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 December 31, 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:    (732) 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 February 10, 1998:  11,226,310
<PAGE>



                      VALUE PROPERTY TRUST AND SUBSIDIARIES

                                      INDEX





Part I:   FINANCIAL INFORMATION

          Item 1.   Consolidated Financial Statements 

                    Consolidated Balance Sheets at December 31, 1997 (Unaudited)
                          and September 30, 1997 

                    Consolidated Statements of Operations for the Three
                          Months Ended December 31, 1997 and 1996 (Unaudited) 

                    Consolidated Statements of Cash Flows for the Three Months
                          Ended December 31, 1997 and 1996 (Unaudited) 

                    Consolidated Statement of Shareholders' Equity for the Three
                          Months Ended December 31, 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)
                                                                   December 31,  September 30,
                                                                      1997            1997
                                                                    --------        --------
                                                                   (Unaudited)
                      ASSETS
<S>                                                                 <C>             <C>
Assets Held for Sale:
   Investment in partnerships ..............................        $  5,959        $  5,869
   Real estate owned .......................................          21,802          22,001
                                                                    --------        --------
         Total Assets Held for Sale ........................          27,761          27,870
                                                                    --------        --------

Assets Held for Investment:
   Mortgage loans ..........................................           6,745           6,805
   Real estate owned .......................................          37,680          37,934
                                                                    --------        --------
         Total Assets Held for Investment ..................          44,425          44,739
                                                                    --------        --------

         Total Invested Assets .............................          72,186          72,609

Cash and cash equivalents ..................................          66,433          81,409
Restricted cash ............................................             703           1,673
Interest receivable and other assets .......................           3,520           3,391
                                                                    --------        --------
         Total Assets ......................................        $142,842        $159,082
                                                                    ========        ========
                       LIABILITIES

Senior secured notes (due 1999) ............................        $   --          $ 18,222
Accounts payable and accrued expenses ......................           1,038           1,245
Interest payable ...........................................            --               103
                                                                    --------        --------
         Total Liabilities .................................           1,038          19,570
                                                                    --------        --------
                      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 .......................................          41,730          39,438
                                                                    --------        --------
         Total Shareholders' Equity ........................         141,804         139,512
                                                                    --------        --------

         Total Liabilities and Shareholders' Equity ........        $142,842        $159,082
                                                                    ========        ========
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
                 VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 10Q
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands Except Per Share Data)

                                                           Three Months Ended
                                                               December 31,
                                                           1997           1996
                                                         --------        -------
<S>                                                      <C>             <C>
Revenue:
   Rental properties:
       Rental income ...........................         $ 3,809         $ 5,924
       Operating expense reimbursements ........             424             845
   Interest and fee income on mortgage loans ...             162              21
   Interest on short-term investments ..........             966             519
                                                         -------         -------
       Total Revenue ...........................           5,361           7,309
                                                         -------         -------

Expenses:
   Interest ....................................             638           1,381
   Rental properties:
       Operating ...............................           1,616           2,484
       Depreciation and amortization ...........             402             529
   Other operating expenses ....................             505             736
                                                         -------         -------
       Total Expenses ..........................           3,161           5,130
                                                         -------         -------

Income before gain on sale of real estate ......           2,200           2,179
Gain on sale of real estate ....................              92           1,795
                                                         -------         -------
Net income .....................................         $ 2,292         $ 3,974
                                                         =======         =======

Per share:
Basic and diluted:
   Income before gain on sale of real estate ...         $   .19         $   .19
   Gain on sale of real estate .................             .01             .16
                                                         -------         -------
   Net income ..................................         $   .20         $   .35
                                                         =======         =======

Weighted average number of common
   shares outstanding
       Basic ...................................          11,226          11,226
                                                         =======         =======
       Diluted .................................          11,514          11,331
                                                         =======         =======
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
                 VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 10Q
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)

                                                                     Three Months Ended
                                                                         December 31,
                                                                  -------------------------
                                                                    1997             1996
                                                                  ---------        --------  
<S>                                                               <C>              <C>
Cash flows from operating activities:
     Net income ..........................................        $  2,292         $  3,974
     Adjustments to reconcile net income to net
         cash provided by operating activities:
              Depreciation and amortization on real estate             402              529
              Increase in receivables and other assets ...            (129)            (298)
              Gain on sale of real estate ................             (92)          (1,795)
              Decrease in payables and accrued expenses ..            (207)            (107)
              Decrease in interest payable ...............            (103)             (26)
                                                                  --------         --------
     Total adjustments ...................................            (129)          (1,697)
                                                                  --------         --------
Net cash provided by operating activities ................           2,163            2,277
                                                                  --------         --------

Cash flows from investing activities:
     Investment in real estate:
         Real estate .....................................            (270)          (1,188)
         Partnerships ....................................             (99)            (284)
     Principal repayments on mortgage loans ..............              60               12
     Proceeds from the sale of real estate ...............             422            4,280
                                                                  --------         --------
Net cash provided by investing activities ................             113            2,820
                                                                  --------         --------

Cash flows from financing activities:
     Prepayment of senior secured notes (due 1999) .......         (18,222)          (8,394)
     Decrease in restricted cash .........................             970            8,774
                                                                  --------         --------
Net cash used in financing activities ....................         (17,252)             380
                                                                  --------         --------

Net increase in cash and cash equivalents ................         (14,976)           5,477
Cash and cash equivalents at beginning of period .........          81,409           29,501
                                                                  --------         --------

Cash and cash equivalents at end of period ...............        $ 66,433         $ 34,978
                                                                  ========         ========

Supplemental schedule of non-cash investment and
     financing activities:

     Interest paid .......................................        $    221         $  1,009
                                                                  ========         ========

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



For the Three Months Ended December 31, 1997


                                                                        Additional      Total
                                       Common Shares         Paid-In     Retained    Shareholders'
                                   Shares       Amount       Capital     Earnings      Equity
                                  --------     --------     --------     --------     --------
<S>                               <C>          <C>          <C>          <C>          <C>
Balance at September 30, 1997       11,226     $ 11,226     $ 88,848     $ 39,438     $139,512

Net income ..................         --           --           --          2,292        2,292
                                  --------     --------     --------     --------     --------

Balance at December 31, 1997        11,226     $ 11,226     $ 88,848     $ 41,730     $141,804
                                  ========     ========     ========     ========     ========      


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

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.           BASIS OF FINANCIAL INFORMATION

         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 three-month periods ended December 31, 1997
are not  necessarily  indicative  of the results  that may be  expected  for the
fiscal year ending September 30, 1998. These financial statements should be read
in conjunction with the Trust's September 30, 1997 audited financial  statements
and notes thereto included in the Trust's Annual Report on Form 10-K.

         As disclosed  previously  on Form 8-K filed on September  22, 1997 with
the  Securities  and  Exchange  Commission  ("SEC"),  the Trust  entered  into a
definitive  agreement  on September  18, 1997 to be acquired by  Wellsford  Real
Properties,  Inc.  ("Wellsford") in a merger transaction for cash and stock. The
proposed transaction, which will be accounted for by Wellsford as a purchase, is
subject to certain  closing  conditions and is expected to be completed in early
1998.  Franklin Mutual Advisors,  Inc.,  whose advisory  clients  currently hold
approximately  50% of the  Trust's  outstanding  shares,  has agreed to vote the
shares of the Trust  over  which it has  voting  power in favor of the  proposed
transaction.  The proposed transaction, if consummated,  will result in a change
of control of the Trust.

         A special meeting of the Trust will be held on February 20, 1998 at 120
Albany Street,  2nd Floor, New Brunswick,  New Jersey 08901 at 10:00 A.M. (local
time) for  shareholder  of record on December 22, 1997.  At the Trust's  special
meeting,  holder's  of the  trust's  shares  will  consider  and vote upon (i) a
proposal to approve the merger of Wellsford  with and into the Trust pursuant to
the merger  agreement;  and (ii) a proposal to amend the Trust's  Declaration of
Trust,  to  be  effective   immediately   prior  to  and  conditional  upon  the
consummation  of the  merger,  so as to  eliminate  the  ownership  restrictions
contained  in the  Declaration  of Trust in order  to  allow  the  merger  to be
consummated.


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.
<PAGE>
                 VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 10Q

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                           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.

         In July 1997,  the Trust  contacted the Internal  Revenue  Service (the
"IRS") regarding  interpretative  advice concerning a technical provision of the
REIT   requirement   of  the  Internal   Revenue  Code  and,   based  upon  such
interpretative advice, potential violations of such provision during fiscal 1994
and 1995. The Trust sought the IRS's  interpretation of the technical  provision
of the REIT  requirement and its concurrence  that, if any technical  violations
were deemed to have occurred,  such violations would not affect the Trust's REIT
status. On December 30, 1997 the Trust entered into a closing agreement with the
IRS which stated,  among other things, that although the Trust failed to satisfy
the relevant technical  provision of the REIT requirement,  such failure was not
willful and the Trust is entitled to elect REIT status for fiscal 1996.

                                 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

         The Trust applies  Financial  Accounting  Standards Board SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan", which requires that impaired
loans be  measured  based on the  present  value of  expected  future cash flows
discounted at the loan's effective  interest rate or, as a practical  expedient,
at the loan's observable market price or the fair value of the collateral if the
loan is  collateral  dependent.


                              NET INCOME PER SHARE

         Basic net  income  per share is  computed  using  the  actual  weighted
average  common  shares  outstanding  during the period.  Diluted net income per
share is computed using the actual  weighted  average common shares  outstanding
during the period,  plus the weighted average number of net shares that would be
issued upon the  exercise  of dilutive options  assuming  the  proceeds  used to
repurchase  share  pursuant to the treasury  stock method.  The  computation  of
diluted net income per share does not assume  conversion  of options  that would
have an antidilutive effect on net income per share.
<PAGE>
                VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 10Q

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


                          DEPRECIATION AND AMORTIZATION

         The Trust  segregates 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.

                            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 PARTNERSHIP

         Investment in partnership  represents the Trust's  investment in a real
estate  partnership.  The  Trust  owns a  majority  percentage  interest  in the
partnership and receives  substantially all of the cash flow. The Trust accounts
for the partnership in a similar manner as real estate investments.

                                REAL ESTATE OWNED

         Real  estate  and  leasehold   improvements  are  stated  at  cost.  In
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of," the Trust records impairment  writedowns on long-lived assets,  when events
and  circumstances  indicate that the assets might be impaired and the estimated
undiscounted  cash  flows to be  generated  by those  assets  are less  than the
carrying amounts of those assets. No such impairment losses have been recognized
in these financial statements.

         As of September 30, 1995, the Trust's  invested assets were adjusted to
reorganization  value which became the new historical cost basis.  Subsequently,
real estate held for investment is carried at historical cost less depreciation.
Real  estate  held for sale is  carried  at the 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.

                                 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.  On November 3, 1997,  the Trust utilized a portion of
available  cash on hand and the net  proceeds  from  the  sale on an  encumbered
building to retire its senior  indebtedness in full. The face amount outstanding
of the  Floating  Rate  Notes  at the  time  of  repayment  was  $18.2  million.
Accordingly,  the remaining unamortized deferred costs were recorded as a charge
to interest expense.
<PAGE> 
                VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 10Q

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


                               REVENUE RECOGNITION

         The Trust  recognizes  base  rental  revenue  for  financial  statement
purposes 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.


NOTE 3.           MORTGAGE LOANS AND INVESTMENTS IN REAL ESTATE

         The following table  summarizes the Trust's  investments in real estate
owned at December 31, 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 ........              5        $21,875        $   (73)        $21,802
         Investment in Partnerships              1          5,995            (36)          5,959
                                           -------        -------        -------         -------
         Total ....................              6        $27,870        $  (109)        $27,761
                                           =======        =======        =======         =======

Real Estate Held for Investment:

         Real Estate Owned ........             15        $40,523        $(2,843)        $37,680
                                           -------        -------        -------         -------
         Total ....................             15        $40,523        $(2,843)        $37,680
                                           =======        =======        =======         =======
</TABLE>
NOTE 4.          BORROWINGS

                              SENIOR SECURED NOTES

         During the first quarter of fiscal 1998,  the Trust sold one of the six
remaining  buildings owned in an industrial park which was encumbered  under the
terms of the New Indenture. On November 3, 1997, the Trust utilized a portion of
available  cash on hand and the net proceeds from this sale to retire its senior
indebtedness in full. The face amount  outstanding of the Floating Rate Notes at
the time of repayment was $18.2 million.
<PAGE> 
                VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 10Q

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5.           SHARE OPTION PLAN

                             1995 SHARE OPTION PLAN

         All the outstanding options of 1995 Share Option Plan (the "1995 Plan")
will fully vest and be cancelled upon the consummation of the definitive  merger
agreement  with  Wellsford,  which is  anticipated to be completed in the second
quarter of fiscal 1998. 
<PAGE>
ITEM 2.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                 AND RESULTS OF OPERATIONS

         Net  income  for the three  months  ended  December  31,  1997 was $2.3
million,  or $0.20 per diluted  share,  compared to $4.0  million,  or $0.35 per
diluted share, for the three months ended December 31, 1996.  Income before gain
on sale of real  estate was  unchanged  at $2.2  million,  or $0.19 per  diluted
share,  for the three months ended December 31, 1997 compared to the same period
last year.

         Rental income was $3.8 million for the three months ended  December 31,
1997  compared to $5.9 million for the three months ended  December 31, 1996. In
addition to rental income, the Trust received reimbursement of certain operating
expenses  totaling  $0.4  million and $0.8  million for the three  months  ended
December  31, 1997 and 1996,  respectively.  The  decrease in rental  income and
reimbursement  of  certain  operating  expenses  is the  result  of real  estate
property sales that occurred  during fiscal 1997. At December 31, 1997 the Trust
owned 21 real estate  properties  compared to 30 at December  31,  1996.  During
fiscal  1997,  the  Trust  sold ten real  estate  properties  and  three of nine
buildings owned by the Trust in an industrial park.  During the first quarter of
fiscal 1998,  the Trust sold one of the remaining six buildings in an industrial
park. Occupancy levels decreased to 86.1% at December 31, 1997 compared to 87.6%
at December 31, 1996. Occupancy levels, adjusted for real estate property sales,
increased to 86.1% at December 31, 1997 compared to 84.9% at December 31, 1996.

         Interest and fee income on mortgage loans increased to $162,000 for the
three  months ended  December 31, 1997  compared to $21,000 the same period last
year.  During the fourth quarter of fiscal 1997,  the Trust provided  commercial
mortgage  financing in the amount of $6.2 million in  conjunction  with the sale
one real  estate  property.  The Trust's  remaining  residential  mortgage  loan
portfolio is currently less than $0.6 million.

         Interest  on  short-term  investments  was $1.0  million  for the three
months  ended  December  31, 1997  compared to $0.5 million for the three months
ended December 31, 1996. As a result of continued  property sales, the amount of
short term investments held by the Trust grew over the prior period.

         Interest  expense  decreased to $0.6 million for the three months ended
December 31, 1997  compared to $1.4 million for the three months ended  December
31,  1996.  Included in interest  expense for fiscal 1998 and fiscal 1997 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 continued
to reduce the Floating Rate Notes  through  prepayments  required  under the New
Indenture  from the sale of encumbered  real estate  properties and four of nine
buildings  owned by the Trust in an industrial  park.  On November 3, 1997,  the
Trust utilized a portion of available cash on hand and the net proceeds from the
sale on an encumbered  building to retire its senior  indebtedness  in full. The
face amount  outstanding of the Floating Rate Notes at the time of repayment was
$18.2 million.

         Operating  expenses on rental properties was $1.6 million for the three
months  ended  December  31, 1997  compared to $2.5 million for the three months
ended December 31, 1996. The decrease in operating expenses on rental properties
is the result of  continued  real estate  property  sales that  occurred  during
fiscal 1997 and cost containment  measures. At December 31, 1997 the Trust owned
<PAGE>
21 real estate  properties  compared to 30 at December 31, 1996.  During  fiscal
1997,  the Trust sold ten real  estate  properties  and three of nine  buildings
owned by the Trust in an  industrial  park.  During the first  quarter of fiscal
1998,  the Trust sold one of the remaining six buildings in an industrial  park.
Occupancy  levels  decreased to 86.1% at December 31, 1997  compared to 87.6% at
December 31, 1996.  Occupancy  levels,  adjusted for real estate property sales,
increased to 86.1% at December 31, 1997 compared to 84.9% at December 31, 1996.

         Depreciation and amortization on rental properties  decreased  slightly
to $0.4 million for the three months  ended  December 31, 1998  compared to $0.5
million for the three months ended December 31, 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 1997, the Trust  reclassified six 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 were $0.5 million for the three months ended
December 31, 1997  compared to $0.7 million for the three months ended  December
31, 1996. The reduction was primarily a result of reduced legal fees  associated
with a lawsuit, which was settled in September 1997.

                         LIQUIDITY AND CAPITAL RESOURCES

         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
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.

         As disclosed  previously  on Form 8-K filed on September  22, 1997 with
the  Securities  and  Exchange  Commission  ("SEC"),  the Trust  entered  into a
definitive  agreement  on September  18, 1997 to be acquired by  Wellsford  Real
Properties,  Inc.  ("Wellsford") in a merger transaction for cash and stock. The
proposed transaction, which will be accounted for by Wellsford as a purchase, is
subject to certain  closing  conditions and is expected to be completed in early
1998.  Franklin Mutual Advisors,  Inc.,  whose advisory  clients  currently hold
approximately  50% of the  Trust's  outstanding  shares,  has agreed to vote the
shares of the Trust  over  which it has  voting  power in favor of the  proposed
transaction.  The proposed transaction, if consummated,  will result in a change
of control of the Trust.
<PAGE>
         A special meeting of the Trust will be held on February 20, 1998 at 120
Albany Street,  2nd Floor, New Brunswick,  New Jersey 08901 at 10:00 A.M. (local
time) for  shareholder  of record on December 22, 1997.  At the Trust's  special
meeting,  holder's  of the  trust's  shares  will  consider  and vote upon (i) a
proposal to approve the merger of Wellsford  with and into the Trust pursuant to
the merger  agreement;  and (ii) a proposal to amend the Trust's  Declaration of
Trust,  to  be  effective   immediately   prior  to  and  conditional  upon  the
consummation  of the  merger,  so as to  eliminate  the  ownership  restrictions
contained  in the  Declaration  of Trust in order  to  allow  the  merger  to be
consummated.

         On November 3, 1997,  the Trust utilized a portion of available cash on
hand and the net proceeds from the sale on an encumbered  building to retire its
senior  indebtedness  in full. The face amount  outstanding of the Floating Rate
Notes at the time of repayment was $18.2  million.  At the time the  prepayment,
the Trust was in compliance with the New Indenture.

         During fiscal 1997,  the Trust  reclassified  six  properties  totaling
$35.7 million to Real Estate Owned Held for Sale from Real Estate Owned Held for
Investment.  During fiscal 1997,  the Trust  received  $80.1 million in net cash
proceeds from the sale of ten real estate properties, three of nine buildings in
an  industrial  park and a 7.6 acre  parcel of  unimproved  land with a carrying
value of $61.9 million classified as Real Estate Owned Held for Sale.

         During first quartet of fiscal 1998, the Trust received $0.4 million in
net proceeds from the sale of one of the  remaining  six buildings  owned by the
Trust in an industrial park.

         For the  three  months  ended  December  31,  1997,  cash  provided  by
operating  activities increased to $2.2 million compared to $2.3 million for the
three months ended December 31, 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 was repaid in
full on November 3, 1997 and was $54.8 million at December 31, 1996.

         Cash  provided by investing  activities  was $0.1 million for the three
months  ended  December  31, 1997  compared to $2.8 million for the three months
ended December 31, 1996.  The decrease in cash provided by investing  activities
was primarily attributable to the decrease in real estate sales activity to $0.4
million for the three  months ended  December 31, 1997  compared to $4.3 million
for the three months ended December 31, 1996.

         Cash used in financing  activities  increased to $17.3  million for the
three  months  ended  December  31, 1997  compared to $0.4 million for the three
months ended  December 31, 1996.  During the first  quarter of fiscal 1998,  the
Trust used $18.2 million to prepay the Floating Rate Notes, in full.  Restricted
cash  decreased to $1.0  million for the three  months  ended  December 31, 1997
compared to a decrease of $8.8 million for the three  months ended  December 31,
1996.
<PAGE>
                 VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 10Q


PART II:         OTHER INFORMATION

ITEM 5.          OTHER INFORMATION

         As disclosed  previously  on Form 8-K filed on September  22, 1997 with
the  Securities  and  Exchange  Commission  ("SEC"),  the Trust  entered  into a
definitive  agreement  on September  18, 1997 to be acquired by  Wellsford  Real
Properties,  Inc.  ("Wellsford") in a merger transaction for cash and stock. The
proposed transaction, which will be accounted for by Wellsford as a purchase, is
subject to certain  closing  conditions and is expected to be completed in early
1998.  Franklin Mutual Advisors,  Inc.,  whose advisory  clients  currently hold
approximately  50% of the  Trust's  outstanding  shares,  has agreed to vote the
shares of the Trust  over  which it has  voting  power in favor of the  proposed
transaction.  The proposed transaction, if consummated,  will result in a change
of control of the Trust.

         A special meeting of the Trust will be held on February 20, 1998 at 120
Albany Street,  2nd Floor, New Brunswick,  New Jersey 08901 at 10:00 A.M. (local
time) for  shareholder  of record on December 22, 1997.  At the Trust's  special
meeting,  holder's  of the  trust's  shares  will  consider  and vote upon (i) a
proposal to approve the merger of Wellsford  with and into the Trust pursuant to
the merger  agreement;  and (ii) a proposal to amend the Trust's  Declaration of
Trust,  to  be  effective   immediately   prior  to  and  conditional  upon  the
consummation  of the  merger,  so as to  eliminate  the  ownership  restrictions
contained  in the  Declaration  of Trust in order  to  allow  the  merger  to be
consummated.

         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

                  None.
<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:   February 17, 1998