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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


                 /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2002

                         Commission file number 0-16341

                         SHELBOURNE PROPERTIES II, INC.
             (Exact name of registrant as specified in its charter)

              Delaware                                       04-3502382
              --------                                       ----------
     State or other jurisdiction of                       (I.R.S.Employer
     incorporation or organization)                       Identification No.)

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

                                 (617) 570-4600
                                 --------------
              (Registrant's telephone number, including area code)



         Indicate by check whether the registrant (1) has filed all reports
         required to be filed by Section 13 or 15(d) of the Securities Exchange
         Act of 1934 during the preceding 12 months (or for such shorter period
         that the registrant was required to file such reports), and (2) has
         been subject to such filing requirements for the past 90 days.

                          Yes X         No

         As of May 13, 2002, there were 894,792 shares of common stock
         outstanding.

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



<PAGE>


                         SHELBOURNE PROPERTIES II, INC.
                            FORM 10-Q - MARCH 31,2002

The financial information contained in this Form 10-Q for the periods prior to
April 17, 2001 are those of Shelbourne Properties II, Inc.'s predecessor in
interest, High Equity Partners L.P. - Series 86 (the "Predecessor Partnership").
On April 17, 2001, the Predecessor Partnership was merged with and into
Shelbourne Properties II, L.P., a limited partnership wholly owned, directly and
indirectly, by Shelbourne Properties II, Inc.

                                      INDEX


                                                                            Page
Part I.  Financial Information

Item I.  Condensed Consolidated Financial Statements

         Condensed Consolidated Balance Sheets -
             March 31, 2002 and December 31, 2001..........................    3

         Condensed Consolidated Statements of Operations -
             Three months Ended March 31, 2002 and 2001....................    4

         Condensed Consolidated Statements of Equity -
                 Three Months Ended March 31, 2002.........................    5

         Condensed Consolidated Statements of Cash Flows -
                 Three Months Ended March 31, 2002 and 2001................    6

         Notes to Condensed Consolidated Financial Statements..............    7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations...............................   13

Item 3.  Quantitative and Qualitative Disclosures about Market Risk........   17


Part II. Other Information:

Item 1.  Legal Proceedings.................................................   18

Item 6.  Exhibits and Reports on Form 8-K..................................   18

Signatures.................................................................   19




                                       2

<PAGE>


                         SHELBOURNE PROPERTIES II, INC.
                            FORM 10-Q - MARCH 31,2002

                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                               (Unaudited)
                                             March 31, 2002    December 31, 2001
                                             --------------    -----------------
ASSETS

Real estate, net                               $ 41,119,501        $  41,327,041
Cash and cash equivalents                         8,485,863           26,011,761
Other assets                                      3,299,179            3,191,467
    Receivables, net of allowances of
    $94,067 and $105,200, respectively              180,397              151,706
                                             --------------      ---------------

TOTAL ASSETS                                   $ 53,084,940        $  70,681,975
                                             ==============      ===============

LIABILITIES AND EQUITY

Accounts payable and accrued expenses          $  1,046,784        $   1,168,273
Accrued interest                                    127,757                    -
Note payable                                     22,034,250                    -
                                             --------------      ---------------

Total Liabilities                                23,208,791            1,168,273
                                             --------------      ---------------

Commitments and Contingencies (See Note 6)

CLASS A 5% PREFERRED PARTNERSHIP INTERESTS,
AT LIQUIDATION VALUE                              1,015,148                    -
                                             --------------      ---------------

EQUITY

Common stock:
   $.01 par value share;
   authorized 2,500,000 shares;
   issued 1,237,916 shares;
   outstanding 894,792 and
   1,237,916, respectively                           12,379               12,379
Additional capital                               66,329,959           66,329,959
Treasury stock, at cost                         (17,866,603)                   -
Retained earnings                               (19,614,734)           3,171,364
                                             --------------      ---------------

Total Equity                                     28,861,001           69,513,702
                                             --------------      ---------------

TOTAL LIABILITIES AND EQUITY                   $ 53,084,940        $  70,681,975
                                             ==============      ===============


                       See notes to financial statements.


                                       3


<PAGE>


                         SHELBOURNE PROPERTIES II, INC.
                            FORM 10-Q - MARCH 31,2002


                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                  For the Three Months Ended
                                                           March 31,
                                            ------------------------------------
                                                 2002                  2001
                                            ---------------       --------------

Rental Revenues                                 $ 3,085,623           $3,054,259
                                            ---------------       --------------

Costs and Expenses

     Operating expenses                           1,041,401              933,781
     Depreciation and amortization                  539,856              559,411
     Asset management fee                           157,582              331,648
     Transition management fees                      41,650                    -
     Purchase of advisory agreements             23,049,398                    -
     Administrative expenses                        892,132              493,390
     Property management fee                         87,848               90,726
                                            ---------------       --------------

                                                 25,809,867            2,408,956
                                            ---------------       --------------

(Loss) income before interest
   and other income                            (22,724,244)              645,303

     Interest expense                             (127,757)                    -
     Interest income                                 71,700              233,573
     Other income                                       548               13,800
                                            ---------------       --------------

Net (loss) income                              (22,779,753)              892,676
Preferred dividends                                 (6,345)                    -
                                            ---------------       --------------

Net (loss) inc ome available
for common shares                             $(22,786,098)            $ 892,676
                                            ===============       ==============

Earnings per share - basic and diluted

Net (loss) income per common share            $     (21.37)            $    0.72
                                            ===============       ==============

Weighted average common shares                   1,066,354             1,237,916
                                            ===============       ==============

                       See notes to financial statements.


                                       4

<PAGE>

                         SHELBOURNE PROPERTIES II, INC.
                            FORM 10-Q - MARCH 31,2002

                   CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
                                   (Unaudited)

<TABLE>
<CAPTION>
                                  Common       Additional        Treasury          Retained
                                  Stock         Capital           Stock            Earnings            Totals
                               ----------- ----------------- ---------------- -----------------  ------------------
<S>                              <C>          <C>           <C>                 <C>                <C>

Balance January 1, 2002           $ 12,379    $66,329,959    $           -      $  3,171,364       $  69,513,702

Purchase of treasury
stock                                    -              -      (17,866,603)                -         (17,866,603)

Preferred dividends                      -              -                -            (6,345)             (6,345)

Net loss                                 -              -                -       (22,779,753)        (22,779,753)
                              ------------ ----------------- ---------------- -----------------  -------------------


Balance, March 31, 2002           $ 12,379    $66,329,959     $(17,866,603)     $(19,614,734)      $  28,861,001
                              ============ ================= ================ =================  ===================
</TABLE>



















                       See notes to financial statements.

                                       5
<PAGE>


                         SHELBOURNE PROPERTIES II, INC.
                            FORM 10-Q - MARCH 31,2002

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                       For the Three Months Ended
                                                                                March 31,
                                                              ----------------------------------------------
                                                                      2002                     2001
                                                              ---------------------     --------------------
CASH FLOWS FORM OPERATING ACTIVITIES:

<S>                                                                <C>                          <C>
Net (Loss) Income                                                   $ (22,779,753)               $  892,676
Adjustments to reconcile net income
to net cash provided by operating activities
         Depreciation and amortization                                     539,856                  559,411
         Straight-line adjustment for stepped
             lease rentals                                                (45,693)                   34,063
         Purchase of advisory agreements                                23,049,398                        -

Change in assets and liabilities
       Accounts payable and accrued expenses                             (127,834)                  220,325
       Accrued interest                                                    127,757                        -
       Receivables                                                        (28,691)                 (130,825)
       Due to affiliates                                                         -                  (54,068)
       Other assets                                                      (160,573)                 (205,042)
                                                              ---------------------     --------------------

Net cash provided by operating activities                                 574,467                 1,316,540
                                                              ---------------------     --------------------

Cash Flows from Investing Activities -

       Improvements to real estate                                       (233,763)                 (442,666)
                                                              ---------------------     --------------------

Cash Flows from Financing Activities -

       Purchase of treasury stock                                     (17,866,603)                        -
                                                              ---------------------     --------------------

(Decrease) Increase in Cash and Cash Equivalents                      (17,525,898)                  873,874

Cash and Cash Equivalents, Beginning of Year                           26,011,761                17,607,533
                                                              ---------------------     --------------------

Cash and Cash Equivalents, End of Quarter                             $  8,485,863             $ 18,481,407
                                                              =====================     ====================
</TABLE>


                       See notes to financial statements.

                                       6
<PAGE>



              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   GENERAL

     The accompanying condensed consolidated financial statements, notes and
     discussions should be read in conjunction with the consolidated financial
     statements, related notes and discussions contained in the Annual Report on
     Form l0-K of Shelbourne Properties II, Inc., a Delaware Corporation
     ("Company") for the year ended December 31, 2001.

     The financial information contained herein is unaudited; however, in the
     opinion of management, all adjustments (consisting only of normal recurring
     adjustments) necessary for a fair presentation of such financial
     information have been included. Results of operations for the three months
     ended March 31, 2002 are not necessarily indicative of the results to be
     expected for the entire year.


2.   SIGNIFICANT ACCOUNTING POLICIES

     Investment in Joint Ventures
     ----------------------------

     Prior to April 30, 2002, certain properties were owned in joint ventures
     with Shelbourne Properties I, L.P. and/or Shelbourne Properties III, L.P.
     The Company owned an undivided interest in the assets owned by these joint
     ventures and was severally liable for indebtedness it incurred in
     connection with its ownership interest in those properties. Therefore, for
     periods prior to April 30, 2002, the Company's condensed consolidated
     financial statements present the assets, liabilities, revenues and expenses
     of the joint ventures on a pro rata basis in accordance with the Company's
     percentage of ownership.

     After April 30, 2002, as a result of the Company's incurring debt in
     connection with entering into the Revolving Credit Agreement discussed in
     Note 7, after April 30, 2002, the Company will no longer be allowed to
     account for its investments in joint ventures on a pro-rata consolidation
     basis in accordance with its percentage of ownership but must utilize the
     equity method of accounting.

     Real Estate
     -----------

     Real estate is carried at cost, net of adjustments for impairment. Repairs
     and maintenance are charged to expense as incurred. Replacement and
     betterments are capitalized. The Company will evaluate the recoverability
     of the net carrying value of its real estate and related assets at least
     annually, and more often if circumstances dictate. If this review indicates
     that the carrying value of a property might not be recoverable, the Company
     prepares estimates of the future undiscounted cash flows expected to result
     from the use of the property and its eventual disposition, generally over a
     five-year holding period. In performing this review, management takes into
     account, among other things, the existing occupancy, the expected leasing
     prospects of the property and the economic situation in the region where
     the property is located.

     If the sum of the expected future cash flows, undiscounted, is less than
     the carrying amount of the property, the Company recognizes an impairment
     loss and reduces the carrying amount of the property to its estimated fair
     value. Fair value is the amount at which the property could be bought or
     sold in a current transaction between willing parties, that is, other than
     in a forced or liquidation sale. Management

                                        7


<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     estimates fair value using discounted cash flows or market comparables, as
     most appropriate for each property. Independent certified appraisers are
     utilized to assist management when warranted.

     Impairment write-downs recorded by the Company prior to April 17, 2001 did
     not affect the tax basis of the assets and were not included in the
     determination of taxable income or loss. No write-downs have been recorded
     since the effective date of the merger.

     Because the expected cash flows used to evaluate the recoverability of the
     property and their fair values are based upon projections of future
     economic events, such as property occupancy rates, rental rates, operating
     cost inflation and market capitalization rates, the amounts ultimately
     realized at disposition may differ materially from the net carrying values
     at the balance sheet dates. The cash flows and market comparables used in
     this process were based on good faith estimates and assumptions developed
     by management. Unanticipated events and circumstances may occur and some
     assumptions may not materialize; therefore, actual results may vary
     materially from the estimates. The Company may in the future provide
     additional write-downs, which could be material, if real estate markets or
     local economic conditions change.

     Treasury Stock
     --------------

     Treasury stock is stated at cost.

     Amounts Per Share
     -----------------

     Net income (loss) per share is computed based on average shares
     outstanding.

     Recently Issued Accounting Pronouncements
     -----------------------------------------

     In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible
     Assets." SFAS No. 142 addresses accounting and reporting for intangible
     assets acquired, except for those acquired in a business combination. SFAS
     No. 142 presumes that goodwill and certain intangible assets have
     indefinite useful lives. Accordingly, goodwill and certain intangibles will
     not be amortized but rather will be tested at least annually for
     impairment. SFAS No. 142 also addresses accounting and reporting for
     goodwill and other intangible assets subsequent to their acquisition. SFAS
     No. 142 is effective for fiscal years beginning after December 15, 2001.
     The Company has adopted this statement, which did not materially affect the
     Company's financial statements.

     In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
     or Disposal of Long-Lived Assets," which addresses financial accounting and
     reporting for the impairment or disposal of long-lived assets. This
     statement supersedes SFAS No. 121, "Accounting for the Impairment of
     Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and the
     accounting and reporting provisions of APB Opinion No. 30, "Reporting the
     Results of Operations - Reporting the Effects of a Disposal of a Business
     and Extraordinary, Unusual and Infrequently Occurring Events and
     Transactions," for the disposal of a segment of a business. SFAS No. 144 is
     effective for fiscal years beginning after December 15, 2001, and interim
     periods within those fiscal years. The provisions of this Statement
     generally are to be applied prospectively. The Company has adopted this
     statement, which did not have a material effect on the Company's financial
     statements.

                                       8

<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


3.   RELATED PARTY TRANSACTIONS

     On February 14, 2002, the Company, Shelbourne Properties I, Inc. and
     Shelbourne Properties III, Inc. (the "Companies") consummated a transaction
     (the "Transaction") whereby the Company purchased an advisory agreement
     (the "Advisory Agreement") between the Company and Shelbourne Management
     LLC ("Shelbourne Management"), an affiliate of Presidio Capital Investment
     Company, LLC ("PCIC"), and the 343,124 shares of the Company's common stock
     held by subsidiaries of PCIC. PCIC is controlled and principally owned by
     affiliates of the former senior management, and one current director, of
     the Company. The Company's operating partnership, Shelbourne Properties II,
     L.P., issued preferred partnership interests with an aggregate liquidation
     preference of $1,015,148 and a note in the amount of $22,034,250.
     Shelbourne Management's obligations under the contract terminated as of the
     effective date of the Transaction.

     In conjunction with the Transaction, PCIC entered into an agreement with
     the Companies and operating partnerships to provide transition services,
     namely, accounting, asset management, investor services and treasury and
     cash management, for a period up to one year from the date of the agreement
     (until February 14, 2003) for a fee of $83,300 per month. This fee is
     allocated equally among the Companies. For the period from February 15,
     2002 to March 31, 2002, the Company paid $41,650 for transition services to
     PCIC.

     Prior to the Transaction, under the terms of the Advisory Agreements,
     Shelbourne Management provided the Company with all management, advisory
     and property management services. For providing these services, Shelbourne
     Management received (1) an annual asset management fee, payable quarterly,
     equal to 1.25% of the gross asset value of the Company as of the last day
     of each year, (2) property management fees of up to 6% of property
     revenues, (3) $150,000 for non-accountable expenses and (4) reimbursement
     of expenses incurred in connection with the performance of its services.

     Upon its disposition of the Advisory Agreements, Shelbourne Management was
     entitled to receive reimbursement for non-accountable expenses for the
     period from January 1, 2002 through February 14, 2002. For that period
     Shelbourne Management received $25,000. Shelbourne Management was also
     entitled to receive an asset management fee for the period of January 1,
     2002 through February 14, 2002 equal to 1.25% of the gross asset value of
     the Company. For that period, Shelbourne Management received $157,582.

     For the quarter ended March 31, 2001, our managing general partner was
     entitled to fees for the administration of High Equity Partners Series 86,
     (the "Predecessor Partnership"), and received $50,000 for non-accountable
     expenses and $331,648 as a fee for asset management.

     In October 2000, Kestrel Management L.P. ("Kestrel"), began performing all
     property management services directly for the Predecessor Partnership and,
     effective April 17, 2001, the Company. The above referenced transaction did
     not have any effect on the property management services contract between
     the Company and Kestrel. For the quarters ended March 31, 2002 and 2001,
     Kestrel earned $87,848 and $90,726.

4.   REAL ESTATE

     The following table is a summary of the Company's real estate as of March
     31, 2002:

                                       9
<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                                           March 31, 2002      December 31, 2001
                                           --------------      -----------------
                                              [Unaudited]

Land                                         $ 9,636,715            $ 9,636,715
Buildings and improvements                    57,268,707             57,034,945
                                            ------------            ------------

                                              66,905,422             66,671,660

Less:  Accumulated depreciation              (25,785,921)           (25,344,619)
                                            ------------            ------------

                                            $ 41,119,501            $ 41,327,041
                                            ============            ============

5.   FEDERAL INCOME TAX CONSIDERATIONS

     As of April 17, 2001, the Predecessor Partnership was converted into a
     corporation that will elect to be taxed as a real estate investment trust
     (REIT) under the provisions of the Internal Revenue Code. As a result, the
     shareholders of the REIT will be required to include their proportionate
     share of any distribution of taxable income on their returns. REITs are
     required to distribute at least 90% of their ordinary taxable income to
     shareholders and meet certain income, asset and shareholder ownership
     requirements.

6.   CONVERSION

     As a first step in reorganizing our Predecessor Partnership as a
     publicly-traded real estate investment trust, a registration statement was
     filed with the Securities and Exchange Commission on February 11, 2000. On
     or about February 15, 2001, a prospectus/consent solicitation statement was
     mailed to the limited partners of our Predecessor Partnership seeking their
     consent to the reorganization of our Predecessor Partnership into a real
     estate investment trust. The consent solicitation period expired on April
     16, 2001, and holders of a majority of the partnership units approved the
     conversion.

     On April 17, 2001 the conversion was accomplished by merging our
     Predecessor Partnership into our current operating partnership. Pursuant to
     the merger, each limited partner received two shares of stock of the
     Company for each unit they owned, and the general partners received an
     aggregate of 61,896 shares of stock of the Company in exchange for their
     general partner interests.

7.   SUBSEQUENT EVENTS

     On May 1, 2002, the operating partnerships of the Companies and certain of
     the operating partnerships' subsidiaries entered into a $75,000,000
     revolving credit facility with Bayerische Hypo-Und Vereinsbank AG, New York
     Branch, as agent for itself and other lenders (the "Credit Facility"). The
     Credit Facility has a term of three years and is prepayable in whole or in
     part at any time without penalty or premium. The Companies initially
     borrowed $73,330,075 under the Credit Facility. The Company's share of the
     proceeds amounted to $29,776,349 of which $22,034,250 was used to repay the
     note issued in the Transaction, $215,768 to pay associated accrued interest
     and $837,629 to pay costs associated with the Credit Facility. The excess
     proceeds of approximately $6,688,702 were deposited into the Company's
     operating cash account. The Companies have the right, from time to time, to
     elect an annual interest rate equal to (i) LIBOR plus 2.5% or (ii) the
     greater of (a) agent's prime rate or (b) the federal funds rate plus

                                       10

<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     1.5%. The Companies are required to pay the lenders, from time to time, a
     commitment fee equal to .25% of the unborrowed portion of the Credit
     Facility.

     The Credit Facility is secured by (i) a pledge by the operating
     partnerships of their membership interest in their wholly-owned
     subsidiaries that hold their interests in joint ventures with the other
     Companies and (ii) mortgages on certain real properties owned directly or
     indirectly by the operating partnerships. All of the properties of the
     Company are security for the Credit Facility, except for its two real
     properties located in Illinois.

     Under the terms of the Credit Facility, the Companies may only sell the
     pledged property if certain conditions are met. In addition, the Companies
     must maintain certain debt yield maintenance ratios and comply with
     restrictions relating to engaging in certain equity financings, business
     combinations and other transactions that may result in a change of control
     (as defined under the Credit Facility).

     The Companies are jointly and severally liable under the Credit Facility
     but have entered into a Contribution and Cross-Indemnification Agreement.

     In addition, following a request by HX Investors, L.P. ("HX Investors") -
     the largest stockholder of each the Companies and an entity controlled by
     Mr. Michael Ashner - the board of directors of each Company waived a
     provision in each Company's certificate of incorporation (as it applies to
     HX Investors) that otherwise prohibits a stockholder from beneficially
     owning more than 8% of the common stock of any of the Companies. Pursuant
     to the waiver, HX Investors may beneficially own up to 12% of the common
     stock of each Company. Pursuant to a Stockholder Agreement among the
     Companies, HX Investors and the general partner of HX Investors, HX
     Investors agreed that until January 1, 2003, with respect to all matters
     submitted for the approval of any Company's stockholders (1) with the
     approval and recommendation of the Company's board of directors or (2) by
     HX Investors or its affiliates, HX Investors and its affiliates would vote
     all shares beneficially owned by them in excess of the 8% threshold in
     proportion to the votes cast by the stockholders of the Company (including
     the 8% of the shares beneficially owned by HX Investors). Mr. Ashner is
     associated with the property manager for the Companies' properties.

                                       11

<PAGE>




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

CAUTIONARY STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. Statements contained herein may constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
section 21E of the Securities Exchange Act of 1934, as amended. Any statements
contained herein which are not statements of historical facts and that address
activities, events or developments that Shelbourne Properties II, Inc. expects,
believes or anticipates will or may occur in the future shall be deemed to be
forward-looking statements. Forward-looking statements are inherently subject to
risks and uncertainties, many of which cannot be predicted with accuracy and
some of which might not even be anticipated. Future events, actual results and
performance financial and otherwise, could differ materially from those set
forth in or contemplated by the forward-looking statements herein. Factors that
could cause actual results to differ materially from those in forward-looking
statements include the terms of future property sales, investments and
financings, general economic and business conditions and various other risk
factors listed in the registration statement of Shelbourne Properties II, Inc.
filed with the Securities and Exchange Commission.

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

On February 14, 2002, the Companies announced the consummation of the
Transaction whereby the Companies (i) purchased each of the Advisory Agreements
between the Companies and PCIC and (ii) repurchased all of the shares of common
stock in the Companies held by PCIC (the "Shares").

Pursuant to the Transaction, Shelbourne paid PCIC $17,866,603 in cash and its
operating partnership, Shelbourne Properties II, L.P. issued preferred
partnership interests with an aggregate liquidation preference of $1,015,148 and
issued a note in the amount of $22,034,250.

The Transaction was unanimously approved by the Boards of Directors of each of
the Companies after recommendation by their respective Special Committees
comprised of the Companies' three independent directors.

Houlihan Lokey Howard & Zukin Capital served as financial advisor to the Special
Committees of the Companies and rendered a fairness opinion to the Special
Committees with respect to the Transaction.

Recent Developments
-------------------

On May 1, 2002, the operating partnerships of the Companies and certain of the
operating partnerships' subsidiaries entered into a $75,000,000 revolving credit
facility with Bayerische Hypo-Und Vereinsbank AG, New York Branch, as agent for
itself and other lenders (the "Credit Facility"). The Credit Facility has a term
of three years and is prepayable in whole or in part at any time without penalty
or premium. The Companies initially borrowed $73,330,075 under the Credit
Facility. The Company's share of the proceeds amounted to $29,776,349 of which
$22,034,250 was used to repay the note issued in the Transaction, $215,768 to
pay associated accrued interest and $837,629 to pay costs associated with the
Credit Facility. The excess proceeds of approximately $6,688,702 were deposited
into the Company's operating cash account. The Companies have the right, from
time to time, to elect an annual interest rate equal to (i) LIBOR plus 2.5% or
(ii) the greater of (a) the agent's prime rate or (b) the federal funds rate

                                       12
<PAGE>

plus 1.5%. The Companies are required to pay the lenders, from time to time, a
commitment fee equal to .25% of the unborrowed portion of the Credit Facility.

The Facility is secured by (i) a pledge by the operating partnerships of their
membership interest in their wholly-owned subsidiaries that hold their interests
in joint ventures with the other Companies and (ii) mortgages on certain real
properties owned directly or indirectly by the operating partnerships. All of
the properties of the Company are security for the Credit Facility, except for
its two real properties located in Illinois.

Under the terms of the Credit Facility, the Companies may only sell the pledged
property if certain conditions are met. In addition, the Companies must maintain
certain debt yield maintenance ratios and comply with restrictions relating to
engaging in certain equity financings, business combinations and other
transactions that may result in a change of control (as defined under the Credit
Facility).

The Companies are joint and severally liable under the Credit Facility but have
entered into a Contribution and Cross-Indemnification Agreement.

In addition, following a request by HX Investors, L.P. ("HX Investors") - the
largest stockholder of each the Companies and an entity controlled by Mr.
Michael Ashner - the board of directors of each Company waived a provision in
each Company's certificate of incorporation (as it applies to HX Investors) that
otherwise prohibits a stockholder from beneficially owning more than 8% of the
common stock of any of the Companies. Pursuant to the waiver, HX Investors may
beneficially own up to 12% of the common stock of each Company. Pursuant to a
Stockholder Agreement among the Companies, HX Investors and the general partner
of HX Investors, HX Investors agreed that until January 1, 2003, with respect to
all matters submitted for the approval of any Company's stockholders (1) with
the approval and recommendation of the Company's board of directors or (2) by HX
Investors or its affiliates, HX Investors and its affiliates would vote all
shares beneficially owned by them in excess of the 8% threshold in proportion to
the votes cast by the stockholders of the Company (including the 8% of the
shares beneficially owned by HX Investors). Mr. Ashner is associated with
Kestrel, the property manager for the Companies' properties.

The foregoing descriptions of the Stockholder Agreement and the Credit Facility
are qualified in their entirety by reference to such agreements, copies of which
are attached as Exhibits to our Current Report on Form 8-K filed on May 14,
2002, which is incorporated herein by reference.


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

The Company uses its working capital reserves and any cash from operations as
its primary source of liquidity. In addition to cash, unlike the Predecessor
Partnership, which could not incur indebtedness or issue additional equity, the
Company has as potential sources of liquidity capital raised by either borrowing
money on a long-term or short-term basis, or issuing additional equity
securities. Due to the restrictions on the incurrence of debt on the Predecessor
Partnership and the resulting lack of mortgage debt on the properties, it is
anticipated that the Company will have significantly enhanced capital resources
as compared to the Predecessor Partnership. The Company's use of these sources
of capital may result in the encumbrance of its current and future assets with
substantial amounts of indebtedness. As a result, the Company may have an
increased risk of default on its obligations and thus a decrease in its
long-term liquidity.

                                       13
<PAGE>

The Company had $8,485,863 in cash and cash equivalents at March 31, 2002. Cash
and cash equivalents are temporarily invested in short-term instruments. The
Company's level of liquidity is based upon cash and cash equivalents, which
decreased by $17,525,898 as compared to December 31, 2001. The decrease in cash
and cash equivalents is due to $17,866,603 paid to Presidio in connection with
the Transaction that was consummated on February 14, 2002 where the Company
repurchased 343,124 shares held by Presidio and the Advisory Agreements. The
Company also incurred expenses of $233,762 in improvements to real estate. These
expenditures were offset by $574,468 of cash provided by operating activities.
Currently, the Company's primary source of funds is cash flows from the
operation of its properties; principally rents received from tenants, which
amounted to $3,085,623 for the three months ended March 31, 2002. In addition,
to the extent the Company were to acquire additional assets, its cash flow from
operations would be derived from a larger, more diverse, and potentially riskier
group of assets than what is currently owned. Likewise, the Company's ability to
pay dividends may be affected by the leveraging of its assets and reinvestment
of sale and financing proceeds for the acquisition of additional assets.

For the three months ended March 31, 2002, the Company made payments amounting
to $233,762 in capital expenditures that were funded from cash flow and the
Company's working capital reserves. In addition to tenant improvements at the
properties, capital expenditures consisted of facade repairs, suite preparation
at 568 Broadway and frontage repairs at our Matthews Festival property due to a
recent car accident.

The budgeted expenditures for 2002 capital improvements and capitalized tenant
procurement cost in 2002 are an aggregate of $2,011,826. These costs are to be
incurred in the normal course of business and funded from cash flows from the
operation of the properties and working capital reserves that are temporarily
invested in short-term money market instruments, as well as other sources of
capital , which could include financing proceeds and the issuance of additional
equity. However, the actual amount of such expenditures depends upon the level
of leasing activity and other factors that cannot be predicted with certainty.
In the event that the Company were to purchase additional real estate assets or
incur additional mortgage indebtedness, the Company's expenses would increase,
which would raise the risk that the Company would be unable to fund the
necessary capital and tenant procurement costs at its properties.

Except as discussed herein, management is not aware of any other trends, events,
commitments or uncertainties that will have a significant impact on the
Company's liquidity. If, however, real estate market conditions deteriorate in
any areas where the properties are located, there is substantial risk that
future cash flow may be insufficient to fund the capital improvements and lease
procurement costs of the properties. In that event, the Company would utilize
its remaining working capital reserves, reduce distributions, raise additional
capital through financing or the issuance of equity, or sell one or more
properties.

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

Three months ended March 31, 2002 vs. March 31, 2001
----------------------------------------------------

Net income

Excluding one-time expenses relating to the Transaction, net income decreased by
$495,274, or 55%, to $397,402 for the three months ended March 31, 2002 from
$892,676 for the same period in 2001. This decrease in net income was due to an
increase of legal fees of approximately $400,000 for this quarter

                                       14
<PAGE>

over the same period in 2001, which were largely incurred in relation to the
Transaction and, therefore, may be one-time expenses as well. The decrease in
net income was also due to an increase in operating expenses of $107,620
primarily attributable to an increase in insurance costs due to increased
insurance rates as a result of the terrorist attacks of September 11, 2001 and
to the incurrence of additional real estate taxes. This decrease in net income
was partially offset by the fourth quarter 2001 sale of Commonwealth Industrial
Park. When taking into account the one-time expenses related to the Transaction,
net income decreased by a total of $23,672,429 for the three months ended March
31, 2002 as compared to the three months ended March 31, 2001. The Company paid
$23,049,398 in relation to the Transaction, consisting of a note payable in the
amount of $22,034,250 and the issuance of Class A 5% cumulative preferred
partnership interests with a liquidation value of $1,015,148.

Income

Income decreased $143,761, or 4.4%, to $3,157,871 for the three months ended
March 31, 2002 from $3,301,632 for the same period in 2001 primarily due to the
decrease in interest income and other income. These decreases were partially
offset by a rental revenue increase of $31,364. Interest income decreased by
$161,873, or 69.3%, to $71,700 for the three months ended March 31, 2002 due to
significantly lower cash balances during that time as compared to the same
period in 2001 due to the Transaction. Other income decreased for the three
months ended March 31, 2002 as compared to the same period ended March 31, 2001
by $13,252 due to the absence in the first quarter of 2002, as a result of the
conversion of the Predecessor Partnership into a REIT, of transfer fees that
were previously generated by the transfer of partnership interests.

Rental Revenues

Rental revenues increased by $31,364, or 1%, to $3,085,623 for the three-months
ended March 31, 2002 from $3,054,259 for the same period in 2001. This is
primarily due to increased base rental rates at 568 Broadway. Rental revenues as
a whole decreased, however, due to the loss of rental revenue following the sale
of Commonwealth Industrial Park on December 6, 2001.

Costs and expenses

Total costs and expenses, including interest expense, for the three months ended
March 31, 2002, amounted to $25,937,624, an increase of $23,528,66 as compared
to the same period in 2001, primarily due to payments in connection with the
Transaction. Of this total, recurring costs and expenses, including interest
expense, amounted to $2,760,469 for the three months ended March 31, 2002, an
increase of $351,513, or 14.6%, from the $2,408,956 incurred for the same period
in 2001. This increase in recurring costs and expenses is attributable to an
increase in operating expenses and administrative expenses unrelated to the
Transaction. The Company also incurred a one-time expense of $23,049,398 in
connection with the Transaction and interest expense of $127,757 on the note
issued in the Transaction. Legal fees for this period, which were largely
attributable to the Transaction, were approximately $400,000 higher as compared
to legal expenses incurred in the first quarter of 2001.

Operating expenses increased by $107,620, or 11.5%, to $1,041,401 for the three
months ended March 31, 2002 from $933,781 for the same period of 2001 due to an
increase in insurance costs as a result of the increased rates in the insurance
industry generally and an increase in the amount of real estate taxes paid.
Expenses related to depreciation and amortization decreased slightly for the
three months ended March 31, 2002 as compared to the same period in 2001
primarily due to the fourth quarter 2001 sale of a property, Commonwealth
Industrial Park. The Commonwealth sale is also primarily responsible for the

                                       16

<PAGE>

slight decrease in property management fees. The decrease is partially offset by
increased collections at 568 Broadway. Expenses related to asset management fees
decreased by $132,416, or 40%, to $199,232 for the three months ended March 31,
2002 from $331,648 for the same period in 2001. The $331,648 in asset management
fees for the first quarter of 2001 were paid to the managing general partner of
the Predecessor Partnership. For the first quarter of 2002, the $199,232 in
asset management fees were paid to Shelbourne Management prior to February 14,
2002 and to PCIC thereafter in accordance with PCIC's agreement to provide
transition services to the Company upon the consummation of the Transaction.

Inflation

Inflation is not expected to have a material impact on the operations or
financial position of the Company.

Funds From Operations
---------------------

Management believes that Funds From Operations ("FFO") is helpful to investors
as a measure of the performance of an equity REIT because, along with cash flows
from operating activities, financing activities and investing activities, it
provides investors with an understanding of the ability of the Company to incur
and service debt, to make capital expenditures and to fund other cash needs.

FFO, which is a commonly used measurement of the performance of an equity REIT,
as defined by the National Association of Real Estate Investment Trusts, Inc.
("NAREIT"), is net income (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from debt restructurings,
asset valuation provisions and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures.

The Company's FFO may not be comparable to FFO reported by other REITs that do
not define the term in accordance with the current NAREIT definition or that
interpret the NAREIT definition differently. FFO does not represent cash
generated from operating activities determined in accordance with accounting
principles generally accepted in the United States and should not be considered
as an alternative to net income (determined in accordance with accounting
principles generally accepted in the United States) as a measure of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make cash distributions.

FFO for the three month periods ended March 31, 2002 and 2001 are summarized in
the following table:
<TABLE>
<CAPTION>

                                                               Three Months Ended
                                                       March 31, 2002      March 31, 2001
                                                       --------------  --------------

<S>                                                     <C>                <C>
            Net (Loss) Income (A)                       $(22,779,753)        $892,676

            Plus:  Depreciation and
            Amortization related to real estate              539,856          559,411
                                                            --------          -------

            Funds From Operations (A)                   $(22,239,897)      $1,452,087
                                                        =============      ==========
</TABLE>

(A) Net Income and Funds From Operations include $23,049,398 related to the
purchase of the Advisory Agreements.

                                       16

<PAGE>


Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary market risk we face is interest rate sensitivity. Our long-term debt
bears interest at a floating rate, and therefore we are exposed to the risk of
interest rate changes. At May 13, 2002, borrowings under our secured revolving
credit facility totaled $29,776,349 million and initially bore an interest rate
of LIBOR plus 2.5%. Based on the balance outstanding on our credit facility at
May 13, 2002 and the interest rate at that date, a 10% increase in LIBOR would
increase our interest expense in 2002 by approximately $36,500. Conversely, a
10% decrease in LIBOR would decrease our interest expense in 2002 by the same
amount. The gain or loss we ultimately realize with respect to interest rate
fluctuations will depend on the actual interest rates during that period. We do
not believe that we have any risk related to derivative financial instruments.

                                       17

<PAGE>


PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

On February 22, 2002, Carl Icahn and Longacre Corp. brought a derivative
shareholder suit in the New York State Supreme Court against NorthStar Capital
Investment Corp., PCIC, Shelbourne Management, Peter W. Ahl, David Hamamoto,
David G. King, Jr., Dallas E. Lucas, W. Edward Scheetz, Michael T. Bebon, Donald
W. Coons and Robert Martin, and nominal defendants the Company, Shelbourne
Properties I, Inc. and Shelbourne Properties III, Inc. for, inter alia, breach
of fiduciary duties relating to the approval of the stock repurchase transaction
between the Company and NorthStar Capital Investment Corp. On March 4, 2002,
Icahn and Longacre brought a motion for expedited discovery, reversal of
priority of discovery and injunctive relief by Order to Show Cause. Thereafter,
the defendants moved to dismiss the case for, among other reasons, the failure
to make a demand on the Board of Directors prior to commencing the action. At a
hearing held on March 11, the court authorized limited discovery in connection
with defendant's motion to dismiss. The parties have conducted the expedited
discovery, and a court conference on the defendants' motion to dismiss is
scheduled for May 24, 2002.

Carl Icahn and Longacre Corp. also filed a complaint in Delaware against the
Company in May 2002 seeking to compel an annual stockholders meeting and for
injunctive relief. The Company has not yet been served with this complaint.

In addition, two shareholder derivative actions were filed in Delaware against
the same defendants in March 2002. Those actions have now been consolidated, and
defendants have moved to dismiss the consolidated action. On or about May 7,
2002, the plaintiffs in the consolidated Delaware actions filed a new complaint
seeking to compel an annual stockholders meeting and for injunctive relief. The
complaint also alleges a breach of fiduciary duties in connection with the
reconstitution of the classes of the Company's board of directors in relation to
the stock repurchase transaction.

With respect to the allegations in the lawsuits, we believed at the time the
Special Committee approved the transaction, and we continue to believe, that the
stock repurchase was fair and reasonable and in the best interests of the
Company and its shareholders.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibits furnished pursuant to the requirements of Form 10-Q:

Number                              Description
------                              -----------

(3.1)       Amended and Restated Certificate of Incorporation of the Company*

(3.2)       Amended and Restated Bylaws of the Corporation*

(4.1)       Amended and Restated Agreement of Limited Partnership of the
            operating partnership*

(4.2)       Shareholder Rights Agreement*

(4.3)       Amendment to Shareholder Rights Agreement**

(4.4)       Certificate of Designations, Preferences and Rights of Series A
            Preferred Stock*


                                       18

<PAGE>

(4.5)       Stockholder Agreement, among the Companies and HX Investors, LP and
            Exeter Capital Corporation, dated as of April 30, 2002***

(10.1)      Revolving Credit Agreement, dated as of April 30, 2002, among the
            operating partnerships of the Companies, such operating
            partnerships' wholly-owned subsidiaries, the lenders from time to
            time party thereto and Bayerische Hypo-Und Vereinsbank AG, New York
            branch, as agent for itself and the other lenders. ***

(10.2)      Promissory note, dated April 30, 2002, issued by the operating
            partnerships of the Companies and such operating partnerships'
            wholly-owned subsidiaries in favor of each lender in the aggregate
            principal amount of $75,000,000. ***

(10.3)      Cash Management Agreement, dated as of April 30, 2002, among the
            operating partnerships of the Companies, such operating
            partnerships' wholly-owned subsidiaries, the agent and Deposit Bank
            (as defined therein), as the same may be amended, restated,
            replaced, supplemented or otherwise modified from time to time. ***

(10.4)      Contribution and Cross-Indemnification Agreement, dated as of April
            30, 2002, among the operating partnerships of the Companies and such
            operating partnerships' wholly-owned subsidiaries. ***

(10.5)      Pledge and Security Agreement, dated as of April 30, 2002, by the
            operating partnerships of the Companies and such operating
            partnerships' wholly-owned subsidiaries in favor of the lenders. ***

(10.6)      Form of Mortgage, dated as of April 30, 2002, issued by Shelbourne
            Properties II, Inc.to Bayerische Hypo- Und Vereinsbank AG, New York
            Branch, as agent for itself and other lenders, with respect to its
            real property located in Richmond, Virginia, Matthews, North
            Carolina and Raleigh, North Carolina. ***

(99.1)      Partnership Unit Designation of the Class A Preferred Partnership
            Units of the Operating Partnership. **

*    incorporated by reference to the Registration Statement of the Company on
     Form S-4 filed on February 11, 2000, as amended
**   incorporated by reference to the Current Report of the Company on Form 8-K
     filed on February 14, 2002
***  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on May 14, 2002.

(b) Reports on Form 8-K

The following reports on Form 8-K were filed on behalf of the Registrant during
     the quarter ended March 31, 2002:

(i)  Press release announcing the purchase of (i) advisory agreements between
        the Companies and an affiliate of Presidio Capital Investment Corp. and
        (ii) the repurchase of all of the shares of capital stock in the
        Companies held by a subsidiary of Presidio Capital Investment Corp.

Items Reported: 5

Date Filed: February 14, 2002


                                       19
<PAGE>




                                   SIGNATURES

 Pursuant to the requirements of the Securities Exchange Act of 1934, the
 Registrant has duly caused this report to be signed on its behalf by the
 undersigned thereunto duly authorized.

                            Shelbourne Properties II, Inc.
                            (Registrant)


Dated:  May 15, 2002        By:  /s/ Dallas E. Lucas
                                 ----------------------------------------
                                 Dallas E. Lucas
                                 Authorized Signatory and Treasurer
                                (Principal Financial and Accounting Officer)

                                       20

<PAGE>


                                  EXHIBIT INDEX

Number                          Description
------                          -----------

(3.1)   Amended and Restated Certificate of Incorporation of the Company*
(3.2)   Amended and Restated Bylaws of the Corporation*
(4.1)   Amended and Restated Agreement of Limited Partnership of the operating
        partnership*
(4.2)   Shareholder Rights Agreement*
(4.3)   Amendment to Shareholder Rights Agreement**
(4.4)   Certificate of Designations, Preferences and Rights of Series A
        Preferred Stock*
(4.5)   Stockholder Agreement, among the Companies and HX Investors, LP and
        Exeter Capital Corporation, dated as of April 30, 2002***
(10.1)  Revolving Credit Agreement, dated as of April 30, 2002, among the
        operating partnerships of the Companies, such operating partnerships'
        wholly-owned subsidiaries, the lenders from time to time party thereto
        and Bayerische Hypo-Und Vereinsbank AG, New York branch, as agent for
        itself and the other lenders. ***
(10.2)  Promissory note, dated April 30, 2002, issued by the operating
        partnerships of the Companies and such operating partnerships'
        wholly-owned subsidiaries in favor of each lender in the aggregate
        principal amount of $75,000,000. ***
(10.3)  Cash Management Agreement, dated as of April 30, 2002, among the
        operating partnerships of the Companies, such operating partnerships'
        wholly-owned subsidiaries, the agent and Deposit Bank (as defined
        therein), as the same may be amended, restated, replaced, supplemented
        or otherwise modified from time to time. ***
(10.4)  Contribution and Cross-Indemnification Agreement, dated as of April 30,
        2002, among the operating partnerships of the Companies and such
        operating partnerships' wholly-owned subsidiaries. ***
(10.6)  Pledge and Security Agreement, dated as of April 30, 2002, by the
        operating partnerships of the Companies and such operating partnerships'
        wholly-owned subsidiaries in favor of the lenders. ***
(10.7)  Form of Mortgage, dated as of April 30, 2002, issued by Shelbourne
        Properties II, Inc.to Bayerische Hypo- Und Vereinsbank AG, New York
        Branch, as agent for itself and other lenders, with respect to its real
        property located in Richmond, Virginia, Matthews, North Carolina and
        Raleigh, North Carolina. ***
(99.1)  Partnership Unit Designation of the Class A Preferred Partnership Units
        of the Operating Partnership. **

*    incorporated by reference to the Registration Statement of the Company on
     Form S-4 filed on February 11, 2000, as amended
**   incorporated by reference to the Current Report of the Company on Form 8-K
     filed on February 14, 2002
***  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on May 14, 2002.


                                       21