AMERICAN INDUSTRIAL PROPERTIES REIT INC, S-3D, 1998-03-24

AMERICAN INDUSTRIAL PROPERTIES REIT INC
S-3D, 1998-03-24
REAL ESTATE INVESTMENT TRUSTS

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As filed with the Securities and Exchange Commission on March 24, 1998.
Registration No.333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
TEXAS 6798 75-6335572
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

6210 N. BELTLINE ROAD, SUITE 170
DALLAS, TEXAS 75063
(972) 756-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
CHARLES W. WOLCOTT
CHIEF EXECUTIVE OFFICER
AMERICAN INDUSTRIAL PROPERTIES REIT
6210 N. BELTLINE ROAD, SUITE 170
DALLAS, TEXAS 75063
(972) 756-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
COPIES TO:
BRYAN L. GOOLSBY
GINA E. BETTS
LIDDELL, SAPP, ZIVLEY, HILL & LABOON, L.L.P.
2001 ROSS AVENUE, SUITE 3000
DALLAS, TEXAS 75201
(214) 849-5500

Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement become effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [x]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]

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CALCULATION OF REGISTRATION FEE
================================================================================

<TABLE>
<CAPTION>
Title of Proposed Maximum
Securities being Amount to be Proposed Maximum Offering Aggregate Offering Amount of
Registered Registered(1) Price Per Share(2) Price(2) Registration Fee
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares of 1,000,000 $13.1875 $13,187,500 $3,890.31
Beneficial Interest,
$0.10 par value
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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(Footnotes from previous page)

(1) PLUS SUCH ADDITIONAL NUMBER OF SHARES AS MAY BE REQUIRED IN THE EVENT
OF A SHARE DIVIDEND, REVERSE SHARE SPLIT, SPLIT-UP, RECAPITALIZATION
OR OTHER SIMILAR EVENT.
(2) THIS ESTIMATE IS BASED ON THE AVERAGE OF THE HIGH AND LOW SALES PRICES
ON THE NEW YORK STOCK EXCHANGE OF THE COMMON SHARES OF BENEFICIAL
INTEREST OF AMERICAN INDUSTRIAL PROPERTIES REIT ON MARCH 17, 1998,
PURSUANT TO RULE 457(C) UNDER THE SECURITIES ACT OF 1933, AND IS MADE
SOLELY FOR PURPOSES OF DETERMINING THE REGISTRATION FEE.
================================================================================
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AMERICAN INDUSTRIAL PROPERTIES REIT

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DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN

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

American Industrial Properties REIT, a Texas real estate investment
trust (the "Trust"), hereby offers to the holders of its common shares of
beneficial interest, par value $0.10 per share (the "Common Shares"),the
opportunity to participate in the Trust's Dividend Reinvestment and Share
Purchase Plan (the "Plan"). The Plan provides a simple and convenient method,
without brokerage commission or service charge, for shareholders to invest cash
distributions and optional cash payments in Common Shares of the Trust. All
holders of record of Common Shares are eligible to participate in the Plan
(each, a "Participant"). Participants may purchase additional Common Shares by
(i) having the cash distributions on all, or part, of their Common Share
automatically reinvested, (ii) by receiving directly, as usual, their cash
distributions, if, as and when declared, on their Common Shares and investing
in the Plan by making cash payments of not less than $100 per payment or more
than $10,000 per calendar quarter ("optional cash payments"), or (iii) by
investing both their cash distributions and such optional cash payments. A
shareholder may begin participating in the Plan by completing an Authorization
Card and returning it to Bank Boston, N.A. as plan administrator. Participants
may terminate their participation at any time. Shareholders who do not wish to
participate in the Plan need take no action and will continue to receive their
cash distributions, if, as and when declared, as usual. It is suggested that
this Prospectus be retained for future reference.

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

The date of this Prospectus is March 24, 1998
<PAGE> 4
AVAILABLE INFORMATION

The Trust has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
and the rules and regulations promulgated thereunder, with respect to the
Common Shares offered pursuant to this Prospectus. This Prospectus, which is
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Trust and the Common Shares, reference
is made to the Registration Statement and such exhibits and schedules.
Statements contained in this Prospectus as to the contents of any contract or
other document which is filed as an exhibit to the Registration Statement are
not necessarily complete, and each such statement is qualified in its entirety
by reference to the full text of such contract or document.

The Trust is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information and the Registration Statement and exhibits and schedules
thereto filed by the Trust with the Commission can be inspected and copied at
the Public Reference Section maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 7 World Trade Center, 13th Floor, New York, New York
10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can be obtained from the Public Reference Section of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission also maintains a Web site at
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. Information about the Trust may be obtained from the Commission's
web site. Such reports, proxy and information statements and other information
can also be inspected at the offices of the New York Stock Exchange (the
"NYSE"), 20 Broad Street, New York, New York 10005.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Trust with the Commission (File
No. 1-9016) are incorporated by reference herein and shall be deemed to be a
part hereof:

(a) Annual Report on Form 10-K for the year ended December 31,
1997;
(b) Current Report on Form 8-K filed January 20, 1998 and Amendment
No. 1 filed March 23, 1998;
(c) Current Report on Form 8-K filed February 13, 1998;
(d) Current Report on Form 8-K filed February 25, 1998 and
Amendment No. 1 filed March 3, 1998 and Amendment No. 2 filed
March 23, 1998;
(e) Current Report on Form 8-K filed March 23, 1998; and
(f) The description of the Common Shares contained in the Trust's
Registration Statement on Form 8-A filed with the Commission
pursuant to the Exchange Act, including all amendments and
reports updating such description.

All documents subsequently filed by the Trust pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in a document
incorporated by reference or deemed to be incorporated by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
incorporated document modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.

UPON WRITTEN OR ORAL REQUEST OF ANY PERSON TO WHOM A PROSPECTUS IS
DELIVERED, THE TRUST WILL PROVIDE, WITHOUT CHARGE, A COPY OF THE DOCUMENTS
WHICH HAVE BEEN INCORPORATED BY REFERENCE (OTHER THAN EXHIBITS UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN ANY SUCH DOCUMENT) IN
THIS PROSPECTUS. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO SHANA EDDY,
AMERICAN INDUSTRIAL PROPERTIES REIT, 6210 N. BELTLINE ROAD, SUITE 170, IRVING,
TEXAS, 75063, TELEPHONE NUMBER (972) 756-6000.

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This Prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. The Trust's actual results could differ materially from those set forth
in the forward-looking statements.

THE TRUST

American Industrial Properties REIT, a Texas real estate investment
trust (the "Trust"), is the issuer of the Common Shares offered hereunder. The
principal executive office of the Trust is located at 6210 N. Beltline Road,
Suite 170, Irving, Texas 75063 and its phone number is (972) 756-6000.

DESCRIPTION OF
THE DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN

The terms of the Trust's Dividend Reinvestment and Share Purchase Plan
(the "Plan") are set forth below in question and answer format.

PURPOSE

1. What is the purpose of the Plan?

The purpose of the Plan is to provide holders of Common Shares with a
simple and convenient method of investing cash distributions or optional cash
payments in Common Shares without payment of any brokerage commissions, fees or
service charges. Common Shares purchased under the Plan will either be original
issue shares or shares purchased in the open market by the plan administrator,
Bank Boston, N.A. (the "Administrator"). The Plan accordingly has the added
benefit of providing the Trust with additional funds for general corporate
purposes when the Trust elects to sell Common Shares to Participants in the
Plan.

ADVANTAGES TO PARTICIPANTS

2. What are the options available to shareholders?

Participants in the Plan may purchase additional Common Shares by (i)
having the cash distributions on all, or part, of their Common Shares
automatically reinvested, (ii) by receiving directly, as usual, their cash
distributions, if, as and when declared, on their Common Shares and investing
in the Plan by making cash payments of not less than $100 per payment or more
than $10,000 per calendar quarter, or (iii) by investing both their cash
distributions and such optional cash payments. What are the advantages of the
Plan? No brokerage commissions, fees or service charges are paid by
Participants in connection with purchases under the Plan; provided, however,
that if shares are registered in the name of a nominee or broker, such nominee
or broker may charge a commission or fee. Full investment of distributions is
possible under the Plan because the Plan permits fractions of shares, as well
as whole shares, to be purchased and credited to Participants' accounts.
Regular statements of account provide simplified record keeping. In addition,
the free custodial services provided in connection with the Plan serve to
protect against loss, theft or destruction of certificates. The price of Common
Shares purchased under the Plan from the Trust with reinvested cash
distributions will be 95% of the mean of the high and low sales prices for such
shares either on (a) the applicable Investment Date (as defined in Question
11), or (b) the distributions payment date, whichever is higher. Common Shares
purchased under the Plan from the Trust with optional cash payments will have a
purchase price equal to 100% of the mean of the high and low sales prices for
such shares on the applicable Investment Date. For open market purchases, the
purchase price will be the

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weighted average price paid by the Administrator for all shares purchased by it
for Participants in the Plan with the proceeds of the cash distribution and/or
optional cash payments being invested on the applicable Investment Date.

ADMINISTRATION

3. Who administers the Plan for Participants?

Bank Boston, N.A., or such other bank or trust company as the Trust
may from time to time designate as plan administrator for the participating
shareholders, administers the Plan for Participants, keeping records, sending
statements of account to Participants and performing other duties relating to
the Plan. Common Shares purchased under the Plan are held by the Administrator
as agent for the Participants and are registered in the name of the
Administrator or its nominee, unless and until a Participant requests that a
share certificate for his or her shares be issued, as more fully described
below in Question 16.

Any questions or correspondence regarding the Plan, all additional
cash investments or requests for withdrawals should be directed to:

Bank Boston, N.A.
c/o Boston EquiServe, L.P.
Investor Relations Department
P.O. Box 8040
Boston, MA 02266
(800) 736-3001

All correspondence that cannot be delivered to a post office box,
please send deliveries to:

Bank Boston, N.A.
c/o Boston EquiServe, L.P.
Investor Relations Department
150 Royall Street
Canton, MA 02021
(800) 736-3001
PARTICIPATION

4. Who is eligible to participate?

All holders of record of Common Shares are eligible to participate in
the Plan ("Eligible Shareholders"). In order to be eligible to participate,
beneficial owners of Common Shares whose shares are registered in names other
than their own (for example, shares registered in the name of a broker, bank
nominee or trustee) must either arrange for the holder of record to join the
Plan or have the shares they wish to enroll in the Plan transferred to their
own names.

5. How does an Eligible Shareholder participate?

An Eligible Shareholder may join the Plan by completing and signing an
Authorization Card and returning it to the Administrator. If shares are
registered in the name of a nominee or broker, Eligible Shareholders must have
the nominee or broker sign the Authorization Card and return it to the
Administrator. When completing the Authorization Card, an Eligible Shareholder
should be careful to include his or her social security number or taxpayer
identification number. Failure to supply this information will result in backup
withholding of 1% of payments owed to a Participant. Once enrolled in the
Plan, Participants will continue to be enrolled without further action on their
part. Participants may change their investment options at any time by
completing, signing and returning to the Administrator a new Authorization
Card. If a Participant's shares are registered in more than one name (e.g.,
joint tenants, trustees, etc.), all registered owners must sign the
Authorization Card exactly as their names appear on the account registration.
Additional

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Authorization Cards and additional copies of this Prospectus may be obtained at
any time by written request to the Administrator at the address set forth in
Question 3 above.

6. When may an Eligible Shareholder join the Plan?

An Eligible Shareholder may join the Plan at any time. Reinvestment of
distributions commences, for any shareholder electing such option, with the
first distribution paid after such shareholder joins the Plan, provided that an
Authorization Card is received for such shareholder by the Administrator before
the record date for such distribution. If any shareholder delivers an
Authorization Card specifying reinvestment of distributions paid on such
holder's Common Shares to the Administrator on or after the record date
established for payment of a particular distribution on the Common Shares,
reinvestment will commence with the distribution payment date following the
next such record date. See Question 12 below for information concerning the
investment of optional cash payments.

7. What does the Authorization Card say about distributions and
optional cash payments?

The Authorization Card allows each shareholder to decide the extent to
which he or she wishes to participate in the Plan through any of the following
investment options:

(a) Full Distribution Reinvestment. If the "Full Distribution
Reinvestment" box is checked, the Administrator will apply
cash distributions on all Common Shares registered in the
Participant's name, as well as on all Common Shares credited
to the Participant's Plan account, and any optional cash
payments to the purchase of additional Common Shares.

(b) Partial Distribution Reinvestment. If the "Partial
Distribution Reinvestment" box is checked, the Administrator
will apply cash distributions on such number of Common Shares
as specified by the Participant on the Authorization Card, as
well as on all Common Shares credited to the Participant's
Plan account, and any optional cash payments to the purchase
of additional Common Shares.

(c) Optional Cash Payments Only. If the "Optional Cash Payments
Only" box is checked, the Administrator will apply only
optional cash payments and any distributions on shares
credited to the Participant's Plan account to the purchase of
additional Common Shares. Cash distributions on Common Shares
registered in the Participant's name, other than in his or her
Plan account, will be paid to the Participant in the usual
manner. Except with respect to distributions on Common Shares
in a Participant's Plan account, which are reinvested
automatically, a Participant may elect to reinvest the
distributions on all or part of the Common Shares registered
in his or her name by designating his or her intentions on the
Authorization Card.

8. How may Participants change their investment options?

A Participant may change his or her investment option at any time by
signing a new Authorization Card and returning it to the Administrator. A
change in investment option will be effective on the next distribution payment
date if the Authorization Card is received by the Administrator before the
related distribution record date. If the Authorization Card is received by the
Administrator on or after the related distribution record date, the change will
be effective on the distribution payment date for the following quarter.

COSTS

9. Are there any expenses to Participants in connection with
participation under the Plan?

Participants incur no brokerage fees with respect to the purchase of
shares from the Trust, and the Trust pays all other costs of administering the
Plan. If a Participant's shares are registered in the name of a nominee or
broker, such

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nominee or broker may charge a commission or fee for both shares purchased in
the open market and original issue shares. Any such commissions or fees will
be the responsibility of the Participant.

PURCHASES

10. How many Common Shares will be purchased for each Participant?

The number of shares to be purchased for a Participant's account under
the Plan will depend upon the amount of the Participant's distribution being
reinvested, the amount of any optional cash payments and the effective purchase
price of the Common Shares. Each Participant's account is credited with the
number of shares, including fractions computed to at least three decimal
places, equal to the total amount invested by him or her divided by the
applicable purchase price.

11. At what price and when will Common Shares be purchased under
the Plan?

The price of Common Shares purchased under the Plan from the Trust
with reinvested cash distributions will be 95% of the mean of the high and low
sales prices for such shares either on (a) the applicable Investment Date, or
(b) the distribution payment date, whichever is higher. Common Shares purchased
under the Plan from the Trust with optional cash payments will have a purchase
price equal to 100% of the mean of the high and low sales prices for such
shares on the applicable Investment Date. For open market purchases, the
purchase price will be the weighted average price paid by the Administrator for
all shares purchased by it for Participants in the Plan with the proceeds of
the cash distribution and/or optional cash payments being invested on the
applicable Investment Date. Shares purchased from the Trust for the account of
holders of Common Shares will be made on or promptly following the first
business day of the month first occurring on or after the distribution payment
date, or, if the Common Shares are not traded on such day, the next trading day
(the "Investment Date"). For purposes of the Plan, a "business day" shall mean
a day other than a Saturday, a Sunday or a day that shall be in the City of
Boston, Massachusetts, a day on which banking institutions are authorized or
obligated by law or executive order to close. Optional cash payments and
distributions will be invested on the Investment Date first occurring on or
after the distribution payment date. No interest will be paid on funds held by
the Administrator pending investment of distributions or optional cash
payments. If the Trust does not elect to sell Common Shares to Participants in
the Plan on an Investment Date, the Administrator shall purchase Common Shares
on such Investment Date, on any securities exchange where such shares are
traded, in the over-the-counter market or in negotiated transactions, on such
terms as the Administrator may determine. Since purchase prices for the Common
Shares are established on the applicable Investment Date, a Participant loses
any advantages otherwise available from being able to select the timing of
investments. Participants should recognize that neither the Trust nor the
Administrator can assure a profit or protect against a loss on Common Shares
purchased under the Plan.

12. How are optional cash payments made?

Optional cash payments may be made at any time and in varying amounts
of not less than $100 per payment or more than $10,000 per calendar quarter. A
shareholder may make an optional cash payment when enrolling in the Plan by
enclosing a check (made payable to Bank Boston, N.A.) with the Authorization
Card. Thereafter, optional cash payments may be made through the use of
optional cash payment forms which will be sent to Participants by the
Administrator. In the event a broker, bank nominee or trustee holds shares of a
beneficial owner in the name of a major securities depository, optional cash
payments must be made on a Broker and Nominee Form (a "B & N Form").

The B & N Form is the sole means by which a broker, bank nominee or
trustee holding shares of a beneficial owner in the name of a major securities
depository may invest optional cash payments on behalf of such beneficial
owner. In such a case, the broker, bank nominee or trustee must use the B & N
Form for transmitting optional cash payments on behalf of the beneficial owner.
A B & N Form must be delivered to the Administrator each time that such broker,
bank nominee or trustee transmits optional cash payments on behalf of a
beneficial owner. B & N Forms will be furnished at any time upon written
request to the Administrator. Optional cash payments, like distributions, will
be invested on the Investment Date first occurring on or after the distribution
payment date. However, only payments

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received at least five days before the related distribution payment date will
be invested on the related Investment Date. Optional cash payments received
within five days of the related distribution payment date will not be invested
until the Investment Date in the following quarter. NO INTEREST WILL BE PAID ON
OPTIONAL CASH PAYMENTS. IT IS THEREFORE SUGGESTED THAT ANY OPTIONAL CASH
PAYMENTS A PARTICIPANT WISHES TO MAKE BE SENT SO AS TO REACH THE ADMINISTRATOR
AS CLOSE AS POSSIBLE TO FIVE DAYS BEFORE THE DISTRIBUTION PAYMENT DATE. The
same amount of money need not be sent each quarter, and there is no obligation
to make an optional cash payment each quarter. Optional cash payments will be
refunded if a written request for a refund is received by the Administrator no
later than two days prior to the related distribution payment date.

A shareholder may participate through the investment of optional cash
payments without the necessity of reinvesting cash distributions by checking
the"Optional Cash Payments Only" box on the Authorization Card. However, even
if the "Optional Cash Payments Only" box is checked, all distributions payable
on shares purchased with optional cash payments and retained in the
Participant's Plan account will be reinvested automatically in additional
Common Shares. In the event that any check is returned unpaid for any reason,
the Administrator will consider the request for investment null and void and
shall immediately remove from the Participant's Plan account shares, if any,
purchased upon credit of such money. The Administrator shall hereupon be
entitled to sell these shares to satisfy uncollected amounts. If the net
proceeds of the sale of such shares are insufficient to satisfy the balance of
such uncollected amounts, the Administrator shall be entitled to sell such
additional shares from the Participant's Plan account to satisfy the
uncollected balance.

The Administrator will charge shareholders a fee of $25.00 for all
returned checks.

REPORTS TO PARTICIPANTS

13. What kind of reports are sent to Participants in the Plan?

Shareholders who participate in the Plan through the reinvestment of
distributions or through the investment of optional cash payments will be sent
a quarterly statement of their accounts. These statements of account will show
any cash distributions and optional cash payments received, the number of
shares purchased, the purchase price for the shares, the number of Plan shares
held for the Participant by the Administrator, the number of enrolled shares
registered in the name of the Participant, and an accumulation of the
transactions for the calendar year to date. Quarterly statements will be
mailed as soon as practicable after each distribution payment date. These
statements are a Participant's continuing record of the cost of his or her
purchases and should be retained for income tax purposes. In addition, each
Participant will receive the most recent Prospectus constituting the Plan and
copies of the same communications sent to every other holder of Common Shares,
including the Trust's Annual Report, Notice of Annual Meeting and Proxy
Statement and income tax information for reporting distributions paid by the
Trust.

DISTRIBUTIONS

14. How are distributions credited to Participants' accounts under
the Plan?

On Common Shares for which a Participant has directed that
distributions be reinvested, cash distributions will automatically be credited
to a Participant's account and reinvested in additional shares of Common
Shares. Cash distributions also will be automatically reinvested on all shares
which have been purchased under the Plan and credited to a Participant's
account; provided, however, that no distributions will be earned on such shares
purchased under the Plan until the distribution payment for the first
distribution record date which follows the date of purchase of such shares. On
Common Shares for which a Participant has not directed that distributions be
reinvested and on shares owned by shareholders who are not participating in the
Plan, cash distributions, if, as and when declared, will be received by them by
check as usual. Share distributions or share splits distributed by the Trust on
the shares purchased for and credited to the account of a Participant under the
Plan will be added to the Participant's account. Share distributions or share
splits distributed on shares owned and held outside the Plan by a Participant
(including shares for which a Participant has directed that cash distributions
be reinvested) will be mailed directly to such Participant.

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15. Will Participants be credited with distributions on fractions
of shares?

Yes. Account balances will be computed to three decimal places and
distributions will be paid on the fractional shares.

CERTIFICATES FOR SHARES

16. Will certificates be issued for Common Shares purchased under
the Plan?

Unless requested by a Participant, certificates for Common Shares
purchased under the Plan will not be issued. Shares will be held in the name
of the Administrator or its nominees. The number of shares credited to a
Participant's account under the Plan will be shown on his or her statement of
account. Certificates for any number of whole shares credited to an account
under the Plan will be issued upon the written request of a Participant. The
remaining whole shares and fractions of shares, if any, will continue to be
credited to the Participant's account. A request for issuance of Plan shares,
including issuance of all of the shares in a Participant's account, will not
constitute a termination of participation in the Plan by the Participant. A
Participant's rights under the Plan and shares credited to the account of a
Participant under the Plan may not be pledged. A Participant who wishes to
pledge such shares must request that certificates for such shares be issued in
his or her name. Certificates for fractional shares are not issued under any
circumstances.

17. In whose name are accounts maintained and certificates
registered when issued?

Accounts in the Plan are maintained in names in which the certificates
of Participants were registered at the time they entered the Plan. When issued
out of the Plan, certificates for whole shares are similarly registered. Upon
written request, certificates may also be registered and issued in names other
than the name of the Participant, subject to compliance with any applicable
laws and the payment of any applicable taxes. Any such request must be made in
writing, signed by the Participant, and the Participant's signature must be
guaranteed by a qualified medallion guarantee member.

SALE OF PLAN SHARES

18. When and how may a Participant sell shares held in the Plan?

Any Participant, including a Participant who is withdrawing from the
Plan, may sell some or all of his or her shares in the Plan in either of the
following ways. A Participant may choose to sell all or a portion of his or her
shares in the Plan on the open market through the Participant's broker. If a
Participant elects to sell through a broker, he or she must first request the
Administrator to send the Participant a certificate or certificates
representing the requested number of shares in the Plan credited to the
Participant's account. As soon as practicable after receipt of such request,
the Administrator will issue a certificate or certificates representing such
number of shares to the Participant in his or her name as it appears in the
Participant's Plan account, unless other instructions are provided in writing
as described in Question 17. As an alternative, a Participant may request the
Administrator to sell up to 1,000 whole shares credited to his or her account
under the Plan in each transaction. The Administrator will use its best efforts
to make the sale in the open market within ten trading days after receipt of
the written request, and the Participant will receive the proceeds of the sale
minus any brokerage commissions and transfer taxes. No Participant has the
authority or power to direct the date or sale price at which the Common Shares
may be sold by the Administrator under this alternative. A Participant who
requests the Administrator to sell up to 1,000 shares and wishes to have
additional shares sold through his or her broker will receive a certificate in
his or her name representing the whole shares that he or she wishes to sell
through a broker. Any written instructions that do not clearly indicate the
whole number of shares to be sold, or that "all" Plan shares are to be sold,
will be returned to the Participant with no action taken. A Participant who
wishes to sell some or all of his or her shares in the Plan should be aware of
the risk under either selling option that the price of the Common Shares may
decrease between the time that the Participant determines to sell shares in the
Plan and the time that the sale is completed. This risk is borne solely by the
Participant. No check for the proceeds of such sale will be mailed prior

8
<PAGE> 11
to the settlement of funds from the brokerage firm through which shares in the
Plan are sold. Settlement is three business days after the sale of the shares.
All information relating to the sale of shares in the Plan will be reported to
the Internal Revenue Service pursuant to applicable legal requirements.

WITHDRAWAL FROM THE PLAN

19. When and how may a Participant withdraw from the Plan?

A Participant may withdraw from the Plan by giving oral or written
notice to the Administrator that he or she wishes to withdraw. When a
Participant withdraws from the Plan (or upon termination of the Plan by the
Trust) certificates for whole shares in his or her account under the Plan are
issued and a cash payment is made for any fraction of a share in such account.
If the written request to withdraw is received by the Administrator before the
record date for a distribution, the withdrawal will be duly processed and such
distribution will not be reinvested on the next distribution payment date. Any
written notice of termination received on or after a distribution record date
will not be effective until distributions for such record date have been
invested and the shares have been allocated to the account of the respective
Participant. After such distributions are invested and allocated to the
Participants' accounts, withdrawal requests will be processed. Allocations may
take up to two weeks after distribution payment. Neither the Administrator nor
the Trust is responsible for losses during such periods. Any optional cash
payment sent to the Administrator prior to the request to withdraw will be
invested in Common Shares unless the Participant expressly requests in writing
that the optional cash payment be returned and the Administrator receives the
Participant's written request before the next Investment Date. A Participant
may re-enroll in the Plan at any time by submitting an Authorization Card as
described in Question 5.

20. May a Participant terminate the reinvestment of distributions
on shares held in his or her name and still remain in the
Plan?

Yes. A Participant who terminates the reinvestment of distributions
paid on shares registered in his or her name may leave in the Plan the shares
previously purchased for his or her account in the Plan. Distributions paid on
the shares left in the Plan continue to be reinvested automatically for his or
her account.

TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN

21. What are the federal income tax consequences of participation
in the Plan?

Under the current provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the purchase of Common Shares under the Plan will
generally result in the following federal income tax consequences:

(a) A distribution on Common Shares will be treated for federal
income tax purposes as a distribution received by the
Participant notwithstanding that it is used to purchase
additional Common Shares pursuant to the Plan. The full amount
of cash distributions reinvested under the Plan plus the 5%
purchase discount on such reinvested distributions represent
distribution income to Participants. In addition, the amount
of any brokerage commissions, mark-ups, and other fees or
expenses incurred by the Trust on behalf of a Participant in
connection with purchases on the open market will also
constitute a distribution to such Participant for federal
income tax purposes.

(b) Distributions paid to corporate shareholders, including
amounts taxable as distributions to corporate Participants
under (a) above, will not be eligible for the corporate
distributions-received deduction under the Code.

(c) A Participant's tax basis in additional Common Shares acquired
under the Plan with reinvested distributions will be equal to
the amount treated as a distribution for federal income tax
purposes. A Participant's tax basis in additional Common
Shares acquired under the Plan with optional cash

9
<PAGE> 12
payments will be equal to the amount of the optional cash
payments plus the excess, if any, of the fair market value of
the shares, on the Investment Date such shares were acquired,
over the amount of such optional cash payments. The
Participant's holding period for Common Shares acquired with
reinvested distributions or optional cash payments will
commence on the day after the Investment Date.

(d) A Participant will not realize any taxable income upon the
receipt of a certificate for full shares credited to the
Participant's account. A Participant will recognize gain or
loss when a fractional share interest is liquidated or when
the Participant sells or exchanges shares received from the
Plan. Such gain or loss will equal the difference between the
amount which the Participant receives for such fractional
share interest or such shares and the tax basis therefor. In
the case of Participants whose distributions are subject to
withholding of federal income tax, distributions will be
reinvested less the amount of tax required to be withheld. The
above is intended only as a general discussion of the current
federal income tax consequences of participation in the Plan.
Participants should consult their own tax advisers regarding
the federal and state income tax consequences (including the
effects of any changes in law) of their individual
participation in the Plan.

OTHER INFORMATION

22. What happens when a Participant sells or transfers all of the
shares registered in his or her name other than shares under
the Plan?

If a Participant disposes of all of the Common Shares registered in
his or her name other than shares purchased for the Participant's account under
the Plan, the Administrator, until it is otherwise instructed, continues to
reinvest the distributions on the Common Shares in the Participant's Plan
account. In the event of a Participant's death or incapacity, the personal
representative of his or her estate may provide the Administrator with a
written request of withdrawal of the Participant's Plan shares. The Trust
reserves the right not to reinvest any additional distributions if a
Participant has only a fractional share of stock credited to his or her account
under the Plan on the record date for any cash distribution on the Common
Shares. If the Trust exercises this right, the Participant will receive a cash
adjustment representing the fractional share and a cash payment for the
distribution. The cash payment for the fractional share will be based on the
closing price of the Common Shares on the NYSE on the date on which the Trust
exercises this right.

23. If the Trust issues rights to purchase securities to the
holders of Common Shares, how will the rights on Plan shares
be handled?

In the event that the Trust makes available to the holders of its
Common Shares rights to purchase additional Common Shares or any other
securities, the Administrator will sell such rights (if such rights are
saleable and detachable from the Common Shares) accruing to Common Shares held
by the Administrator for Participants and invest the proceeds in additional
Common Shares on the next distribution payment date for the Common Shares. In
the event that such rights are not saleable or detachable, the Plan will hold
such rights for the benefit of Participants. A Participant who wishes to
receive directly any such rights may do so by sending to the Administrator, on
or before the rights offering record date, a written request that certificates
for shares in his or her account be sent to him or her.

24. What happens if the Trust issues a share distribution or
declares a share split?

Any shares representing share distributions (payable in Common Shares)
or share splits distributed by the Trust on Common Shares credited to the
account of a Participant under the Plan will be added to the Participant's
account. Shares representing share distributions payable other than in Common
Shares or share splits distributed by the Trust on Common Shares credited to
the account of a Participant under the Plan shall be paid to the Administrator,
which shall distribute the shares in accordance with the interests of
Participants in the Plan. Shares representing share distributions or split
shares distributed on shares registered in the name of the Participant will be
mailed directly to such Participant in the same manner as to shareholders who
are not participating in the Plan.

10
<PAGE> 13
25. How are a Participant's shares held under the Plan to be voted
at meetings of shareholders?

Full Common Shares credited to the account of a Participant under the
Plan are voted by the Administrator as record holder in accordance with
instructions of the Participant given to the Administrator on an instruction
form or proxy furnished to the Participant. If the Participant desires to vote
in person at a meeting, a proxy to vote the number of full shares credited to
his or her account under the Plan may be obtained upon written request received
by the Administrator at least 15 days before the meeting.

26. May Common Shares held in certificate form be deposited in a
Participant's Plan account?

Yes. A Participant may deposit share certificates of the Common Shares
with the Administrator for safekeeping. The Administrator will credit the
number of shares deposited in the Participant's account and will treat them in
all respects in the same manner as shares purchased under the Plan for the
Participant's account. A Participant does not need to endorse his or her
certificates before sending them to the Administrator. There is no additional
charge for this additional service. All Trust share certificates should be sent
(by either registered or certified mail, return receipt requested) to:

Bank Boston, N.A.
c/o Boston EquiServe, L.P.
Dividend Reinvestment Department
P.O. Box 8040
Boston, MA 02266
(800) 736-3001

A return receipt is requested since the Participant bears the risk of
loss in transit.

27. What are the responsibilities of the Trust and the
Administrator under the Plan?

Neither the Trust nor the Administrator will be liable for any act
done in good faith or for any good faith omission to act, including, without
limitation, any claims of liability arising out of a failure to terminate a
Participant's account upon such Participant's death or adjudicated incompetency
prior to the receipt of notice in writing of such death or adjudicated
incompetency, the prices at which shares are purchased for the Participant's
account, the times when purchases are made or fluctuations in the market value
of the Common Shares. Neither the Trust nor the Administrator has any duties,
responsibilities or liabilities except those expressly set forth in the Plan.
THE PARTICIPANT SHOULD RECOGNIZE THAT THE TRUST CANNOT ASSURE A PROFIT OR
PROTECT AGAINST A LOSS ON THE SHARES PURCHASED BY A PARTICIPANT UNDER THE PLAN.

28. May the Plan be changed or discontinued?

The Trust reserves the right to suspend or terminate the Plan at any
time. The Trust also reserves the right to make modifications to the Plan.
Notice of such suspension, termination or modification will be sent to all
Participants. The Trust intends to use its best efforts to maintain the
effectiveness of the Registration Statement filed with the Commission covering
the offer and sale of Common Shares under the Plan. However, the Trust has no
obligation to offer, issue or sell Common Shares to Participants under the Plan
if, at the time of the offer, issuance or sale, such Registration Statement is
for any reason not effective. Also, the Trust may elect not to offer or sell
Common Shares under the Plan to Participants residing in any jurisdiction or
foreign country where, in the judgment of the Trust, the burden or expense of
compliance with applicable blue sky or securities laws makes such offer or sale
there impracticable or inadvisable. In any of these circumstances,
distributions, if, as and when declared, will be paid in the usual manner to
the shareholders and any optional cash payments received from such shareholder
will be returned to him or her.

11
<PAGE> 14
RESALE RESTRICTIONS

29. Are there any restrictions on the resale of Common Shares
acquired under the Plan?

Employees who are not "affiliates" of the Trust are free to sell at
any time the Common Shares acquired under the Plan. Employees who are
"affiliates"of the Trust, as that term is defined in Rule 405 promulgated by
the Commission under the Securities Act, may not publicly reoffer shares
acquired under the Plan except pursuant to Rule 144 promulgated by the
Commission or under the Securities Act pursuant to an effective Registration
Statement. Rule 405 defines an"affiliate" as a person who directly, or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with the Trust. Trust Managers and certain officers of the
Trust may be "affiliates" of the Trust under this definition. Trust Managers
and certain executive officers of the Trust participating in the Plan are also
subject to the reporting obligations of Section 16(a) and the short-swing
profit recovery provisions of Section 16(b) of the Exchange Act with respect to
purchases of the Common Shares made under the Plan with optional cash payments.
While such Trust Managers and officers are not subject to the short-swing
profit recovery provisions of Section 16(b) of the Exchange Act with respect to
purchases of Common Shares made under the Plan with reinvested distributions,
such purchases must be disclosed in annual reports filed pursuant to Section
16(a) of the Exchange Act.

LIMITATIONS ON PARTICIPATION

30. Are there limitations on participation in the Plan other than
those described above?

The Trust reserves the right to limit participation in the Plan for
any reason, even if a shareholder is otherwise eligible to participate. In
order to enable the Trust to meet one of the requirements for continued
qualification as a REIT, the Trust's Declaration of Trust limits ownership by
any one person to no more than 9.8% of the Trust's outstanding capital stock.
No shareholder may acquire any shares pursuant to the Plan that exceed this
limit. Some shareholders may be residents of jurisdictions in which the Trust
determines that it may not legally or economically offer its shares under the
Plan, and accordingly residents of such jurisdictions may be precluded from
participating in the Plan. The Trust has no present plans to limit
participation in the Plan by any shareholder of record for reasons other that
those set forth above, but it reserves such right in the event that it
determines in its sole discretion that such limitation may be in the best
interests of the Trust and its shareholders.

USE OF PROCEEDS

The Trust intends to use proceeds from the sale of its Common Shares
for general corporate purposes, including repayment of indebtedness, investment
in new properties and new developments and maintenance of currently owned
properties. The Trust has no basis for estimating either the number of Common
Shares that ultimately will be sold pursuant to the Plan or the prices at which
such shares will be sold. The Trust will not receive any funds under the Plan
from the purchase of Common Shares in the open market by the Administrator.

COMMON SHARES

Holders of the Common Shares of the Trust are entitled to share
equally, share for share, in distributions payable in cash, shares or other
property, when, as and if declared by the Trust's Board of Trust Managers. In
the event of any liquidation, dissolution or winding-up, the holders of the
Common Shares are entitled to receive, on a share for share basis, any assets
or funds of the Trust that are distributable to its holders of Common Shares
upon such events. Holders of Common Shares are entitled to one vote for each
share held on all matters voted upon by shareholders. Holders of Common Shares
are not entitled to preemptive rights or to cumulative voting rights. The
shares of Common Shares issued or to be issued upon receipt of payment therefor
by the Trust in accordance with the terms set forth in the Plan will be validly
issued, fully paid and non-assessable. The Trust's Declaration of Trust
provides that no shareholder may beneficially own more than 9.8% of the Trust's
outstanding capital stock. Any attempted transfer or acquisition of capital
stock that would create a direct or indirect ownership of capital stock in
excess of this limit or otherwise result in disqualification of the Trust as a
REIT will be null and void. The Trust's Declaration of Trust provides that
capital stock

12
<PAGE> 15
subject to these limitations is subject to various rights of the Trust to
enforce these limitations, including conversion of the shares into nonvoting
shares and transfer to a trust. The above summary of the ownership limitation
is qualified in its entirety by reference to the Trust's Declaration of Trust,
as amended from time to time. The Trust reserves the right to invalidate any
purchases made under the Plan that, in the Trust's sole discretion, may violate
the ownership limits.

COMMON SHARE PRICE

The Common Shares are listed on the New York Stock Exchange under the
symbol "IND." On March 19, 1998, the last reported sale price of the Trust's
Common Shares on the NYSE was $13.50.

EXPERTS

The consolidated financial statements of American Industrial
Properties REIT included in its Annual Report on Form 10-K for the year ended
December 31, 1997, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

The Combined Historical Summary of Gross Income and Direct Operating
Expenses of Merit Texas Properties Portfolio for the year ended December 31,
1996, included in the American Industrial Properties RElT's Current Report on
Form 8-K, dated October 17, 1997, as amended, has been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included
therein and incorporated by reference herein. Such Combined Historical Summary
is incorporated by reference herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

The Historical Summary of Gross Income and Direct Operating Expenses
of Commerce Center for the year ended May 31, 1997, included in the American
Industrial Properties REIT's Current Report on Form 8-K, dated November 25,
1997, as amended, has been audited by Easley, Endres, Parkhill & Brackendorff,
P.C., independent auditors, as set forth in their report thereon included
therein and incorporated by reference herein. Such Historical Summary is
incorporated by reference herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

The financial statements of USAA Real Estate Income Investments I
Limited Partnership, USAA Income Properties III Limited Partnership, and USAA
Income Properties IV Limited Partnership all as of December 31, 1997 and 1996,
and for each of the years in the three-year period ended December 31, 1997, and
the financial statements of USAA Real Estate Income Investments II Limited
Partnership as of June 30, 1997 and 1996, and for each of the years in the
three-year period ended June 30, 1997, which report appears in Amendment No. 1
filed March 23, 1998, to American Industrial Properties REIT's Current Report
on Form 8-K, dated January 20, 1998, have been incorporated by reference herein
in reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, included therein, and upon the authority of said firm as
experts in accounting and auditing.

The Combined Historical Summary of Gross Income and Direct Operating
Expenses of Skyway and Central Park Industrial Properties for the year ended
December 31, 1996, included in the American Industrial Properties REIT's
Current Report on Form 8-K, dated March 23, 1998, has been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated by reference herein. Such Combined Historical Summary
is incorporated by reference herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

The Historical Summary of Gross Income and Direct Operating Expenses
of Inverness Industrial Property for the year ended December 31, 1996, included
in the Current Report on Form 8-K, dated March 23, 1998, of American Industrial
Properties REIT has been audited by Ernst & Young LLP, independent auditors, as
set forth in their report

13
<PAGE> 16
thereon included therein and incorporated by reference herein. Such Historical
Summary is incorporated by reference herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

The Historical Summary of Gross Income and Direct Operating Expenses
of Avion Industrial Property for the year ended December 31, 1996, included in
the Current Report on Form 8-K, dated March 23, 1998, of American Industrial
Properties REIT has been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon included therein and incorporated by
reference herein. Such Historical Summary is incorporated by reference herein
in reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.

The Historical Summary of Gross Income and Direct Operating Expenses
of Spring Valley #6 Industrial Property for the years ended December 31, 1997
and 1996, included in the Current Report on Form 8-K, dated February 11, 1998,
as amended, of American Industrial Properties REIT has been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated by reference herein. Such Historical Summary is
incorporated by reference herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

The Combined Statement of Revenues and Certain Expenses of Corporex
Plaza I and President's Plaza Business Center for the year ended December 31,
1996, included in the Current Report on Form 8-K, dated March 23, 1998, of
American Industrial Properties REIT has been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report thereon included therein and
incorporated by reference herein, and is incorporated by reference herein in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.

LEGAL MATTERS

Certain legal matters relating to the validity of the Common Shares
and certain tax matters will be passed upon for the Trust by Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P., Dallas, Texas.

INDEMNIFICATION

The Trust's Declaration of Trust and Bylaws provide for the
indemnification of its Trust Managers and executive officers to the fullest
extent permitted by Texas law. Additionally, each of the Trust's executive
officers and Trust Managers is a party to an Indemnification Agreement with the
Trust. It is the position of the Commission that indemnification of Trust
Managers and officers for liabilities arising under the Securities Act is
against public policy and is unenforceable pursuant to Section 14 of the
Securities Act.

CORRESPONDENCE

All correspondence concerning the Plan should be addressed to:

Shana Eddy
Director of Investor Relations
American Industrial Properties REIT
6210 N. Beltline Road
Suite 170
Irving, Texas 75063
(972) 756-6000

14
<PAGE> 17
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE
TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

TABLE OF CONTENTS

<TABLE>
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents By Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Description of the Dividend Reinvestment and
Share Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Common Share Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Correspondence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>

1,000,000 SHARES

AMERICAN INDUSTRIAL
PROPERTIES REIT

COMMON SHARES OF
BENEFICIAL INTEREST

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

PROSPECTUS

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

March 24, 1998
<PAGE> 18
PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated expenses in connection
with the offering contemplated by this Registration Statement:

<TABLE>
<S> <C>
SEC Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,890
NYSE Application Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
Printing and Engraving Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500
Trustee and Registrar Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,784
------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,674
--------
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Subsection (B) of Section 9.20 of the Texas Real Estate Investment
Trust Act, as amended (the "Texas REIT Act"), empowers a real estate investment
trust to indemnify any person who was, is, or is threatened to be made a named
defendant or respondent in any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, any appeal in such an action, suit, or proceeding, or any
inquiry or investigation that can lead to such an action, suit or proceeding
because the person is or was a trust manager, officer, employee or agent of the
real estate investment trust or is or was serving at the request of the real
estate investment trust as a trust manager, director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another real estate investment trust, corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan, or other enterprise against
expenses (including court costs and attorney fees), judgments, penalties, fines
and settlements if he conducted himself in good faith and reasonably believed
his conduct was in or not opposed to the best interests of the real estate
investment trust and, in the case of any criminal proceeding, had no reasonable
cause to believe that his conduct was unlawful.

The Texas REIT Act further provides that, except to the extent
otherwise permitted by the Texas REIT Act, a person may not be indemnified in
respect of a proceeding in which the person is found liable on the basis that
personal benefit was improperly received by him or in which the person is found
liable to the real estate investment trust. Indemnification pursuant to
Subsection (B) of Section 9.20 of the Texas REIT Act is limited to reasonable
expenses actually incurred and may not be made in respect of any proceeding in
which the person has been found liable for willful or intentional misconduct in
the performance of his duty to the real estate investment trust.

Subsection (C) of Section 15.10 of the Texas REIT Act provides that a
trust manager shall not be liable for any claims or damages that may result
from his acts in the discharge of any duty imposed or power conferred upon him
by the real estate investment trust, if, in the exercise of ordinary care, he
acted in good faith and in reliance upon information, opinions, reports, or
statements, including financial statements and other financial data, concerning
the real estate investment trust, that were prepared or presented by officers
or employees of the real estate investment trust, legal counsel, public
accountants, investment bankers, or certain other professionals, or a committee
of trust manager of which the trust manager is not a member. In addition, no
trust manager shall be liable to the real estate investment trust for any act,
omission, loss, damage, or expense arising from the performance of his duty to
a real estate investment trust, save only for his own willful misfeasance,
willful malfeasance or gross negligence.

The Declaration of Trust provides that the Trust shall indemnify every
Indemnitee (as defined below) against all judgments, penalties, fines, amounts
paid in settlement and reasonable expenses actually incurred by the Indemnitee

II-1
<PAGE> 19
in connection with any Proceeding (as defined in the Declaration of Trust) in
which Indemnitee was, is, or is threatened to be named defendant or respondent
or called as a witness, by reason of his serving or having served in various
capacities for the Trust if it is determined that the Indemnitee conducted
himself in good faith, reasonably believed that his conduct was in the Trust's
best interests (or, in certain cases, not opposed to the Trust's best
interests) and, in the case of any criminal proceeding, had no reasonable cause
to believe that his conduct was unlawful. For purposes of the Declaration of
Trust, "Indemnitee" shall mean (i) any present or former Trust Manager or
officer of the Trust; (ii) any person who while serving in any of such
capacities served at the Trust's request as a director, officer, partner,
venturer, proprietor, Trust Manager, employee, agent or similar functionary of
another REIT or other enterprise; and (iii) any person nominated or designated
by the Board of Trust Managers or any committee thereof to serve in any of the
capacities referred to in the preceding clauses (i) or (ii).

Pursuant to indemnification agreements entered into between the Trust
and each of its Trust Managers and executive officers, the Trust has agreed to
indemnify such Trust Managers and executive officers for certain liabilities,
including liabilities under the Securities Act of 1933.

ITEM 16. EXHIBITS.

2.1 Form of Amended and Restated Agreement and Plan of
Merger, dated as of June 30, 1997, by and between the
Trust and each of USAA Real Estate Income Investments
I, A California Limited Partnership, USAA Real Estate
Income Investments II Limited Partnership, USAA Income
Properties III Limited Partnership and USAA Income
Properties IV Limited Partnership (Included as Annex I
to the Joint Proxy Statement/ Prospectus of the Trust
included in Form S-4, Registration No. 333-31823)
2.2 Purchase Agreement dated as of July 2, 1997 between
Shidler West Investment Corporation and Merit
Industrial Properties Limited Partnership, as amended
by (i) First Amendment to Purchase Agreement dated as
of July 30, 1997; (ii) Second Amendment to Purchase
Agreement dated as of July 31, 1997; (iii) Third
Amendment to Purchase Agreement dated as of August 8,
1997, (iv) Fourth Amendment to Purchase Agreement
dated as of August 12, 1997, and (v) Fifth Amendment
to Purchase Agreement dated as of October 2, 1997
(Incorporated herein by reference from Exhibit 2.1 to
Form 8-K of the Trust dated October 3, 1997; File No.
1-9016)
2.3 Purchase Agreement dated as of July 2, 1997 between
Shidler West Investment Corporation and Merit 1995
Industrial Portfolio Limited Partnership, as amended
by (i) First Amendment to Purchase Agreement dated as
of July 30, 1997, (ii) Second Amendment to Purchase
Agreement dated as of July 31, 1997, (iii) Third
Amendment to Purchase Agreement dated as of August 8,
1997, and (iv) Fourth Amendment to Purchase Agreement
dated as of August 12, 1997 (Incorporated herein by
reference from Exhibit 2.2 to Form 8-K of the Trust
dated October 3, 1997; File No. 1-9016)
2.4 Purchase Agreement dated as of July 2, 1997 between
Shidler West Investment Corporation and Merit VV 1995
Industrial Portfolio Limited Partnership, as amended
by (i) First Amendment to Purchase Agreement dated as
of July 30, 1997, (ii) Second Amendment to Purchase
Agreement dated as of July 31, 1997, (iii) Third
Amendment to Purchase Agreement dated as of July 31,
1997, (iv) Fourth Amendment to Purchase Agreement
dated as of August 12, 1997, (v) Fifth Amendment to
Purchase Agreement dated as of October 2, 1997
(Incorporated herein by reference from Exhibit 2.3 to
Form 8-K of the Trust dated October 3, 1997; File No.
1-9016)
2.5 Purchase Agreement dated as of June 30, 1997 between
Shidler West Investment Corporation and Merit VV Land
1995 Industrial Portfolio Limited Partnership, as
amended by (i) First Amendment to Purchase Agreement
dated as of July 30, 1997, (ii) Second Amendment to
Purchase Agreement dated as of July 31, 1997, (iii)
Third Amendment to Purchase Agreement dated as of July
31, 1997, (iv) Fourth Amendment to Purchase Agreement
dated as of August 12, 1997, (v) Fifth Amendment to
Purchase Agreement dated as of October 2,

II-2
<PAGE> 20
1997 (Incorporated herein by reference from Exhibit
2.4 to Form 8-K of the Trust dated October 3, 1997;
File No. 1-9016)
2.6 Purchase and Sale Agreement dated as of September 24,
1997 by and between Midway/Commerce Center Limited
Partnership and American Industrial Properties REIT
(Incorporated herein by reference from Exhibit 2.1 to
Form 8-K of the Trust dated November 13, 1997; File
No. 1-09016)
2.7 First Amendment to Purchase and Sale Agreement dated
as of October 22, 1997 by and between Midway/Commerce
Center Limited Partnership and American Industrial
Properties REIT ( Incorporated herein by reference
from Exhibit 2.2 to Form 8-K of the Trust dated
November 13, 1997; File No. 1-09016)
2.8 Second Amendment to Purchase and Sale Agreement dated
as of October 31, 1997 by and between Midway/Commerce
Center Limited Partnership and American Industrial
Properties REIT ( Incorporated herein by reference
from Exhibit 2.3 to Form 8-K of the Trust dated
November 13, 1997; File No. 1-09016)
3.1 Third Amended and Restated Declaration of Trust, as
amended (filed as Exhibit 3.1 to the Trust's
Registration Statement on Form S-4 filed July 22, 1997
(Registration No. 333-31823) and incorporated herein
by reference)
3.2 Fifth Amended and Restated Bylaws of the Trust (filed
as Exhibit 3.1 to the Trust's Form 8-K dated January
29, 1998 (File No. 001-09016) and incorporated herein
by reference)
4.1 Form of Common Share Certificate (Incorporated herein
by reference from Exhibit 4.2 of the Trust's
Registration Statement on Form S-4; Registration No.
333-31823)
4.2 Indenture dated November 15, 1985, by and between
American Industrial Properties REIT (the "Trust") and
IBJ Schroder Bank & Trust Company (Incorporated herein
by reference from Exhibit 10.4 to Form S-4 of American
Industrial Properties REIT, Inc. ("AIP Inc.") dated
March 16, 1994; Registration No. 33-74292)
*5.1 Opinion of Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P. as to the legality of the Common Shares being
registered
*8.1 Opinion of Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P. as to certain tax matters
23.1 Consent of Liddell,Sapp, Zivley, Hill & LaBoon, L.L.P.
(included in Exhibits 5.1 and 8.1 hereto)
*23.2 Consent of Ernst & Young LLP
*23.3 Consent of Easley, Endres, Parkhill & Brackendorff,
P.C.
*23.4 Consent of KPMG Peat Marwick LLP
*23.5 Consent of Deloitte & Touche LLP
24.1 Power of Attorney (included on signature page)
99.1 Dividend Reinvestment and Share Purchase Plan
(included in the Prospectus constituting part of this
Registration Statement)
- - ---------------
* Filed herewith.

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act");

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration

II-3
<PAGE> 21
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the Registration Statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are incorporated by reference in the Registration
Statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.

(4) To file an application for the purpose of determining the
eligibility of the Trustee to act under subsection (a) of Section 310
of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305 (b)(2) of
the Trust Indenture Act of 1939, as amended.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to trust managers, directors, officers and
controlling persons of the registrant pursuant to the provisions described in
Item 15 of this Registration Statement or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than in payment by the registrant of expenses
incurred or paid by a trust manager, director, officer or controlling person in
the successful defense of any action, suit or proceeding) is asserted against
the registrant by such trust manager, director, officer or controlling person
in connection with the securities being registered hereby, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

II-4
<PAGE> 22
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas, on the 24th day of
March, 1998.

AMERICAN INDUSTRIAL PROPERTIES REIT

/s/ Charles W. Wolcott
---------------------------------------------------------
Charles W. Wolcott, President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Charles W. Wolcott and Marc A.
Simpson, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him, and on his behalf
and in his name, place and stead, in any and all capacities, to sign, execute
and file this Registration Statement under the Securities Act of 1933, as
amended, and any or all amendments (including, without limitation,
post-effective amendments), with all exhibits and any and all documents
required to be filed with respect thereto, with the Securities and Exchange
Commission or any regulatory authority, granting unto such attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as he himself might or could do if personally present, hereby ratifying and
confirming all that such attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Theodore R. Bigman Trust Manager March 24, 1998
------------------------------
Theodore R. Bigman

/s/ W.H. Bricker Trust Manager March 24, 1998
------------------------------
W. H. Bricker

/s/ T. Patrick Duncan Trust Manager March 24, 1998
------------------------------
T. Patrick Duncan
</TABLE>

II-5
<PAGE> 23
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert E. Giles Trust Manager March 24, 1998
------------------------------
Robert E. Giles

/s/ Edward B. Kelley Trust Manager March 24, 1998
------------------------------
Edward B. Kelley

/s/ Stanley J. Kraska, Jr. Trust Manager March 24, 1998
------------------------------
Stanley J. Kraska, Jr.

/s/ Russell C. Platt Trust Manager March 24, 1998
------------------------------
Russell C. Platt

Trust Manager, President and Chief March 24, 1998
/s/ Charles W. Wolcott Executive Officer (Principal
------------------------------ Executive Officer)
Charles W. Wolcott

Vice President -- Finance, Chief March 24, 1998
/s/ Marc A. Simpson Financial Officer, Treasurer and
------------------------------ Secretary (Principal Financial and
Marc A. Simpson Accounting Officer)

</TABLE>

II-6
<PAGE> 24
EXHIBIT INDEX

Exhibit
Number

II-7
<PAGE> 25
REIT (Incorporated herein by reference from Exhibit
2.3 to Form 8-K of the Trust dated November 13, 1997;
File No. 1-09016)
3.1 Third Amended and Restated Declaration of Trust, as
amended (filed as Exhibit 3.1 to the Trust's
Registration Statement on Form S-4 filed July 22, 1997
(Registration No. 333-31823) and incorporated herein
by reference)
3.2 Fifth Amended and Restated Bylaws of the Trust (filed
as Exhibit 3.1 to the Trust's Form 8-K dated January
29, 1998 (File No. 001-09016) and incorporated herein
by reference)
4.1 Form of Common Share Certificate (Incorporated herein
by reference from Exhibit 4.2 of the Trust's
Registration Statement on Form S-4; Registration No.
333-31823)
4.2 Indenture dated November 15, 1985, by and between
American Industrial Properties REIT (the "Trust") and
IBJ Schroder Bank & Trust Company (Incorporated herein
by reference from Exhibit 10.4 to Form S-4 of American
Industrial Properties REIT, Inc. ("AIP Inc.") dated
March 16, 1994; Registration No. 33-74292)
*5.1 Opinion of Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P. as to the legality of the Common Shares being
registered
*8.1 Opinion of Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P. as to certain tax matters
23.1 Consent of Liddell,Sapp, Zivley, Hill & LaBoon, L.L.P.
(included in Exhibits 5.1 and 8.1 hereto)
*23.2 Consent of Ernst & Young LLP
*23.3 Consent of Easley, Endres, Parkhill & Brackendorff,
P.C.
*23.4 Consent of KPMG Peat Marwick LLP
*23.5 Consent of Deloitte & Touche LLP
24.1 Power of Attorney (included on signature page)
99.1 Dividend Reinvestment and Share Purchase Plan
(included in the Prospectus constituting part of this
Registration Statement)
- - ---------------
* Filed herewith.

II-8

<PAGE> 1
EXHIBIT 5.1

[LIDDELL, SAPP, ZIVLEY, HILL & LABOON, L.L.P. LETTERHEAD]

March 24, 1998

American Industrial Properties REIT
6210 North Beltline Road
Suite 170
Dallas, Texas 75063

Re: Legality of Securities to be Registered Under Registration
Statement on Form S-3

Ladies and Gentlemen:

This opinion is furnished in connection with the registration on Form
S-3 (the "Registration Statement"), pursuant to the Securities Act of 1933, as
amended, (the "Securities Act"), of 1,000,000 Common Shares of Beneficial
Interest, par value $.10 per share (the "Common Shares"), of American
Industrial Properties REIT, a Texas real estate investment trust (the "Trust"),
that may be issued by the Trust pursuant to the Trust's Dividend Reinvestment
and Share Purchase Plan (the "Plan").

We have examined and are familiar with originals or copies, certified
or otherwise identified to our satisfaction, of such documents, Trust records,
certificates of public officials and other instruments as we have deemed
necessary or advisable in connection with this opinion, including (a) the Third
Amended and Restated Declaration of Trust of the Trust and the Fifth Amended
and Restated Bylaws of the Trust, as amended to date, (b) minutes of the
proceedings of the Board of Trust Managers of the Trust, and (c) the
Registration Statement. In our examination, we have assumed the genuineness of
all signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, the
authenticity of the originals of such copies and the authenticity of
telegraphic or telephonic confirmations of public officials and others. As to
facts material to our opinion, we have relied upon certificates or telegraphic
or telephonic confirmations of public officials and certificates, documents,
statements and other information of the Trust or representatives or officers
thereof.
<PAGE> 2

American Industrial Properties REIT
March 24, 1998
Page 2

The opinions set forth herein are subject to the qualification that we
are admitted to practice law in the State of Texas and we express no opinion as
to laws other than the law of the State of Texas and the federal law of the
United States of America.

Based upon the foregoing, we are of the opinion that when the Common
Shares have been issued and paid for in accordance with the terms of the Plan
and pursuant to the Registration Statement, such Common Shares will be validly
issued, fully paid and non-assessable.

The foregoing assumes that all requisite steps will be taken to comply
with the requirements of the Securities Act and applicable requirements of
state laws regulating the offer and sale of securities, as to which we express
no opinion.

This opinion is based upon currently existing statutes, rules and
regulations and judicial decisions and is rendered as of the date hereof, and
we disclaim any obligation to advise you of any change in any of the foregoing
sources of law or subsequent developments in law or changes in facts or
circumstances which might affect any matters or opinions set forth herein.

We hereby consent to being named as counsel to the Trust in the
Registration Statement, to the references therein to our firm under the caption
"Legal Matters" and to the inclusion of this opinion as an exhibit to the
Registration Statement. We are furnishing this letter to you in connection with
the filing of the Registration Statement and consent to the filing of this
opinion as an exhibit to the Registration Statement. This opinion is not to be
used, circulated, quoted or otherwise referred to for any other purpose.

Very truly yours,

/s/ Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.

LIDDELL, SAPP, ZIVLEY, HILL & LABOON, L.L.P.

<PAGE> 1
EXHIBIT 8.1

[LIDDELL, SAPP, ZIVLEY, HILL & LABOON, L.L.P. LETTERHEAD]

March 24, 1998

American Industrial Properties REIT
6224 N. Beltline Road, Suite 205
Irving, Texas 75063
Attention: Charles W. Wolcott, President

Re: Certain Federal Income Tax Matters

Ladies and Gentlemen:

This opinion is delivered to you in our capacity as counsel to
American Industrial Properties REIT (the "Company") in connection with the
Company's registration statement on Form S-3 (the "Registration Statement")
filed by the Company with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, relating to the registration of 1,000,000
shares of the Company's common stock, par value $0.10 per share, that may be
issued by the Company pursuant to the Company's Dividend Reinvestment and Stock
Purchase Plan. This opinion relates to the Company's qualification for federal
income tax purposes as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended (the "Code"), and the accuracy of the
discussion under the heading "Tax Consequences of Participation in the Plan"
contained in the registration Statement.

The opinions set forth in this letter are based on relevant provisions
of the Code, Treasury Regulations promulgated thereunder (including proposed
and temporary Regulations), and interpretations of the foregoing as expressed
in court decisions, the legislative history and existing administrative rulings
and practices of the Internal Revenue Service ("IRS") (including its practices
and policies in issuing private letter rulings, which are not binding on the
IRS except with respect to a taxpayer that receives such a ruling), all as of
the date hereof. These provisions and interpretations are subject to change,
which may or may not be retroactive in effect, that might result in
modifications of our opinion.

In rendering the following opinion, we have examined such statutes,
regulations, records, certificates and other documents as we have considered
necessary or appropriate as a basis for such
<PAGE> 2
March 24, 1998
Page 2

opinion, including the following: (1) the Third Amended and Restated
Declaration of Trust and Fourth Amended and Restated Bylaws of the Company as
amended to date; (2) certain written representations of the Company contained
in an Officer's Certificate to Counsel for American Industrial Properties REIT
Regarding Certain Income Tax Matters, dated March 24, 1998; and (3) such other
certificates, documents, agreements and instruments as we have considered
necessary or appropriate.

We have reviewed the Registration Statement and the description set
forth therein of the Company and its investments and activities. We have relied
upon the representations of the Company and its affiliates and certain officers
thereof regarding the manner in which the Company has been and will continue to
be owned and operated. We have neither independently investigated nor verified
such representations, and we assume that such representations are true, correct
and complete and that all representations made "to the best of the knowledge
and belief" of any person(s) or party(ies) or with similar qualification are
and will be true, correct and complete as if made without such qualification.
We assume that the Company has been and will be operated in accordance with
applicable laws and the terms and conditions of applicable documents, and that
the descriptions of the Company and its investments, and the proposed
investments, activities, operations and governance of the Company set forth in
the Registration Statement continue to be true. In addition, we have relied on
certain additional facts and assumptions described below.

In rendering the opinion set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the
conformity to the original documents of all documents submitted to us as
copies, (iv) the conformity of final documents to all documents submitted to us
as drafts, (v) the authority and capacity of the individual or individuals who
executed any such documents on behalf of any person, (vi) the accuracy and
completeness of all records made available to us, and (vii) the factual
accuracy of all representations, warranties and other statements made by all
parties. We also have assumed, without investigation, that all documents,
certificates, warranties and covenants on which we have relied in rendering the
opinion set forth below and that were given or dated earlier than the date of
this letter continue to remain accurate, insofar as relevant to the opinion set
forth herein, from such earlier date through and including the date of this
letter.

Based upon and subject to the foregoing, and provided that the Company
continues to meet the applicable asset composition, source of income,
shareholder diversification, distribution, record keeping and other
requirements of the Code necessary for a corporation to qualify as a REIT, we
are of the opinion that:

1. Commencing with the Company's first taxable year ended
December 31, 1985, the Company has been organized in
conformity with the requirements for qualification as
<PAGE> 3
March 24, 1998
Page 3

a REIT under the Code, and the Company's method of operation,
as described in the representations referred to above, will
enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code.

2. The statements in the Registration Statement set forth under
the heading "Tax Consequences of Participation in the Plan" to
the extent such information constitutes matters of law,
summaries of legal matters, or legal conclusions, have been
reviewed by us and are accurate to all material respects.

We assume no obligation to advise you of any changes in our opinion
subsequent to the delivery of this opinion letter. The Company's qualification
as a REIT depends upon the Company's ability to meet on a continuing basis,
through actual annual operating and other results, the various requirements
under the Code with regard to, among other things, the sources of its gross
income, the composition of its assets, the level of its distributions to
stockholders, and the diversity of its stock ownership. We have not undertaken
to review or audit the Company's compliance with these requirements on a
continuing basis. Accordingly, no assurance can be given that the actual
operating results of the Company, and the entities in which the Company owns
interests, the sources of their income, the nature of their assets, the level
of distributions to shareholders and the diversity of stock ownership for any
given taxable year has satisfied or will satisfy the requirements under the
Code for qualification and taxation as a REIT.

We express no opinion herein other than those expressly set forth
herein. You should recognize that our opinion is not binding on the IRS and
that the IRS may disagree with the opinion contained herein. Although we
believe that our opinion will be sustained if challenged, there can be no
assurance that this will be the case. The opinion expressed herein is based
upon the law as it currently exists. Consequently, future changes in the law
may cause the federal income tax treatment of the transactions described herein
to be materially and adversely different from that described above.

This opinion letter may not be used or relied upon by any other person
or for any other purpose and may not be disclosed, quoted, filed with a
governmental agency or otherwise referred to without our prior written consent.
Notwithstanding the foregoing, we hereby consent to being named as counsel to
the Company in the REGISTRATION STATEMENT, to the references in the
Registration Statement to our firm and to the inclusion of a copy of this
opinion letter as an exhibit
<PAGE> 4
March 24, 1998
Page 4

to the REGISTRATION STATEMENT. In giving such consent, we do not thereby admit
that we are an "expert" within the meaning of the Securities Act of 1933, as
amended.

Sincerely yours,

/s/ Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.

Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in the Registration Statement on Form S-3 for the
Dividend Reinvestment and Share Purchase Plan of American Industrial Properties
REIT of our reports: (i) dated March 11, 1998 with respect to the Consolidated
Financial Statements of American Industrial Properties REIT as of December 31,
1997 and 1996 and for the three years in the period ended December 31, 1997;
(ii) dated September 16, 1997 with respect to the Combined Historical Summary
of Gross Income and Direct Operating Expenses of Merit Texas Properties
Portfolio for the year ended December 31, 1996; (iii) dated March 4, 1998 with
respect to the Combined Historical Summary of Gross Income and Direct Operating
Expenses of Skyway and Central Park Industrial Properties for the year ended
December 31, 1996; (iv) dated January 15, 1998 with respect to the Historical
Summary of Gross Income and Direct Operating Expenses of Inverness Industrial
Property for the year ended December 31, 1996; (v) dated February 28, 1998 with
respect to the Historical Summary of Gross Income and Direct Operating Expenses
of Avion Industrial Property for the year ended December 31, 1996; and (vi)
dated February 13, 1998 with respect to the Historical Summary of Gross Income
and Direct Operating Expenses of Spring Valley #6 Industrial Property for the
years ended December 31, 1997 and 1996.

/s/ Ernst & Young LLP
Ernst & Young LLP

Dallas, Texas
March 20, 1998

<PAGE> 1
EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

/s/ Easley, Endres, Parkhill & Brackendorff, P.C.
EASLEY, ENDRES, PARKHILL & BRACKENDORFF, P.C.

Houston, Texas
March 20, 1998

<PAGE> 1
EXHIBIT 23.4

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in the Registration Statement on Form S-3 for the
Dividend Reinvestment and Share Purchase Plan of American Industrial Properties
REIT of our reports (i) dated February 12, 1998 with respect to the Financial
Statements of USAA Real Estate Income Investments I Limited Partnership as of
December 31, 1997 and 1996 and for the three years in the period ended December
31, 1997; (ii) dated July 25, 1997 with respect to the Financial Statements of
USAA Real Estate Income Investments II Limited Partnership as of June 30, 1997
and 1996 and for the three years in the period ended June 30, 1997; (iii) dated
February 9, 1998 with respect to the Financial Statements of USAA Income
Properties III Limited Partnership as of December 31, 1997 and 1996 and for the
three years in the period ended December 31, 1997; and (iv) dated February 9,
1998 with respect to the Financial Statements of USAA Income Properties IV
Limited Partnership as of December 31, 1997 and 1996 and for the three years in
the period ended December 31, 1997, which reports appear in Amendment No. 1
filed March 23, 1998 to Form 8-K of American Industrial Properties REIT dated
January 20, 1998.

/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP

San Antonio, Texas
March 20, 1998

<PAGE> 1
EXHIBIT 23.5

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement on
Form S-3 for the Dividend Reinvestment and Share Purchase Plan of American
Industrial Properties REIT of our report dated January 26, 1998, appearing in
the Current Report on Form 8-K dated March 23, 1998, with respect to the
Combined Statement of Revenues and Certain Expenses of Corporex Plaza I and
Presidents' Plaza Business Center for the year ended December 31, 1996, and the
reference to us under the heading "Experts" in the Prospectus, which is part of
such Registration Statement.

/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

Cincinnati, Ohio
March 20, 1998