LOEB REALTY CORP, S-11/A, 1998-07-22

LOEB REALTY CORP
S-11/A, 1998-07-22
ELECTRIC SERVICES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1998

REGISTRATION NO. 333-52391

================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

PRE EFFECTIVE AMENDMENT NO. 1
TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------------

LOEB REALTY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENTS)
------------------------
521 FIFTH AVENUE
NEW YORK, NEW YORK 10175
(212) 883-0388
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOSEPH S. LESSER
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
LOEB REALTY CORPORATION
521 FIFTH AVENUE
NEW YORK, NEW YORK 10175
(212) 883-0360
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
<TABLE>
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COPIES TO:
ALAN L. GOSULE, ESQ.
ROBERT E. KING, JR., ESQ. BRUCE M. MONTGOMERIE, ESQ.
ROGERS & WELLS LLP WILLKIE FARR & GALLAGHER
200 PARK AVENUE 153 EAST 53 STREET
NEW YORK, NEW YORK 10166 NEW YORK, NEW YORK 10022
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
------------------------

<TABLE>
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CALCULATION OF REGISTRATION FEE
==================================================================================================================
PROPOSED MAXIMUM
PROPOSED AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT TO MAXIMUM OFFERING OFFERING REGISTRATION
TO BE REGISTERED BE REGISTERED PRICE PER SHARE(a) PRICE(a) FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001
per share 15,640,000(b) $21.00 $ 328,440,000 $96,890.00(c)
==================================================================================================================
</TABLE>

(a) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

(b) Includes 2,040,000 shares being registered in connection with an
over-allotment option being granted to the Underwriters.

------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 21, 1998

PROSPECTUS

13,600,000 SHARES
LOEB REALTY CORPORATION
COMMON STOCK

------------------------
Loeb Realty Corporation (together with its subsidiaries, the 'Company') is
the successor to the real estate business of Loeb Partners Realty which, for
over 30 years, has invested in a variety of types of real estate assets located
in markets throughout the United States, with a primary focus on office
properties located in New York City and other central business districts. Upon
completion of the Offering, the Company will own interests in 31 properties
located in 14 states, including six office properties located in New York City.
The balance of the portfolio includes interests in retail, residential and
storage properties and one hospitality/resort complex. The Company also controls
approximately 974 acres of land held for development located in suburban
Atlanta. The Company is self-administered and self-advised and intends to elect
to qualify as a real estate investment trust ('REIT') for federal income tax
purposes.

All of the shares of common stock of the Company (the 'Common Stock')
offered hereby are being sold by the Company (the 'Offering'). Upon completion
of the Offering, the Company's directors and officers, and investors who owned
interests in the Company's properties prior to the Offering will beneficially
own, in the aggregate, 51.7% of the Company's equity interests on a fully
diluted basis.

The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol 'LRC,' subject to official notice of issuance. Prior
to the Offering, there has been no public market for the Common Stock. It is
estimated that the initial public offering price will be between $19.00 and
$21.00 per share. See 'Underwriting' for a discussion of the factors that will
be considered in determining the initial public offering price.

SEE 'RISK FACTORS' BEGINNING ON PAGE 15 FOR A DISCUSSION OF MATERIAL RISKS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK, WHICH INCLUDE:

Risks associated with the real estate industry generally and with the
concentration of the properties in a limited number of markets, particularly
New York City, could adversely affect the Company's financial performance;

The possibility that the consideration paid by the Company for the properties
and the Company's other assets may exceed their fair market value could result
in aspects of the Formation Transactions being unfavorable to stockholders;

Conflicts of interest in connection with the Offering and the Formation
Transactions, including material benefits to certain officers, directors and
affiliates of the Company, and the lack of arm's-length negotiations in
connection with the Formation Transactions could result in aspects of the
Formation Transactions being unfavorable to stockholders;

The Company's estimated initial annual distributions for the 12 months ending
September 30, 1999 represent % of its estimated cash available for
distribution, principally as a result of rent abatements and anticipated
capital expenditures during that period related to recent significant
redevelopment projects, resulting in the Company initially having to fund a
portion of its distributions from working capital or additional borrowings;

Loss of the services of key personnel, particularly Joseph S. Lesser and Peter
S. Duncan, could adversely affect the Company's operations;

Taxation of the Company as a regular corporation if it fails to qualify as a
REIT could result in a decrease in cash available for distribution;

Limitations on stockholders' ability to change control of the Company,
including restrictions on ownership of more than 9.8% of the Common Stock,
could adversely affect the market for the Common Stock and may inhibit a change
in control of the Company; and

The Company's policy of no limitation on debt could adversely affect the
Company's cash flow.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
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===============================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
===============================================================================================================
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(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See 'Underwriting.'

(2) Before deducting estimated expenses of approximately $7,000,000 payable
by the Company.

(3) The Company has granted the Underwriters an option to purchase up to
2,040,000 additional shares of Common Stock to cover over-allotments. If
all such Common Stock is purchased, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See 'Underwriting.'
------------------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if issued to and accepted by
them and subject to certain conditions. It is expected that delivery of the
shares of Common Stock offered hereby will be made on or about , 1998, at
the offices of Smith Barney Inc., 333 West 34th Street, New York, New York
10001.
------------------------
SALOMON SMITH BARNEY
LAZARD FRERES & CO. LLC
PAINEWEBBER INCORPORATED

PRUDENTIAL SECURITIES INCORPORATED

, 1998

[MAP, PHOTOGRAPHS, ETC.]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE 'UNDERWRITING.'

FORWARD-LOOKING INFORMATION

Information contained in or delivered in connection with this Prospectus
contains 'forward-looking statements' relating to, without limitation, future
economic performance, plans and objectives of management for future operations
and projections of revenue and other financial items, which can be identified by
the use of forward-looking terminology such as 'may,' 'will,' 'should,'
'expect,' 'anticipate,' 'estimate' or 'continue' or the negative thereof or
other variations thereon or comparable terminology. The cautionary statements
set forth under the caption 'Risk Factors' and elsewhere in this Prospectus
identify important factors with respect to such forward-looking statements,
including certain risks and uncertainties, that could cause actual results to
differ materially from those in such forward-looking statements.

TABLE OF CONTENTS

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PAGE
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PROSPECTUS SUMMARY......................................................................................... 1
The Company........................................................................................... 1
Summary Risk Factors.................................................................................. 2
Business and Growth Strategies........................................................................ 3
The Properties........................................................................................ 7
Structure and Formation of the Company................................................................ 9
Benefits to Related Parties........................................................................... 10
Conflicts of Interest................................................................................. 10
The Offering.......................................................................................... 11
Distributions......................................................................................... 11
Tax Status of the Company............................................................................. 12
Summary Selected Combined Financial and Operating Information......................................... 13
RISK FACTORS............................................................................................... 15
The Company's Performance and Value Are Subject to Risks Associated with the Real Estate Industry..... 15
Concentration of Properties in a limited number of markets could adversely affect the Company's
financial performance............................................................................ 15
The Properties are subject to uncontrollable factors affecting performance and value............. 15
Operating costs could adversely affect the Company's cash flow................................... 15
The Company's financial condition could be adversely affected due to its reliance on major
tenants.......................................................................................... 15
The Company expects to expend significant amounts on renovation, capital improvements and leasing
commissions, and to provide significant amounts of free rent..................................... 16
Failure to renew leases or relet space could adversely affect the Company's cash flow or
financial performance............................................................................ 16
The Company could be adversely affected by the Company's lack of sole decision-making authority
with respect to partially owned Properties....................................................... 16
The Company could be adversely affected by a default under the Longboat Key Club lease........... 16
Prospective and recent acquisitions may not perform to expectations.............................. 17
Illiquidity of real estate investments could adversely affect the Company's financial
condition........................................................................................ 17
The cost of complying with the Americans with Disabilities Act could adversely affect the
Company's cash flow.............................................................................. 17
The Company may experience uninsured losses...................................................... 17
Reassessment could adversely affect the Company.................................................. 18
Conflicts of Interest Could Adversely Affect Stockholders............................................. 18
Absence of arm's-length negotiations in the Formation Transactions may have resulted in aspects
of the Formation Transactions' being unfavorable to stockholders................................. 18
Directors, officers and significant stockholders may influence the Company not to act in the best
interests of stockholders........................................................................ 18
Conflicts will exist with respect to the Operating Partnership................................... 19
A sale of, or reduction in mortgage indebtedness on, any of the Properties will have different
effects on holders of Units than on stockholders................................................. 19
Outside interests of officers and directors could conflict with the Company's interests.......... 19
Interests of lessee and manager of Longboat Key Club could conflict with Company's interests..... 19
Estimated Initial Cash Available for Distribution Will Not Be Sufficient to Make Distributions at
Expected Levels...................................................................................... 20
The Company Relies on Key Personnel Whose Continued Service Is Not Guaranteed......................... 20
</TABLE>

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PAGE
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Failure to Qualify as a REIT Would Cause the Company to Be Taxed as
a Corporation....................................................................................... 20
The Company will be taxed as a corporation if it fails to qualify as a REIT...................... 20
REIT Minimum Distribution Requirements: Possible Incurrence of Additional Debt................... 21
Potential Legislative Action Regarding REITs may adversely affect the Company.................... 22
Other Tax Liabilities will reduce the Company's cash available for distribution.................. 22
Limitations on Changes in Control and Ownership Limit Could Adversely Affect the Market for the Common
Stock................................................................................................ 22
The Articles of Incorporation and By-laws and provisions of the Operating Partnership Agreement
may inhibit changes of control................................................................... 22
Maryland law imposes certain limitations on changes in control................................... 23
The Company's Ownership Limit may have adverse consequences for stockholders..................... 23
The Company's Use of Debt Financing, Increases in Interest Rates, Financial Covenants and the Absence
of Any Debt Limitation Could Adversely Affect the Company............................................ 24
The required repayment of debt or interest thereon could adversely affect the Company's financial
position......................................................................................... 24
The Company's policy of no limitations on indebtedness could result in high leverage............. 24
Rising interest rates and variable rate debt could adversely affect the Company's ability to make
expected distributions........................................................................... 24
Competition in Its Marketplace Could Have an Adverse Impact on the Company's Results of Operations.... 25
The Company Will Substantially Depend on External Sources of Capital.................................. 25
The Board of Directors Could Change Policies Without Stockholder Approval............................. 25
Purchasers of Common Stock in the Offering Will Experience Immediate Dilution......................... 25
Possible Environmental Liabilities Could Adversely Affect the Company's Financial Condition........... 25
The Company, as an owner and operator of properties, may be subject to liability under
environmental laws, which could adversely affect its financial condition......................... 25
Costs of complying with Environmental Laws may adversely affect the Company's cash flow.......... 26
Environmental conditions of which the Company is unaware may adversely affect the Company's
financial condition.............................................................................. 26
Absence of Prior Public Market for Common Stock Could Adversely Affect the Common Stock Price......... 27
Other Risks of Ownership of Common Stock Could Adversely Affect the Common Stock Price................ 27
The availability of a substantial amount of Common Stock for future sale could adversely affect
the Common Stock price........................................................................... 27
Changes in market conditions could adversely affect the Common Stock price....................... 28
Growth potential and cash distributions could adversely affect the Common Stock price............ 28
Changes in market interest rates could adversely affect the Common Stock price................... 28
Contingent or Undisclosed Liabilities Could Adversely Affect the Company's Financial Condition........ 28
Risks Relating to Year 2000 Issue..................................................................... 28
THE COMPANY................................................................................................ 29
General............................................................................................... 29
Operational Structure................................................................................. 30
BUSINESS AND GROWTH STRATEGIES............................................................................. 30
External Growth....................................................................................... 30
Internal Growth....................................................................................... 32
USE OF PROCEEDS............................................................................................ 33
DISTRIBUTIONS.............................................................................................. 34
CAPITALIZATION............................................................................................. 41
DILUTION................................................................................................... 42
SELECTED COMBINED FINANCIAL AND OPERATING INFORMATION...................................................... 44
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................... 46
Results of Operations................................................................................. 46
Pro Forma Operating Results........................................................................... 48
Liquidity and Capital Resources....................................................................... 48
Funds from Operations................................................................................. 50
Inflation............................................................................................. 50
Year 2000............................................................................................. 51
BUSINESS AND PROPERTIES.................................................................................... 52
The Company's New York City and Other Office Properties............................................... 54
The Retail Properties................................................................................. 62
The Residential Properties............................................................................ 65
The Hospitality/Resort Complex........................................................................ 65
Lease Expirations of Office and Retail Properties..................................................... 66
Tenants............................................................................................... 73
Tenant Improvement and Leasing Commission Costs....................................................... 74
Historical Lease Renewals............................................................................. 76
Lease Distribution.................................................................................... 76
Debt Financing........................................................................................ 77
Credit Facility....................................................................................... 77
Third-Party Property Management....................................................................... 78
Excluded Interests.................................................................................... 78
Litigation............................................................................................ 79
Insurance............................................................................................. 79
Environmental Matters................................................................................. 79
MANAGEMENT................................................................................................. 81
Committees of the Board of Directors.................................................................. 82
Compensation of Directors............................................................................. 83
Executive Compensation................................................................................ 83
Stock Option and Incentive Plan....................................................................... 84
Employment Agreements................................................................................. 84
Incentive Compensation................................................................................ 85
Limitation of Liability and Indemnification........................................................... 85
FORMATION TRANSACTIONS..................................................................................... 86
Benefits to Related Parties........................................................................... 87
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES................................................................ 88
Investment Policies................................................................................... 88
Financing Policies.................................................................................... 88
Conflict of Interest Policies......................................................................... 89
Policies with Respect to Other Activities............................................................. 90
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................................. 90
Formation Transactions................................................................................ 90
Operating Partnership Agreement....................................................................... 90
Registration Rights................................................................................... 90
Longboat Key Club..................................................................................... 90
PRINCIPAL STOCKHOLDERS..................................................................................... 91
DESCRIPTION OF SECURITIES.................................................................................. 91
General............................................................................................... 91
Common Stock.......................................................................................... 91
Additional Classes of Stock........................................................................... 92
Restrictions on Transfer.............................................................................. 92
Limitation of Liability of Directors.................................................................. 93
Indemnification of Directors and Officers............................................................. 93
SHARES AVAILABLE FOR FUTURE SALE........................................................................... 94
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CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE COMPANY'S CHARTER AND BY-LAWS................................ 95
Certain Charter and By-law Provisions................................................................. 95
Changes in Control Pursuant to Maryland Law........................................................... 96
THE OPERATING PARTNERSHIP AGREEMENT........................................................................ 97
General............................................................................................... 97
Fiduciary Duties...................................................................................... 98
Amendments of the Operating Partnership Agreement..................................................... 98
Transfer of Interests................................................................................. 99
Redemption of Units................................................................................... 99
Issuance of Additional Limited Partnership Interests.................................................. 100
Extraordinary Transactions............................................................................ 100
Liability and Indemnification......................................................................... 101
Tax Matters........................................................................................... 101
Dissolution, Winding Up and Termination............................................................... 101
ERISA AND CERTAIN OTHER CONSIDERATIONS..................................................................... 102
General............................................................................................... 102
Status of the Company and the Operating Partnership under ERISA....................................... 102
FEDERAL INCOME TAX CONSEQUENCES............................................................................ 104
General............................................................................................... 104
Taxation of the Company............................................................................... 105
Taxation of Stockholders.............................................................................. 111
Other Tax Considerations.............................................................................. 115
UNDERWRITING............................................................................................... 116
LEGAL MATTERS.............................................................................................. 118
EXPERTS.................................................................................................... 119
ADDITIONAL INFORMATION..................................................................................... 119
GLOSSARY................................................................................................... 120
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
</TABLE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the financial statements and related notes appearing elsewhere
in this Prospectus. Unless indicated otherwise, the information contained in
this Prospectus assumes (i) that the transactions detailed under 'Formation
Transactions' (the 'Formation Transactions') have been completed, (ii) an
initial public offering price of $20.00 per share, which is the midpoint of the
price range set forth on the cover page of this Prospectus, and (iii) that the
Underwriters' over-allotment option is not exercised. Unless the context
otherwise requires, all references to the 'Company' in this Prospectus include
Loeb Realty Corporation and its subsidiaries, including Loeb Realty, L.P., the
operating partnership through which the Company will own its real estate
interests (the 'Operating Partnership') and Loeb Property Services, Inc., the
subsidiary through which the Company will conduct its third party sales and
leasing brokerage business (the 'Real Estate Brokerage Subsidiary'). All
references in this Prospectus to the historical activities of the Company refer
to the activities of its predecessors including Loeb Partners Realty. See
'Glossary' on page 120 for the definition of certain terms used in this
Prospectus.

THE COMPANY

The Company is the successor to the real estate business of Loeb Partners
Realty which, for over 30 years, has invested in a variety of types of real
estate assets located in markets throughout the United States, with a primary
focus on office properties located in New York City and other central business
districts ('CBDs'). The Company seeks to make opportunistic investments in
properties where the Company believes there is significant potential to increase
the value of the property through leasing, capital improvements and operating
efficiencies or as a result of changes in market conditions. Upon completion of
the Offering, the Company will own interests in 31 properties located in 14
states (the 'Properties'). For the year ended December 31, 1997, the Company
derived approximately 67% of its Adjusted Pro Forma Net Operating Income from
its interests in office Properties. During that same period, the Company derived
approximately 41% of its Adjusted Pro Forma Net Operating Income from its
interests in New York City office Properties. The balance of the portfolio
includes interests in retail, residential and storage Properties and one
hospitality/resort complex. The Company also controls 974 acres of land located
in suburban Atlanta, which could support the development of approximately 12
million net rentable square feet. The Company is self-administered and
self-advised and intends to elect to qualify as a REIT for federal income tax
purposes.

The Company intends to continue to make geographically diverse investments
in a variety of property types, with an initial focus on Class B office
properties in New York City and other CBDs. The Company generally seeks to
acquire high quality Class B office properties which are typically more than 25
years old and have fewer amenities and lower rental rates than Class A
properties, but which, after renovation, may be 'repositioned' to appeal to
corporate tenants because of the properties' large floor plates and prime
locations within their CBD. In executing its acquisition and asset management
strategy, the Company expects to benefit from (i) a network of relationships
which the Company's management has developed over 30 years, (ii) a value
enhancement strategy through which the Company seeks to identify and acquire
underperforming assets at prices which the Company believes are below the
assets' potential value, (iii) its employees who have expertise in acquiring,
repositioning and managing properties, and (iv) its experience in employing its
value enhancement investment strategy during good and bad real estate markets
over 30 years, all of which the Company believes are important competitive
advantages in its business.

who owned interests in the Properties prior to the Offering (including members
of the Company's management) are exchanging their interests in the Properties
for equity interests in the Company, and will beneficially own approximately
51.7% of the Company's equity interests on a fully diluted basis upon completion
of the Offering.

As part of the Formation Transactions, the Company will acquire the assets
and property management business of George Comfort & Sons, Inc. ('Comfort').
Comfort, which was formed in 1919, specializes in the management and leasing of,
and investment in, commercial properties, particularly in New York City. Over
the past five years, Comfort has managed approximately 5.5 million net rentable
square feet of properties. Loeb Partners Realty and Comfort have been partners
in various real estate projects for over 30 years, and jointly purchased and
repositioned approximately 3.0 million square feet of commercial real estate in
metropolitan New York in the last five years. The Company believes that
Comfort's management and leasing expertise will complement the Company's
existing asset management and acquisition capabilities to create a full service
real estate organization.

The Company's management will continue to foster the creative and
disciplined corporate culture of its predecessors. The Company's management has
extensive experience with a wide variety of property types and geographic
regions throughout the United States, having acquired, financed, repositioned or
managed over 25 million square feet of real estate assets over the last 30
years. The key executives of the Company, Joseph S. Lesser, Alan L. Gordon,
Peter S. Duncan, Gary L. Naughton and Bernard B. Falk have been with the Company
or Comfort for an average of more than 20 years. None of the officers and
directors of the Company, other than Messrs. Lesser and Gordon, has any prior
experience managing a REIT. Upon completion of the Offering, the Company's
officers and directors will own equity interests in the Company representing
approximately 9.3% of the Company's equity interests on a fully diluted basis.

The Company was formed on February 9, 1998 as a Maryland corporation. The
Company's executive offices are located at 521 Fifth Avenue, New York, New York
and its telephone number is (212) 883-0360.

SUMMARY RISK FACTORS

An investment in the Common Stock involves various risks and prospective
investors should carefully consider the matters discussed under 'Risk Factors'
prior to making an investment in the Common Stock. Those risks include:

the concentration of approximately 41% of the Properties (based on
Adjusted Pro Forma Net Operating Income) in New York City, and the
resulting dependence of the Company on economic conditions in New York
City could adversely affect the Company's financial performance;

the effect of economic and other conditions on Property cash flows and
values, the ability of tenants to make lease payments, the ability of a
Property to generate revenue sufficient to meet operating expenses
(including future debt service), and the illiquidity of real estate
investments, all of which could decrease cash available for distribution;

the absence of arm's length negotiations with respect to the Properties
and other assets contributed to the Company in its formation could result
in aspects of the Formation Transactions being unfavorable to
stockholders, including, that the consideration paid by the Company for
its assets may exceed their fair market value and the market value of the
Common Stock may exceed the stockholders' proportionate share of the
aggregate fair market value of those assets;

conflicts of interest in connection with the Offering and the Formation
Transactions, including an absence of arm's length negotiations in the
Formation Transactions, and the receipt by certain officers, directors and
affiliates of the Company of material benefits as a result of the
Formation Transactions, could result in aspects of the Formation
Transactions being unfavorable to stockholders;

conflicts arising from the Company leasing its interests in the Longboat
Key Club complex to an affiliate, Longboat Key Club, Inc. (in which
directors and officers of the Company own approximately a 4% interest), in
order to maintain the Company's REIT status could result in actions or
decisions which conflict with the interests of the Company's stockholders;

conflicts arising from officers, directors and affiliates of the Company
retaining interests or positions in real estate assets or companies which
are not being contributed to the Company, could result in management time
and attention being diverted to these conflicting interests;

the Company's estimated initial annual distributions for the 12 months
ending September 30, 1999 represent % of its estimated cash available
for distribution, principally as a result of rent abatements and
anticipated capital expenditures during that period related to recent
significant redevelopment projects, resulting in the Company initially
having to fund a portion of its distributions from working capital or
additional borrowings;

loss of the services of key personnel, particularly Joseph S. Lesser and
Peter S. Duncan, could adversely affect the Company's operations;

taxation of the Company as a corporation if it fails to qualify as a REIT
for federal income tax purposes and the Company's liability for certain
federal, state and local income taxes in that event, could result in a
decrease in cash available for distribution;

the possible anti-takeover effect of the Company's ability to limit, for
purposes of maintaining its REIT status, the actual or constructive
ownership of Common Stock to 9.8% of the outstanding shares of Common
Stock, and of certain other provisions of the organizational documents of
the Company and its subsidiaries and of Maryland law, which could have the
effect of delaying, deferring or preventing a transaction or change in
control of the Company that might involve a premium price for the Common
Stock or otherwise would be in the best interests of the Company's
stockholders;

the Company's policy of no limitation on debt could adversely affect the
Company's cash flow;

the inability to refinance outstanding indebtedness upon maturity or
refinance indebtedness on favorable terms could result in foreclosures on
Properties pledged as collateral for indebtedness;

immediate dilution of $1.20 in the net tangible book value per share of
Common Stock purchased in the Offering (based on the assumed initial
public offering price);

absence of a prior public market for the Common Stock and no assurance
that a public market will develop or be sustained could adversely affect
the Common Stock price; and

the availability of a substantial amount of Common Stock for future sale
could adversely affect the Common Stock price; and

possible liabilities under various federal, state and local environmental
laws could adversely affect the Company's financial condition.

BUSINESS AND GROWTH STRATEGIES

The Company's primary business objectives are to maximize growth in cash
available for distribution per share and to enhance the value of its portfolio
in order to maximize the long-term total return to stockholders. The Company
intends to achieve these objectives principally by executing the external and
internal growth strategies described below.

EXTERNAL GROWTH

Acquire Assets with Value Enhancement Potential. The Company will seek to
acquire assets which could benefit from the Company's value enhancement strategy
and provide favorable returns on the Company's invested capital. The Company
will focus on properties whose value can be enhanced through one or more of the
following: (i) asset repositioning, expansion or redevelopment, (ii) aggressive
leasing of vacant space, (iii) replacing expiring leases with leases at higher
rental rates or (iv) more intensive property management.

Reposition/Redevelop Assets. Management believes that value added
renovation and expansion of properties will continue to provide the Company with
attractive opportunities for increased cash flow

and higher potential returns than may be obtained from the purchase of
stabilized properties. The Company believes that the economic and real estate
fundamentals of commercial markets, particularly New York City, provide a
positive environment in which the Company can seek to implement its
repositioning strategy.

For example, in January 1998, the Company signed a 21 year lease with
Ziff-Davis, Inc. ('Ziff-Davis'), a multimedia company, for 400,000 net rentable
square feet at the 63 Madison Avenue Property, bringing this Property to 100%
occupancy. The Company and its partners acquired this 800,000 net rentable
square foot Property in December 1995 for approximately $81.25 per net rentable
square foot and made significant capital improvements to it. The Annualized Net
Operating Income at acquisition of this Property was approximately $9.7 million
(of which $6.5 million was attributable to a short-term lease which was replaced
by the new Ziff-Davis lease), compared to an Annualized Net Operating Income of
approximately $11.9 million based on leases currently in place. The Company has
budgeted $6.8 million to complete capital improvements. The Company will own
approximately a 50.0% interest in this Property upon completion of the Offering.

Similarly, in 1997 and 1998 the Company entered into leases covering
400,000 net rentable square feet at the 873,000 net rentable square foot 498
Seventh Avenue Property, bringing the occupancy level to approximately 90%. The
Company and its partners acquired this Property in March 1997 for approximately
$46.90 per net rentable square foot and made significant capital improvements to
it at a cost of approximately $7.0 million. The Annualized Net Operating Income
at acquisition of this Property was approximately $2.0 million, compared to
Annualized Net Operating Income of approximately $11.5 million based on leases
currently in place. The Company will own a 50% in this Property upon completion
of the Offering.

The Company also leased an additional approximately 200,000 net rentable
square feet at the 200 Madison Avenue Property in 1997 and 1998, bringing the
occupancy level to approximately 95%. The Company acquired the leasehold
interest in this Property for approximately $36.50 per net rentable square foot
while there was litigation pending between the owners of the leasehold and the
fee. Upon acquisition of the leasehold interest, the Company settled the
litigation and subsequently acquired the fee interest for approximately $27.75
per net rentable square foot. The Company also invested approximately $3.0
million in a base capital improvement program. The Annualized Net Operating
Income of this Property was approximately $6.8 million at acquisition and is
approximately $10.5 million based on leased currently in place. See 'Business
and Properties -- The Company's New York City Office Properties and Other Office
Properties.'

Acquire a Variety of Asset Types in Diverse Markets. The Company's
strategy is to invest in a variety of property types and markets, which the
Company believes provides it with flexibility to allocate capital and
organizational resources in order to maximize the Company's ability to realize
growth, current income and stability through market cycles. Unlike many other
REITs who publicly identify themselves, and are characterized by industry
analysts, as office, retail, industrial or hospitality real estate companies
with specific geographic focuses, the Company does not restrict its acquisitions
to any particular market or asset type.

The Company believes that its strategy of investing in diverse asset types
helps minimize the impact of oversupply from new construction or declining
demand in a particular property type. Although the Company believes that office
properties located in CBDs, particularly New York City, currently represent some
of the most attractive acquisition opportunities available to the Company, the
Company will continue selectively to pursue other asset types and markets in
order to expand and diversify its property portfolio.

In seeking opportunistic investments, the Company has operated with a
national focus over the last 30 years. The Company currently owns real estate
interests in 14 states. The Company believes that this geographic
diversification helps minimize the effects of a local or regional economic
downturn on the Company's property portfolio and its financial performance.

Acquire Distressed Assets at Attractive Prices. The Company believes that
there are opportunities to acquire properties at prices which do not reflect the
potential realizable value of the property to the Company. The Company has
realized positive returns in some instances by acquiring assets which were
subject to impediments such as defaulted loans or other financial distress,
bankruptcy, litigation or ownership conflict. The Company believes that due to
its size, management strength, reputation and ability to execute complex
transactions, it is in an advantageous position to acquire undervalued
properties drawing upon its network of relationships developed over 30 years.

Acquire Properties in Markets which are in the Initial Stages of Recovery
or Have Excess Supply. The Company's management team is experienced in operating
properties in markets suffering from adverse economic conditions or an excess
supply of available space. The Company believes that from time to time it will
have the opportunity to acquire assets at attractive prices in markets where
rental rates are below the rates necessary to support new construction,
resulting in favorable supply and demand characteristics.

Financing Strategy. The Company expects initially to fund its
acquisitions with a combination of capital from an unsecured credit facility and
the issuance of partnership interests ('Units') in the Operating Partnership. In
addition, the Company has from time to time in the past obtained, and may seek
in the future, seller financing to fund acquisitions. The Company expects that
it will replace this financing over time with the issuance of equity and longer
term debt securities. The Company is in negotiations with several financial
institutions with regard to obtaining a $250 million senior unsecured credit
facility. The Company expects to have the credit facility in place upon
completion of the Offering. The unsecured line of credit will be used to
facilitate acquisition and development activities, to fund distribution
payments, if necessary, and for working capital purposes.

Upon completion of the Offering, the Company's Debt-to-Market
Capitalization Ratio will be approximately 24.6%. See 'Business and
Properties -- Debt Financing.'

INTERNAL GROWTH

Intensive Property Management. The Company will manage 22 of its 31
Properties upon completion of the Offering, which accounted for approximately
82% of the Company's Adjusted Pro Forma Net Operating Income for the year ended
December 31, 1997. The Company has established property management offices in
New York City and Albany, New York; Daytona Beach, Florida and Atlanta, Georgia.
In markets where it is more efficient to do so, the Company outsources property
management to a select group of joint venture partners or third-party local
managers with whom the Company has established relationships. The Company's
management philosophy embodies a hands-on approach, with a constant evaluation
of the leasing, financing, capital improvements and market repositioning
opportunities for the assets.

Replace Expiring Leases at Higher Rents. The Company will seek to replace
expiring leases at its Properties with new leases at higher rental rates,
particularly at the office Properties. Leases with respect to approximately
4.7%, 5.8% and 10.8% of the net rentable square footage of the office Properties
are expiring in 1998, 1999 and 2000, at average rents of approximately $11.22,
$10.79 and $11.14, respectively. The weighted average of the Company's quoted
rent at the office Properties as of March 31, 1998 was $18.70, before giving
effect to tenant concessions. The Company generally expects, based on its
knowledge of the markets where the Properties are located, that leases expiring
over the next three years will be renewed, or space relet, at higher rents,
particularly expiring leases at the New York City Properties. However, there can
be no assurance that the Company will be able to replace expiring leases at
higher rental rates or at all.

Lease-Up of Space. The Company will aggressively seek new tenants for
vacant space at the Properties. Specifically, the Company is seeking to lease
the remaining vacant space at the 498 Seventh Avenue (approximately 87,000 net
rentable square feet), 24 West 57th Street (approximately 11,700 net rentable
square feet), First NBC Center (approximately 80,430 net rentable square feet),
Riverview Center (approximately 322,670 net rentable square feet) and 38 Chauncy
Street (approximately 13,000

net rentable square feet) office Properties, as well as the Easton Commons Plaza
(approximately 19,200 net rentable square feet) and Sunset Strip (approximately
20,500 net rentable square feet) retail Properties. The Company believes that it
has a competitive advantage in attracting new tenants to its office Properties
because the Company can offer space in prime locations which may be suitable for
tenants who might otherwise choose a Class A property at rental rates which are
lower than rates for Class A properties.

Shenandoah Development. The Company has the right to acquire
approximately 974 acres of land at the Shenandoah Industrial Park Property,
which is located approximately 20 miles from Atlanta Hartsfield International
Airport, for a remaining option exercise price of approximately $700,000 plus
the payment of approximately $375,000 of accrued real estate taxes. The Company
intends to pursue opportunities for 'build-to-suit' (i.e. development according
to the specifications of a tenant) development at this Property. The Company
estimates that this land could support the development of an additional 12
million net rentable square feet of light manufacturing and distribution
facilities under current zoning and entitlements. The Company estimates that the
cost of developing a typical distribution facility of approximately 200,000 net
rentable square feet with concrete and steel construction and loading docks
would be approximately $23.50 per net rentable square foot in today's market.
The Company believes that the current market rent for such a facility would be
approximately $2.75 per net rentable square foot on a triple net basis. The
Company has previously developed or provided development advisory services for
four industrial facilities at this Property. Development advisory services
typically entail giving advice on construction plans, obtaining necessary
governmental approvals and implementing the development program.

Renovation and Expansions at Existing Properties. The Company seeks to
enhance the income potential of its Properties through a selective but
aggressive program of renovation and expansion. For example, the Company
recently completed an approximately $6.0 million renovation and expansion of the
Longboat Key Club. This project included the construction of a new restaurant,
club, fitness center, banquet facilities and meeting rooms. The Company believes
that these added amenities will help to attract additional guests and golf club
members to the Club and support possible future increases in rates at this
Property.

At the Outlet Park Shoppes at Waccamaw Property, the Company and its
partners are in the process of expanding this approximately 739,000 net rentable
square foot property by an additional 36,500 net rentable square feet. This
expansion is expected to be completed in 1998 at an aggregate cost to the
Company and its partners of approximately $4.0 million. The expansion is
expected to be fully leased by the end of 1998. In addition, the Company is
considering a potential additional expansion of this Property by approximately
27,000 net rentable square feet in 2000, although there can be no assurance that
the Company will complete this later expansion. The Company estimates that
rental rates will be approximately $13.00 per net rentable square foot for space
at this expansion. The Company will own a 25.0% interest in this Property.

The Company has budgeted approximately $6.5 million through the end of 1999
for expansion of the Manufacturers Outlet Center Property. This expansion is
currently in the planning stage and would include the development of a five acre
site owned by the Company which is adjacent to the Property. This expansion
project is subject to the receipt of governmental approvals.

As part of the Formation Transactions, the Company will acquire a 17.9 acre
parcel of land from a third party which is adjacent to the Company's Shoppes at
St. Lucie West Property. The Shoppes at St. Lucie West was approximately 99%
leased at March 31, 1998. The Company estimates that this land could support
approximately a 150,000 net rentable square foot expansion of the Shoppes at St.
Lucie West Property under current zoning and entitlements. The Company will
acquire this parcel for Units with a value of $2.25 million.

There can be no assurance that the Company will successfully complete the
expansion projects described above or that the Company's estimate of the cost of
any expansion will prove accurate.

THE PROPERTIES

The Properties are located in 14 states and consist of interests in 14
office Properties, 10 retail Properties, two storage Properties, three
residential Properties and one hospitality/resort complex. The office, retail,
storage and residential Properties contain an aggregate of approximately 8.6
million net rentable square feet and approximately 1,100 apartment units. These
Properties were approximately 90% leased at March 31, 1998. The Properties also
include approximately 974 acres of land held for development located in an
industrial park and an interest in the Longboat Key Club resort complex. Set
forth below is certain information regarding the Properties:

<TABLE>
<CAPTION>
COMPANY'S
PERCENT SHARE OF PERCENT
YEAR NET LEASED BASE RENT OF
PERCENT BUILT/ RENTABLE AS OF AS OF COMPANY'S
PROPERTY NAME MARKET OWNERSHIP RENOVATED SQUARE FEET 3/31/98 3/31/98(1) BASE RENT
- ----------------------------- --------------------------- ---------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE PROPERTIES:
63 Madison Avenue............ New York, NY 50.5%(4) 1961/1997 797,377 100%(5) $ 4,401,360 6.8%
200 Madison Avenue........... New York, NY 31.5(6) 1927/1997 670,238 95 4,334,292 6.7
498 Seventh Avenue........... New York, NY 50.0(7) 1920/1997 873,137 90(8) 3,334,288 5.1
24 West 57th Street.......... New York, NY 100.0 1920/1997 97,312 88 2,592,276 4.0
529 Fifth Avenue............. New York, NY 32.6(9) 1959 266,772 99 2,353,974 3.6
307 West 38th Street......... New York, NY 100.0 1927/1996 273,819 90 1,937,784 3.0
First NBC Center............. New Orleans, LA 100.0 1985 1,005,357 88 7,717,824 11.9
Riverview Center............. Menands, NY 100.0 1929/1990 977,780 68 4,116,108 6.4
Marketplace Design Center.... Philadelphia, PA N/A(10) 1921/1974 302,541 81 3,004,161 4.6
38 Chauncy Street............ Boston, MA 100.0 1927/1982 130,142 90 1,843,260 2.8
First Union Bank Building.... Daytona Beach, FL 100.0 1972/1991 129,765 84 1,754,381 2.7
328 South Jefferson Street... Chicago, IL 100.0 1923 287,468 93 1,406,597 2.2
Winewood Office Park......... Tallahassee, FL 20.0(11) 1972/1997 332,030 100 1,039,322 1.6
GTE Property(12)............. Beaverton, OR 100.0 1980 65,000 100 1,016,760 1.6
Shenandoah Industrial Park... Coweta County, GA N/A(13) N/A N/A N/A N/A N/A
SUBTOTAL/WEIGHTED AVERAGE
FOR OFFICE
PROPERTIES............. N/A N/A 6,208,738 84% $40,852,386 63.1%
----------- -----------
----------- -----------
RETAIL PROPERTIES:
Princeton Shopping Center.... Princeton, NJ 100.0% 1957/1997 217,441 86% $ 2,854,821 4.4%
International Drive Value
Center..................... Orlando, FL 100.0 1995 185,953 100 2,302,290 3.6
Manufacturers Outlet
Center..................... Mt. Kisco, NY 100.0 1979/1994 203,121 92 1,873,296 2.9
Kendall Value Center......... Kendall, FL 100.0 1984/1993 173,302 100 1, 681,357 2.6
Shoppes at St. Lucie West.... St. Lucie, FL 100.0 1992/1994 200,669 99 1,575,969 2.4
Outlet Park Shoppes at
Waccamaw................... Myrtle Beach, SC 25.0(14) 1981/1996 738,590 93 1,538,194 2.4
Easton Commons Shopping
Center..................... Houston, TX 100.0 1985 192,154 90 1,377,334 2.1
Kirby/Richmond Shopping
Center..................... Houston, TX 100.0 1972/1989 54,321 92 708,675 1.1
Sunset Strip Center.......... Kendall, FL 100.0 1984/1992 81,998 74 673,865 1.0
M&M Plaza.................... Menominee, MI 100.0 1967/1990 225,760 93 352,911 0.5
SUBTOTAL/WEIGHTED AVERAGE
FOR RETAIL
PROPERTIES............. N/A N/A 2,273,309 93% $14,938,712 22.5%
----------- -----------
----------- -----------
STORAGE PROPERTIES:
Public Storage Facility...... Alameda, CA 74.25%(9) -- 74,581 98% $ 665,417 1.0%
Public Storage Facility...... Glendale, CA 74.25(9) -- 57,690 95 461,823 0.7
SUBTOTAL/WEIGHTED AVERAGE
FOR STORAGE
PROPERTIES............. N/A N/A 132,271 96% $ 1,127,240 1.7%
----------- -----------
----------- -----------

<CAPTION>
BASE RENT
PER LEASED NET
SQUARE EFFECTIVE
PROPERTY NAME FOOT(2) RENT(3)
- ----------------------------- ---------- ---------
<S> <C> <C>
OFFICE PROPERTIES:
63 Madison Avenue............ $10.93 $ 18.45
200 Madison Avenue........... 21.61 22.61
498 Seventh Avenue........... 8.55 17.52
24 West 57th Street.......... 30.31 32.37
529 Fifth Avenue............. 27.34 22.35
307 West 38th Street......... 7.86 8.02
First NBC Center............. 8.70 8.17
Riverview Center............. 6.19 8.82
Marketplace Design Center.... 12.31 13.18
38 Chauncy Street............ 15.68 15.72
First Union Bank Building.... 16.12 14.07
328 South Jefferson Street... 5.26 5.12
Winewood Office Park......... 15.65 17.35
GTE Property(12)............. 15.64 15.64
Shenandoah Industrial Park... N/A N/A
SUBTOTAL/WEIGHTED AVERAGE
FOR OFFICE
PROPERTIES............. $12.91 N/A
RETAIL PROPERTIES:
Princeton Shopping Center.... $15.20 $ 12.82
International Drive Value
Center..................... 12.38 12.84
Manufacturers Outlet
Center..................... 10.05 11.34
Kendall Value Center......... 9.73 10.05
Shoppes at St. Lucie West.... 7.93 7.52
Outlet Park Shoppes at
Waccamaw................... 8.95 9.55
Easton Commons Shopping
Center..................... 8.19 7.48
Kirby/Richmond Shopping
Center..................... 14.19 12.76
Sunset Strip Center.......... 11.15 11.35
M&M Plaza.................... 1.67(15) 1.79
SUBTOTAL/WEIGHTED AVERAGE
FOR RETAIL
PROPERTIES............. $ 7.09 N/A
STORAGE PROPERTIES:
Public Storage Facility...... $12.24 $ 12.66
Public Storage Facility...... 11.34 11.85
SUBTOTAL/WEIGHTED AVERAGE
FOR STORAGE
PROPERTIES............. $ 8.80 $ 8.80
</TABLE>

<TABLE>
<CAPTION>
COMPANY'S
SHARE OF
BASE RENT PERCENTAGE OF
NET RENTABLE PERCENT LEASED AS OF COMPANY'S
SQUARE FEET AS OF 3/31/98 3/31/98 BASE RENT
------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
TOTAL/WEIGHTED AVERAGE FOR OFFICE,
RETAIL AND STORAGE
PROPERTIES............................ 8,614,318 90% 56,648,338 87%
</TABLE>

<TABLE>
<CAPTION>
COMPANY'S
PERCENT SHARE OF
YEAR LEASED BASE RENT PERCENT OF
PERCENT BUILT/ NO. OF AS OF AS OF COMPANY'S
PROPERTY NAME MARKET OWNERSHIP RENOVATED APARTMENTS 3/31/98 3/31/98(1) BASE RENT
- ---------------------------------------- ---------------- --------- ---------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
RESIDENTIAL PROPERTIES:
Park Hill Lane.......................... Menands, NY 100.0% 1962/1979 567 86% $ 3,919,115 4.2%
One Dartmouth Place..................... Denver, CO 100.0 1973/1993 418 97 2,696,832 6.1
Presidential Estates.................... Guilderland, NY 100.0 1967/1997 128 97 1,241,607 1.9
TOTAL/WEIGHTED AVERAGE FOR
RESIDENTIAL PROPERTIES............ 1,113 92% $ 7,857,554 12.1%
----- --- ----------- ---
----- --- ----------- ---

<CAPTION>
NET
EFFECTIVE
RENT PER
PROPERTY NAME APARTMENT(3)
- ---------------------------------------- ------------
<S> <<C>
RESIDENTIAL PROPERTIES:
Park Hill Lane.......................... $672
One Dartmouth Place..................... 568
Presidential Estates.................... 834
TOTAL/WEIGHTED AVERAGE FOR
RESIDENTIAL PROPERTIES............ $691
-----
-----
</TABLE>

<TABLE>
<CAPTION>
COMPANY'S PERCENT OF
NET RENTABLE SHARE OF COMPANY'S
SQUARE FEET NO. OF APARTMENTS BASE RENT BASE RENT
------------- ------------------ ------------ ----------
<S> <C> <C> <C> <C>
TOTAL/WEIGHTED AVERAGE FOR OFFICE,
RETAIL, STORAGE AND RESIDENTIAL
PROPERTIES........................ 8,614,318 1,113 $64,505,892 100.0%
</TABLE>

<TABLE>
<CAPTION>
PERCENT YEAR 1998 MINIMUM
PROPERTY NAME MARKET OWNERSHIP BUILT/RENOVATED LEASE PAYMENT(17)
- ---------------------------------------- ----------------- ---------- ---------------- -------------------
<S> <C> <C> <C> <C>
HOSPITALITY/RESORT COMPLEX:
Longboat Key Club(16)................... Longboat Key, FL (16) 1982/1991 $6,700,000
</TABLE>
- ------------

(1) Company's share of base rent represents the annual contractual rent in
effect under existing leases as of March 31, 1998 multiplied by the
Company's percentage ownership of the Property.

(2) The base rent per leased square foot information is calculated by dividing
100% of the Property's base rent by the net rentable square feet leased as
of March 31, 1998.

(3) As used throughout this Prospectus, net effective rent represents (a) for
leases in effect at the time an interest in the relevant property was first
acquired by the Company, the remaining lease payments under the lease
excluding operating expense pass-throughs, if any, divided by the number of
months remaining under the lease multiplied by 12 and (b) for leases
entered into after an interest in the relevant Property was first acquired
by the Company, all lease payments under the lease excluding operating
expense pass-throughs, if any, divided by the number of months in the lease
multiplied by 12, and, in the case of both (a) and (b), minus tenant
improvement costs and leasing commissions, if any, paid or payable, divided
by the number of months in the respective lease multiplied by 12, and
presented on a per leased square foot basis. Net effective rent includes
the effect of rent abatements during the periods described in clauses (a)
and (b). Net effective rent also includes future contractual increases in
rental payments and therefore, in certain cases, may exceed base rent per
leased square foot as a result of the provision for future contractual
increases in rental payments in the net effective rent data.

(4) The Company owns the entire general partner interest in this Property and
49.5% of the limited partner interests.

(5) In January 1998, New York Life delivered approximately 60,000 net rentable
square feet back to the Company so that the Company could lease that space
together with an additional 340,000 net rentable square feet to Ziff-Davis
under a 21 year lease. After giving effect to this leasing activity, the
Property is 100% leased. See 'Business and Growth Strategies -- External
Growth.' The base rent information does not give effect to this leasing
activity.

(6) The Company owns the entire general partner interest in this Property and
30.5% of the limited partner interests.

(7) The Company owns a 50% managing member interest in this Property.

(8) The percent leased data for this Property reflects the execution of (i) a
lease with Bates in November 1997 with regard to approximately 200,000 net
rentable square feet which commences in June 1998 and (ii) leases with
regard to an additional 200,000 net rentable square feet at this Property
which were signed during the first three months of 1998. After giving
effect to these leases, the Property is 90% leased. See 'Business and
Growth Strategies -- External Growth.' The base rent information does not
give effect to this leasing activity.

(9) The Company owns a limited partnership interest in this Property.

(10) The Company holds the mortgage note on this Property with a participation
interest substantially equivalent to 100% economic ownership.

(11) The Company has a 20% co-tenant's interest in this Property.

(12) This Property is leased on a triple net basis to a subsidiary of GTE
Corporation.

(13) This Property consists of 973.7 acres of land being held for development.
The Company does not own fee title to this Property; rather, the Company
owns an option to purchase title to this Property. The option price
currently is approximately $700,000 plus the payment of approximately
$375,000 of accrued real estate taxes.

(14) The Company owns a 25.0% membership interest in the limited liability
company which owns this Property.

(15) Base rent per leased square foot has been adjusted to exclude 85,000 square
feet which is on land that has been ground leased at a rate of $10,000 per
year.

(16) The Longboat Key Club consists of two golf courses with 45 holes of golf,
two tennis centers with 38 Har-Tru tennis courts, two pro shops, a fitness
center and restaurants. The Club also currently operates 220 units at the
Resort at Longboat Key condominium hotel (the 'Hotel') which is located
within the Club's premises. The Hotel is owned by the condominium unit
owners. The Company will acquire the assets of the Club in the Formation
Transactions. The Operating Partnership will lease the assets of the Club
to an affiliated lessee (in which directors and officers of the Company own
approximately a 4% interest) in order to satisfy certain conditions for the
maintenance of the Company's REIT status. See 'Business and Properties --
The Hospitality/Resort Complex.' The average occupancy of the Hotel for
the year ended December 31, 1997 was 76.8%, the average daily rate was
$212, and the revenue per available room was approximately $163.

(17) The 1998 minimum lease payment represents the fixed annual base rent
payable to the Operating Partnership by the lessee of the Club's assets.
Under the terms of the lease, the Operating Partnership may also
participate in the revenues of the lessee to the extent they exceed certain
base levels. See 'Business and Properties -- The Hospitality/Resort
Complex.'

STRUCTURE AND FORMATION OF THE COMPANY

STRUCTURE OF THE COMPANY

The Company will be the general partner of the Operating Partnership and
will contribute the proceeds of the Offering to the Operating Partnership in
exchange for a number of Units equal to the number of shares of Common Stock
sold in the Offering. The Company will conduct substantially all of its
business, and will hold its interests in the Properties, through the Operating
Partnership. As the sole general partner of the Operating Partnership, the
Company will have the exclusive power to manage and conduct the business of the
Operating Partnership. The chart below shows the ownership of the Company and
its principal subsidiaries after the completion of the Formation Transactions
and the Offering. The Company owns the golf courses, tennis centers and other
amenities at the Longboat Key Club and leases them to an affiliated entity. See
'Business and Properties -- The Hospitality/Resort Complex.'

[CHART]

No independent third party appraisals, valuations or fairness opinions have
been obtained by the Company in connection with the Formation Transactions.
Accordingly, there can be no assurance that the value of the consideration
received by the contributors in the Formation Transactions is equivalent to the
fair market value of the interests and assets acquired by the Company. See 'Risk
Factors -- Conflicts of Interest Could Adversely Affect Stockholders.'

BENEFITS TO RELATED PARTIES

Certain affiliates of the Company will realize material benefits as a
result of the Offering and the Formation Transactions, including the following:

Investors who owned interests in the Properties and the Company's property
management and real estate brokerage businesses immediately prior to the
Formation Transactions will receive 13,426,066 Units and 1,148,934 shares of
Common Stock in consideration for the contribution of those interests to the
Operating Partnership. The executive officers of the Company will receive the
following number of Units and shares of Common Stock in the Formation
Transactions: Joseph S. Lesser, 1,166,349 Units; Alan L. Gordon, 596,750 Units;
Peter S. Duncan, 335,491 Units and 400,000 shares of Common Stock; Gary L.
Naughton, 19,191 Units; and Bernard B. Falk, 105,464 Units. The aggregate number
of Units and shares of Common Stock being issued in the Formation Transactions
to all contributors has an aggregate value of approximately $291.5 million
(based on the midpoint of the price range set forth on the cover of this
Prospectus), and represent approximately 51.7% of the Company's equity interests
on a fully diluted basis. The interests being contributed have a book value of
approximately $64.7 million, as depreciated.

Members of the management of Loeb Partners Realty and Comfort (Messrs.
Lesser, Gordon, Duncan, Naughton and Falk) will become executive officers and,
in the case of Messrs. Lesser, Duncan and Gordon, directors of the Company. Each
of the executive officers will enter into employment agreements with the
Company. See 'Management -- Employment Agreements.' Also, the Company will grant
to directors, officers and employees of the Company options to purchase an
aggregate of approximately 1,127,000 shares of Common Stock at the initial
public offering price under the Stock Option and Incentive Plan, subject to
certain vesting requirements. See 'Management -- Stock Option and Incentive
Plan.'

Investors who owned interests in the 63 Madison Avenue Property prior to
the Formation Transactions will receive approximately $5.8 million of the net
cash proceeds of the Offering in repayment of a loan previously made by those
investors to fund improvements at the Property. Messrs. Lesser, Gordon, Duncan,
Naughton and Falk will receive an aggregate of approximately $224,000 of these
proceeds.

The structure of the Formation Transactions will provide Unit recipients,
including members of management, with the opportunity to defer the recognition
of gain for tax purposes resulting from the contribution of their interests in
the Properties and the property management and real estate brokerage businesses
to the Operating Partnership in the Formation Transactions.

The lease with regard to the facilities at the Longboat Key Club will
provide certain of the contributors of the Properties in the Formation
Transactions with potential economic benefits. Directors and officers of the
Company will own approximately a 4% interest in the lessee; the balance of the
interests in the lessee will be owned by the former owners of this Property,
none of whom is an officer, director or employee of the Company. See 'Business
and Properties -- The Hospitality/Resort Complex.'

Recipients of Units in the Formation Transactions will have registration
rights with respect to shares of Common Stock issued in exchange for Units. See
'Shares Available for Future Sales.'

Additional information regarding the benefits to related parties is set
forth under 'Formation Transactions,' 'Management' and 'Certain Relationships
and Related Transactions.'

CONFLICTS OF INTEREST

Following the formation of the Operating Partnership and the completion of
the Offering, there will be conflicts of interest with respect to certain
transactions between the holders of Units and the stockholders of the Company.
In particular, the consummation of business combinations, the sale of properties
or a reduction of indebtedness could have adverse tax consequences to holders of
Units. In addition, after the Offering the Company, as the general partner of
the Operating Partnership and the

Company's directors and officers, acting on behalf of the Company in its
capacity as general partner, will have fiduciary obligations to the other
partners of the Operating Partnership, the discharge of which may conflict with
the interests of the Company's stockholders. Certain officers and directors of
the Company also will continue to own direct and indirect interests in office
properties and other real estate assets, which interest may give rise to
conflicts of interest concerning the fulfillment of their responsibilities as
officers and directors of the Company. See 'Risk Factors -- Conflicts of
Interest Could Adversely Affect Stockholders' and 'Business and
Properties -- Excluded Interests.' For a discussion of the role of the Company's
disinterested directors and the Company's policies and agreements designed to
minimize adverse effects from these conflicts of interest, see 'Policies with
Respect to Certain Activities -- Conflicts of Interest Policies' and
'Manangement -- Employment Agreements.'

THE OFFERING

All of the shares of Common Stock offered by this Prospectus are being
offered by the Company.

<TABLE>
<S> <C>
Shares of Common Stock Offered................. 13,600,000
Shares of Common Stock Outstanding after the
Offering(1).................................. 14,749,034
Shares of Common Stock and Units Outstanding
after the Offering(2)........................ 28,175,100
Use of Proceeds................................ To acquire interests in the Properties and other assets in the
Formation Transactions, to repay indebtedness and for working
capital. See 'Use of Proceeds.'
NYSE Symbol.................................... 'LRC'
</TABLE>

- ------------

(1) Includes 1,148,934 shares of Common Stock expected to be issued in
connection with the Formation Transactions and 100 shares of Common Stock
issued to Joseph S. Lesser when the Company was incorporated.

(2) Units are exchangeable on a one-for-one basis for shares of Common Stock or,
at the option of the Company, cash, subject to certain exceptions. Includes
13,426,066 Units expected to be issued in connection with the Formation
Transactions that may be exchanged for cash or, at the option of the
Company, shares of Common Stock on a one-for-one basis generally commencing
one year after completion of the Offering. Excludes 2,040,000 shares that
are issuable upon the exercise of the Underwriters' overallotment option and
approximately 1,127,000 shares reserved for issuance upon the exercise of
stock options to be granted pursuant to the Company's Stock Option and
Incentive Plan concurrent with the Offering.

DISTRIBUTIONS

The Company intends to initially distribute annually approximately % of
estimated cash available for distribution. The Company's estimate of the cash
available for distribution for the twelve months ending December 31, 1998, is
based upon pro forma funds from operations for the 12 months ended December 31,
1997, with certain adjustments as described in 'Distributions.' The actual
distributions made by the Company will be determined by the Board of Directors,
in its discretion, and will be affected by a number of factors, including the
gross revenues received from its Properties, the operating expenses of the
Company, the interest expense incurred through borrowing, and unanticipated
capital and other expenditures. No assurance can be given that the Company's
estimates will

prove accurate or that any level of distributions will be made or sustained. The
Company does not expect to change its estimated distribution rate per share if
the Underwriters' over-allotment option is exercised.

The Company anticipates that cash flow available for distribution will
exceed earnings and profits for federal income tax purposes due to non-cash
expenses, primarily depreciation and amortization, to be incurred by the
Company. Distributions by the Company to the extent of its current and
accumulated earnings and profits for federal income tax purposes, other than
capital gains dividends, generally will be taxable to stockholders as ordinary
dividend income. Capital gains dividends (other than any portion of such gains
attributable to certain depreciation recapture) generally will be taxable as
long-term capital gain for federal income tax purposes. Distributions in excess
of earnings and profits generally will be treated as non-taxable return of
capital and, therefore, will result in a reduction of a stockholder's basis in
the Common Stock, to the extent thereof, and thereafter as taxable gain unless
properly designated by the Company as capital gains dividends. The Company
anticipates that approximately % (or approximately $. per share of
Common Stock) of the distributions intended to be paid by the Company in 1998
will represent a return of capital for federal income tax purposes. See
'Distributions' and 'Federal Income Tax Consequences -- Taxation of
Stockholders.'

TAX STATUS OF THE COMPANY

The Company intends to elect to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the 'Code'),
commencing with its taxable year ending December 31, 1998. The Company believes,
and has obtained an opinion of Rogers & Wells LLP, counsel to the Company, to
the effect that, commencing with its taxable year ending December 31, 1998, the
Company will be organized in conformity with the requirements for qualification
as a REIT under the Code and that the Company's proposed method of operation
will enable it to meet the requirements for taxation as a REIT. This legal
opinion is based on various assumptions and factual representations by the
Company regarding the Company's ability to meet various requirements for
qualification as a REIT, and no assurance can be given that actual operating
results will meet these requirements. The legal opinion is not binding on the
Internal Revenue Service ('IRS') or any court.

To maintain REIT status, an entity must meet a number of organizational and
operational requirements. In addition, in order to maintain its qualification as
a REIT, the Company generally will be required each year to distribute at least
95% of its net taxable income. As a REIT, the Company generally will not be
subject to federal income tax on net income it distributes currently to its
stockholders. If the Company fails to qualify as a REIT in any taxable year, it
will be subject to federal income tax at regular corporate rates. See 'Federal
Income Tax Consequences -- Taxation of the Company -- Failure to Qualify' and
'Risk Factors -- Failure to Qualify as a REIT Would Cause the Company to be
Taxed as a Corporation' for a more detailed discussion of the consequences of
the failure of the Company to qualify as a REIT. Even if the Company qualifies
for taxation as a REIT, the Company may be subject to certain state and local
taxes on its income and property and federal income and excise taxes on its
undistributed income.

SUMMARY SELECTED COMBINED FINANCIAL AND OPERATING INFORMATION

The following table sets forth summary selected financial and operating
information on a pro forma basis for the Company and on a historical combined
basis for the Company's predecessor, which is referred to in the historical
financial statements as 'Loeb Real Estate.' Loeb Real Estate is not a legal
entity, but rather a combination of real estate partnerships and limited
liability companies which were under common management and control. The
following information should be read in conjunction with the combined financial
statements and notes thereto included elsewhere in this Prospectus. The balance
sheet data as of December 31, 1997 and 1996 and the operating data for the three
years ended December 31, 1997, of Loeb Real Estate have been derived from the
historical combined financial statements audited by Ernst & Young LLP,
independent auditors, whose report with respect thereto is included elsewhere in
this Prospectus. The operating data for the three months ended March 31, 1997
and 1998, the balance sheet data as of December 31, 1995 and the operating data
for the years ended December 31, 1994 and 1993 has been derived from the
unaudited financial statements of Loeb Real Estate. In the opinion of
management, the unaudited financial statements include all adjustments,
consisting only of normal recurring adjustments, that management considers
necessary for a fair presentation of the financial position and results of
operations for the period. The results of operations for the interim periods
ended March 31, 1997 and 1998 are not necessarily indicative of the results
which may be obtained for the full fiscal year. The summary pro forma
information is presented as if (i) the Offering and the other transactions
contemplated herein under 'Formation Transactions' had occurred as of the
beginning of the period presented for operating data and as of the balance sheet
date for balance sheet data and (ii) the Company qualified as a REIT,
distributed all of its taxable income and, therefore, incurred no income tax
expense during the period presented (see 'Risk Factors' and 'Federal Income Tax
Consequences -- Taxation of the Company -- Failure to Qualify'). In management's
opinion, all adjustments necessary to present fairly the effects of these
transactions have been made. The pro forma financial data is not necessarily
indicative of what the actual financial position and results of operations of
the Company would have been as of and for the periods indicated, nor does it
purport to represent the Company's future financial position or results of
operations.

THE COMPANY (PRO FORMA) AND LOEB REAL ESTATE (COMBINED HISTORICAL)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF PROPERTIES DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------------------------------- ----------------------------------------------------
PRO COMBINED PRO
FORMA HISTORICAL FORMA COMBINED HISTORICAL
----------- ----------- ----------- -------------------------------------
1998 1998 1997 1997 1997 1996 1995 1994
----------- ----------- ----------- ----------- ------- -------- ------- -------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenues:
Revenue from rental
property.................... $15,710 $11,567 $ 94,194 $ 51,306 $48,194 $29,461 $27,460
Hotel revenue................ -- 2,920 -- -- -- -- -- --
Management fee income........ 1,217 741 2,841 3,554 2,675 2,256 1,449
Other income................. 765 254 5,357 3,221 4,581 1,755 2,825
----------- ----------- ----------- ----------- -------- ------- ------- -------
Total revenue............. $20,612 $12,562 $ 102,392 $ 58,081 $55,450 $33,472 $31,734
----------- ----------- ----------- ----------- -------- ------- ------- -------
Expenses:
Property operating
expenses.................... $ 4,888 $ 4,076 $ 31,551 $ 19,182 $18,280 $11,043 $11,679
Hotel operating expenses..... -- 1,708 -- -- -- -- -- --
Real estate taxes............ 1,972 1,707 11,783 7,456 6,784 4,407 4,047
Interest..................... 4,860 4,067 16,599 17,712 13,343 8,015 6,396
Depreciation and
amortization................ 2,117 1,661 18,042 7,078 6,013 4,108 3,164
General and administrative... 1,017 567 3,458 2,207 2,574 2,170 1,421
----------- ----------- ----------- ----------- -------- ------- ------- -------
Total expenses............ $16,562 $12,078 $ 81,433 $ 53,635 $46,994 $29,743 $26,707
----------- ----------- ----------- ----------- -------- ------- ------- -------
Operating income.................... $ 4,050 $ 484 $ 20,959 $ 4,446 $ 8,456 $ 3,729 $ 5,027
Equity in (loss) income of
investees.......................... 542 1,000 (1,255) 807 835 1,023 628
Income tax (expense) benefit........ (23) (29) (259) 150 139 138
----------- ----------- ----------- ----------- -------- ------- ------- -------
Income before minority interest and
extraordinary item................. $ 4,569 $ 1,455 $ 19,704 $ 4,994 $ 9,441 $ 4,891 $ 5,793
----------- ----------- ----------- ----------- -------- ------- ------- -------
Minority interest in:
Operating partnership............ (8,655)
Real estate partnerships......... (1,561) -- -- -- --
----------- ----------- ----------- ----------- -------- ------- ------- -------
Income before extraordinary items... $ 4,569 $ 1,455 $ 9,488 $ 4,994 $ 9,441 $ 4,891 $ 5,793
----------- ----------- ----------- ----------- -------- ------- ------- -------
----------- ----------- ----------- ----------- -------- ------- ------- -------
Income before extraordinary items
per share(1):
Basic............................ $.64
----
----
Diluted.......................... $.64
----
----
<CAPTION>
1993
---------
(UNAUDITED)
<S> <C>
Operating Data:
Revenues:
Revenue from rental
property.................... $17,906
Hotel revenue................ --
Management fee income........ 505
Other income................. 2,924
-------
Total revenue............. $21,335
-------
Expenses:
Property operating
expenses.................... $ 8,958
Hotel operating expenses..... --
Real estate taxes............ 2,494
Interest..................... 4,491
Depreciation and
amortization................ 2,709
General and administrative... 1,269
-------
Total expenses............ $19,921
-------
Operating income.................... $ 1,414
Equity in (loss) income of
investees.......................... 798
Income tax (expense) benefit........ 81
-------
Income before minority interest and
extraordinary item................. $ 2,293
-------
Minority interest in:
Operating partnership............
Real estate partnerships......... --
-------
Income before extraordinary items... $ 2,293
-------
-------
Income before extraordinary items
per share(1):
Basic............................
Diluted..........................
</TABLE>

(table continued on next page)

(table continued from previous page)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF PROPERTIES DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, 1998 COMBINED HISTORICAL
-------------------------------- -----------------------------------------------------------------
PRO COMBINED
FORMA HISTORICAL 1997 1996 1995 1994 1993
------------------ ---------- -------- -------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
(at end of period)
Real properties, at cost
before accumulated
depreciation.......... $297,941 $242,748 $202,912 $ 179,699 $ 110,300 $ 79,426
Total assets............ 341,444 268,669 231,136 199,128 127,273 101,627
Mortgage notes
payable............... 257,162 212,456 184,379 142,905 86,689 75,198
Owner's equity
(deficit)............. 59,057 42,281 33,706 41,699 26,912 12,946

Other Data:
Fund from
operations(2)......... -- -- -- -- -- --
Net cash provided by
operating
activities(3)......... 4,527 4,675 1,484 1,354 -- --
Net cash (used in)
investing
activities(3)......... (2,105) (39,531) (21,670) (17,443) -- --
Net cash provided by
financing
activities............ 12,159 32,088 25,559 14,610 -- --
Number of properties.... 31 13 12 10 9 8 8
Square footage
(excluding Longboat
Key Club and
residential
Properties)........... 8,614 2,529 2,246 1,990 1,193 523
Apartment units......... 1,113 1,113 1,113 1,113 1,113 1,113
</TABLE>

- ------------
(1) Pro forma basic net income per share excludes any dilutive effect of options
outstanding. Pro forma diluted net income per share includes the dilutive
effect of the outstanding options calculated under the treasury stock
method. As each Unit is redeemable for one share of Common Stock, the
calculation of net income per share upon redemption of the outstanding Units
will be unaffected, as Unitholders and Common Stockholders are entitled to
equal distributions on a per Unit and per share basis in the net income of
the Company.

(2) The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ('NAREIT') in
March 1995 defines Funds from Operations as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring
and sales of properties, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. The Company believes that Funds from Operations is helpful to
investors as a measure of the performance of an equity REIT because, along
with cash flow from operating activities, financing activities and investing
activities, it provides investors with an indication of the ability of the
Company to incur and service debt, to make capital expenditures and to fund
other cash needs. The Company computes Funds from Operations in accordance
with standards established by NAREIT which may not be comparable to Funds
from Operations reported by other REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the current
NAREIT definition differently than the Company. Funds from Operations does
not represent cash generated from operating activities in accordance with
GAAP and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of the Company's
financial performance or to cash flow from operating activities (determined
in accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including
its ability to make cash distributions. For a reconciliation of net income
and Funds from Operations, see 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Funds from Operations.'

(3) Pro forma information relating to cash flow from operating and investing
activities has not been included because the Company believes that this
information would not be meaningful due to the number of assumptions
required in order to calculate this information.

RISK FACTORS

An investment in the Common Stock involves various risks. Prospective
investors should carefully consider the following information before making a
decision to purchase Common Stock in the Offering.

THE COMPANY'S PERFORMANCE AND VALUE ARE SUBJECT TO RISKS ASSOCIATED WITH THE
REAL ESTATE INDUSTRY

CONCENTRATION OF PROPERTIES IN A LIMITED NUMBER OF MARKETS COULD ADVERSELY
AFFECT THE COMPANY'S FINANCIAL PERFORMANCE. While the Properties are located in
various markets throughout the United States, Properties accounting for
approximately 41% of the total portfolio (based on the Company's Adjusted Pro
Forma Net Operating Income for the year ended December 31, 1997) are located in
New York City. The Company's revenue from, and the value of its Properties in,
New York City will be affected by a number of factors, including the local
economic climate (which may be adversely impacted by business layoffs or
downsizing, industry slowdowns, relocations of businesses, changing
demographics, increased telecommuting, New York State and New York City
budgetary commitments and priorities and other factors) and local real estate
conditions (such as oversupply of or reduced demand for office properties and
other competing commercial properties). Therefore, the Company's performance and
its ability to make distributions to stockholders will depend, in part, on the
economic conditions in New York City (as well as the economic conditions in its
other principal markets). Downturns in the New York City real estate market or
the Company's other principal markets, including New Orleans, Louisiana and
Northern Florida, could adversely affect the Company.

THE PROPERTIES ARE SUBJECT TO UNCONTROLLABLE FACTORS AFFECTING PERFORMANCE
AND VALUE. Stockholders will bear risks associated with real property
investments. The yields available from equity investments in real estate depend
in large part on the amount of income generated and expenses incurred. The
economic performance and value of the Company's real estate assets will be
subject to all of the risks incident to the ownership and operation of real
estate. These include the risks normally associated with changes in general
national, regional and local economic and market conditions. Such local real
estate market conditions may include excess supply and intense competition for
tenants, including competition based on rental rates, attractiveness and
location of the property and quality of maintenance, insurance and management
services. Other factors that may adversely affect the performance and value of a
Property include changes in laws and governmental regulations (including those
governing usage, zoning and taxes), changes in interest rates, the availability
of financing and the possibility of bankruptcies of tenants at the Properties.
To the extent that the value and/or performance of the Properties are adversely
effected by any of the foregoing factors, the Company's financial condition and
results of operations would be adversely effected.

OPERATING COSTS COULD ADVERSELY AFFECT THE COMPANY'S CASH FLOW. The
Properties will be subject to operating risks common to commercial real estate
in general, any and all of which may adversely affect occupancy or rental rates.
The Properties are subject to increases in operating expenses such as cleaning;
electricity; heating, ventilation and air conditioning ('HVAC'); elevator repair
and maintenance; insurance and administrative costs; and other general costs
associated with security, repairs and maintenance. While the Company's tenants
generally are currently obligated to pay all or a portion of these escalating
costs, there can be no assurance that tenants will agree to pay such costs upon
renewal or that new tenants will agree to pay such costs. If operating expenses
increase, the local rental market may limit the extent to which rents may be
increased to meet increased expenses without decreasing occupancy rates. While
the Company implements cost saving incentive measures at each of its Properties,
if any of the above occurs, the Company's ability to make distributions to
stockholders could be adversely affected.

THE COMPANY'S FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED DUE TO ITS
RELIANCE ON MAJOR TENANTS. On a pro forma basis as of December 31, 1997, New
York Life and Ziff-Davis each accounted for more than 3% of the Company's pro
forma total annualized base rent, as adjusted to give effect to the execution
and commencement of significant leases at the New York City Properties in 1998
(6.6% in the aggregate). See 'Business and Properties -- Tenants.' The Company
would be adversely affected in the event of a bankruptcy or insolvency of, or a
downturn in the business of, any major tenant which resulted in a failure or
delay in such tenant's rent payments.

THE COMPANY EXPECTS TO EXPEND SIGNIFICANT AMOUNTS ON RENOVATION, CAPITAL
IMPROVEMENTS AND LEASING COMMISSIONS, AND TO PROVIDE SIGNIFICANT AMOUNTS OF FREE
RENT. The Company's business strategy requires intensive renovation and capital
expenditures, and often requires the Company to provide significant amounts of
free rent to tenants. Free rent is estimated to comprise an aggregate of
approximately $9.3 million and $4.3 million in 1998 and 1999, respectively. See
' -- Estimated Initial Cash Available for Distribution Will Not be sufficient to
Make Distributions at Expected Levels.' If that occurs, the incremental costs
could adversely affect cash available for distribution to the Company's
stockholders. In addition, renovations and other capital improvements entail
certain risks, including environmental risks, construction cost overruns and
delays, and unanticipated downturns in demand or unanticipated emergence of
competition in the affected market, which risks individually or in the aggregate
could give rise to a material adverse effect on the Company or its financial
condition or results of operations.

FAILURE TO RENEW LEASES OR RELET SPACE COULD ADVERSELY AFFECT THE COMPANY'S
CASH FLOW OR FINANCIAL PERFORMANCE. The Company will be subject to the risks
that leases may not be renewed, space may not be relet or the terms of renewal
or reletting (including the cost of required renovations) may be less favorable
than current lease terms. Leases on a total of approximately 6.1%, 6.5% and 9.7%
of the net rentable square feet at the office and retail Properties will expire
in 1998, 1999 and 2000, respectively. If the Company were unable promptly to
relet or renew the leases for all or a substantial portion of this space, if the
rental rates upon such renewal or reletting were significantly lower than
expected rates or if its reserves for these purposes proved inadequate, then the
Company's cash flow and ability to make expected distributions to stockholders
may be adversely affected.

THE COMPANY COULD BE ADVERSELY AFFECTED BY THE COMPANY'S LACK OF SOLE
DECISION-MAKING AUTHORITY WITH RESPECT TO PARTIALLY OWNED PROPERTIES. The
Company will own only partial interests in eight of its Properties and will
lease the assets of the Longboat Key Club to an affiliated entity. The lease
with regard to the Longboat Key Club will give substantial control over the
operations of the complex to the lessee. In the case of the Properties located
at 498 Seventh Avenue, 200 Madison Avenue and 63 Madison Avenue, the Company
will own the general partner or managing member interest of the entities which
own these assets and, as a result, will have control over the operation of the
Property, although consent of the other partners or members is required with
regard to extraordinary transactions. As a general partner or managing member,
the Company will have fiduciary responsibilities to third parties which it will
be required to consider when making decisions relating to such partially owned
Properties. In addition, the 498 Seventh Avenue Property is subject to a
customary buy-sell arrangement which may be exercised by the Company or its
partner, each of whom owns a 50% interest, and would require the other party to
sell or buy the corresponding interest. At the Winewood and Outlet Park Shoppes
at Waccamaw Properties the Company shares decision-making authority with its
partners, and at the 529 Fifth Avenue and two public storage Properties the
Company owns only a limited partner interest. Partial ownership entails certain
risks not present were a third party not involved, including the possibility
that the other partners in such partially owned Properties might become bankrupt
or otherwise fail to fund their share of required capital contributions, that
such partners might at any time have economic or other business interests or
goals which are inconsistent with the business interests or goals of the
Company, that buy/sell rights might exist with respect to such property, and
that such partners may be in a position to take action contrary to the
instructions or the requests of the Company and contrary to the Company's
policies or objectives. Such investments may also have the potential risk of
impasses on decisions, such as a sale, because neither the Company nor the
partner would have full control over the affected Property. Consequently,
actions by such partner might result in subjecting such partially owned
Properties to additional risk. In addition, the Company may in certain
circumstances be liable for the actions of such third-party partners. There is
no limitation under the Company's organizational documents as to the amount of
funds that may be invested in additional partially owned properties.

THE COMPANY COULD BE ADVERSELY AFFECTED BY A DEFAULT UNDER THE LONGBOAT KEY
CLUB LEASE. The calculation of the minimum annual base rent under the lease for
Longboat Key Club was based on the historical performance of the Club as well as
certain assumptions with regard to the future performance of the Club, in light
of, among other things, the significant renovations and expansion of the Club in
1997. See 'The Company -- Internal Growth -- Renovation Expansions at Existing
Properties.' The

Club is subject to operating risks common to the hospitality/resort industry
including, among other things, (i) competition for guests from other providers,
(ii) increases in operating costs due to inflation and other factors, which
increases may not be offset by increased rates, (iii) dependence on business and
commercial travelers and tourism, which business may fluctuate and be seasonal
and, in particular will be affected by weather conditions; and (iv) adverse
affects of general and local economic conditions. These factors could adversely
affect the ability of the Longboat Key Club to generate revenues and for the
lessee to make lease payments and, therefore, the Company's ability to make
expected distributions.

PROSPECTIVE AND RECENT ACQUISITIONS MAY NOT PERFORM TO EXPECTATIONS. The
Company intends actively to continue to acquire real estate assets. See
'Business and Growth Strategies.' Acquisitions of real estate assets entail
risks that investments will fail to perform in accordance with expectations.
Estimates of the costs of improvements to bring an acquired property up to
standards established for the market position intended for that property may
prove inaccurate. In addition, the general investment risks described above
under ' -- The Properties are subject to uncontrollable factors affecting
performance and value' are associated with any new real estate investment.
The Company's ability to manage future growth successfully will require it to
integrate successfully its new acquisitions and there can be no assurance that
the Company will be able to do that. Certain of the Properties, including
498 Seventh Avenue, 24 West 57th Street and 63 Madison Avenue, have relatively
short operating histories under the Company's management. Finally, the
Company expects that there will be significant competition for attractive
investment opportunities from other major real estate investors, many of whom
have greater capital resources than the Company, including both publicly traded
REITs and private institutional investment funds. The Company anticipates that
future acquisitions will be financed through secured or unsecured financing and
proceeds from equity or debt offerings by the Company or the Operating
Partnership. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources.'

ILLIQUIDITY OF REAL ESTATE INVESTMENTS COULD ADVERSELY AFFECT THE COMPANY'S
FINANCIAL CONDITION. Because real estate investments are relatively illiquid,
the Company's ability to vary its portfolio promptly in response to economic or
other conditions will be limited. In addition, certain significant expenditures,
such as debt service, real estate taxes, and operating and maintenance costs
generally are not reduced in circumstances resulting in a reduction in income
from the investment. The foregoing and any other factor or event that would
impede the ability of the Company to respond to adverse changes in the
performance of its investments could have an adverse effect on the Company's
financial condition and results of operations, with a consequent adverse effect
on the Company's ability to make expected distributions to stockholders.

THE COST OF COMPLYING WITH THE AMERICANS WITH DISABILITIES ACT COULD
ADVERSELY AFFECT THE COMPANY'S CASH FLOW. The Properties are subject to the
requirements of the Americans with Disabilities Act (the 'ADA'), which generally
requires that public accommodations, including office buildings, be made
accessible to disabled persons. The Company believes that the Properties are in
substantial compliance with the ADA and that it will not be required to make
substantial capital expenditures to address the requirements of the ADA.
However, compliance with the ADA could require removal of access barriers and
noncompliance could result in the imposition of fines by the federal government
or the award of damages to private litigants. If, pursuant to the ADA, the
Company were required to make substantial alterations in one or more of the
Properties, the Company's financial condition and results of operations, as well
as the amount of funds available for distribution to stockholders, could be
adversely affected.

THE COMPANY MAY EXPERIENCE UNINSURED LOSSES. The Company carries
comprehensive liability, fire, extended coverage and rental loss insurance
covering all of the Properties, with policy specifications and insured limits
which the Company believes are adequate and appropriate under the circumstances.
There are, however, certain types of losses such as war risks, nuclear hazards
and losses due to governmental actions that are not generally insured because
the Company believes that the risks associated with such losses do not justify
the costs of the insurance coverage. Should an uninsured loss or a loss in
excess of insured limits occur, the Company could lose its capital invested in
the Property, as well as the anticipated future revenue from the Property and,
in the case of debt which is recourse to the Company, the Company would remain
obligated for any mortgage debt or other financial

obligations related to the Property. No assurance can be given that material
losses in excess of insurance proceeds will not occur in the future.

The Company's title insurance policies covering each Property are generally
for an amount which is less than the current value of the Property. In the event
of a loss with respect to a Property relating to a title defect that is in
excess of the amount of such title insurance policy, the Company could lose both
its capital invested in and anticipated profits from such property.

REASSESSMENT COULD ADVERSELY AFFECT THE COMPANY. Certain local real
property tax assessors may seek to reassess certain of the Properties as a
result of the Formation Transactions. The Company would contest vigorously any
reassessment of this type. Subject to market conditions, current leases may
permit the Company to pass through to tenants a portion of the effect of any
increases in real estate taxes resulting from a reassessment. Those increases
could, however, adversely affect the Company's competitive position and
consequently have a negative impact on its financial condition.

CONFLICTS OF INTEREST COULD ADVERSELY AFFECT STOCKHOLDERS

ABSENCE OF ARM'S-LENGTH NEGOTIATIONS IN THE FORMATION TRANSACTIONS MAY HAVE
RESULTED IN ASPECTS OF THE FORMATION TRANSACTIONS' BEING UNFAVORABLE TO
STOCKHOLDERS. There have been no arm's-length negotiations or third-party
appraisals with respect to the valuation of the Properties and other assets
contributed to the Company in its formation. The amount of consideration to be
paid by the Company to acquire interests in the Properties was determined by the
Loeb Group and Comfort. No independent valuations or appraisals of the
Properties were obtained by the Company in connection with the Formation
Transactions. See 'Formation Transactions.' As a result, the consideration paid
by the Company for its assets may exceed their fair market value and the market
value of the Common Stock may exceed a stockholder's proportionate share of the
aggregate fair value of the Company's assets. Further, there were no
arm's-length negotiations with respect to other terms of the Formation
Transactions, in particular with respect to the representations and warranties
made by the contributors of properties to the Company in the Formation
Transactions, or the indemnification provided for breach of representations and
warranties. In addition, Messrs. Joseph Lesser, Alan Gordon and Peter Duncan,
who had significant influence in structuring the Formation Transactions, had
preexisting ownership interests in the Properties and will receive substantial
economic benefits as a result of the Formation Transactions. Further, in the
course of structuring the Formation Transactions, Messrs. Lesser, Gordon and
Duncan had the ability to influence the type and level of benefits that they and
the executive officers of the Company will receive from the Company.

DIRECTORS, OFFICERS AND SIGNIFICANT STOCKHOLDERS MAY INFLUENCE THE COMPANY
NOT TO ACT IN THE BEST INTERESTS OF STOCKHOLDERS. Upon consummation of the
Offering, Messrs. Lesser, Gordon, Duncan, Naughton and Falk will be deemed
beneficially to own approximately 9.3% of the outstanding Common Stock (on a
fully diluted basis, i.e., including Common Stock issuable upon exchange of
Units). All of those Units will be exchangeable for Common Stock (subject to the
Ownership Limit) or, at the option of the Company, for the cash equivalent of
that number of shares of Common Stock, beginning on the first anniversary of the
Closing. See 'Formation Transactions.' In addition, executive officers of the
Company will receive options to purchase shares of Common Stock exercisable at
the initial offering price. See 'Management -- Executive Compensation.' Messrs.
Lesser, Gordon and Duncan are affiliated with the Company and, as directors,
will have influence on the management and operation of the Company and, as
stockholders, on the outcome of any matters submitted to a vote of the
stockholders. Such influence might be exercised in a manner that is inconsistent
with the interests of other stockholders. Although there is no understanding or
arrangement for these directors, officers and stockholders and their affiliates
to act in concert, these parties would be in a position to exercise significant
influence over the Company's affairs should they choose to do so. If all or a
substantial portion of the Units were exchanged for Common Stock and that Common
Stock were retained and not sold, subject to the Ownership Limit described under
'Description of Securities -- Restrictions on Transfer,' the influence of the
holders thereof over the affairs of the Company would increase, and the
influence of the remaining stockholders would be diminished accordingly. See
'Management' and 'Principal Stockholders.'

In connection with the Formation Transactions, the contributors of
interests in the Properties and the property management and real estate
brokerage businesses will enter into contribution agreements with the Company
and the Operating Partnership. The contribution agreements generally contain
representations only with respect to the ownership of the interests by the
holders thereof and certain other limited matters. Pursuant to a Supplemental
Representations and Warranties Agreement, Messrs. Lesser, Gordon and Duncan (the
'Indemnitors') have agreed to provide additional representations and warranties
to the Company which are in some cases limited to the knowledge of the
Indemnitors. The maximum aggregate liability of the Indemnitors is limited and
may not be sufficient in all circumstances to recompense the Company in the
event of material breaches of these representations. See 'The Formation
Transactions for a discussion of these limitations.' Messrs. Lesser, Gordon,
Duncan, Naughton and Falk will enter into employment and noncompetition
agreements with the Company pursuant to which they will agree, among other
things, not to engage in certain business activities in competition with the
Company. See 'Management -- Employment Agreements.' To the extent that the
Company chooses to enforce its rights under any of the contribution, employment
and noncompetition agreements, it may determine to pursue available remedies,
such as actions for damages or injunctive relief, less vigorously than it
otherwise might because of its desire to maintain its ongoing relationship with
the individual involved.

CONFLICTS WILL EXIST WITH RESPECT TO THE OPERATING PARTNERSHIP. After the
Offering, the Company, as the general partner of the Operating Partnership and
the Company's directors and officers, acting on behalf of the Company in its
capacity as general partner, will have fiduciary obligations to the other
partners of the Operating Partnership, the discharge of which may conflict with
the interests of the Company's stockholders. In addition, those persons holding
Units, as limited partners, will have the right to vote on amendments to the
Partnership Agreement (most of which require approval by a majority in interest
of the limited partners, including the Company) and individually to approve
certain amendments that would adversely affect their rights, which may be
exercised in a manner that conflicts with the interests of the Company's
stockholders.

A SALE OF, OR REDUCTION IN MORTGAGE INDEBTEDNESS ON, ANY OF THE PROPERTIES
WILL HAVE DIFFERENT EFFECTS ON HOLDERS OF UNITS THAN ON STOCKHOLDERS. Certain
holders of Units, including Messrs. Lesser, Gordon and Duncan, may experience
different and more adverse tax consequences compared to those experienced by
holders of shares of Common Stock or other holders of Units upon the sale of, or
reduction of mortgage indebtedness on, any of the Properties. Therefore, such
holders and the Company, may have different objectives regarding the appropriate
pricing and timing of any sale of, or reduction of mortgage indebtedness on the
Properties, and regarding the appropriate characteristics of additional
properties to be considered for acquisition. Messrs. Lesser, Gordon, Duncan,
Naughton and Falk will be holders of 2,223,245 Units, and their status as
holders of Units may influence the Company not to sell particular properties, or
not to pay down mortgage indebtedness on particular properties, even though such
sales or debt paydowns might otherwise be financially advantageous to the
Company and its stockholders.

OUTSIDE INTERESTS OF OFFICERS AND DIRECTORS COULD CONFLICT WITH THE
COMPANY'S INTERESTS. Certain officers and directors of the Company will continue
to own direct and indirect interests in office properties and other real estate
assets, which interests may give rise to certain conflicts of interest
concerning the fulfillment of their responsibilities as officers and directors
of the Company. See 'Business and Properties -- Excluded Interests.' For a
discussion of the role of the Company's disinterested directors and the
Company's policies and agreements designed to minimize adverse effects from
these conflicts of interest, see 'Policies with Respect to Certain
Activities -- Conflict of Interest Policies.'

INTERESTS OF LESSEE AND MANAGER OF LONGBOAT KEY CLUB COULD CONFLICT WITH
COMPANY'S INTERESTS. Through their ownership of approximately 4% of the
interests of the lessee of Longboat Key Club, certain directors and officers of
the Company will derive benefits from the operation of the Longboat Key Club by
the lessee. Accordingly, they have faced conflicts of interest in structuring
the lease and the management contract with regard to the Club and may face
conflicts upon renewals of the lease or with respect to enforcing the provisions
of the lease. The Company believes that the influence of such officers and
directors, each of whom owes a fiduciary duty to the Company's stockholders,
over the

lessee will enable the Company to maintain a degree of control over the assets
of Longboat Key Club; however, as a result of their ownership interests in the
lessee Messrs. Lesser and Gordon may face conflicts in operating the Longboat
Key Club in a manner that may maximize profits for the lessee and manager
without necessarily benefitting the Company.

ESTIMATED INITIAL CASH AVAILABLE FOR DISTRIBUTION WILL NOT BE SUFFICIENT TO MAKE
DISTRIBUTIONS AT EXPECTED LEVELS

The Company's estimated initial annual distributions represent % of the
Company's estimated initial cash available for distribution for the twelve
months ending September 30, 1999, principally due to rent abatements and
anticipated capital expenditures during that period related to recent
significant redevelopment projects. Accordingly, it is expected that the Company
initially will be unable to pay its estimated initial annual distribution of
$1.30 per share to stockholders out of cash available for distribution as
calculated under 'Distributions' below. Under such circumstances, the Company
will have to fund a portion of its distributions from working capital or
additional borrowings under its credit facilities, if available. In the event
the Underwriters' over-allotment is exercised, pending investment of the
proceeds therefrom, the Company's ability to pay such distribution out of cash
available for distribution may be further adversely affected.

THE COMPANY RELIES ON KEY PERSONNEL WHOSE CONTINUED SERVICE IS NOT GUARANTEED

The Company is dependent on the efforts of its executive officers,
particularly Messrs. Lesser and Duncan. The loss of their services could have an
adverse effect on the operations of the Company. Each of these executive
officers will enter into an employment agreement with the Company. As described
herein, the Company will not acquire certain real estate assets in which Messrs.
Lesser, Gordon and Duncan and other members of management will retain an
interest. See 'Business and Properties -- Excluded Interests.' It is expected
that Messrs. Lesser and Duncan and such other members of management will not
devote a substantial amount of time to the management or operation of these
excluded properties. Prior to the completion of the Offering, each of the
executive officers, including Messrs. Lesser, Gordon and Duncan, will enter into
a multiyear employment and noncompetition agreement with the Company which will
provide, among other things, that each such person will devote substantially all
of their business time to the Company.

FAILURE TO QUALIFY AS A REIT WOULD CAUSE THE COMPANY TO BE TAXED AS A
CORPORATION

THE COMPANY WILL BE TAXED AS A CORPORATION IF IT FAILS TO QUALIFY AS A
REIT. The Company intends to operate so as to qualify as a REIT under the Code,
commencing with its taxable year ending December 31, 1998. Although management
believes that the Company will be organized and will operate in such a manner,
no assurance can be given that the Company will be organized or will be able to
operate in a manner so as to qualify or remain so qualified. Qualification as a
REIT involves the satisfaction of numerous requirements (some on an annual or
quarterly basis) established under highly technical and complex Code provisions
for which there are only limited judicial and administrative interpretations,
and involves the determination of various factual matters and circumstances not
entirely within the Company's control. For example, in order to qualify as a
REIT, at least 95% of the Company's gross income in any year must be derived
from qualifying sources, and the Company must pay distributions to stockholders
aggregating annually at least 95% of its REIT taxable income (excluding net
capital gains). The complexity of these provisions and of the applicable
Treasury regulations that have been promulgated under the Code is greater in the
case of a REIT, such as the Company, that holds its assets in partnership form.
No assurance can be given that legislation, new regulations, administrative
interpretations or court decisions will not significantly change the tax laws
with respect to qualification as a REIT or the federal income tax consequences
of such qualification.

Longboat Key Club, Inc. will lease from the Operating Partnership the
assets comprising the Longboat Key Club pursuant to a lease which generally
provides for payment of rent equal to the greater of fixed rent or percentage
rent. If the lease is recharacterized as a service contract, joint venture or
some other type of arrangement, rather than a true lease, for federal income tax
purposes, part or all

of the payments that the Operating Partnership receives from Longboat Key Club,
L.P. would not be considered rent and would not otherwise satisfy the various
requirements for qualification as 'rents from real property.' In that case, the
Company would not be able to satisfy either the 75% or 95% gross income tests
and, as a result, would not qualify as a REIT. While the Company believes that
the lease will be respected as a true lease for federal income tax purposes,
there can be no assurance that the IRS will not assert a contrary position.

Rogers & Wells LLP, counsel to the Company, has rendered an opinion to the
effect that commencing with its taxable year ending December 31, 1998 the
Company will be organized in conformity with the requirements for qualification
as a REIT and its proposed method of operation, including the Company's interest
in the Real Estate Brokerage Subsidiary and the lease of the Longboat Key Club,
will enable it to meet the requirements for qualification and taxation as a
REIT. See 'Federal Income Tax Consequences -- Taxation of the Company.' Rogers &
Wells LLP's opinion, however, is based on various assumptions and factual
representations by the Company regarding the Company's ability to meet the
various requirements for qualification as a REIT, and no assurance can be given
that actual operating results will meet these requirements. The legal opinion is
not binding on the IRS or any court and only represents the view of counsel to
the Company based upon existing law, some of which contains no controlling
precedent. Moreover, the Company's qualification and taxation as a REIT will
depend upon the Company's ability to meet from time to time (through actual
annual operating results, distribution levels and diversity of stock ownership)
the various qualification tests imposed under the Code, the results of which
will not be reviewed by counsel.

If the Company were to fail to qualify as a REIT in any taxable year, the
Company would be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income (calculated without a deduction
for distributions to shareholders) at regular corporate rates. Moreover, unless
entitled to relief under certain statutory provisions, the Company also would be
disqualified from treatment as a REIT for the four taxable years following the
year during which qualification was lost. This treatment would significantly
reduce the net earnings of the Company available for investment or distribution
to stockholders because of the additional tax liability to the Company for the
years involved. In addition, distributions to stockholders would no longer be
required to be made. See 'Federal Income Tax Consequences -- Taxation of the
Company -- Failure to Qualify.'

REIT MINIMUM DISTRIBUTION REQUIREMENTS: POSSIBLE INCURRENCE OF ADDITIONAL
DEBT. In order to qualify as a REIT, the Company generally will be required each
year to distribute to its shareholders at least 95% of its net taxable income
(excluding any net capital gain). In addition, the Company will be subject to a
4% nondeductible excise tax on the amount, if any, by which certain
distributions paid by it with respect to any calendar year are less than the sum
of (i) 85% of its ordinary income for that year, (ii) 95% of its capital gain
net income for that year and (iii) 100% of its undistributed taxable income from
prior years upon which the Company has not paid federal income tax. The Company
intends to make distributions to its shareholders to comply with the 95%
distribution requirement and to avoid the nondeductible excise tax. The
Company's income will consist primarily of its share of the income of the
Operating Partnership, and the cash available for distribution by the Company to
its shareholders will consist of its share of cash distributions from the
Operating Partnership and funds available to it from borrowings. Differences in
timing between (i) the actual receipt of income and actual payment of deductible
expenses and (ii) the inclusion of such income and deduction of such expenses in
arriving at taxable income of the Company could require the Company, directly or
indirectly through the Operating Partnership, to borrow funds on a short-term
basis to meet the 95% distribution requirement and to avoid the nondeductible
excise tax.

A portion of the amounts used by the Operating Partnership to fund
distributions to stockholders is expected to come from the Real Estate Brokerage
Subsidiary through dividends on the non-voting stock of the Real Estate
Brokerage Subsidiary to be held by the Operating Partnership. The Real Estate
Brokerage Subsidiary will not qualify as a REIT and thus will pay federal, state
and local income taxes on its net income at normal corporate rates. To the
extent that the Real Estate Brokerage Subsidiary is required to pay federal,
state and local income taxes, the cash available for distribution to the
Company's stockholders will be reduced accordingly.

The value of the securities of the Real Estate Brokerage Subsidiary held by
the Company cannot exceed 5% of the value of the Company's total assets. See
'Federal Income Tax Consequences -- Taxation of the Company -- Asset Tests.'
This limitation may restrict the ability of the Real Estate Brokerage Subsidiary
to increase the size of its business unless the value of the other assets of the
Company is increasing at a commensurate rate.

POTENTIAL LEGISLATIVE ACTION REGARDING REITS MAY ADVERSELY AFFECT THE
COMPANY. On February 2, 1998, the Clinton Administration released a summary of
its proposed budget plan which contained several proposals affecting REITs. One
such proposal, if enacted in its present form, would prohibit a REIT from
holding securities representing more than 10% of the vote or value of all
classes of stock of a corporation, other than a qualified REIT subsidiary or
another REIT. If enacted in its present form, the proposal may limit the future
activities and growth of the Real Estate Brokerage Subsidiary. No prediction can
be made as to whether such proposal or any other proposal affecting REITs will
be enacted into legislation and the impact of any such legislation on the
Company.

OTHER TAX LIABILITIES WILL REDUCE THE COMPANY'S CASH AVAILABLE FOR
DISTRIBUTION. Even if the Company qualifies as a REIT, it will be subject to
certain federal, state and local taxes on its income and property. See 'Federal
Income Tax Consequences -- Other Tax Considerations.'

LIMITATIONS ON CHANGES IN CONTROL AND OWNERSHIP LIMIT COULD ADVERSELY AFFECT THE
MARKET FOR THE COMMON STOCK

THE ARTICLES OF INCORPORATION AND BY-LAWS AND PROVISIONS OF THE OPERATING
PARTNERSHIP AGREEMENT MAY INHIBIT CHANGES OF CONTROL. Certain provisions of the
Company's Articles of Incorporation (the 'Charter') and by-laws (the 'By-laws')
may have the effect of delaying, deferring or preventing a change in control of
the Company or other transaction that could provide the holders of Common Stock
with the opportunity to realize a premium over the then-prevailing market price
of such Common Stock or otherwise be in their best interest. The Ownership Limit
(described under ' -- The Company's Ownership Limit may have adverse
consequences for stockholders') also may have the effect of delaying, deferring
or preventing a change in control of the Company or other transaction even if
such a change in control or transaction were in the best interests of some, or a
majority, of the Company's stockholders. The Board of Directors will consist of
seven members as of the Closing of the Offering who will be classified into
three classes with each class serving a three-year term. The staggered terms of
the members of the Board of Directors may adversely affect the stockholders'
ability to effect a change in control of the Company, even if a change in
control were in the best interests of some, or a majority, of the Company's
stockholders. See 'Management.' The Charter authorizes the Board of Directors to
cause the Company to issue additional authorized but unissued Common Stock, and
to classify or reclassify any unissued Common Stock, and to establish the
preferences, rights and other terms of any such classified or unclassified
shares. See 'Description of Securities -- General.' Any such issuance could have
the effect of diluting existing stockholders' interests in the Company. Although
the Board of Directors has no such intention at the present time, it could
establish a series of preferred stock that could delay, defer or prevent a
change in control of the Company or other transaction that might involve a
premium price for the Common Stock or otherwise be in the best interest of the
stockholders. The Charter and By-laws also contain other provisions that may
delay, defer or prevent a change in control of the Company or other transaction
that might involve a premium price for the Common Stock or otherwise be in the
best interest of the stockholders. See 'Certain Provisions of Maryland Law and
of the Company's Charter and By-laws.'

income tax purposes as a result of their participation in the Business
Combination and the rights, preferences and privileges of the limited partners
are preserved. If holders of Units will not be treated in such manner in
connection with a proposed Business Combination, the Company may not engage in
such transaction unless limited partners (other than the Company) holding more
than 50% of the Units held by limited partners vote to approve the Business
Combination. In addition, the Company, as general partner of the Operating
Partnership, has agreed in the Operating Partnership Agreement with the limited
partners that the Company will not consummate a Business Combination in which
the Company conducted a vote of the stockholders unless the matter would have
been approved had holders of Units been able to vote together with the
stockholders on the transaction. The foregoing provision of the Operating
Partnership Agreement would under no circumstances enable or require the Company
to engage in a Business Combination which required the approval of the Company's
stockholders if the Company's stockholders did not in fact give the requisite
approval. Rather, if the Company's stockholders did approve a Business
Combination, the Company would not consummate the transaction unless (i) the
Company as general partner first conducts a vote of holders of Units (including
the Company) on the matter, (ii) the Company votes the Units held by it in the
same proportion as the stockholders of the Company voted on the matter in the
stockholder vote, and (iii) the result of such vote of the Unit holders
(including the proportionate vote of the Company's Units) is that had such vote
been a vote of stockholders, the Business Combination would have been approved
by the stockholders. As a result of these provisions of the Operating
Partnership Agreement, a third party may be inhibited from making an acquisition
proposal that it would otherwise make, or the Company, despite having the
requisite authority under its Articles of Incorporation, may be prohibited from
engaging in a proposed business combination.

MARYLAND LAW IMPOSES CERTAIN LIMITATIONS ON CHANGES IN CONTROL. Under
provisions of the Maryland General Corporation Law, as amended ('MGCL'), certain
'business combinations' (including certain issuances of equity securities)
between a Maryland corporation and any person who beneficially owns ten percent
or more of the voting power of the corporation's then outstanding shares or an
affiliate of the corporation who, at any time within the two-year period prior
to the date in question, was the beneficial owner of ten percent or more of the
voting power of the then outstanding voting shares of common stock of the
corporation (an 'Interested Stockholder'), or an affiliate of the Interested
Stockholder, are prohibited for five years after the most recent date on which
the Interested Stockholder becomes an Interested Stockholder. Thereafter, any
such business combination must be approved by two super-majority stockholder
votes unless, among other conditions, the corporation's common stockholders
receive a minimum price (as defined in the MGCL) for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Stockholder for its common shares. The Company has opted out of these
provisions of the MGCL, but the Board of Directors may elect to adopt these
provisions in the future.

THE COMPANY'S OWNERSHIP LIMIT MAY HAVE ADVERSE CONSEQUENCES FOR
STOCKHOLDERS. To maintain its qualification as a REIT for federal income tax
purposes, not more than 50% in value of the outstanding shares of beneficial
interest of the Company may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code, to include certain entities). See 'Federal
Income Tax Consequences -- Taxation of the Company -- Requirements for
Qualification.' To facilitate maintenance of its qualification as a REIT for
federal income tax purposes, the Charter generally prohibits ownership, directly
or by virtue of the attribution provisions of the Code, by any single
stockholder of more than 9.8% (in value or number of shares, whichever is more
restrictive) of the issued and outstanding Common Stock and generally will
prohibit ownership, directly or by virtue of the attribution provisions of the
Code, by any single stockholder of more than 9.8% (in value) of the issued and
outstanding shares of any class or series of the Company's capital stock
(collectively, the 'Ownership Limit'). The Board of Directors has the power to
waive or modify the Ownership Limit with respect to one or more persons who
would not be treated as 'individuals' for purposes of the Code if it is
satisfied, based upon information required to be provided by the party seeking
the waiver, that ownership in excess of this limit will not cause a person who
is an individual to be treated as owning Common Stock or preferred stock in
excess of the Ownership Limit, applying the applicable constructive ownership
rules, and will not otherwise jeopardize the Company's status as a REIT for
federal income tax purposes. Absent any such exemption or waiver, Common Stock
or preferred stock

acquired or held in violation of the Ownership Limit will be transferred to a
trust for the benefit of a designated charitable organization, with the person
who acquired such Common Stock and/or preferred stock in violation of the
Ownership Limit not entitled to receive any distributions thereon, to vote such
Common Stock or preferred stock, or to receive any proceeds from the subsequent
sale thereof in excess of the lesser of the price paid therefor or the amount
realized from such sale. A transfer of Common Stock and/or preferred stock to a
person who, as a result of the transfer, violates the Ownership Limit may be
void under certain circumstances. See 'Description of Securities -- Restrictions
on Transfer.' The Ownership Limit may have the effect of delaying, deferring or
preventing a change in control and, therefore, could adversely affect the
stockholders' ability to realize a premium over the then-prevailing market price
for the Common Stock in connection with such transaction.

THE COMPANY'S USE OF DEBT FINANCING, INCREASES IN INTEREST RATES, FINANCIAL
COVENANTS AND THE ABSENCE OF ANY DEBT LIMITATION COULD ADVERSELY AFFECT THE
COMPANY

THE REQUIRED REPAYMENT OF DEBT OR INTEREST THEREON COULD ADVERSELY AFFECT
THE COMPANY'S FINANCIAL POSITION. The Company will be subject to risks normally
associated with debt financing, including the risk that the Company's cash flow
will be insufficient to pay distributions at expected levels and meet required
payments of principal and interest, and the risk that existing indebtedness on
the Properties (which will not in all cases have been fully amortized at
maturity) will not be able to be refinanced or that the terms of such
refinancing will not be as favorable as the terms of existing indebtedness. The
Company's pro forma indebtedness at December 31, 1997 was $197.3 million. See
'Business and Properties -- Debt Financing.' If principal payments due at
maturity cannot be refinanced, extended or paid with proceeds of other capital
transactions, such as new equity capital, the Company expects that its cash flow
will not be sufficient in all years to pay distributions at expected levels and
to repay all of its maturing debt. Furthermore, if prevailing interest rates or
other factors at the time of refinancing (such as the possible reluctance of
lenders to make commercial real estate loans) result in higher interest rates
upon refinancing, the interest expense relating to refinanced indebtedness would
increase, which would adversely affect the Company's cash flow and the amount of
distributions it can make to stockholders. If a Property is mortgaged to secure
payment of indebtedness and the Company is unable to meet mortgage payments, the
Property could be foreclosed upon by, or otherwise transferred to, the mortgagee
with a consequent loss of income and asset value to the Company. The Company's
mortgages contain customary negative covenants limiting, among other things, the
Company's ability, without the prior consent of the lender, to enter into new,
or materially modify existing, leases of a material nature, to transfer
interests in the mortgagor entity (including mortgage interests) and to
discontinue insurance coverage. None of the Company's mortgage loans is
cross-defaulted to, or cross-collateralized with, any other.

THE COMPANY'S POLICY OF NO LIMITATIONS ON INDEBTEDNESS COULD RESULT IN HIGH
LEVERAGE. Upon completion of the Offering, the Company's Debt-to-Market
Capitalization Ratio (that is, the total consolidated and unconsolidated debt of
the Company as a percentage of the market value of outstanding Common Stock and
Units plus total consolidated and unconsolidated debt) is expected to be 24.6%
See 'Business and Properties -- Debt Financing.' The Company does not have a
policy limiting the amount of indebtedness that the Company may incur, and the
organizational documents of the Company and the Operating Partnership will not
contain any limitation on the amount of indebtedness that may be incurred. The
Company could become more highly leveraged, resulting in an increase in debt
service that could adversely affect the Company's Funds from Operations and,
consequently, the amount of cash available for distribution to stockholders and
could increase the risk of default on the Company's indebtedness.

RISING INTEREST RATES AND VARIABLE RATE DEBT COULD ADVERSELY AFFECT THE
COMPANY'S ABILITY TO MAKE EXPECTED DISTRIBUTIONS. Upon consummation of the
Offering, approximately 19.0% of the Company's total indebtedness will bear
interest at variable rates. The Company, which expects to incur indebtedness
through the Operating Partnership, may incur other variable rate indebtedness in
the future. Increases in interest rates on such indebtedness could increase the
Company's interest expense, which would adversely affect the Company's cash flow
and its ability to pay expected distributions to stockholders. Accordingly, the
Company may in the future engage in other transactions to further limit

its exposure to rising interest rates as appropriate and cost effective. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.'

COMPETITION IN ITS MARKETPLACE COULD HAVE AN ADVERSE IMPACT ON THE COMPANY'S
RESULTS OF OPERATIONS

A substantial portion of the Properties are located in highly developed
areas of Manhattan that include a large number of other office properties.
Manhattan is by far the largest office market in the United States, with a total
commercial real estate inventory of approximately 330 million rentable square
feet in the midtown and downtown Manhattan markets, according to The Gordon
Office Market Report. The number of competitive Class B office properties in
Manhattan could have a material adverse effect on the Company's ability to lease
office space at its Properties, and on the effective rents the Company is able
to charge. The Company also competes with numerous firms in the other markets
where the Properties are located.

Some of the other property owners with whom the Company competes have
greater resources than the Company. In particular, the Company may compete with
other REITs seeking to acquire properties of the type owned by the Company, some
of which may have or acquire greater financial, managerial and other resources
than the Company. The Company also will face competition from other real estate
companies that provide management, leasing, construction and other services
similar to those to be provided by the Company.

THE COMPANY WILL SUBSTANTIALLY DEPEND ON EXTERNAL SOURCES OF CAPITAL

In order to qualify as a REIT under the Code, the Company generally is
required each year to distribute to its stockholders at least 95% of its net
taxable income (excluding any net capital gain). See 'Federal Income Tax
Considerations -- Taxation of the Company -- Annual Distribution Requirements.'
Because of these distribution requirements, it is unlikely that the Company will
be able to fund all future capital needs, including capital needs in connection
with acquisitions, from cash retained from operations. As a result, to fund
future capital needs, the Company likely will have to rely on third-party
sources of capital which may or may not be available on favorable terms or at
all. The Company's access to third-party sources of capital will depend upon a
number of factors, including the market's perception of the Company's growth
potential and its current and potential future earnings and cash distributions
and the market price of the Common Stock. Moreover, additional equity offerings
may result in substantial dilution of stockholders' interests in the Company,
and additional debt financing may substantially increase the Company's leverage.
See 'Policies with Respect to Certain Activities -- Financing Policies.'

THE BOARD OF DIRECTORS COULD CHANGE POLICIES WITHOUT STOCKHOLDER APPROVAL

The Company's investment, financing and conflicts of interest policies and
its policies with respect to all other activities will be determined by the
Board of Directors. Although the Board of Directors has no present intention to
do so, it can amend, revise or eliminate these policies at any time and from
time to time at its discretion without a vote of the stockholders. A change in
any of these policies could adversely affect the Company's financial condition
or results of operations or the market price of the Common Stock.

PURCHASERS OF COMMON STOCK IN THE OFFERING WILL EXPERIENCE IMMEDIATE DILUTION

As set forth more fully under 'Dilution,' the pro forma net tangible book
value per share of the assets of the Company after the Offering will be
substantially less than the estimated initial public offering price per share in
the Offering. Accordingly, purchasers of the Common Stock offered hereby will
experience immediate dilution of $1.20 in the net tangible book value of the
Common Stock from the offering price (based on the assumed initial public
offering price). See 'Dilution.'

POSSIBLE ENVIRONMENTAL LIABILITIES COULD ADVERSELY AFFECT THE COMPANY'S
FINANCIAL CONDITION

THE COMPANY, AS AN OWNER AND OPERATOR OF PROPERTIES, MAY BE SUBJECT TO
LIABILITY UNDER ENVIRONMENTAL LAWS, WHICH COULD ADVERSELY AFFECT ITS FINANCIAL
CONDITION. Under federal, state and local

laws and regulations relating to protection of the environment or the impact of
the environment on human health ('Environmental Laws'), a current or previous
owner or operator of real estate may be required to investigate and clean up
hazardous or toxic substances or petroleum product releases at such property and
may be held liable to a governmental entity or to third parties for property
damage and for investigation and clean-up costs incurred by such parties in
connection with the contamination. Such laws typically impose clean-up
responsibility and liability without regard to whether the owner or operator
knew of or caused the presence of the contaminants, and the liability under such
laws has been interpreted to be joint and several unless the harm is divisible
and there is a reasonable basis for allocation of responsibility. In addition,
the owner or operator of a site may be subject to claims by third parties based
on damages and costs resulting from environmental contamination emanating from a
site.

Other Environmental Laws impose on owners and operators certain
requirements regarding activities and conditions involving hazardous or toxic
materials and substances that may affect adversely human health or the
environment. Failure to comply with applicable requirements could delay or
hinder the lease or sale of any affected property or result in the imposition of
monetary penalties and liens, in addition to the costs required to achieve
compliance, or create potential liability for third party claims. The Company
may be potentially liable for such costs or claims in connection with ownership
and operation of the Properties and properties acquired by the Company in the
future.

COSTS OF COMPLYING WITH ENVIRONMENTAL LAWS MAY ADVERSELY AFFECT THE
COMPANY'S CASH FLOW. Among other things, Environmental Laws also govern the
presence, maintenance and removal of asbestos-containing building materials
('ACBM'). These laws require that ACBM be properly managed and maintained, that
those who may come into contact with ACBM be adequately apprised or trained and
that special precautions, including removal or other abatement, be undertaken in
the event ACBM would be disturbed during renovation or demolition of a building.
These laws may impose fines and penalties on building owners or operators for
failure to comply with these requirements and may allow third parties to seek
recovery from owners or operators for personal injury or property damage
associated with exposure to asbestos fibers. ACBM has been detected through
sampling in certain of the Properties. Most of these buildings contain only
minor amounts of ACBM in good condition. The Company believes that ACBM is
currently being properly managed and maintained and other requirements relating
to ACBM are being followed, although some ACBM removal and disposal has been
recommended by recent environmental assessments at certain Properties. The cost
of this removal is expected by the Company to amount to less than $100,000. The
presence of ACBM should not present a significant risk as long as compliance
with requirements continues.

Additionally, certain Environmental Laws also impose requirements with
respect to wetlands. Pursuant to these laws, certain activities in and around
wetlands may require prior governmental approvals. Certain of the Properties,
including Shenandoah Industrial Park, contain wetlands, the presence of which
could delay or hinder the development of such Properties.

ENVIRONMENTAL CONDITIONS OF WHICH THE COMPANY IS UNAWARE MAY ADVERSELY
AFFECT THE COMPANY'S FINANCIAL CONDITION OR RESULTS OF OPERATIONS. All but four
of the Properties have been subject to varying degrees of environmental
assessments by independent environmental consultants since December 1995. The
environmental assessments typically included a visual inspection of the
Properties and the surrounding areas, an examination of current and historical
uses of the Properties and the surrounding areas and a review of relevant state,
Federal and historical documents. Where deemed appropriate by the Company or the
respective owners, on a property-by-property basis, additional testing was
conducted, including sampling for asbestos, for lead in drinking water, for soil
contamination where underground storage tanks ('USTs') are or were located or
where other past site usages create a potential for site impact, and for
contamination in groundwater. The Company has not obtained an environmental
assessment with regard to the GTE Property and has not obtained an environmental
assessment more recent than March 1995 for the 529 Fifth Avenue Property. The
Company has not been able to obtain any environmental assessments at the two
public storage Properties, because the Company owns only a limited partnership
interest in each of such Properties and does not have the unilateral right to
subject the Properties to environmental assessment.

Several of the Properties contain, or at one time contained, USTs used to
store petroleum products, including fuel oil, waste oil and gasoline.
Environmental assessments at the 38 Chauncy Street and

Princeton Shopping Center Properties have revealed soil and/or groundwater
contamination associated with USTs. Moreover, at four other Properties the
environmental assessments revealed USTs of unknown physical integrity. Given
such uncertainty, there can be no assurance that such USTs have not caused or
are not presently causing soil and/or ground water contamination at the
respective Properties. In addition, an environmental assessment performed at the
Winewood Office Park, in which the Company owns a 20% co-tenant interest, has
revealed groundwater contamination associated with the migration of petroleum
products from an adjacent property. Certain other environmental assessments
recommend additional review of environmental conditions at adjacent properties
from which contamination may migrate to the Properties. At certain of such
Properties, the contamination is being addressed by third-parties responsible
for the contamination who, in some cases, have indemnified the Company. There
can be no assurance, however, that if recourse to such indemnities becomes
necessary, such indemnity will be available or uncontested.

The Company is not aware of any environmental liabilities that the Company
believes would have a material adverse effect on the Company's business, assets,
financial condition or results of operations taken as a whole.

The Company believes that the Properties are in compliance in all material
respects with applicable Environmental Laws. The Company believes that the
issues identified in the environmental reports will not have a material adverse
effect on the Company if it continues to comply with Environmental Laws and with
the recommendations set forth in these reports. No assurance can be given,
however, that unidentified environmental liabilities will not arise at the
Properties or properties which the Company may acquire in the future which could
have an adverse effect on the Company's financial condition or results of
operations.

ABSENCE OF PRIOR PUBLIC MARKET FOR COMMON STOCK COULD ADVERSELY AFFECT THE
COMMON STOCK PRICE

Prior to the completion of the Offering, there has been no public market
for the Common Stock and there can be no assurance that an active trading market
will develop or be sustained or that Common Stock will be resold at or above the
initial public offering price. The offering price of the Common Stock was
determined by agreement among the Company and the Underwriters and may not be
indicative of the market price for the Common Stock after the completion of the
Offering. The market value of the Common Stock could be substantially affected
by general market conditions, including changes in interest rates. Moreover,
numerous other factors, such as governmental regulatory action and changes in
tax laws, could have a significant impact on the future market price of the
Common Stock.

OTHER RISKS OF OWNERSHIP OF COMMON STOCK COULD ADVERSELY AFFECT THE COMMON STOCK
PRICE

THE AVAILABILITY OF A SUBSTANTIAL AMOUNT OF COMMON STOCK FOR FUTURE SALE
COULD ADVERSELY AFFECT THE COMMON STOCK PRICE. Sales of a substantial number of
shares of Restricted Stock (as defined herein), or the perception that such
sales could occur, could adversely affect prevailing market prices of the Common
Stock. Subsequent to the Offering, 51.7% of the Company's outstanding equity
will be Restricted Stock or Units which may be converted into shares of
Restricted Stock. Common Stock issued upon redemption of Units may be sold in
the public market pursuant to registration rights (subject to the terms and
conditions thereof) that the Company has granted to all holders of Units, or
pursuant to Rule 144 under the Securities Act of 1933, as amended (the
'Securities Act'), or other available exemptions from registration. In addition,
the Company intends to reserve a number of shares of Common Stock for issuance
pursuant to the Company's Employee Stock Option Plan, and these shares of Common
Stock will be available for sale from time to time pursuant to exemptions from
registration requirements or upon registration. Options to purchase additional
shares of Common Stock will be granted to certain executive officers, employees
and directors upon the completion of the Offering. See 'Management.' No
prediction can be made about the effect that future sales of Common Stock will
have on the market prices of the Common Stock. See 'Shares Available for Future
Sale.'

To the extent any future growth of the Company is accompanied by the
issuance of additional shares of Common Stock, any such issuance could have the
effect of diluting existing stockholders' interests in the Company.

CHANGES IN MARKET CONDITIONS COULD ADVERSELY AFFECT THE COMMON STOCK PRICE.
As with other publicly traded equity securities, the value of the Common Stock
will depend upon various market conditions, which may change from time to time.
Among the market conditions that may affect the value of the Common Stock are
the following: the extent to which a secondary market develops for the Common
Stock following the completion of the Offering; the extent of institutional
investor interest in the Company; the general reputation of REITs and the
attractiveness of their equity securities in comparison to other equity
securities (including securities issued by other real estate-based companies);
the Company's financial performance; and general stock and bond market
conditions. There can be no assurance that the Common Stock will not trade below
the offering price following the completion of the Offering.

GROWTH POTENTIAL AND CASH DISTRIBUTIONS COULD ADVERSELY AFFECT THE COMMON
STOCK PRICE. Management believes, based on discussions with industry analysts
and other professionals in the real estate securities industry, that the market
value of the equity securities of a REIT is based primarily upon the market's
perception of the REIT's growth potential and its current and potential future
cash distributions, whether from operations or sales or refinancings, and is
secondarily based upon the real estate market value of the underlying assets.
For that reason, Common Stock may trade at prices that are higher or lower than
the net asset value per share of Common Stock. To the extent the Company retains
operating cash flow for investment purposes, working capital reserves or other
purposes, these retained funds, while increasing the value of the Company's
underlying assets, may not correspondingly increase the market price of the
Common Stock. The failure of the Company to meet the market's expectation with
regard to future earnings and cash distributions likely would adversely affect
the market price of the Common Stock. If the market price of the Common Stock
declined significantly, the Company might breach certain covenants with respect
to future debt obligations, which breach might adversely affect the Company's
liquidity and the Company's ability to make future acquisitions.

CHANGES IN MARKET INTEREST RATES COULD ADVERSELY AFFECT THE COMMON STOCK
PRICE. One of the factors that will influence the price of the Common Stock will
be the distribution rate on the Common Stock (as a percentage of the price of
the Common Stock) relative to market interest rates. Thus, an increase in market
interest rates may lead prospective purchasers of Common Stock to expect a
higher distribution rate, which would adversely affect the market price of the
Common Stock.

CONTINGENT OR UNDISCLOSED LIABILITIES COULD ADVERSELY AFFECT THE COMPANY'S
FINANCIAL CONDITION

As part of the Formation Transactions, the Company (through the Operating
Partnership) will acquire certain assets of the Loeb Group and Comfort subject
to existing liabilities, some of which may be unknown at the time the Offering
is consummated. Unknown liabilities might include liabilities for cleanup or
remediation of undisclosed environmental conditions, claims of tenants, vendors
or other persons dealing with the entities prior to the Offering (that had not
been asserted prior to the Offering), accrued but unpaid liabilities incurred in
the ordinary course of business. See ' -- Possible Environmental Liabilities
Could Adversely Affect the Company's Financial Condition' as to the possibility
of undisclosed environmental conditions potentially affecting the value of the
Properties.

RISKS RELATING TO YEAR 2000 ISSUE

Many existing computer programs were designed to use only two digits to
identify a year in the date field without considering the impact of the upcoming
change in the century. If not corrected, many computer applications could fail
or create erroneous results by or at the year 2000. The Company is addressing
the 'Year 2000' issue with respect to its operations and is in the process of
evaluating its potential exposure to the systems of its vendors, tenants,
clients and other third parties with whom the Company does business. There can
be no assurance that the systems of such third persons, on which the Company
relies for certain supporting administrative procedures and functions and
information, will be timely converted; however, the financial impact of becoming
year 2000 compliant has not to date been, and is not expected to be, material to
the Company's financial position or results of operations in a given year.

THE COMPANY

GENERAL

The Company is the successor to the real estate business of Loeb Partners
Realty which for over 30 years has invested in a variety of types of real estate
assets located in markets throughout the United States, with a primary focus on
office properties located in New York City and other CBDs. The Company seeks to
make opportunistic investments in properties where the Company believes there is
significant potential to increase the value of the property through leasing,
capital improvements and operating efficiencies or as a result of changes in
market conditions. Upon completion of the Offering, the Company will own
interests in 31 Properties located in 14 states. For the year ended December 31,
1997, the Company derived approximately 67% of its Adjusted Pro Forma Net
Operating Income from its interests in office Properties. During that same
period, the Company derived approximately 41% of its Adjusted Pro Forma Net
Operating Income from its interests in New York City office Properties. The
balance of the portfolio includes interests in retail, residential and storage
properties and one hospitality/resort complex. The Company also controls
approximately 974 acres of land located in suburban Atlanta, which could support
the development of approximately 12 million net rentable square feet. The
Company is self-administered and self-advised and intends to elect to qualify as
a REIT for federal income tax purposes.

The Company intends to continue to make geographically diverse investments
in a variety of property types, with an initial focus on Class B office
properties in New York City and other CBDs. The Company generally seeks to
acquire high quality Class B office properties which are typically more than 25
years old and have fewer amenities and lower rental rates than Class A
properties, but which, after renovation, may be 'repositioned' to appeal to
corporate tenants because of the properties' large floor plates and prime
locations within their CBD. In executing its acquisition and asset management
strategy, the Company expects to benefit from (i) a network of relationships
which the Company's management has developed over 30 years, (ii) a value
enhancement strategy through which the Company seeks to identify and acquire
underperforming assets at prices which the Company believes are below the
assets' potential value, (iii) its employees who have expertise in acquiring,
repositioning and managing properties, and (iv) its experience in employing its
value enhancement investment strategy through good and bad real estate markets
over 30 years, all of which the Company believes are important competitive
advantages in its business.

The Company's predecessor originated as the real estate business of Loeb
Rhoades & Co. Since the 1960's, the Company has invested in and managed real
estate assets for the Loeb family and for major domestic and foreign pension
funds, insurance companies and wealthy private investment groups. The Company's
largest investors include the Loeb family, C.V. Starr & Co., Inc. (whose
founders also started American International Group, Inc.) and Abercromby
Property International (an investment partnership whose investors include
Barclays Bank Pension Funds, London & Manchester Assurance Company and the
Shipbuilding Industries Pension Fund). These investors and certain other
investors who owned interests in the Properties prior to the Offering (including
members of the Company's management) are exchanging their interests in the
Properties for equity interests in the Company, and will beneficially own
approximately 51.7% of the Company's equity interests on a fully diluted basis
upon completion of the Offering.

As part of the Formation Transactions, the Company will acquire the assets
and property management business of Comfort. Comfort, which was formed in 1919,
specializes in the management and leasing of, and investment in, commercial
properties, particularly in New York City. Over the past five years, Comfort has
managed approximately 5.5 million net rentable square feet of properties. Loeb
Partners Realty and Comfort have been partners in various real estate projects
for over 30 years, and jointly purchased and repositioned approximately 3.0
million square feet of commercial real estate in metropolitan New York in the
last five years. The Company believes that Comfort's management and leasing
expertise will complement the Company's existing asset management and
acquisition capabilities to create a full service real estate organization.

The Company's management will continue to foster the creative and
disciplined corporate culture of its predecessors. The Company's management has
extensive experience with a wide variety of

property types and geographic regions throughout the United States, having
acquired, financed, repositioned or managed over 25 million square feet of real
estate assets over the last 30 years. The key executives of the Company, Joseph
S. Lesser, Alan L. Gordon, Peter S. Duncan, Gary L. Naughton and Bernard B. Falk
have been with the Company or Comfort for an average of more than 20 years. Mr.
Lesser was the Chairman of Trustees and Mr. Gordon was the Managing Trustee of
Florida Gulf Realty Trust, a REIT which owned shopping centers and office
properties located in Florida and which sold its real estate portfolio in 1985.
Upon completion of the Offering, the Company's officers and directors will own
equity interests in the Company representing approximately 9.3% of the Company's
equity interests on a fully diluted basis.

The Company was formed on February 9, 1998 as a Maryland corporation. The
Company's executive offices are located at 521 Fifth Avenue, New York, New York
and its telephone number is (212) 883-0360.

OPERATIONAL STRUCTURE

The Operating Partnership. The Operating Partnership is the entity through
which the Company will own its interests in the Properties. The ownership and
management structure of the Company is intended to (i) enable the Company to
acquire assets in transactions that may defer some or all of the sellers' tax
consequences, including in connection with the Company's formation and (ii)
enable the Company to comply with certain technical and complex requirements
under the federal tax rules and regulations relating to the assets and income
permitted for a REIT.

The Real Estate Brokerage Subsidiary. In order to maintain the Company's
qualification as a REIT while realizing income from third party sales and
leasing brokerage activities, those services will be conducted through the Real
Estate Brokerage Subsidiary. The Company, through the Operating Partnership,
will own 100% of the non-voting common stock (representing 95% of the total
equity) of the Real Estate Brokerage Subsidiary. Through dividends on its equity
interest, the Operating Partnership expects to receive substantially all of the
after-tax cash flow from the Real Estate Brokerage Subsidiary's operations. All
of the voting common stock of the Real Estate Brokerage Subsidiary (representing
5% of the total equity) will be held by directors and officers of the Real
Estate Brokerage Subsidiary. The directors of the Real Estate Brokerage
Subsidiary are Joseph S. Lesser (Chairman), Alan L. Gordon and Peter S. Duncan;
the officers are Peter S. Duncan (President), Josh Goldman (Vice President and
Secretary) and Sean Leary (Vice President).

Longboat Key Lease. In order to maintain the Company's qualification as a
REIT while realizing income from the Longboat Key Club, the Company leases the
Longboat Key Club's assets pursuant to a 10-year lease with a participation in
the gross receipts of the Club to a lessee ('Longboat Key Club, Inc.'), in which
directors and officers of the Company have approximately a 4% interest. The
lease provides for a participation in the gross receipts of the Club and 220
units of the condominium Hotel which is located within the Club's premises. The
terms of the participating lease are structured such that the Operating
Partnership expects to receive significant economic benefits from the operations
of the Club and the Hotel. See 'Business and Properties -- The
Hospitality/Resort Complex' for a description of the terms of the lease.

BUSINESS AND GROWTH STRATEGIES

EXTERNAL GROWTH

aggressive leasing of vacant space, (iii) replacing expiring leases with leases
at higher rental rates or (iv) more intensive property management.

Reposition/Redevelop Assets. Management believes that value added
renovation and expansion of properties will continue to provide the Company with
attractive opportunities for increased cash flow and higher potential returns
than may be obtained from the purchase of stabilized properties. The Company has
found that the repositioning potential of high quality Class B office space is
driven in large part by the growth of smaller companies and the relocation of
large firms from Class A space to Class B space due to a present scarcity of
large blocks of space and the anticipated cost savings associated with such a
move. The Company's Class B Properties generally have the requisite large floor
plates and prime locations sought by institutional tenants, and offer the
opportunity to create, through renovation or expansion, the high quality
building premises and common areas which appeal to those tenants. The Company
believes that the economic and real estate fundamentals of commercial markets,
particularly New York City, provide a positive environment in which the Company
can seek to implement its repositioning strategy.

Acquire Distressed Assets at Attractive Prices. The Company believes that
there are opportunities to acquire properties at prices which do not reflect the
potential realizable value of the property to the Company. The Company has
realized positive returns in some instances by acquiring assets which were
subject to impediments such as defaulted loans or other financial distress,
bankruptcy, litigation or ownership conflict. In many cases these properties
suffer from inadequate property management and leasing efforts which the Company
is able to address rapidly by undertaking capital improvements and aggressively
seeking tenants for vacant space. Management has recently seen, and expects to
continue to see, opportunities to acquire assets whose owners are unable to meet
their obligations under mortgage loans.

The Company believes that due to its size, management strength, reputation
and ability to execute complex transactions, it is in an advantageous position
to acquire undervalued properties, particularly in New York City because of the
Company's historical presence there and the number of transactions which the
Company has consummated in New York City in the past five years. During its more
than 30 years of operations, the Company has developed relationships with
numerous banks, insurance companies, brokers, attorneys, accountants, and other
intermediaries and principals, which provide the Company with opportunities to
acquire properties across the country, especially in markets where the
Properties are located.

economically depressed or in the early stages of recovery, where rental rates
are below the rates necessary to support new construction, resulting in
favorable supply and demand characteristics. The Company intends to allocate its
capital to the markets which the Company believes provide the best investment
opportunities at any given time.

Financing Strategy. The Company expects initially to fund its
acquisitions with a combination of capital from an unsecured credit facility and
the issuance of Units in the Operating Partnership. In addition, the Company has
from time to time in the past obtained, and may seek in the future seller
financing to fund acquisitions. The Company expects that it will replace this
financing over time with the issuance of equity and longer term debt securities.
The Company is in negotiations with several financial institutions with regard
to obtaining a $250 million senior unsecured credit facility. The Company
expects to have the credit facility in place upon completion of the Offering.
The unsecured line of credit will be used to facilitate acquisition and
development activities, to fund distribution payments, if necessary, and for
working capital purposes.

Upon completion of the Offering, the Company's Debt-to-Market
Capitalization Ratio will be approximately 24.6%. See 'Business and
Properties -- Debt Financing.'

INTERNAL GROWTH

Intensive Property Management. The Company actively manages Properties
through its experienced staff of 43 people who have an average of more than 10
years of experience managing properties. Additionally, in markets where it is
more efficient to do so, the Company outsources property management to a select
group of joint venture partners or third-party local managers with whom the
Company has established relationships. The Company will manage 22 of its 31
Properties upon completion of the Offering, which account for approximately 82%
of the Company's Adjusted Pro Forma Income for the year ended December 31, 1997.
The Company has established property management offices in New York City and
Albany, New York; Daytona Beach, Florida; and Atlanta, Georgia. The Company has
significant expertise in managing urban properties and will seek to capitalize
on management's extensive knowledge of the Class B New York City marketplace and
the other CBD's where Properties are located as it acquires additional
properties in these markets. The Company's management philosophy embodies a
hands-on approach, with a constant evaluation of the leasing, financing, capital
improvements and market repositioning opportunities for the assets.

Lease-Up of Space. The Company will aggressively seek new tenants for
vacant space at the Properties. Specifically, the Company in particular is
seeking to lease the remaining vacant space at the 498 Seventh Avenue
(approximately 87,000 net rentable square feet), 24 West 57th Street
(approximately 11,700 net rentable square feet), First NBC Center (approximately
80,430 net rentable square feet), Riverview Center (approximately 322,670 net
rentable square feet) and 38 Chauncy Street (approximately 13,000 net rentable
square feet) office Properties, as well as the Easton Commons Plaza
(approximately 19,200 net rentable square feet) and Sunset Strip (approximately
20,500 net rentable square feet) retail Properties. The Company believes that it
has a competitive advantage in attracting new tenants to its office Properties
because the Company can offer space in prime locations which may be suitable for
tenants who might otherwise choose a Class A property at rental rates which are
lower than rates for Class A properties.

Shenandoah Development. The Company has the right to acquire
approximately 974 acres of land at the Shenandoah Industrial Park Property,
which is located approximately 20 miles from Atlanta Hartsfield International
Airport, for a remaining option exercise price of approximately $700,000 plus
the payment of approximately $375,000 of accrued real estate taxes. The Company
intends to pursue opportunities for build-to-suit development at this Property.
The Company estimates that this land could support the development of an
additional 12 million net rentable square feet of light manufacturing and
distribution facilities under current zoning and entitlements. The Company
estimates that the cost of developing a typical distribution facility of
approximately 200,000 net rentable square feet with concrete and steel
construction and loading docks would be approximately $23.50 per net rentable
square foot in today's market. The Company believes that the current market rent
for such a facility would be approximately $2.75 per net rentable square foot on
a triple net basis. The Company has previously developed or provided development
advisory services for four industrial facilities at this Property. Development
advisory services typically entail giving advice on construction plans,
obtaining necessary governmental approvals and implementing the development
program.

Renovation and Expansions at Existing Properties. The Company recently
completed an approximately $6.0 million renovation and expansion of the Longboat
Key Club. This project included the construction of a new restaurant, club,
fitness center, banquet facilities and meeting rooms. The Company believes that
these added amenities will help to attract additional guests and golf club
members to Longboat Key Club and support possible future increases in rates at
this Property.

At the Outlet Park Shoppes at Waccamaw Property, the Company and its
partners are in the process of expanding this 763,818 net rentable square foot
property by an additional 36,500 net rentable square feet. This expansion is
expected to be completed in 1998 at an aggregate cost to the Company and its
partners of approximately $4.0 million. The expansion is expected to be fully
leased by the end of 1998. In addition, the Company is considering a potential
additional expansion of this Property by approximately 27,000 net rentable
square feet in 2000, although there can be no assurance that the Company will
complete this later expansion. The Company estimates that rental rates will be
approximately $13.00 per net rentable square foot for space at this expansion.
The Company will own a 25.0% interest in this Property.

The Company has budgeted approximately $6.5 million through the end of 1999
for expansion of the Manufacturer's Outlet Center Property. This expansion is
currently in the planning stage and would include the development of a five acre
site owned by the Company which is adjacent to the Property. This expansion
project is subject to the receipt of governmental approvals.

As part of the Formation Transactions, the Company will acquire a 17.9 acre
parcel of land from a third party which is adjacent to the Company's Shoppes at
St. Lucie West Property. The Shoppes at St. Lucie West were approximately 99%
leased at March 31, 1998. The Company estimates that this land could support
approximately a 150,000 net rentable square foot expansion of the Shoppes at St.
Lucie West Property under current zoning and entitlements. The Company will
acquire this parcel for Units with a value of $2.25 million.

There can be no assurance that the Company will successfully complete the
expansion projects described above or that the Company's estimate of the cost of
any expansion will prove accurate.

USE OF PROCEEDS

The net proceeds to the Company from the Offering, after payment of
underwriting discounts and commissions and offering and organizational expenses,
are estimated to be approximately $248.0 million approximately ($286.3 million
if the Underwriters' over-allotment option is exercised in full), assuming an
initial public offering price of $20.00 per share (the midpoint of the range
shown on the cover of this Prospectus). The Company plans to use the proceeds of
the Offering to purchase its general partner interest in the Operating
Partnership. The Operating Partnership will in turn utilize such proceeds to (i)
retire approximately $201.7 million out of approximately $385.9 million in
existing mortgage indebtedness on the Properties and pay prepayment penalties
relating to such retirement of approximately $7.0 million; (ii) purchase
interests in the Properties for cash in the amount of approximately $17.9
million; (iii) repay an approximately $5.8 million loan made by the owners of
the

63 Madison Avenue Property to fund improvements at that Property; and (iv)
provide approximately $15.5 million to fund capital expenditures and for working
capital. As of December 31, 1997, the weighted average interest rate on the
indebtedness that will be retired with the proceeds of the Offering and the
weighted average maturity of such indebtedness was approximately 8.5% and 4.4
years, respectively. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources.'
Approximately $68,255,000 of the debt being repaid was incurred by the Company
during the previous 12 months to finance the acquisition of interests in certain
Properties. Pending application of the net proceeds of the Offering, the Company
may invest such portion of the net proceeds in interest-bearing accounts and/or
short-term, interest-bearing securities that are consistent with the Company's
intention to qualify for taxation as a REIT.

If the Underwriters' overallotment option to purchase 2,040,000 shares of
Common Stock is exercised in full, the Company will use the additional proceeds
(approximately $37.9 million) to acquire an additional interest in the Operating
Partnership. The Operating Partnership would use this additional contribution
for working capital purposes.

DISTRIBUTIONS

The Company intends to pay regular quarterly distributions to holders of
Common Stock. The Company estimates that the first distribution, for the period
commencing on the closing of the Offering and ending on September 30, 1998, will
be approximately $ per share, which is equivalent to a quarterly distribution
of approximately $0.325 per share, and an annual distribution of approximately
$1.30 per share (or an annual distribution rate of approximately 6.50%, based on
the midpoint of the estimated initial public offering prices shown on the cover
page of this Prospectus). The actual distributions made by the Company will be
determined by the Board of Directors, in its discretion, and will be affected by
a number of factors, including the gross revenues received from the Properties,
the operating expenses of the Company, the interest expense incurred in
borrowing, the ability of tenants to meet their obligations and unanticipated
capital expenditures. No assurance can be given that the Company's estimates
will prove accurate or that any level of distributions will be made or
sustained. The Company does not expect to change its estimated distribution rate
per share if the Underwriters' over-allotment option is exercised.

The Company intends to initially distribute annually approximately % of
estimated cash available for distribution. See 'Risk Factors -- Estimated
Initial Cash Available for Distribution Will Not Be Sufficient to Make
Distributions at Expected Levels.' The Company's estimate of the cash available
for distribution for the twelve months ending March 31, 1999, is based upon pro
forma Funds from Operations for the 12 months ended March 31, 1998, adjusted (i)
for certain known events and/or contractual commitments that either have
occurred or will occur subsequent to March 31, 1998 or during the 12 months
ended March 31, 1998, but were not effective for the full 12 months or will not
recur, and (ii) for certain non-GAAP adjustments consisting of (A) revisions
from historical rent on a straight-line, GAAP basis to amounts currently being
paid or due from tenants based on contractual rents, (B) estimates of amounts
anticipated for recurring tenant improvements, leasing commissions and capital
expenditures, and (C) scheduled mortgage loan principal payments. No effect was
given to any changes in working capital resulting from changes in current assets
and current liabilities (which changes are not anticipated to be material) or
the amount of cash estimated to be used for (i) investing activities for
acquisition and other activities (other than a reserve for capital expenditures,
tenant improvements for renewing space and working capital) and (ii) financing
activities (other than scheduled mortgage loan principal payments on existing
mortgage indebtedness). The Company anticipates that, except as reflected in the
table below and the notes thereto, investing and financing activities will not
have a material effect on estimated cash available for distribution. The
Company's estimated pro forma Funds from Operations, as adjusted as reflected in
clause (A) above, is substantially equivalent to the Company's estimated pro
forma cash flows from operating activities determined in accordance with GAAP.
The estimate of cash available for distribution is being made solely for the
purpose of setting the initial distribution and is not intended to be a
projection or forecast of the Company's results of operations or its liquidity,
nor is the methodology upon which such adjustments were made necessarily
intended to be a basis for determining future distributions.

The Company anticipates that cash flow available for distribution will
exceed earnings and profits for federal income tax purposes due to non-cash
expenses, primarily depreciation and amortization, to be incurred by the
Company. Distributions by the Company to the extent of its current and
accumulated earnings and profits for federal income tax purposes, other than
capital gains dividends, generally will be taxable to stockholders as ordinary
dividend income. Capital gains dividends generally will be taxable as gain from
the sale or exchange of a capital asset for federal income tax purposes.
Distributions in excess of earnings and profits generally will be treated as
non-taxable return of capital and, therefore, will result in a reduction of a
stockholder's basis in the Common Stock, to the extent thereof, and thereafter
as taxable gain unless properly designated by the Company as capital gains
dividends. Any non-taxable distributions will have the effect of increasing the
gain or decreasing the loss recognized on a sale of such Common Stock. The
Company anticipates that approximately % (or approximately $. per share of
Common Stock) of the distributions intended to be paid by the Company for 1998
will represent a return of capital for federal income tax purposes. See 'Federal
Income Tax Consequences -- Taxation of Stockholders.' The percentage of
stockholder distributions that represents a nontaxable return of capital may
vary substantially from year to year.

The Code generally requires that a REIT distribute annually at least 95% of
its REIT taxable income. See 'Federal Income Tax Considerations -- Taxation of
the Company.' The amount of distributions on an annual basis necessary to
maintain the Company's REIT status based on pro forma taxable income of the
Company for the 12 months ended March 31, 1998, as adjusted for certain items in
the following table, would have been approximately $ million. The estimated
cash available for distribution is anticipated to be in excess of the annual
distribution requirements applicable to REITs under the Code. Under certain
circumstances, the Company may be required to make distributions in excess of
cash available for distribution in order to meet such distribution requirements.
For a discussion of the tax treatment of distributions to holders of Common
Stock, see 'Federal Income Tax Considerations -- Taxation of
Stockholders -- Taxation of Taxable Domestic Stockholders.'

The Company believes that its estimate of cash available for distributions
constitutes a reasonable basis for establishing the initial distribution rate,
and the Company expects to maintain its initial distribution rate for at least
the first 12 months following the completion of the Offering, unless actual
results of operations, economic conditions or other factors differ from the
assumptions used in calculating the estimate. The estimate of cash available for
distributions covers only the 12-month period following the closing of the
Offering and is being made solely for the purpose of setting the initial
distribution amount and is not intended to be a projection or prediction of the
Company's future results from operations. Pro forma results of operations do not
purport to present the actual results that can be expected for future periods.
Variations in the net proceeds from the Offering as a result of a change in the
initial public offering price or the exercise of the Underwriters'
over-allotment option may affect cash available for distribution, the payout
ratio based on cash available for distribution and available reserves. No
assurance can be given that the Company's estimate will prove accurate. Actual
results may vary substantially from the estimate. See 'Risk Factors' and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'

The following table describes the calculation of pro forma Funds from
Operations for the 12 months ended March 31, 1998 and the adjustments made to
pro forma Funds from Operations for the 12 months ended March 31, 1998 used in
estimating initial cash available for distribution for the 12 months following
the Offering and establishing its estimated initial annual distributions:

<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS,
EXCEPT FOR
SHARE DATA)
-----------
<S> <C> <C>
Pro forma income before minority interest and extraordinary items for the 12
months ended December 31, 1997(1)........................................... $ 19,704
Plus: Pro forma real estate depreciation for the 12 months ended
December 31, 1997...................................................... 16,404
Plus: Pro forma amortization (excluding financing costs) for the 12
months ended December 31, 1997......................................... 1,011
-----------
37,119
Less: Pro forma Funds from Operations attributed to minority interest in
real estate partnerships(2)............................................ (4,539)
Plus: The Company's share of pro forma depreciation and amortization
(excluding financing costs) attributable to investments in partnerships
and limited liability companies........................................ 987
-----------
Pro forma Funds from Operations for the 12 months ended December 31,
1997(3)..................................................................... $ 33,567
Less: Pro forma Funds from Operations for the three months ended March
31, 1997...............................................................
Plus: Pro forma Funds from Operations for the three months ended March
31, 1998...............................................................
Pro forma Funds from Operations for the 12 months ended March 31, 1998........
Adjustments:
Net increases in rental income(4)........................................
Net change in rental income, assuming no renewals(5).....................
Interest adjustment(6)...................................................
-----------
Estimated adjusted pro forma Funds from Operations for the 12 months ending
March 31, 1999..............................................................
Net effect of straight-line rents(7).....................................
Pro forma amortization of financing costs for the 12 months ended March
31, 1998(8)............................................................
Less: Pro forma funds from operations for the 12 months ending March 31,
1999 attributable to investments in partnerships and limited liability
companies..............................................................
-----------
Estimated pro forma Cash Flow from Operating Activities for the 12 months
ending March 31, 1999.......................................................
Investment Activities:
Estimated recurring capitalized tenant improvements and leasing
commissions(9)......................................................... $
Estimated recurring capital expenditures(10).............................
-------
Estimated cash to be used in investing activities........................
Financing Activities:
Scheduled mortgage loan principal payments(11)...........................
-------
Estimated cash to be used in financing activities........................
-----------
Estimated Cash Available for Distribution for the 12 months ending March 31,
1999........................................................................
-----------
The Company's share of estimated Cash Available for Distribution(12)
Minority interest's share of estimated Cash Available for Distribution
Total estimated initial annual cash distributions
Estimated initial annual distribution per share(13)
Payout ratio based on estimated Cash Available for Distribution(14)...... %
</TABLE>

(footnotes on next page)

(footnotes from previous page)

(1) Pro forma income before minority interest and extraordinary items is based
on total revenue of $ , of which $ is derived from management,
leasing, and other activities relating to properties not owned by the
Company.

(2) Pro forma Funds from Operation attributed to minority interest in real
estate partnership is calculated as follows:

<TABLE>
<S> <C>
Minority Interest in Real Estate Partnerships....................................... $
Plus: Pro forma real estate depreciation for the 12 months ended
December 31, 1997.................................................................
Plus: Pro forma amortization (excluding financing costs) for the 12 months ended
December 31, 1997.................................................................
------
$
------
</TABLE>

(3) The White Paper on Funds from Operations approved by the Board of Governors
of NAREIT in March, 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures. The Company believes that Funds from Operations is helpful
to investors as a measure of the performance of an equity REIT because,
along with cash flow from operating activities, financing activities and
investing activities, it provides investors with an indication of the
ability of the Company to incur and service debt, to make capital
expenditures and to fund other cash needs. The Company computes Funds from
Operations in accordance with standards established by NAREIT which may not
be comparable to Funds from Operations reported by other REITs that do not
define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than the Company. Funds
from Operations does not represent cash generated from operating activities
in accordance with GAAP and should not be considered as an alternative to
net income (determined in accordance with GAAP) as an indication of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company's
liquidity, nor is it indicative of funds available to fund the Company's
cash needs, including its ability to make cash distributions. For a
reconciliation of net income and Funds from Operations, see 'Management's
Discussion and Analysis of Financial Condition and results of
Operations -- Funds from Operations.'

(4) Represents the increase in rental income resulting from new leases that went
into effect between April 1, 1998 and July 15, 1998 ($ less $
attributed to the minority interest in the real estate partnerships).

(5) Represents the net change, excluding minority interest in real estate
partnerships, resulting from (a) increased rental income from new leases and
renewals that were not in effect for the 12 month period ending March 31,
1998 and (b) rent reductions from leases expiring after March 31, 1998
assuming no lease renewals or new leases.

(6) The amount represents a reduction in interest expense due to amortization of
the related mortgages over the 12-month period ending March 31, 1999.

(7) Represents the effect of adjusting straight-line rental revenue included in
pro forma net income from the straight-line accrual basis to amounts
currently being paid or due from tenants, net of minority interest in real
estate partnerships.

(8) Financing costs for the 12 month period ended March 31, 1998, net of
minority interest in real estate partnerships, are based on principal
mortgage indebtedness outstanding of $ . See 'Business and
Properties -- Debt Financing.'

(9) Reflects recurring tenant improvements and leasing commissions anticipated
for the 12 months ending December 31, 1998 which have been calculated by
multiplying (i) the weighted average tenant improvements and leasing
commissions expenditures for renewed and newly tenanted space at the
Properties incurred during 1993, 1994, 1995, 1996 and 1997 of $14.09, $0.08,
$4.69 and $3.17 per square foot for New York City office properties,
office/loft, other office properties and retail properties, repectively,
exclusive of minority interests in real estate partnerships, (assuming a

(footnotes continued on next page)

(footnotes continued from previous page)

renewal rate of 75% of expiring square footage. See 'The Properties -- The
Portfolio -- Historical Tenant Improvements and Leasing Commissions'), by
(ii) (the average annual square feet of leased space for which leases expire
during the years ending December 31, 1998 through December 31, 2003). The
weighted average annual per square foot cost of tenant improvements and
leasing commission expenditures is presented below:

NEW YORK CITY OFFICE PROPERTIES

<TABLE>
<CAPTION>
WEIGHTED
YEAR ENDED DECEMBER 31, AVERAGE
---------------------------------------------- JAN. 1, 1993-
1993 1994 1995 1996 1997 DEC. 31, 1997
------ ------ ------ ------ ------ -------------

<S> <C> <C> <C> <C> <C> <C>
Renewals:
Tenant improvement costs ('TI') per square
foot....................................... $ 7.63 $10.35 $11.25 $ .65 $ -- $ 4.79
Leasing commission costs ('LC') per square
foot....................................... 3.15 3.46 3.10 .24 4.63 2.62
------ ------ ------ ------ ------ -------------
Total Renewal TI and LC per square
foot.................................. $10.78 $13.81 $14.35 $ .89 $ 4.63 $ 7.41
------ ------ ------ ------ ------ -------------
------ ------ ------ ------ ------ -------------
Newly Tenanted Space:
TI per square foot........................... $24.94 $26.99 $23.55 $40.32 $13.18 $ 23.50
LC per square foot........................... 9.30 8.54 10.43 8.32 13.50 10.64
------ ------ ------ ------ ------ -------------
Total newly tenanted TI and LC per
square foot........................... $34.24 $35.53 $33.98 $48.64 $26.68 $ 34.14
------ ------ ------ ------ ------ -------------
------ ------ ------ ------ ------ -------------
</TABLE>

<TABLE>
<CAPTION>
AVERAGE
5 YEAR ANNUAL
WEIGHTED SQUARE FOOTAGE RATE OF
AVERAGE TI AND EXPIRING IN RENEWALS/ TOTAL
LC PER SQUARE FOOT 1998-2003 NEWLY TENANTED COST
------------------ -------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Renewal..................................... $ 7.41 x 56,580 x 75%(i) = $314,444
Newly Tenanted.............................. $ 34.14 x 56,580 x 25% = 482,910
--------
$797,354
--------
--------
</TABLE>

OFFICE/LOFT PROPERTIES

<TABLE>
<CAPTION>
WEIGHTED
YEAR ENDED DECEMBER 31, AVERAGE
------------------------------------ JAN. 1, 1993-
1993 1994 1995 1996 1997 DEC. 31, 1997
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Renewals:
Tenant improvement costs ('TI') per square foot.......... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Leasing commission costs ('LC') per square foot.......... 0 0 0 0 0 0
---- ---- ---- ---- ---- -----
Total Renewal TI and LC per square foot............. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
---- ---- ---- ---- ---- -----
---- ---- ---- ---- ---- -----
Newly Tenanted Space:
TI per square foot....................................... $.02 $-- $.43 $-- $.29 $ .19
LC per square foot....................................... .11 .22 .13 .13 .14 .14
---- ---- ---- ---- ---- -----
Total newly tenanted TI and LC per square foot...... $.13 $.22 $.56 $.13 $.43 $ .33
---- ---- ---- ---- ---- -----
---- ---- ---- ---- ---- -----
</TABLE>

(footnotes continued on next page)

(footnotes continued from previous page)

<S> <C> <C> <C> <C> <C> <C> <C>
Renewal........................................ -- $ x 35,931 x 75%(i) = $ --
Newly Tenanted................................. $.33 x 35,931 x 25% = 2,964
------
$2,964
------
------
</TABLE>

OTHER OFFICE PROPERTIES

<TABLE>
<CAPTION>
WEIGHTED
YEAR ENDED DECEMBER 31, AVERAGE
------------------------------------------ JAN. 1, 1993-
1993 1994 1995 1996 1997 DEC. 31, 1997
----- ----- ----- ------ ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Renewals:
Tenant improvement costs ('TI') per square foot... $ .17 $ .31 $2.57 $ 3.47 $ .93 $ 1.73
Leasing commission costs ('LC') per square foot... .80 .20 .39 .89 .88 .60
----- ----- ----- ------ ----- -------------
Total Renewal TI and LC per square foot...... $ .97 $ .51 $2.96 $ 4.36 $1.81 $ 2.33
----- ----- ----- ------ ----- -------------
----- ----- ----- ------ ----- -------------
Newly Tenanted Space:
TI per square foot................................ $1.52 $ .98 $7.28 $17.86 $6.32 $ 9.40
LC per square foot................................ .74 1.06 .96 4.10 2.67 2.38
----- ----- ----- ------ ----- -------------
Total Newly Tenanted TI and LC per square
foot....................................... $2.26 $2.04 $8.24 $21.96 $8.99 $ 11.78
----- ----- ----- ------ ----- -------------
----- ----- ----- ------ ----- -------------
</TABLE>

<S> <C> <C> <C> <C> <C> <C> <C>
Renewal................................... $ 2.33 x 262,910 x 75%(i) = $ 459,435
Newly Tenanted............................ $11.78 x 262,910 x 25% = 774,270
----------
$1,233,705
----------
----------
</TABLE>

RETAIL PROPERTIES

<TABLE>
<CAPTION>
WEIGHTED
YEAR ENDED DECEMBER 31, AVERAGE
----------------------------------------- JAN. 1, 1993-
1993 1994 1995 1996 1997 DEC. 31, 1997
----- ----- ----- ----- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Renewals:
Tenant improvement costs ('TI') per square foot.... $-- $ .84 $ .18 $ .67 $ .95 $ .57
Leasing commission costs ('LC') per square foot.... .26 1.43 1.90 .50 2.31 1.25
----- ----- ----- ----- ----- ------
Total Renewal TI and LC per square foot....... $ .26 $2.27 $2.08 $1.17 $3.26 $1.82
----- ----- ----- ----- ----- ------
----- ----- ----- ----- ----- ------
Newly Tenanted Space:
TI per square foot................................. $2.69 $5.38 $6.10 $6.78 $2.44 $4.80
LC per square foot................................. 5.33 0.51 1.81 3.03 4.77 2.42
----- ----- ----- ----- ----- ------
Total Newly Tenanted TI and LC per square
foot........................................ $8.02 $5.89 $7.91 $9.81 $7.21 $7.22
----- ----- ----- ----- ----- ------
----- ----- ----- ----- ----- ------
</TABLE>

(footnotes continued on next page)

(footnotes continued from previous page)

<TABLE>
<CAPTION>
AVERAGE
5 YEAR ANNUAL
WEIGHTED SQUARE FOOTAGE RATE OF
AVERAGE TI AND EXPIRING IN RENEWALS/ TOTAL
LC PER SQUARE FOOT 1998-2003 NEWLY TENANTED COST
------------------ -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Renewal................................... $ 1.82 x 187,640 x 75%(i) = $ 256,129
Newly Tenanted............................ $ 7.22 x 187,640 x 25% = 338,690
----------
$ 594,819
----------
----------
Total estimated recurring tenant
improvements and leasing
commissions................... $2,628,824
----------
----------
</TABLE>

(i) The historical weighted average renewal rate, based on square footage,
for the Company from January 1, 1993 through December 31, 1997 is %.

(10) Estimated recurring capital expenditures have been calculated by
multiplying (i) estimated capital expenditures per square foot or per unit
for the Properties for the 12 month period ended December 31, 1998 by (ii)
the aggregate square footage or number of units of the Properties, plus
estimated 1998 capital expenditures associated with the Longboat Key Club
Property. For the 12 months ending December 31, 1998, the estimated cost of
recurring building improvements and equipment upgrades and replacements
(excluding costs of tenant improvements) at the Properties is approximately
$2.1 million. For the 12 months ending December 31, 1998, the estimated
cost of non-recurring capital expenditures of the Properties is
approximately million. The Company expects to fund non-recurring capital
expenditures, tenant improvements and leasing commissions from working
capital or borrowings. Following completion of the Formation Transactions
and the Offering, the Company expects to have remaining net proceeds of
$15.5 million available for capital expenditures and working capital
purposes.

(11) Scheduled mortgage loan principal payments for the 12 months ending March
31, 1999.

(12) The Company's share of estimated Cash Available for Distribution and
estimated initial annual cash distributions to stockholders of the Company
is based on its approximately 50% aggregate partnership interest in the
Operating Partnership.

(13) Based on a total of 13,600,000 Shares of Common Stock to be outstanding
after the Offering (2,040,000 shares to be sold in the Offering, assuming
no exercise of the Underwriters' over-allotment option, and 1,148,934
additional shares of Common Stock to be issued in the Formation
Transactions.)

(14) Calculated as estimated initial annual cash distributions to stockholders
of the Company divided by the Company's share of estimated Cash Available
for Distribution for the 12 months ending March 31, 1999. The payout ratio
based on estimated adjusted pro forma Funds from Operations is %.

Future distributions of the Company will be at the discretion of the Board
of Directors and will depend on the amount of Funds from Operations of the
Company, its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Code and other factors the Board
of Directors deems relevant. See 'Federal Income Tax Consequences -- Taxation of
the Company -- Annual Distribution Requirements.'

CAPITALIZATION

The following table sets forth the combined historical capitalization of
Loeb Real Estate, the predecessor of the Company, as of March 31, 1998 and on a
pro forma basis to give effect to the Formation Transactions, the Offering and
the use of the estimated net proceeds from the Offering as described under 'Use
of Proceeds.' The following information should be read in conjunction with the
combined financial statements and notes thereto and pro forma financial
information and notes thereto included elsewhere in this Prospectus, as well as
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
COMBINED
HISTORICAL PRO FORMA
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Mortgage debt........................................................................... $257,162 $
Minority interests in:
Operating Partnership.............................................................. --
Real Estate Partnership............................................................ --
Stockholders' equity:
Common Stock, $.001 par value per share, 200,000,000 shares authorized; 14,749,034
shares issued and outstanding on a pro forma basis(1)............................. --
Additional paid-in capital......................................................... --
Owners equity...................................................................... 59,057
--------- ---------
Total capitalization.......................................................... $316,219 $
--------- ---------
--------- ---------
</TABLE>

- ------------
(1) Includes 14,749,034 shares of Common Stock to be issued in the Formation
Transactions and the Offering. Excludes (i) 13,426,066 shares of Common
Stock reserved for issuance upon exchange of Units; (ii) 1,127,000 shares of
Common Stock subject to options being granted concurrently with the Offering
under the Company's Stock Option and Incentive Plan; and (iii) 2,040,000
shares issuable upon exercise of the Underwriters' overallotment option.

DILUTION

The midpoint of the assumed initial prices per share to the public of
Common Stock offered hereby exceeds the pro forma net tangible book value per
share before giving effect to the Offering. Therefore, the holders of the shares
of Common Stock and Units issued in connection with the formation of the Company
will realize an immediate increase in the net tangible book value of their
shares or Units, while purchasers of shares of Common Stock sold in the Offering
will realize an immediate dilution in the net tangible book value of their
shares.

The following table illustrates the per share dilution to investors who
purchase shares of Common Stock in the Offering, assuming an initial public
offering price of $20.00 per share (the midpoint of the range shown on the cover
of this Prospectus):

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1)................................... $20.00
Pro forma net tangible book value per share prior to the Offering(2)................. $19.34
Decrease in net tangible book value per share attributable to the Offering(3)........ (.54)
------
Pro forma net tangible book value per share after the Offering(4).................... 18.80
------
Dilution per share of Common Stock to purchasers in the Offering(5).................. $ 1.20
------
------
</TABLE>
- ------------
(1) Before deduction of the estimated Underwriters' discounts and expenses of
the Offering.

(2) Pro forma net tangible book value per share prior to the Offering
attributable to continuing investors is determined by dividing net tangible
book value of the Company attributable to continuing investors based on the
December 31, 1997 net book value of the tangible assets (consisting of total
assets less intangible assets consisting of deferred lease and loan costs
and after the Formation Transactions, net of liabilities to be assumed) by
the sum of the number of shares of Common Stock (i) issued and outstanding
(ii) issuable (upon the exchange of all Units to be issued) to continuing
investors in the Formation Transactions.

(3) Based on an initial public offering price of $20.00 per share of Common
Stock and after deducting Underwriters' discounts and commissions and
estimated expenses of the Offering.

(4) Based on total pro forma net tangible book value of $530 million divided by
the total number of shares of Common Stock outstanding after the completion
of the Offering (28,175,100 shares including shares issuable upon exchange
of Units issued to continuing investors), and excluding shares of Common
Stock that may be issuable upon exercise of share options. There is no
impact on dilution attributable to the issuance of Common Stock in exchange
for Units to be issued to the continuing investors in the Formation
Transactions because such Units would be exchanged for Common Stock on a
one-for-one basis.

(5) Dilution is determined by subtracting net tangible book value per share of
Common Stock after the Offering from the assumed initial public offering
price of $20.00.

The following table summarizes, on a pro forma basis giving effect to the
Offering and the Formation Transactions, the number of shares of Common Stock to
be sold by the Company in the Offering and the number of shares of Common Stock
and Units to be issued to the continuing investors in the Formation
Transactions, the adjusted net tangible book value as of December 31, 1997 of
the net assets contributed by the continuing investors in the Formation
Transactions and the net tangible book value of the average contribution per
share based on total contributions.

<TABLE>
<CAPTION>
SHARES AND UNITS BOOK VALUE BOOK VALUE OF
ISSUED OF TOTAL AVERAGE
--------------------------- CONTRIBUTION CONTRIBUTION
NUMBER OF --------------------- PER SHARE/
SHARES OR UNITS PERCENT AMOUNT PERCENT UNIT
---------------- ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Purchasers in the Offering................. 13,600,000 48.2% $247,949(1) 46.8% $ 20.00(2)
Common Stock issued in Formation
Transactions............................. 1,149,034 4.1 22,222 4.2 19.34(3)
Units issued in Formation Transactions..... 13,426,066 47.7 259,596 49.0 19.34(3)
---------------- ------- -------- -------
Total................................. 28,175,100 100% $529,767 100%
---------------- ------- -------- -------
---------------- ------- -------- -------
</TABLE>
- ------------
(1) Assumes an estimated initial public offering price of $20.00 (the mid-point
of the range on the cover page of this Prospectus) less the underwriting
discount and the expenses of the Offering.

(2) Before deducting Underwriters' discounts and commissions and other estimated
expenses of the Offering and the Formation Transactions.

(3) Based on the December 31, 1997 net book value of the assets less deferred
financing and leasing cost to be contributed in connection with the
Formation Transactions, net of liabilities to be assumed.

SELECTED COMBINED FINANCIAL AND OPERATING INFORMATION

The following table sets forth selected financial and operating information
on a pro forma basis for the Company and on a historical combined basis for the
Company's predecessor, which is referred to in the combined historical financial
statements, as 'Loeb Real Estate'. Loeb Real Estate is not a legal entity, but
rather a combination of real estate partnership and limited liability companies
which were under common management and control. The following information should
be read in conjunction with the combined financial statements and notes thereto
included elsewhere in this Prospectus. The balance sheet data as of December 31,
1995 and the operating data for the three years ended December 31, 1997, of Loeb
Real Estate have been derived from the historical combined financial statements
audited by Ernst & Young LLP, independent auditors, whose report with respect
thereto is included elsewhere in this Prospectus. The operating data for the
three months ended March 31, 1997 and 1998, the balance sheet and operating data
for the years ended December 31, 1994 and 1993 has been derived from the
unaudited financial statements of Loeb Real Estate. In the opinion of
management, the unaudited financial statements include all adjustments,
consisting only of normal recurring adjustments, that management considers
necessary for a fair presentation of the financial position and results of
operations for the period. The results of operations for the interim periods
ended March 31, 1997 and 1998 are not necessarily indicative of the results
which may be obtained for the full fiscal year. The selected pro forma
information is presented as if (i) the Offering and the other transactions
contemplated herein under 'Formation Transactions' had occurred as of the
beginning of the period presented for operating data and as of the balance sheet
date for balance sheet data and (ii) the Company qualified as a REIT,
distributed all of its taxable income and, therefore, incurred no income tax
expense during the period presented (see 'Risk Factors' and 'Federal Income Tax
Consequences -- Taxation of the Company -- Failure to Qualify'). In management's
opinion, all adjustments necessary to present fairly the effects of these
transactions have been made. The pro forma financial data is not necessarily
indicative of what the actual financial position and results of operations of
the Company would have been as of and for the periods indicated, nor does it
purport to represent the Company's future financial position and results of
operations.

THE COMPANY (PRO FORMA) AND LOEB REAL ESTATE (COMBINED HISTORICAL)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF PROPERTIES DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------------------------------- ------------------------------------------
PRO COMBINED PRO
FORMA HISTORICAL FORMA COMBINED HISTORICAL
----------- ----------- ----------- ---------------------------
1998 1998 1997 1997 1997 1996 1995
----------- ----------- ----------- ----------- ------- -------- ------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenues:
Revenue from rental property....... $ 15,710 $ 11,567 $ 94,194 $51,306 $48,194 $29,461
Hotel revenue...................... -- 2,920 -- -- -- -- --
Management fee income.............. 1,217 741 2,841 3,554 2,675 2,256
Other income....................... 765 254 5,357 3,221 4,581 1,755
----------- ----------- ----------- ----------- ------- ------- -------
Total revenue.................. $ 20,612 $ 12,562 $ 102,392 $58,081 $55,450 $33,472
----------- ----------- ----------- ----------- ------- ------- -------
Expenses:
Property operating expenses........ $ 4,888 $ 4,076 $ 31,551 $19,182 $18,280 $11,043
Hotel operating expenses........... -- 1,708 -- -- -- -- --
Real estate taxes.................. 1,972 1,707 11,783 7,456 6,784 4,407
Interest........................... 4,860 4,067 16,599 17,712 13,343 8,015
Depreciation and amortization...... 2,117 1,661 18,042 7,078 6,013 4,108
General and administrative......... 1,017 567 3,458 2,207 2,574 2,170
----------- ----------- ----------- ----------- ------- ------- -------
Total expenses................. $ 16,562 $ 12,078 $ 81,433 $53,635 $46,994 $29,743
----------- ----------- ----------- ----------- ------- ------- -------
Operating Income....................... $ 4,050 $ 484 $ 20,959 $ 4,446 $ 8,456 $ 3,729
Equity in (loss) income of investees... 542 1,000 (1,255) 807 835 1,023
Income tax (expense) benefit........... (23) (29) -- (259) 150 139
Income before minority interest and
extraordinary item................... 4,569 1,455 19,704 4,994 9,441 4,891
Minority interest in:
Operating partnership.............. (8,655) -- -- --
Real estate partnerships........... (1,561) -- -- --
----------- ----------- ----------- ----------- ------- ------- -------
Income before extraordinary item....... $ 4,569 $ 1,455 $ 9,488 $ 4,994 $ 9,441 $ 4,891
----------- ----------- ----------- ----------- ------- ------- -------
----------- ----------- ----------- ----------- ------- ------- -------
Income before extraordinary items per
share(1):
Basic.............................. $.64
----
----
Diluted............................ $.64
----
----
<CAPTION>
1994 1993
------- -------
(UNAUDITED)
<S> <C> <C>
Operating Data:
Revenues:
Revenue from rental property....... $27,460 $17,906
Hotel revenue...................... -- --
Management fee income.............. 1,449 505
Other income....................... 2,825 2,924
------- -------
Total revenue.................. $31,734 $21,335
------- -------
Expenses:
Property operating expenses........ $11,679 $ 8,958
Hotel operating expenses........... -- --
Real estate taxes.................. 4,047 2,494
Interest........................... 6,396 4,491
Depreciation and amortization...... 3,164 2,709
General and administrative......... 1,421 1,269
------- -------
Total expenses................. $26,707 $19,921
------- -------
Operating Income....................... $ 5,027 $ 1,414
Equity in (loss) income of investees... 628 798
Income tax (expense) benefit........... 138 81
Income before minority interest and
extraordinary item................... 5,793 2,293
Minority interest in:
Operating partnership.............. -- --
Real estate partnerships........... -- --
------- -------
Income before extraordinary item....... $ 5,793 $ 2,293
------- -------
------- -------
Income before extraordinary items per
share(1):
Basic..............................
Diluted............................
</TABLE>

(table continued on next page)

(table continued from previous page)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF PROPERTIES DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, 1998 COMBINED HISTORICAL
------------------------ -----------------------------------------------
PRO COMBINED
FORMA HISTORICAL 1997 1996 1995 1994
----------- ---------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data: (at end of period)
Real properties, at cost before accumulated
depreciation................................... $ 297,941 $242,748 $202,912 $ 179,699 $ 110,300
Total assets................................. 341,444 268,669 231,136 199,128 127,273
Mortgage notes payable........................... 257,162 212,456 184,379 142,905 86,689
Owner's equity................................... 59,057 42,281 33,706 41,699 26,912
Other Data:
Fund from operations(2).......................... -- -- -- -- --
Net cash provided by operating activities(3)..... 4,527 4,675 1,484 1,354 --
Net cash (used in) investing activities(3)....... (2,105) (39,531) (21,670) (17,443) --
Net cash provided by financing activities........ 12,159 32,088 25,559 14,610 --
Number of properties............................. 13 12 10 9 8
Square footage (excluding Longboat Key Club and
residential Properties)........................ 2,529 2,246 1,990 1,193
Apartment units.................................. 1,113 1,113 1,113 1,113

1993
-----------
(UNAUDITED)
<S> <C>
Balance Sheet Data: (at end of period)
Real properties, at cost before accumulated
depreciation................................... $ 79,426
Total assets................................. 101,627
Mortgage notes payable........................... 75,198
Owner's equity................................... 12,946
Other Data:
Fund from operations(2).......................... --
Net cash provided by operating activities(3)..... --
Net cash (used in) investing activities(3)....... --
Net cash provided by financing activities........ --
Number of properties............................. 8
Square footage (excluding Longboat Key Club and
residential Properties)........................ 523
Apartment units.................................. 1,113
</TABLE>

- ------------

(1) Pro forma basic net income per share excludes any dilutive effect of options
outstanding. Pro forma diluted net income per share includes the dilutive
effect of the outstanding options calculated under the treasury stock
method. As each Unit is redeemable for one share of Common Stock, the
calculation of net income per share upon redemption of the outstanding Units
will be unaffected, as Unitholders and Common Stockholders are entitled to
equal distributions on a per Unit and per share basis in the net income of
the Company.

(2) The White Paper on Funds from Operations approved by the Board of Governors
of NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures. The Company believes that Funds from Operations is helpful
to investors as a measure of the performance of an equity REIT because,
along with cash flow from operating activities, financing activities and
investing activities, it provides investors with an indication of the
ability of the Company to incur and service debt, to make capital
expenditures and to fund other cash needs. The Company computes Funds from
Operations in accordance with standards established by NAREIT which may not
be comparable to Funds from Operations reported by other REITs that do not
define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than the Company. Funds
from Operations does not represent cash generated from operating activities
in accordance with GAAP and should not be considered as an alternative to
net income (determined in accordance with GAAP) as an indication of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company's
liquidity, nor is it indicative of funds available to fund the Company's
cash needs, including its ability to make cash distributions. For a
reconciliation of net income and Funds from Operations, see 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Funds from Operations.'

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the 'Selected
Combined Financial Information' and the historical and pro forma consolidated
financial statements and notes thereto appearing elsewhere in this Prospectus.
Those financial statements and information reflect the historical Combined
financial position and results of operations of the Company's predecessor, which
is referred to in the historical financial statements as 'Loeb Real Estate'
prior to the completion of the Offering and the Formation Transactions. The pro
forma financial position is presented as if the Offering and the Formation
Transactions had occurred on December 31, 1997. The combined historical
financial statements of Loeb Real Estate reflect the consolidated financial
information of 13 Properties, and Loeb Real Estate's equity interest in 10
Properties that were owned during the periods presented. The pro forma results
of operations are presented as if the Offering and the Formation Transactions
had occurred on January 1, 1997. See 'Formation Transactions' and the Notes to
the pro forma financial statements of the Company.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 TO THREE MONTHS ENDED MARCH 31,
1997

Rental income increased $4.0 million or 37.5% to $14.6 million from $10.6
million for the three months ended March 31, 1998 compared to the three months
ended March 31, 1997 primarily as a result of the acquisition of International
Drive Value Center and 24 West 57th Street in 1997 and the lease of space in 63
Madison Avenue in 1998 to Ziff-Davis, Inc.

Management fee income increased $0.5 million or 64% to $1.2 million from
$0.7 million for the three months ended March 31, 1998 compared to March 31,
1997 primarily as a result of higher brokerage and leasing fees.

Income from hotel operations increased to $2.9 million for the three months
ended March 31, 1998 compared to none for the three months ended March 31, 1997
as a result of the acquisition of an increased interest in the Longboat Key Club
and operating control of the property on March 11, 1998. For the three months
ended March 31, 1997 the Company included its portion of the income from
Longboat Key Club as its share of net income of investments in partnerships and
limited liability companies.

Other income increased $0.5 million or 167% to $0.8 million from $0.3
million for the three months ended March 31, 1998 compared to the three months
ended March 31, 1997 primarily as a result of land sales at Shenandoah
Industrial Park of $0.4 million compared to none in the prior period.

Property operating expenses increased $0.7 million or 20% to $4.6 million
from $3.9 million for the three months ended March 31, 1998 compared to the
three months ended March 31, 1997, as a result of a $0.2 million increase in the
cost of property sales at Shenandoah Industrial Park compared to no cost for the
year ended March 31, 1997 and higher management company expenses and expenses
for International Drive Value Center and 24 West 57th Street, which were
acquired in 1997.

Hotel operating expenses increased to $1.7 million for the three months
ended March 31, 1998 compared to none for the three months ended March 31, 1997
as a result of the acquisition of an increased interest and operating control of
Longboat Key Club on March 11, 1998.

Real estate taxes increased $.3 million or 16% to $2.0 million from $1.7
million for the three months ended March 31, 1998 compared to the three months
ended March 31, 1997 as a result of the acquisition of International Drive Value
Center, 24 West 57th Street and the acquisition of a controlling interest in
Longboat Key Club.

Interest expense increased $.8 million or 19% to $4.9 million from $4.1
million for the three months ended March 31, 1998 compared to the three months
ended March 31, 1997 as a result of the acquisition of International Drive Value
Center, 24 West 57th Street and the acquisition of a controlling interest and
operating control of Longboat Key Club on March 11, 1998.

Depreciation and amortization increased $0.4 million or 27% to $2.1 million
from $1.7 million for the three months ended March 31, 1998 compared to the
three months ended March 31, 1997 as a result

of the acquisition of International Drive Value Center, 24 West 57th Street and
the acquisition of a controlling interest in Longboat Key Club on March 11,
1998.

General and administrative expenses increased $0.5 million or 79% to $1.0
million from $.6 million for the three months ended March 31, 1998 compared to
the three months ended March 31, 1997 as a result of the acquisition of
International Drive Value Center and 24 West 57th Street and the acquisition of
a controlling interest in Longboat Key Club on March 11, 1998.

The extraordinary loss for the three months ended March 31, 1998 represents
the prepayment penalty paid by Longboat Key Club on the refinancing of its
indebtedness on March 11, 1998.

As a result of the foregoing, net income increased $2.3 million to $3.7
million from $1.5 million for the three months ended March 31, 1998 compared to
the three months ended March 31, 1997.

COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996

Rental revenue increased $2.3 million or 5.3% to $45.8 million from $43.5
million for the year ended December 31, 1997 compared to the year ended
December 31, 1996 primarily as a result of the acquisition of Kendall Value
Center and Sunset Strip Center on December 30, 1996, the acquisition of
International Drive Value Center and 24 West 57th Street in 1997, and an
increase in rental revenue at 200 Madison Avenue due to increased occupancy.
These increases were partially offset by a decrease in rental revenue of $4.4
million at 63 Madison Avenue due to the scheduled downsizing by New York Life of
space which New York Life leased on a short term basis at the time the Company
acquired the Property. The space vacated by New York Life has since been
re-leased to Ziff-Davis. See 'Business and Growth Strategies -- External
Growth.'

Management fee income increased $0.9 million or 32.8% to $3.5 million from
$2.7 million for the year ended December 31, 1997 compared to the year ended
December 31, 1996 primarily as a result of new or higher fees for management
projects which began during 1996.

Other income decreased by $1.4 million or 29.7% to 3.2 million from $4.6
million primarily due to a reduction in land sales at Shenandoah Industrial Park
compared to 1996, partially offset by a $.5 million increase in income from
investments.

Property operating expenses increased $0.5 million or 2.7% to $18.3 million
from $17.8 million for the year ended December 31, 1997 compared to the year
ended December 31, 1996 primarily as a result of an increase in expenses
associated with the Properties acquired at the end of 1996 and in 1997, offset
by a $1.1 million decrease in the cost of property sales at Shenandoah
Industrial Park for the reasons described above. Additionally, real estate taxes
increased by approximately $0.7 million for the year ended December 31, 1997
compared to the year ended December 31, 1996.

Management fee payments to third party property managers increased by
approximately $0.5 million or 97.1% to $0.9 million from $0.4 million primarily
due to the acquisitions of Kendall Value Center, Sunset Strip Center and
International Drive Value Center.

Interest expense increased $4.4 million or 32.7% to $17.7 million from
$13.3 million for the year ended December 31, 1997 compared to the year ended
December 31, 1996 primarily as the result of the acquisition of Properties at
the end of 1996 and in 1997 and the refinancing of 200 Madison Avenue in April
1996 for approximately $28.0 million of additional mortgage proceeds, resulting
in an increase of $1.2 million in interest expense.

Depreciation and amortization expense increased $1.1 million or 17.7% to
$7.1 million from $6.0 million for the year ended December 31, 1997 compared to
the year ended December 31, 1996 as a result of the acquisition of Kendall Value
Center and Sunset Strip Center, the acquisition of International Drive Value
Center, the acquisition of 24 West 57th Street and the increased tenant
improvement costs at 200 Madison Avenue due to leasing activities.

General and administrative expense decreased $0.4 million or 14.3% to $2.2
million from $2.6 million for the year ended December 31, 1997 compared to the
year ended December 31, 1996 primarily due to insignificant reductions in
expenses at many of the Properties.

As a result of the foregoing, net income decreased $4.5 million to $4.9
million from $9.4 million for the year ended December 31, 1997 compared to the
year ended December 31, 1996.

COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995

Rental revenue increased $17.9 million or 69.9% to $43.5 million from
$25.6 million for the year ended December 31, 1996 compared to the year ended
December 31, 1995 as a result of the acquisition of 63 Madison Avenue in
November 1995 ($15.7 million) and increased occupancy at 200 Madison Avenue.

Management fee revenue increased $0.4 million or 18.6% to $2.7 million from
$2.3 million primarily as the result of new fees for management projects which
began during 1996.

Other income increased $2.8 million or 161% to $4.6 million from $1.8
million for the year ended December 31, 1996 compared to the year ended
December 31, 1995 primarily as a result of an increase in land sales at
Shenandoah Industrial Park ($2.6 million) and the acquisition of 63 Madison
Avenue.

Property operating expenses increased $7.0 million or 64.4% to $17.8
million from $10.8 million for the year ended December 31, 1996 compared to the
year ended December 31, 1995 primarily as a result of the acquisition of 63
Madison Avenue ($3.9 million) an increase in the cost of property sales at
Shenandoah Industrial Park ($1.3 million), increases in the operating expenses
of the management business ($1.3 million), and increases in operating expenses
at 200 Madison Avenue and First Union Bank Buildings. Additionally, real estate
taxes increased by $2.4 million for the year ended December 31, 1996 compared to
the year ended December 31, 1995 primarily as a result of the acquisition of 63
Madison Avenue.

Interest expense increased $5.3 million or 66.5% to $13.3 million from
$8.0 million for the year ended December 31, 1996 compared to the year ended
December 31, 1995 as a result of the acquisition of 63 Madison Avenue ($3.7
million), the refinancing of 200 Madison Avenue in April 1996, which increased
the mortgage debt on that Property ($1.5 million) and the refinancing of One
Dartmouth Place in December 1995 which increased the outstanding mortgage debt
on that Property. These increases were offset by a $0.1 million decrease in
Presidential Estates' interest expense as a result of refinancing the mortgage
in December 1995 at a lower interest rate.

Depreciation and amortization expense increased $1.9 million or 46.4% to
$6.0 million from $4.1 million for the year ended December 31, 1996 compared to
the year ended December 31, 1995, as a result of the acquisition of 63 Madison
Avenue ($1.3 million) and increased tenant improvement costs at 200 Madison
Avenue due to significant leasing activities.

General and administrative expense increased $0.4 million, or 18.6% to
$2.6 million from $2.2 million for the year ended December 31, 1996 compared to
the year ended December 31, 1995.

As a result of the foregoing, net income increased $4.5 million to $9.4
million from $4.9 million for the year ended December 31, 1996 compared to the
year ended December 31, 1995.

PRO FORMA OPERATING RESULTS

On a pro forma basis, after giving effect to the Offering and the Formation
Transactions, income before minority interest would have been $23.2 million for
the year ended December 31, 1997, representing an increase of approximately
$19.4 million over the historical combined income before minority interest and
extraordinary item for the same period. The increase is attributable to a
significant reduction in interest expense based on the effects of the Proposed
Offering as well as a substantial increase in total revenue, due to the benefit
of a pro forma full year of revenues from the Properties.

On a pro forma basis, total revenue for the year ended December 31, 1997
would have been approximately $109.4 million, representing a $51.4 million
increase over historical total revenue for the same period, resulting primarily
from a $46.1 million increase in rental revenue associated with the Properties
and a $1.6 million increase in management fee income associated with the
acquisition of Comfort.

LIQUIDITY AND CAPITAL RESOURCES

Upon completion of the Offering and the Formation Transactions and the
application of the net proceeds therefrom as described in 'Use of Proceeds,' the
Company expects to have reduced its total indebtedness from $385.9 million to
approximately $184.1 million, all of which is secured by Properties (the
'Mortgage Debt'). The Mortgage Debt is comprised of 15 loans secured by 15
properties, with a

weighted average interest rate of 8.2% on the fixed rate loans which total
approximately $162.5. There will be a total of approximately $17.9 million of
scheduled loan payments due during the year ending December 31, 1998. The
Company's Debt-to-Market Capitalization Ratio upon completion of the Offering is
expected to be approximately 24.6%. For information about the Mortgage Debt, see
'Business and Properties -- Debt Financing.'

The Unsecured Line of Credit. The Company is currently negotiating with
several lenders to obtain a $250 million unsecured line of credit. The Company
expects to have this line of credit in place prior to the closing of the
Offering. The unsecured line of credit will be used to facilitate acquisition
and development activities and for working capital purposes.

Analysis of Liquidity and Capital Resources. Upon completion of the
Offering and the Formation Transactions and the use of proceeds therefrom, the
Company will have reduced its total indebtedness by approximately $201.8
million.

The Company believes the Offering and the Formation Transactions will
improve its financial performance through changes in its capital structure,
principally the substantial reduction in its overall debt and its debt to equity
ratio. The Company anticipates that distributions will be paid from cash
available for distribution, which is expected to exceed cash historically
available for distribution as a result of the reduction in debt service
resulting from the repayment of indebtedness. Through the Formation
Transactions, the Company expects to reduce its pro forma 1997 annual interest
expense by approximately $10.6 million.

The Company expects to meet its short-term liquidity requirements generally
through its initial working capital and net cash provided by operations.
Properties require periodic investments of capital for tenant-related capital
expenditures and for general capital improvements. For the years ended December
31, 1993 through December 31, 1997, the Company's recurring tenant improvements
and leasing commissions averaged $21.68, $7.32 and $5.09 per square foot of
leased space per year at the New York City office Properties, other Properties
and retail Properties, respectively. The Company expects that the average annual
cost of recurring tenant improvements and leasing commissions will be
approximately $2.2 million, $2.2 million and $1.0 million based upon an average
annual square feet for which leases expire during the years ending December 31,
1998 through December 31, 2002 of 100,986, 304,132, and 203,317 square feet at
the New York City office Properties, other Properties and retail Properties,
respectively. The Company expects the cost of general capital improvements to
the Properties to average approximately $2.1 million annually.

The Company expects to meet its long-term liquidity requirements for the
funding of property acquisitions, property development, and other non-recurring
capital improvements through long-term secured and unsecured indebtedness and
the issuance of additional equity securities by the Company. The Company also
intends to fund property acquisitions, property development, and other non-
recurring capital improvements using the lines of credit on an interim basis.

Comparison of Three Months Ended March 31, 1998 to Three Months Ended
March 31, 1997. Net cash provided by operating activities increased $1.2 million
to $4.5 million from $3.3 million for the three months ended March 31, 1998 as
compared to the three months ended March 31, 1997. The increase was primarily
due to the income earned from Longboat Key Club, 24 West 57th Street and 38
Chauncy Street, all of which were acquired subsequent to the first quarter ended
March 31, 1997. Net cash provided by investing activities decreased $5.0 million
to $2.1 million from $7.1 million for the three months ended March 31, 1998 as
compared to the three months ended March 31, 1997. The decrease was primarily
due to the acquisition of several properties during 1997. Net cash provided by
financing activities increased $7.7 million to $12.2 million from $4.5 million
for the three months ended March 31, 1998 as compared to the three months ended
March 31, 1997. The increase was primarily due to new debt incurred upon the
acquisition of Longboat Key Club, offset by the repayment of Longboat Key Club's
existing debt.

Comparison for the Year Ended December 31, 1997 to Year Ended December 31,
1996. Cash and cash equivalents were $4.9 million and $7.6 million at December
31, 1997 and 1996, respectively. Cash and cash equivalents decreased $2.8
million during 1997 compared to an increase of $5.4 million during 1996. The
decrease in 1997 is due to a $17.9 million increase in net cash used in
investing activities from $21.7 million to $39.5 million, offset by a $6.5
million increase in net cash provided in financing activities

from $25.6 million to $32.1 million and an increase in cash flows provided by
operating activities of $3.1 million from $1.5 million to $4.6 million. The
increase in net cash used in investing activities of $17.8 million is primarily
attributable to the acquisitions of 24 West 57th Street and International Drive
Value Center. The increase in net cash provided by financing activities is
primarily the result of the debt relating to the acquisitions of 24 West 57th
Street and International Drive Value Center. The increase in cash provided by
operating activities of $3.5 million is primarily due to increases from accounts
receivable, escrows and prepaid expenses.

Comparison for the Year Ended December 31, 1996 to Year Ended December 31,
1995. Cash and cash equivalents were $7.6 million and $2.3 million at December
31, 1996 and 1995 respectively. Cash and cash equivalents increased $5.4 million
during 1996 compared to a decrease of $1.5 million during 1995. The increase in
1996 is due to an increase in cash used in investing activities of $4.3 million
from $17.4 million to $21.7 million, an increase in net cash provided by
financing activities of $11.0 million from $14.6 million to $25.6 million.

FUNDS FROM OPERATIONS

The White Paper defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. Management believes Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flows from
operating activities, financing activities and investing activities, it provides
investors with an understanding of the ability of the Company to incur and
service debt and make capital expenditures. The Company computes Funds from
Operations in accordance with standards established by the White Paper, which
may differ from the methodology for calculating Funds from Operations utilized
by other equity REITs, and, accordingly, may not be comparable to such other
REITs. Further, Funds from Operations does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, or other commitments and uncertainties.
Funds from Operations should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of the Company's financial
performance or to cash flows from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it indicative of
funds available to fund the Company's cash needs, including its ability to make
distributions. The Company believes that in order to facilitate a clear
understanding of the combined historical operating results of the Loeb Group and
the Company, Funds from Operations should be examined in conjunction with net
income as presented in the combined financial statements and information
included elsewhere in this Prospectus.

Proforma funds from operations for the twelve months ended December 31,
1997 is calculated as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
------------------
<S> <C>
Proforma income before extraordinary item......................................... $ 9,488
PLUS:
Proforma minority interest in Operating Partnership.......................... 8,655
Proforma real estate depreciation and amortization (excluding financing
costs)...................................................................... 14,437
The Company's share of proforma depreciation and amortization (excluding
financing costs) attributable to investments in partnerships and limited
liability companies......................................................... 987
----------
Funds from operations................................................... $ 33,567
----------
----------
</TABLE>

INFLATION

Substantially all of the office leases provide for separate real estate tax
and operating expense escalations over a base amount. In addition, many of the
leases provide for fixed base rent increases or indexed increases. The Company
believes that inflationary increases may be at least partially offset by
contractual rent increases.

YEAR 2000

Many existing computer programs were designed to use only two digits to
identify a year in the date field without considering the impact of the upcoming
change in the century. If not corrected, many computer applications could fail
or create erroneous results by or at the year 2000. The Company is addressing
the 'Year 2000' issue with respect to its operations and is in the process of
evaluating its potential exposures from the non-compliance with the Year 2000,
if any, of the systems of its vendors, tenants, clients and other third parties
with whom the Company does business. There can be no assurance that the systems
of such third persons, on which the Company relies on for certain supporting
administrative procedures and functions and information, will be timely
converted, however, the financial impact of becoming year 2000 compliant has not
to date been, and is not expected to be, material to the Company's financial
position or results of operations in a given year.

BUSINESS AND PROPERTIES

<TABLE>
<CAPTION>
COMPANY'S
PERCENT SHARE OF PERCENT
YEAR NET LEASED BASE RENT OF
PERCENT BUILT/ RENTABLE AS OF AS OF COMPANY'S
PROPERTY NAME MARKET OWNERSHIP RENOVATED SQUARE FEET 3/31/98 3/31/98(1) BASE RENT
- -------------------------------- --------------------------- ---------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE PROPERTIES:
63 Madison Avenue............... New York, NY 50.5%(4) 1961/1997 797,377 100%(5) $ 4,401,360 6.8%
200 Madison Avenue.............. New York, NY 31.5(6) 1927/1997 670,238 95 4,334,292 6.7
498 Seventh Avenue.............. New York, NY 50.0(7) 1920/1997 873,137 90(8) 3,334,288 5.1
24 West 57th Street............. New York, NY 100.0 1920/1997 97,312 88 2,592,276 4.0
529 Fifth Avenue................ New York, NY 32.6(9) 1959 266,772 99 2,353,974 3.6
307 West 38th Street............ New York, NY 100.0 1927/1996 273,819 90 1,937,784 3.0
First NBC Center................ New Orleans, LA 100.0 1985 1,005,357 88 7,717,824 11.9
Riverview Center................ Menands, NY 100.0 1929/1990 977,780 68 4,116,108 6.4
Marketplace Design Center....... Philadelphia, PA N/A(10) 1921/1974 302,541 81 3,004,161 4.6
38 Chauncy Street............... Boston, MA 100.0 1927/1982 130,142 90 1,843,260 2.8
First Union Bank Building....... Daytona Beach, FL 100.0 1972/1991 129,765 84 1,754,381 2.7
328 South Jefferson Street...... Chicago, IL 100.0 1923 287,468 93 1,406,597 2.2
Winewood Office Park............ Tallahassee, FL 20.0(11) 1972/1997 332,030 100 1,039,322 1.6
GTE Property(12)................ Beaverton, OR 100.0 1980 65,000 100 1,016,760 1.6
Shenandoah Industrial Park...... Coweta County, GA N/A(13) N/A N/A N/A N/A N/A
SUBTOTAL/WEIGHTED AVERAGE
FOR OFFICE PROPERTIES..... N/A N/A 6,208,738 84% $40,852,386 63.1%
----------- -----------
----------- -----------
RETAIL PROPERTIES:
Princeton Shopping Center....... Princeton, NJ 100.0% 1957/1997 217,441 86% $ 2,854,821 4.4%
International Drive Value
Center........................ Orlando, FL 100.0 1995 185,953 100 2,302,290 3.6
Manufacturers Outlet Center..... Mt. Kisco, NY 100.0 1979/1994 203,121 92 1,873,296 2.9
Kendall Value Center............ Kendall, FL 100.0 1984/1993 173,302 100 1, 681,357 2.6
Shoppes at St. Lucie West....... St. Lucie, FL 100.0 1992/1994 200,669 99 1,575,969 2.4
Outlet Park Shoppes at
Waccamaw...................... Myrtle Beach, SC 25.0(14) 1981/1996 738,590 93 1,538,194 2.4
Easton Commons Shopping
Center........................ Houston, TX 100.0 1985 192,154 90 1,377,334 2.1
Kirby/Richmond Shopping
Center........................ Houston, TX 100.0 1972/1989 54,321 92 708,675 1.1
Sunset Strip Center............. Kendall, FL 100.0 1984/1992 81,998 74 673,865 1.0
M&M Plaza....................... Menominee, MI 100.0 1967/1990 225,760 93 352,911 0.5
SUBTOTAL/WEIGHTED AVERAGE
FOR RETAIL PROPERTIES..... N/A N/A 2,273,309 93% $14,938,712 22.5%
----------- -----------
----------- -----------
STORAGE PROPERTIES:
Public Storage Facility......... Alameda, CA 74.25%(9) -- 74,581 98% $ 665,417 1.0%
Public Storage Facility......... Glendale, CA 74.25(9) -- 57,690 95 461,823 0.7
SUBTOTAL/WEIGHTED AVERAGE
FOR STORAGE PROPERTIES.... N/A N/A 132,271 96% $ 1,127,240 1.7%
----------- -----------
----------- -----------

<CAPTION>
BASE RENT
PER LEASED NET
SQUARE EFFECTIVE
PROPERTY NAME FOOT(2) RENT(3)
- -------------------------------- ---------- ---------
<S> <C> <C>
OFFICE PROPERTIES:
63 Madison Avenue............... $10.93 $ 18.45
200 Madison Avenue.............. 21.61 22.61
498 Seventh Avenue.............. 8.55 17.52
24 West 57th Street............. 30.31 32.37
529 Fifth Avenue................ 27.34 22.35
307 West 38th Street............ 7.86 8.02
First NBC Center................ 8.70 8.17
Riverview Center................ 6.19 8.82
Marketplace Design Center....... 12.31 13.18
38 Chauncy Street............... 15.68 15.72
First Union Bank Building....... 16.12 14.07
328 South Jefferson Street...... 5.26 5.12
Winewood Office Park............ 15.65 17.35
GTE Property(12)................ 15.64 15.64
Shenandoah Industrial Park...... N/A N/A
SUBTOTAL/WEIGHTED AVERAGE
FOR OFFICE PROPERTIES..... $12.91 N/A
RETAIL PROPERTIES:
Princeton Shopping Center....... $15.20 $ 12.82
International Drive Value
Center........................ 12.38 12.84
Manufacturers Outlet Center..... 10.05 11.34
Kendall Value Center............ 9.73 10.05
Shoppes at St. Lucie West....... 7.93 7.52
Outlet Park Shoppes at
Waccamaw...................... 8.95 9.55
Easton Commons Shopping
Center........................ 8.19 7.48
Kirby/Richmond Shopping
Center........................ 14.19 12.76
Sunset Strip Center............. 11.15 11.35
M&M Plaza....................... 1.67(15) 1.79
SUBTOTAL/WEIGHTED AVERAGE
FOR RETAIL PROPERTIES..... $ 7.09 N/A
STORAGE PROPERTIES:
Public Storage Facility......... $12.24 $ 12.66
Public Storage Facility......... 11.34 11.85
SUBTOTAL/WEIGHTED AVERAGE
FOR STORAGE PROPERTIES.... $ 8.80 $ 8.80
</TABLE>

<TABLE>
<CAPTION>
COMPANY'S
PERCENT SHARE OF
YEAR LEASED BASE RENT PERCENT OF
PERCENT BUILT/ NO. OF AS OF AS OF COMPANY'S
PROPERTY NAME MARKET OWNERSHIP RENOVATED APARTMENTS 3/31/98 3/31/98(1) BASE RENT
- ---------------------------------------- ---------------- --------- ---------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
RESIDENTIAL PROPERTIES:
Park Hill Lane.......................... Menands, NY 100.0% 1962/1979 567 86% $ 3,919,115 4.2%
One Dartmouth Place..................... Denver, CO 100.0 1973/1993 418 97 2,696,832 6.1
Presidential Estates.................... Guilderland, NY 100.0 1967/1997 128 97 1,241,607 1.9
TOTAL/WEIGHTED AVERAGE FOR
RESIDENTIAL
PROPERTIES........................ 1,113 92% $ 7,857,554 12.1%
----- --- ----------- ---
----- --- ----------- ---

NET
EFFECTIVE
RENT PER
PROPERTY NAME APARTMENT(3)
- ---------------------------------------- ------------
<S> <<C>
RESIDENTIAL PROPERTIES:
Park Hill Lane.......................... $672
One Dartmouth Place..................... 568
Presidential Estates.................... 834
TOTAL/WEIGHTED AVERAGE FOR
RESIDENTIAL
PROPERTIES........................ $691
-----
-----
</TABLE>

<TABLE>
<CAPTION>
COMPANY'S PERCENT OF
NET RENTABLE SHARE OF COMPANY'S
SQUARE FEET NO. OF APARTMENTS BASE RENT BASE RENT
------------- ------------------ ------------ ----------
<S> <C> <C> <C> <C>
TOTAL/WEIGHTED AVERAGE FOR OFFICE,
RETAIL,
STORAGE AND RESIDENTIAL
PROPERTIES........................ 8,614,318 1,113 $64,505,892 100.0%
</TABLE>