SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

                  For the quarterly period ended June 30, 1997

                                       OR

[   ]             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 1-6613


                              VALUE PROPERTY TRUST
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)



          Maryland                                          23-1862664
-------------------------------                 --------------------------------
(State or other jurisdiction of                 (I.R.S. Employer Identification)
incorporation or organization)                                  

     120 Albany Street, 8th Floor
      New Brunswick, New Jersey                             08901-2163
----------------------------------------                    ----------
(Address of principal executive offices)                    (Zip Code)


Registrant's telephone number, including area code:    (908) 296-3080
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.    Yes [ X ]    No [   ].


Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12, 13 or 15 (d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan

Number of Common Shares Outstanding at August 5, 1997:  11,226,310
<PAGE>

                      VALUE PROPERTY TRUST AND SUBSIDIARIES

                                      INDEX




                                                                                

Part I:    FINANCIAL INFORMATION

           Item 1.  Consolidated Financial Statements..........................

                    Consolidated Balance Sheets at June 30, 1997 (Unaudited)
                          and September 30, 1996...............................

                    Consolidated Statements of Operations for the Three and Nine
                          Months Ended June 30, 1997 and 1996 (Unaudited)......

                    Consolidated Statements of Cash Flows for the Nine Months
                          Ended June 30, 1997 and 1996 (Unaudited).............

                    Consolidated Statement of Shareholders' Equity for the Nine
                          Months Ended June 30, 1997 (Unaudited)...............

                    Notes to the Consolidated Financial Statements.............

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




Part II:   OTHER INFORMATION

           Item 5.  Other Information..........................................

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

                    Signatures.................................................

<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q

PART I:              FINANCIAL INFORMATION

ITEM 1.              CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(In Thousands)

                                                                 June 30,    September 30,
                                                                   1997         1996
                                                                 --------     --------
                                                                (Unaudited)
<S>                                                              <C>          <C>
                   ASSETS

Assets Held for Sale:
   Investment in partnerships ..............................     $ 11,366     $ 10,219
   Real estate owned .......................................       23,249       38,171
                                                                 --------     --------
         Total Assets Held for Sale ........................       34,615       48,390
                                                                 --------     --------

Assets Held for Investment:
   Mortgage loans ..........................................          583          663
   Investment in partnerships ..............................         --         13,486
   Real estate owned .......................................       37,935       63,196
                                                                 --------     --------
         Total Assets Held for Investment ..................       38,518       77,345
                                                                 --------     --------

         Total Invested Assets .............................       73,133      125,735

Cash and cash equivalents ..................................       65,932       29,501
Restricted cash ............................................       34,734       12,213
Interest receivable and other assets .......................        3,683        4,962
                                                                 --------     --------
         Total Assets ......................................     $177,482     $172,411
                                                                 ========     ========

                   LIABILITIES

Senior secured notes (due 1999) ............................     $ 42,882     $ 63,226
Accounts payable and accrued expenses ......................        1,396        1,804
Interest payable ...........................................          244          334
                                                                 --------     --------
         Total Liabilities .................................       44,522       65,364
                                                                 --------     --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(In Thousands) (continued)

                                                                 June 30,    September 30,
                                                                   1997         1996
                                                                 --------     --------
                                                                (Unaudited)
<S>                                                              <C>          <C>
                   SHAREHOLDERS' EQUITY

Preferred shares, $1 par value: 3,500,000 shares authorized,
   none issued .............................................         --           --
Common shares, $1 par value: 20,000,000 shares authorized,
   11,226,310 and 11,226,310 shares issued and outstanding .       11,226       11,226
Additional paid-in capital .................................       88,848       88,848
Accumulated earnings .......................................       32,886        6,973
                                                                 --------     --------
         Total Shareholders' Equity ........................      132,960      107,047
                                                                 --------     --------

         Total Liabilities and Shareholders' Equity ........     $177,482     $172,411
                                                                 ========     ========




        See accompanying notes to the consolidated financial statements. 
</TABLE>
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands Except Per Share Data)



                                                  Three Months Ended       Nine Months Ended
                                                        June 30,                June 30,
                                                 -------------------       -----------------
                                                   1997        1996        1997        1996
                                                 -------     -------     -------     -------
<S>                                              <C>         <C>         <C>         <C>
Revenue:
   Rental properties:
       Rental income .......................     $ 5,052     $ 6,909     $16,701     $20,454
       Operating expense reimbursements ....         843         985       2,518       2,681
   Interest and fee income on mortgage loans          19          19          61       2,833
   Interest on short-term investments ......         829         543       1,943       1,310
   Other ...................................           0           6           8          17
                                                 -------     -------     -------     -------
       Total Revenue .......................       6,743       8,462      21,231      27,295
                                                 -------     -------     -------     -------

Expenses:
   Interest ................................       1,389       2,064       4,162       9,049
   Rental properties:
       Operating ...........................       2,171       2,978       7,102       9,104
       Depreciation and amortization .......         377         585       1,321       1,780
   Other operating expenses ................         802         819       2,317       2,459
                                                 -------     -------     -------     -------
       Total Expenses ......................       4,739       6,446      14,902      22,392
                                                 -------     -------     -------     -------

Income before gain on sale of real estate ..       2,004       2,016       6,329       4,903
Gain on sale of real estate ................      11,712        --        19,584        --
                                                 -------     -------     -------     -------
Net income .................................     $13,716     $ 2,016     $25,913     $ 4,903
                                                 =======     =======     =======     =======

Per share:
Income before gain on sale of real estate ..     $   .18     $   .18     $   .56     $   .44
Gain on sale of real estate ................        1.04        --          1.75        --
                                                 -------     -------     -------     -------
Net income .................................     $  1.22     $   .18     $  2.31     $   .44
                                                 =======     =======     =======     =======

Weighted average number of common
   shares outstanding ......................      11,226      11,226      11,226      11,226
                                                 =======     =======     =======     =======



               See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
                                                                         Nine Months Ended
                                                                              June 30,
                                                                         1997          1996
                                                                      ---------     ---------
<S>                                                                   <C>           <C>
Cash flows from operating activities:
     Net income ..................................................    $  25,913     $   4,903
     Adjustments to reconcile net income to net
         cash provided by operating activities:
              Depreciation and amortization on real estate .......        1,321         1,780
              Decrease in payables and accrued expenses ..........         (408)       (2,897)
              (Decrease) increase in interest payable ............          (90)          357
              Decrease in receivables and other assets ...........        1,647         3,061
              Gain on sale of real estate ........................      (19,584)         --
                                                                      ---------     ---------
     Total adjustments ...........................................      (17,114)        2,301
                                                                      ---------     ---------
Net cash provided by operating activities ........................        8,799         7,204
                                                                      ---------     ---------
Cash flows from investing activities: Investment in real estate:
         Real estate .............................................       (2,706)       (3,403)
         Partnerships ............................................         (629)         (145)
         Advances on mortgage loans ..............................         --             (73)
     Principal repayments on mortgage loans ......................           80         2,357
     Proceeds from the sale of real estate .......................       73,752        14,677
     Proceeds from the sale of mortgage loans and notes receivable         --          53,991
     Principal repayments on notes receivable ....................         --             366
                                                                      ---------     ---------
Net cash provided by investing activities ........................       70,497        67,770
                                                                      ---------     ---------
Cash flows from financing activities:
     Payment of mortgage payable .................................         --         (17,535)
     Prepayment of senior secured notes (due 2002) ...............         --        (109,975)
     Borrowing of senior secured notes (due 1999) ................         --          67,379
     Prepayment of senior secured notes (due 1999) ...............      (20,344)         --
     Increase in restricted cash .................................      (22,521)       (3,243)
                                                                      ---------     ---------
Net cash used in financing activities ............................      (42,865)      (63,374)
                                                                      ---------     ---------
Net increase in cash and cash equivalents ........................       36,431        11,600
Cash and cash equivalents at beginning of period .................       29,501         9,977
                                                                      ---------     ---------
Cash and cash equivalents at end of period .......................    $  65,932     $  21,577
                                                                      =========     =========
Supplemental schedule of non-cash investment and
     financing activities:

     Transfer of mortgage loans to real estate owned .............    $    --       $   5,120
                                                                      =========     =========
     Interest paid ...............................................    $   2,747     $   7,787
                                                                      =========     =========

               See accompanying notes to the consolidated financial statements. 
</TABLE>
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited)
(Amounts In Thousands)

For the Nine Months Ended June 30, 1997


                                                                    Additional                    Total
                                             Common Shares           Paid-In       Retained   Shareholders'
                                          Shares        Amount       Capital       Earnings      Equity
                                          ------        ------       -------       --------      ------
<S>                                     <C>           <C>           <C>           <C>           <C>
Balance at September 30, 1996 ......      11,226      $ 11,226      $ 88,848      $  6,973      $107,047

Net income .........................        --            --            --          25,913        25,913
                                        --------      --------      --------      --------      --------

Balance at June 30, 1997 ...........      11,226      $ 11,226      $ 88,848      $ 32,886      $132,960
                                        ========      ========      ========      ========      ========




                     See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q


                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

NOTE 1. BASIS OF FINANCIAL INFORMATION AND PLAN OF REORGANIZATION

         In connection  with its emergence  from the Chapter 11 proceeding  (the
"1995  Restructuring"),  the  Trust  implemented  Fresh  Start  Reporting  as of
September  30,  1995,  as set forth in Statement  of Position  90-7,  "Financial
Reporting by Entities in Reorganization  Under the Bankruptcy Code." Fresh Start
Reporting  was  required  because  (1) the  reorganization  value of the Trust's
assets  immediately  before the date of confirmation  was less than the total of
all  post-petition  liabilities,  (2) there  was more  than a 50%  change in the
ownership of the Trust,  and (3) there was a permanent and  substantive  loss of
control by existing  shareholders.  As a result, all assets and liabilities were
restated to reflect their respective reorganization value or fair value.

         The accompanying  unaudited financial  statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all the information and footnotes required
by generally accepted accounting  principles for complete financial  statements.
In the  opinion  of  management,  all  adjustments,  consisting  of only  normal
recurring  accruals,  considered  necessary  for a fair  presentation  have been
included.  Operating  results for the nine-month and  three-month  periods ended
June 30, 1997 are not necessarily indicative of the results that may be expected
for the fiscal year ending September 30, 1997. These financial statements should
be read in  conjunction  with the Trust's  September 30, 1996 audited  financial
statements and notes thereto included in the Trust's Annual Report on Form 10-K.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

         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. The most significant of these estimates relate to the carrying
value of the Assets Held for Sale and the estimated  useful lives of Assets Held
for Investment. Actual results could differ from those estimates.

                           PRINCIPLES OF CONSOLIDATION

         The  accounts  of the  Trust  and its  wholly  owned  subsidiaries  are
consolidated  in  the  accompanying   financial   statements.   All  significant
intercompany balances and transactions have been eliminated in consolidation.

                                  INCOME TAXES

         The Trust is a real estate  investment  trust ("REIT") that has elected
to be taxed under  Sections  856-860 of the Internal  Revenue  Code of 1986,  as
amended (the "Code").  Accordingly, the Trust does not pay Federal income tax on
income as long as income distributed to shareholders is at least equal to 95% of
real estate  investment trust taxable income,  and pays no Federal income tax on
capital gains distributed to shareholders.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q


         In July 1997,  the Trust  contacted the Internal  Revenue  Service (the
"IRS") regarding  interpretative  advice concerning a technical provision of the
REIT requirements of the Internal Revenue Code and, based upon such interpretive
advice,  potential violations of such provision during fiscal 1994 and 1995. The
Trust does not believe that any such potential  violations would have a material
adverse  effect  on  the  Trust.   However,   the  Trust  has  sought  the  IRS'
interpretation  of the  technical  provision  of the REIT  requirements  and its
concurrence that, if any technical violations were deemed to have occurred, such
violations would not affect the Trust's REIT status.  The Trust believes that if
its status as a REIT was terminated, potential corporate taxes for prior periods
would  not be  material  due to the net  operating  losses  available  in  prior
periods.  Moreover,  there  should be no material  adverse tax  consequences  to
shareholders  during  such prior  periods  since no  distributions  were made to
shareholders during such periods.  The effect of a termination of REIT status in
current and future periods would be based upon a number of factors;  because the
Trust is unable to predict the  occurrence or magnitude of such  factors;  it is
unable to predict the effect of a termination of REIT status on the Trust or its
shareholders for such periods.

         For the fiscal years ended  September  30, 1996,  1995 and 1994,  there
were significant  differences  between taxable net loss and net income (loss) as
reported  in the  financial  statements.  The  differences  were  related to the
recognition of bad debt deductions and accounting for  reorganization  costs and
Fresh  Start  Reporting.  For  financial  accounting  purposes,  these items are
expensed  currently,  while for tax  purposes  some  portion of these  items are
deferred to future  periods or may not be  deductible.  In  addition,  the Fresh
Start Reporting discussed in Note 1 is not recognized for tax purposes, and will
result in future years financial reporting and tax basis differences.

         The Trust has  approximately  $115 million in net operating losses (the
"NOLs") for tax purposes  attributable to losses  generated in fiscal years 1992
through 1996. The NOLs  attributable  to each year can be carried  forward up to
fifteen  years  from the year  the  loss was  generated.  The use of NOLs in any
taxable  year  (together  with  any  recognized  losses  that  are  economically
attributable to the period up to the Restructuring) will be subject to an annual
limitation  under Section 382 of the Code. The Trust  estimates that this annual
limitation is approximately $6 million.

                                 INTEREST INCOME

         Interest income on each loan is recorded as earned.  Interest income is
not recognized if, in the opinion of the management, collection is doubtful. The
Trust  generally  considers  loans as delinquent  if payment of interest  and/or
principal,  as required by the terms of the note, is more than 60 days past due.
Accrual of interest income is generally  terminated and foreclosure  proceedings
are started if payment is more than 60 days past due.

                              ALLOWANCE FOR LOSSES

         Impairment  on  mortgage  loans is  accounted  for in  accordance  with
Financial Accounting Standards Board Statement No. 114 - Accounting by Creditors
for Impairment of a Loan.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q


                              NET INCOME PER SHARE

         Net income per share is  computed  using the  weighted  average  common
shares outstanding during the period.

                          DEPRECIATION AND AMORTIZATION

         At September 30, 1995, as a result of Fresh Start Reporting, all assets
and  liabilities  of  the  Trust  were  restated  to  reflect  their  respective
reorganization value or fair value. The accumulated  depreciation on real estate
owned was reset to zero as a result of the adoption of Fresh Start Reporting. At
September 30, 1995,  the Trust  segregated  the real estate  portfolio  into two
categories:  Held for Sale and Held for  Investment.  The Trust  depreciates the
Held for Investment  category over the estimated useful lives of the assets;  40
years for buildings, three to five years for other property and over the term of
the related lease for lease  commissions and tenant  improvements.  The Held for
Sale category is not  depreciated.  During fiscal 1996,  the Trust  reclassified
seven real estate properties totaling $18.7 million to Assets Held for Sale from
Assets Held for Investment and no longer  depreciates  these assets.  During the
second  quarter  of  fiscal  1997,  the  Trust  reclassified  five  real  estate
properties  totaling  $35.7 million to Assets Held for Sale from Assets Held for
Investment and no longer depreciates these assets.

                            CASH AND CASH EQUIVALENTS

         Cash  and cash  equivalents  and  restricted  cash  include  short-term
investments  (high grade commercial  paper,  bank CDS and US Treasury and Agency
Securities) with original maturities not exceeding a term greater than 90 days.

                           INVESTMENT IN PARTNERSHIPS 

         Investment in  partnerships  represents the Trust's  investment in real
estate  partnerships.  The Trust owns a majority  percentage interest in most of
these  partnerships and receives  substantially  all of the cash flow. The Trust
accounts for all of these partnerships,  except one, in a similar manner as real
estate  investments;  the one  partnership  was  accounted  for using the equity
method.

                                REAL ESTATE OWNED

         As of September 30, 1995, the Trust's  invested assets were adjusted to
reorganization  value which became the new historical cost basis.  Subsequently,
Assets Held for  Investment  are carried at historical  cost less  depreciation.
Assets Held for Sale are carried at lower of cost or net  realizable  value.  In
conjunction  with the adoption of Fresh Start  Reporting on September  30, 1995,
all gains or losses for a period of one year after such  adoption  were  applied
against the  carrying  value of long lived assets Held for  Investment.  Through
September  30, 1996,  the Trust  reduced the carrying  values of Assets Held for
Investment by $12.6 million as a result of the net gains on both the disposition
of  substantially  all of its mortgage loan portfolio in March 1996 and the sale
of nine real estate properties  classified as Assets Held for Sale. For the nine
months ended of June 30, 1997, a gain of $19.6 million is recorded in net income
as a result of real estate  property sales. At June 30, 1997, the Trust owned 23
real estate  properties  of which eight are  classified as Assets Held for Sale.
The fiscal 1996  revenue and net  operating  income from these eight real estate
properties were $7.8 million and $4.4 million, respectively.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q


                                 DEFERRED COSTS

         Included in other assets are costs incurred in obtaining debt financing
which are deferred and  amortized  over the term of the related debt  agreement.
Amortization  expense  is  included  in  interest  expense  in the  accompanying
statement of operations.  Net deferred  financing costs included in other assets
in the accompanying balance sheet amounted to $0.7 million at June 30, 1997.

                               REVENUE RECOGNITION

         The Trust  recognizes  base  rental  revenue  for  financial  statement
purposes ratably as earned over the term of the lease.

                          INTEREST RATE SWAP AGREEMENT 

         The Trust is a party to an  interest  rate  protection  agreement  (the
"Cap") used to hedge its interest  rate exposure on floating rate debt (See Note
4  "Borrowings").  The  differential to be paid or received is recognized in the
period incurred and included in interest expense.

                    RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In February 1997,  the Financial  Accounting  Standards  Board ("FASB")
issued Statement of Financial  Accounting  Standards ("SFAS") No. 128, "Earnings
Per  Share"  and  SFAS  No.  129,   "Disclosure  of  Information  about  Capital
Structure." In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131,  "Disclosures  about  Segments  of an  Enterprise  and
Related Information."

         SFAS  128,  which   simplifies   existing   computational   guidelines,
supersedes Accounting Principles Board ("APB") Opinion 15, "Earnings Per Share,"
and specifies the  computation,  presentation,  and disclosure  requirements for
earnings  per share  ("EPS") for  entities  with  publicly  held common stock or
potential common stock.  SFAS 128 is effective for financial  statements  issued
for periods ending after December 15, 1997,  including interim periods.  Earlier
application  is not  permitted,  and all  prior  period  EPS  figures  that  are
presented are required to be restated.  The Trust is currently  evaluating  SFAS
128 and  believes  that the  adoption  of SFAS  128 will not have a  significant
impact on the disclosures in the financial statements of the Trust.

         SFAS 129,  "Disclosure of Information  about Capital  Structure"  lists
required  disclosure about capital  structure that had been included in a number
of separate statements and opinions of authoritative accounting literature. SFAS
129 is  effective  for  financial  statements  issued for periods  ending  after
December 15,  1997.  The Trust  believes  that the adoption of SFAS 129 will not
have a significant impact on the disclosures in the financial  statements of the
Trust.

         SFAS No. 130, "Reporting  Comprehensive  Income" establishes  standards
for reporting and display of  comprehensive  income and its components in a full
set of  general-purpose  financial  statements.  SFAS No. 131 is  effective  for
financial statements issued for periods beginning after December 15, 1997.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q

         SFAS No. 131,  "Disclosures about Segments of an Enterprise and Related
Information"  establishes standards for the way that public business enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  anout operating
segments in interim  financial  reports issued to shareholders.  SFAS No. 131 is
effective for financial  statements  issued for periods beginning after December
15, 1997.

NOTE 3. MORTGAGE LOANS AND INVESTMENTS IN REAL ESTATE

         During  the second  quarter of fiscal  1996,  the Trust  completed  the
disposition  of  substantially  all of its mortgage  loan  portfolio.  The Trust
received  $55.5  million in net cash proceeds  through a series of  transactions
which included loan repayments and a bulk sale of mortgage  loans.  The carrying
value of the  mortgage  loans  involved  in  these  transactions  totaled  $50.5
million.  The Trust's  remaining  mortgage loan holdings are currently less than
$0.6 million.

         The following table  summarizes the Trust's  investments in real estate
owned at June 30, 1997.
<TABLE>
<CAPTION>

                Type of
              Real Estate                  Number         Carrying     Accumulated         Book
               Property                of Properties       Amount      Depreciation        Value
               --------                -------------       ------      ------------        -----
                                                            (dollars in thousands)
<S>                                        <C>            <C>            <C>             <C>
Real Estate Held for Sale:

         Real Estate Owned ........              6        $23,384        $  (135)        $23,249
         Investment in Partnerships              2         11,562           (196)         11,366
                                           -------        -------        -------         -------
         Total ....................              8        $34,946        $  (331)        $34,615
                                           =======        =======        =======         =======

Real Estate Held for Investment:

         Real Estate Owned ........             15        $40,015        $(2,080)        $37,935
                                           -------        -------        -------         -------
         Total ....................             15        $40,015        $(2,080)        $37,935
                                           =======        =======        =======         =======
</TABLE>

NOTE 4. BORROWINGS

                              SENIOR SECURED NOTES 

         The Holders of the Prior Notes had a first  priority lien on all of the
Trust's collateral. The Prior Notes were governed by the Prior Indenture between
the Trust and Wilmington  Trust Co., as Trustee,  dated as of the effective date
of the Trust's reorganization  (September 29, 1995). Interest on the Prior Notes
accrued at 11-1/8%  per annum and was payable  semi-annually  in arrears on each
June 30 and December 31. The Prior  Indenture  included  affirmative  covenants,
negative covenants and financial covenants.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q

         On March 28, 1996, the Trust entered into a financing  agreement  which
provided  for the  issuance  of $67.4  million of new  Floating  Rate Notes (the
"Floating Rate Notes"),  which issuance occurred on April 30, 1996. The Floating
Rate Notes bear interest at 30 day LIBOR + 1.375%,  payable monthly,  and have a
stated maturity date of May 1, 1999.

         The indenture relative to the Floating Rate Notes (the "New Indenture")
generally  requires that, on a monthly  basis,  the Trust deposit into a Trapped
Funds  Account,  as defined in the New  Indenture,  maintained  by the indenture
trustee (the "New Indenture  Trustee") for the Floating Rate Notes all Cash Flow
and Asset Sale Proceeds (each as defined in the New  Indenture).  Cash Flow from
the Trapped Funds Account will be distributed to pay the New Indenture Trustee's
expenses,  pay all accrued but unpaid interest on the Floating Rate Notes and to
maintain a Debt  Service  Reserve  Account  before any funds are released to the
Trust. In the event of a sale of, or certain casualty, or indemnification events
with  respect to any of the  remaining  sixteen  real estate  properties  of the
original  twenty-four  real estate  properties  mortgaged under the terms of the
Floating Rate Notes  (underlying  collateralized  value of $46.1 million at June
30, 1997), the proceeds therefrom will be used to retire up to 125% of a portion
of the  allocated  debt of such  property  before any funds are  released to the
Trust. The New Indenture includes affirmative  covenants and negative covenants.
At June 30, 1997, the Trust was in compliance with the New Indenture.

         The proceeds  received  from the  Floating  Rate Notes,  together  with
approximately  $56.5  million of cash on hand,  were used to prepay the  Trust's
Prior Notes and Mortgage Payable. The face amount outstanding of the Prior Notes
and the Mortgage  Payable at the time of repayment was $110.0  million and $13.9
million,  respectively. The Prior Notes and Mortgage Payable were repaid in full
on April 30, 1996.

         Effective  April 30,  1996,  the Trust  entered  into an interest  rate
protection  agreement  (the  "Cap")  that  serves to cap the  floating  interest
component  of the  Floating  Rate Notes at 8%. The Trust paid a one-time  fee of
$377,000 to the counterparty to the Cap.

         During fiscal 1996, the Trust sold nine real estate  properties,  three
of which were encumbered under the terms of the New Indenture.  The Trust used a
portion of the net proceeds from the sale of encumbered  real estate  properties
to prepay a portion of the Floating Rate Notes,  as required  under the terms of
the New  Indenture.  In July of fiscal 1996,  the Trust used $4.2 million of the
net  proceeds  and in October and  November of fiscal 1997 used $2.6 million and
$4.4 million, respectively, of the net proceeds of fiscal 1996 sales to prepay a
portion of the Floating Rate Notes.

         During the nine months  ended June 30,  1997,  the Trust sold five real
estate  properties  and  three  of  nine  buildings  owned  by the  Trust  in an
industrial park, which were encumbered under the terms of the New Indenture.  In
addition,  the Trust sold three real estate properties which were not encumbered
under the terms of the New  Indenture.  During  the nine  months  ended June 30,
1997, the Trust used $13.3 million of the net proceeds of the  encumbered  sales
to prepay a portion of the  Floating  Rate Notes.  In July of fiscal  1997,  the
Trust used $22.1  million of the net  proceeds  of two  encumbered  sales  which
occurred in June of fiscal 1997 to prepay a portion of the Floating Rate Notes.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q

NOTE 5. SHARE OPTION PLAN

                             1995 SHARE OPTION PLAN 

         On October 2, 1995,  the Board of Trustees  adopted a 1995 Share Option
Plan (the "1995 Plan") for Trustees,  officers,  employees and other key persons
of the Trust.  On February  15,  1996,  the Trust's  shareholders  approved  the
adoption of the 1995 Plan at the Trust's 1996 Annual Meeting of Shareholders.

         The 1995 Plan  provides  for the grant of  options  to  purchase  up to
870,000  common  shares at not less than  100% of the fair  market  value of the
common  shares,  subject to  adjustment  for share splits,  share  dividends and
similar  events.  To the extent that  awards  under the 1995 Plan do not vest or
otherwise revert to the Trust, the common shares  represented by such awards may
be the subject of subsequent awards.

         The 1995  Plan  provides  for the  grant  of  incentive  stock  options
("Incentive   Options")  which  qualify  under  Section  422  of  the  Code  and
non-qualified stock options ("Non-Qualified  Options").  Holders of options also
receive dividend equivalent rights.  During fiscal 1996, 894,000 shares from the
1995 Plan were  granted  with a price  range from $10.00 to $12.25 per share and
55,000  shares  were  canceled  at a price of $10.00 per share.  During the nine
months  ended  June 30,  1997,  no shares  from the 1995 Plan  were  granted  or
canceled. The options expire four years from the date of grant.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q


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

         The following section includes a discussion and analysis of the results
of operations for the nine months and three months ended June 30, 1997 and 1996.
The Trust has, for the past several years, reported significant net losses. As a
result of the 1995  Restructuring,  past  results  should not be  indicative  of
future operating performance. Future results of operations of the Trust will not
be comparable to the historical operating performance.

RESULTS OF OPERATIONS-NINE MONTHS ENDED JUNE 30, 1997 VERSUS NINE MONTHS
ENDED JUNE 30, 1996

         Net income for the nine months  ended June 30, 1997 was $25.9  million,
or $2.31 per share,  compared to $4.9 million,  or $0.44 per share, for the nine
months ended June 30, 1996.  Income  before gain on sale of real estate was $6.3
million, or $0.56 per share, for the nine months ended June 30, 1997 compared to
$4.9 million, or $0.44 per share, for the nine months ended June 30, 1996.

         Rental income was $16.7 million for the nine months ended June 30, 1997
compared to $20.5  million for the nine months ended June 30, 1996.  In addition
to rental income, the Trust received reimbursement of certain operating expenses
totaling  $2.5  million and $2.7 million for the nine months ended June 30, 1997
and 1996, respectively. The decrease in rental income was the result of the real
estate  property  sales that  occurred  during fiscal 1996 and 1997. At June 30,
1997 the Trust owned 23 real estate  properties  compared to 34 at June 30, 1996
and 38 at  September  30, 1995.  During the third and fourth  quarters of fiscal
1996,  the Trust sold eight real  estate  properties  and during the nine months
ended June 30, 1997,  the Trust sold eight real estate  properties  and three of
nine buildings  owned by the Trust in an industrial  park. The eight real estate
properties  sold during the last two  quarters of fiscal 1996  contributed  $2.8
million in revenue during the nine months ended June 30, 1996.  Occupancy levels
decreased  to 85.9% at June 30, 1997  compared to 87.5% at  September  30, 1996,
88.7% at June 30, 1996 and  increased  compared to 81.1% at September  30, 1995.
Occupancy levels, adjusted for real estate property sales, increased to 85.9% at
June 30, 1997 compared to 85.1% at June 30, 1996.

         Interest  and fee income on  mortgage  loans was  $61,000  for the nine
months  ended June 30, 1997  compared to $2.8  million for the nine months ended
June  30,  1996.  In  March  1996,  the  Trust   completed  the  disposition  of
substantially  all of its mortgage  loan  portfolio.  The Trust  received  $55.5
million in net cash proceeds  through a series of  transactions  which  included
loan repayments and a bulk sale of mortgage loans. As a result,  interest income
earned on the mortgage loan  portfolio was  substantially  reduced.  The Trust's
remaining mortgage loan portfolio is currently less than $0.6 million.

         Interest on short-term investments was $1.9 million for the nine months
ended June 30, 1997  compared to $1.3 million for the nine months ended June 30,
1996.  The increase  was due to the increase in cash  balances as a result of 11
real  estate  property  sales  since  June  30,  1996  and  the  disposition  of
substantially all of the mortgage loan portfolio in March 1996.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q

         Interest  expense was $4.2  million for the nine months  ended June 30,
1997  compared to $9.0 million for the nine months  ended June 30, 1996.  During
October of fiscal  1996,  the Trust used $3.5  million to repay a portion of the
Mortgage Payable. On April 30, 1996, the Trust refinanced its outstanding Senior
Secured Notes at a substantially lower rate of interest with the issuance of new
Floating Rate Notes in the amount of $67.4 million.  The proceeds  received from
the Floating Rate Notes,  together with  approximately  $56.5 million of cash on
hand, were used to prepay the Trust's Senior Secured Notes and Mortgage Payable.
The face amount outstanding of the Senior Secured Notes and the Mortgage Payable
at the time of repayment was $110.0 million and $13.9 million, respectively. The
Senior Secured Notes and Mortgage Payable were repaid in full on April 30, 1996.
Included in  interest  expense for fiscal 1997 and for two months of fiscal 1996
is the  amortization  of deferred  costs incurred in obtaining the Floating Rate
Notes which are  amortized  over the term of the debt  agreement.  The Trust has
reduced the  Floating  Rate Notes by $24.5  million  through  June 30, 1997 as a
result of the prepayments  required under the New Indenture from the sale of six
encumbered real estate properties and three of nine buildings owned by the Trust
in an industrial  park. In July of fiscal 1997,  the Trust used $22.1 million of
the net proceeds of two  encumbered  sales which occurred in June of fiscal 1997
to prepay a portion of the Floating Rate Notes.

         Operating  expenses on rental  properties was $7.1 million for the nine
months  ended June 30, 1997  compared to $9.1  million for the nine months ended
June 30, 1996.  The decrease in operating  expenses on rental  properties is the
result of real estate  property sales that occurred  during fiscal 1996 and cost
containment measures. At June 30, 1997 the Trust owned 23 real estate properties
compared to 34 at June 30, 1996 and 38 at September  30, 1995.  During the third
and fourth quarters of fiscal 1996, the Trust sold eight real estate  properties
and  during the nine  months of fiscal  1997,  the Trust sold eight real  estate
properties and three of nine buildings owned by the Trust in an industrial park.
The eight real estate  properties  sold  during the last two  quarters of fiscal
1996 contributed $1.0 million in operating expenses during the nine months ended
June 30, 1996.  Occupancy levels decreased to 85.9% at June 30, 1997 compared to
87.5% at September 30, 1996,  88.7% at June 30, 1996 and  increased  compared to
81.1% at September 30, 1995. Occupancy levels, adjusted for real estate property
sales, increased to 85.9% at June 30, 1997 compared to 85.1% at June 30, 1996.

         Depreciation and amortization on rental properties was $1.3 million for
the nine months ended June 30, 1997 compared to $1.8 million for the nine months
ended June 30, 1996. At September 30, 1995, the Trust segregated the real estate
portfolio  into  two  categories:   Held  for  Sale  and  Held  for  Investment.
Additionally,  all assets and  liabilities of the Trust were restated to reflect
their respective  reorganization  value or fair value. The Trust depreciates the
Held for Investment  category over the estimated useful lives of the assets. The
Held for Sale  category  is not  depreciated.  During  fiscal  1996,  the  Trust
reclassified seven real estate properties with a carrying value of $18.7 million
to Assets Held for Sale from Assets Held for Investment.  During the nine months
ended June 30, 1997, the Trust  reclassified  five real estate properties with a
carrying  value of $35.7  million to Assets  Held for Sale from  Assets Held for
Investment and no longer depreciates these assets.

         Other operating  expenses decreased 5.8% for the nine months ended June
30, 1997 compared to the nine months ended June 30, 1996.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q

RESULTS OF OPERATIONS-THREE MONTHS ENDED JUNE 30, 1997 VERSUS THREE
MONTHS ENDED JUNE 30, 1996

         Net income for the three months ended June 30, 1997 was $13.7  million,
or $1.22 per share,  compared to $2.0 million, or $0.18 per share, for the three
months  ended  June 30,  1996.  Income  before  gain on sale of real  estate was
unchanged at $2.0 million,  or $0.18 per share,  for the three months ended June
30, 1997 compared to the same period last fiscal year.

         Rental income was $5.1 million for the three months ended June 30, 1997
compared to $6.9 million for the three  months ended June 30, 1996.  In addition
to rental income, the Trust received reimbursement of certain operating expenses
totaling  $0.8 million and $1.0 million for the three months ended June 30, 1997
and 1996,  respectively.  The  decrease  in rental  income is the result of real
estate  property sales that occurred during fiscal 1996 and fiscal 1997. At June
30, 1997 the Trust owned 23 real  estate  properties  compared to 34 at June 30,
1996 and 38 at September 30, 1995.  During the last two quarters of fiscal 1996,
the Trust sold eight real estate properties and during the nine months of fiscal
1997,  the Trust sold eight real estate  properties  and three of nine buildings
owned by the Trust in an industrial park. The eight real estate  properties sold
during the last two quarters of fiscal 1996  contributed $0.9 million in revenue
during the three months ended June 30, 1996. Occupancy levels decreased to 85.9%
at June 30, 1997 compared to 87.5% at September 30, 1996, 88.7% at June 30, 1996
and 81.1% at September  30,  1995.  Occupancy  levels,  adjusted for real estate
property  sales,  increased to 85.9% at June 30, 1997  compared to 85.1% at June
30, 1996.

         Interest and fee income on mortgage  loans was unchanged at $19,000 for
the three months ended June 30, 1997  compared to the same period last year.  In
March 1996,  the Trust  completed the  disposition of  substantially  all of the
mortgage loan  portfolio.  The Trust received $55.5 million in net cash proceeds
through a series of transactions  which included loan repayments and a bulk sale
of mortgage  loans.  As a result,  interest  income  earned on the mortgage loan
portfolio  was  substantially  reduced.  The  Trust's  remaining  mortgage  loan
portfolio is currently less than $0.6 million.

         Interest  on  short-term  investments  was $0.8  million  for the three
months  ended June 30, 1997  compared to $0.5 million for the three months ended
June 30, 1996. The increase was due to the increase in cash balances as a result
of 11 real estate  property  sales since June 30,  1996 and the  disposition  of
substantially all of the mortgage loan portfolio in March 1996.

         Interest  expense was $1.4  million for the three months ended June 30,
1997 compared to $2.1 million for the three months ended June 30, 1996. On April
30,  1996,  the Trust  refinanced  its  outstanding  Senior  Secured  Notes at a
substantially  lower rate of interest  with the  issuance of new  Floating  Rate
Notes in the amount of $67.4  million.  The proceeds  received from the Floating
Rate Notes, together with approximately $56.5 million of cash on hand, were used
to prepay the Trust's Senior Secured Notes and Mortgage Payable. The face amount
outstanding of the Senior Secured Notes and the Mortgage  Payable at the time of
repayment was $110.0 million and $13.9 million, respectively. The Senior Secured
Notes and Mortgage  Payable  were repaid in full on April 30, 1996.  Included in
interest  expense  for  fiscal  1997 and for two  months of  fiscal  1996 is the
amortization  of deferred  costs  incurred in obtaining  the Floating Rate Notes
which are amortized over the term of the debt  agreement.  The Trust has reduced
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q

the Floating  Rate Notes by $24.5  million  through June 30, 1997 as a result of
the prepayments required under the New Indenture from the sale of six encumbered
real  estate  properties  and three of nine  buildings  owned by the Trust in an
industrial park. In July of fiscal 1997, the Trust used $22.1 million of the net
proceeds of two encumbered sales which occurred in June of fiscal 1997 to prepay
a portion of the Floating Rate Notes.

         Operating  expenses on rental properties was $2.2 million for the three
months  ended June 30, 1997  compared to $3.0 million for the three months ended
June 30, 1996.  The decrease in operating  expenses on rental  properties is the
result of real estate  property sales that occurred  during fiscal 1996 and cost
containment measures. At June 30, 1997 the Trust owned 23 real estate properties
compared to 34 at June 30, 1996 and 38 at September  30, 1995.  During the third
and fourth quarters of fiscal 1996, the Trust sold eight real estate  properties
and  during the nine  months of fiscal  1997,  the Trust sold eight real  estate
properties and three of nine buildings owned by the Trust in an industrial park.
The eight real estate  properties  sold  during the last two  quarters of fiscal
1996  contributed  $0.3 million in operating  expenses  during the third quarter
ended  June 30,  1996.  Occupancy  levels  decreased  to 85.9% at June 30,  1997
compared to 87.5% at September  30, 1996,  88.7% at June 30, 1996 and  increased
compared to 81.1% at September  30, 1995.  Occupancy  levels,  adjusted for real
estate property sales,  increased to 85.9% at June 30, 1997 compared to 85.1% at
June 30, 1996.

         Depreciation and amortization on rental properties was $0.4 million for
the three  months  ended June 30, 1997  compared  to $0.6  million for the three
months ended June 30, 1996. At September 30, 1995, the Trust segregated the real
estate  portfolio into two  categories:  Held for Sale and Held for  Investment.
Additionally,  all assets and  liabilities of the Trust were restated to reflect
their respective  reorganization  value or fair value. The Trust depreciates the
Held for Investment  category over the estimated useful lives of the assets. The
Held for Sale  category  is not  depreciated.  During  fiscal  1996,  the  Trust
reclassified seven real estate properties with a carrying value of $18.7 million
to Assets  Held for Sale from  Assets  Held for  Investment.  During  the second
quarter of fiscal 1997, the Trust  reclassified five real estate properties with
a carrying  value of $35.7  million to Assets Held for Sale from Assets Held for
Investment and no longer depreciates these assets.

         Other operating expenses decreased 2.1% for the three months ended June
30, 1997 compared to the three months ended June 30, 1996.

                         LIQUIDITY AND CAPITAL RESOURCES

         Prior to the 1995 Restructuring,  the Trust faced significant liquidity
problems. The Trust did not generate sufficient cash flow from normal operations
and was not able to  liquidate  mortgage  loans and real estate  investments  in
order to meet scheduled  amortization  on its  indebtedness.  As a result of the
1995 Restructuring,  management believes the cash flow from operating activities
will be sufficient to meet minimum debt service requirements.  In the near term,
the Trust  expects  to fund  capital  expenditures  from  available  funds  from
operations  and cash on hand,  however,  no  assurance  can be given  that  this
expectation  will be achieved.  The Trust's  present  liquidity,  cash flow from
operating  activities  and  ability  to  liquidate  existing  assets to meet its
obligations  can be  adversely  impacted  by a negative  change in the  national
economy,  particularly  as those  changes may relate to real  estate  markets in
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q

which the Trust  operates.  Certain  factors  that might cause such a difference
include the  following:  risks and  uncertainties  inherent to general and local
real estate conditions; the supply and demand for the types of rental properties
which the Trust operates;  interest rate levels;  non-payment of rent by tenants
or that operating costs may be greater than anticipated.

         Taxable  income  required to be  distributed  in order for the Trust to
maintain  its REIT  status  will be less  than  income  reported  for  financial
reporting  purposes  under  generally  accepted  accounting  principles  due  to
differences  related to  depreciation,  use of NOLs (subject to the Code Section
382 limitations) and timing differences related to bad debt deductions.

         On March 28, 1996, the Trust entered into a financing  agreement  which
provided for the issuance of $67.4  million of new  Floating  Rate Notes,  which
issuance occurred on April 30, 1996. The Floating Rate Notes bear interest at 30
day LIBOR + 1.375%,  payable monthly,  and have a stated maturity date of May 1,
1999.

         The New Indenture  generally  requires  that, on a monthly  basis,  the
Trust  deposit into a Trapped  Funds  Account  maintained  by the New  Indenture
Trustee all Cash Flow and Asset Sale Proceeds.  Cash Flow from the Trapped Funds
Account  will  be  distributed  by the  New  Indenture  Trustee  to pay  the New
Indenture  Trustee's  expenses,  pay all  accrued  but  unpaid  interest  on the
Floating Rate Notes and maintain a Debt Service Reserve Account before any funds
are  released  to the Trust.  In the event of a sale of, or certain  casualty or
indemnification  events  with  respect  to,  any of the real  estate  properties
mortgaged under the terms of the debt instruments,  the proceeds  therefrom will
be used to retire up to 125% of a portion  of the  Floating  Rate Notes that has
been allocated to such real estate property before any funds are released to the
Trust. The New Indenture includes affirmative  covenants and negative covenants.
At June 30, 1997, the Trust was in compliance with the New Indenture.

         The proceeds  received  from the  Floating  Rate Notes,  together  with
approximately  $56.5  million of cash on hand,  were used to prepay the  Trust's
Senior Secured Notes and Mortgage  Payable.  The face amount  outstanding of the
Senior  Secured  Notes and the  Mortgage  Payable at the time of  repayment  was
$110.0  million and $13.9  million,  respectively.  The Senior Secured Notes and
Mortgage Payable were repaid in full on April 30, 1996.

         Effective  April 30,  1996,  the Trust  entered  into an interest  rate
protection  agreement  (the  "Cap")  that  serves to cap the  floating  interest
component  of the  Floating  Rate Notes at 8%. The Trust paid a one-time  fee of
$377,000 to the counterparty to the Cap.

         During fiscal 1996, the Trust reclassified seven real estate properties
with a carrying  value of $18.7 million to Assets Held for Sale from Assets Held
for  Investment.  During fiscal 1996,  the Trust  received  $26.6 million in net
proceeds from the sale of nine real estate  properties  with a carrying value of
$19.2 million classified as Assets Held for Sale.

         During the second quarter of fiscal,  1997, the Trust reclassified five
real estate properties with a carrying value of $35.7 million to Assets Held for
Sale from Assets  Held for  Investment.  During the nine  months  ended June 30,
1997,  the Trust  received  $73.8  million in net proceeds from the sale of real
estate  properties  classified as Assets Held for Sale with a carrying  value of
$54.3 million.  These sales  included eight real estate  properties and three of
nine buildings owned by the Trust in an industrial park.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q

         The  Trust's  cash  flow  is  derived  from  operating,  investing  and
financing activities.  For the nine months ended June 30, 1997, cash provided by
operating  activities increased to $8.8 million compared to $7.2 million for the
nine months  ended June 30,  1996.  The  increase in cash  provided by operating
activities  was  primarily  attributable  to a  reduced  number  of real  estate
properties  offset by lower  interest  payments  in  connection  with the senior
indebtedness.  The outstanding  balance on the Senior Secured Notes decreased to
$42.9 million at June 30, 1997 from $67.4 million at June 30, 1996.

         Cash  provided by investing  activities  increased to $70.5 million for
the nine  months  ended June 30,  1997  compared  to $67.8  million for the nine
months  ended  June  30,  1996.  The  increase  in cash  provided  by  investing
activities  was  primarily  attributable  to the  increase in real estate  sales
activity to $73.8  million for the nine months  ended June 30, 1997  compared to
$14.7 million for the nine months ended June 30, 1996.  Partial  offsetting  the
increase was the disposition of  substantially  all of the Trust's mortgage loan
portfolio in March 1996 offset the increase in the real estate sales activity.

         Cash used in financing  activities  decreased to $42.9  million for the
nine months  ended June 30, 1997  compared to $63.4  million for the nine months
ended June 30, 1996. In April of fiscal 1996,  the Trust issued $67.4 million in
New  Floating  Rate Notes and used the  proceeds  from the  issuance  along with
approximately  $56.5  million  of cash on hand to repay  the Old  Notes  and the
Mortgage Payable.

During the nine  months  ended June 30,  1997,  the Trust used $20.3  million to
prepay a portion of the Floating Rate Notes.  Restricted cash increased to $22.5
million for the nine months ended June 30, 1997  compared to an increase of $3.2
million for the nine months ended June 30, 1996. The increase in restricted cash
is related to the funds held by the New  Indenture  Trustee in the Trapped Funds
Account as a result of the June 1997 real estate property sales.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q


PART II: OTHER INFORMATION


ITEM 5. OTHER INFORMATION

         THIS FORM 10-Q CONTAINS  FORWARD-LOOKING  STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE  SECURITIES  ACT OF 1993 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. THE TRUST'S ACTUAL  RESULTS COULD DIFFER  MATERIALLY  FROM
THOSE SET FORTH IN  FORWARD-LOOKING  STATEMENTS.  THOSE FACTORS THAT MIGHT CAUSE
SUCH  A  DIFFERENCE  INCLUDE  THOSE  SET  FORTH  UNDER  "LIQUIDITY  AND  CAPITAL
RESOURCES" SECTION OF ITEM 2.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

                  27       Financial Data Schedule

(b)      Reports on Form 8-K

                  The Trust  filed a Current  Report on Form 8-K dated  June 24,
                  1997 under Item 2 and Item 7 of Form 8-K regarding the Trust's
                  disposition of three real estate properties during the current
                  quarter.
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES                                   FORM 10Q



                                   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.




                                                  Value Property Trust         
                                                                               
                                                                               
                                                                               
                                                                               
                                                  /s/George R. Zoffinger       
                                                  ----------------------       
                                                  George R. Zoffinger          
                                                  President, Chief Executive   
                                                  Officer and Trustee          
                                                  (Principal Executive Officer)
                                                                               
                                                                               
                                                                               
                                                  /s/Robert T. English         
                                                  --------------------         
                                                  Robert T. English         
                                                  Secretary, Treasurer and Chief
                                                  Financial Officer             
                                                  (Principal Financial and      
                                                  Accounting Officer)           
                                        



DATE:   August 14, 1997