FORM 10-K

                     SECURITIES AND EXCHANGE COMMISSION

                           Washington, D.C. 20549

(Mark One)

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

For the fiscal year ended     December 31, 1996



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

For the transition period from     to



Commission file number   0-6103





                      Watermark Investors Realty Trust
           (Exact name of registrant as specified in the charter)

                 Texas                           75-1372785

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

   227 West Trade Street, Suite 2320,              28202
       Charlotte, North Carolina
    (Address of principal executive              (Zip Code)
                offices)

Registrant's telephone number, including area code  704/343-9334

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

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

         Securities registered pursuant to Section 12(g) of the
Act

               Shares of Beneficial Interest, $1.00 par value
                              (Title of class)

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

     Indicate by check mark if disclosure of delinquent filers
pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is
not
contained herein, and will not be contained, to the best of
registrant's
knowledge, in definitive proxy or information statements
incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[     ]

     The aggregate market value of the 178,996 shares of
Beneficial
Interest (voting securities) held by non-affiliates of the
Registrant is
not ascertainable since no trading market presently exists for
such shares.

     As of February 28, 1997, there were 542,413 shares of
Beneficial
Interest of the Registrant.

                    DOCUMENTS INCORPORATED BY REFERENCE

                                    None


SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF
1995:  This Annual Report, on Form 10-K, may contain
forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933
and Section 21E of the Securities Exchange Act of 1934 which are
not
historical facts, and involve risks and uncertainties that could
cause
actual results to differ materially from those expected and
projected.
Such risks and uncertainties include the following:  general
economic
conditions and conditions specific to the real estate industry
including
its cyclical nature, and competitive factors, changes in
generally accepted
accounting principles, change in federal tax laws regarding Real
Estate
Investment Trusts, and the risk factors listed from time to time
in the
Company s Securities and Exchange Commission filings.
Accordingly, there
can be no assurance that the actual results will conform to the
forward-
looking statements in the Annual Report.


                                   PART I

Item 1.   Business.

     Watermark Investors Realty Trust (herein referred to as the
"Trust" or
"Watermark" or the "Registrant") was originally organized as Ryan
Mortgage
Investors pursuant to the Texas Real Estate Investment Trust Act
under a
Declaration of Trust dated October 13, 1971.  On March 6, 1984,
its name
was changed to Arlington Realty Investors pursuant to an
Amendment to the
Declaration of Trust.  On December 5, 1995, the Trust's name was
changed to
Watermark Investors Realty Trust pursuant to an Amendment to the
Declaration of Trust.  The Trust has elected to be treated as a
Real Estate
Investment Trust ("REIT") under Section 856 through 860 of the
Internal
Revenue Code of 1986, as amended.  The Trust has, in the opinion
of the
Trust's management, qualified for federal taxation as a REIT for
each
fiscal year subsequent to December 31, 1971.  Although not
currently
active, the Trust's primary business and only industry segment
has been
investing in equity interests in real estate and related real
estate
activities.

     During March 1995, the Trust formed a wholly owned
subsidiary,
Watermark Texas 1, Inc., a Maryland corporation, and contributed
its sole
property to such subsidiary.

Item 2.   Properties.

     At December 31, 1996, the Trust's only significant asset was
its
ownership interest in its subsidiary, Watermark Texas 1, Inc.,
which owns a
parcel of unimproved land consisting of approximately 4.5 acres
located on
Parker Road in Houston, Harris County, Texas.  The Trust has held
the
Parker Road property for sale for several years, has listed the
property
with various brokers over that time period, and inquired of the
City of
Houston as to the desire of the City to acquire such property for
a park
site.  Management presently intends to sell the Parker Road
property at the
first available opportunity.  The anticipated carrying costs
associated
with the Parker Road property are currently limited to property
taxes,
insurance, and maintenance.

Item 3.   Legal Proceedings.

     At December 31, 1996, and thereafter through the date of
this report,
the Trust was not a party, nor was any property or assets of the
Trust
subject, to any material pending legal proceedings.

Item 4.   Submission of Matters to a Vote of Security Holders.

     None.

                                  PART II

Item 5.   Market for Registrant's Common Equity and Related
Stockholder
          Matters.

     The Trust's shares of Beneficial Interest (the "Shares") are
traded on
a sporadic basis.  The Trust believes there has been no
established
independent trading market for the Shares since the Shares were
delisted
from NASDAQ in 1988.  A limited number of Shares are believed to
have been
traded in privately negotiated transactions.

     No regular dividends on Shares were paid in 1994 or 1995.
As of
February 28, 1997, 542,413 Shares were held by approximately 316
holders of
record.

Item 6.   Selected Financial Data.

     The following table sets forth a summary of certain selected
financial
data of the Trust.  This summary should be read in conjunction
with the
Notes to Financial Statements included at Item 8.


                               For the Years Ended December 31,
                            1996       1995     1994      1993
 1992

                           (dollars in thousands, except per
share)

Statement of Operations Data

Rental Operations, net      $  -     $   -    $  70        $  -
$   95

Real estate sales, net         -         -        -           -
   244

Interest Income                -         -        -          22
    19

Gain on Sale of Land           -         4        -           -
     -

Net earnings <loss>          <31>     <103>     <44>          7
   333

Earnings <loss> per        $<.06>    $<.18>   $<.09>       $.01
$  .67
 share

Distributions per          $   -     $    -    $  -       $2.80
$    -
 share

Weighted average          542,413   542,413  505,172    498,985
498,985
shares outstanding


Balance Sheet Data

Real estate, net of        $    -    $    -    $   -      $   -
$    -
 allowances

Mortgages, receivable           -         -        -          -
     -
 net

Total assets                   12         1       33        116
 1,441

Shareholders' equity        $<87>     $<56>     $<1>       $<1>
$1,389
  (deficit)


Item 7.   Management's Discussion and Analysis of Financial
Condition and
          Results of Operation.

Results of Operations

     Watermark's primary revenue sources for the three years
ended
December 31, 1996, were net rental property operations and sales
of real
estate.  Watermark's properties consisted of the Parker Road
property.
In February of 1995, Watermark sold a 4,429 square foot strip of
land to the
City of Houston, Texas, for $3,765.  Watermark did not have any
rental
operations in 1995 or 1996.  Rental operations in 1994 consisted
of a ground
lease on the Parker Road property in Houston, Texas.

     On December 24, 1993, Watermark entered into a ground lease
on its
Parker Road property in Houston, Texas with Plano Outlet Mall,
Ltd., a
limited partnership.  At the time, one of the officers of
Watermark was
also an officer of a subsidiary of the corporate general partner
of Plano
Outlet Mall, Ltd.  The lease was for a period of one year and
expired
December 23, 1994.  As a result of the lease, Watermark received
a required
prepayment of $70,000, representing the total amount of the
annual rental.
Such $70,000 was ultimately used to pay legal fees and other
costs.

Liquidity and Capital Resources

     Management currently plans for the subsidiary to sell the
Parker Road
property at the first available opportunity.  The anticipated
carrying
costs associated with the Parker Road property are currently
limited to
property taxes, insurance and maintenance.  There are no other
known
material demands, commitments, events or uncertainties that will
result in
or that are reasonably likely to result in Watermark s liquidity
increasing
or decreasing in any material way.  However, in order to meet
corporate
expenses and the carrying costs of the Parker Road property,
Watermark will
have to (i) raise additional funds (either by selling or leasing
the Parker
Road property) or (ii) generate additional funds (either by
selling or
leasing the Parker Road property).  There are no material
commitments for
capital expenditures.

Inflationary Factors

     In recent years, inflation has neither increased Watermark's
revenues
from operating assets nor beneficially affected the current value
of its
remaining real estate assets to any significant degree.


Item 8.   Financial Statements and Supplementary Data.

                       INDEX TO FINANCIAL STATEMENTS


    Page

Report of Farmer, Fuqua, Hunt & Munselle, P.C.
     Independent Auditors . . . . . . . . . . . . . . . . . . . .
 . . . . 6

Consolidated Balance Sheets as of December 31, 1996 and 1995  . .
 . . . . 8

Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994  . . . . . . . . . . . . . . . .
 . . . . 9

Consolidated Statements of Shareholders' Equity (Deficit)
for the years ended December 31, 1996, 1995 and 1994  . . . . . .
 . . .  10

Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994  . . . . . . . . . . . . . . . .
 . . .  11

Notes of Consolidated Financial Statements  . . . . . . . . . . .
 . . .  12

Schedule III - Real Estate Investments and Accumulated
Depreciation . .  17

All other schedules are omitted since they are not required, are
not
applicable, or the financial information required is included in
the
financial statements or the notes thereto.




                        INDEPENDENT AUDITORS' REPORT



To Board of Trustees and Shareholders
Watermark Investors Realty Trust

We have audited the accompanying consolidated balance sheets of
Watermark
Investors Realty Trust and subsidiary as of December 31, 1996 and
1995, and
the related consolidated statements of operations, shareholders'
equity
(deficit) and cash flows for the years ended December 31, 1996,
1995 and
1994.  These consolidated financial statements and the schedule
referred to
below are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated
financial
statements and the schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to
above
present fairly, in all material respects, the consolidated
financial
position of Watermark Investors Realty Trust and subsidiary as of
December
31, 1996 and 1995 and the results of their operations and their
cash flows
for each of the years ended December 31, 1996, 1995 and 1994, in
conformity
with generally accepted accounting principles.

The accompanying consolidated financial statements have been
prepared
assuming that the Trust will continue as a going concern.  As
discussed in
Note 11 to the consolidated financial statements, the Trust has
no
operating assets or revenues, and is dependent upon the financial
support
of its shareholders.  These matters raise substantial doubt about
the
Trust's ability to continue as a going concern.  Management's
plans in
regard to these matters are also discussed in Note 11.  These
consolidated
financial statements do not include any adjustments that might
result from
this uncertainty.

As more fully described in Note 2, Watermark Investors Realty
Trust was
operating under a Plan of Complete Liquidation and Termination
until June
30, 1994.  The consolidated financial statements include
adjustments to
reflect assets at their net realizable value as determined by the
Company's
management.  The ultimate value of the assets will be determined
at the
time of sale and may differ significantly from the value as
determined by
the Company's management.

Our audits were made for the purpose of forming an opinion on the
basic
consolidated financial statements taken as a whole.  Schedule III
is
presented for the purpose of complying with the Securities and
Exchange
Commission's rules and is not a required part of the basic
consolidated
financial statements.  This schedule has been subjected to the
auditing
procedures applied in our audits of the basic consolidated
financial
statements and, in our opinion, fairly states in all material
respects, the
financial data required to be set forth therein in relation to
the basic
consolidated financial statements taken as a whole.

Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
March 15, 1997





              WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY
                        CONSOLIDATED BALANCE SHEETS
                                December 31,


                                ASSETS
                                                  1996
1995
                                                  ____
____

 Real estate                                    $168,588
$168,588

 Less allowance for possible losses            (168,588)
(168,588)
                                               _________
_________

                                                     ---
---
 Cash                                             12,152
880
                                               _________
________
                                                 $12,152
$880

            LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Liabilities
      Note payable - related party               $60,000     $
---

      Accounts payable and accrued liabilities    19,444
36,673

      Unclaimed dividends                         20,174
20,174
                                                  ______
______

                                                  99,618
56,847

 Shareholders' Equity (Deficit)

      Preferred shares of beneficial
           interest; $.01 par value;
           authorized, 10,000,000 shares; -
           0- shares issued and outstanding
           at December 31, 1996 and 1995             ---
---

      Common shares of beneficial interest;
           $1.00 par value; authorized,
           10,000,000 shares; 542,413
           shares issued and outstanding at
           December 31, 1996 and 1995            196,235
196,235

      Additional paid-in capital                  44,205
44,205

      Accumulated deficit                      (327,906)
(296,407)
                                               _________
_________
                                                (87,466)
(55,967)
                                                ________
________

                                                 $12,152
$880


      The accompanying notes are an integral part of these
statements.




              WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                          Years Ended December 31,

                                       1996       1995       1994
                                       ____       ____       ____

 Revenues

   Rental operations, net           $    ---    $    ---   $
70,000

   Insurance proceeds                    ---         ---
7,049

   Gain on sale of land                  ---        3,765
---
                                       ______      ______
_____
                                         ---        3,765
77,049
                                       ______      ______
_______

 Expenses

   Interest                             2,584         ---
---

   Property expenses                    7,967       4,722
3,177

   Legal and professional              20,948      98,457
117,526
                                       ______     _______
_______
                                    $  31,499   $ 103,179  $
120,703
                                    _________   _________
_________



 NET LOSS                           $(31,499)   $(99,414)
$(43,654)

 Loss per share                     $   (.06)   $   (.18)  $
(.09)

 Distributions per share            $    ---    $     ---  $
---

 Weighted average shares of           542,413     542,413
505,172
   beneficial interest used in
   computing loss per share


      The accompanying notes are an integral part of these
statements.




              WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY
         CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(DEFICIT)
                Years Ended December 31, 1996, 1995 and 1994


                         Shares of      Additional
                         Beneficial      Paid-in    Accumulated
                          Interest       Capital      Deficit
   Total

Balance at January 1,
 1994                      $152,807       $   ---    $(153,339)
 $   (532)

 Issuance of 43,428
 common shares of
 beneficial interest
 for cash                    43,428           ---          ---
   43,428

 Net loss for the year          ---           ---      (43,654)
  (43,654)
                            _______        ______     _________
  ________

 Balance at December
  31, 1994                  196,235           ---     (196,993)
     (758)

  Contribution by
  Shareholders                  ---        44,205          ---
   44,205

  Net loss for the year         ---           ---      (99,414)
  (99,414)
                            _______        ______     _________
 _________

 Balance at December
  31, 1995                  196,235        44,205   (296,407)
(55,967)

  Net loss for the year         ---           ---    (31,499)
(31,499)
                            _______        ______    ________
________

 Balance at December
  31, 1996                 $196,235       $44,205  $(327,906)
$(87,466)



      The accompanying notes are an integral part of these
statements.




              WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                          Years Ended December 31,


                                       1996       1995       1994
                                       ____       ____       ____

Cash flows from operating
activities

  Net loss                          $(31,499)   $(99,414)
$(43,654)

  Adjustments to reconcile net
    loss to net cash used for
    operating activities
    Gain on sale of real estate          ---      (3,765)
---

    Increase (decrease) in
    accounts payable and accrued
    liabilities                      (17,229)     23,002
(13,044)

    Decrease in deferred lease
    revenue                              ---         ---
(70,000)

    Expenses paid directly by
    shareholder                          ---      44,205
70,000
                                      _______   _________
________
  Net cash used for operating
  activities                         (48,728)    (35,972)
(56,698)

Cash flows from investing
activities

  Proceeds from sale of real
  estate                                 ---       3,765
---
                                      _______   _________
________

  Net cash provided by investing
  activities                             ---       3,765
---

Cash flows from financing
activities

  Proceeds from loans                  60,000        ---
---

  Sale of shares                         ---         ---
43,428
                                     ________   _________
________

  Net cash provided by financing
  activities                           60,000        ---
43,428
                                      ________   _________
________

 Increase (decrease) in cash           11,272    (32,207)
(13,270)

 Cash at beginning of year            $   880    $ 33,087   $
46,357
                                      _______    ________
________
 Cash at end of year                  $12,152    $    880   $
33,087

Supplemental cash flow
information

  Cash paid for interest              $  ---     $   ---    $
---


      The accompanying notes are an integral part of these
statements.




                      WATERMARK INVESTORS REALTY TRUST
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      December 31, 1996, 1995 and 1994


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

Watermark Investors Realty Trust (Watermark) was originally
organized as
Ryan Mortgage Investors pursuant to the Texas Real Estate
Investment Trust
Act under a Declaration of Trust dated October 13, 1971.  On
March 6, 1984,
its name was changed to Arlington Realty Investors pursuant to an
Amendment
to the Declaration of Trust.  On December 5, 1995, the Trust's
name was
changed to Watermark Investors Realty Trust pursuant to an
Amendment to the
Declaration of Trust.  The Trust has elected to be treated as a
Real Estate
Investment Trust ("REIT") under Sections 856 through 860 of the
Internal
Revenue Code.  The Trust has, in the opinion of the Trust's
management,
qualified for federal taxation as a REIT for each fiscal year
subsequent to
December 31, 1971.  Although not currently active, the Trust's
primary
business and only industry segment has been investing in equity
interests
in real estate and related real estate activities.  Under the
Trust's
Declaration of Trust and Bylaws, the Trustees, at their option,
may
terminate the Trust's status as a REIT for federal income tax
purposes.

During March 1995, the Trust formed a wholly-owned subsidiary,
Watermark
Texas 1, Inc., a Maryland corporation, and contributed its sole
property to
such subsidiary.

Principles of Consolidation

The consolidated financial statements include the accounts of
Watermark,
and its wholly-owned subsidiary, Watermark Texas 1, Inc.  All
significant
intercompany transactions and accounts have been eliminated.

Real Estate

Watermark carries real estate at the lower of cost or estimated
net
realizable value.

Allowance for Possible Losses

Watermark provides for possible losses on real estate when such
amounts are
considered necessary after making periodic reviews of the
estimated net
realizable values of the real estate.

Earnings (Loss) Per Share

Earnings (loss) per share is computed based upon the weighted
average
number of shares of beneficial interest outstanding during the
year.

Statements of Cash Flows

The Company does not consider any of its assets to meet the
definition of a
cash equivalent.

Accounting Estimates

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

Legal and Other Expenses

Legal and other expenses incurred for 1996, 1995 and 1994 include
legal
expenses of approximately $9,700, $62,000 and $100,000,
respectively.

Income Taxes

Watermark is qualified as a REIT.  To retain its REIT
qualification,
Watermark must restrict its investments principally to rental
properties or
notes secured by real estate, and must not realize more than 30%
of its
gross income from gain on the sale of real estate assets held for
less than
four years.  In addition, Watermark must pay out at least 95% of
its
taxable income, excluding capital gains, as dividends, provided
that
Watermark pays tax at corporate rates on capital gains not
distributed.  No
distributions were required in 1996, 1995 or 1994 due to net
operating
losses.


NOTE 2 - PLAN OF LIQUIDATION AND TERMINATION

Watermark operated under a Plan of Complete Liquidation and
Termination
(the "Plan" or the "Watermark Plan") approved by the shareholders
in 1985
until June 30, 1994.


NOTE 3 - REAL ESTATE

At December 31, 1995 and 1994, Watermark's only real estate asset
was a
parcel of unimproved land consisting of approximately 4.5 acres
located on
Parker Road in Houston, Harris County, Texas.  During 1992, a
provision was
made to reduce the Parker Road land to its estimated net
realizable value,
which was determined to be zero at December 31, 1992.  During
March 1995,
the Trust formed a wholly-owned subsidiary and contributed the
Park Road
property to such subsidiary.  At December 31, 1996 and 1995, the
Trust's
only significant asset was its ownership interest in such
subsidiary.

During February 1995, the Trust sold a 4,429 square foot strip of
land on
the south side of the Parker Road property to the City of
Houston, Texas
for $3,765.


NOTE 4 - NOTE PAYABLE

                                                       1996
1995
                                                       ____
____

 Note payable to Abbestate Holding, Inc., a           $60,000
$ ---
 related party, with an interest rate of 12%,
 uncollateralized, with interest and principal
 due August 1, 1997

Interest on the note payable was $2,584 in 1996 and is included
in accrued
liabilities on the balance sheet at December 31, 1996.


NOTE 5 - FEDERAL INCOME TAXES

No Federal income taxes have been provided for financial
statement purposes
because, as a REIT with no operating income, Watermark has no tax
liability.  At December 31, 1996, net operating loss
carryforwards of
approximately $844,000 were available for tax purposes which, if
not
utilized, will expire at various dates through 2010.


NOTE 6 - RELATED PARTY TRANSACTIONS

On November 10, 1993 Davister Corp. ("Davister") and Davister's
officers
became officers of Watermark.  On December 31, 1993 Watermark
advanced
$70,000 to Davister.  In 1994, Davister agreed to pay $70,000 of
legal fees
and other costs on behalf of Watermark to liquidate the advance.

From November 10, 1993 to December 5, 1995, Davister provided
office space
and legal, administrative and accounting services to the Trust
under the
supervision of the Trust's officers at that time (who were also
officers of
Davister or one of its affiliates).  Davister was not compensated
by the
Trust for any services rendered during the years ended December
31, 1995,
1994 or 1993.

On December 24, 1993, Watermark entered into a ground lease on
its Parker
Road property in Houston, Texas with Plano Outlet Mall, Ltd., a
related
party.  The lease expired December 23, 1994 and required
prepayment of the
total annual rental of $70,000.  For financial reporting
purposes, the
prepayment was classified as deferred lease revenue and was
amortized
ratably over the life of the lease.

Since December 5, 1995, HPI Capital, LLC has provided
administrative and
accounting services to the Trust under supervision of the Trust's
officers
(two of whom are also officers of HPI Capital, LLC).  HPI
Capital, LLC has
not been compensated by the Trust for any services rendered to
the Trust.


NOTE 7 - FINANCIAL INSTRUMENTS

The estimated fair values of Watermark's financial instruments at
December
31, 1996 and 1995 follow:


                                      1996
1995

                               Carrying       Fair       Carrying
   Fair
                                amount       value        amount
  value

 Cash                           $12,152     $12,152         $880
   $880

 Note payable-related party      60,000      60,000          ---
    ---


The fair value amounts for each of the financial instruments
listed above
approximate carrying amounts due to the short maturities of these
instruments.


NOTE 8 - ISSUANCE OF SHARES OF BENEFICIAL INTEREST

On November 10, 1994, Watermark issued 43,428 shares of
beneficial interest
for $43,428.  The shares were purchased by one of the investor
groups that
acquired Davister's interest in Watermark.


NOTE 9 - LIQUIDATING DISTRIBUTION

The recorded par value of the outstanding common shares of
beneficial
interest has been reduced by $346,178, which represents the
amount of a
1993 liquidating distribution in excess of additional paid-in
capital.


NOTE 10 - RECLASSIFICATIONS

Certain reclassifications have been made to the 1995 and 1994
consolidated
financial statements to conform to the 1996 presentation.


NOTE 11 - GOING CONCERN

The Trust has no operating assets or revenues.  Its continuation
as a
going concern is dependent upon the Trust's ability to raise
additional
capital from its shareholders or from third parties.  The
shareholders
anticipate providing such financial support to the Trust.
However, there
can be no assurances that the shareholders will continue to
provide such
support or that the Trust will be successful in raising
additional capital
from other sources.  Further, there can be no assurance, assuming
the Trust
successfully raises additional capital, that the Trust will
achieve
profitability or positive cash flow.




SCHEDULE III

                 WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY
              REAL ESTATE INVESTMENTS AND ACCUMULATED
DEPRECIATION
                        December 31, 1996, 1995 and 1994

<TABLE>
<C>            <C>         <C>             <C>             <C>
      <C>             <C>        <C>

                                           Gross Amount
                               Cost          at which
                Initial     Capitalized     Carried at
                Cost to      Subsequent     December 31,
Valuation    Accumulated       Date     Depreciable
Description    Watermark   to Acquisition       1996
Allowance    Depreciation    Acquired   Life (years)

Undeveloped
land
Houston, TX     $162,729       $5,859         $168,588
$(168,588)       ---          Various       ---

</TABLE>


A summary of activity in real estate and accumulated depreciation
for the three years in the period ended December 31, 1996 is as
follows:


 REAL ESTATE                             1996       1995
1994
 ___________                             ____       ____
____

 Balance at beginning of year          $168,588   $168,588
$168,588

 Sales                                   ---         ---
---

 Foreclosure additions                   ---         ---
---

 Improvements                            ---         ---
---
                                       _______     _______
_______

 Balance at end of year                $168,588   $168,588
$168,588

 ACCUMULATED DEPRECIATION

 Balance at beginning of year         $   ---      $  ---    $
---

 Sales                                    ---         ---
---

 Depreciation                             ---         ---
---
                                       _________   ________
_______
 Balance at end of year               $    ---    $   ---   $
---



Item 9.  Changes and Disagreements with Accountants on Accounting
and
Financial Disclosure.

     None.

                             PART III

Item 10.  Directors and Executive Officers of the Registrant.

     The business affairs of the Trust are managed by, or under
the direction of, the Board of Trustees.  The Trustees are
responsible for the general investment policies of the Trust and
for such general supervision of the business of the Trust
conducted by officers, agents, employees, investment advisors or
independent contractors of the Trust as may be necessary to
insure that such business conforms to the provisions of the
Declaration of Trust.  Pursuant to Article II, Section 2.1 of the
Declaration of Trust, as amended, of the Trust, there shall not
be less than two (2), nor more than fifteen (15), Trustees of the
Trust.  The number of Trustees shall be determined from time to
time by resolution of the Trustees and the current number of
Trustees is set at three (3).  Trustees may succeed themselves in
office and are required to be individuals at least 21 years old
not under legal disability and at least a majority must be
natural persons.  Commencing with the 1996 annual meeting of
shareholders, the Board of Trustees of the Trust shall be divided
into three classes, each class to consist as nearly as possible
of one-third of the Trustees.  The term of office of one class of
Trustees shall expire each year.  The initial term of office of
the Class I Trustees shall expire at the 1997 annual meeting of
shareholders.  The initial term of office of the Class II
Trustees shall expire at the 1998 annual meeting of shareholders.
The initial term of office of the Class III Trustees shall expire
at the 1999 annual meeting of shareholders.  After the 1996
annual meeting of shareholders, the Trustees of the class elected
at each annual meeting of shareholders thereafter shall hold
office for a term of three years.

     The current Trustees of the Trust (two of whom are also the
executive officers) are listed below, together with their ages,
all positions and offices with the Trust and their principal
occupations, business experience and directorships with other
companies during the last five years or more.

     David S. Givner, 52, has been Trustee, President and
Treasurer of the Trust since December 5, 1995, and is also the
President/Managing Director of HPI Capital, LLC.  Since 1992,
Mr. Givner has been President and Chief Operating Officer of
various affiliates of HPI Capital, LLC.  From 1987 until 1992, he
was Senior Vice President/Director of Leasing and Consulting
Services for Williams Real Estate Company based in New York, New
York.  Mr. Givner is also the sole shareholder and the President
of DAGI Corporation, a Delaware corporation and the general
partner of DAGI Limited Partnership, a Delaware limited
partnership.  Mr. Givner beneficially owns 59,655 Shares through
DAGI Limited Partnership.

     Simon Mizrachi, 48, has been Trustee of the Trust since
December 5, 1995 and is also the President of Midatlantic Agency,
Inc. a Florida corporation and financial consulting company.
Mr. Mizrachi has served as President of Midatlantic Agency, Inc.
since 1992.  Mr. Mizrachi and Midatlantic Agency, Inc. are the
sole partners of MIZ Investors Associates, a Delaware general
partnership.  Mr. Mizrachi has been a director and officer of PAZ
Securities, Inc., an NASD broker/dealer firm, since 1978.
Mr. Mizrachi is an officer with PAK Investors, Inc., Pudgie's
Chicken, Inc., Topaz Securities, Inc., Topaz, Inc., Cal-Mar,
Inc., TMT Hanes, Inc., and TMT Sales, Inc.  Mr. Mizrachi is also
an officer of various affiliates of MIZ Investors Associates and
Midatlantic Agency, Inc.  Mr. Mizrachi beneficially owns 59,655
Shares through MIZ Investors Associates.

     Michael S. Verruto, 36, has been Trustee, Vice President and
Secretary of the Trust since December 5, 1995 and is also the
Vice President/Managing Director of HPI Capital, LLC, a North
Carolina limited liability company that develops real estate.
Since January 1990, Mr. Verruto has held various positions with
various affiliates of HPI Capital, LLC, all of which are active
in real estate development and management.  Mr. Verruto is also
the sole shareholder and the President and Treasurer of Fletcher
Napolitano Styles and Verruto Holding Company, Inc., a Delaware
corporation and the general partner of Fletcher Napolitano Styles
and Verruto Family Property Partners, L.P., a Delaware limited
partnership.  Mr. Verruto beneficially owns 59,655 Shares through
Fletcher Napolitano Styles and Verruto Family Property Partners,
L.P.

Meetings and Committees of Trustees

The business affairs of the Trust are managed by, or under the
direction of, the Board of Trustees.  During the fiscal year
ended December 31, 1996, the Board of Trustees held one formal
meeting and no matters were handled by unanimous written consent.
The Board of Trustees has no standing audit, nominating or
compensation committee.

Compliance with Section 16(a) of the Securities Exchange Act of
1934

Under the securities laws of the United States, the Trust's
trustees, executive officers, and any persons holding more than
ten percent of the Trust's Shares are required to report their
ownership of the Shares and any changes in that ownership to the
Securities and Exchange Commission (the "Commission").  Specific
due dates for these reports have been established under
applicable law and the Trust is required to report any failure to
file by these dates during 1995.  To the best knowledge of the
current officers of the Trust, based upon the representations of
its former trustees and executive officers and its ten percent
holders and copies of the reports that they have filed with the
Commission, all of these filing requirements were satisfied by
its trustees and executive officers and ten percent holders.


Item 11.  Executive Compensation.

Neither the trustees nor the officers of the Trust received
salaries or other cash compensation from the Trust for acting in
such capacities during the year ended December 31, 1996.  The
Trust has no retirement, annuity or pension plans covering its
trustees or officers.  Based upon the Trust's current operations,
the Board of Trustees does not believe compensation will be paid
or given in the near future.


Item 12.  Security Ownership of Certain Beneficial Owners and
Management.

Security Ownership of Certain Beneficial Owners

     According to the Share transfer records of the Trust and
other information available to the Trust, the following persons
were known to be the beneficial owners, as of February 28, 1997,
of more than five percent (5%) of the outstanding Shares of the
Trust:

                                    Amount of       Percent of
        Name and Address           Beneficial         Shares
      of Beneficial Owner           Ownership     Outstanding(1)
      ___________________           _________     ______________

 Fletcher Napolitano Styles        59,665 (2)        11.0 (2)
 and                                 Shares
 Verruto Family Property
 Partners, L.P. (3)
 227 W. Trade Street
 Suite 2320
 Charlotte, NC 28202
 Attn: Michael S. Verruto

 MIZ Investors Associates (4)      59,665 (2)        11.0 (2)
 6971 N. Federal Highway             Shares
 Suite 203
 Boca Raton, FL 33487
 Attn: Simon and Joseph
 Mizrachi

 DAGI Limited Partnership (5)      59,665 (2)        11.0 (2)
 227 W. Trade Street                 Shares
 Suite 2320
 Charlotte, NC 28202
 Attn: David S. Givner

 Antapolis N.V.                    184,422 (2)       34.0 (2)
 c/o MeesPierson Trust               Shares
 (Curacao) N.V.
 Number 6 Curacao
 Netherlands Antilles
 Attn: John B. Goisiraweg

 _________________________

     (1)  Based on 542,413 Shares outstanding on February 28,
          1997.

     (2)  Does not include shares owned by others in group that
          filed a Schedule 13D dated November 10, 1994.  The
          group consists solely of the four entities listed
          above, which collectively own 363,417 Shares or 67.0%
          of the issued and outstanding Shares.

     (3)  Through his control of Fletcher Napolitano Styles and
          Verruto Family Property Partners, L.P., Michael S.
          Verruto is deemed the beneficial owner of 59,665
          shares.

     (4)  Through their control of MIZ Investors Associates,
          Simon and Joseph Mizrachi are deemed to share
          beneficial ownership of 59,665 shares.

     (5)  Through his control of DAGI Limited Partnership, David
          S. Givner is deemed the beneficial owner of 59,665
          shares.


Security Ownership of Management

     According to the Share transfer records of the Trust and
other information available to the Trust, as of February 28,
1997, the current trustees and executive officers of the trust
beneficially owned the following Shares:

      Name and Offices of          Amount of
       Beneficial Owner            Beneficial       Percent of
                                   Ownership         Class (1)

   David S. Givner, Trustee,       59,665 (2)        11.0 (2)
  (3) President and Treasurer

  Simon Mizrachi, Trustee (4)      59,665 (2)        11.0 (2)

 Michael S. Verruto, Trustee,      59,665 (2)        11.0 (2)
    (5) Vice President and
           Secretary

  All trustees and executive      178,995 (2)        33.0 (2)
      officers as a group

____________________________

     (1)  Based on 542,413 Shares outstanding on February 28,
          1997.

     (2)  Does not include shares owned by others in group that
          filed a Schedule 13D dated November 10, 1994.  The
          group consists solely of the four entities listed
          previously as the beneficial owners, which collectively
own
       363,417 Shares or 67.0% of the issued and outstanding
Shares.

     (3)  Through his control of DAGI Limited Partnership, David
          S. Givner is deemed the beneficial owner of 59,665
          shares.

     (4)  Through their control of MIZ Investors Associates,
          Simon and Joseph Mizrachi are deemed to share
          beneficial ownership of 59,665 shares.

     (5)  Through his control of Fletcher Napolitano Styles and
          Verruto Family Property Partners, L.P., Michael S.
          Verruto is deemed the beneficial owner of 59,665
          shares.


Item 13.  Certain Relationships and Related Transactions.

     Since December 5, 1995, HPI Capital, LLC has provided
administrative and accounting services to the Trust under the
supervision of the Trust's officers (two of whom are also
officers of HPI Capital, LLC).  HPI Capital, LLC has not been
compensated by the Trust for any services rendered to the Trust.



                             PART IV

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

(a)  The following documents are filed as part of this report:

     1.   Consolidated Financial Statements:

               Balance Sheets as of December 31, 1996 and 1995.

               Statements of Operations for the years ended
               December 31, 1996, 1995 and 1994.

               Statements of Shareholders' Equity for the years
               ended December 31, 1996, 1995 and 1994.

               Statements of Cash Flows for the years ended
               December 31, 1996, 1995 and 1994.

               Notes to Financial Statements.

     2.   Schedules:

               Schedule III - Real Estate Investments and
               Accumulated Depreciation.

               All other schedules are omitted since they are not
               required, are not applicable, or the information
               required is included in the financial statements
               or the notes thereto.

     3.   Exhibits:

          The following documents are filed as exhibits to this
          report:

          Exhibit
          Number         Description
          ______         ___________

           3.1      Declaration of Trust, as amended
                    (Incorporated by reference to Exhibit 3.1 to
                    Registrant's Form and for the year ended
                    December 31, 1995).

           3.2      By-laws, as amended (Incorporated by
                    reference to Exhibit 3.1 to Registrant's Form
                    and for the year ended December 31, 1995).

           21       List of Subsidiaries.

           27       Financial Data Schedule

           99       Trust Share Purchase Agreement dated
                    November 10, 1994 between Watermark Realty
                    Investors and MIZ Investors Associates.
                    (Incorporated by reference to Exhibit 28.1 to
                    Registrant's Current Report on Form 8-K for
                    November 10, 1994.)

(b)  Reports on Form 8-K.

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




                            SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on this the 25th day of March, 1997.

                              WATERMARK INVESTORS REALTY TRUST



                              By:  /s/ David S. Givner

                                   ______________________________
                                   David S. Givner
                                   Trustee, President and
Treasurer


     Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated.




      Signature                    Title                   Date

 /s/ David S. Givner      Trustee, President and      March 25,
1997
     David S. Givner      Treasurer (Principal
                          Executive Officer and
                          Principal Financial and
                          Accounting Officer)

 /s/ Michael S. Verruto   Trustee, Vice President     March 25,
1997
     Michael S. Verruto   and Secretary