<PAGE>


================================================================================

                                  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 SEPTEMBER 30, 2002

                         Commission file number 0-16345


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


              Delaware                                           04-3502384
              --------                                           ----------
(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 November 13, 2002, there were 839,286 shares of common stock outstanding.

================================================================================


                                       1


<PAGE>


The financial information contained in this Form 10-Q for the periods prior to
April 18, 2001 are those of Shelbourne Properties I, Inc.'s predecessor in
interest, Integrated Resources High Equity Partners, Series 85, A California
Limited Partnership (the "Predecessor Partnership"). On April 18, 2001, the
Predecessor Partnership was merged with and into Shelbourne Properties I, L.P. a
limited partnership wholly owned, directly and indirectly, by Shelbourne
Properties I, Inc.

                                      INDEX

                                                                            Page
                                                                            ----
    Part I.  Financial Information
    Item 1. Condensed Consolidated Financial Statements:

         Condensed Consolidated Balance Sheets -
            September 30, 2002 and December 31, 2001.......................   3

         Condensed Consolidated Statements of Operations -
           Three and Nine Months Ended September 30, 2002 and 2001.........   4

         Condensed Consolidated Statement of Equity -
             Nine Months Ended September 30, 2002..........................   5

         Condensed Consolidated Statements of Cash Flows -
             Nine Months Ended September 30, 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...........................  17

    Item 3.  Quantitative and Qualitative Disclosures about Market Risk....  28

    Item 4.  Controls and Procedures.......................................  28


    Part II. Other Information:

    Item 1.  Legal Proceedings.............................................  29

    Item 6.  Exhibits and Reports on Form 8-K..............................  30

    Signatures.............................................................  32

    Certifications.........................................................  33

    Exhibit Index..........................................................  37




                                       2
<PAGE>


                               SHELBOURNE PROPERTIES I, INC.
                               FORM 10Q - SEPTEMBER 30, 2002

                           CONDENSED CONSOLIDATED BALANCE SHEETS
                           (SEE NOTE 1 - BASIS OF PRESENTATION)

<TABLE>
<CAPTION>
                                                               (UNAUDITED)
                                                              September 30,           December 31,
                                                                   2002                   2001
                                                               ------------           ------------
<S>                                                            <C>                    <C>
ASSETS

Real estate, net                                               $ 18,826,307           $ 31,783,227
Cash and cash equivalents                                         2,638,372             14,191,726
Other assets                                                      1,687,599              3,013,830
Receivables, net                                                    165,574                279,777
Investment in joint ventures                                     19,347,023                      -
                                                               ------------           ------------
TOTAL ASSETS                                                   $ 42,664,875           $ 49,268,560
                                                               ============           ============
LIABILITIES AND EQUITY

Accounts payable and accrued expenses                          $    709,024           $    783,308
Other liabilities                                                 1,978,222                      -
Note payable                                                     23,832,274                      -
                                                               ------------           ------------
Total Liabilities                                                26,519,520                783,308
                                                               ------------           ------------
COMMITMENTS AND CONTINGENCIES

CLASS B PARTNERSHIP INTERESTS                                             -                      -
                                                               ------------           ------------
CLASS A 5% PREFERRED PARTNERSHIP INTERESTS,
   AT LIQUIDATION VALUE                                             812,674                      -
                                                               ------------           ------------
EQUITY

Common Stock:
   $.01 par value share; authorized 2,500,000 shares;
   issued 1,263,189 shares; outstanding 839,286 and
   1,263,189, respectively                                           12,632                 12,632
Additional capital                                               48,072,897             48,072,897
Treasury stock, at cost                                         (14,303,060)
Retained earnings                                               (18,449,788)               399,723
                                                               ------------           ------------
Total Equity                                                     15,332,681             48,485,252
                                                               ------------           ------------
Total Liabilities and Equity                                   $ 42,664,875           $ 49,268,560
                                                               ============           ============
</TABLE>

           See notes to condensed consolidated financial statements.


                                       3
<PAGE>


                                        SHELBOURNE PROPERTIES I, INC.
                                        FORM 10Q - SEPTEMBER 30, 2002
                               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                    (SEE NOTE 1 - BASIS OF PRESENTATION)
                                                 (UNAUDITED)

<TABLE>
<CAPTION>
                                                       FOR THE THREE MONTHS ENDED          FOR THE NINE MONTHS ENDED

                                                    September 30,     September 30,       September 30,    September 30,
                                                        2002               2001               2002              2001
                                                    -------------     -------------       -------------    -------------
<S>                                                <C>                <C>               <C>                <C>
Rental revenues                                    $    914,766       $  2,414,141      $  3,392,446       $  7,906,552
                                                   ------------       ------------      ------------       ------------
Cost and Expenses

     Operating expenses                                 387,474            928,904         1,201,084          2,637,555
     Depreciation and amortization                      263,082            398,976           697,004          1,140,975
     Asset management fee                                     -            268,799           135,805            799,893
     Transition management fee                           83,300                  -           208,250                  -
     Purchase of advisory agreements                          -                  -        18,452,133                  -
     Administrative expenses                            688,257            123,921         3,731,224            805,259
     Property management fee                             27,412             71,572            98,699            236,256
                                                   ------------       ------------      ------------       ------------
                                                      1,449,525          1,792,172        24,524,199          5,619,938
                                                   ------------       ------------      ------------       ------------
(Loss) income before equity income from joint
     ventures, interest and other income               (534,759)           621,969       (21,131,753)         2,286,614

     Equity income from joint ventures                1,050,495                  -         2,858,674                  -
     Interest expense                                  (254,333)                 -          (596,335)                 -
     Interest income                                     11,953            115,411            39,760            447,931
     Other income                                         1,927             11,291             5,878             29,257
                                                   ------------       ------------      ------------       ------------
Net income (loss)                                       275,283            748,671       (18,823,776)         2,763,802
Preferred dividends                                     (10,384)                 -           (25,735)                 -
                                                   ------------       ------------      ------------       ------------
Net income (loss) available for common shares      $    264,899       $    748,671      $(18,849,511)      $  2,763,802
                                                   ============       ============      ============       ============
EARNINGS PER SHARE - BASIC AND DILUTED

Net income (loss) per common share                 $       0.32       $       0.59      $     (20.73)      $       2.19
                                                   ============       ============      ============       ============
Weighted average common shares                          839,286          1,263,189           909,160          1,263,189
                                                   ============       ============      ============       ============
</TABLE>


           See notes to condensed consolidated financial statements.


                                       4

<PAGE>


                                            SHELBOURNE PROPERTIES I, INC.
                                            FORM 10Q - SEPTEMBER 30, 2002

                                     CONDENSED CONSOLIDATED STATEMENT OF EQUITY
                                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                       COMMON         ADDITIONAL          TREASURY            RETAINED
                                       STOCK           CAPITAL             STOCK              EARNINGS               TOTALS
                                       -----           -------             -----              --------               ------
<S>                                   <C>            <C>                <C>                  <C>                  <C>
Balance, January 1, 2002              $12,632        $48,072,897        $          -         $    399,723         $ 48,485,252

Purchase of treasury stock                  -                  -         (14,303,060)                   -          (14,303,060)

Preferred dividends                         -                  -                   -              (25,735)             (25,735)

Net loss                                    -                  -                   -          (18,823,776)         (18,823,776)
                                      -------        -----------        ------------         ------------         ------------

Balance, September 30, 2002           $12,632        $48,072,897        $(14,303,060)        $(18,449,788)        $ 15,332,681
                                      =======        ===========        ============         ============         ============
</TABLE>















           See notes to condensed consolidated financial statements.


                                       5

<PAGE>

                                          SHELBOURNE PROPERTIES I, INC.
                                          FORM 10Q - SEPTEMBER 30, 2002

                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              FOR THE NINE MONTHS ENDED
                                                                                     SEPTEMBER 30,
                                                                          ----------------------------------
                                                                              2002                  2001
                                                                          ------------          ------------
<S>                                                                       <C>                   <C>
CASH FLOW FROM OPERATING ACTIVITIES:

Net (loss) income                                                         $(18,823,776)         $  2,763,802
Adjustments to reconcile net (loss) income
   to net cash provided by operating activities:
       Depreciation and amortization                                           697,004             1,140,975
       Straight-line adjustment for stepped
           lease rentals                                                        18,984                23,395
       Increase in bad debt reserve                                             76,882                     -
       Purchase of advisory agreement                                       18,452,133                     -
       Equity income from joint ventures                                    (2,858,674)                    -

Change in assets and liabilities:
       Accounts payable and accrued expenses                                   326,921               382,770
       Other liabilities                                                     1,978,222                     -
       Receivables                                                            (107,206)              (98,467)
       Due to affiliates                                                             -              (396,320)
       Other assets                                                          4,190,522              (278,352)
                                                                          ------------          ------------
Net Cash Provided by Operating Activities                                    3,951,012             3,537,803
                                                                          ------------          ------------
CASH FLOW FROM INVESTING ACTIVITIES -
       Improvements to real estate                                             (85,144)             (965,127)
                                                                          ------------          ------------
CASH FLOW FROM FINANCING ACTIVITIES:
       Purchase of treasury stock                                          (14,303,060)                    -
       Proceeds from note payable                                           23,832,274                     -
       Payoff of note payable                                              (17,639,459)                    -
                                                                          ------------          ------------
Net Cash Used in Financing Activities                                       (8,110,245)                    -
                                                                          ------------          ------------
(Decrease) increase in cash and cash equivalents                            (4,244,377)            2,572,676
                                                                          ------------          ------------
Cash and cash equivalents, beginning of year                                14,191,726            13,229,944
Cash and cash equivalents related to investment in joint ventures           (7,308,977)                    -
                                                                          ------------          ------------
Adjusted cash and cash equivalents, beginning of year                        6,882,749            13,229,944
                                                                          ------------          ------------
Cash and cash equivalents, end of quarter                                 $  2,638,372          $ 15,802,620
                                                                          ============          ============
Supplemental Disclosure of Cash Flow Information:

       Cash Paid for Interest                                             $    596,335          $          -
                                                                          ============          ============
</TABLE>

           See notes to condensed consolidated financial statements.

                                       6
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

L.       BASIS OF PRESENTATION

         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 10-K of Shelbourne Properties I, Inc., a Delaware
         corporation (the "Company"), for the year ended December 31, 2001.

         As a result of the Company's incurring debt, the Company is no longer
         allowed to account for its investments in joint ventures on a pro-rata
         consolidation basis. The Company must instead utilize the equity method
         of accounting. As required, the Company's condensed consolidated
         statements of operations reflect the equity method of accounting
         subsequent to January 1, 2002 and the pro-rata consolidation prior to
         that date. (See Note 2 - Investment in Joint Ventures).

         The financial information contained herein is condensed and 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 and nine months ended September 30, 2002 are not
         necessarily indicative of the results to be expected for the entire
         year.

         As a result of the approval of the Plan of Liquidation (See Note 11 -
         Subsequent Events), the Company will adopt liquidation accounting
         during the last quarter of 2002.


2.       SIGNIFICANT ACCOUNTING POLICIES

         Cash Equivalents

         Cash equivalents consist of short-term, highly liquid debt instruments
         with maturities of three months or less at acquisition. Items
         classified as cash equivalents include insured bank certificates of
         deposit and commercial paper. At times, cash balances at a limited
         number of banks may exceed insurable amounts. The company believes it
         mitigates its risk by investing in or through major financial
         institutions.

         Accounts Receivable

         Accounts receivable are stated net of allowance for doubtful accounts
         of $89,656 and $92,074 as of September 30, 2002 and December 31, 2001,
         respectively.

         Investment in Joint Ventures

         Certain properties are owned in joint ventures with Shelbourne
         Properties II, L.P. and/or Shelbourne Properties III, L.P. Prior to
         April 30, 2002, 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 presented the
         assets, liabilities, revenues and expenses of the joint ventures on a
         pro rata basis in accordance with the Company's percentage of
         ownership.

                                       7
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         After April 30, 2002, as a result of the Company's incurring debt in
         connection with entering into the Note Payable discussed in 8, the
         Company is no longer allowed to account for its investments in joint
         ventures on a pro-rata consolidation basis in accordance with its
         percentage of ownership but must instead utilize the equity method of
         accounting. Accordingly, the Company's condensed consolidated balance
         sheet at September 30, 2002 and the Company's condensed consolidated
         statements of operations for the three and nine month period ended
         September 30, 2002 reflect the equity method of accounting.

         If the change to equity accounting had been reflected upon the December
         31, 2001 condensed consolidated balance sheet, the changes would have
         been to reduce real estate by $12.5 million, cash and cash equivalents
         by $7.3 million, receivables by $0.1 million, accounts payable and
         accrued expenses by $0.4 million and to increase other assets by $3.1
         million and investment in joint ventures by $16.4 million.

         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 evaluates 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, managementtakes 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 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 18, 2001
         did not affect the tax basis of the assets and were not included in the
         determination of taxable income or loss. No additional write-downs have
         been recorded since the effective date of the conversion.

         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.

                                       8
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         Deferred Leasing and Loan Costs

         Cost incurred in the execution of new tenant leases and renewals of
         existing leases are amortized over the life of the lease using a
         straight lined method. All un-amortized costs, due to early termination
         or eviction of existing tenant, are expensed.

         Costs incurred with obtaining debt are amortized over the life of the
         debt.

         Treasury Stock

         Treasury stock is stated at cost.

         Amounts Per Share

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

         Recently Issued Accounting Pronouncements

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
         Statement of Financial Accounting Standards ("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 materially effect
         the Company's financial statements.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
         Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and
         Technical Corrections," which updates, clarifies and simplifies
         existing accounting pronouncements. In part, this statement rescinds
         SFAS 4, "Reporting Gains and Losses from Extinguishment of Debt." FASB
         No. 145 will be effective for fiscal years beginning after May 15,
         2002. Under adoption, enterprises must reclassify prior period items
         that do not meet the extraordinary item classification criteria in APB
         opinion No. 30. The Company does not expect that this statement will
         have an effect on the Company's financial statements.

                                       9
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal Activities." SFAS No. 146 requires
         companies to recognize costs associated with exit or disposal
         activities when they are incurred rather than at the date of a
         commitment to an exit or disposal plan. Examples of costs covered by
         the standard include lease termination costs and certain employee
         severance costs that are associated with a restructuring, discontinued
         operation, plant closing or other exit or disposal activity. SFAS No.
         146 is effective prospectively for exit and disposal activities
         initiated after December 31, 2002 with earlier adoption encouraged. The
         Company does not expect that this statement will have a material effect
         on the Company's financial statements.

3.       RELATED PARTY TRANSACTIONS

         On February 14, 2002, the Company, Shelbourne Properties II, 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 423,903
         shares of the Company's common stock held by subsidiaries of PCIC. PCIC
         is controlled and principally owned by affiliates of former senior
         management of the Company. Pursuant to the transaction, the Company
         paid PCIC $14,303,060 in cash and the Company's operating partnership,
         Shelbourne Properties I, L.P., issued preferred partnership interests
         with an aggregate liquidation preference of $812,674 and a note in the
         amount of $17,639,459. 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 their respective 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 July 1, 2002 to September 30, 2002, the
         Company paid $83,300 for transition services and for the period from
         February 15, 2002 to September 30, 2002, the Company paid PCIC $208,250
         for transition services. As a result of the settlement of the lawsuit
         brought by HX Investors, L.P. (see Note 10) this agreement was
         terminated effective September 30, 2002. Effective October 1, 2002,
         Kestrel Management L.P. ("Kestrel"), an affiliate of the Companies,
         entered into an agreement with the Companies to provide the services
         that PCIC had previously provided for a fee of $600,000 per year,
         $50,000 per month, allocated equally among the Companies.

         Prior to the Transaction, under the terms of the Advisory Agreements,
         Shelbourne Management provided the Company with all management and
         advisory 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.


                                       10
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         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 $18,750. 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 $135,805.

         On April 18, 2001, High Equity Partners LP Series 85, (the "Predecessor
         Partnership") was converted into a Real Estate Investment Trust. With
         the conversion, the managing general partner of the Predecessor
         Partnership was no longer entitled to receive fees for the
         administration of the Predecessor Partnership. As of the conversion
         date, Shelbourne Management was entitled to receive the fees formerly
         paid to the managing general partner. During the three months ended
         September 30, 2001, Shelbourne Management received $37,500 for
         non-accountable expenses and $268,799 for the asset management fee. For
         the nine months ended September 30, 2001, the managing general partner
         received $44,583 and Shelbourne Management received $67,917 for
         non-accountable expense. For the nine months ended September 30, 2001,
         the managing general partner received $314,102 and Shelbourne
         Management received $485,791 for the asset management fee.

         Since October 2000, Kestrel has performed all property management
         services directly for the Predecessor Partnership and, as of April 18,
         2001, the Company. The Transaction did not have any effect on the
         property management services contract between the Company and Kestrel.
         For the three months ended September 30, 2002, Kestrel earned $82,589
         that consists of $27,412 earned from wholly owned properties and
         $55,177 earned from joint venture investment properties. For the three
         months ended September 30, 2001, Kestrel earned $71,572 that consists
         of $24,911 earned from wholly owned properties and $46,661 earned from
         joint venture investment properties. For the nine months ended
         September 30, 2002, Kestrel earned $256,508 that consists of $98,699
         earned from wholly owned properties and $157,809 earned from joint
         venture investment properties. For the nine months ended September 30,
         2001, Kestrel earned $236,256 that consists of $96,343 earned from
         wholly owned properties and $139,913 earned from joint venture
         investment properties.

         At September 30, 2002, $1,978,222 of payables to related joint ventures
         are included in other liabilities.





                                       11
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


4.       REAL ESTATE

         The following table is a summary of the Company's real estate as of
         September 30, 2002:

                                          SEPTEMBER 30, 2002  DECEMBER 31, 2001
                                          ------------------  -----------------
                                              (UNAUDITED)

         Land                                 $  7,505,421      $ 10,370,965
         Building and improvements              20,978,672        39,444,906
                                              ------------      ------------
                                                28,484,093        49,815,871
         Less: Accumulated depreciation         (9,657,786)      (18,032,644)
                                              ------------      ------------
                                              $ 18,826,307      $ 31,783,227
                                              ============      ============


         See Note 2 "Investment in Joint Ventures" for the impact on real estate
         as a result of the change to equity accounting for joint ventures


5.       INVESTMENT IN JOINT VENTURES

         The Company invests in three joint ventures, (568 Broadway, Century
         Park and Seattle Landmark) which are accounted for under the equity
         method. The joint ventures' condensed consolidated statements of
         operations for the three and nine months ended September 30, 2002, are
         as follows:


                                             FOR THE THREE       FOR THE NINE
                                             MONTHS ENDED        MONTHS ENDED
                                          SEPTEMBER 30, 2002  SEPTEMBER 30, 2002
                                          ------------------  ------------------
    Rental revenues                            $ 4,583,300        $12,861,458
    Costs and expenses                           2,021,132          6,030,951
                                               -----------        -----------
    Income before interest and other income      2,562,168          6,830,507
    Interest Income                                 16,686             62,470
                                               -----------        -----------
    Net income from joint ventures             $ 2,578,854        $ 6,892,977
                                               ===========        ===========
    Equity income from joint ventures for
    Shelbourne Properties I, Inc.              $ 1,050,495        $ 2,858,674
                                               ===========        ===========


6.       FEDERAL INCOME TAX CONSIDERATIONS

         As of April 18, 2001, the Predecessor Partnership was converted into a
         corporation that elected 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 are 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.


                                       12
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


7.       CONVERSION

         As the first step in reorganizing the Predecessor Partnership into a
         publicly-traded REIT, 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 the Predecessor Partnership seeking
         their consent to the reorganization of the 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 18, 2001 the conversion was accomplished by merging the
         Predecessor Partnership into the operating partnership. Pursuant to the
         merger, each limited partner received three shares of stock of the
         Company for each unit they owned, and the general partners received an
         aggregate of 63,159 shares of stock of the Company in exchange for
         their general partner interests. The common stock of the Company is
         listed on the American Stock Exchange under the symbol HXD.


8.       NOTE PAYABLE

         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 (referred to as the
         "Credit Facility" or the "Note Payable"). 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 $23,832,274, of which $17,639,459 was used to
         repay the note issued in the Transaction, $172,733 to pay associated
         accrued interest and $667,145 to pay costs related to the Credit
         Facility. The excess proceeds of $5,352,937 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
         1.5% for the portion of the Note Payable secured by mortgages on
         certain real properties (Conversion rate) (ii) LIBOR plus 2.5% for the
         portion of the Note Payable secured by a pledge of partnership
         interests (LIBOR rate) or (iii) the greater of (a) agent's prime rate
         or (b) the federal funds rate plus 1.5% (Base rate). 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. There has
         been no fee paid to date. Interest is payable monthly in arrears. The
         interest rate at September 30, 2002 was approximately 4.16%.

         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
         Company and (ii) mortgages on certain real properties owned directly or
         indirectly by the operating partnerships. All of the properties of the
         Companies are security for the Credit Facility.

         Under the terms of the Credit Facility, the Companies may only sell the
         pledged property if certain conditions are met. If properties are sold,
         the Companies must pay a fixed release amount to the lender except in
         the case of core properties, which have been defined as 568 Broadway,
         Century Park, Seattle Tower and Southport, in which case the Companies
         must pay the lender the greater of the net proceeds or the release
         amount. In addition, the Companies must maintain


                                       13
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         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.


9.       CLASS A 5% PREFERRED PARTNERSHIP INTEREST

         In connection with the Transaction, the Company's operating partnership
         issued to Shelbourne Management 812.674 Class A 5% Preferred
         Partnership Units (the "Class A Units"). The Class A Units entitle the
         holder to a quarterly distribution equal to 1.25% of the aggregate
         liquidation preference of the Class A Units ($812,674). In addition,
         upon the liquidation of the operating partnership, each Class A Unit is
         entitled to a liquidation preference of $1,000 per unit. The Class A
         Units are not convertible into common units of the operating
         partnership or shares in the Company and the holders of the Class A
         Units do not have voting rights except in limited circumstances.
         Although the holders of the Class A Units do not have redemption
         rights, pursuant to the terms of the Purchase and Contribution
         Agreement entered into in connection with the Transaction, Shelbourne
         Management has the right to cause the operating partnership to
         reacquire the Class A Units upon the occurrence of certain events
         including, without limitation, if the aggregate assets of the Companies
         is below approximately $75 million or the outstanding debt under which
         the Companies are obligated is less than $55 million, for a purchase
         price equal to the liquidation preference plus an amount (the "Put
         Premium") which is presently equal to $5,698,795 and declines each
         February 13, May 13, August 13 and November 13 until it reaches zero on
         May 13, 2007. The Company is currently seeking alternative arrangements
         or transactions in an effort to eliminate the Put Premium, if the
         Companies assets are less than $75 million, which will enable the
         Company to proceed with its Plan of Liquidation.

         In connection with the settlement of the lawsuit brought by HX
         Investors, Shelbourne Management agreed to pay to HX Investors 42% of
         the amounts to Shelbourne Management with respect to the Class A units.


10.      SETTLEMENT AGREEMENT

         On July 1, 2002, the Company, along with Shelbourne Properties II, Inc.
         and Shelbourne Properties III, Inc., entered into settlement agreements
         with respect to certain outstanding litigation involving the Companies.
         In connection with the settlements, the Company entered into a stock
         purchase agreement (the Stock Purchase Agreement") with HX Investors,
         L.P. ("HX Investors") and Exeter Capital Corporation ("Exeter"), the
         general partner of HX Investors, pursuant to which HX Investors, the
         then owner of approximately 12% of the outstanding common stock of the
         Company, agreed to conduct a tender offer for up to an additional 30%
         of the Company's outstanding stock at a price per share of $53.00 (the
         "HX Investors Offer"). The tender offer commenced on July 5, 2002
         following the filing of the required tender offer documents with the
         Securities and Exchange Commission by HX Investors.

         Pursuant to the Stock Purchase Agreement, the board of directors of the
         Company approved a plan of liquidation for the Company (the "Plan of
         Liquidation") and agreed to submit the Plan of Liquidation to its
         stockholders for approval. HX Investors agreed to vote all of its
         shares in favor

                                       14
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         of the Plan of Liquidation. Under the Plan of Liquidation, HX Investors
         was to receive an incentive payment of 25% of gross proceeds after the
         payment of a priority return of approximately $59.00 per share was made
         to the stockholders of the Company.

         Subsequently, on July 29, 2002, Longacre Corp. ("Longacre") commenced a
         lawsuit individually and derivatively against the Company, Shelbourne
         Properties II, Inc., Shelbourne Properties III, Inc., their boards, HX
         Investors, and Exeter seeking preliminary and permanent injunctive
         relief and monetary damages based on purported violations of the
         securities laws and mismanagement related to the tender offer by HX
         Investors, the Stock Purchase Agreement, and the plan of liquidation.
         The suit was filed in federal court in New York, New York. On August 1,
         2002, the court denied Longacre's motion for a preliminary injunction,
         and on September 30, 2002, the court dismissed the lawsuit at the
         request of Longacre.

         Contemporaneous with filing its July 29, 2002 lawsuit, Longacre
         publicly announced that its related companies, together with outside
         investors, were prepared to initiate a competing tender offer for the
         same number of shares of common stock of the Company as were tendered
         for under the HX Investors Offer, at a price per share of $58.30. Over
         the course of the next several days, Longacre and HX Investors
         submitted competing proposals to the board of directors of the Company
         and made those proposals public. On August 4, 2002, Longacre notified
         the Company that it was no longer interested in proceeding with its
         proposed offer.

         On August 5, 2002, the Company entered into an amendment to the Stock
         Purchase Agreement. Pursuant to the terms of the amendment, the
         purchase price per share offered under the HX Investors Offer was
         increased from $53.00 to $63.15. The amendment also reduced the
         incentive payment payable to HX Investors under the Plan of Liquidation
         from 25% to 15% of gross proceeds after payment of the approximately
         $59.00 per share priority return to stockholders of the Company, and
         included certain corporate governance provisions.

         On August 16, 2002, the HX Investors Offer expired, and HX Investors
         acquired 251,785 shares representing 30% of the outstanding shares.

         On August 19, 2002, as contemplated by the Stock Purchase Agreement,
         the existing Board of Directors and executive officer of the Company
         resigned, and the Board was reconstituted to consist of six members,
         four of whom are independent directors. In addition, new executive
         officers were appointed.

         Also on August 19, 2002, the Board of Directors of the Company
         authorized the issuance by the operating partnership of the Company of
         Class B Units to HX Investors which Class B Units provide distribution
         rights consistent with the intent and financial terms of the incentive
         payment provided for in the Stock Purchase Agreement described above
         and which distributions are payable only in the event that the Plan of
         Liquidation was adopted. On August 19, 2002, the operating partnership
         issued the Class B Units to HX Investors in full satisfaction of the
         incentive fee payment otherwise required under the Plan of Liquidation.


11.      SUBSEQUENT EVENTS

         On October 29, 2002, the Company held a special meeting of the
         Stockholders, at which time the Plan of Liquidation was approved by a
         majority of the shareholders.

                                       15
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         On October 31, 2002, 568 Broadway Joint Venture, a joint venture in
         which the Company indirectly holds a 38.925% interest, entered into a
         contract to sell its property located at 568 Broadway, New York, New
         York for a gross sales price of $87,500,000. It is anticipated that the
         sale of this property will occur during the first quarter of 2003 and
         that all or substantially all the proceeds from the sale will be
         required to pay off the Note Payable.

         On November 5, 2002, the Board of Directors authorized the payment of a
         dividend in the amount of $4.50 per common share. The dividend will be
         paid to holders of record on November 15, 2002 and will be paid on
         November 21, 2002.








                                       16
<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 I, 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 I, 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.


PCIC TRANSACTION

On February 14, 2002, the Company, Shelbourne Properties II, 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 423,903 shares of the Company's common stock held by
subsidiaries of PCIC. PCIC is controlled and principally owned by affiliates of
former senior management of the Company. Pursuant to the Transaction, the
Company paid PCIC $14,303,060 in cash. In addition, the Company's operating
partnership, Shelbourne Properties I, L.P., issued preferred partnership
interests with an aggregate liquidation preference of $812,674 and a note in the
amount of $17,639,459. Shelbourne Management's obligations under the contract
terminated as of the effective date of the Transaction.

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.


HYPO LOAN

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 $23,832,274, of which
$17,639,459 was used to repay the note issued in the Transaction, $172,733 to
pay associated accrued interest and $667,145 to pay costs related to the Credit
Facility. The excess proceeds of $5,352,937 were deposited into the Company's
operating cash account.


                                       17
<PAGE>


The Companies have the right, from time to time, to elect an annual interest
rate equal to (i) LIBOR plus 1.5% for the portion of the Note Payable secured by
mortgages on certain real properties (Conversion rate) (ii) LIBOR plus 2.5% for
the portion of the Note Payable secured by a pledge of partnership interests
(LIBOR rate) or (iii) the greater of (a) agent's prime rate or (b) the federal
funds rate plus 1.5% (Base rate). 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. There has been no fee paid to date. Interest is payable
monthly in arrears. The interest rate at September 30, 2002 was approximately
4.16%.

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.

Under the terms of the Credit Facility, the Companies may only sell the pledged
property if certain conditions are met. If properties are sold, the Companies
must pay a fixed release amount to the lender except in the case of core
properties, which have been defined as 568 Broadway, Century Park, Seattle Tower
and Southport, in which case the Companies must pay the lender the greater of
the net proceeds or the release amount. 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.

At the request of HX Investors, L.P. ("HX Investors") - the largest stockholder
of the Company and an entity controlled by Mr. Michael Ashner (who, effective
August 19, 2002, became a director and chief executive officer of the Companies)
- the board of directors of the Company waived a provision in its 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 the
Company to allow HX Investors to own up to 12% of the common stock of the
Company. Pursuant to a Stockholder Agreement among the Company, Shelbourne
Properties II, Inc., Shelbourne Properties III, Inc., 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 the 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 Company's properties.

The foregoing description 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 the Company's Current Report on Form 8-K filed on
May 14, 2002, which is incorporated herein by reference.


CHANGE IN CONTROL

On July 1, 2002, the Company, along with Shelbourne Properties II, Inc. and
Shelbourne Properties III, Inc., entered into a settlement agreement with
respect to certain outstanding litigation brought by HX Investors in the
Chancery Court of Delaware against the Companies. At the same time, the Company,
along with Shelbourne Properties II, Inc. and Shelbourne Properties III, Inc.
entered into a letter agreement settling other outstanding litigation brought by
shareholders against the Companies, subject to approval by the court of a
stipulation of settlement. In connection with the settlements, the Company
entered into a stock purchase agreement (the "Stock Purchase Agreement") with HX
Investors and Exeter


                                       18
<PAGE>


Capital Corporation ("Exeter"), the general partner of HX Investors, pursuant to
which HX Investors, the then owner of approximately 12% of the outstanding
common stock of the Company, agreed to conduct a tender offer for up to an
additional 30% of the Company's outstanding stock at a price per share of $53.00
(the "HX Investors Offer"). The tender offer commenced on July 5, 2002 following
the filing of the required tender offer documents with the Securities and
Exchange Commission by HX Investors.

Pursuant to the Stock Purchase Agreement, the board of directors of the Company
approved a plan of liquidation for the Company (the "Plan of Liquidation") and
agreed to submit the Plan of Liquidation to its stockholders for approval. HX
Investors agreed to vote all of its shares in favor of the Plan of Liquidation.
Under the Plan of Liquidation, HX Investors was to receive an incentive payment
of 25% of gross proceeds after the payment of a priority return of approximately
$59.00 per share was made to the stockholders of the Company.

Subsequently, on July 29, 2002, Longacre Corp. ("Longacre"), commenced a lawsuit
individually and derivatively against the Company, Shelbourne Properties II,
Inc., Shelbourne Properties III, Inc., their boards, HX Investors, and Exeter
seeking preliminary and permanent injunctive relief and monetary damages based
on purported violations of the securities laws and mismanagement related to the
tender offer by HX Investors, the Stock Purchase Agreement, and the plan of
liquidation. The suit was filed in federal court in New York, New York. On
August 1, 2002, the court denied Longacre's motion for a preliminary injunction,
and the court dismissed the lawsuit on September 30, 2002, at the request of
Longacre.

Contemporaneous with filing his July 29, 2002 lawsuit, Longacre publicly
announced that its related companies, together with outside investors, were
prepared to initiate a competing tender offer for the same number of shares of
common stock of the Company as were tendered for under the HX Investors Offer,
at a price per share of $58.30. Over the course of the next several days,
Longacre and HX Investors submitted competing proposals to the board of
directors of the Company and made those proposals public. On August 4, 2002,
Longacre notified the Company that it was no longer interested in proceeding
with its proposed offer.

On August 5, 2002, the Company entered into an amendment to the Stock Purchase
Agreement. Pursuant to the terms of the amendment, the purchase price per share
offered under the HX Investors Offer was increased from $53.00 to $63.15. The
amendment also reduced the incentive payment payable to HX Investors under the
Plan of Liquidation from 25% to 15% of gross proceeds after payment of the
approximately $59.00 per share priority return to stockholders of the Company,
and included certain corporate governance provisions.

On August 16, 2002, the HX Investors Offer expired and HX Investors acquired
251,785 shares representing 30% of the outstanding shares.

On August 19, 2002, as contemplated by the Stock Purchase Agreement, the
existing Board of Directors and executive officer of the Company resigned, and
the Board was reconstituted to consist of six members, four of whom are
independent directors. In addition, new executive officers were appointed.

Also on August 19, 2002, the Board of Directors of the Company authorized the
issuance by the operating partnership of the Company of Class B Units to HX
Investors which Class B Units provide distribution rights to HX Investors only
in the event that the Plan of Liquidation were adopted and consistent with the
intent and financial terms of the incentive payment provided for in Stock
Purchase Agreement described above. On August 19, 2002, the operating
partnership issued the Class B Units to HX Investors in full satisfaction of the
incentive fee payment otherwise required under the Plan of Liquidation.

                                       19
<PAGE>


RECENT DEVELOPMENTS

On October 29,2002, the Company held a special meeting of the Stockholders at
which time the Plan of Liquidation was approved by a majority of the
shareholders.

On October 31, 2002, 568 Broadway Joint Venture, a joint venture in which the
Company indirectly holds a 38.925% interest, entered into a contract to sell its
property located at 568 Broadway, New York, NY for a gross sales price of
$87,500,000. It is anticipated that the sale of this property will occur during
the first quarter of 2003 and that all or substantially all of the proceeds from
the sale will be required to pay off the Note Payable.

On November 5, 2002, the Board of Directors authorized the payment of a dividend
in the amount of $4.50 per common share. The dividend will be paid to holders of
record on November 15, 2002 and will be paid on November 21, 2002.


CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions in certain circumstances that affect amounts reported in the
accompanying financial statements and related Notes. In preparing these
financial statements, management has made its best estimates and judgments of
certain amounts included in the financial statements, giving due consideration
to materiality. The Company does not believe there is a great likelihood that
materially different amounts would be reported related to the accounting
policies described below. However, application of these accounting policies
involves the exercise of judgment and use of assumptions as to future
uncertainties and, as a result, actual results could differ from these
estimates.

Impairment of long-lived assets. At September 30, 2002 and December 31, 2001,
the Company had $18,206,307 and $19,238,027 of real estate (net), accounting for
approximately 44% and 39%, respectively, of the Company's total assets. Property
and equipment is carried at cost net of adjustments for impairment. The fair
value of the Operating Partnership's property and equipment is dependent on the
performance of the properties.

The Company evaluates recoverability of the net carrying value of its real
estate and related assets at least annually, and more often if circumstances
dictated. If there is an indication that the carrying value of a property might
not be recoverable, the Company prepares an estimate 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 was located.

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

For the years ended December 31, 2001, 2000 and 1999, no impairment losses have
been recorded. Cumulative impairment losses from previous years for all
properties included in real estate in the


                                       20
<PAGE>


accompanying balance sheets would amount to $9,700,000. Impairment write-downs
recorded by the Corporation do not affect the tax basis of the assets and are
not included in the determination of taxable income or loss.

Because the cash flows used to evaluate the recoverability of the assets 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 which are inherently subjective, 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 are 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 from the estimates and variances
may be material. The Company may provide additional write-downs, which could be
material in subsequent years if real estate markets or local economic conditions
change.

Useful lives of long-lived assets. Property and equipment, and certain other
long-lived assets are amortized over their useful lives. Depreciation and
amortization are computed using the straight-line method over the useful life of
the property and equipment. The cost of properties represents the initial cost
of the properties to the Company plus acquisition and closing costs less
impairment adjustments. Tenant improvements and leasing costs are amortized over
the applicable lease term. Useful lives are based upon management's estimate
over the period that the assets will generate revenue.

Revenue Recognition. Base rents are recognized on a straight-line basis over the
terms of the related leases. Percentage rents charged to retail tenants based on
sales volume are recognized when earned pursuant to Staff Accounting Bulletin No
101, "Revenue Recognition in Financial Statements," issued by the Securities and
Exchange Commission in December 1999, and the Emerging Issues Tax Force's
consensus on Issue 98-9, "Accounting for Contingent Rent in Interim Financial
Periods." The Company defers recognition of contingent rental income (i.e.,
percentage/excess rent) in interim periods until the specified target (i.e.,
breakpoint) that triggers the contingent rental income is achieved. Recoveries
from tenants for taxes, insurance and other operating expenses are recognized as
revenue in the period the applicable expenses are incurred.


NEW ACCOUNTING POLICIES

Certain properties are owned in joint ventures with Shelbourne Properties II,
L.P. and/or Shelbourne Properties III, L.P. Prior to April 30, 2002, 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 presented 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 Note Payable discussed in Note 8 in the "Notes to
Condensed Consolidated Financial Statements", the Company is no longer 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. As required, effective January 1, 2002, the Company's
condensed consolidated balance sheet and condensed consolidated statements of
operations reflect the equity method of accounting.


                                       21
<PAGE>


PRO-FORMA INFORMATION

         The following tables show (i) the pro-forma condensed consolidated
balance sheet as of December 31, 2001 and (ii) the pro-forma condensed
consolidated statement of operations for the three and nine months ended
September 30, 2001, both reflecting the impact of the change to equity
accounting for the investments in joint ventures. The pro-forma information is
provided for the purpose of comparing results of operations in the review of
management's discussion and analysis. The Company's total equity did not change.


           CONDENSED CONSOLIDATED PRO-FORMA BALANCE SHEET INFORMATION

<TABLE>
<CAPTION>

                                              AS REPORTED           PRO-FORMA          EQUITY METHOD
                                           DECEMBER 31, 2001       ADJUSTMENTS       DECEMBER 31, 2001
                                           -----------------       -----------       -----------------
<S>                                           <C>                  <C>                   <C>
ASSETS

Real estate, net                              $ 31,783,227         $(12,545,200)         $ 19,238,027
Cash and cash equivalents                       14,191,726           (7,308,977)            6,882,749
Other assets                                     3,013,830            3,083,415             6,097,245
Receivables, net                                   279,777             (144,526)              135,251
Investment in joint ventures                             -           16,488,348            16,488,348
                                              ------------         ------------          ------------

TOTAL ASSETS                                  $ 49,268,560         $   (426,940)         $ 48,841,620
                                              ============         ============          ============


LIABILITIES

Accounts payable and accrued expenses         $    783,308         $   (426,940)         $    356,368
                                              ------------         ------------          ------------

Total Liabilities                             $    783,308         $   (426,940)         $    356,368
                                              ============         ============          ============
</TABLE>



                                       22
<PAGE>


            CONDENSED CONSOLIDATED PRO-FORMA STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                    FOR THE THREE MONTHS ENDED                           FOR THE NINE MONTHS ENDED
                                            SEPTEMBER 30,                                     SEPTEMBER 30
                                       As           Pro-forma                              As           Pro-forma
                                    Reported      Adjustments                           Reported      Adjustments
                                      2001            2001            Total               2001             2001            Total
<S>                              <C>            <C>                 <C>              <C>             <C>               <C>
Rental revenues                  $ 2,414,141    $ (1,542,195)       $ 871,946        $ 7,906,552     $ (4,624,456)     $ 3,282,096
                                 -----------    ------------        ---------        -----------     ------------      -----------

Costs and expenses                 1,792,172        (824,973)         967,199          5,619,938       (2,352,424)       3,267,514
                                 -----------    ------------        ---------        -----------     ------------      -----------

Income (loss) before equity
        income from joint
        ventures, interest
        and other income             621,969        (717,222)         (95,253)         2,286,614       (2,272,032)          14,582

       Equity income from
         joint ventures                    -         789,440          789,440                  -        2,560,167        2,560,167
       Interest income               115,411         (72,218)          43,193            447,931         (288,135)         159,796
       Other income                   11,291               -           11,291             29,257                -           29,257
                                 -----------    ------------        ---------        -----------     ------------      -----------

Net income                       $   748,671    $          -        $ 748,671        $ 2,763,802     $          -      $ 2,763,802
                                 ===========    ============        =========        ===========     ============      ===========

</TABLE>


LIQUIDITY AND CAPITAL RESOURCES

The Company uses its working capital reserves and any cash from operations as
its primary source of liquidity. On October 29, 2002, the Company's shareholders
approved the Plan of Liquidation. Accordingly, it is expected that the Company
will seek to sell its properties in the near term. In this regard, on October
31, 2002, 568 Broadway Joint Venture, a joint venture in which the Company
indirectly holds a 38.925% interest, entered into a contract to sell its
property located at 568 Broadway, New York, NY for a gross sales price of
$87,500,000. It is anticipated that the sale of this property will occur during
the first quarter of 2003 and that all or substantially all of the proceeds from
the sale will be required to pay off the Note Payable.

The Company had $2,638,372 in cash and cash equivalents at September 30, 2002.
Cash and cash equivalents are temporarily invested in short-term instruments.
The Company's level of liquidity based upon cash and cash equivalents decreased
by $4,244,377 from $6,882,749 for the year ended December 31, 2001. The decrease
resulted from $8,110,245 of cash used in financing activities and $85,144 of
improvements to real estate (investment activities) that were partially offset
by $3,951,012 of net cash provided by operating activities. Additionally, the
Company's joint ventures held cash at September 30, 2002 of which the Company's
allocable share was approximately $2,858,000.

Cash used in financing activities consisted of $14,303,060 paid to PCIC in
connection with the Transaction and $17,639,459 paid to retire the note that was
issued in relation to the Transaction which was partially offset by the receipt
of proceeds from the initial borrowing under the Credit Facility of $23,832,274.

Currently, the Company's primary source of funds is cash flow from the operation
of its properties, principally rents billed to tenants, which amounted to
$914,766 and $3,392,446 for the three and nine months ended September 30, 2002.

As disclosed in Item 1. Financial Statements - Note 9, the operating partnership
of the Company has issued Class A Preferred Units (the "Class A Units") which
entitle the holder thereof to certain rights to


                                       23
<PAGE>

require the operating partnership to redeem such units at a significant premium
if the aggregate assets of the Companies fall below approximately $75 million or
the outstanding debt under which the Companies are obligated is less than
approximately $55 million. The Company is currently negotiating to acquire an
interest in a joint venture with the other Companies that will hold an interest
in 20 hotels leased to a subsidiary of Accor S.A. (Motel 6) for a purchase price
of $877,770 which hotels will be subject to existing non-recourse debt of
approximately $74.6 million. In connection with this acquisition, the terms of
the Class A units will be amended to delete the right of PCIC (the holder of the
Class A Units) to put the preferred units to the operating partnership in the
event that the value of the Company's assets falls below a certain threshold.
Further, the transaction will provide additional non-recourse debt under which
the Companies will be obligated and will satisfy the debt level requirements for
the Class A unitholders. If the foregoing transaction is not consummated or an
alternative arrangement or transaction is not entered into, the sale of 568
Broadway would enable the holder of the Class A Units to exercise its right to
put the Class A Units to the Company for a price equal to the liquidation
preference for such Class A Units plus the put premium. See "Item 1, Financial
Statements - Note 9."

For the nine months ended September 30, 2002, the Company made $85,144 in
capital expenditures that were funded from cash flow and the Company's working
capital reserves. The Company's primary capital expenditures were for tenant
improvements at the properties.

The budgeted expenditures for 2002 capital improvements and capitalized tenant
procurement costs in 2002 are an aggregate of $253,647. These costs are expected
to be incurred in the normal course of business and are funded from cash flows
from the operation of the properties and working capital reserves that are
temporarily invested in short-term money market instruments. The actual amount
of such expenditures depends upon the level of leasing activity and other
factors that cannot be predicted with certainty. 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.


RESULTS OF OPERATIONS

The management's discussion and analysis compares the results of operations
reflecting the equity method of accounting for the three and nine months ended
September 30, 2002 to the pro-forma statement of operations for the same period
ended September 30, 2001.


Nine months ended September 30, 2002 vs. September 30, 2001

Net income

The Company's net income decreased by $21,587,578 to a net loss of $18,823,776
for the nine months ended September 30, 2002 from a net income of $2,763,802 for
the same period in 2001. This decrease is primarily attributable to expenses
incurred in connection with the Transaction, including the purchase of the
Advisory Agreement, legal fees and consulting fees to Lazard Freres & Co LLC
("Lazard") for its advisory and valuation services for the Company. In addition,
further contributing to this decrease were the legal fees associated with
defending the lawsuits brought in connection with the Transaction. Partially
offsetting the increase in costs and expenses was an increase in rental revenue
of $110,350 and an increase in income from the investment in joint ventures of
$298,507.

Rental Revenues

Rental revenues increased $110,350, or approximately 3%, to $3,392,446 during
the nine months ended September 30, 2002 from $3,282,096 during the nine months
ended September 30, 2001 due to an increase in base rent of $57,988. Percentage
rent increased in the same period due to payments by Eckerd


                                       24
<PAGE>


Drugs and Publix Supermarkets at Southport Shopping Center, which increased
cumulatively by $24,032 along with an aggregate increase in all other rental
revenue categories of $28,330.

Costs and Expenses

Costs and expenses, for the nine months ended September 30, 2002 amounted to
$24,524,199 an increase of $21,256,685 from the same period in 2001. This
increase consists of a one-time expense of $18,452,133 in relation to the
purchase of the Advisory Agreements. The remaining costs and expenses amounted
to $6,072,066 for the nine months ended September 30, 2002, an increase of
$2,804,552 from the $3,267,514 incurred for the same period in 2001. The
increase is primarily due to an increase in administrative expenses due to the
Transaction, legal, professional and consulting fees.

Operating expenses increased by $149,949, or 14%, to $1,201,084 for the nine
months ended September 30, 2002 from $1,051,135 for the same period in 2001 due
to increased insurance and real estate tax expense. The Company also experienced
higher depreciation and amortization expense due to real estate improvements and
tenant procurement costs. Property management fees increased slightly due to an
increase in rental collections. Expenses related to the partnership asset
management fees decreased by $453,838 for the nine months ended September 30,
2002 from $799,893 for the same period in 2001 as the obligation to pay the
partnership asset management fee terminated with the consummation of the
Transaction. For the nine months ended September 30, 2002, $135,805 in asset
management fees were paid to Shelbourne Management prior to February 14, 2002
and $208,250 to PCIC thereafter in accordance with PCIC's agreement to provide
transition services to the Company upon the consummation of the Transaction.

Non-Operating Income and Expenses

Income from the investment in joint ventures increased by $298,507, or
approximately 12% to $2,858,674 from $2,560,167 for the same period in 2001 due
to increased Net Income from 568 Broadway of $406,353 that was partially offset
by a decrease in aggregate Net Income of Century Park and Seattle Tower of
$107,846.

Interest expense of $172,733 was paid on the note issued in the Transaction. An
additional $423,602 in interest was incurred on the Credit Facility dated May 1,
2002. Interest from the Credit Facility is a first-time expense because prior to
the conversion from a partnership to a REIT, no debt was allowed on any of the
properties.

Interest income decreased by $120,036, or 75%, to $39,760 for the current period
as compared to $159,796 for the comparable period in 2001 due to significantly
lower cash balances due to the Transaction and other fees paid.

Other income decreased for the nine months ended September 30, 2002 as compared
to the same period ended September 30, 2001 by $23,379, or 80%, to $5,878 from
$29,257 due to the absence, 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.

Inflation

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



                                       25
<PAGE>


Three months ended September 30, 2002 vs. September 30, 2001

Net income

The Company had net income of $275,283 for the three months ended September 30,
2002, a decrease of $473,388, or 63% from $748,671 for the same period in 2001.
This decrease was due to an increase in costs and expenses, primarily due to the
incurrence of legal, professional and consulting fees resulting from lawsuits,
partially offset by an increase in rental revenues of $42,820 and an increase in
income of $261,055 from the investment in joint ventures.

Rental Revenues

Rental revenues increased $42,820, or 5%, from $871,946 during the three months
ended September 30, 2001 to $914,766 during the three months ended September 30,
2002. This was due to an increase in base rent of $19,670, an increase in common
area maintenance charges of $16,540, and an aggregate increase in all other
rental revenue categories of $6,610.

Costs and Expenses

Costs and expenses for the three months ended September 30, 2002 amounted to
$1,449,525, an increase of $482,326 from $967,199 for the three months ended
September 30, 2001. The increase is primarily due to an increase in
administrative expenses due to increased legal, professional and consulting
fees. The remaining costs and expenses, amounted to $761,268 for the three
months ended September 30, 2002, a decrease of $85,997, or 10%, from the same
period in 2001.

Operating expenses increased by $26,615, or 7%, to $387,474 for the three months
ended September 30, 2002 as compared to $360,859 for the same period in 2001 due
to an increase in insurance premiums. The Company also experienced higher
depreciation and amortization expense due to real estate improvements and tenant
procurement costs. Property management fees increased slightly due to an
increase in rental collections. Expenses related to partnership asset management
fees decreased by $185,499 for the three months ended September 30, 2002 from
the same period in 2001 as the obligation to pay the partnership asset
management fee terminated with the consummation of the Transaction.

Non-Operating Income and Expenses

Equity income from joint ventures increased by $261,055. This is primarily due
to an increase of the Net Income at 568 Broadway.

Interest expense for the three months ended September 30, 2002 on the Credit
Facility dated May 1, 2002 was $254,333. This is a first-time expense because
prior to the conversion from a partnership to a REIT, no debt was allowed on any
of the properties.

Interest income decreased $31,240 or 72% as compared to the same period in 2001
due to significantly lower cash balances due to the Transaction.

Other income decreased for the three months ended September 30, 2002 as compared
to the three months ended September 30, 2001 by $9,364.


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


                                       26
<PAGE>


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 accounting principles
generally accepted in the United States), 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 the 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- and nine-month periods ended September 30, 2002 and 2001 are
summarized in the following table:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED,                          NINE MONTHS ENDED,
                                               September 30, 2002   September 30, 2001   September 30, 2002    September 30, 2001
                                               ------------------   ------------------   ------------------    ------------------
<S>                                               <C>                  <C>                  <C>                   <C>
Net Income (Loss) (A)                             $    275,283         $    748,671         $(18,823,776)         $  2,763,802

Plus: Depreciation of
        real estate assets and
        tenant improvements                            166,222              164,198              496,864               486,567

Plus: Amortization of leasing
        commissions                                     28,630               28,498               83,335                66,771

Plus: Adjustments for
        unconsolidated joint ventures (B)              212,711              206,280              701,986               587,637
                                                  ------------         ------------         ------------          ------------
Funds From Operations (A)                         $    682,846         $  1,147,647         $(17,541,591)         $  3,904,777
                                                  ============         ============         ============          ============
</TABLE>


(A)  Net Income and Funds From Operations for the nine months ended September
     30, 2002 includes $18,452,133 related to the purchase of the Advisory
     Agreements.

(B)  Adjustments for unconsolidated joint ventures includes all adjustments to
     convert the Company's share of net income from unconsolidated joint
     ventures to FFO.






                                       27
<PAGE>



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary market risk the Company faces is interest rate sensitivity. The
Company's long-term debt bears interest at a floating rate, and therefore is
exposed to the risk of interest rate changes. At November 13, 2002, borrowings
under the secured revolving credit facility totaled $23,832,274 and initially
bore an interest rate of LIBOR plus 2.5%. Based on the balance outstanding on
the credit facility at November 13, 2002 and the interest rate at that date, a
10% increase in LIBOR would increase the interest expense in 2002 by
approximately $25,000. Conversely, a 10% decrease in LIBOR would decrease
interest expense in 2002 by the same amount. The gain or loss the Company
ultimately realizes with respect to interest rate fluctuations will depend on
the actual interest rates during that period. The Company does not believe that
it has any risk related to derivative financial instruments.


ITEM 4.  CONTROLS AND PROCEDURES

The Registrant's principal executive officer and principal financial officer
have, within 90 days of the filing date of this quarterly report, evaluated the
effectiveness of the Registrant's disclosure controls and procedures (as defined
in Exchange Act Rules 13a - 14(c) and have determined that such disclosure
controls and procedures are adequate. There have been no significant changes in
the Registrant's internal controls or in other factors that could significantly
affect such internal controls since the date of evaluation. Accordingly, no
corrective actions have been taken with regard to significant deficiencies or
material weaknesses.













                                       28
<PAGE>


PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

Delaware Plaintiffs' litigation

As previously disclosed in the Company's report on Form 10-Q filed May 15, 2002,
a group of plaintiffs (the "Delaware Plaintiffs") brought suit derivatively on
behalf of the Companies against NorthStar, PCIC, Shelbourne Management and eight
former and present directors of the boards of directors of the Companies (the
"Individual Defendants"). The Delaware Plaintiffs filed a consolidated class and
derivative complaint on April 10, 2002 alleging that the boards of directors of
the Companies mismanaged the Companies making it less likely that they could pay
dividends. Plaintiffs sought disgorgement of profits, accounting for profits and
rescission of an agreement to repurchase shares of stock held by PCIC and
purchase the Advisory Agreements. On May 15, 2002, the Delaware Plaintiffs filed
a second consolidated and amended class and derivative action complaint that
additionally sought to have the Company consider all available transactions to
maximize shareholder value.

The Delaware Plaintiffs separately filed a class action under Section 211 of the
General Corporation Law of Delaware on May 7, 2002 (i) seeking to compel the
Companies to hold an annual meeting of shareholders and (ii) challenging an
action taken by the Companies' boards of directors in which the boards of
directors of each company were reclassified from nine to four directors. This
matter was consolidated with the HX Investors action described above for the
limited purpose of discovery and trial on the statutory issues.

A letter agreement settling each of the actions brought by the Delaware
Plaintiffs' was signed by the parties on July 1, 2002, and remains subject to
court approval. The principal terms of the settlement were that the Companies
and their boards of directors would facilitate the completion of the HX
Investors Offer; conduct annual meetings on September 9, 2002 and expand the
board of directors of each of the Companies from four members to six, four of
whom would be independent directors, implement additional corporate governance
protections, propose and, if approved by shareholders, implement the plan of
liquidation. The settlement also provided for, among other things, a
contribution by Shelbourne Management of up to one million dollars, as approved
by the court, for plaintiffs' attorneys fees.

Longacre Corp. litigation

Longacre Corp. ("Longacre") filed an action on July 29, 2002 in the United
States District Court for the Southern District of New York against the
Companies seeking (i) a declaration that HX Investors violated Sections 13(e)
and 14(d) and (e) of the Securities and Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, and that the 25% liquidation
premium to be paid to HX Investors and Exeter Capital Corporation upon
liquidation of the Companies is invalid and illegal; and (2) an injunction
enjoining HX Investors from proceeding with the HX Investors Offer until HX
Investors made the appropriate filings and disclosures. A hearing on Longacre's
Motion for an Injunction was held on August 1, 2002, and a preliminary
injunction was denied. The court dismissed the lawsuit on September 30, 2002, at
the request of Longacre.




                                       29
<PAGE>



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

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

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

(2.1)    Stock Purchase Agreement among HX Investors, Exeter Capital Corporation
         and the Company (4)

(2.2)    Amendment No. 1 to Stock Purchase Agreement (6)

(2.3)    Plan of Liquidation (7)

(3.1)    Amended and Restated Certificate of Incorporation of the Company(1)

(3.2)    Amended and Restated Bylaws of the Corporation(1)

(4.1)    Amended and Restated Agreement of Limited Partnership of the operating
         partnership(1)

(4.2)    Shareholder Rights Agreement(1)

(4.3)    Amendment to Shareholder Rights Agreement(2)

(4.4)    Certificate of Designations, Preferences and Rights of Series A
         Preferred Stock(1)

(4.5)    Stockholder Agreement, among the Companies and HX Investors, LP and
         Exeter Capital Corporation, dated as of April 30, 2002 (3)

(4.6)    Amendment No. 2 to Shareholder Rights Agreement (5)

(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 (3)

(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 (3)

(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 (3)

(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 (3)

(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 (3)

(10.6)   Form of Mortgage, dated as of April 30, 2002, issued by the Company to
         Bayerische Hypo- Und Vereinsbank AG, New York Branch, as agent for
         itself and other lenders(3)


                                       30
<PAGE>


(10.7)   Settlement Agreement and Mutual Release between HX Investors, the
         Companies and Shelbourne Management(4)

(10.8)   Amendment No. 1 to Settlement Agreement (6)

(99.1)   Partnership Unit Designation of the Class A Preferred Partnership Units
         of the Operating Partnership(2)

(99.2)   Partnership Unit Designation of the Class B Partnership Units of the
         Operating Partnership

(99.3)   Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.

--------------
(1)      incorporated by reference to the Registration Statement of the Company
         on Form S-4 filed on February 11, 2000, as amended

(2)      incorporated by reference to the Current Report of the Company on Form
         8-K filed on February 14, 2002

(3)      incorporated by reference to the Current Report of the Company on Form
         8-K filed on May 14, 2002.

(4)      incorporated by reference to the Current Report of the Company on Form
         8-K filed on July 2, 2002.

(5)      incorporated by reference to the Current Report of the Company on Form
         8-K filed on July 8, 2002

(6)      incorporated by reference to the Current Report of the Company on Form
         8-K filed on August 5, 2002

(7)      incorporated by reference to Appendix A to the Company's Definitive
         Proxy Statement on Schedule 14A filed on September 27, 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 September 30, 2002:

(i)      Press release announcing that the Companies had entered into the HX
         Investors Stock Purchase Agreement.

         Item reported: 5

         Dated filed: July 2, 2002

(ii)     Amendment to Company's Shareholders Rights Agreement.

Item reported: 5

Dated filed: July 8, 2002

(iii)    Amendment to HX Investors Stock Purchase Agreement and Settlement
         Agreement.

         Item reported: 5

         Dated filed: August 5, 2002

(iv)     Change in Control of the Company.

         Item reported: 1

         Dated filed: August 21, 2002


                                       31
<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 I, Inc.
                                              (Registrant)

Dated: November 13, 2002                      By:  /S/ Michael L. Ashner
                                                   -------------------------
                                                   Michael L. Ashner
                                                   (Chief Executive Officer)













                                       32
<PAGE>


                          SHELBOURNE PROPERTIES I, INC.
                          FORM 10-Q SEPTEMBER 30, 2002

                                 CERTIFICATIONS

     I, Michael L. Ashner, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Shelbourne Properties
     I, Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant is made known to us,
          particularly during the period in which this quarterly report is being
          prepared:

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and





                                       33
<PAGE>


                          SHELBOURNE PROPERTIES I, INC.
                          FORM 10-Q SEPTEMBER 30, 2002

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.




     Date: November 13, 2002                         /s/ Michael L. Ashner
                                                     -----------------------
                                                     Michael L. Ashner
                                                     Chief Executive Officer














                                       34
<PAGE>


                          SHELBOURNE PROPERTIES I, INC.
                          FORM 10-Q SEPTEMBER 30, 2002

                                 CERTIFICATIONS

     I, Carolyn B. Tiffany, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Shelbourne Properties
     I, Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant is made known to us,
          particularly during the period in which this quarterly report is being
          prepared:

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and






                                       35
<PAGE>


                          SHELBOURNE PROPERTIES I, INC.
                          FORM 10-Q SEPTEMBER 30, 2002

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.




      Date: November 13, 2002                     /s/ Carolyn B. Tiffany
                                                  -----------------------
                                                  Carolyn B. Tiffany
                                                  Chief Financial Officer











                                       36
<PAGE>



                          SHELBOURNE PROPERTIES I INC,
                          FORM 10-Q SEPTEMBER 30, 2002


EXHIBIT INDEX

<TABLE>
<CAPTION>

Exhibit
-------
Number                                    Description                                                     Page
------                                    -----------                                                     ----
<S>      <C>                                                                                              <C>
2.1      Stock Purchase Agreement among HX Investors, Exeter Capital Corporation
         and the Company                                                                                  (4)

2.2      Amendment No. 1 to Stock Purchase Agreement                                                      (6)

2.3      Plan of Liquidation                                                                              (7)

3.1      Amended and Restated Certificate of Incorporation of the Company                                 (1)

3.2      Amended and Restated Bylaws of the Corporation                                                   (1)

4.1      Amended and Restated Agreement of Limited Partnership of the operating partnership               (1)

4.2      Shareholder Rights Agreement                                                                     (1)

4.3      Amendment to Shareholder Rights Agreement                                                        (2)

4.4      Certificate of Designations, Preferences and Rights of Series A Preferred Stock                  (1)

4.5      Stockholder Agreement, among the Companies and HX Investors, LP and
         Exeter Capital Corporation, dated as of April 30, 2002                                           (3)

4.6      Amendment No. 2 to Shareholder Rights Agreement                                                  (5)

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                                       (3)

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                            (3)

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                                                                       (3)

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                                                                        (3)

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                                                             (3)

10.6     Form of Mortgage, dated as of April 30, 2002, issued by the Company to
         Bayerische Hypo- Und Vereinsbank AG, New York Branch, as agent for
         itself and other lenders                                                                         (3)


                                       37
<PAGE>


10.7     Settlement Agreement and Mutual Release between HX Investors,
         the Companies and Shelbourne Management                                                          (4)

10.8     Amendment No. 1 to Settlement Agreement                                                          (6)

99.1     Partnership Unit Designation of the Class A Preferred Partnership
         Units of the Operating Partnership                                                               (2)

99.2     Partnership Unit Designation of the Class B Partnership Units of the Operating Partnership       39

99.3     Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                         43

</TABLE>

------------------
(1)  incorporated by reference to the Registration Statement of the Company on
     Form S-4 filed on February 11, 2000, as amended

(2)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on February 14, 2002

(3)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on May 14, 2002.

(4)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on July 2, 2002.

(5)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on July 8, 2002

(6)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on August 5, 2002

(7)  incorporated by reference to Appendix A to the Company's Definitive Proxy
     Statement on Schedule 14A filed on September 27, 2002




                                       38