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 March 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:    (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
confirmed by a court.

                           Yes [ X ]    No [   ]

         Number of Common Shares Outstanding at May 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 March 31, 1997 (Unaudited)
                           and September 30, 1996...............................

                     Consolidated Statement of Operations for the Three and Six
                           Months Ended March 31, 1997 and 1996 (Unaudited).....

                     Consolidated Statement of Cash Flows for the Six Months
                           Ended March 31, 1997 and 1996 (Unaudited)............

                     Consolidated Statement of Shareholders' Equity for the Six
                           Months Ended March 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 4.   Submission of Matters to a Vote of Security Holders........

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

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

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

<PAGE>
PART I:              FINANCIAL INFORMATION

ITEM 1.              CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------   
CONSOLIDATED BALANCE SHEETS
(In Thousands)
------------------------------------------------------------------------------------
                                                           March 31,   September 30,
                                                             1997           1996
                                                            -------        --------
                                                         (Unaudited)
                   ASSETS
<S>                                                        <C>             <C>
Assets Held for Sale:
   Investment in partnerships .....................        $ 15,906        $ 10,219
   Real estate owned ..............................          47,076          38,171
                                                            -------        --------
         Total Assets Held for Sale ...............          62,982          48,390
                                                            -------        --------
Assets Held for Investment:
   Mortgage loans .................................             605             663
   Investment in partnerships .....................             --           13,486
   Real estate owned ..............................          37,801          63,196
                                                            -------        --------
         Total Assets Held for Investment .........          38,406          77,345
                                                            -------        --------

         Total Invested Assets ....................         101,388         125,735

Cash and cash equivalents .........................          53,526          29,501
Restricted cash ...................................          11,943          12,213
Interest receivable and other assets ..............           3,908           4,962
                                                            -------        --------
         Total Assets .............................        $170,765        $172,411
                                                           ========        ========

                   LIABILITIES

Senior secured notes (due 1999) ...................        $ 49,729        $ 63,226
Accounts payable and accrued expenses .............           1,540           1,804
Interest payable ..................................             252             334
                                                            -------        --------
         Total Liabilities ........................          51,521          65,364
                                                            -------        --------
<PAGE>
<CAPTION>
------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
(In Thousands)(continued)
------------------------------------------------------------------------------------
                                                           March 31,   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 ..............................          19,170           6,973
                                                           --------        --------
         Total Shareholders' Equity ...............         119,244         107,047
                                                           --------        --------

         Total Liabilities and Shareholders' Equity        $170,765        $172,411
                                                           ========        ========




         See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------- 

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(In Thousands Except Per Share Data)
-------------------------------------------------------------------------------------------- 
                                                 Three Months Ended         Six Months Ended
                                                       March 31,               March 31,
                                                 -------------------     -------------------    
                                                    1997        1996        1997        1996
                                                 -------     -------     -------     -------
<S>                                              <C>         <C>         <C>         <C>
Revenue:
   Rental properties:
       Rental income .......................     $ 5,725     $ 6,880     $11,649     $13,545
       Operating expense reimbursements ....         830         853       1,675       1,696
   Interest and fee income on mortgage loans          21       1,240          42       2,814
   Interest on short-term investments ......         595         462       1,114         767
   Other ...................................           8           3           8          11
                                                 -------     -------     -------     -------
       Total Revenue .......................       7,179       9,438      14,488      18,833
                                                 -------     -------     -------     -------

Expenses:
   Interest ................................       1,392       3,420       2,773       6,985
   Rental properties:
       Operating ...........................       2,447       3,051       4,931       6,126
       Depreciation and amortization .......         415         630         944       1,195
   Other operating expenses ................         779         887       1,515       1,640
                                                 -------     -------     -------     -------
       Total Expenses ......................       5,033       7,988      10,163      15,946
                                                 -------     -------     -------     -------

Income before gain on sale of real estate ..       2,146       1,450       4,325       2,887
Gain on sale of real estate ................       6,077         --        7,872         --
                                                 -------     -------     -------     -------
Net income .................................     $ 8,223     $ 1,450     $12,197     $ 2,887
                                                 =======     =======     =======     =======

Per share:
Income before gain on sale of real estate ..     $   .19     $   .13     $   .39     $   .26
Gain on sale of real estate ................         .55         --          .70         --
                                                 -------     -------     -------     -------
Net income .................................     $   .74     $   .13     $  1.09     $   .26
                                                 =======     =======     =======     =======

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>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------- 
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In Thousands)
--------------------------------------------------------------------------------------------- 
                                                                          Six Months Ended
                                                                               March 31,
                                                                          1997          1996
                                                                       --------      --------
<S>                                                                    <C>           <C>
Cash flows from operating activities:
     Net income ..................................................     $ 12,197      $  2,887
     Adjustments to reconcile net income to net
         cash provided by operating activities:
              Depreciation and amortization on real estate .......          944         1,195
              Decrease in payables and accrued expenses ..........         (264)       (2,918)
              (Decrease) increase in interest payable ............          (82)        3,059
              Decrease in receivables and other assets ...........        1,021         4,955
              Gain on sale of real estate ........................       (7,872)           --
                                                                       --------      --------
     Total adjustments ...........................................       (6,253)        6,291
                                                                       --------      --------
Net cash provided by operating activities ........................        5,944         9,178
                                                                       --------      --------
Cash flows from investing activities:
     Investment in real estate:
         Real estate .............................................       (1,933)        2,393
         Partnerships ............................................         (440)         (139)
         Advances on mortgage loans ..............................           --           (73)
     Principal repayments on mortgage loans ......................           58           244
     Proceeds from the sale of real estate .......................       33,623           658
     Proceeds from the sale of mortgage loans and notes receivable           --        51,123
     Principal repayments on notes receivable ....................           --           338
                                                                       --------      --------
Net cash provided by investing activities ........................       31,308        54,544
                                                                       --------      --------
Cash flows from financing activities:
     Payment of mortgage payable .................................           --        (3,638)
     Prepayment of senior secured notes (due 1999) ...............      (13,497)           --
     Decrease in restricted cash .................................          270         5,592
                                                                       --------      --------
Net cash (used in) provided by financing activities ..............      (13,227)        1,954
                                                                       --------      --------

Net increase in cash and cash equivalents ........................       24,025        65,676
Cash and cash equivalents at beginning of period .................       29,501         9,977
                                                                       --------      --------

Cash and cash equivalents at end of period .......................     $ 53,526      $ 75,653
                                                                       ========      ========
Supplemental schedule of non-cash investment and
     financing activities:

     Transfer of mortgage loans to real estate owned .............     $     --      $  5,120
                                                                       ========      ========

     Interest paid ...............................................     $  1,952      $  3,127
                                                                       ========      ========
         See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited)
(Amounts In Thousands)
-------------------------------------------------------------------------------------------------------------------
For the Six Months Ended March 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, 1996 ...................       11,226     $ 11,226     $ 88,848     $  6,973     $107,047

Net income ......................................           --           --           --       12,197       12,197
                                                      --------     --------     --------     --------     --------

Balance at March 31, 1997 .......................       11,226     $ 11,226     $ 88,848     $ 19,170     $119,244
                                                      ========     ========     ========     ========     ========


                          See accompanying notes to the consolidated financial statements.


</TABLE>
<PAGE>
                 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  six-month and  three-month  periods ended
March  31,  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 real
estate  investment  trust  taxable  income,  and pays no  Federal  income tax on
capital gains distributed to shareholders.
<PAGE>
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 


         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  $102 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.

                              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 properties totaling $18.7 million to Assets Held for Sale from Assets Held
for Investment  and no longer  depreciates  these assets.  During the six months
ended March 31, 1997,  the Trust  reclassified  five  properties  totaling $35.7
million to Assets Held for Sale from Assets  Held for  Investment  and no longer
depreciates these assets.
<PAGE>
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

                            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  is  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 properties  classified as Assets Held for Sale. For the first six months
of fiscal  1997, a gain of $7.9 million is recorded in net income as a result of
property sales. At March 31, 1997, the Trust owned 26 properties of which 11 are
classified  as Assets Held for Sale.  The fiscal 1996 revenue and net  operating
income  from  these  11   properties   were  $12.8  million  and  $7.8  million,
respectively.

                                 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 $1.3 million at March 31, 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.
<PAGE>
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

                    RECENTLY ISSUED ACCOUNTING PRONOUNCMENTS 

         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."

         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.


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
$0.7 million.
<PAGE>
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

         The following table  summarizes the Trust's  investments in real estate
owned at March 31, 1997.
<TABLE>
<CAPTION>

              Type of                      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 ........              8        $48,066        $  (990)        $47,076
         Investment in Partnerships              3         16,247           (341)         15,906
                                           -------        -------        -------         -------
         Total ....................             11        $64,313        $(1,331)        $62,982
                                           =======        =======        =======         =======

<CAPTION>
<S>                                        <C>            <C>            <C>             <C>
Real Estate Held for Investment:

         Real Estate Owned ........             15        $39,527        $(1,726)        $37,801
                                           -------        -------        -------         -------
         Total ....................             15        $39,527        $(1,726)        $37,801
                                           =======        =======        =======         =======
</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.

         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
<PAGE>
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

with  respect  to any of  the  remaining  eighteen  properties  of the  original
twenty-four  properties  mortgaged  under the terms of the  Floating  Rate Notes
(underlying  collateralized  value of $69.8  million  at March  31,  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 March
31, 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  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 six months ended March 31,  1997,  the Trust sold three 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 two real estate  properties  which were not encumbered
under the terms of the New  Indenture.  During  the six months  ended  March 31,
1997, the Trust used $6.5 million of the net proceeds of the encumbered sales to
prepay a portion of the Floating Rate Notes.  In April of fiscal 1997, the Trust
used $6.8 million of the net proceeds of an  encumbered  sale which  occurred in
March 1997 to prepay a portion of the Floating Rate Notes.

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.
<PAGE>
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 


         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 six
months  ended  March 31,  1997,  no shares  from the 1995 Plan were  granted  or
canceled. The options expire four years from the date of grant.

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 six months and three months ended March 31, 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-SIX MONTHS ENDED MARCH 31, 1997 VS. SIX MONTHS
ENDED MARCH 31, 1996

         Net income for the six months  ended March 31, 1997 was $12.2  million,
or $1.09 per share,  compared to $2.9 million,  or $0.26 per share,  for the six
months ended March 31, 1996.  Income before gain on sale of real estate was $4.3
million, or $0.39 per share, for the six months ended March 31, 1997 compared to
$2.9 million, or $0.26 per share, for the six months ended March 31, 1996.

         Rental income was $11.6 million for the six months ended March 31, 1997
compared to $13.5  million for the six months ended March 31, 1996.  In addition
to rental income, the Trust received reimbursement of certain operating expenses
totaling $1.7 million for both the six months ended March 31, 1997 and 1996. The
decrease in rental  income was the result of the  property  sales that  occurred
during fiscal 1996. At March 31, 1997 the Trust owned 26 real estate  properties
compared to 39 at March 31, 1996 and 38 at September 30, 1995.  During the third
and fourth  quarters of fiscal 1996, the Trust sold eight  properties and during
the first six months  ended  March 31,  1997,  the Trust  sold five real  estate
properties and three of nine buildings owned by the Trust in an industrial park.
The  eight  properties  sold  during  the  last  two  quarters  of  fiscal  1996
contributed  $1.9 million in revenue during the six months ended March 31, 1996.
Occupancy  levels  decreased  to 85.5% at March 31,  1997  compared  to 87.5% at
September 30, 1996 and 81.1% at September 30, 1995.  Occupancy levels,  adjusted
for property  sales,  increased to 85.5% at March 31, 1997  compared to 85.0% at
March 31, 1996.

         Interest  and fee  income on  mortgage  loans was  $42,000  for the six
months  ended March 31, 1997  compared to $2.8  million for the six months ended
March  31,  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 $0.7 million.
<PAGE>
         Interest on short-term  investments was $1.1 million for the six months
ended March 31, 1997 compared to $0.8 million for the six months ended March 31,
1996.  The increase  was due to the increase in cash  balances as a result of 13
property sales after March 31, 1996 and the disposition of substantially  all of
the mortgage loan portfolio in March 1996.

         Interest  expense was $2.8  million for the six months  ended March 31,
1997  compared to $7.0 million for the six months  ended March 31, 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 is the  amortization  of deferred
costs incurred in obtaining debt financing  which are amortized over the term of
the debt  agreement.  The Trust has  reduced  the  Floating  Rate Notes by $17.7
million through March 31, 1997 as a result of the prepayments required under the
New  Indenture  from the sale of five  encumbered  properties  and three of nine
buildings owned by the Trust in an industrial park. In April of fiscal 1997, the
Trust used $6.8 million of the net proceeds of an encumbered sale which occurred
in March of fiscal 1997 to prepay a portion of the Floating Rate Notes.

         Operating  expenses on rental  properties  was $4.9 million for the six
months  ended March 31, 1997  compared to $6.1  million for the six months ended
March 31, 1996. The decrease in operating  expenses on rental  properties is the
result of property sales that occurred  during fiscal 1996 and cost  containment
measures.  At March 31, 1997 the Trust owned 26 real estate properties  compared
to 39 at March 31,  1996 and 38 at  September  30,  1995.  During  the third and
fourth  quarters of fiscal 1996, the Trust sold eight  properties and during the
first six months of fiscal 1997, the Trust sold five real estate  properties and
three of nine  buildings  owned by the Trust in an  industrial  park.  The eight
properties  sold during the last two  quarters of fiscal 1996  contributed  $0.7
million  in  operating  expenses  during the six months  ended  March 31,  1996.
Occupancy  levels  decreased  to 85.5% at March 31,  1997  compared  to 87.5% at
September 30, 1996 and 81.1% at September 30, 1995.  Occupancy levels,  adjusted
for property  sales,  increased to 85.5% at March 31, 1997  compared to 85.0% at
March 31, 1996.

         Depreciation and amortization on rental properties was $0.9 million for
the six months ended March 31, 1997  compared to $1.2 million for the six months
ended March 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  1996,  the  Trust
reclassified  seven  properties  totaling  $18.7 million to Assets Held for Sale
from Assets Held for Investment. During the six months ended March 31, 1997, the
Trust  reclassified  five  properties  totaling $35.7 million to Assets Held for
Sale from Assets Held for Investment and no longer depreciates these assets.

         Other operating  expenses decreased 7.6% for the six months ended March
31, 1997 compared to the six months ended March 31, 1996.
<PAGE>
RESULTS OF OPERATIONS-THREE MONTHS ENDED MARCH 31, 1997 VS.THREE MONTHS
ENDED MARCH 31, 1996

         Net income for the three months ended March 31, 1997 was $8.2  million,
or $0.74 per share,  compared to $1.5 million, or $0.13 per share, for the three
months ended March 31, 1996.  Income before gain on sale of real estate was $2.1
million,  or $0.19 per share, for the three months ended March 31, 1997 compared
to $1.5 million, or $0.13 per share, for the three months ended March 31, 1996.

         Rental  income was $5.7  million for the three  months  ended March 31,
1997  compared to $6.9 million for the three  months  ended March 31,  1996.  In
addition to rental income, the Trust received reimbursement of certain operating
expenses totaling $0.8 million and $0.9 million for the three months ended March
31, 1997 and 1996, respectively.  The decrease in rental income is the result of
property  sales that  occurred  during  fiscal 1996. At March 31, 1997 the Trust
owned 26 real  estate  properties  compared  to 39 at March  31,  1996 and 38 at
September  30, 1995.  During the last six months of fiscal 1996,  the Trust sold
eight  properties.  During the first six months of fiscal  1997,  the Trust sold
five real estate properties and three of nine buildings owned by the Trust in an
industrial  park.  The eight  properties  sold  during the last two  quarters of
fiscal 1996  contributed  $1.0 million in revenue  during the three months ended
March 31, 1996.  Occupancy  levels decreased to 85.5% at March 31, 1997 compared
to 87.5% at  September  30,  1996 and 81.1% at  September  30,  1995.  Occupancy
levels,  adjusted  for  property  sales,  increased  to 85.5% at March 31,  1997
compared to 85.0% at March 31, 1996.

         Interest  and fee income on  mortgage  loans was  $21,000 for the three
months ended March 31, 1997  compared to $1.2 million for the three months ended
March  31,  1996.  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 $0.7 million.

         Interest  on  short-term  investments  was $0.6  million  for the three
months ended March 31, 1997  compared to $0.5 million for the three months ended
March 31,  1996.  The  increase  was due to the  increase in cash  balances as a
result  of 13  property  sales  after  March  31,  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 March 31,
1997  compared to $3.4 million for the three  months  ended March 31,  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 is the amortization of deferred costs incurred
in  obtaining  debt  financing  which  are  amortized  over the term of the debt
agreement.  The Trust has  reduced  the  Floating  Rate  Notes by $17.7  million
through  March 31, 1997 as a result of the  prepayments  required  under the New
Indenture  from  the  sale of  five  encumbered  properties  and  three  of nine
buildings owned by the Trust in an industrial park. In April of fiscal 1997, the
Trust used $6.8  million of the net proceeds of an  encumbered  sale in March of
fiscal 1996 to prepay a portion of the Floating Rate Notes.
<PAGE>
         Operating  expenses on rental properties was $2.4 million for the three
months ended March 31, 1997  compared to $3.1 million for the three months ended
March 31, 1996. The decrease in operating  expenses on rental  properties is the
result of property sales that occurred  during fiscal 1996 and cost  containment
measures.  At March 31, 1997 the Trust owned 26 real estate properties  compared
to 39 at March 31,  1996 and 38 at  September  30,  1995.  During  the third and
fourth  quarters of fiscal 1996, the Trust sold eight  properties and during the
first six months of fiscal 1997, the Trust sold five real estate  properties and
three of nine  buildings  owned by the Trust in an  industrial  park.  The eight
properties  sold during the last two  quarters of fiscal 1996  contributed  $0.4
million in operating  expenses  during the second  quarter ended March 31, 1996.
Occupancy  levels  decreased  to 85.5% at March 31,  1997  compared  to 87.5% at
September 30, 1996 and 81.1% at September 30, 1995.  Occupancy levels,  adjusted
for property  sales,  increased to 85.5% at March 31, 1997  compared to 85.0% at
March 31, 1996.

         Depreciation and amortization on rental properties was $0.4 million for
the three  months  ended March 31, 1997  compared to $0.6  million for the three
months ended March 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 1996,
the Trust  reclassified  seven properties  totaling $18.7 million to Assets Held
for Sale from Assets Held for  Investment.  During the second  quarter of fiscal
1997, the Trust  reclassified  five properties  totaling $35.7 million to Assets
Held for Sale from Assets Held for  Investment and no longer  depreciates  these
assets.

         Other  operating  expenses  decreased  12.2% for the three months ended
March 31, 1997 compared to the three months ended March 31, 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
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.
<PAGE>
         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 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  property  before any funds are  released to the Trust.  The New  Indenture
includes  affirmative  covenants and negative covenants.  At March 31, 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 properties  totaling
$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 properties with a carrying value of $19.2 million classified as Assets Held
for Sale.

         During the six months ended March 31, 1997, the Trust reclassified five
properties  totaling  $35.7 million to Assets Held for Sale from Assets Held for
Investment. During the six months ended March 31, 1997, the Trust received $33.6
million in net  proceeds  from the sale of real estate  property  classified  as
Assets Held for Sale with a carrying value of $25.7 million.  The sales included
five real estate properties and three of nine buildings owned by the Trust in an
industrial park.

         The  Trust's  cash  flow  is  derived  from  operating,  investing  and
financing activities.  For the six months ended March 31, 1997, cash provided by
operating  activities decreased to $5.9 million compared to $9.2 million for the
six months  ended March 31,  1996.  The  decrease in cash  provided by operating
activities was primarily  attributable to a reduced number of properties  offset
by lower  interest  payments in  connection  with the senior  indebtedness.  The
outstanding  balance on the Senior  Secured Notes  decreased to $49.7 million at
March 31, 1997 from $110.0 million at March 31, 1996.
<PAGE>
         Cash  provided by investing  activities  decreased to $31.3 million for
the six months ended March 31, 1997 compared to $54.5 million for the six months
ended March 31, 1996. The decrease in cash provided by investing  activities was
primarily  attributable to the disposition of  substantially  all of the Trust's
mortgage loan portfolio in March 1996.  Real estate sales  activity  offset this
decrease by  increasing to $33.6 million for the six months ended March 31, 1997
compared to $0.7 million for the six months ended March 31, 1996.

         Cash used in financing  activities  increased to $13.2  million for the
six  months  ended  March  31,  1997  compared  to cash  provided  by  financing
activities  of $2.0 million for the six months  ended March 31, 1996.  The Trust
used $13.5 million in the six months ended March 31, 1997 to prepay a portion of
the Senior  Secured  Notes.  Restricted  cash was flat for the six months  ended
March 31, 1997  compared to a decrease of $5.6  million for the six months ended
March 31, 1996. The decrease in restricted  cash is related to the funds held by
the New Indenture Trustee in the Debt Service Reserve and Trapped Funds Account.
<PAGE>
PART II:          OTHER INFORMATION

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  The Trust held its Annual Meeting of  Shareholders on Tuesday,
                  February 25, 1997.  The  shareholders  approved the  following
                  proposals  as set  forth  in the  Trust's  1997  Annual  Proxy
                  Statement:

                  Proposal 1 - Election of seven (7) Trustees to serve until the
                  next Annual Meeting of Shareholders and until their successors
                  have been duly elected and qualified.
<TABLE>
<CAPTION>

                           Trustee                                     For              Withheld
                           -------                                     ---              --------
<S>                                                                 <C>                   <C>
                           Jeffrey A. Altman....................... 9,725,434             4,846
                           Martin Bernstein........................ 9,725,455             4,825
                           Richard S. Frary........................ 9,725,465             4,815
                           Richard B. Jennings..................... 9,725,464             4,816
                           John B. Levy............................ 9,725,450             4,830
                           Carl A. Mayer, Jr....................... 9,725,449             4,831
                           George R. Zoffinger..................... 9,725,444             4,836
</TABLE>

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 March 17,
                  1997 under Item 2 and Item 7 of Form 8-K regarding the Trust's
                  disposition of four real estate  properties during the current
                  quarter.
<PAGE>

                                   SIGNATURES







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






                                 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: May 15, 1997