                                                                 NATURE OF
                                                                 BENEFICIAL        PERCENT OF
 TITLE OF CLASS      NAME AND ADDRESS OF BENEFICIAL OWNER        OWNERSHIP          CLASS(a)
<S>                  <C>                                      <C>                  <C>
Shares of Common         Ronald E. Kimbrough                       none                none
Stock, par value         1800 Valley View Lane, Suite 100
$0.01 per share          Dallas, Texas 75234

Shares of Common         Ken Joines                                none                none
Stock, par value         1800 Valley View Lane, Suite 100
$0.01 per share          Dallas, Texas 75234

Shares of Common         All officers and directors as a group     none                none
Stock, par value
$0.01 per share
</Table>

---------
(a) Based on 10,570,944 shares of common stock outstanding on March 22, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         On June 25, 1996, in connection with the Confirmed Plan, the Company
received an advance of funds from Nevada Sea in the amount of $250,000 unsecured
and bearing interest at the rate of 8% per annum. Subsequent to the initial
advance, Nevada Sea and/or its affiliates


                                      -12-
<PAGE>


have advanced an additional $2,391,552 to the Company under the same terms and
conditions. During 1999, the Company repaid all amounts advanced together with
interest at the rate of 8% per annum.

         Effective January 1, 1997, the Company acquired from Syntek West, Inc.,
a Nevada corporation, all of the issued and outstanding common stock of Carmel
Realty, Inc., a Texas corporation ("Carmel") and an 81.6% limited partnership
interest in Carmel Realty Services, Ltd., a Texas limited partnership ("CRSL")
for an aggregate purchase price of $22,500,000, which was paid by the issuance
of 32,500 shares of Series A 8% Cumulative Preferred Stock with a liquidation
value of $1,000 per share (the "Series A Preferred Stock"). The Series A
Preferred Stock has a right to cumulative cash dividends of $80 per share per
annum, payment of $1,000 per share in the event of dissolution, liquidation of
winding up of the Company before any distribution is made to the holders of
Common Stock, optional redemption at any time at a price of $1,000 per share,
plus cumulative dividends, no right to conversion into any other securities of
the Company, and no voting rights except as may be required by law. In 2001, the
Company acquired another 17.4% interest in CRSL for $4,225,879. See "Item 1.
Business," for a brief description of businesses of Carmel and CRSL and see the
Notes to the Financial Statements. During 1998, the Company redeemed all of its
$32,500,000 preferred stock in exchange for reduction of receivables from Syntek
West, Inc.

         Effective January 1, 1997 the Company contracted with Regis Management
Corporation, a subsidiary of Carmel, to manage the day-to-day operations of the
Spokane Properties for 5% of the gross revenues from the Spokane Properties.
Such management arrangement ceased at the time of disposition of the Spokane
Properties during June 1998.

         Effective June 1, 1997, the Company sold a 90-room Roadway Inn located
at W. 4301 Sunset Boulevard, Spokane, Washington to Georgie Liebelt. At the time
of the sale the Company paid off the underlying debt secured by the property
sold. Ms. Liebelt was appointed a Trustee of Wespac in January 1994 and served
in that capacity until implementation of the Incorporation Procedure. She was an
initial director of the Company and Regional Director for the Company
responsible for all operations involving the hotel properties located in
Spokane, Washington. Ms. Liebelt resigned as a Director effective March 1, 1997.
The purchase price for the Roadway Inn was $1,475,000 paid by the delivery of a
promissory note from Spokane House, Inc. (a Washington corporation wholly owned
by Georgie Liebelt) secured by a Deed of Trust covering the property and a
security interest on all related personal property. Such note bore interest at
5% per annum for the period from June 1, 1997 to June 1, 1998 and was to
increase by 1% per annum until it reached 9% for the period from June 1, 2001 to
July 10, 2002. At the time of maturity of the Note, Spokane House, Inc. was
obligated to pay the lesser of (i) the total of the unpaid principal and
interest due on the note, or (ii) the appraised value of the property as of June
1, 2002. In addition, the Company loaned to Spokane House, Inc. $160,000 to fund
needed renovations on the


                                      -13-
<PAGE>


property. Commencing March 1, 1997, Spokane House, Inc. became the operator of
the property, retaining all income and paying all expenses relating to the
operation of the property. In January 1998 the Company foreclosed on the
property following a failure of performance on the promissory note and wrote off
the $160,000 loan. The Company exchanged the property in June 1998 for a
residential property in Couer dAlene, Idaho (since sold). See also the Notes to
the Consolidated Financial Statements.

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

Financial Statements. The following documents are filed as part of this report:


<Table>
<Caption>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
1. Consolidated Financial Statements.

Independent auditor's report                                              F-1

Consolidated Balance Sheets as of December 31, 2001 and 2000              F-2

Consolidated Statements of Operations for the three years
ended December 31, 2001                                                   F-3

Consolidated Statements of Changes in Shareholders' Equity
for the three years ended December 31, 2001                               F-4

Consolidated Statements of Cash Flows for the three years
ended December 31, 2001                                                   F-5

Notes to Consolidated Financial Statements                                F-6

2. Financial Statement Schedules.
</Table>

         All other schedules and financial statements are omitted because they
         are not applicable or the required information is shown in the
         financial statements or notes thereto.

(a) Reports on Form 8-K. During the last quarter of the period covered by this
report, no reports on Form 8-K were filed.

(b) Exhibits. The following documents are filed herewith as exhibits or
incorporated by the references indicated below:


<Table>
<Caption>
       EXHIBIT
     DESIGNATION                   DESCRIPTION OF EXHIBIT
     -----------                   ----------------------
<S>               <C>
         2.1      Plan of Reorganization (as modified) dated March 22, 1996
                  (incorporation by reference is made by Exhibit 2.1 to Form 8-K
                  of First Equity Properties, Inc. for event reported June 19,
                  1996).
</Table>


                                      -14-
<PAGE>


<Table>
<Caption>
       EXHIBIT
     DESIGNATION                   DESCRIPTION OF EXHIBIT
     -----------                   ----------------------
<S>               <C>

         2.2      First Amended Disclosure Statement (as modified) dated March
                  22, 1996 (incorporation by reference is made to Exhibit 2.2 to
                  Form 8-K of First Equity Properties, Inc. for event reported
                  June 19, 1996).

         2.3      Order Confirming Plan of Reorganization dated May 15, 1996
                  entered May 20, 1996 (incorporation by reference is made to
                  Exhibit 2.3 to Form 8-K of First Equity Properties, Inc. for
                  event reported June 19, 1996).

         2.4      First Modification to Plan of Reorganization (as modified)
                  dated October 29, 1996 (incorporation by reference is made to
                  Exhibit 2.4 to Form 8-K of First Equity Properties, Inc. for
                  event reported June 19, 1996).

         2.5      Ex parte Order approving modification to Plan of
                  Reorganization (as modified) entered October 29, 1996
                  (incorporation by reference is made to Exhibit 2.5 to Form 8-K
                  of First Equity Properties, Inc. for event reported June 19,
                  1996).

         2.6      Certificate of Substantial Consummation dated January 21, 1997
                  (incorporation by reference is made to Exhibit 2.6 to Form 8-K
                  of First Equity Properties, Inc. for event reported June 19,
                  1996).

         2.7      Final Decree issued by the Court on February 11, 1997
                  (incorporation by reference is made to Exhibit 2.7 to Form 8-K
                  of First Equity Properties, Inc. for event reported June 19,
                  1996).

         3.1      Articles of Incorporation of Wespac Property Corporation as
                  filed with and endorsed by the Secretary of State of
                  California on December 16, 1996 (incorporation by reference is
                  made to Exhibit 3.1 to Form 8-K of First Equity Properties,
                  Inc. for event reported June 19, 1996).

         3.2      Articles of Incorporation of First Equity Properties, Inc.
                  filed with and approved by the Secretary of State of Nevada on
                  December 19, 1996 (incorporation by reference is made to
                  Exhibit 3.2 to Form 8-K of First Equity Properties, Inc. for
                  event reported June 19, 1996).
</Table>


                                      -15-
<PAGE>


<Table>
<Caption>
       EXHIBIT
     DESIGNATION                   DESCRIPTION OF EXHIBIT
     -----------                   ----------------------
<S>               <C>
         3.3      Bylaws of First Equity Properties, Inc. as adopted December
                  20, 1996 (incorporation by reference is made to Exhibit 3.3 to
                  Form 8-K of First Equity Properties, Inc. for event reported
                  June 19, 1996).

         3.4      Agreement and Plan of Merger of Wespac Property Corporation
                  and First Equity Properties, Inc. dated December 23, 1996
                  (incorporation by reference is made to Exhibit 3.4 to Form 8-K
                  of First Equity Properties, Inc. for event reported June 19,
                  1996).

         3.5      Articles of Merger of Wespac Property Corporation into First
                  Equity Properties, Inc. as filed with and approved with the
                  Secretary of State in Nevada December 24, 1996 (incorporation
                  by reference is made to Exhibit 3.5 to Form 8-K of First
                  Equity Properties, Inc. for event reported June 19, 1996).

         3.6      Certificate of Designation of Preferences and Relative
                  Participating or Optional of Other Special Rights and
                  Qualifications, Limitations or Restrictions thereof of the
                  Series A 8% Cumulative Preferred Stock (incorporation by
                  reference is made to Exhibit 3.6 to Form 10-KSB of First
                  Equity Properties, Inc. for the fiscal year ended December 31,
                  1996.)

         21*      Subsidiaries of the Registrant

</Table>

---------
* filed herewith



                                      -16-
<PAGE>


                                   SIGNATURES


         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has caused this report to be signed by the undersigned, thereunto
duly authorized.

                                            FIRST EQUITY PROPERTIES, INC.

Dated: March 25, 2002

                                            By /s/ RONALD E. KIMBROUGH
                                               ---------------------------------
                                               Ronald E. Kimbrough, Director,
                                               Vice President and Treasurer



         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacity and on
the date indicated.


/s/ RONALD E. KIMBROUGH  Director, Vice                      March 25, 2002
-----------------------  President and Treasurer
Ronald E. Kimbrough      (Principal Executive
                         and Financial and
                         Accounting Officer)




/s/ KEN JOINES           Director and Secretary              March 25, 2002
------------------
Ken Joines



                                      -17-
<PAGE>


                          INDEX TO FINANCIAL STATEMENTS


<Table>
<Caption>
                                                                                      Page
                                                                                      ----
<S>                                                                                   <C>
INDEPENDENT AUDITOR'S REPORT                                                          F-1

CONSOLIDATED FINANCIAL STATEMENTS

     Balance sheets as of December 31, 2001 and 2000                                  F-2

     Statements of operations for the years ended December 31, 2001, 2000 and 1999    F-3

     Statements of changes in shareholders' equity for the years ended
       December 31, 2001, 2000 and 1999                                               F-4

     Statements of cash flows for the years ended December 31, 2001, 2000 and 1999    F-5

     Notes to financial statements                                                    F-6
</Table>


All other schedules and financial statements are omitted because they are not
applicable or the required information is shown in the financial statements or
notes thereto.


<PAGE>


                          INDEPENDENT AUDITOR'S REPORT


Board of Directors
First Equity Properties, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of First Equity
Properties, Inc. and subsidiaries as of December 31, 2001 and 2000 and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the years ended December 31, 2001, 2000 and 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of First
Equity Properties, Inc. and subsidiaries as of December 31, 2001 and 2000 and
the results of their operations and their cash flows for the years ended
December 31, 2001, 2000 and 1999, in conformity with U.S. generally accepted
accounting principles.



March 25, 2002
Plano, Texas


                                      F-1
<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                  December 31,


<Table>
<Caption>
                          ASSETS
                                                               2001          2000
                                                           -----------   -----------
<S>                                                        <C>           <C>
Cash and cash equivalents                                  $     8,985   $    44,679
Accounts receivable -- affiliate                               851,946       966,359
Investments                                                 46,421,719    51,137,790
Notes receivable                                                    --     3,110,588
                                                           -----------   -----------

                                                           $47,282,650   $55,259,416
                                                           ===========   ===========


             LIABILITIES AND SHAREHOLDERS' EQUITY

Notes payable                                              $        --   $ 2,048,559
Accounts payable -- trade                                    5,548,224     5,548,224
Accounts payable -- affiliate                                3,622,977        27,322
                                                           -----------   -----------

         Total liabilities                                   9,171,201     7,624,105

Minority interest in subsidiary                                547,498    10,074,447

Shareholders' equity
  Preferred stock, $.01 par value; 4,960,000 shares
     authorized; none issued or outstanding                         --            --
  Common stock, $0.01 par, 40,000,000 shares authorized,
    10,570,944 shares issued and outstanding                   105,710       105,710
  Capital in excess of par value                             1,281,548     1,281,548
  Retained earnings                                         36,176,693    36,173,606
                                                           -----------   -----------

         Total shareholders' equity                         37,563,951    37,560,864
                                                           -----------   -----------

                                                           $47,282,650   $55,259,416
                                                           ===========   ===========
</Table>


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

                                       F-2

<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the Years Ended December 31, 2001, 2000 and 1999

<Table>
<Caption>
                                          2001            2000             1999
                                      ------------    ------------    ------------
<S>                                   <C>             <C>             <C>
Revenue
   Commissions                        $         --    $         --    $ 10,061,286
   Management fees                         104,591              --       5,431,460
   Consulting fees                              --              --       2,748,452
   Other                                        --           1,566       1,093,872
   Interest                                 49,023         284,167         303,580
                                      ------------    ------------    ------------

                                           153,614         285,733      19,638,650
Operating expenses
   Consulting fees                              --              --       5,308,225
   Salaries and wages                           --              --       4,361,715
   Goodwill amortization                        --              --       2,819,995
   General and administrative                9,669          24,241       1,655,537
   Minority interest in earnings
     of subsidiary                              --              --       1,157,732
   Insurance and taxes                          --              --         894,669
   Legal and accounting                     34,951          46,313         307,313
   Other operating expenses                     --              --         201,020
   Depreciation and amortization                --              --         100,729
   Telephone and utilities                      --              --          56,998
   Repairs and maintenance                      --              --          20,238
   Bad debt expense                         76,800              --              --
   Advertising and promotion                    --              --           5,410
                                      ------------    ------------    ------------

         Total operating expenses          121,420          70,554      16,889,581
                                      ------------    ------------    ------------

Earnings from operations                    32,194         215,179       2,749,069

Other expenses
     Interest expense                      (29,107)       (326,471)       (448,477)
                                      ------------    ------------    ------------

Earnings (loss) before income taxes
     and loss on sale of assets              3,087        (111,292)      2,300,592

Loss on sale of assets                          --              --         (97,128)
                                      ------------    ------------    ------------

Earnings (loss) before income taxes          3,087        (111,292)      2,203,464

Income tax benefit (expense)
     Current                                    --              --        (200,906)
     Deferred                                   --              --              --
                                      ------------    ------------    ------------
                                                --              --        (200,906)
                                      ------------    ------------    ------------

         NET EARNINGS (LOSS)          $      3,087    $   (111,292)   $  2,002,558
                                      ============    ============    ============

Earnings (loss) per share             $       0.00    $       (.01)   $        .19
                                      ============    ============    ============

Weighted average shares outstanding     10,570,944      10,570,944      10,570,944
                                      ============    ============    ============
</Table>


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

                                       F-3

<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
              For the Years Ended December 31, 2001, 2000 and 1999



<Table>
<Caption>
                                       Common Stock       Preferred Stock    Capital      Retained
                                  ---------------------   ---------------   in excess     earnings        Total
                                    Shares      Amount    Shares   Amount     of par      (deficit)       equity
                                  ----------   --------   ------   ------   ----------   -----------    -----------
<S>                               <C>           <C>       <C>      <C>      <C>          <C>            <C>
Balances at January 1, 1999       10,570,944    105,710       --       --    1,281,548    34,282,340     35,669,598
Net earnings                              --         --       --       --           --     2,002,558      2,002,558
                                  ----------   --------   ------   ------   ----------   -----------    -----------
Balances at December 31, 1999     10,570,944    105,710       --       --    1,281,548    36,284,898     37,672,156
Net loss                                  --         --       --       --           --      (111,292)      (111,292)
                                  ----------   --------   ------   ------   ----------   -----------    -----------
Balances at December 31, 2000     10,570,944   $105,710       --       --   $1,281,548   $36,173,606    $37,560,864
Net earnings                              --         --       --       --           --         3,087          3,087
                                  ----------   --------   ------   ------   ----------   -----------    -----------
Balances at December 31, 2001     10,570,944   $105,710       --       --   $1,281,548   $36,176,693    $37,563,951
                                  ==========   ========   ======   ======   ==========   ===========    ===========
</Table>


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

                                       F-4

<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the Year Ended December 31, 2001, 2000 and 1999

<Table>
<Caption>
                                                            2001            2000             1999
                                                        ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net earnings (loss)                                    $      3,087    $   (111,292)   $  2,002,558
   Adjustments to reconcile net earnings
     (loss) to net cash used for operating activities
   Depreciation and amortization                                  --              --         100,729
   Minority interest                                              --              --       1,157,735
   Loss on sale of assets and write-off                       76,800              --       2,897,133
   Gain on forgiveness of debt                                    --              --        (214,707)
   (Increase) decrease in
       Accounts receivable -- trade                               --              --        (483,280)
       Deferred tax asset                                         --              --              --
       Accounts receivable -- affiliate                     (598,609)       (966,359)      3,304,283
       Prepaid expenses and other assets                          --              --          (1,885)
   Increase (decrease) in
       Accounts payable                                           --              --       6,099,751
       Accounts payable -- affiliate                           5,999         153,145     (15,348,123)
       Accrued expenses                                           --              --         217,553
       Accrued interest -- affiliate                              --          77,117              --
       Income taxes payable                                       --         (72,000)       (166,500)
       Other                                                      --              --          75,444
                                                        ------------    ------------    ------------

  Net cash used for operating activities                    (512,723)       (919,389)       (359,309)

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from sale of investment                               --              --         525,000
   Purchase of property and equipment                             --              --         (54,105)
   Sale of motels and equipment                                   --              --              --
   Payments received on notes receivable                   2,525,588         347,029         121,568
                                                        ------------    ------------    ------------

Net cash provided by investing activities                  2,525,588         347,029         592,463

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from notes payable -- affiliate                       --         801,970              --
   Payments on long-term debt                             (2,048,559)       (185,481)       (558,303)
                                                        ------------    ------------    ------------

Net cash provided by (used for) financing activities      (2,048,559)        616,489        (558,303)
                                                        ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents         (35,694)         44,129        (325,149)

Cash and cash equivalents at beginning of period              44,679             550         325,699
                                                        ------------    ------------    ------------

Cash and cash equivalents at end of period              $      8,985    $     44,679    $        550
                                                        ============    ============    ============
</Table>


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

                                       F-5


<PAGE>

                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2001, 2000 and 1999


NOTE A -- HISTORY

         WesPac Investors Trust III ("WesPac), a California business trust, was
         originally organized on August 22, 1983. On January 24, 1994, WesPac
         instituted a Chapter 11 bankruptcy proceeding in the United States
         Bankruptcy Court for the Eastern District of Washington. A Plan of
         Reorganization dated March 22, 1996 (as modified) was confirmed by
         order dated May 15, 1996 and was amended by Order entered October 29,
         1996 approving the First Modification to Plan of Reorganization (the
         "Modified Plan"). Pursuant to the Modified Plan, WesPac was converted
         from a California business trust into a Nevada corporation. First
         Equity Properties, Inc. (the "Company"), which was incorporated in
         Nevada on December 19, 1996, was the surviving entity following the
         incorporation of WesPac into a California corporation and subsequent
         merger of that California corporation with and into the Company
         accomplished by Articles of Merger and a Plan of Merger filed in the
         States of California and Nevada on December 24, 1996. The Company
         automatically, by operation of law, succeeded to all of the assets,
         rights, duties, liabilities and obligations of the California
         corporation (as the immediate successor to WesPac) upon the
         effectiveness of the Merger on December 24, 1996.

         In general, the Modified Plan provided for the cancellation of the
         former publicly-held shares on the effective date of the Modified Plan
         with one share of the Company deemed to be exchanged for each former
         publicly-held share with the former public shareholders to hold, in the
         aggregate, 25% of the equity interest in the Company. Confirmation of
         the Modified Plan served to re-vest all assets of the estate of WesPac
         free and clear of all liabilities, except those payable pursuant to the
         Modified Plan. Under the Modified Plan, WesPac retained the Certain
         Motel Properties and all allowed claims were provided for or paid.

NOTE B -- FRESH START REPORTING

         In accordance with AICPA Statement of Position 90-7, "Financial
         Reporting by Entities in Reorganization Under the Bankruptcy Code",
         ("SOP 90-7") the Company was required to adopt "fresh start" reporting
         and reflect the effects of such adoption in the financial statements as
         of June 15, 1996. The ongoing impact of the adoption of fresh-start
         reporting is reflected in the accompanying financial statements.

NOTE C -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Nature of Operations

         The Company and its subsidiaries provided management services to a
         variety of commercial and residential real estate entities throughout
         the continental United States. Effective October 1, 1999, substantially
         all of the contracts for management services were transferred from the
         Company. In addition, the Company indirectly invests in real estate
         entities and marketable securities through its investment in the
         preferred stock of Realty Advisors, Inc.


                                      F-6
<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                        December 31, 2001, 2000 and 1999


NOTE C -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

         Principles of Consolidation

         The consolidated financial statements include the accounts of First
         Equity Properties, Inc., its wholly-owned subsidiary Carmel Realty,
         Inc. and its majority-owned subsidiary, Carmel Realty Services, Ltd.
         All significant intercompany accounts and transactions have been
         eliminated in consolidation.

         Cash Equivalents

         For purposes of the statement of cash flows, the Company considers all
         short-term investments with original maturities of three months or less
         to be cash equivalents.

         Property, Equipment, Depreciation and Amortization

         Property and equipment in place on June 15, 1996 are stated at fair
         value in accordance with fresh-start reporting. Additions are stated at
         cost. Depreciation and amortization are provided over the estimated
         useful lives of the assets on the straight-line method. Maintenance and
         repairs of a routine nature are charged to expense. Renewals and
         betterments which extend the useful life of existing assets are
         capitalized and depreciated over their estimated useful lives.

         Investments

         Investments consist of non-marketable investments in private companies,
         and are carried at the lower of cost or estimated net realizable value.

         Goodwill

         Goodwill represents the excess of cost over the fair value of assets
         acquired and is being amortized using the straight-line method over 40
         years. The carrying value of goodwill is periodically reviewed by the
         Company based on the expected future operating cash flows of the
         related business unit. It was determined in 1999 that, due to the
         publicly traded real estate entities transferring their management and
         brokerage contracts to another entity, impairment had occurred and the
         unamortized goodwill has been charged to operations in 1999.

         Accounting Estimates

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make certain
         estimates and assumptions that affect the amounts reported in the
         financial statements and accompanying notes. Actual results could
         differ from those estimates.


                                      F-7
<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                        December 31, 2001, 2000 and 1999


NOTE C -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

         Income Taxes

         The Company accounts for income taxes in accordance with Statement of
         Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
         Income Taxes". SFAS 109 requires an asset and liability approach to
         financial accounting for income taxes. In the event differences between
         the financial reporting basis and the tax basis of the Company's assets
         and liabilities result in deferred tax assets, SFAS 109 requires an
         evaluation of the probability of being able to realize the future
         benefits indicated by such assets. A valuation allowance is provided
         for a portion or all of the deferred tax assets when there is an
         uncertainty regarding the Company's ability to recognize the benefits
         of the assets in future years.

         Credit Risk

         The Company's trade accounts receivable arise in the normal course of
         business and primarily relate to management of commercial and
         residential properties located throughout the United States. Such
         receivables are unsecured. The Company performs ongoing credit
         evaluations of the entities from whom such amounts are receivable. The
         Company places its cash investments in high credit quality institutions
         and, by policy, limits the amount of credit exposure to any one
         institution.

         Earnings (Loss) per Share

         Earnings (loss) per share (EPS) are calculated in accordance with
         Statement of Financial Accounting Standards No. 128, Earnings per Share
         (SFAS 128), which was adopted in 1997 for both years presented. Basic
         EPS is computed by dividing income available to common shareholders by
         the weighted average number of common shares outstanding during the
         period. Diluted EPS does not apply to the Company due to the absence of
         dilutive potential common shares. The adoption of SFAS 128 had no
         effect on previously reported EPS.

NOTE D -- ACCOUNTS RECEIVABLE -- AFFILIATES

<Table>
<Caption>
                                   2001       2000
                                 --------   --------
<S>                              <C>        <C>
RBA Partners                     $     --   $682,831
Basic Capital Management, Inc.    500,000         --
TRS, Ltd. and other                68,418         --
Regis Realty                      283,528    283,528
                                 --------   --------

                                 $851,947   $966,359
                                 ========   ========
</Table>


                                      F-8
<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                        December 31, 2001, 2000 and 1999


NOTE E -- INVESTMENTS

         The investment in Realty Advisors, Inc. preferred stock at December 31,
         2001 and 2000 is $45,836,719 and $51,137,790, respectively, and
         represents 464,889 and 464,889 shares, respectively, of no par value,
         non-voting preferred stock with a liquidation value of $110 per share.
         These shares do not earn dividends. Realty Advisors, Inc. is an
         affiliated company who invests in real estate directly and indirectly
         through investments in real estate entities. At June 30, 2001, Realty
         Advisors, Inc. had total assets of $232,085,955, total liabilities of
         $114,390,762 and total shareholders equity of $117,695,193. The
         decrease in the value of the preferred stock resulted from the
         application of the purchase method of accounting for the acquisition of
         the minority interest of the subsidiary which holds the preferred
         stock. The Company acquired all but a 1% minority interest from a
         related party in Carmel Realty Services, Ltd. The Company paid
         $4,225,879 for the 17.4% interest.

         Investments at December 31, 2001 includes 58,500 shares of preferred
         stock in North American Mortgage, a related party, valued at $585,000.
         The shares have a par value of $10, are non-voting shares with a
         liquidation value of $10 per share and do not earn dividends.

NOTE F -- NOTES PAYABLE

<Table>
<Caption>
                                                                   2001         2000
                                                                ----------   ----------
<S>                                                             <C>          <C>
         Mortgage notes payable to a bank, bearing interest
         at 3.5% in excess of the U.S. T-Bill rate (as
         defined), payable in monthly installments of
         $26,886 including interest through maturity on
         April 1, 2000; subsequently extended,
         collateralized by certain motel property and
         equipment.                                             $       --   $2,048,559
</Table>

NOTE G -- NOTES PAYABLE -- AFFILIATE

         The Company has a revolving line of credit with Nevada Sea Investments,
         Inc., a shareholder. Amounts borrowed under the line bear interest at
         8% per year and are due on demand.

NOTE H -- INCOME TAXES

         Income tax expense (benefit) differed from the amounts computed by
         applying the U.S. federal income tax rate of 35% to pretax income in
         2001, 2000 and 1999 as a result of the following:

<Table>
<Caption>
                                      2001        2000       1999
                                   ---------   ---------   ---------
<S>                                <C>         <C>         <C>
Computed expected tax expense      $      --   $      --   $ 749,178
Alternative minimum tax credit            --          --    (677,334)
Miscellaneous timing differences          --          --     129,062
                                   ---------   ---------   ---------
                                   $      --   $      --   $ 200,906
                                   =========   =========   =========
</Table>

                                      F-9

<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                        December 31, 2001, 2000 and 1999


NOTE I -- RELATED PARTY TRANSACTIONS

         Effective January 1, 1997 the Company contracted with Regis Management
         Corporation (Regis) to manage the day-to-day operations of the motel
         properties for 5% of gross revenues. Regis is a subsidiary of Carmel
         Realty, Inc. Such contract terminated at the time of disposition of the
         motel properties.

         The Company provided management services primarily to five affiliated
         publicly traded real estate entities throughout the United States.
         Under such arrangements, the Company received a fee of 5% or less of
         the monthly gross rents collected on the properties under management.
         The Company subcontracts with other entities for the provision of
         property level services. All property management contracts,
         constituting substantially all management service revenues, with the
         five publicly traded real estate entities were cancelled effective
         October 1, 1999.

         The Company also provided real estate brokerage services to the five
         affiliated publicly traded real estate entities and a number of other
         entities, and receives brokerage commissions under varying arrangements
         from a fixed amount to a sliding scale on a percentage basis. In
         general, such services include providing assistance in locating,
         leasing or purchasing real estate. The Company receives fees equal to
         the lesser of (i) a percentage of the cost of acquisition, inclusive of
         commissions, if any, paid to nonaffiliated brokers, or (ii) the
         compensation customarily charged in similar transactions by others
         rendering similar property acquisition services. The contracts for the
         brokerage services were also cancelled effective October 1, 1999. These
         contracts represented substantially all brokerage and commission
         service revenue.

         Effective January 1, 1997, the Company acquired from a related party,
         100% of the outstanding common stock of Carmel Realty, Inc. and an
         81.6% limited partnership interest in Carmel Realty Services, Ltd. (the
         "Acquired Companies"), for a purchase price of $32,500,000, consisting
         of 32,500 shares of Series A 8% Cumulative Preferred Stock having a
         liquidation value of $1,000 per share (the "Preferred Stock").
         Accordingly, the acquired Companies' results of operations are included
         in the consolidated financial statements since the date of acquisition.
         The excess of the purchase price over assets acquired approximated
         $3,035,000 and was being amortized over 40 years. Due to the fact that
         the service contracts with the five affiliated publicly traded real
         estate entities were cancelled and that this goodwill purchase was
         based on the continuing revenue stream from those contracts, the
         remainder of goodwill was charged to operations in 1999.


                                      F-10
<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                        December 31, 2001, 2000 and 1999


NOTE J -- FINANCIAL INSTRUMENTS

         The estimated fair values of the Company's financial instruments at
         December 31, 2001 and 2000 follow:

<Table>
<Caption>
                                                2001                        2000
                                    -------------------------   -------------------------
                                      Carrying       Fair         Carrying        Fair
                                       Amount        Value         Amount         Value
                                    -----------   -----------   -----------   -----------
<S>                                 <C>           <C>           <C>           <C>
Accounts receivable -- affiliates   $   851,946   $   851,946   $   966,359   $   966,359
Investments                          46,421,719    46,421,719    51,137,790    51,137,790
Note receivable                              --            --     3,110,588     3,110,588
Notes payable                                --            --     2,048,559     2,048,559
</Table>

         The carrying values of cash and cash equivalents, accounts receivable
         and payable, and accrued liabilities approximate fair value due to
         short-term maturities of these assets and liabilities.

         Investments are accounted for using the cost method and pertain to
         investments in companies for which fair values are not readily
         available, but are believed to exceed carrying amounts.

         The aggregate fair value of notes payable and notes payable-affiliate
         approximate carrying amounts due to their short maturities.

NOTE K -- COMMITMENTS AND CONTINGENCIES

         The Company is involved in various legal actions incidental to its
         business. In Management's opinion, none of these actions will have a
         material adverse effect on the Company's financial position.


                                      F-11
<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                        December 31, 2001, 2000 and 1999


NOTE L -- SUPPLEMENTAL CASH FLOW INFORMATION

<Table>
<Caption>
                                                     2001           2000           1999
                                                ------------   ------------   ------------
<S>                                             <C>            <C>            <C>
Cash paid during the year for:
  Interest                                      $     29,107   $    221,000   $         --
  Income taxes                                            --         76,000        367,009

Noncash investing and financing activities:
  Exchange of account payable from affiliate
       for minority interest in subsidiary         4,225,879             --             --
  Effective writedown of investment due to
       application of purchase method of
       accounting for the acquisition of
       minority interest                           5,301,071             --             --
  Exchange of a note receivable for an
       investment in preferred stock of
       an affiliate                                  585,000             --             --
  Note payable exchanged for
       amounts due to affiliate                           --      3,495,833             --
  Stock issued to company to retire debt                  --             --     15,560,710
  Preferred stock investment exchanged
       for notes payable                                  --      4,374,920             --

Details of sale of Carmel Property Management
  Sales price                                             --             --        283,528
  Assets sold                                             --             --     (2,162,144)
  Liabilities transferred                                 --             --      1,878,616
                                                ------------   ------------   ------------
  Net cash from sale                            $         --   $         --   $         --
                                                ============   ============   ============
</Table>

NOTE M -- EMPLOYEE BENEFIT PLAN

         The Company has a 401(k) plan for the benefit of its employees.
         Employees can contribute to the plan up to 15% of their salary, subject
         to certain maximum dollar amounts set forth by the Internal Revenue
         Service, pursuant to a salary reduction agreement, upon meeting age and
         length of service requirements. The Companies' matching contribution is
         a discretionary percentage of electing employees' contributions, and
         totaled $-0-, $-0- and $9,923 in 2001, 2000 and 1999, respectively.


                                      F-12
<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                        December 31, 2001, 2000 and 1999


NOTE N -- BUSINESS SEGMENTS

         In 1999, the Company's operations have been classified into two
         business segments: property management and real estate brokerage. These
         segments have separate financial information and, to a large extent,
         separate management and operating groups. Property management relates
         to services rendered primarily to five publicly-traded real estate
         entities, in connection with the management of commercial real
         property, including retail centers, office buildings, industrial
         properties and hotels. Real estate brokerage relates to services
         rendered primarily to five publicly-traded real estate entities, in
         connection with locating, leasing and purchasing real estate.
         Summarized financial data by segment for 2001, 2000 and 1999 is as
         follows:

<Table>
<Caption>
                                                                     2001
                             ----------------------------------------------------------------------------------
                             Hospitality     Property    Real Estate                Adjustments
                               Business     Management     Brokerage     Other     & Eliminations  Consolidated
                             -----------   -----------   -----------   ----------- --------------  ------------
<S>                          <C>           <C>           <C>           <C>         <C>             <C>
Revenues                     $        --   $   104,591   $        --   $    49,023   $        --   $   153,614
                             ===========   ===========   ===========   ===========   ===========
Operating profit             $        --   $        --   $        --   $        --   $        --   $   153,614
                             ===========   ===========   ===========   ===========   ===========
General corporate expenses                                                                             150,527
Loss before income taxes                                                                           $     3,087
                                                                                                   ===========

Identifiable assets          $        --   $        --   $        --                               $        --
                             ===========   ===========   ===========
Corporate assets                                                                                    47,282,650
                                                                                                   -----------
                                                                                                   $47,282,650
                                                                                                   ===========
</Table>

         Corporate assets include cash and cash equivalents, notes receivable
         and investments.


<Table>
<Caption>
                                                                     2000
                             ----------------------------------------------------------------------------------
                             Hospitality     Property    Real Estate                Adjustments
                               Business     Management     Brokerage     Other     & Eliminations  Consolidated
                             -----------   -----------   -----------   ----------- --------------  ------------
<S>                          <C>           <C>           <C>           <C>         <C>             <C>

Revenues                     $        --   $        --   $        --   $   285,733   $        --   $    285,733
                             ===========   ===========   ===========   ===========   ===========
Operating profit             $        --   $        --   $        --   $        --   $        --   $         --
                             ===========   ===========   ===========   ===========   ===========
General corporate expenses                                                                              397,025
Loss before income taxes                                                                           $   (111,292)
                                                                                                   ============

Identifiable assets          $        --   $        --   $        --                               $         --
                             ===========   ===========   ===========
Corporate assets                                                                                     55,259,416
                                                                                                   ------------
                                                                                                   $ 55,259,416
                                                                                                   ============
</Table>

         Corporate assets include cash and cash equivalents, investments and
         deferred tax assets.


                                      F-13
<PAGE>


                 FIRST EQUITY PROPERTIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
                        December 31, 2001, 2000 and 1999


NOTE N -- BUSINESS SEGMENTS -- CONTINUED


<Table>
<Caption>
                                                                     1999
                             ----------------------------------------------------------------------------------
                             Hospitality     Property    Real Estate                Adjustments
                               Business     Management     Brokerage     Other     & Eliminations  Consolidated
                             -----------   -----------   -----------   ----------- --------------  ------------
<S>                          <C>           <C>           <C>           <C>         <C>             <C>
Revenues                     $        --   $12,374,533   $10,061,286   $   505,756   $(3,322,915)  $ 19,618,660
                             ===========   ===========   ===========   ===========   ===========

Operating profit (loss)      $        --   $ 8,660,172   $ 7,041,273   $   505,756   $(3,322,915)  $ 12,884,286
                             ===========   ===========   ===========   ===========   ===========

General corporate expenses                                                                           (9,523,090)
Minority interest in
earnings of subsidiary                                                                               (1,157,732)
                                                                                                   ------------
Earnings before income taxes                                                                       $  2,203,464
                                                                                                   ============

Identifiable assets          $        --   $         --  $        --                               $         --
                             ===========   ============  ===========
Corporate assets                                                                                     58,970,877
                                                                                                   ------------
                                                                                                   $ 58,970,877
                                                                                                   ============
</Table>

         Corporate assets include cash and cash equivalents, investments and
         deferred tax assets.

NOTE O -- COMPREHENSIVE INCOME

         Statement of Financial Accounting Standards No. 130, Reporting
         Comprehensive Income, (SFAS 130), requires that total comprehensive
         income be reported in the financial statements. For the years ended
         December 31, 2001, 2000, and 1999, the Company's comprehensive income
         was equal to its net income and the Company does not have income
         meeting the definition of other comprehensive income.



                                      F-14
<PAGE>

                                 EXHIBIT INDEX


<Table>
<Caption>
       EXHIBIT
     DESIGNATION                   DESCRIPTION OF EXHIBIT
     -----------                   ----------------------
<S>               <C>
         2.1      Plan of Reorganization (as modified) dated March 22, 1996
                  (incorporation by reference is made by Exhibit 2.1 to Form 8-K
                  of First Equity Properties, Inc. for event reported June 19,
                  1996).

         2.2      First Amended Disclosure Statement (as modified) dated March
                  22, 1996 (incorporation by reference is made to Exhibit 2.2 to
                  Form 8-K of First Equity Properties, Inc. for event reported
                  June 19, 1996).

         2.3      Order Confirming Plan of Reorganization dated May 15, 1996
                  entered May 20, 1996 (incorporation by reference is made to
                  Exhibit 2.3 to Form 8-K of First Equity Properties, Inc. for
                  event reported June 19, 1996).

         2.4      First Modification to Plan of Reorganization (as modified)
                  dated October 29, 1996 (incorporation by reference is made to
                  Exhibit 2.4 to Form 8-K of First Equity Properties, Inc. for
                  event reported June 19, 1996).

         2.5      Ex parte Order approving modification to Plan of
                  Reorganization (as modified) entered October 29, 1996
                  (incorporation by reference is made to Exhibit 2.5 to Form 8-K
                  of First Equity Properties, Inc. for event reported June 19,
                  1996).

         2.6      Certificate of Substantial Consummation dated January 21, 1997
                  (incorporation by reference is made to Exhibit 2.6 to Form 8-K
                  of First Equity Properties, Inc. for event reported June 19,
                  1996).

         2.7      Final Decree issued by the Court on February 11, 1997
                  (incorporation by reference is made to Exhibit 2.7 to Form 8-K
                  of First Equity Properties, Inc. for event reported June 19,
                  1996).

         3.1      Articles of Incorporation of Wespac Property Corporation as
                  filed with and endorsed by the Secretary of State of
                  California on December 16, 1996 (incorporation by reference is
                  made to Exhibit 3.1 to Form 8-K of First Equity Properties,
                  Inc. for event reported June 19, 1996).

         3.2      Articles of Incorporation of First Equity Properties, Inc.
                  filed with and approved by the Secretary of State of Nevada on
                  December 19, 1996 (incorporation by reference is made to
                  Exhibit 3.2 to Form 8-K of First Equity Properties, Inc. for
                  event reported June 19, 1996).

         3.3      Bylaws of First Equity Properties, Inc. as adopted December
                  20, 1996 (incorporation by reference is made to Exhibit 3.3 to
                  Form 8-K of First Equity Properties, Inc. for event reported
                  June 19, 1996).

         3.4      Agreement and Plan of Merger of Wespac Property Corporation
                  and First Equity Properties, Inc. dated December 23, 1996
                  (incorporation by reference is made to Exhibit 3.4 to Form 8-K
                  of First Equity Properties, Inc. for event reported June 19,
                  1996).

         3.5      Articles of Merger of Wespac Property Corporation into First
                  Equity Properties, Inc. as filed with and approved with the
                  Secretary of State in Nevada December 24, 1996 (incorporation
                  by reference is made to Exhibit 3.5 to Form 8-K of First
                  Equity Properties, Inc. for event reported June 19, 1996).

         3.6      Certificate of Designation of Preferences and Relative
                  Participating or Optional of Other Special Rights and
                  Qualifications, Limitations or Restrictions thereof of the
                  Series A 8% Cumulative Preferred Stock (incorporation by
                  reference is made to Exhibit 3.6 to Form 10-KSB of First
                  Equity Properties, Inc. for the fiscal year ended December 31,
                  1996.)

         21*      Subsidiaries of the Registrant

</Table>

---------
* filed herewith