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                                                                    EXHIBIT 10.3
                                                                         ANNEX B

                               ADVISORY AGREEMENT

                                     BETWEEN

             FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS

                                       AND

                                FUR ADVISORS LLC

                        Dated as of __________ ___, 2004

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                               ADVISORY AGREEMENT

                  THIS AGREEMENT, made as of __________ ___, 2004, between FIRST
UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust
corporation (the "Trust") and FUR ADVISORS LLC (the "Advisor").

                  WHEREAS, pursuant to a Stock Purchase Agreement (the "Stock
Purchase Agreement") dated as of November 26, 2003 between the Trust and FUR
Investments LLC, an affiliate of the Advisor ("FUR"), FUR is purchasing common
shares of beneficial interest of the Trust on the date hereof;

                  WHEREAS, the Trust's Board of Trustees (the "Board") has
approved and adopted the transactions contemplated by the Stock Purchase
Agreement and has determined that such transactions would be in the best
interest of the holders of the Trust's common shares of beneficial interest;

                  WHEREAS, pursuant to the Stock Purchase Agreement, the Trust
and FUR have agreed to enter into this Agreement with respect to the management
of the affairs of the Trust;

                  WHEREAS, the Trust intends to continue to be qualified as a
real estate investment trust under the Internal Revenue Code of 1986, as amended
(the "Code").

                  NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, it is agreed as follows:

                                    ARTICLE I

                              RETENTION OF ADVISOR

                  Subject to the terms and conditions hereinafter set forth, the
Trust hereby retains the Advisor to undertake the duties and responsibilities
hereinafter set forth. By its execution and delivery of this Agreement, the
Advisor represents and warrants that (i) it is duly organized, validly existing,
in good standing under the laws of the state of Delaware and has all requisite
power and authority to enter into and perform its obligations under this
Agreement and (ii) the person signing this Agreement for the Advisor is duly
authorized to execute this Agreement on the Advisor's behalf.

                                   ARTICLE II

                           RESPONSIBILITIES OF ADVISOR

                  2.1      GENERAL RESPONSIBILITY. Subject to the supervision of
the Board, the Advisor shall:

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                           (i) serve as the Trust's investment and financial
         advisor and recommend changes in the Trust's investment policies, when
         appropriate;

                           (ii) investigate and evaluate investment
         opportunities and recommend them to the Board;

                           (iii) administer the day-to-day operations of the
         Trust;

                           (iv) investigate, select and conduct relations and
         enter into appropriate contracts on behalf of the Trust with other
         individuals, corporations and entities in furtherance of the investment
         activities of the Trust;

                           (v) acquire and dispose of investments and funds of
         the Trust, handle, prosecute and settle any claims of the Trust and
         handle, defend and settle claims against the Trust;

                           (vi) invest and reinvest any money of the Trust;

                           (vii) negotiate, as appropriate, on behalf of the
         Trust with investment banking firms, banks and other institutions or
         investors for public or private sales of securities of the Trust or for
         other financing on behalf of the Trust;

                           (viii) conduct relations on behalf of the Trust with
         the Trust's beneficiaries and with securities exchanges and dealers
         making markets in the Trust's securities;

                           (ix) establish one or more bank accounts in the name
         of the Trust and deposit into and disburse from such accounts any
         moneys on behalf of the Trust, provided that no funds in any such
         account shall be commingled with funds of the Advisor, and the Advisor
         shall as requested by the Board render appropriate accountings of such
         deposits and payments to the Board;

                           (x) administer such day-to-day bookkeeping and
         accounting functions as are required for the proper management of the
         assets of the Trust and prepare or cause to be prepared such reports
         (other than the preparation and filing of tax returns) as may be
         required by any governmental authority in connection with the ordinary
         conduct of the Trust's business, including without limitation, periodic
         reports, returns or statements required under the Securities Exchange
         Act of 1934, as amended, the Code, the securities and tax statutes of
         any jurisdiction in which the Trust is obligated to file reports or the
         rules and regulations promulgated under any of the foregoing;

                           (xi) from time to time, enter into Property
         Management Agreements and Construction Management Agreements (each as
         defined below), upon terms set forth in Article 4.2 of this Agreement,
         in consultation with the Board; and

                           (xii) from time to time, or at any time requested by
         the Board, make reports to the Board of its performance of the
         foregoing services.

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                  2.2      AUTHORITY. The Advisor shall have full discretion and
authority pursuant to this Agreement to perform the duties and services
specified in Section 2.1 hereof in such manner as the Advisor reasonably
considers appropriate subject to the terms and restrictions contained in the
Trust's Trust Agreement, as amended from time to time. In furtherance of the
foregoing, the Trust hereby designates and appoints the Advisor or its designee
as the agent and attorney-in-fact of the Trust, with full power and authority
and without further approval of the Trust, for purposes of accomplishing on its
behalf any of the foregoing matters or any matters which are properly the
subject matter of this Agreement. The Advisor may execute, in the name and on
behalf of the Trust and its affiliates all such documents and take all such
other actions which the Advisor reasonably considers necessary or advisable to
carry out its duties hereunder.

                                   ARTICLE III

                                 INDEMNIFICATION

                  3.1      INDEMNITY. (a) The Trust shall indemnify and hold
harmless the Advisor, and its members, officers, affiliates, agents and
employees, from and against any and all liability, claims, demands, expenses and
fees, fines, suits, losses and causes of action of any and every kind or nature
arising from or in any way connected with the performance by the Advisor of its
obligations under this Agreement, other than any liability, claim, demand,
expense, fee, suit, loss or cause of action arising from or in any way connected
with (i) any acts of the Advisor, or its members, officers, affiliates, agents
or employees, outside the scope of the authority of the Advisor under this
Agreement unless such person acted in good faith and reasonably believed that
his conduct was within the scope of authority of the Advisor under this
Agreement, or (ii) the gross negligence, willful misconduct or material breach
of this Agreement or the violation of applicable laws by the Advisor, its
members, officers, affiliates, agents or employees.

                           (b) The Advisor shall indemnify and hold harmless the
Trust and its Trustees, officers, affiliates, agents and employees, from and
against any and all liability, claims, demands, expenses and fees, fines, suits,
losses and causes of action of any and every kind or nature arising from third
party actions and connected with the performance by the Advisor of its
obligations under this Agreement to the extent caused by (i) any acts of the
Advisor, or its members, officers, affiliates, agents or employees, outside the
scope of the authority of the Advisor under this Agreement unless such person
acted in good faith and reasonably believed that his conduct was within the
scope of authority of the Advisor under this Agreement, or (ii) the gross
negligence, willful misconduct or material breach of this Agreement or the
violation of applicable laws by the Advisor, its members, officers, affiliates,
agents or employees.

                  3.2      ADDITIONAL COSTS; SURVIVAL. The obligation to
indemnify set forth in Section 3.1 above shall include the payment of reasonable
attorneys' fees and investigation costs, as well as other reasonable costs and
expenses incurred by the indemnified party in connection with any such claim. At
the option of, and upon receipt of notice from, the indemnified party, the
indemnifying party shall promptly and diligently defend any such claim, demand,
action or proceeding. The provisions of Sections 3.1 and 3.2 hereof shall
survive the expiration or earlier termination of this Agreement.

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                                   ARTICLE IV

                                  COMPENSATION

                  The Advisor agrees to accept from the Trust, the compensation
set forth in this Article IV as full and complete consideration for all services
to be rendered by the Advisor pursuant to this Agreement. Except as hereinafter
provided, neither the Advisor nor any of its affiliates shall be entitled to
receive any other fees or compensation relating to the Trust or its properties,
including but not limited to leasing commissions, acquisition fees, disposition
fees or loan fees.

                  4.1      ANNUAL ASSET MANAGEMENT FEE. The Advisor shall be
entitled to receive an annual asset management fee in accordance with the
following payment schedule: 1.00% of the Gross Asset Value up to $100 million,
..75% of the Gross Asset Value between $100 million and $250 million, .625% of
the Gross Asset Value between $250 million and $500 million and .50% of the
Gross Asset Value in excess of $500 million. The Gross Asset Value shall be
calculated as of the last day of the period in respect of which the annual asset
management fee is payable (which amount shall be prorated for any partial year).
For purposes of this Paragraph 4.1, the term "Gross Asset Value" on a particular
date means the gross asset value of all assets owned, directly or indirectly, by
the Trust on that date, as determined, in the case of assets whose values are
not readily ascertainable, by the most recent appraisal of such assets by an
independent appraiser of national reputation selected by the Trust. This annual
fee shall be payable in arrears on a quarterly basis.

                  4.2      PROPERTY AND CONSTRUCTION MANAGEMENT FEES. (a) The
Trust may, from time to time, enter into separate property management agreements
(the "Property Management Agreements") with third parties, the Advisor or an
affiliate of the Advisor for each Trust property, pursuant to which the Advisor
or its affiliate shall be entitled to receive fees for property management
services at a rate for each property that does not exceed a commercially
reasonable rate for performing such services for comparable properties in the
same geographic location taking into account that the Advisor will not be
performing leasing services or receiving leasing commissions. The proposed rates
shall be submitted for approval by a majority of the independent trustees on the
Board. Such Property Management Agreements may be terminated in the same manner
as proscribed in Section 6.2 of this Agreement and shall contain commercially
reasonable and customary terms for such arrangements.

                  (b) The Trust may, from time to time, enter into construction
management agreements (the "Construction Management Agreements") with third
parties, the Advisor or an affiliate of the Advisor with respect to Trust
properties, pursuant to which the Advisor or its affiliate shall be entitled to
receive fees for construction management services at a rate that does not exceed
a commercially reasonable rate for performing such services for comparable
properties in the same geographic location. The proposed rates shall be
submitted for approval by a majority of the independent trustees on the Board.
Such Construction Management Agreements may be terminated in the same manner as
proscribed in Section 6.2 of this

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Agreement and shall contain commercially reasonable and customary terms for such
arrangements.

                  4.3      LOAN SERVICING FEE. The Advisor shall be entitled to
receive an annual fee for providing administrative and clerical services with
respect to loans made by the Trust to third parties. The fee for such services
shall not exceed a commercially reasonable rate for the provision of such
services and shall be subject to the approval of a majority of the independent
trustees on the Board.

                  4.4      INCENTIVE FEE. (a) As additional compensation for its
services hereunder, the Advisor shall be paid a fee (the "Incentive Fee"), at
the times and pursuant to the procedures set forth below, equal to twenty
percent (20%) of Excess Share Distributions.

                  (b) Definitions as used herein:

                           (i)      "Excess Share Distributions" means the
         aggregate of all Distributions after the date hereof in respect of all
         common shares of beneficial interest of the Trust which exceed the
         Hurdle as of the date of calculation. The "Hurdle" means (x)
         $71,300,000, increased by the net issuance price of all common shares
         of beneficial interests issued after the date hereof (including the
         conversion price of any securities actually converted into Common
         Shares) and decreased by the redemption price of all common shares of
         beneficial interest redeemed after the date hereof, plus (y) a return
         on the amount set forth in (x) above, as adjusted, equal to 7% per
         annum compounded annually taking into account the timing of any such
         adjustments.

                           (ii)     "Distributions" means all distributions made
         after the date hereof in respect of common shares of beneficial
         interest of the Trust, including distributions of cash, debt
         obligations and the fair market value of other property and the fair
         market value of any consideration received in exchange for common
         shares of beneficial interest by reason of a merger or consolidation
         with a third party entity or other similar transaction. In the event of
         a merger, consolidation or other similar business combination
         transaction, the Advisor will receive a credit toward the Distribution
         amount equal to the fair market value of the consideration received by
         holders of common shares of beneficial interest of the Trust received
         in exchange for their common shares of beneficial interest of the
         Trust, including, but not limited to, the fair market value ascribed in
         the transaction to stock, preferred stock, debt instruments, cash,
         warrants, options, etc., received by the holders of common shares of
         beneficial interest of the Trust. Except as otherwise provided herein,
         "fair market value" shall be determined by the Board in good faith;
         provided, however, that if the Advisor disagrees in good faith with
         such determination, then the Advisor shall be entitled to seek
         arbitration in accordance with Section 7.4 herein with respect to this
         issue.

                  (c)      Time of Payment. The Incentive Fee shall be paid to
the Advisor from time to time, as, when and if Excess Share Distributions are
made to shareholders of the Trust. The Incentive Fee shall be deemed earned on
the first date that Excess Share Distributions are made and shall not be subject
to any claw-back, refund or offset for any reason, including as a result of an
increase in the amount of the Hurdle from time to time. The amount of each

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payment of the Incentive Fee shall equal the entire Incentive Fee computed
pursuant to Section 4.4(a), less the amount thereof which has theretofore been
paid to the Advisor.

                  4.5      JOINT INVESTMENT FEES. In the event that the Trust
and the Advisor or an affiliate of the Advisor make a joint investment as
permitted by the Stock Purchase Agreement, then the Advisor agrees to share with
the Trust, in proportion to their respective investments, the amount of any fee
or promoted interest payable to the Advisor or its affiliate by a third party in
connection with entering into or structuring the transaction.

                  4.6      OTHER SERVICES. Other than as specifically provided
in this Agreement, or as approved in writing by a majority of independent
Trustees of the Board, the Advisor shall not be compensated by the Trust for
services rendered to the Trust. The Advisor shall disclose to the Board the
terms of any sub-contracting arrangement entered into by the Advisor with third
parties with respect to the services to be provided by the Advisor hereunder.

                                    ARTICLE V

                                 TRUST EXPENSES

                  5.1      EXPENSES PAID BY ADVISOR. Without regard to the
amount of compensation received hereunder by the Advisor, the Advisor shall bear
the following expenses of the Trust:

                  (a) All direct and indirect remuneration and all other
employment expenses of employees of the Advisor, including but not limited to,
salaries, wages, payroll taxes and the costs of employee benefit plans, and
fees, if any, paid to members of the Board who are employed by the Advisor;

                  (b) rent, telephone, utilities, office furniture, equipment
and machinery and other office expenses of the Advisor and the Trust; and

                  (c) administrative expenses relating to performance by the
Advisor of its duties hereunder other than payments to third parties as provided
in Section 5.2.

                  5.2      EXPENSES PAID BY THE TRUST. The following expenses
relating to the operation and management of the Trust shall be paid by the
Trust:

                  (a) Underwriting, brokerage, listing, reporting, registration
and other fees, and printing, engraving and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, trading, registration and
securities exchange or quotation system listing of the Trust's securities;

                  (b) Fees and expenses paid to members of the Board who are not
affiliated with the Advisor, independent advisors, consultants and other agents
employed by or on behalf of the Trust;

                  (c) The cost of borrowed money;

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                  (d) Third party expenses directly connected with the
acquisition, disposition, ownership and operation of real estate interests or
other property (including the costs of foreclosure, insurance premiums, legal
services, brokerage and sales commissions, taxes and assessments on real
property and all other taxes, utilities, maintenance, repair and improvement of
property and expenses for which reimbursement or payment by the Trust is
provided for under the Property Management Agreements);

                  (e) Third party expenses connected with payments of dividends
or interest or distributions in cash or any other form made to beneficiaries of
the Trust;

                  (f) All third party expenses connected with communications to
the beneficiaries of the Trust including with the proxy solicitation materials
and reports to holders of the Trust's beneficial interests;

                  (g) Transfer agent's, registrar's and indenture trustee's fees
and charges;

                  (h) Legal, investment banking, and external accounting,
auditing and tax return preparation fees and expenses;

                  (i) Directors and officers liability insurance costs;

                  (j) All expenses in connection with the beneficiaries'
meetings;

                  (k) All expenses relating to membership of the Trust in any
trade or similar association; and

                  (l) expenses relating to the employment of one full-time
analyst, to be chosen at the discretion of the Advisor at a maximum salary of up
to $125,000 per annum (subject to increase upon review by the Trust's Board of
Trustees), for every $250 million of Gross Asset Value.

                                   ARTICLE VI

                         TERM OF AGREEMENT; TERMINATION

                  6.1      TERM. This Agreement shall become effective on
________ ___, 2004 and shall continue in force for a period of one year and
thereafter shall be automatically renewed for successive one-year periods unless
terminated in accordance with the provisions of this Agreement.

                  6.2      RIGHT OF TERMINATION. (a) Notwithstanding anything to
the contrary contained in this Agreement, (i) the Trust may terminate this
Agreement with or without cause upon sixty (60) days' prior written notice to
the Advisor and (ii) the Advisor may terminate this Agreement with or without
cause upon one hundred and twenty (120) days' prior written notice to the Trust.
In addition, this Agreement may be terminated by the Trust at any time for
"cause", defined as (i) the Advisor's continuous and intentional failure to
perform its duties under this

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Agreement after written notice from the Trust to the Advisor of such
non-performance; (ii) intentional misconduct by the Advisor which is materially
injurious to the Trust, monetarily or otherwise; or (iii) the material breach by
the Advisor of any of the material terms or conditions of this Agreement.

                  (b) The Advisor shall have the continuing right, but not the
obligation, to immediately terminate this Agreement from and after the date that
the Exclusivity Agreement (as defined in the Stock Purchase Agreement) or the
Covenant Agreement (as defined in the Stock Purchase Agreement) is, without the
prior written consent of FUR, terminated by the Company or voided, in each case
in whole or material part.

                  6.3      TERMINATION FEE. (a) Upon termination of this
Agreement in accordance with Section 6.1 or 6.2 above, the Trust will be
obligated to pay the Advisor a termination fee equal to 20% of the difference
between (x) the Deemed Excess Share Distributions less (y) the amount of
Incentive Fees which have theretofore been paid to the Advisor in accordance
with Section 4.4(a) hereto.

                  (b) Definitions as used herein:

                           (i)      "Deemed Excess Share Distributions" means
         the difference between (A) the aggregate of all Distributions in
         respect of all common shares of beneficial interest plus the Net Asset
         Amount (as defined below) and (B) the Hurdle, as of the date of
         termination..

                           (ii)     "Net Asset Amount" means the difference
         between (x) the gross assets of the Trust as of the date of termination
         less (y) the total liabilities of the Trust as of the date of
         termination (including any amounts necessary to satisfy obligations due
         to holders of preferred shares of the Trust as liabilities), as
         determined by an appraisal to be conducted by a nationally recognized
         appraisal firm mutually agreed upon by the Trust and the Advisor. If
         the Trust and the Advisor are unable to agree upon an appraisal firm,
         then each of the Trust and the Advisor is to choose an independent
         appraisal firm to conduct an appraisal. In such event, (i) if the
         appraisals prepared by the two appraisers so selected are the same or
         differ by an amount that does not exceed 20% of the higher of the two
         appraisals, the Net Asset Amount is to be deemed to be the average of
         the appraisals, as prepared by each party's chosen appraiser, and (ii)
         if these two appraisals differ by more than 20% of such higher amount,
         the two appraisers together are to select a third appraisal firm to
         conduct an appraisal. If the two appraisers are unable to agree on the
         identity of such third appraiser, either of the Advisor and the Trust
         may request that the American Arbitration Association ("AAA") select
         the third appraiser. The Net Asset Amount then is to be the amount
         determined by such third appraiser, but in no event less then the lower
         of the two initial appraisals or more than the higher of such two
         initial appraisals. Each party shall pay the costs of the appraisals
         chosen by it, and each party shall pay one half of the costs of the
         third appraiser. Any appraisal hereunder shall be performed no later
         than 45 days following selection of the appraiser or appraisers.

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                  6.4      CONTINUED RESPONSIBILITY. Notwithstanding termination
of this Agreement as provided above, the Advisor agrees to use its best efforts
in the performance of its duties under this Agreement until the effective date
of the termination of this Agreement.

                  6.5      RESPONSIBILITIES UPON TERMINATION. Upon termination
of this Agreement, the Advisor shall forthwith deliver the following to the
Trust, as applicable, on the effective date of termination:

                  (a) A final accounting reflecting the balance of funds held on
behalf of the Trust as of the date of termination; and

                  (b) All files, records, documents and other property of any
kind relating to the Trust, including, but not limited to, computer records,
contracts, leases, warranties, bank statements, rent rolls, employment records,
plans and specifications, inventories, correspondence, tenant records, receipts,
paid and unpaid bills or invoices, maintenance records.

                  (c) Agreements to terminate all property management,
construction management and other agreements with affiliates of the Advisor and
third parties retained on a subcontracting basis by the Advisor, in each case,
with respect to the services to be provided by the Advisor hereunder.

                                   ARTICLE VII

                            MISCELLANEOUS PROVISIONS

                  7.1      NOTICE. Any notice required or permitted under this
Agreement shall be in writing and shall be given by being delivered to the
following addresses or fax numbers of the parties hereto:

                  To the Trust:     First Union Real Estate Equity and Mortgage
                                    Investments
                                    [address]

                  To the Advisor:   FUR Advisors LLC
                                    [Address]

or to such other address or fax number as may be specified from time to time by
such party in writing.

                  7.2      ENTIRE AGREEMENT; AMENDMENT. This Agreement contains
the entire agreement of the parties hereto with respect to the subject matter
hereof. This Agreement shall not be amended or modified in any respect unless
agreed to in writing by the Trust and the Advisor.

                  7.3      GOVERNING LAW. This Agreement shall be construed,
interpreted and applied in accordance with, and shall be governed by, the laws
of the State of New York without reference to principles of conflicts of law.

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                  7.4      ARBITRATION. Any dispute or controversy between the
Advisor or any of its employees and the Trust or any of its affiliates arising
in connection with this Agreement, any amendment thereof, or the breach thereof
shall be determined and settled by arbitration in New York, New York, by a panel
of three arbitrators in accordance with the rules of the American Arbitration
Association. Any award rendered therein shall be final and binding upon the
Trust, its affiliates and the Advisor and their respective legal representatives
and judgment may be entered in any court having jurisdiction thereof. The
expenses of such arbitration shall be paid by the party against whom the award
shall be entered, unless otherwise directed by the arbitrators.

                  7.5      ASSIGNMENT. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties hereto;
provided, however, that the Advisor shall be permitted to assign this Agreement
or any of its rights hereunder, and delegate any and all of its responsibilities
and obligations hereunder, to any of its affiliates without the consent of the
other parties hereto.

                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.

                                    FIRST UNION REAL ESTATE EQUITY AND
                                    MORTGAGE INVESTMENTS

                                    By: ____________________________________
                                        Name:
                                        Title:

                                    [Advisor]

                                    By: _____________________________________
                                        Name:
                                        Title:

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