USP REAL ESTATE INVESTMENT TRUST, 10-K, 2000-03-30

USP REAL ESTATE INVESTMENT TRUST
10-K, 2000-03-30
REAL ESTATE INVESTMENT TRUSTS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1999 Commission file number 0-7589

USP REAL ESTATE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)

Iowa 42-6149662
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

4333 Edgewood Road N.E., Cedar Rapids, IA 52499
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (319) 398-8975

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

None

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

Shares of Beneficial Interest, $1 Par Value
(Title of Class)

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

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

The aggregate market value of the voting shares of the registrant
held by non-affiliates at March 15, 2000 was $12,288,920.

The number of shares of beneficial interest of the registrant
outstanding at March 15, 2000 was 3,880,000.

DOCUMENTS INCORPORATED BY REFERENCE

None.
Part I.

Item I. Business

The Trust

USP Real Estate Investment Trust ("USP" or the Trust") is an
equity-oriented real estate investment trust organized under the
laws of the State of Iowa pursuant to a Declaration of Trust as
amended and restated through April 23, 1984. The Trust was
formed on March 10, 1970 to provide its shareholders with an
opportunity to participate in the benefits of real estate
investment and at the same time enjoy the liquidity and
marketability resulting from the ownership of securities which
are publicly-traded.

USP has elected to qualify as a real estate investment trust
("REIT") under the Internal Revenue Code. As a result of this
election, the Trust is not taxed on the portion of its income
which is distributed to shareholders, provided it distributes at
least 95% of its taxable income, has at least 75% of its assets
in real estate investments and meets certain other requirements
for qualification as a real estate investment trust.

The Trust has no employees as all services necessary to conduct
the day-to-day operations are performed by AEGON USA Realty
Advisors, Inc. ("AEGON Advisors") and its affiliates. (See Note
6 to the Financial Statements.)

Investment Policy

The Trust's primary investment objective is to invest in real
estate which will provide the best available cash flow and offer
prospects for long-term appreciation in value. The Trust
selectively sells property when it is determined that a sales
transaction will economically benefit the Trust through the
realization of capital gains. The Trust does not acquire
property with a view to realizing appreciation from short-term
sales.

The Trust has sought to achieve its investment objectives by
investing principally in the direct ownership of real estate.
Short-term cash investments are made in high-quality commercial
paper, money market funds and certificates of deposit.

Source of Funds and Financing

The principal source of funds for investment by USP was $25
million in proceeds from its initial public offering of shares.
The Trust ceased the issuance of shares from this offering in
1978. The Trust completed a secondary offering of its shares in
1988, raising nearly $10 million. Since substantially all of the
Trust's net income must be distributed to shareholders in order
to qualify as a real estate investment trust, USP has relied
primarily on cash generated from operations and property sales in
excess of shareholder distributions, along with borrowings
secured by mortgages on specific properties, to finance real
estate investments. Outstanding indebtedness of USP may not,
according to the Declaration of Trust, exceed four hundred
percent of the Trust's net assets (shareholders' equity plus
accumulated depreciation). The aggregate principal amounts of
mortgage indebtedness and net assets of the Trust as of December
31, 1999 were $9,359,426 and $27,580,995, respectively.

The Trust may finance future real estate investments through
additional borrowings secured by mortgages on the Trust's real
estate properties. USP currently has no commitments or
arrangements for any such financing and there can be no assurance
that suitable financing will be available on terms satisfactory
to the Trust in the future.

Competition

USP's portfolio competes with other similar properties in its
respective markets, some of which are newer than the USP
properties. A strong U.S. economy, a low level of commercial
real estate construction, and strong leasing efforts were factors
resulting in a strong occupancy of Trust properties during the
last three years. Overall leased occupancy for the entire
portfolio was 94% at December 31, 1999, compared to 96% at
December 31, 1998 and 87% at December 31, 1997.

Sale of Assets

In January 2000, the Trust signed a contract to sell all of its
real estate assets to AEGON Advisors, the Trust's advisor and a
subsidiary of AEGON USA, Inc., the Trust's largest shareholder
which owns approximately 30.86% of the Trust's outstanding
shares, for a total purchase price of $33,500,000. The sale of
the real estate assets of the Trust is conditioned upon
shareholder approval of the sale, as well as shareholder approval
of the subsequent liquidation of the Trust and distribution of
the proceeds of the sale to the shareholders. A notice of a
special meeting of the shareholders and a proxy statement
containing details of the proposed transaction will be sent to
all shareholders pending a filing with the Securities and
Exchange Commission. The transaction is anticipated to be
completed in the second quarter of 2000, resulting in an expected
liquidating distribution in excess of $6.00 per share.
Shareholder approval of the liquidation of the Trust will result
in termination of the Trust. Neither the sale of assets nor the
liquidation will occur unless both are approved at the special
meeting.

Item 2. Properties

Real Estate Investments

The Trust has direct ownership of six commercial real estate
properties. These real estate investments are diversified
geographically with 69% of the portfolio located in the
Southeast, 25% in the Southwest and 6% in the Great Lakes Region
based on the cost of the properties.

Properties owned by the Trust are leased to tenants either on a
managed basis or under net lease arrangements. As the owner of
managed property the Trust receives gross rentals and incurs
operating expenses, such as property taxes, insurance, repairs,
maintenance and common area utilities. Under net lease
arrangements, the tenant, rather than the Trust, pays all
operating expenses related to the leased premises. At December
31, 1999, five commercial properties were being leased on a
managed basis and one property was leased on a net lease basis.

The five managed commercial properties consisted of four shopping
centers and one business park. Managed commercial properties
comprised 94% of the Trust's investment portfolio in 1999 and in
1998, compared to 95% in 1997. Managed commercial properties
provided 89% of USP's annual revenue in 1999, compared to 91% in
1998 and 89% in 1997. All managed properties have at least one
tenant representing 19% or more of the revenue from that
property. Safeway at North Park Plaza in Phoenix, Arizona and
Kroger Company at Mendenhall Commons in Memphis, Tennessee each
represent approximately 16% and 14%, respectively, of the total
revenue of the Trust under leases expiring in 2018 and 2012,
respectively.

The net leased property is the Yamaha office/warehouse in Cudahy,
Wisconsin, which represented approximately 6% of the Trust's
investment portfolio in 1999 and 1998, compared to 5% in 1997,
and generated 8% of the Trust's annual revenue in 1999 compared
to 7% in 1998 and 1997. Trust properties and operations are
summarized in the table on the next page.

The Trust's real estate investments are not expected to be
substantially affected by current federal, state or local laws
and regulations establishing ecological or environmental
restrictions on the development and operations of such property.
However, the enactment of new provisions or laws may reduce the
Trust's ability to fulfill its investment objectives.

The Trust's properties and operations are summarized in the table
below.

Real Estate Cost
at December 31, 1999 1999 Revenue

Amount Percent Amount Percent

Managed
Kingsley Square
Orange Park, Florida $ 5,743,758 17% $ 627,373 14%
First Tuesday Mall
Carrollton, Georgia 7,184,057 21 892,196 19
Mendenhall Commons
Memphis, Tennessee 8,795,032 25 1,022,472 22
North Park Plaza
Phoenix, Arizona 8,680,330 25 1,159,993 21
Presidential Drive
Atlanta, Georgia 2,016,596 6 389,330 8

32,419,773 94 4,091,364 89

Net Leased
Yamaha Warehouse
Cudahy, Wisconsin 2,197,937 6 371,100 8

Properties sold --- --- (21,391) --
Trust operations --- --- 140,095 3

$34,617,710 100% $4,581,168 100%

Largest Tenant
Percent Percent
Lease of Property of Trust
Name of Tenant Expiration Revenue Revenue Revenue

Managed
Kingsley Square
Orange Park, Florida OfficeMax 2012 $ 128,485 20% 3%
First Tuesday Mall
Carrollton, Georgia Winn Dixie 2004 187,450 21 4
Mendenhall Commons
Memphis, Tennessee Kroger 2012 638,501 62 14
North Park Plaza
Phoenix, Arizona Safeway 2018 739,592 64 16
Presidential Drive
Atlanta, Georgia Atlanta Dental Supply 2004 75,216 19 2

1,769,244 39

Net Leased
Yamaha Warehouse
Cudahy, Wisconsin Yamaha Motor Corp. 2000 371,100 100 8

Properties sold
Trust operations

$2,140,344 47%
</TABLE>

Recent Transactions

At Kingsley Square in Orange Park, Florida, the Trust has a lease
with Publix Super Markets for 34,400 square feet. In 1997 the
Trust received written notice from Publix that they planned to
close their store and move to a new location. In April 1999
Publix vacated their space. The Trust continued to receive rent
from Publix through its lease expiration in February 2000. The
Trust is attempting to secure a new tenant for this space.
OfficeMax, a current tenant at Kingsley square, has a lease
provision that allows them to pay rent based on their sales in
the event an anchor tenant vacates. As a result of Publix
vacating their space, the Trust will be receiving significantly
less rent from OfficeMax.

Also at Kingsley Square, the Trust has a lease with Eckerd Drugs
for 10,080 square feet. The Trust has received notice from
Eckerd's stating their intent to close the store on or about
March 25, 2000. The Trust anticipates receiving rent from
Eckerd's for the remainder of the lease term, which expires in
February 2005.

On February 1, 1999, the Trust prepaid the mortgage loan on
Presidential Drive Business Park. The prepayment amount,
including a 1% prepayment fee of $7,065 to the lender, was
$713,548. On February 5, 1999, the Trust prepaid the mortgage
loan on First Tuesday Mall. The prepayment amount, including a
1% prepayment fee of $4,637 to the lender, was $468,281.

On March 1, 1999, the mortgage loans payable on Mendenhall
Commons and North Park Plaza matured, with remaining principal
balances of $3,930,120 and $3,944,537, respectively. The Trust
refinanced these properties with Monumental Life Insurance
Company, an affiliate of AEGON Realty Advisors. The loan amount
for Mendenhall was $3,925,000 with monthly debt service of
$30,430. The loan amount for North Park was $3,940,000 with
monthly debt service of $30,547. Debt service on both loans
include principal amortization over twenty years and interest at
an initial rate of 7%, which is adjusted quarterly based on three
month LIBOR plus 2%. The loans originally matured on March 1,
2000, but have been extended until May 1, 2000, and may be
prepaid at any time without penalty.

The Yamaha Warehouse facility in Cudahy, Wisconsin has a lease
with Yamaha Motor Corporation, its sole tenant. In March 1998,
Yamaha exercised both of their remaining one-year options in
order to renew their lease for two more years. The lease expires
in June 2000. As of March 15, 2000, Yamaha has not indicated
their intent to renew.

The operating results and financial condition of the Trust
greatly depend upon all tenants continuing to pay rent, and the
Trust's ability to renew expiring tenant leases and obtain new
leases at competitive rental rates.

Item 3. Legal Proceedings

Legal Proceedings

The Trust is not a party to any pending legal proceedings which,
in the opinion of management, are material to the Trust's
financial position.

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

None.

Part II.

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

Distribution Information

The Trust is required to distribute at least 95% of its taxable
income to continue its qualification as a real estate investment
trust. During 1999, the Trust made distributions of $.08 per
share on February 16 to shareholders of record as of February 4,
on May 24 to shareholders of record as of May 13, on August 16 to
shareholders of record as of August 6, and on November 29 to
shareholders of record as of November 16. Due to the pending
transaction to sell all of the Trust's real estate assets to
AEGON Advisors, regular quarterly distributions have been
suspended. In connection with the proposed sale of assets to
AEGON Advisors, the Board of Trustees has adopted a plan of
liquidation. As a result, if the shareholders approve the sale
of the real estate assets to AEGON Advisors and the liquidation
of the Trust at the special meeting, all future distributions to
shareholders will be considered liquidating dividends.

Identification of Market and Price Range

At March 15, 2000, the Trust had 3,880,000 shares of beneficial
interest issued and outstanding to 1,837 shareholders of record.
The Trust's shares of beneficial interest are traded over-the-
counter on the Nasdaq SmallCap Market under the symbol USPTS. At
March 15, 2000, the Trust's per share high and low sales prices
were $5.844 and $5.813, respectively, as obtained from
Wedbush/Morgan Securities, Inc., Newport Beach, California,
Stifel Nicolaus, St. Louis, Missouri, and Herzog, Heine, Geduld,
Inc., New York, New York, the principal market makers for shares
of the Trust. These prices reflect quotations between dealers
without adjustment for retail mark-up, mark-down or commission
and do not necessarily represent actual transactions.

Market Price Range

Over-the-Counter Sales Prices
Quarter Ended High Low Close
1999
March 31 4 1/4 3 3/4 3 7/8
June 30 5 3 13/16 4 1/4
September 30 5 13/16 4 5 15/32
December 31 5 13/16 5 15/32 5 21/32

1998
March 31 4 3/4 4 1/8 4 1/2
June 30 5 4 5/16 4 5/8
September 30 7 1/2 3 7/8 5 5/8
December 31 6 1/4 3 3/4 3 7/8

Income Tax Information

The percentages indicated below, multiplied by the amount of
distributions received or reinvested during the year, result in
the amount to be reported for income tax purposes. A Form 1099
is mailed to shareholders at the end of each year reflecting the
distributions paid by the Trust in that year.

Dividend Character

1999 1998 1997

Ordinary Income 83.77% 76.21% 50.75%

Capital Gains 16.23% 23.79% ---

Return of Capital --- --- 49.25%
Total 100.00% 100.00% 100.00%
Distributions paid,
per share $.32 $.32 $.32

Advisor

AEGON USA Realty Advisors, Inc.
Cedar Rapids, Iowa

Stock Transfer and Dividend Reinvestment Agent

USP Real Estate Investment Trust
c/o Boston EquiServe, L.P.
P.O. Box 8200
Boston, MA 02266-8200
Telephone: 1-800-426-5523

Item 6. Selected Financial Data
<TABLE>
<S> <C> <C> <C> <C> <C>
Years Ended December 31 1999 1998 1997 1996 1995

Revenue $ 4,581,168 5,331,955 5,012,087 5,217,313 5,618,014

Earnings from Operations $ 1,061,376 943,975 637,129 946,230 1,100,149
Net Gain on Sale or Disposition of Property $ --- 528,282 259,157 --- ---

Net Earnings $ 1,061,376 1,472,257 896,286 946,230 1,100,149

Distributions to Shareholders $ 931,200 1,241,600 1,241,600 1,241,600 1,202,800

Per Share*
Earnings from Operations $ .27 .24 .16 .24 .28
Basic and Diluted Net Earnings $ .27 .38 .23 .24 .28
Distributions to Shareholders $ .24 .32 .32 .32 .31

Real Estate and Mortgage
Loans Receivable $23,267,496 23,816,859 28,571,464 29,627,786 30,434,137

Total Assets $26,380,141 27,932,493 31,104,418 32,207,728 32,853,270

Mortgage Loans Payable $ 9,359,426 10,897,933 14,140,584 14,819,479 15,271,385

Total Liabilities $10,149,360 11,831,888 15,234,470 15,992,466 16,342,638

Shareholders' Equity $16,230,781 16,100,605 15,869,948 16,215,262 16,510,632

*Per share amounts for Earnings from Operations and Basic and
Diluted Net Earnings are based on the weighted average number of
shares outstanding for each period. Per share amounts for
Distributions to Shareholders are based on the actual number of
shares outstanding on the respective record dates.
</TABLE>

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

The discussion that follows should be read in the general context
of the discussion in "Item 1. Business" and "Item 2. Properties,"
particularly the description of "Recent Transactions" in Item 2.

Results of Operations

The Trust owns shopping centers, an office park and an office
warehouse facility in six U.S. cities. The Trust's properties
continue to compete with centers and office buildings of similar
size, tenant mix and location. As of December 31, 1999, the
combined leased occupancy of the Trust's six properties was 94%.
Operating results in the forthcoming year will be influenced by
the ability of current tenants to continue paying rent, and the
Trust's ability to renew expiring tenant leases and obtain new
leases at competitive rental rates.

1999 compared to 1998

The Trust's net earnings for the year ended December 31, 1999
were $1,061,376 ($.27 per share) compared to $1,472,257 ($.38 per
share) for the year ended December 31, 1998. The net earnings
for 1998 include a net gain on sale of $528,282 ($.14 per share)
from the sale of Geneva Square Shopping Center in December 1998.
(All per share amounts are on a basic and diluted basis.)

Rental income was $4,441,073 in 1999 compared to $5,218,707 in
1998. This decrease of $777,634 was primarily attributed to the
sale of Geneva Square. Rental income for properties owned in
both years increased by $45,901.

Interest income was $140,095 in 1999 compared to $113,248 in
1998, an increase of $26,847 due to a larger balance of funds
available for investment.

Property expenses before depreciation were $1,461,734 in 1999
compared to $1,634,237 in 1998, representing 33% of rental income
for 1999 and 31% of rental income for 1998. As a percentage of
rental income, such expenses increased primarily because rents
declined more than expenses. Expenses for properties owned in
both years increased by $59,606 primarily attributed to repairs
and maintenance for parking lots at several properties and tenant
remodeling expenses. The decrease in other expenses is due to
fewer lease commissions and lower advertising expenses. In 1998,
an unamortized lease commission of approximately $46,000 was
written off when a tenant defaulted on its lease. Advertising
decreased from 1998 as the Trust incurred approximately $30,000
in promoting Martin's Family Clothing which began occupancy at
First Tuesday Mall in 1998.

Depreciation expense decreased by $172,781 due to the sale of
Geneva Square. Interest expense declined by $540,751 due to the
sale of Geneva Square and due to the Trust prepaying the mortgage
loans in February 1999 on Presidential Drive Business Park and
First Tuesday Mall. The administrative fee, which is primarily
based on the Trust's gross real estate investments, decreased by
$30,756 due to the sale of Geneva Square. Other administrative
expenses increased by $48,603 due to a $100,000 fairness opinion
incurred in connection with the anticipated transaction to sell
all of the real estate assets to AEGON Advisors.

1998 compared to 1997

The Trust's net earnings for the year ended December 31, 1998
were $1,472,257 ($.38 per share) compared to $896,286 ($.23 per
share) for the year ended December 31, 1997. The net earnings
for 1998 include a net gain on sale of $528,282 ($.14 per share)
from the sale of Geneva Square Shopping Center in December 1998.
The net earnings for 1997 include a net gain of $259,157 ($.07
per share) realized from a previously deferred installment sale.
(All per share amounts are on a basic and diluted basis.) The
increase in net earnings is primarily due to the gain from the
sale of Geneva Square and rent settlements collected in 1998 from
two previous tenants at Geneva Square.

Rental income was $5,218,707 in 1998 compared to $4,802,974 in
1997. This increase of $415,733 was primarily due to the receipt
of settlements in the amount of $333,000 from two previous
tenants at Geneva Square. Rental income increased by $175,415 at
Kingsley Square in Orange Park, Florida due to OfficeMax, which
began paying rent in May 1997. Rents at North Park Plaza
Shopping Center in Phoenix, Arizona increased by $86,519 but was
offset by a $78,228 decrease at First Tuesday Mall in Carrollton,
Georgia.

Interest income was $113,248 in 1998 compared to $209,113 in
1997, a decrease of 46% due a lower balance of funds available
for investment.

Property expenses before depreciation were $1,634,237 in 1998
compared to $1,705,298 in 1997, representing 31% of rental income
for 1998 and 36% of rental income for 1997. Real estate taxes
decreased by 8% as all properties experienced a reduction in
property taxes. Repairs and maintenance expenses decreased by
$102,978 or 19% due to tenant improvements made in 1997. Other
property expenses increased by $66,132 or 43% primarily due to an
increase in lease commissions, particularly at First Tuesday
where unamortized lease commissions pertaining to Luria's, a
former tenant, were written off in 1998.

Interest expense declined by $68,306 from 1997 to 1998 due to the
normal amortization of mortgage loans payable and due to the
underlying mortgage loan on College Square, which was assigned in
December 1997. Other administrative expenses increased by
$128,517 in 1998 primarily due to legal fees in connection with
the Trust's efforts to maximize shareholder value. As previously
reported, the Board of Trustees has been exploring various
strategic alternatives with the intent to maximize shareholder
value. Raymond James & Associates, Inc. has been engaged as
financial advisor to assist the Trust with these ongoing efforts.

Cash Flow and Funds from Operations

The Trust has for several years used "funds from operations" as a
measurement of operating performance. Funds from operations is
defined by the Trust as earnings from operations plus
depreciation expense. Funds from operations does not represent
operating income or cash flows from operations as defined by
accounting principles generally accepted in the United States,
and should not be construed as an alternative to operating income
as an indicator of operating performance or to cash flows as a
measure of liquidity. Management generally considers funds from
operations to be a useful financial performance measure which,
together with earnings, cash flows and other information, may be
used by investors to evaluate the Trust. Funds from operations
as presented by the Trust may not be comparable to similarly
titled measures reported by other companies. The Trust's funds
from operations for the three years ended December 31, 1999 and
other property information are presented on the next page.

Sale of Assets

Net Leased
Yamaha Warehouse, Cudahy, Wisconsin 140,040 2000 140,040

Total 678,949 211,824
</TABLE>
<TABLE>
<S> <C> <C> <C>

Funds from operations*
Name and Location 1999 1998 1997
Managed
Kingsley Square, Orange Park, Florida $ 309,825 456,334 211,012
First Tuesday Mall, Carrollton, Georgia 533,326 443,774 594,006
Mendenhall Commons, Memphis, Tennessee 406,496 256,895 320,796
North Park Plaza, Phoenix, Arizona 446,147 337,055 273,077
Presidential Drive Business Park, Atlanta, Georgia 250,888 153,081 124,227
1,946,682 1,647,139 1,523,118

Net Leased
Yamaha Warehouse, Cudahy, Wisconsin 226,245 217,383 208,134

Total 2,172,927 1,864,522 1,731,252
Properties sold (27,867) 334,837 (58,464)
Non-property Trust operations, net (425,133) (424,052) (229,326)

Funds from operations $1,719,927 1,775,307 1,443,462

*Earnings from operations plus depreciation
</TABLE>

Liquidity and Capital Resources

The Trust's capital resources consist of its current equity in
real estate investments. The Trust maintains its properties in
good condition and provides adequate insurance coverage.
Liquidity is represented by cash and cash equivalents ($2,369,176
at December 31, 1999) and the continued operation of the Trust's
real estate portfolio. This liquidity is considered sufficient
to meet current obligations, which include capital expenditures.

Net cash provided by operating activities, as shown in the
Statements of Cash Flows, was $1,810,891 for the year ended
December 31, 1999. Major applications of cash in 1999 included
$1,241,600 for distributions to shareholders and $1,538,507 in
principal payments on mortgage loans payable. The Trust's debt
service commitments for mortgage loans payable are described in
Note 7 to the Financial Statements.

On February 1, 1999, the Trust prepaid the mortgage loan on
Presidential Drive Business Park. The prepayment amount,
including a 1% prepayment fee of $7,065 to the lender, was
$713,548. On February 5, 1999, the Trust prepaid the mortgage
loan on First Tuesday Mall. The prepayment amount, including a
1% prepayment fee of $4,637 to the lender, was $468,281.

The Board of Trustees continues to monitor occupancy, leasing
activity, cash flow, overall Trust operations, liquidity, and
financial condition in determining quarterly distributions to
shareholders. In January 2000, the Board of Trustees suspended
quarterly distributions pending the sale of assets to AEGON
Advisors.

Inflation

Low to moderate levels of inflation during the past few years
have favorably impacted the Company's operation by stabilizing
operating expenses. At the same time, low inflation has the
indirect effect of reducing the Company's ability to increase
tenant rents. The Trust's properties have tenants whose leases
include expense reimbursements and other provisions to minimize
the effect of inflation. These factors, in the long run, are
expected to result in more attractive returns from the Trust's
real estate portfolio compared to short-term investment vehicles.

Impact of Year 2000

The Trust does not own or use any information technology
directly, because all services necessary to conduct the day-to-
day operations of the Trust are performed by AEGON Advisors and
its affiliates. In late 1999, AEGON Advisors completed its
remediation and testing of systems. As a result of AEGON
Advisors' planning and implementation efforts, the Trust
experienced no significant disruptions in mission critical
information technology and non-information technology systems,
and believes those systems successfully responded to the Year
2000 date change. In addition, the Trust has not been adversely
affected by computer systems, as well as certain embedded
technology, used by tenants, vendors, financial institutions and
other third parties as a result of systems not properly
processing or calculating date-related information and data from
and after January 1, 2000. The Trust did not incur any direct
costs associated with Year 2000 issues.

Forward Looking Information

This Form 10-K Annual Report contains "forward-looking
statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking
statements represent our expectations or beliefs relating to
anticipated financial performance, business prospects and our
plans for future operations, which are subject to various risks
and uncertainties. When used in this Form 10-K and in future
filings by the Trust with the Securities and Exchange Commission,
in our press releases, presentations to securities analysts or
investors, in oral statements made by or with the approval of an
executive officer of the Trust, the words or phrases "believes,"
"may," "will," "expects," "should," "continue," "anticipates,"
"intends," "will likely result," "estimates," "projects," or
similar expressions and variations thereof are intended to
identify such forward-looking statements. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for these
types of statements. In order to comply with the terms of the
safe harbor, the Trust notes that a variety of factors could
cause the Trust's actual results and experiences to differ
materially from the anticipated results or other expectations
expressed in the Trust's forward-looking statements. The risks
and uncertainties that may affect the operations, performance,
and results of the Trust's business, in addition to those
identified under "Impact of Year 2000" and "Sale of Assets"
include but are not limited to the following:

* The Trust's ability to renew expiring tenant leases and
obtain new leases at competitive rental rates.

* Changes in interest rates which will affect the amount of
interest paid on mortgage loans.

* The Trust's ability to refinance mortgage loans which
require balloon payments.

* The ability to complete the anticipated sale of real
estate assets to AEGON Advisors.

Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.

The primary market risk facing the Trust is interest rate risk on
its mortgage loans payable. The Trust does not hedge interest
rate risk using financial instruments nor is the Trust subject to
foreign currency risk.

The following table sets forth the Trust's long term debt
obligations, principal cash flows by scheduled maturity, weighted
average interest rates and estimated fair market value ("FMV") at
December 31, 1999:

<TABLE>
<S> <C> <C> <C> <C> <C>
For the Year ended December 31,

2000 2001 2002 Total FMV
Long Term Debt:
Fixed Rate $ 169,083 $1,438,920 $2,015 $1,610,018 $1,652,733
Variable Rate $7,749,408 --- --- $7,749,408 $7,762,119
Average Interest Rate 9.08% 10.00% 10.00% 10.00%
</TABLE>

The fair value of the Trust's mortgage loans payable is estimated
based on the discounting of future cash flows at interest rates
that management believes reflects the risks associated with
mortgage loans payable at similar risk and duration.

Item 8. Financial Statements and Supplementary Data
<TABLE>
Balance Sheets
<S> <C> <C>

December 31
1999 1998

Assets
Real estate
Land $ 9,189,243 9,189,243
Buildings and improvements 25,428,467 25,319,279
34,617,710 34,508,522
Less accumulated depreciation (11,350,214) (10,691,663)
23,267,496 23,816,859

Cash and cash equivalents 2,369,176 3,423,296
Rents and other receivables 499,810 397,822
Prepaid and deferred expenses 243,659 275,653
Taxes held in escrow --- 18,863
$26,380,141 27,932,493

Liabilities and Shareholders' Equity
Liabilities
Mortgage loans payable $ 9,359,426 10,897,933
Accounts payable and accrued expenses 665,387 418,204
Due to affiliates 31,935 115,722
Distribution declared --- 310,400
Tenant deposits 86,259 78,701
Other 6,353 10,928
10,149,360 11,831,888

Shareholders' Equity
Shares of beneficial interest, $1 par value,
20,000,000 shares authorized, 3,880,000
shares issued and outstanding 3,880,000 3,880,000
Additional paid-in capital, net of cumulative
distributions in excess of earnings
of $16,411,501 in 1999 and 1998 11,989,948 11,989,948
Undistributed net earnings 360,833 230,657
16,230,781 16,100,605
$26,380,141 27,932,493

See the accompanying notes to financial statements.
</TABLE>

<TABLE>
Statements of Earnings
<S> <C> <C> <C>

Years Ended December 31,

1999 1998 1997
Revenue
Rents $4,441,073 5,218,707 4,802,974
Interest 140,095 113,248 209,113
4,581,168 5,331,955 5,012,087
Expenses
Property expenses:
Real estate taxes 478,570 561,818 610,322
Repairs and maintenance 507,444 446,787 549,765
Utilities 112,716 113,939 122,754
Management fee 203,500 241,877 221,935
Insurance 29,884 50,299 47,137
Other 129,620 219,517 153,385
Property expenses, excluding depreciation 1,461,734 1,634,237 1,705,298
Depreciation 658,551 831,332 806,333
Total property expenses 2,120,285 2,465,569 2,511,631
Interest 834,280 1,375,031 1,443,337
Administrative fee 173,831 204,587 205,714
Other administrative 391,396 342,793 214,276
3,519,792 4,387,980 4,374,958

Earnings from operations 1,061,376 943,975 637,129

Net gain on sale of property --- 528,282 259,157

Net earnings $1,061,376 1,472,257 896,286

Basic and diluted net earnings per share $ .27 .38 .23

Distributions to shareholders $ 931,200 1,241,600 1,241,600

Distributions to shareholders per share $ .24 .32 .32

See the accompanying notes to financial statements.
</TABLE>

<TABLE>
Statements of Cash Flows
<S> <C> <C> <C>

Years Ended December 31,
1999 1998 1997
Cash flows from operating activities:
Rents collected $4,331,090 5,219,180 4,825,238
Interest received 140,095 113,248 216,650
Payments for operating expenses (1,829,379) (2,139,822) (2,283,645)
Interest paid (830,915) (1,371,666) (1,439,972)
Net cash provided by operating activities 1,810,891 1,820,940 1,318,271

Cash flows from investing activities:
Proceeds from property sales, net of closing costs --- 4,479,835 ---
Capital expenditures (109,188) (28,280) (1,010,937)
Principal collections on mortgage loans receivable --- --- 28,094
Principal repayment on mortgage loans receivable --- --- 1,298,008
Other, net 24,284 28,625 (34,135)
Net cash provided (used) by investing activities (84,904) 4,480,180 281,030

Cash flows from financing activities:
Principal portion of scheduled mortgage loan payments (368,380) (438,861) (484,914)
Principal prepayment on mortgage loans payable (1,170,127) (2,803,790) ---
Distributions paid to shareholders (1,241,600) (1,241,600) (1,241,600)
Net cash used by financing activities (2,780,107) (4,484,251) (1,726,514)

Net increase (decrease) in cash and cash equivalents (1,054,120) 1,816,869 (127,213)
Cash and cash equivalents at beginning of year 3,423,296 1,606,427 1,733,640
Cash and cash equivalents at end of year $2,369,176 3,423,296 1,606,427

Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings $1,061,376 1,472,257 896,286
Gain on sale of property --- (528,282) (259,157)
Earnings from operations 1,061,376 943,975 637,129
Add (deduct) reconciling adjustments:
Depreciation 658,551 831,332 806,333
Amortization 3,365 3,365 3,365
Decrease (increase) in rents and other receivables (105,408) 33,823 26,608
Decrease (increase) in prepaid and deferred expenses 15,323 32,106 (80,011)
Decrease (increase) in taxes held in escrow 18,863 134,153 (6,145)
Increase (decrease) in accounts payable and accrued expenses 247,183 (142,713) (123,228)
Increase (decrease) in due to affiliates (83,787) 18,249 51,027
Increase (decrease) in advance rents (4,575) (33,350) 3,193
Net cash provided by operating activities $1,810,891 1,820,940 1,318,271

See the accompanying notes to financial statements.
</TABLE>
<TABLE>
Statements of Shareholders' Equity
<S> <C> <C> <C> <C>

Years Ended December 31, 1999, 1998 and 1997
Shares of Additional Undistributed Total
Beneficial Paid-In Net Shareholders'
Interest Capital Earnings Equity

Balance at January 1, 1997 $3,880,000 12,018,890 316,372 16,215,262
Net earnings --- --- 896,286 896,286
Distributions to shareholders --- (28,942) (1,212,658) (1,241,600)

Balance at December 31, 1997 $3,880,000 11,989,948 --- 15,869,948
Net earnings --- --- 1,472,257 1,472,257
Distribution to Shareholders --- --- (1,241,600) (1,241,600)

Balance at December 31, 1998 $3,880,000 11,989,948 230,657 16,100,605
Net earnings --- --- 1,061,376 1,061,376
Distribution to Shareholders --- --- (931,200) (931,200)
Balance at December 31, 1999 $3,880,000 11,989,948 360,833 16,230,781

See the accompanying notes to financial statements.
</TABLE>

Notes to Financial Statements

1. Accounting Policies

The Trust is predominantly in the business of investing in real
estate. Investments in real estate are stated at cost. The
Trust provides an allowance for valuation of real estate when it
is determined that the values have permanently declined below
recorded book value.

The Trust records impairment losses when indicators of impairment
are present and the undiscounted cash flows estimated to be
generated by the real estate are less than their carrying amount.
If real estate is considered to be impaired, its carrying amount
is written down to fair value and recognized as a net loss on
property in the statement of earnings.

Expenditures for repairs and maintenance which do not add to the
value or extend the useful life of property are expensed when
incurred. Additions to existing properties, including
replacements, improvements and expenditures which do add to the
value or extend the useful life of property, are capitalized.
Depreciation is calculated using the straight-line method over
the estimated useful lives of the respective assets.

The Trust follows the operating method of accounting for leases,
whereby scheduled rental income is recognized on a straight-line
basis over the lease term. Contingent rental income is recognized
in the period in which it arises. Interest on mortgage loans
receivable and amortization of discounts are recognized as income
over the period the respective loans are outstanding. The Trust
provides for possible losses on mortgage loans, rents and other
receivables when it is determined that collection of such
receivables is doubtful. Rents and other receivables are stated
net of an allowance for uncollectible accounts of $185,494 in
1999 and $224,938 in 1998. Cash equivalents include investments
with original maturities of three months or less.

Gains on real estate sales are recognized for financial
accounting purposes in accordance with Statement of Financial
Accounting Standard No. 66, Accounting for Sales of Real Estate.
Deferred gains are recognized as income using the installment
method.

Since the Trust has no potentially dilutive securities
outstanding, basic and diluted net earnings per share in
accordance with Statement of Financial Accounting Standard No.
128, Earnings per Share, are the same.

During 1997, the Financial Accounting Standards Board issued
Statement No. 131, Disclosures about Segments of an Enterprise
and Related Information. Statement No. 131 establishes standards
for reporting information about operating segments, products and
markets. Generally, Statement No. 131 requires financial
information to be reported on the basis on which it is used
internally for evaluating segment performance and deciding how to
allocate resources to segments. The Statement, which was
required to be adopted by the Trust during 1998, had no impact on
the financial statements as the Trust has only one operating
segment, which involves the direct ownership of commercial real
estate properties substantially on a managed basis.

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. The actual results of the Trust could differ as a result
of those estimates.

2. Fair Values of Financial Instruments

Statement of Financial Accounting Standard No. 107, Disclosures
about Fair Value of Financial Instruments, requires disclosure of
fair value information about financial instruments.

The following methods and assumptions were used by the Trust in
estimating its fair value disclosures for financial instruments.

Cash and cash equivalents: The carrying amounts of cash and cash
equivalents approximates their fair values.

Mortgage loans payable: The fair values of mortgage loans payable
are estimated utilizing discounted cash flow analysis, using
interest rates reflective of current market conditions and the
risk characteristics of the loans.

The following sets forth a comparison of the fair values and
carrying values of the Trust's financial instruments subject to
the provisions of Statement of Financial Accounting Standard No.
107:

1999 1998
Carrying Carrying
Value Fair Value Value Fair Value
Assets
Cash and cash equivalents $2,369,176 2,369,176 3,423,296 3,423,296

Liabilities
Mortgage loans payable $9,359,426 9,414,852 10,897,933 11,265,751

3. Real Estate

Investments in real estate consist entirely of managed and net
leased commercial property. Information regarding the Trust's
investment in each property is presented in the Schedule of Real
Estate and Accumulated Depreciation below.
<TABLE>
Schedule of Real Estate and Accumulated Depreciation
<S> <C> <C> <C> <C>

Initial Cost to Trust

Amount of Buildings & Subsequent Cost
Property Description Encumbrance Land Improvements Capitalized

Managed
Kingsley Square $ 223,171 450,000 3,311,660 1,982,098
Orange Park, FL

First Tuesday Mall ---- 595,000 4,347,697 2,241,360
Carrollton, GA

Mendenhall Commons 3,867,315 3,134,692 5,597,340 63,000
Memphis, TN

North Park Plaza 3,882,094 4,635,147 4,018,353 26,830
Phoenix, AZ

Presidential Drive ---- 344,582 1,424,300 247,714
Atlanta, GA
7,972,580 9,159,421 18,699,350 4,561,002

Net Leased
Yamaha Warehouse 1,386,846 26,195 755,756 1,415,986
Cudahy, WI

Total $9,359,426 9,185,616 19,455,106 5,976,988
</TABLE>

Life on Which
Depreciation
Buildings & Accumulated Date Date is computed
Property Description Land Improvements Total Depreciation Built Acquired (in years)

Managed
Kingsley Square $ 450,000 5,293,758 5,743,758 2,734,366 1975-76 7/79 10-40
Orange Park, FL

First Tuesday Mall 600,392 6,583,665 7,184,057 3,839,951 1975-78 7/79 10-40
Carrollton, GA

Mendenhall Commons 3,134,692 5,660,340 8,795,032 1,533,865 1987 2/89 10-40
Memphis, TN

North Park Plaza 4,633,382 4,046,948 8,680,330 1,091,233 1963 2/89 10-40
Phoenix, AZ

Presidential Drive 344,582 1,672,014 2,016,596 694,533 1980 12/84 10-35
Atlanta, GA
9,163,048 23,256,725 32,419,773 9,893,948

Net Leased
Yamaha Warehouse 26,195 2,171,742 2,197,937 1,456,266 1971 2/72 15-40
Cudahy, WI

Total $9,189,243 25,428,467 34,617,710 11,350,214

The above properties are all shopping centers except for Presidential Drive
which is a business park and Yamaha Warehouse which is an office/warehouse.
</TABLE>

The activity in real estate and related depreciation for the three years ended
December 31, 1999 is summarized in the table below.
<TABLE>
<S> <C> <C> <C>
Real Estate Years Ended December 31,
1999 1998 1997
Cost
Beginning of year $34,508,522 40,694,216 39,683,279
Additions during year
Improvements 109,188 28,280 1,010,937
Deductions during year
Property sales --- (6,213,974) ---

End of year $34,617,710* 34,508,522 40,694,216

Accumulated Depreciation
Beginning of year $10,691,663 12,122,752 11,316,419
Additions during year
Depreciation expense 658,551 831,332 806,333
Deductions during year
Property sales --- (2,262,421) ---

End of year $11,350,214 10,691,663 12,122,752

*The aggregate cost for federal income tax purposes is $34,751,420.
</TABLE>

Wholly owned managed properties with an aggregate cost of
$32,419,773 are leased to tenants pursuant to lease agreements
under which the Trust incurs normal real estate operating
expenses associated with ownership. Yamaha Warehouse, a wholly-
owned property with an aggregate cost of $2,197,937 is leased
under a net lease agreement which requires the lessee to pay cash
rental, property taxes and other expenses incurred in connection
with the operation of the property.

In 1999, the Trust incurred capital expenditures of $109,188.
The improvements consisted of $93,714 for tenant build-outs at
Presidential Drive Business Park and $15,474 for roof repairs at
First Tuesday Mall. In 1998, the Trust incurred capital
expenditures of $28,280 for parking lot improvements at First
Tuesday Mall.

On December 22, 1998, the Trust sold Geneva Square, a 143,676
square foot shopping center located in Lake Geneva, Wisconsin.
The sale price was $4,500,000 from which the Trust paid selling
expenses of $20,165 and retired mortgage indebtedness on the
property of $2,803,790. Gain on the sale was $528,282.

4. Mortgage Loans Receivable

Mortgage loans receivable consisted of notes received from
financing property sales and were secured by the properties sold,
subject to any underlying mortgage loans payable. The Trust
received mortgage loans receivable of $1,650,000 as part of the
consideration for the sales of Hickory Hills and College Square
in 1990 and retained a mortgage payable on the property.
Accordingly, the gain on this sale was deferred. The mortgage
loans receivable matured on December 20, 1997 and had yielded
9.5% to the Trust. Upon maturity of these mortgage loans
receivable, the Trust assigned the underlying mortgage loan
payable on College Square to the mortgagee. As a result of the
assignment, the proceeds from the College Square mortgage loan
receivable were reduced by the outstanding mortgage loan payable
of $193,981.

The activity in mortgage loans receivable for the year ended
December 31, 1997 (there was no activity in 1998 or 1999) is
summarized in the table below.

Mortgage Loans Receivable
December 31,
1997
Principal

Beginning of year $1,520,083
Deductions during year
Principal collections (28,094)
Principal repayment (1,491,989)

Balance at end of year $ ---

5. Cash and Cash Equivalents

At December 31, 1999, cash and cash equivalents consisted of cash
of $1,333 and a money market fund of $2,367,843. At December 31,
1998, cash and cash equivalents consisted of cash of $548 and a
money market fund of $3,422,748.

6. Transactions With Affiliates

The Trust has contracted with AEGON USA Realty Advisors, Inc.
("AEGON Advisors") to provide administrative services for a base
fee of 5/8% of the average gross real estate investment plus 1/4%
of the monthly balance of mortgage loans receivable and an
incentive fee of 20% of annual adjusted cash flow from operations
in excess of $.72 per share. If the annual adjusted cash flow
from operations is less than $.72 per share, then the payment of
so much of the base fee is to be deferred so that revised cash
flow from operations will be equal to $.72 per share; provided,
however, in no event shall the amount deferred exceed 20% of the
previously determined base fee. Any deferred fees may be paid in
subsequent years (subject to certain limits). Annual adjusted
cash flow from operations, as defined for purposes of the
incentive fee, includes the net realized gain (or loss) from the
disposition of property, adjusted to exclude accumulated
depreciation (otherwise stated as gain in excess of cost without
reduction for allowable depreciation). The administrative fee is
limited to 1 1/2% of average quarterly net invested assets. The
administrative agreement is for a one-year term, automatically
renewed annually and cancelable by either party upon 90 days
written notice. Amounts paid to AEGON Advisors for
administrative services were: $173,831 for 1999, $204,587 for
1998, and $205,714 for 1997. No incentive fees were paid in
1999, 1998 or 1997.

AEGON Advisors also provides real estate acquisition and
disposition services for the Trust. A negotiated fee of 2% to 4%
of the cost is charged for properties acquired. No separate fee
is charged for property dispositions. There were no acquisition
fees paid in 1999, 1998 or 1997.

AEGON USA Realty Management, Inc. ("AEGON Realty Management"), a
wholly-owned subsidiary of AEGON Advisors, provided property
management services to the Trust for a fee of 5% of the gross
income of each managed property. The property management
agreement is for a one-year term, automatically renewed annually
and cancelable upon a 30-day written notice from either party. On
December 31, 1998, AEGON Realty Management was merged with and
into AEGON Advisors and the property management agreement was
assumed by AEGON Advisors. Amounts paid for property management
services were $203,500 for 1999, $241,877 for 1998, and $221,935
for 1997.

AEGON Advisors previously provided dividend disbursement, stock
certificate preparation, recordkeeping and other shareholder
services to the Company for a quarterly fee of $1.25 per
shareholder account, $.75 per shareholder account for
distributions processed, $.50 per shareholder account for proxy
tabulation, and such other compensation for services performed as
from time to time agreed to by the parties. The Trust paid AEGON
Advisors $21,376 and $21,658 in shareholder service fees for 1998
and 1997, respectively. AEGON Advisors had subcontracted with
Boston EquiServe, L.P., a subsidiary of State Street Bank and
Trust Company, for delivery of these services. Effective January
1, 1999, the Trust contracted directly with Boston EquiServe,
L.P. and terminated the agreement with AEGON Advisors.

The mortgage loan on the Trust's Presidential Drive property was
with AUSA Life Insurance Company, Inc., an affiliate of AEGON
Advisors. Interest paid on the mortgage was $13,124 in 1999,
$74,575 in 1998, and $77,779 in 1997. This mortgage loan was
prepaid on February 1, 1999. (See Note 7.) In addition, the
mortgage loan on Geneva Square was with PFL Life Insurance
Company, an affiliate of AEGON Advisors. Interest paid on the
mortgage was $228,562 in 1998 and $235,842 in 1997. Geneva Square
was sold in December 1998.

On March 1, 1999, the mortgage loans on Mendenhall Commons and
North Park Plaza matured at which time the Trust obtained
financing from Monumental Life Insurance Company ("Monumental"),
an affiliate of AEGON Advisors, for these properties. (See Note
7.) Interest paid on the mortgage loans was $229,163 in 1999 for
Mendenhall Commons and $230,039 in 1999 for North Park Plaza.

On January 20, 2000, the Trust entered into a Real Estate Sale
and Purchase Contract to sell all of the real estate assets of
the Trust to AEGON Advisors for a total purchase price of
$33,500,000. (See Note 11.)

AEGON Advisors is an indirect wholly-owned subsidiary of AEGON
USA, Inc. which, through other wholly-owned subsidiaries,
beneficially owns approximately 30.86% of the outstanding shares
of the Trust at December 31, 1999.

7. Mortgage Loans Payable

Mortgage loan obligations, secured by the real estate owned,
carry annual interest rates ranging from 8.115% to 10.125%.

On February 1, 1999, the Trust prepaid the mortgage loan on
Presidential Drive Business Park. The prepayment amount,
including a 1% prepayment fee of $7,065 to the lender, was
$713,548. The annual debt service on this mortgage was $107,604,
including interest at 10.25%. On February 5, 1999, the Trust
prepaid the mortgage loan on First Tuesday Mall. The prepayment
amount, including a 1% prepayment fee of $4,637 to the lender,
was $468,281. The annual debt service on this mortgage was
$115,128, including interest at 9.25%.

On March 1, 1999, the mortgage loans on Mendenhall Commons and
North Park Plaza matured, requiring principal repayments of
$3,930,120 and $3,944,537, respectively. On March 15, 1999, the
Trust refinanced these mortgage loans with Monumental. The loan
amount for Mendenhall Commons was $3,925,000 with monthly debt
service of $30,430. The loan amount for North Park Plaza was
$3,940,000 with monthly debt service of $30,547. Information
regarding each mortgage is presented in the Schedule of Mortgage
Loans on Real Estate below.
<TABLE>
Schedule of Mortgage Loans on Real Estate
<S> <C> <C> <C> <C> <C> <S>

Stated Final Annual Balloon
Date Interest Maturity Principal Payment at Prepayment Penalty
Property Description of Note Rate Date and Interest Maturity Provisions*

Managed
Kingsley Square 2/77 10% 2/02 $ 76,370 $ --- Feb. 99 to Feb. 00 penalty is
Orange Park, FL 5.0%, declining .5% per year
thereafter

8/75 10% 8/00 163,650 --- 5.0%

Mendenhall Commons 3/99 8.115% *** 3/00 ** 365,166 3,858,737 None
Memphis, TN

North Park Plaza 3/99 8.115% *** 3/00 ** 366,561 3,873,483 None
Phoenix, AZ
971,747 7,732,220

Net Leased
Yamaha Warehouse 12/90 10.125% 1/01 159,627 1,366,721 Excess of loan rate over
Cudahy, WI U.S. Treasury Bill rate

$1,131,374 $9,098,941

* Percentages are of the principal amount at time ofprepayment.
** Loan extended through May 1, 2000 under original terms.
*** Variable loan rate adjusted quarterly equal to 3 month LIBOR plus 2%.
</TABLE>

Face Amount Carrying Amount
of Mortgage of Mortgage
Property Description at Acquisition Dec. 31, 1999
Managed
Kingsley Square $ 700,000 $ 139,568
Orange Park, FL
(two loans)
1,500,000 83,603

Mendenhall Commons 3,925,000 3,867,315
Memphis, TN

North Park Plaza 3,940,000 3,882,094
Phoenix, AZ
10,065,000 7,972,580

Net Leased
Yamaha Warehouse 1,500,000 1,386,846
Cudahy, WI

$11,565,000 $9,359,426

The activity in mortgage loans payable for the three years ended
December 31, 1999 is summarized in the table below.
<TABLE>
Mortgage Loans Payable
<S> <C> <C> <C>

Years Ended December 31,
1999 1998 1997

Principal
Beginning of year $10,897,933 14,140,584 14,819,479
Additions during year
New mortgage loans on refinancing 7,865,000 --- ---
Deductions during year
Principal payments (368,380) (438,861) (484,914)
Prepayments and maturities (9,035,127) (2,803,790) (193,981)

Balance at end of year $9,359,426 10,897,933 14,140,584
</TABLE>

Scheduled monthly payments will substantially amortize the
principal balances of the mortgage loans over their respective
terms with the exception of balloon payments at maturity.
Amortized payments on the outstanding balances due, including
balloon repayments at maturity, are summarized as follows:

Amortized Payments
Year Payments at Maturity

2000 $186,271 $7,732,220
2001 72,199 1,366,721
2002 2,015

8. Leased Assets

The Trust is lessor of various properties as described in Note 3.
Certain properties are leased to tenants under long-term, non-
cancelable operating lease agreements. Future minimum lease
rentals to be received under the terms of these lease agreements
are as follows:

Year Amount

2000 $3,053,873
2001 2,550,264
2002 2,185,604
2003 2,089,728
2004 1,641,237
2005-2018 10,732,689

Contingent rentals included in income received in connection with
operating leases were $38,268, $136,446, and $134,343 for the
years ended December 31, 1999, 1998 and 1997, respectively. Such
rentals are based principally on tenant sales in excess of
stipulated minimums. In 1999, 1998, and 1997, the Trust derived
10% or more of its revenue from Kroger Company at Mendenhall
Commons and from Safeway at North Park Plaza. The revenue from
these tenants was $638,501 and $739,592 in 1999, $644,083 and
$625,034 in 1998, and $587,097 and $581,028 in 1997,
respectively.

In April 1999, Publix Supermarkets closed its store at Kingsley
Square. When Publix vacated, Office Max exercised its right
under the terms of its lease to go to percentage rents.

9. Federal Income Taxes

The Trust conducts its operations so as to qualify as a real
estate investment trust under the Internal Revenue Code which
requires, among other things, that at least 95% of the Trust's
taxable income be distributed to shareholders. The Trust has
historically distributed all of its taxable income.
Distributions made in 1999 were used to meet the Internal Revenue
Code distribution requirements for 1999. Accordingly, no
provision has been made for federal income taxes since the Trust
did not have taxable income after the deductions allowed for
distributions to shareholders.

Certain property acquisitions have resulted in the basis of those
properties being determined differently for financial accounting
purposes than for income tax purposes. The differing methods of
determination of basis in these transactions have resulted in the
tax basis of certain properties being higher or lower than the
financial basis. At December 31, 1999 the tax basis of real
estate was $133,710 in excess of the financial basis.

10. Legal Proceedings

The Trust is not a party to any pending legal proceedings which,
in the opinion of management, are material to the Trust's
financial position.

11. Subsequent Event

12. Selected Quarterly Financial Data (Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Quarter Ended Year Ended
Year 3/31 6/30 9/30 12/31 12/31
1999

Revenue $1,235,691 1,145,054 1,089,484 1,110,939 4,581,168
Earnings from operations $ 359,078 286,357 258,682 157,259(1) 1,061,376
Net gain on sale of property --- --- --- --- ---
Net earnings $ 359,078 286,357 258,682 157,259(1) 1,061,376
Basic and diluted net
earnings per share $ .09 .07 .07 .04 .27

1998

Revenue $1,622,786(2) 1,266,703 1,230,616 1,211,850 5,331,955
Earnings from operations $ 512,257 108,264 112,875 210,579 943,975
Net gain on sale of property --- --- --- 528,282 528,282
Net earnings $ 512,257(2) 108,264 112,875 738,861 1,472,257
Basic and diluted net
earnings per share $ .13 .03 .03 .19 .38

1997

Revenue $1,277,422 1,236,318 1,250,455 1,247,892 5,012,087
Earnings from operations $ 163,220 166,302 66,105 241,502 637,129
Net gain on sale of property --- --- --- 259,157 259,157
Net earnings $ 163,220 166,302 66,105 500,659 896,286
Basic and diluted net
earnings per share $ .04 .04 .02 .13 .23
</TABLE>

(1) Administrative expenses for the fourth quarter of 1999
included $100,000 due to the fairness opinion related to the
potential sale of the Trust's real estate assets to AEGON
Advisors.

(2) Revenues and net income for the first quarter of 1998
included a final settlement of $248,000 for a claim as an
unsecured creditor under a Chapter 11 reorganization plan and an
$85,000 settlement for the termination of a lease by a tenant in
1997.

Report of Independent Auditors

The Board of Trustees and Shareholders
USP Real Estate Investment Trust

We have audited the accompanying balance sheets of USP Real
Estate Investment Trust as of December 31, 1999 and 1998, and the
related statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of
the Trust's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of USP Real Estate Investment Trust at December 31, 1999 and
1998, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the
United States.

/s/ Ernst & Young LLP

Des Moines, Iowa
February 25, 2000

Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure

None.

Part III

Item 10. Directors and Executive Officers of the Registrant

Information About Directors (referred to herein as "Trustees")

Certain information about the Trustees appears below. (See "Item
13. Certain Relationships and Related Transactions" for a
description of the Trust's relationship with AEGON USA Realty
Advisors, Inc. and other subsidiaries of AEGON USA, Inc.)

PATRICK E. FALCONIO, age 58, has served as a Trustee and Chairman
of the Board since 1988. He retired on February 1, 1999 as an
Executive Vice President of AEGON USA, Inc. (insurance and
financial services), Cedar Rapids, Iowa, where he had been
employed since 1987. He was also a Director of AEGON USA Realty
Advisors, Inc. and various other subsidiaries of AEGON USA, Inc.
until his retirement.

EDWIN L. INGRAHAM, age 73, has served as a Trustee of the Trust
since 1984, and as Vice Chairman of the Board of Trustees since
1990. He retired in 1988 as Executive Vice President, Treasurer
and Chief Investment Officer of AEGON USA, Inc., where he had
been employed since 1982. Mr. Ingraham is a member of the Audit
Committee.

SAMUEL L. KAPLAN, age 63, has served as a Trustee of the Trust
since 1983. He has been engaged in the practice of law in
Minneapolis, Minnesota as a member of the firm of Kaplan,
Strangis and Kaplan, P.A. since 1978. Mr. Kaplan is a member of
the Audit Committee.

RICHARD M. OSBORNE, age 54, has served as a Trustee of the Trust
since January 1999. He is President and Chief Executive Officer
of OsAir, Inc., a company he founded in 1963. OsAir, Inc. is a
manufacturer of industrial gases for pipeline delivery and a real
property developer. Mr. Osborne is the sole Manager of Turkey
Vulture Fund XIII, Ltd. which acquires, holds, sells or otherwise
invests in all types of securities and other instruments. Mr.
Osborne is a Director and Chairman of the Board of Liberty Self-
Stor, Inc., a publicly-held real estate investment trust, a
Director of Ceres Group, Inc., a publicly-held insurance holding
company, a Director and Chairman of the Board of Pacific Gateway
Properties, Inc., a publicly-held real estate company and a
Director and Vice Chairman of the Board of GLB Bancorp, Inc., a
bank holding company.

Information About Executive Officers

Certain information about the executive officers of the Trust
appears below. (See "Item 13. Certain Relationships and Related
Transactions" for a description of the Trust's relationship with
AEGON USA Realty Advisors, Inc. and other subsidiaries of AEGON
USA, Inc.)

DAVID L. BLANKENSHIP, age 49, has served as President of the
Trust since 1985. He has been employed by AEGON USA, Inc. since
1977 in various administrative and management positions related
to real estate investment activities and is Chairman of the Board
and President of AEGON USA Realty Advisors, Inc.

MAUREEN DEWALD, age 49, has served as Vice President of the Trust
since 1986 and Secretary since 1985. She has been employed by
AEGON USA, Inc. since 1983 as an attorney for real estate
investment activities and is Senior Vice President, Secretary and
General Counsel of AEGON USA Realty Advisors, Inc.

ALAN F. FLETCHER, age 50, has served as Treasurer of the Trust
since 1986, as Vice President since 1985, as Assistant Secretary
since 1982 and as principal financial officer since 1981. He has
been employed by AEGON USA, Inc. since 1981 in various financial
and administrative positions related to investment activities and
is Senior Vice President and Chief Financial Officer of AEGON USA
Realty Advisors, Inc.

ROGER L. SCHULZ, age 38, has served as Controller and Assistant
Secretary of the Trust since 1995. He has been employed by AEGON
USA, Inc. since 1985 in various accounting and financial
reporting positions related to real estate investment activities
and is Manager - Financial Reporting for AEGON USA Realty
Advisors, Inc.

Item 11. Executive Compensation

During 1999, each Trustee received an annual fee of $6,000 plus
$750 for each regular or special meeting attended, as well as
$400 per day for inspecting properties owned by the Trust and
$400 for attendance at each committee meeting as a member, unless
held in conjunction with a meeting of the Board of Trustees.
Total fees paid to all Trustees as a group were $37,500 for 1999.

The executive officers of the Trust are not employees of the
Trust and receive no cash or deferred compensation in their
capacities as such.

Item 12. Security Ownership of Certain Beneficial Owners and
Management

Security Ownership of Certain Beneficial Owners

The following table sets forth information with respect to each
person and group (as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) known by the Trust to be the
beneficial owner of more than five percent (5%) of the
outstanding shares of the Trust as of March 15, 2000.

Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class

AEGON USA, Inc. (1) 1,197,260 30.86%
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499

Turkey Vulture Fund XIII, Ltd. (2) 561,081 14.46%
c/o Kohrman Jackson & Krantz P.L.L.
1375 East 9th Street
Cleveland, Ohio 44114

(1) AEGON USA, Inc., an Iowa Corporation, is an indirect,
wholly owned subsidiary of AEGON N.V., a holding company
organized under the laws of The Netherlands which is controlled
by Vereninging AEGON, an association organized under the laws of
The Netherlands. AEGON USA, Inc. has sole voting and investment
powers with respect to the above shares.

(2) Turkey Vulture Fund XIII, Ltd. (the "Fund") is an Ohio
limited liability company, of which Richard M. Osborne is the
sole Manager. As sole Manager of the Fund, with sole power to
vote, or to direct the voting of, and the sole power to dispose
or to direct the disposition of, any shares owned by the Fund,
Mr. Osborne may be deemed to beneficially own all of the Shares
of beneficial interest of USP owned by the Fund.

Security Ownership of Management

The following table sets forth the number of shares beneficially
owned as of March 15, 2000 by each Trustee and officer and by all
Trustees and officers as a group (8 persons). Except as
otherwise indicated by footnote, the individuals have direct
ownership of, and sole voting and investment power with respect
to, any shares beneficially owned by them. Under rules adopted
by the Securities and Exchange Commission, transactions in shares
of the Trust are reportable by Trustees and officers on specified
forms, and the Trust is required to disclose any known delinquent
filings. The Trust is not aware of any delinquent filings by its
current trustees and officers, except that Richard Osborne
inadvertently failed to report on a Form 4 Statement of Changes
of Beneficial Ownership of Securities a purchase of 10,000 shares
in December 1998.

Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class

Patrick E. Falconio(1) 2,000 *
Edwin L. Ingraham 1,500 *
Samuel L. Kaplan(2) 10,000 *
Richard M. Osborne(3) 561,081 14.46%
David L. Blankenship(4) 1,199,078 30.90%
Maureen DeWald 0 *
Alan F. Fletcher(5) 2,200 *
Roger L. Schulz 100 *
Trustees, nominees and officers as a group 1,775,959 45.77%

(1) Mr. Falconio may be deemed to be the beneficial owner of
2,000 shares owned by his wife.
(2) Mr. Kaplan is the direct owner of 8,500 shares and may be
deemed to be the beneficial owner of 1,500 shares held in a
profit sharing trust for his account.
(3) Mr. Osborne may be deemed to be the beneficial owner of
561,081 shares beneficially owned by Turkey Vulture Fund, XIII,
Ltd., an Ohio limited liability company, of which Mr. Osborne is
the sole Manager.
(4) Mr. Blankenship may be deemed to be the beneficial
owner of 1,197,260 shares beneficially owned by AEGON USA,
Inc. with respect to which he shares voting and investment
powers (see "Security Ownership of Certain Beneficial
Owners" and "Information About Executive Officers"). Mr.
Blankenship disclaims beneficial ownership of such shares.
He may also be deemed to be the beneficial owner of 1,818
shares held in custodial accounts for his children.
(5) Mr. Fletcher is the direct owner of 600 shares and is
the beneficial owner of 1,600 shares held in an individual
retirement account.

*Such holdings represent less than one percent of the
outstanding Shares.

Item 13. Certain Relationships and Related Transactions.

The Trust has no employees and has contracted with AEGON
Advisors, a subsidiary of AEGON USA, Inc., the Trust's largest
shareholder, to provide administrative, advisory, acquisition,
divestiture, and property management services. Certain officers
of AEGON Advisors serve as non-employee officers of the Trust. A
description of the relationships between AEGON USA, Inc. and its
various subsidiaries and of such subsidiaries' agreements with
the Trust follows. The description of the agreements which
follows is qualified in its entirety by reference to the terms
and provisions of such agreements, copies of which are available
from the Trust's filings with the Securities and Exchange
Commission and from the Trust's Investor Relations department.
(See "Item 12. Security Ownership of Certain Beneficial Owners
and Management" for a description of the relationship between
AEGON USA, Inc. and AEGON N.V.)

Administrative, Advisory and Acquisition Services

AEGON Advisors is a wholly owned subsidiary of AEGON USA, Inc.
AEGON Advisors provides administrative, advisory, acquisition and
divestiture services to the Trust pursuant to an Administrative
Agreement dated January 1, 1984. The term of the Administrative
Agreement is for one (1) year and is automatically renewable each
year for an additional year subject to the right of either party
to cancel the Agreement upon 90 days written notice. The
performance of AEGON Advisors' duties and obligations under the
Administrative Agreement has been guaranteed by AEGON USA, Inc.

Under the Administrative Agreement, AEGON Advisors (a) provides
clerical, administrative and data processing services, office
space, equipment and other general office services necessary for
the Trust's day-to-day operations, (b) provides legal, tax and
accounting services to maintain all necessary books and records
of the Trust and to ensure Trust compliance with all applicable
federal, state and local laws, regulatory reporting requirements
and tax codes, (c) arranges financing for the Trust, including
but not limited to mortgage financing for property acquisition,
(d) obtains property management services for the Trust's
properties and supervises the activities of persons performing
such services, (e) provides monthly reports summarizing the
results of operations and financial conditions of the Trust, (f)
prepares and files all reports to shareholders and regulatory
authorities on behalf of the Trust, (g) prepares and files all
tax returns of the Trust and (h) provides the Trust with property
acquisition and divestiture services.

AEGON Advisors receives fees for its administrative and advisory
services as follows: (a) a base fee, payable monthly, equal to
0.625% per annum of the average monthly gross real estate
investments of the Trust plus 0.25% per annum of the monthly
outstanding principal balance of mortgage loans receivable; and
(b) an incentive fee, payable annually, equal to 20% of the
annual adjusted cash flow from operations in excess of $.72 per
share. If the annual adjusted cash flow from operations is less
than $.72 per share, then the payment of so much of the base fee
is to be deferred so that revised cash flow from operations will
be equal to $.72 per share; provided, however, in no event shall
the amount deferred exceed 20% of the previously determined base
fee. Any deferred fees may be paid in a subsequent year, up to a
maximum of 30% of that year's revised cash flow from operations
in excess of $.72 per share. Annual adjusted cash flow from
operations, as defined for purposes of the incentive fee,
includes the net realized gain (or loss) from the disposition of
property, adjusted to exclude accumulated depreciation (otherwise
stated as gain in excess of cost without reduction for allowable
depreciation). Notwithstanding the foregoing, the combined base
and incentive fees cannot exceed the amount permitted by the
limitation on operating expenses as provided in the Trust's
Declaration of Trust, which limitation is essentially 1.5% of the
Trust's average quarterly invested assets, net of depreciation.
In addition, AEGON Advisors is to be paid a separately negotiated
fee of not less than 2% nor more than 4% of the cost of each
property acquired by the Trust as compensation for acquisition
services furnished by it to the Trust. Administrative fees paid
to AEGON Advisors for 1999 were $173,831. No acquisition fees
were paid in 1999.

Management Services

AEGON Advisors provides management services to the Trust pursuant
to a Property Management Agreement dated July 1, 1981. The term
of the Agreement is for one (1) year and is automatically
renewable each year for an additional year subject to the right
of either party to cancel the Management Agreement upon 30 days
written notice. Under the Management Agreement, AEGON Advisors
is obligated to (a) procure tenants and execute leases with
respect to Trust properties which are not leased under net lease
arrangements (the "Managed Properties"), (b) maintain and repair
(at the Trust's expense) the Managed Properties, (c) maintain
complete and accurate books and records of the operations of the
Managed Properties, (d) maintain the Managed Properties in
accordance with applicable government rules and regulations,
licensing requirements and building codes, (e) collect all rents
and (f) carry (at the Trust's expense) general liability,
accident, fire and other property damage insurance. For these
services, AEGON Advisors receives 5% of the gross income derived
from the operation of the Managed Properties. Management fees
paid to AEGON Advisors for 1999 were $203,500. These services
were previously provided by AEGON USA Realty Management, Inc., a
wholly owned subsidiary of AEGON Advisors, which was merged into
AEGON Advisors in December 1998.

Other

On December 31, 1993, the mortgage loan on the Trust's
Presidential Drive property was acquired from the lender by AUSA
Life Insurance Company, Inc., a wholly-owned subsidiary of AEGON
USA, Inc., as part of a large transaction involving the transfer
of loans and securities. The terms of the mortgage loan remained
the same. On February 1, 1999, the Trust prepaid the mortgage
loan on Presidential Drive Business Park. The prepayment amount,
including a 1% prepayment fee of $7,065 to the lender, was
$713,548. In February 1994, the Trust refinanced the existing
mortgage loan on its Geneva Square property with a new mortgage
loan from PFL Life Insurance Company ("PFL"), a wholly-owned
subsidiary of AEGON USA, Inc. This $3,000,000 loan was obtained
by the Trust on commercially competitive terms at a fixed
interest rate of 8% and a 1% origination fee ($30,000) was paid
to PFL in connection with the loan. The loan matured on March 1,
1996, and the Trust exercised an option to extend the loan for
eight years at 8.30% based on commercially competitive terms
offered for comparable loans by PFL. On December 22, 1998, the
Trust sold Geneva Square and the mortgage balance of $2,803,790
was repaid. On March 1, 1999, the mortgage loans on Mendenhall
Commons and North Park Plaza matured, requiring principal
repayment. On March 15, 1999, the Trust refinanced these
mortgage loans with Monumental Life Insurance Company, a wholly
owned subsidiary of AEGON USA, Inc. The new loans are for a
period of one year, carry an initial interest rate of 7%, and may
be prepaid at any time without penalty. The maximum principal
amount of the Mendenhall Commons and North Park Plaza mortgage
indebtedness outstanding during 1999 was $7,865,000. The Trust
paid $115,592 in principal and $459,202 in interest on such
mortgage indebtedness for 1999.

Sale of Assets

Part IV

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

(a) List of Documents

The following financial statements are included in Item 8:

1. Financial Statements.

Balance Sheets, December 31, 1999 and 1998.
Statements of Earnings, Years Ended December 31, 1999, 1998, and 1997.
Statements of Cash Flows, Years Ended December 31, 1999, 1998, and 1997.
Statements of Shareholders' Equity, Years Ended December 31, 1999, 1998,
and 1997.
Notes to Financial Statements.
Report of Independent Auditors.

2. Financial Statement Schedules.

Financial Statement Schedules. (Included in Notes to Financial Statements)

(III) Schedule of Real Estate and Accumulated Depreciation. Note 3
(IV) Schedule of Mortgage Loans on Real Estate. Note 4

All other schedules have been omitted because they are not
required, or because the required information, where
material, is included in the financial statements or
accompanying notes.

Part IV (continued)

Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K (continued)

(a)List of Documents (continued)

3. Exhibits.

(2) Real Estate Sale and Purchase Contract, dated January 20,
2000, by and between the Trust and AEGON USA Realty Advisors,
Inc. Filed herewith.

(2.1) Plan of Liquidation, adopted by the Board of Trustees
on October 21, 1999. Filed herewith.

(3) Second Amended and Restated Declaration of Trust currently in
effect, dated October 5,1972, as amended December 18, 1972,
March 3, 1975 and April 23, 1984, incorporated herein by
reference to Item 14(a)3, Exhibit (3) of Form 10-K for the
year ended December 31, 1984.

(3.1) By-Laws currently in effect, dated November 19, 1997,
incorporated herein by reference to Item 14(a)3, Exhibit (3.1)
of Form 10-K for the year ended December 31, 1997.

(4) Articles II and III of the Second Amended and Restated
Declaration of Trust currently in effect, dated October 5, 1972,
as amended December 18, 1972, March 3, 1975 and April 23, 1984,
incorporated herein by reference to Item 14(a)3, Exhibit (3) of
Form 10-K for the year ended December 31, 1984.

(10) Administrative Agreement currently in effect, dated January 1,
1984, incorporated herein by reference to Item 5, Exhibit (28)
of Form 8-K dated January 1, 1984.

(10.1) Property Management Agreement currently in effect, dated July 1,
1981, as amended November 4, 1982, incorporated herein by
reference to Item 14(a)3, Exhibit (10) of Form 10-K for the year
ended December 31, 1982.

(10.2) Shareholder Services Agreement, currently in effect, dated
January 1, 1991, as amended January 1, 1992 and assigned
January 28, 1992, incorporated herein by reference to Item 14(a)3,
Exhibit (10.2) of Form 10-K for the year ended December 31, 1991.

(b) No reports on Form 8-K were filed during the fourth quarter of 1999.

(d) There are no required financial statement schedules applicable to
this section.

SIGNATURES

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

USP REAL ESTATE INVESTMENT TRUST

/s/ Patrick E. Falconio /s/ Alan F. Fletcher
Patrick E. Falconio Alan F. Fletcher
Chairman of the Board Vice President and Treasurer
(principal executive officer) (principal financial officer)

/s/ Roger L. Schulz
Roger L. Schulz
Controller
(principal accounting officer)

March 30, 2000

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

/s/ Patrick E. Falconio /s/ Samuel L. Kaplan
Patrick E. Falconio Samuel L. Kaplan
Trustee Trustee

/s/ Edwin L. Ingraham /s/ Richard M. Osborne
Edwin L. Ingraham Richard M. Osborne
Trustee Trustee

March 30, 2000

EXHIBIT INDEX

Exhibit
Item Title or Description

(2) Real Estate Sale and Purchase Contract, dated January 20,
2000, by and between the Trust and AEGON USA Realty Advisors,
Inc. Filed herewith.

(2.1) Plan of Liquidation, adopted by the Board of Trustees on
October 21, 1999. Filed herewith.

(3.1) By-Laws currently in effect, dated November 19, 1997,
incorporated herein by reference to Item 14(a)3, Exhibit (3.1)
of Form 10-K for the year ended December 31, 1997.

(10) Administrative Agreement currently in effect, dated January 1,
1984,incorporated herein by reference to Item 5, Exhibit (28)
of Form 8-K dated January 1, 1984.

(10.1) Property Management Agreement currently in effect, dated
July 1, 1981, as amended November 4, 1982,incorporated herein
by reference to Item 14(a)3, Exhibit (10) of Form 10-K for
the year ended December 31, 1982.

(10.2) Shareholder Services Agreement dated January 1, 1991, as amended
January 1, 1992 and assigned January 28, 1992, incorporated
herein by reference to Item 14(a)3, Exhibit (10.2) of Form 10-K
for the year ended December 31, 1991.

All Exhibit Items are omitted from this report, but a copy will
be furnished upon payment of $33.00, representing a charge of
fifty cents ($.50) per page, accompanying a written request to
Roger L. Schulz, Controller, USP Real Estate Investment Trust,
4333 Edgewood Road N.E., Cedar Rapids, IA 52499.

Exhibit 2

REAL ESTATE SALE AND PURCHASE CONTRACT

THIS CONTRACT ("Contract") is made and entered into as of

the 20th day of January, 2000 (hereinafter referred to as the

date hereof), by and between USP Real Estate Investment Trust, an

Iowa common law business trust (hereinafter referred to as

"Seller"), and AEGON USA Realty Advisors, Inc., an Iowa

corporation (hereinafter referred to as "Purchaser").

The parties hereto agree as follows:

l. Agreement to Purchase and Sell.

A. Seller agrees to sell to Purchaser and Purchaser agrees

to purchase from Seller, subject to the terms and conditions of

this Contract, the six properties (the "Properties") described as

follows:

(i) Kingsley Square Shopping Center located in Orange

Park, Florida, and legally described on Exhibit "A-1" attached

hereto;

(ii) First Tuesday Mall located in Carrollton, Georgia,

and legally described on Exhibit "A-2" attached hereto;

(iii) Mendenhall Commons Shopping Center located in

Memphis, Tennessee, and legally described on Exhibit "A-3"

attached hereto;

(iv) North Park Plaza Shopping Center located in

Phoenix, Arizona, and legally described on Exhibit "A-4" attached

hereto;

(v) Presidential Drive Office Building located in

Atlanta, Georgia, and legally described on Exhibit "A-5" attached

hereto;

(vi) Yamaha Warehouse located in Cudahy, Wisconsin, and

legally described on Exhibit "A-6" attached hereto.

The Properties are being sold together with:

(vii) All buildings, improvements, structures and

fixtures, placed, constructed, installed, or located on the

Properties, together with the parking facilities related thereto,

and all other improvements situated on, over and under the lands

legally described above (the "Improvements");

(viii) All of the furniture, furnishings, fixtures,

fittings, appliances, apparatus, equipment, tools, supplies and

machinery, if any, owned by Seller and located on the Properties

(the "Personal Property");

(ix) Seller's interest as landlord under all leases of

space of and within any part of the Properties, including,

without limitation, any renewals thereof and any options to renew

the same, together with any and all third party guarantees of the

obligations of tenants under such leases (hereinafter referred to

as the "Tenant Leases:");

(x) All contract agreements, if any, affecting the

operation of the Improvements as fully developed commercial

properties, including without limitation, all service contracts,

maintenance agreements, equipment leases, advertising contracts,

and the like, to the extent assignable, (hereinafter together

referred to as the "Operating Agreements");

(xi) To the extent assignable, all guarantees and

warranties given, made, or issued by any contractors,

subcontractors, servicers, suppliers, manufacturers, installers,

and the like, relating to or with respect to the construction,

repair, or maintenance of the Improvements or Personal Property

and the workmanship, materials, components, appliances, and

equipment forming a part of or installed on or included within or

upon the Improvements (hereinafter referred to as the

"Warranties");

(xii) All development, construction, and

engineering plans, specifications, drawings, survey materials or

other written materials or matters in the possession of Seller

which pertain to the planning, development, construction,

maintenance and repair of the Improvements, including, without

limitation all "working" drawings and all "as-built" drawings and

surveys, compliance reports, engineering reports, soil,

geological, and environmental reports (hereinafter referred to as

the "Plans and Specifications");

(xiii) All licenses, permits, authorizations, and

certificates of occupancy affecting the Improvements as fully

operational commercial rental properties (hereinafter referred to

as the "Licenses"), including without limitation the right to use

the names of the Properties set forth above, to the extent Seller

has any ownership or proprietary rights to use such names; and

(xiv) All rents, issues, royalties, and profits of

the Properties, whether coming due before or after the Closing

Date, including all refunds or rebates of any nature concerning

the Property which are made on or after the Closing Date and

including all rights to insurance proceeds or other recoveries

for damage to the Properties (or any part thereof) which is not

repaired by the date of Closing.

The Properties, together with all other rights and

properties set forth in (i) through (xiv) above are collectively

sometimes referred to herein as the "Property".

2. Purchase Price and Method of Payment.

A. The total purchase price for the Property to be paid by

Purchaser is Thirty-Three Million Five Hundred Thousand Dollars

($33,500,000.00), payable in cash by Purchaser at Closing. The

purchase price will be reduced in accordance with paragraph 10C

hereof if the mortgage on the Yamaha Warehouse is assumed by

Purchaser. The allocation of purchase price between the

Properties for purposes of title insurance coverage and transfer

tax or other legally required declarations shall be as set forth

on Exhibit "B".

B. Within three (3) business days after the date hereof,

Purchaser shall deliver to American Title Company, 3131 Turtle

Creek Blvd., Suite 101, Dallas, TX 75219 Attention: Bo Feagin

(hereinafter referred to as the "Title Company") earnest money

(the "Deposit") in the amount of Two Hundred Thousand Dollars

($200,000.00). The Deposit shall be placed by the Title Company

in an interest bearing account with all interest earned thereon

to be for the benefit of the Purchaser. The Deposit shall be

held during the pendency of this Contract and disbursed in

accordance with the terms hereof. In the event the transactions

covered hereby shall close, at Closing the Deposit shall be

credited towards the Purchase Price.

3. Permitted Title Exceptions.

The Properties are being sold in fee simple title, subject

to the following exceptions:

A. Zoning and building laws or ordinances;

B. The liens of real estate taxes which are not yet due

and payable;

C. Those matters set forth on the Seller's title polices

concerning the Properties which are identified on Exhibit "C"

attached hereto, except for liens or encumbrances (subject to

subparagraph F below) and expired Tenant Leases or other expired

exceptions, which shall be discharged by Seller at or prior to

Closing;

D. Rights of tenants in possession;

E. Those matters set forth on the existing surveys of the

Properties identified on Exhibit "D" attached hereto; and

F. Subject to paragraph 10C, the lien of the first

mortgage and related security instruments encumbering the Yamaha

Warehouse in the current principal amount of approximately One

Million Three Hundred Ninety-Six Thousand One Hundred Seventy-

Three Dollars ($1,396,173.00) held by Wisconsin National Life

Insurance Company (hereinafter referred to as the "Yamaha

Lender").

G. Such other easements or reservations of title as shall

be approved by Purchaser after Purchaser's examination of the

title binders and updated surveys for the Property as hereinafter

required.

(A through G above are hereinafter collectively referred to

as "Permitted Exceptions").

4. Closing.

Consummation of the transactions contemplated by this

Contract (the "Closing") will be held at or closed in escrow

through the offices of the Title Company on a day and at a time

mutually agreeable to the parties, after all conditions precedent

have been satisfied, but in any case on or before June 30, 2000.

In the absence of a different specified date in accordance with

this paragraph, the Closing shall take place at 9:00 A.M., March

30, 2000 (hereinafter referred to as the "Closing Date").

5. Purchaser's Conditions Precedent.

Purchaser's obligations to purchase the Property hereunder

are contingent upon satisfaction of the following conditions

precedent ("Purchaser's Conditions Precedent") within forty-five

(45) days of the date hereof (the "Purchaser's Condition

Period"):

A. Unless this Condition is waived by Purchaser within the

Purchaser's Condition Period, Purchaser agrees to obtain a

preliminary title report and commitment to insure title covering

each Property issued by the Title Company. It is a condition

precedent to Purchaser's obligations to purchase the Property

that the Title Company agree to issue an owner's policy of title

insurance to Purchaser for each Property in an amount equal to

the purchase price set forth on Exhibit "B" and in ALTA Extended

Owner's Form B-1970 or the equivalent thereof as used in the

applicable state. The Title Company shall agree to delete from

the final policies any exceptions for mechanic's or materialman's

liens, and for discrepancies, conflicts in boundary lines, lack

of access, shortages in area, encroachments, or other facts a

current survey or inspection of the Property would disclose.

Seller agrees to execute those affidavits and/or furnish other

documentation reasonably requested by the Title Company to make

such deletions and to reflect the current status of rights

pursuant to Tenant Leases as of the Closing Date. Purchaser

shall have until expiration of its Conditions Period to examine

the title to the Properties and to notify Seller in writing of

any defects in or encumbrances upon Seller's title to the

Properties (other than the Permitted Exceptions) that are

unacceptable to Purchaser. Any objection not timely made by

Purchaser shall be deemed to be waived, and all such matters

shown as exceptions to title in the commitments (but not

including items shown in requirements sections) shall be

Permitted Exceptions.

Seller shall have until Closing to cure all such defects.

If any defects (other than Permitted Title Exceptions) are not

cured or otherwise removed in a manner reasonably satisfactory to

Purchaser by the scheduled date of Closing, Purchaser shall have

the remedies set forth in subparagraph F below.

B. Unless this Condition is waived by Purchaser within the

Purchaser's Condition Period, Purchaser agrees to obtain

certified surveys of the Properties certified by the surveyor to

Purchaser and to the Title Company. It is a Condition Precedent

to Purchaser's obligations hereunder that the surveys reveal no

new exceptions to title that are unacceptable to Purchaser. Any

such matters shall be reported to Seller and dealt with in

accordance with the procedure for other title exceptions as set

forth in subparagraph 5A above.

C. Purchaser acknowledges receipt of the environmental

reports on the Properties identified in Exhibit "E" attached

hereto and agrees to accept the Properties in the environmental

condition as reflected therein, provided, however, any new or

additional information concerning the environmental condition of

any Property shall be subject to Purchaser's approval, in

Purchaser's sole discretion and except that, prior to Closing,

Purchaser shall receive evidence of proper closure or removal of

underground tanks as noted in the report concerning Northpark

Shopping Center.

D. The Mutual Representations as set forth herein in

paragraph 7 hereof and Seller's representations as set forth in

paragraph 8 hereof shall be true and correct as of the Closing

Date without any change in the rent rolls or the status of

defaults of tenants which would be detrimental to the value of

any Property. Each party agrees to promptly notify the other of

any matter coming to the knowledge of such party which would

render any of the Mutual Representations or Seller's

Representations untrue in any material respect. Seller agrees to

use reasonable efforts to correct any such matter prior to

Closing, but shall not be obligated to expend any money or to

incur any liability to effect any such cure.

E. The parties acknowledge that Purchaser is the asset

manager for the Properties pursuant to a Management Agreement

dated July 1, 1981 and an Administrative Agreement dated January

1, 1984 (together the "Advisory Agreements"). Purchaser shall

continue to manage the Property in the best interests of the

Seller pursuant to the Advisory Agreements in the same manner as

prior to this Contract. All actions taken by Seller in regard to

the Property at the recommendation of Purchaser as Advisor shall

be considered consented to by Purchaser pursuant to this

Contract. Seller hereby directs Purchaser to conduct operations

at the Properties in accordance with any applicable terms and

conditions of this Contract. Seller agrees that Purchaser shall

have access to the Property pending Closing to perform its due

diligence and inspections allowed by this Contract in addition to

Purchaser's access to the Property in its capacity as Advisor.

Purchaser agrees to indemnify and hold Seller harmless from any

loss, cost, damage, or liability caused by Purchaser's conduct of

the due diligence set forth herein. This indemnity shall survive

the Closing or earlier termination of this Contract.

F. If the Purchaser's Conditions Precedent set forth in

this paragraph 5 are not timely satisfied, then Purchaser may

elect to (i) waive such condition(s) and close, by giving written

notice to Seller such that Seller receives the notice no later

than sixty (60) days after the date hereof in the event of a

failure of conditions to be satisfied within Purchaser's

Condition Period, or no later than the date scheduled for Closing

in the event of a failure of the conditions to be met prior to

Closing (hereinafter referred to in this paragraph as "Timely

Notice"), or (ii) terminate this Contract by Timely Notice to

Seller. Upon a termination of this Contract in accordance

herewith, Purchaser's Deposit shall be promptly refunded and

neither party shall have any further rights or obligations

hereunder. In the absence of any written notice from Purchaser,

Purchaser shall be deemed to have elected to terminate this

Contract.

6. Additional Conditions Precedent.

The parties obligations to purchase and sell the Property

hereunder are conditioned upon the following:

A. Seller obtaining a favorable vote for this transaction

from its holders of beneficial interest in accordance with

Seller's Declaration of Trust. Seller agrees to hold a special

meeting for such purpose on or before June 15, 2000 and to comply

with its Declaration of Trust and all applicable laws, codes,

ordinances, and regulations in the holding of such meeting and

vote.

B. Seller agrees to recommend the sale contemplated by

this Contract for shareholder approval at or prior to the special

meeting held for such purpose. It is a condition precedent to

Purchaser's obligations hereunder that the shareholder approval

of this transaction contain a further mandatory provision

satisfactory to Purchaser that the Trust be liquidated and that

the proceeds of this sale, together with other liquid assets of

the Trust, less costs and reserves, be promptly distributed to

the holders of beneficial interests of Seller.

C. Seller's obligations hereunder are subject to the

Purchaser's representations as set forth in paragraph 9 hereof

being true and correct on the Closing Date. Each party agrees to

notify the other of any matter which would render any of

Purchaser's representations and warranties untrue in any material

respect. Purchaser agrees to utilize its best efforts to cure

such matters, but shall not be obligated to expend any money or

incur any liability to effect such cure.

E. If any of the Additional Conditions Precedent are not

timely satisfied, unless the parties mutually agree to extend the

time for satisfaction of the conditions, this Contract shall be

terminated, the Purchaser's Deposit shall be promptly returned,

and neither party shall have any further rights or obligations

hereunder.

7. Mutual Representations.

The parties, to their actual knowledge, each make to the

other the following statements concerning the condition of the

Property (hereinafter referred to as the "Mutual

Representations"):

A. Attached hereto as Exhibits "F-1" through "F-6" are

true and complete rent rolls of the Properties as of the date set

forth thereon, and except as set forth on Exhibits "F-1" through

"F-6", no tenant is in material default under its lease, nor has

Seller received any notice that it is in default as landlord

thereunder.

B. All of the Property is, or on the Closing Date will be,

owned by Seller free and clear of liens and encumbrances, other

than the Permitted Title Exceptions.

C. Each of the Properties is in material compliance with

all applicable laws, codes, and ordinances including those

regulating zoning, building, health, fire, or other safety and

environmental condition.

D. The Properties are insured against fire and other

hazards as described in Exhibit "G" attached hereto.

E. There are no plans for condemnation of all or any part

of the Properties.

F. There are no planned street or other improvements which

may result in special assessments against the Properties or any

part thereof, or which may alter or disrupt ingress and egress

from the Properties.

G. There are no claims, actions, suits, or proceedings

pending, threatened against, or affecting the Property.

H. There are, and on the date of Closing there will be no

damage to the Property which has not been repaired. Subject to

the provisions of paragraph 15, all damage occurring to the

Property prior to Closing shall be repaired by Seller at Seller's

expense. All mechanical equipment for which Seller is

responsible pursuant to the terms of Tenant Leases, including,

but not limited to the plumbing, air conditioning and heating and

electrical systems will be in good and serviceable operating

condition.

I. At the time of Closing, any work required to be

performed by the Seller under the terms of the Tenant Leases or

the Operating Agreements or other agreements in connection with

the Property will have been completed in accordance with the

plans and specifications therefor, if any, and fully paid for by

Seller, except for tenant finish work incident to new leases

entered into between the date hereof and Closing, which shall be

governed by the provisions of paragraph 10.

J. Neither the execution and delivery of this Contract or

the other documents called for hereunder, nor the consummation of

any of the transactions herein or therein contemplated, nor

compliance with the terms and provisions hereof, or with the

terms and provisions thereof, will contravene any provision of

law, statute, rule, or regulation to which Seller is subject, or

will conflict to be inconsistent with, or result in any breach of

any of the terms, conditions, covenants, or provisions of, or

constitute a default under or result in the creation or

imposition of any lien, security interest, charge, or encumbrance

upon the Property pursuant to the terms of any indenture,

mortgage, deed of trust, lease, or other instrument to which

Seller is a party, or by which Seller or any Property may be

bound. Except as set forth in Exhibit "L", no person or entity

has any right to acquire the Property or any interest or part

thereof.

K. There are no Operating Agreements that are either not

assignable or non-cancelable on thirty (30) days prior notice.

L. Except for the Permitted Exceptions and except as

otherwise disclosed herein and in Exhibits "C" and "D" attached

hereto, there are no material liens or encumbrances against the

Properties or other exceptions to fee simple title which would

materially adversely affect the value of the Properties.

M. For purposes of this Contract, the actual knowledge of

Seller shall mean the actual knowledge of the Trustees, and the

actual knowledge of Purchaser shall mean the actual knowledge of

David Blankenship, Alan Fletcher, Roger Schulz, Dennis Roland,

and Maureen DeWald.

8. Representations and Warranties of Seller.

Seller represents and warrants the following:

A. Seller is not a foreign person, foreign corporation,

foreign partnership, foreign trust, or foreign estate as defined

in the Internal Revenue Code and Regulations.

B. The execution and delivery of this Contract and each

instrument or document required to be executed and delivered by

Seller pursuant hereto and the consummation of the transactions

contemplated hereby, upon execution, delivery, and consummation

thereof, will be duly authorized and approved by all requisite

Trust actions and no other authorization or approval, whether of

governmental bodies or otherwise, will be necessary in order to

enable Seller to enter into or to perform this Contract, subject

to the Conditions Precedent. Seller is not a party to any

contract or agreement, other than through Purchaser as Advisor,

which would violate the representations contained in subparagraph

J above.

9. Representations and Warranties of Purchaser.

Purchaser represents and warrants that it has taken all

necessary action to authorize the execution and delivery of this

Contract and to consummate the purchase of the Property as herein

contemplated. The officer executing this Contract on behalf of

Purchaser has been duly authorized to do so pursuant to proper

action by Purchaser's Board of Directors. Purchaser is not

subject to any governmental or other regulations that would

restrict this purchase, nor is this purchase in contravention of

any term or provision of Purchaser's Articles of Incorporation or

By-Laws.

10. Covenants and Agreements.

Between the date hereof and the Closing:

A. Seller shall not enter into any agreements or contracts

affecting the Properties which survive Closing, nor shall Seller

enter into any new lease or modify or terminate any existing

Tenant Lease without the prior written consent of Purchaser,

which consent shall not be unreasonably withheld or delayed.

Notwithstanding the foregoing, Seller may enter the pending lease

transactions described on Exhibit "H" ("Permitted Lease

Transactions"). The parties agree to pursue, approve, and enter

new leases in the ordinary course of business. The parties shall

pay for the tenant improvement costs or allowances and leasing

commissions in Permitted or hereafter approved Lease Transactions

entered between the date hereof and Closing in accordance with

Exhibit "H". Nothing in this Contract shall be deemed to require

Seller to enter into any new lease, lease modification, or

operating agreement. Any contracts for tenant improvements for

the Permitted Lease Transactions which are not completed prior to

Closing shall be assigned to and assumed by Purchaser as an

Operating Contract pursuant to paragraph 11A(2) hereof, subject

to any appropriate prorations for the costs thereof in accordance

with this paragraph.

B. Seller shall operate the Property in the ordinary

course of business, including without limitation, compliance with

the terms of all leases, mortgages, or other contractual

obligations relating to the Property and doing regular,

scheduled, or necessary maintenance and repair of the Properties,

and of the fixtures, furniture, and equipment, so that the

Property will be in the condition required herein on the Closing

Date. Discretionary repairs and maintenance shall be performed

in accordance with the budget for such matters as approved by the

Seller.

C. The Purchaser shall use reasonable efforts to obtain

the Yamaha Lender's consent to the Purchaser's purchase of Yamaha

Warehouse subject to its mortgage. If such consent is obtained,

the purchase price shall be reduced by the principal balance of

the mortgage at Closing and accrued interest on the mortgage debt

will be pro rated between the parties with Purchaser responsible

for interest on and after the date of Closing. Seller agrees to

pay the assumption fee to the Yamaha Lender in the amount of one

percent (1%) of the principal balance of the loan. If the Yamaha

Lender refuses to consent to the sale, then the purchase price

will not be reduced, Seller will pay off the Yamaha mortgage at

Closing and deliver the Property free and clear of the mortgage

and related liens.

11. Items to be Delivered at the Closing.

A. At Closing, Seller shall cause to be delivered the

following:

(1) A Special Warranty Deed for each Property in the

form attached hereto as Exhibit "I" (modified as necessary to

comply with state, local law, or recording requirements),

conveying to Purchaser fee simple title to the Properties,

subject only to the Permitted Exceptions.

(2) A blanket conveyance, bill of sale and assignment

for each Property (the "Bill of Sale"), conveying and assigning

title with covenants of general warranty to Purchaser, free and

clear of all liens and encumbrances, (other than the Permitted

Exceptions); the Personal Property and the Tenant Leases, the

Operating Agreements, the Warranties, and the Licenses, such

instrument to be in form attached hereto as Exhibit "J".

(3) A rent roll (the "Rent Roll") for each Property,

certified by Seller and Purchaser to be true, complete and

correct as of the Closing Date and reflecting the status of

tenant delinquencies, if any, existing as of the Closing Date.

(4) All keys in Seller's possession or control to all

locks on the Property.

(5) To the extent they are in Seller's possession, the

executed originals of all Tenant Leases, together with copies of

all correspondence relating to the Leases and such accounting

information relating to the Leases as Purchaser may reasonably

require.

(6) A certificate in the form attached hereto as

Exhibit "K", certifying that Seller is a non-foreign entity.

(7) Possession of the Property subject to the

Permitted Exceptions.

(8) Notices to Tenants of sale, in a form acceptable

to Purchaser and Seller.

(9) To the extent they are in Seller's possession, all

original Operating Agreements, Warranties, and Plans and

Specifications.

(10) Proper documentation showing the good standing or

other authorization of Seller and the authorization of all

persons executing documents on behalf of Seller. Seller shall

also execute and/or deliver all documents required by the Title

Company to issue the title policies in the form required by this

Contract, provided that disclosures, if any, required to be

certified by the Trust shall be either (i) certified to the

knowledge of the Trustees, or (ii) Purchaser as Advisor shall

give the same certifications to Seller, which certifications may

be limited to the officers of USP.

B. Action at the Closing by Purchaser.

On the date of Closing, Purchaser shall deliver the

purchase price to Seller by wire transfer in the amount required

by paragraph 2 hereof, subject to prorations and credits as

contemplated herein. Purchaser shall execute and deliver to

Seller at Closing the Bills of Sale evidencing Purchaser's

assumption of the Tenant Leases and Operating Agreements. The

parties shall execute "Notices to Tenants" advising tenants of

the sale and Purchaser agrees to deliver, or cause to be

delivered, such notices to each tenant after Closing.

12. Closing Prorations.

Purchaser shall obtain its own insurance coverage for the

Property at Closing. Property expenses, including charges under

the continuing Operating Agreements assumed by Purchaser,

collected rents, and ad valorem taxes on the Property shall be

prorated at the Closing, effective as of the Closing date, using

the latest available computations of such items. Utilities shall

be prorated between the parties at Closing. Purchaser shall have

all utilities in Seller's name transferred to Purchaser's name

promptly following the Closing. All expenses which are prorated

at Closing (exclusive of any unknown claims related thereto,

which shall remain the responsibility of Seller) shall be deemed

a final proration and Purchaser shall be responsible for payment

of such items when due. Except as prorated between the parties at

Closing or as otherwise agreed by the parties in accordance with

this paragraph and paragraph 10A, Seller shall be responsible for

all property expenses incurred, undertaken, or contracted for

prior to Closing, and agrees to indemnify and hold Purchaser

harmless from any claim, cost, or cause of action arising from

any such expenses and liabilities, including court costs and

attorney's fees in the defense thereof or in the enforcement of

this indemnity. Tenant security deposits in the possession of

Seller and prepaid rents shall be credited to Purchaser.

Included in this sale are all delinquent rental accounts and all

rents, issues, and profits of the Properties due or which may

become due after Closing relating to periods occurring prior to

Closing. In addition to the purchase price, Purchaser shall pay

Seller for Seller's prorata share of delinquent tenant rental

accounts, exclusive of late charges and/or interest, at face

value, but specifically excluding payment for delinquent accounts

of tenants in Material Default (hereinafter defined), as of the

Closing Date. Purchaser shall also pay Seller at Closing for

Seller's prorata share of tenant reimbursements for CAM and real

estate taxes due after Closing based upon the most recent

estimate of such amounts as used in Seller's ledgers to accrue

for such items, specifically excluding any payment for

reimbursables of tenants in Material Default as of the Closing

Date. As used in this paragraph, Material Default shall mean any

tenant (i) whose rental account is more than ninety (90) days

delinquent, (ii) who is in bankruptcy or insolvency proceedings,

(iii) has vacated the Property and is delinquent in payment of

rent for more than thirty (30) days, or (iv) has indicated in

writing its inability or refusal to pay its account. Subject

only to the payments and prorations set forth in this paragraph,

all rent issues and profits of the Properties of every nature due

or paid after Closing shall be the property of Purchaser.

13. Closing Costs.

Purchaser shall pay the cost of the title policies, surveys,

and environmental reports. Seller shall pay for the applicable

transfer taxes. The parties shall each pay one-half of the Title

Company escrow fees, if any. Each party shall bear its own

attorney's fees.

14. Remedies Upon Default.

IF PURCHASER SHALL DEFAULT IN ITS PERFORMANCE OF THIS

CONTRACT, PURCHASER AND SELLER AGREE IT WOULD BE IMPRACTICAL AND

EXTREMELY DIFFICULT TO FIX THE DAMAGES WHICH SELLER MAY SUFFER.

THEREFORE, PURCHASER AND SELLER HEREBY AGREE A REASONABLE

ESTIMATE OF THE TOTAL NET DETRIMENT SELLER WOULD SUFFER IN THE

EVENT PURCHASER DEFAULTS AND FAILS TO COMPLETE THE PURCHASE OF

THE PROPERTIES ARE AND SHALL BE, AS SELLER'S SOLE AND EXCLUSIVE

REMEDY (WHETHER AT LAW OR IN EQUITY), AN AMOUNT EQUAL TO THE

EARNEST MONEY. SAID AMOUNT SHALL BE THE FULL, AGREED AND

LIQUIDATED DAMAGES FOR THE BREACH OF THIS CONTRACT BY PURCHASER,

ALL OTHER CLAIMS TO DAMAGES OR REMEDIES BEING HEREIN EXPRESSLY

WAIVED BY SELLER. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED

DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT IS

INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER. UPON SUCH

DEFAULT BY PURCHASER, THIS AGREEMENT SHALL BE TERMINATED AND

NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS

HEREUNDER, EACH TO THE OTHER EXCEPT FOR THE RIGHT OF SELLER TO

RECEIVE SUCH LIQUIDATED DAMAGES FROM THE TITLE COMPANY.

If Seller shall default in its performance of this Contract,

the Purchaser may, as its sole and exclusive remedies elect to

either (i) terminate this Contract and receive a refund of the

Deposit, or (ii) sue Seller for damages, which damages the

parties agree shall be limited to an amount not to exceed the

Deposit.

Except for failure to close on the specified Closing Date,

for which default no notice or cure period is required, prior to

a declaration of default, the declaring party shall give the

defaulting party written notice specifying the default. The

defaulting party shall have five (5) business days from receipt

of such notice to cure the default. If the cure period extends

beyond the scheduled date of Closing, the Closing Date shall be

postponed to the last day of the cure period.

In the event either party hereto employs an attorney and

commences legal action because of the other party's default, then

the non-prevailing party shall pay to the prevailing party

reasonable attorney's fees incurred in the enforcement of this

Contract.

15. Risk of Loss.

Until Closing, all risk of loss of the Property is on the

Seller and if, prior to Closing, the Property, or any part

thereof, shall become damaged by fire or other casualty or become

the object of any condemnation proceedings, Purchaser may, as its

sole and exclusive remedy, elect to either (i) terminate this

Contract, or (ii) proceed with the Closing and receive an

assignment in form acceptable to Purchaser of all insurance

proceeds or awards for such taking, free and clear of all liens,

claims and encumbrances, and in the case of casualty, together

with a cash payment by Seller to Purchaser in the amount of the

lesser of (a) any deductible under Seller's insurance, or (b) the

cost of the repair of the damage. If the estimated cost of

repair is less than One Million Dollars ($1,000,000.00),

Purchaser agrees to proceed to Closing in accordance with (ii)

above. Any election allowed hereunder shall be made in writing

no later than the earlier of (i) the scheduled date of Closing,

or (ii) ten (10) days after a party's receipt of notice of such

damage or proceeding.

16. Notices.

All notices and demands herein required shall be in writing.

Whenever any notice, demand or request is required or permitted

hereunder, such notice, demand or request shall be hand-delivered

personally or by express mail, courier service (both with

delivery receipt), or electronically verifiable facsimile

transmission or sent by United States Mail (registered or

certified) postage prepaid, to the addresses set forth below.

As to Seller: Patrick E. Falconio,
Chairman of the Board of Trustees
USP Real Estate Investment Trust
111 Cottage Grove SE, #501
Cedar Rapids, IA 52403
Fax: 319/298-1910

With a copy to: Timothy Hearn
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, MN 55402
Fax Number: (612) 340-2868

As to Purchaser: AEGON USA Realty Advisors, Inc.
4333 Edgewood Road N.E.
Cedar Rapids, IA 52499
Attention: Maureen DeWald
Fax Number (319) 369-2188

Any notice, demand or request which shall be given in the

manner aforesaid shall be deemed sufficiently given for all

purposes hereunder (1) at the time such notices, demands or

requests are hand-delivered (which shall be deemed to include

delivery by express mail or courier service or transmission by

telefax facsimile) or (2) the day such notices, demands or

requests are posted, postage prepaid, in the United States Mail

in accordance with the preceding portion of this paragraph,

provided however, time for response to any such notice shall

commence upon receipt at the address specified. Notice by

telefax transmission shall be given on a non-banking holiday

weekday between the hours of 9:00 a.m. to 5:00 p.m. (at the

destination) or shall be deemed received on the next such day and

time.

17. Time of Essence.

Time is of the essence of this Contract.

18. Real Estate Brokers.

Purchaser and Seller covenant and represent to each other

that, there is no party entitled to a real estate commission,

finder's fee, cooperation fee, or brokerage-type fee or similar

compensation in connection with this Contract and the

transactions contemplated herein, except for a fee due Raymond

James & Associates, Inc. for rendering the fairness opinion

requested by Seller herein, and whose fee shall be paid by Seller

pursuant to a separate agreement. Each party agrees to hold the

other harmless from and against any claim for a commission or fee

from any other broker or agent claiming by or through the

indemnifying party. Seller warrants that Raymond James &

Associates, Inc. has waived any right to claim a commission or

transaction fee on this sale.

19. Entire Agreement.

This Contract contains all of the agreements,

representations and warranties of the parties hereto and

supersedes all other discussions, understandings or agreements in

respect to the subject matter hereof. All prior discussions,

understandings and agreements are merged into this Contract,

which alone fully and completely expresses the agreements and

understandings of the parties hereto. This Contract may be

amended, superseded, extended or modified only by an instrument

in writing referring hereto signed by both parties.

20. Exhibits a Part of This Contract.

All Exhibits referred to in this Contract and attached

hereto are incorporated into this Contract by reference and are

hereby made a part hereof.

21. No Benefit to Other Parties.

Except as otherwise provided herein, none of the provisions

hereof shall inure to the benefit of any party other than the

parties hereto and their respective successors and permitted

assigns, or be deemed to create any rights, benefits or

privileges in favor of any other party except the parties hereto.

22. No Agency, Partnership or Joint Venture.

Nothing herein shall be construed to establish an agency

relationship, a partnership or a joint venture between Seller and

Purchaser for any purpose.

23. Captions.

The captions and headings contained in this Contract are for

reference purposes only and shall not in any way affect the

meaning or interpretation hereof.

24. Governing Law.

This Contract shall be governed, construed and enforced in

accordance with the laws of the State of Iowa.

25. No Waiver.

The waiver by one party of the performance of any covenant

or condition herein shall not invalidate this Contract, nor shall

it be considered to be a waiver by such party of any other

covenant or condition herein. The waiver by either or both

parties of the time for performing any act shall not constitute a

waiver of the time for performing any other act or an identical

act required to be performed at a later time. Except as

otherwise specifically restricted herein, the exercise of any

remedy provided by law and the provisions of this Contract shall

not exclude other available remedies.

26. AS-IS Condition.

Purchaser acknowledges that it is purchasing the Property on

an AS-IS condition, based upon its own inspections thereof and

without benefit of any representation, warranty or disclosure

from Seller, either express or implied or in the nature of

fitness for any particular purpose, except as specifically set

forth herein. Seller agrees to maintain the Properties in their

current physical condition to the Closing Date, normal wear and

tear excepted.

27. Survival of Representations.

The representations and warranties made by Seller in

paragraph 8 of this Contract and by Purchaser in paragraph 9 (the

parties "Separate Representations and Warranties") shall survive

the Closing and delivery of deeds and other conveyance documents.

Each party agrees to indemnify and hold the other harmless from

and against any loss, cost, liability, claim, or cause of action

arising from the inaccuracy of such parties Separate

Representations and Warranties, including court costs and

attorney's fees incurred by such indemnified party in the defense

of any such claim and in the enforcement of this indemnity. All

indemnities contained in this Contract shall survive the Closing.

The Mutual Representations in paragraph 7 are given for the sole

purpose of establishing the Purchaser's Conditions Precedent to

Closing contained in paragraph 5D and shall not survive the

Closing; the sole remedy for breach of the Mutual Representations

being as set forth in paragraph 5F. Provided, however,

notwithstanding the provisions of the prior sentence to the

contrary, the breach of any of the Mutual Representations by

Purchaser that results in a claim against Seller by Purchaser

under or pursuant to any representations or warranties of Seller

contained in the conveyance documents delivered by Seller at

Closing, shall survive for the sole benefit of Seller and for the

sole use as a defense against any such claim by Purchaser and/or

its successors or assigns in interest to the Properties.

28. Access to Files.

For a period of three (3) years after Closing, Purchaser

agrees to grant to Seller, its successors or assigns, access to

Tenant Lease and Property files delivered to Purchaser at

Closing, subject to reasonable advance written notice.

29. Package Sale.

The purchase price provided herein is based upon a group

sale of the Properties, and except as provided in paragraph 5F,

no Property or Properties may be purchased or sold individually

hereunder without the prior written consent of Purchaser and

Seller, which consent may be withheld in the sole discretion of

either party.

30. Assignment.

Purchaser shall have the right to assign this Contract, in

whole or in part, to one or more affiliated entities, provided

written notice shall be given to Seller of such assignment no

later than ten (10) days prior to Closing. Any such assignment

shall not terminate any liability hereunder unless so released in

writing by Seller.

31. Business Days.

In the event that any time period under this Contract

expires on a day that is not a business day, such time period

shall be deemed extended to the first business day following such

date. "Business day" as used herein shall mean any day other

than Saturday, Sunday or a legal holiday on which business is

transacted by federally insured national banking institutions in

Cedar Rapids, Iowa.

32. Counterparts.

This Contract may be signed in counterparts, each of which

is deemed an original. This Contract shall be null and void

unless it shall be executed by Purchaser and one copy returned to

Seller on or before January 20, 2000.

WHEREFORE, the parties have hereunto affixed their hands and

seals as of the date set hereof.

SELLER: PURCHASER:

USP Real Estate Investment Trust AEGON USA Realty Advisors, Inc.

By: /s/ Patrick E. Falconio By: /s/David L. Blankenship
Patrick E. Falconio, Trustee David L.Blankenship, President
Chairman of the Board of Trustees

Exhibit 2.1

PLAN OF LIQUIDATION
OF
USP REAL ESTATE INVESTMENT TRUST

1. Upon approval of the liquidation and termination of the
Trust by the shareholders of the Trust, the Trust shall cease to
carry on business except to the extent necessary for the
beneficial winding up of the business and affairs of the Trust
and the liquidation of the Trust's assets.

2. The officers of the Trust shall be authorized to sell
or otherwise liquidate any or all of the properties of the Trust
which, in their judgment, should be sold or liquidated in order
to facilitate the liquidation of the Trust, and such officers
shall make payment of, or provide for the payment or settlement
of, all debts and obligations of the Trust.

3. The officers of the Trust or their designees are
authorized, directed and empowered to distribute to the
shareholders, in proportion to their respective shareholdings,
the assets of the Trust, in whatever form they may then be, not
needed for the payment of the liabilities of the Trust, in
whatever form they may be, as liquidating distributions of the
Trust, such distributions to be made on or before December 31,
2000.

4. Upon termination of the Trust and distribution to the
Shareholders as herein provided, a majority of the Trustees shall
execute and lodge among the records of the Trust an instrument in
writing setting forth the fact of such termination, which
instrument shall also be recorded in the Office of the Recorder
of Linn County, Iowa. A copy of such instrument shall also be
sent to each Shareholder and each State Administrator.

5. This Plan of Liquidation shall be a plan of complete
liquidation within the meaning of Section 331 of the Code, and
this Plan shall be deemed to authorize, empower and direct the
officers of the Trust to file the appropriate forms with the
Internal Revenue Service, file final tax returns for the Trust,
and do all such other things as, in their opinion, may be
necessary to conform with the provisions of Section 331 of the
Code or advisable to carry out the purposes of this Plan

<ARTICLE> 5
<CIK> 0000102438
<NAME> USP REAL ESTATE INVESTMENT TRUST

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,369,176
<SECURITIES> 0
<RECEIVABLES> 685,304
<ALLOWANCES> 185,494
<INVENTORY> 0
<CURRENT-ASSETS> 3,112,645
<PP&E> 34,617,710
<DEPRECIATION> 11,350,214
<TOTAL-ASSETS> 26,380,141
<CURRENT-LIABILITIES> 789,934
<BONDS> 9,359,426
0
0
<COMMON> 3,880,000
<OTHER-SE> 12,350,781
<TOTAL-LIABILITY-AND-EQUITY> 26,380,141
<SALES> 0
<TOTAL-REVENUES> 4,581,168
<CGS> 0
<TOTAL-COSTS> 2,120,285
<OTHER-EXPENSES> 565,227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 834,280
<INCOME-PRETAX> 1,061,376
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,061,376
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,061,376
<EPS-BASIC> .27
<EPS-DILUTED> .27

</TABLE>