BRANDYWINE REALTY TRUST
S-3, 1998-12-23
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>

    As filed with the Securities and Exchange Commission on December 23, 1998

                                                    Registration No. 333-[     ]
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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


                                    FORM S-3
                             REGISTRATION STATEMENT
                                      Under
                           THE SECURITIES ACT OF 1933

                             BRANDYWINE REALTY TRUST
             (Exact name of Registrant as specified in its charter)


            Maryland                                           23-2413352
  (State or other jurisdiction                              (I.R.S. Employer 
of incorporation or organization)                           Identification No.)

                               14 Campus Boulevard
                       Newtown Square, Pennsylvania 19073
                                 (610) 325-5600
    (Address, including zip code, and telephone number, including area code,
                  of Registrant's principal executive offices)

                                Gerard H. Sweeney
                      President and Chief Executive Officer
                               14 Campus Boulevard
                       Newtown Square, Pennsylvania 19073
                                 (610) 325-5600
            (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                                    Copy to:
                          Michael H. Friedman, Esquire
                               Pepper Hamilton LLP
                              3000 Two Logan Square
                      Philadelphia, Pennsylvania 19103-2799
                                 (215) 981-4563
                                 ---------------

         Approximate date of commencement of proposed sale to the public: As
soon as possible after the effective date of this Registration Statement and
from time to time as determined by market conditions.

         If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

         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, please check the following box. |X|

         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. [ ]



<PAGE>
<TABLE>
<CAPTION>

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

Title of each Class of Securities     Amount to be        Proposed            Proposed               Amount of
to be Registered                      Registered          Maximum Price       Maximum                Registration
                                                          Per Share           Aggregate              Fee
                                                                              Offering  Price
- -----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                 <C>                <C>                    <C>    
7.25% Series A Cumulative                   750,000             $50.00             $37,500,000            $10,425
Convertible Preferred Shares of
Beneficial Interest, par value $.01
per share (the "Series A Preferred
Shares")
- -----------------------------------------------------------------------------------------------------------------------
Common Shares of Beneficial              1,415,094(1)             --                   --                    --
Interest, par value $.01 per share,
issuable upon conversion or redemption
of the Series A Preferred Shares
- -----------------------------------------------------------------------------------------------------------------------
Common Shares of Beneficial                1,127,896          $17.8125(2)        $20,090,647.50            $5,586
Interest, par value $.01 per share
=======================================================================================================================
</TABLE>


(1)  Such number represents the number of Common Shares initially issuable upon
     conversion of the Series A Preferred Shares registered hereby and, pursuant
     to Rule 416 under the Securities Act of 1933, as amended, such
     indeterminate number of Common Shares as may be issued from time to time
     upon conversion or redemption of the Series A Preferred Shares by reason of
     adjustment of the conversion price under certain circumstances outlined in
     the Prospectus. No additional consideration will be received by the
     Registrant for these Common Shares. Therefore, pursuant to Rule 457(i), no
     additional fee is payable for the registration of such Common Shares.

(2)  Estimated solely for the purpose of calculating the registration fee in
     accordance with Rule 457(c) based on the average of the high and low
     reported sales prices per share on the New York Stock Exchange on December
     16, 1998.


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

The Registrants hereby amend this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrants shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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


<PAGE>
The information in this prospectus is not complete and may be changed. The
selling shareholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.

                 Preliminary Prospectus dated December 23, 1998
                              Subject to Completion



================================================================================




                             BRANDYWINE REALTY TRUST


                        750,000 Series A Preferred Shares


                             2,542,990 Common Shares



================================================================================

         This prospectus relates to the offer and sale by certain persons of up
to:

          o    750,000 7.25% Series A Cumulative Convertible Preferred Shares of
               Beneficial Interest;

          o    1,415,094 Common Shares of Beneficial Interest issuable upon
               conversion or redemption of such Series A Preferred Shares;

          o    1,127,896 Common Shares issuable upon redemption units of limited
               partnership interest in Brandywine Operating Partnership, L.P.


         None of the securities offered by this prospectus are being offered by
us. We will not receive any of the proceeds of the securities sold by the
selling shareholders.

         To assist us in qualifying as a real estate investment trust for
federal income tax purposes, our Declaration of Trust provides that no
shareholder or group of affiliated shareholders may own more than 9.8% in value
of the outstanding Common Shares, subject to certain exceptions.

         The Common Shares are traded on the New York Stock Exchange under the
symbol "BDN." There is no public market for the Series A Preferred Shares.

         You should read this prospectus carefully before you invest.

                                   ----------

           See "Risk Factors" beginning on page 5 of this prospectus
       for certain factors relevant to an investment in these securities.

                                   ----------

     Neither the Securities and Exchange Commission nor any state securities
  commission has approved or disapproved of these securities or passed upon the
          accuracy or adequacy of this prospectus. Any representation
                     to the contrary is a criminal offense.

                   The date of this prospectus is [   ], 1998.

<PAGE>



                                TABLE OF CONTENTS

                                                                       Page
                                                                       ----

WHERE YOU CAN FIND MORE INFORMATION.......................................3

SUMMARY...................................................................4

RISK FACTORS..............................................................5

RATIOS OF EARNINGS TO COMBINED FIXED
     CHARGES AND PREFERRED SHARE DISTRIBUTIONS...........................12

DESCRIPTION OF SHARES OF BENEFICIAL INTEREST.............................12

CERTAIN PROVISIONS OF MARYLAND LAW AND OF
     THE COMPANY'S DECLARATION OF TRUST AND BYLAWS.......................16

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES..............................20

FEDERAL INCOME TAX CONSIDERATIONS........................................22

USE OF PROCEEDS..........................................................34

SELLING SHAREHOLDERS.....................................................34

PLAN OF DISTRIBUTION.....................................................36

EXPERTS..................................................................37

LEGAL MATTERS............................................................37

TAX MATTERS..............................................................37




                                       -2-


<PAGE>



                       WHERE YOU CAN FIND MORE INFORMATION

     Brandywine Realty Trust (collectively with its subsidiaries, the "Company")
files, annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also photocopy any
document we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms.

     The registration statement on Form S-3 of which this prospectus is a part
contains important additional information not included in this prospectus.
Statements in the registration statement summarizing other documents are
qualified by reference to such documents which have been filed as exhibits to
the registration statement or other filings made with the SEC. The registration
statement is available at the SEC's web site and public reference rooms.

     The SEC allows us to "incorporate by reference" the information which we
file with them, which means we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus and information which we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities.

     o    Our Annual Report on Form 10-K for the year ended December 31, 1997,
          as amended by a Form 10-K/A No. 1;

     o    Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
          1998, June 30, 1998 and September 30, 1998;

     o    The combined statements of revenues and certain expenses of the Green
          Hills Properties for the year ended December 31, 1996; the combined
          statements of revenues and certain expenses of Berwyn Park Properties
          for the year ended December 31, 1996; and the reports thereon of our
          independent public accountants included in our Quarterly Report on
          Form 10-Q for the quarter ended June 30, 1997;

     o    Our Current Reports on Form 8-K/A No. 1 dated February 13, 1997; Form
          8-K/A No. 2 dated February 24, 1997; Form 8-K/A No. 1 dated April 29,
          1997; Form 8-K dated June 9, 1997; Form 8-K dated June 26, 1997; Form
          8-K dated September 10, 1997; Form 8-K dated October 30, 1997; Form
          8-K dated December 17, 1997; Form 8-K dated January 9, 1998; Form 8-K
          dated January 27, 1998; Form 8-K dated January 30, 1998; Form 8-K
          dated February 13, 1998; Form 8-K dated February 23, 1998; Form 8-K
          dated February 25, 1998; Form 8-K dated March 17, 1998; Form 8-K dated
          April 13, 1998; Form 8-K/A dated April 16, 1998; Form 8-K dated April
          17, 1998; Form 8-K dated May 14, 1998; Form 8-K dated June 3, 1998;
          Form 8-K/A No. 1 dated July 30, 1998; Form 8-K dated July 30, 1998;
          Form 8-K dated October 13, 1998; and Form 8-K/A No. 1 dated October
          21, 1998; and

     o   The description of the Common Shares contained in our Registration
         Statement on Form 8-A dated October 14, 1997 and any other reports or
         amendments filed for the purpose of updating such description.

     You may request a copy of these filings (not including the exhibits to such
filings unless such exhibits are specifically incorporated by reference therein)
at no cost, by writing or telephoning us at the following address:

                             Brandywine Realty Trust
                               14 Campus Boulevard
                                 Newtown Square
                               Pennsylvania 19073
                     Attention: Brad A. Molotsky, Secretary
                                 (610) 325-5600

     You should rely only on the information provided or incorporated by
reference in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of those documents.


                                       -3-


<PAGE>
                                     SUMMARY

The Company and the Operating Partnership

     We are a self-administered and self-managed real estate investment trust
("REIT") active in acquiring, developing, redeveloping, leasing and managing
office and industrial properties. As of December 1, 1998, our portfolio included
199 office properties, 70 industrial facilities and one mixed use property
(collectively, the "Properties") that contained an aggregate of approximately
18.5 million net rentable square feet. As of December 1, 1998, we also owned or
held options to purchase approximately 457.0 acres of land for future
development.

     In addition, as of December 1, 1998, we owned economic interests, ranging
from 35% to 65%, in ten office real estate ventures. Four of these ventures own
eight suburban office buildings that contain an aggregate of approximately
451,000 net rentable square feet. A fifth venture is currently redeveloping an
existing suburban building into an office building that is expected to contain
approximately 72,000 net rentable square feet upon completion in early 1999. As
of December 1, 1998, the ventures also owned or held options to purchase
approximately 46.8 acres of land for future development.

     We own our assets and conduct our operations through Brandywine Operating
Partnership, L.P. (the "Operating Partnership") and subsidiaries of the
Operating Partnership. We are the sole general partner of the Operating
Partnership and, as of December 1, 1998, held an approximately 88.6% interest in
the Operating Partnership and were entitled to 94.8% of the Operating
Partnership's income after the payment of preferred distributions on the
Operating Partnership's Series B Preferred Units.

     We provide real estate management services through a management company
(the "Management Company"). As of December 1, 1998, the Management Company
managed approximately 16.9 million net rentable square feet (of which 16.7
million net rentable square feet related to the Properties). Through its
ownership of securities of the Management Company, the Operating Partnership is
entitled to receive 95% of amounts paid as dividends by the Management Company.

     We were organized as a Maryland real estate investment trust in 1986. Our
principal executive offices are located at 14 Campus Boulevard, Newtown Square,
Pennsylvania 19073 and our telephone number is (610) 325- 5600.

Securities Offered

     On September 28, 1998, we completed the acquisition of a portfolio of
Properties. As part of the consideration for the transaction, we issued the
Series A Preferred Shares. On October 6, 1998, we completed another acquisition
of a portfolio of Properties. As part of the consideration for the transaction,
the Operating Partnership issued 1,127,896 Class A Units of limited partnership
interest ("Units").

     We issued the Series A Preferred Shares and Units in reliance upon an
exemption from registration under Section 4(2) of the Securities Act. As part of
the acquisitions, we agreed to register the offer and sale by the holders of
Series A Preferred Shares and the Common Shares issuable upon the conversion or
redemption of the Series A Preferred Shares and Units.

     Each Series A Preferred Share is subject to conversion into Common Shares
at a price of $28.00. Under certain circumstances, this price may be reduced to
$26.50. Subject to certain time restrictions, each Unit may be tendered by its
holder to the Operating Partnership for cash equal to the fair market value of a
Common Share at the time of tender. At our option, we may purchase the Units for
cash equal to the value of an equivalent number of Common Shares or we may
redeem the Units for an equivalent number of Common Shares, and thereby become
the owner of the redeemed Units. We generally expect to acquire Units for
Common Shares.



                                       -4-


<PAGE>
                                  RISK FACTORS

     This prospectus contains forward-looking statements. These statements are
identified by words such as "expect," "anticipate," "should," "pro forma" and
words of similar import. Actual results may differ significantly from those
expressed or implied by the forward-looking statements. Factors that might cause
such a difference include the various risks stated below that we believe are
material to investors who purchase or own our securities. Before deciding to
purchase the securities offered, prospective investors should carefully consider
the following information together with the other information contained in this
prospectus.

There is no public market for the Series A Preferred Shares

     There is no established trading market for the Series A Preferred Shares.
We do not currently intend to list the Series A Preferred Shares on a national
securities exchange or the Nasdaq National Market, and even if we did, the
Series A Preferred Shares do not currently meet the listing requirements of any
national exchange or the Nasdaq National Market. Accordingly, we cannot give
assurance as to (i) the likelihood that an active market for the Series A
Preferred Shares will develop, (ii) the liquidity of any such market, (iii) the
ability of the security holders to sell their Series A Preferred Shares and (v)
the prices that security holders may obtain for their Series A Preferred Shares.

There can be no assurance that we will effectively manage our rapid growth

     We have been growing rapidly. Since August 1, 1996, we have acquired or
developed 266 of the 270 Properties owned by us on December 1, 1998. We plan on
managing this growth by applying our experience to newly acquired properties and
expect to be successful in that effort. No assurances can be given, however,
that we will succeed in our integration efforts or that newly acquired
properties will perform as we expect.

We depend on the performance of our primary markets, and changes in such markets
may adversely affect our financial condition

     Most of our Properties are currently located in suburban markets in
Pennsylvania, New Jersey, New York, Virginia and Delaware. Like other real
estate markets, these commercial real estate markets have experienced economic
downturns in the past, and future declines in any of these real estate markets
could adversely affect our operations or cash flow and ability to make
distributions to shareholders. Our financial performance will be particularly
sensitive to the economic conditions in these markets. Our revenues and the
value of our Properties may be adversely affected by a number of factors,
including the economic climate in these markets (which may be adversely impacted
by business layoffs, industry slowdowns, changing demographics and other
factors) and real estate conditions in these markets (such as oversupply of or
reduced demand for office and industrial properties). These factors, when and if
they occur in the area in which our Properties are located, would adversely
affect our cash flow and ability to make distributions to shareholders.

Our ability to make distributions is subject to various risks

     We pay regular distributions to our shareholders. Our ability to make
distributions in the future will depend upon:

          o    the performance of our Properties;

          o    expenditures with respect to existing and newly acquired
               properties;

          o    the amount of, and the interest rates on, our debt;

          o    the absence of significant expenditures relating to environmental
               and other regulatory matters; and

          o    future sales of Common Shares.


Certain of these matters are beyond our control and any significant difference
between our expectations and actual results could have a material adverse effect
our cash flow and our ability to make or sustain distributions.



                                       -5-


<PAGE>



We may be unable to renew leases or relet space as leases expire

     If our tenants fail to renew their leases upon expiration, we may be unable
to relet the subject space. Even if the tenants do renew their leases or we can
relet the space, the terms of renewal or reletting (including the cost of
required renovations) may be less favorable than current lease terms. Certain
leases grant the tenants an early termination right upon payment of a
termination penalty. While we have estimated the necessary expenditures for new
and renewal leases for 1999 and 2000, no assurances can be given as to the
accuracy of such estimates.

Financially distressed tenants may limit our ability to realize the value of our
investments

     Following a tenant's lease default, we may experience delays in enforcing
our rights as a landlord and may incur substantial costs in protecting our
investment. In addition, a tenant may seek bankruptcy law protection which could
relieve the tenant from its obligation to make lease payments.

We face significant competition from other real estate developers

     We compete with a number of real estate developers, operators and
institutions for tenants and acquisition opportunities. Some of these
competitors have significantly greater resources than we do. No assurances can
be given that this competition will not adversely affect our cash flow and
ability to make distributions to shareholders.

Because real estate is illiquid, we may not be able to sell properties when
appropriate

     Real estate investments generally cannot be sold quickly. We may not be
able to vary our portfolio promptly in response to economic or other conditions.
In addition, the Internal Revenue Code of 1986 (the "Code") limits our ability
to sell properties held for fewer than four years. Purchase options and rights
of first refusal held by certain tenants may also limit our ability to sell
certain properties. Any of these factors could adversely affect our cash flow
and ability to make distributions to shareholders as well as the ability of
someone to purchase us, even if a purchase were in our shareholders' best
interests.

We have agreed not to sell certain of our properties

     We have agreed with the sellers of certain of our properties not to sell
certain properties for varying periods of time in any transaction that would
trigger taxable income, subject to certain exceptions. Some of these agreements
are with current trustees of our company. In addition, we may enter into similar
agreements with future sellers of properties. These agreements generally provide
that we may dispose of the applicable properties in transactions that qualify as
tax-free exchanges under Section 1031 of the Code. Therefore, without suffering
adverse tax consequences, we may be precluded from selling certain properties
other than in transactions that would qualify as tax-free exchanges for federal
income tax purposes.

Changes in the law may adversely affect our cash flow

     Because increases in income and service taxes are generally not passed
through to tenants under leases, such increases may adversely affect our cash
flow and ability to make expected distributions to shareholders. The Properties
are also subject to various regulatory requirements, such as those relating to
fire and safety. Our failure to comply with these requirements could result in
the imposition of fines and damage awards. While we believe that the Properties
are currently in material compliance with all such requirements, there can be no
assurance that these requirements will not change or that newly imposed
requirements will not require significant unanticipated expenditures.

By holding properties through the Operating Partnership and various joint
ventures, we are exposed to certain additional risks

     We own our Properties and our interests in our real estate ventures through
the Operating Partnership. In the future, we expect to continue to participate
with other entities in property ownership through joint ventures or
partnerships. Partnership or joint venture investments may, under certain
circumstances, involve risks not otherwise present in direct investments. Such
risks include:

          o    the potential bankruptcy of our partners or co-venturers;



                                       -6-


<PAGE>



          o    a conflict between our business goals and those of our partners
               or co-venturers; and

          o    actions taken by our partners or co-venturers contrary to our
               instructions or objectives, including our policy of maintaining
               the Company's REIT qualification.

We will, however, seek to maintain sufficient control of such partnerships and
joint ventures to enable us to achieve our business objectives. Investors should
be aware that there is no limitation under our organizational documents as to
the amount of funds which we may invest in partnerships or joint ventures.

Future acquisitions may fail to perform in accordance with our expectations and
may require development and renovation costs exceeding our estimates

         We intend to continue acquiring office and industrial properties.
Changing market conditions, however, including competition from others, may
diminish our opportunities for making attractive acquisitions. Once made, our
investments may fail to perform in accordance with our expectations. In
addition, the estimated renovation and improvement costs incurred in bringing an
acquired property up to market standards may exceed our estimates. We anticipate
financing future acquisitions and renovations through a combination of advances
under lines of credit and other forms of secured or unsecured financing. If new
developments are financed through construction loans, there is a risk that, upon
completion of construction, permanent financing for newly developed properties
may not be available or may be available only on disadvantageous terms.

         In addition to acquisitions, we periodically consider developing,
redeveloping and constructing office buildings and other commercial properties.
Risks associated with development, redevelopment and construction activities
include:

          o    the unavailability of favorable financing;

          o    the abandonment of such activities prior to completion;

          o    construction costs exceeding original estimates;

          o    construction and lease-up delays resulting in increased debt
               service expense and construction costs; and

          o    insufficient occupancy rates and rents at a newly completed
               property causing a property to be unprofitable.

Development and redevelopment activities are subject to risks relating to our
inability to obtain, or delays in obtaining, all necessary zoning, land-use,
building, occupancy and other required governmental and utility company
authorizations.

Our indebtedness subjects us to additional risks

         Debt Financing and Existing Debt Maturities. We are subject to risks
normally associated with debt financing, such as the insufficiency of cash flow
to meet required payment obligations and the inability to refinance existing
indebtedness. If our debt cannot be paid, refinanced or extended at maturity, in
addition to our failure to repay our debt, we may not be able to make
distributions to shareholders at expected levels or at all. Furthermore, if any
refinancing is done at higher interest rates, the increased interest expense
could adversely affect our cash flow and ability to make distributions to
shareholders. In addition, if we do not meet our mortgage financings
obligations, any properties securing such indebtedness could be foreclosed on,
which would have a material adverse effect our cash flow and ability to make
distributions and, depending on the number of properties foreclosed on, could
threaten our continued viability.

         Risk of Rising Interest Rates and Variable Rate Debt. Increases in
interest rates on variable rate indebtedness would increase our interest
expense, which could adversely affect our cash flow and ability to make
distributions to shareholders.

         No Limitation on Debt. The Company's organizational documents do not
contain any limitation on the Company's debt-to-total market capitalization
ratio. Accordingly, the Board of Trustees could increase the


                                       -7-


<PAGE>
Company's leverage without restriction. The increased debt service could
adversely affect our cash flow and ability to make distributions and could
increase the risk of default on our indebtedness.

Our status as a REIT is dependent on compliance with federal income tax
requirements

         Our failure to qualify as a REIT would have serious adverse
consequences to our shareholders. We believe that since 1986, we have qualified
for taxation as a REIT for federal income tax purposes. We plan to continue to
meet the requirements for taxation as a REIT. Many of these requirements,
however, are highly technical and complex. The determination that we are a REIT
requires an analysis of various factual matters and circumstances that may not
be totally within our control. For example, to qualify as a REIT, at least 95%
of our gross income must come from certain sources that are itemized in the REIT
tax laws. We are also required to distribute to shareholders at least 95% of our
REIT taxable income (excluding capital gains). The fact that we hold our assets
through the Operating Partnership and its subsidiaries further complicates the
application of the REIT requirements. Even a technical or inadvertent mistake
could jeopardize our REIT status. Furthermore, Congress and the IRS might change
the tax laws and regulations, and the courts might issue new rulings that make
it more difficult, or impossible, for the Company to remain qualified as a REIT.
We do not believe, however, that any pending or proposed tax law changes would
jeopardize our REIT status.

         To maintain REIT status, a REIT may not own more than 10% of the voting
stock of any corporation, except for a qualified REIT subsidiary (which must be
wholly-owned by the REIT) or another REIT. In order to comply with this rule,
the Operating Partnership owns 5% of the voting common stock and all of the
non-voting preferred stock of the Management Company. The Internal Revenue
Service ("IRS"), however, could contend that the Operating Partnership's
ownership of all of the non-voting preferred stock of the Management Company
should be viewed as voting stock because of the Operating Partnership's
substantial economic position in the Management Company. If successful in such a
contention, the Company's status as a REIT would be lost and the Company would
be subject to the consequences summarized below.

         Arthur Andersen LLP, special tax advisor to the Company, has given us
an opinion to the effect that, beginning with our taxable year ended December
31, 1986, we have been organized and have operated in conformity with the
requirements for qualification and taxation as a REIT under the Code for each of
our taxable years and that our current method of organization and operation will
enable us to continue to so qualify. See "Federal Income Tax Considerations --
General." The opinion of Arthur Andersen LLP is based on assumptions and factual
representations made by us regarding our ability to meet the requirements for
qualification as a REIT and the opinion of Pepper Hamilton LLP that the shares
of preferred stock issued by the Management Company to the Operating Partnership
do not constitute voting securities for purposes of the Investment Company Act
of 1940. Such opinion is not binding on the IRS or any court. Moreover, Arthur
Andersen LLP does not review or monitor our compliance with the requirements for
REIT qualification on an ongoing basis. We cannot guarantee that we will be
qualified and taxed as a REIT, because our qualification and taxation as a REIT
will depend upon our ability to meet, on an ongoing basis, the requirements
imposed under the Code.

         If we fail to qualify as a REIT, we would be subject to federal income
tax at regular corporate rates. Also, unless the IRS granted us relief under
certain statutory provisions, we would remain disqualified as a REIT for four
years following the year we first failed to qualify. If we failed to qualify as
a REIT, we would have to pay significant income taxes and would therefore have
less money available for investments or for distributions to shareholders. This
would likely have a significant adverse affect of the value of our securities.
In addition, we would no longer be required to make any distributions to
shareholders. See "Federal Income Tax Considerations -- Failure to Qualify."

         In order to make the distributions required to maintain our REIT
status, we may need to borrow funds. To obtain the favorable tax treatment
associated with REIT qualification, we generally will be required to distribute
to shareholders at least 95% of our annual REIT taxable income (excluding net
capital gain). In addition, we will be subject to tax on our undistributed net
taxable income and net capital gain and a 4% nondeductible excise tax on the
amount, if any, by which certain distributions paid by us with respect to any
calendar year are less than the sum of 85% of our ordinary income plus 95% of
our capital gain net income for the calendar year, plus certain undistributed
amounts from prior years.

         We intend to make distributions to shareholders to comply with the
distribution provisions of the Code and to avoid income and other taxes. Our
income will consist primarily of our share of the income of the Operating
Partnership and our cash flow will consist primarily of our share of
distributions from the Operating Partnership.


                                       -8-


<PAGE>
Differences in timing between the receipt of income and the payment of expenses
in arriving at taxable income (of the Company or the Operating Partnership) and
the effect of required debt amortization payments could require us to borrow
funds on a short-term basis or liquidate funds on adverse terms to meet the REIT
qualification distribution requirements.

         The failure of the Operating Partnership (or a subsidiary partnership)
to be treated as a partnership would have serious adverse consequences to our
shareholders. If the IRS were to successfully challenge the tax status of the
Operating Partnership or any of its subsidiary partnerships for federal income
tax purposes, the Operating Partnership or the affected subsidiary partnership
would be taxable as a corporation. In such event, we would cease to qualify as a
REIT and the imposition of a corporate tax on the Operating Partnership or a
subsidiary partnership would reduce the amount of cash available for
distribution from such partnership to us and our shareholders. See "Federal
Income Tax Considerations - Income Taxation of the Operating Partnership, the
Title Holding Partnerships and Their Partners."

          We do pay some taxes. Even if we qualify as a REIT, we are required to
pay certain federal, state and local taxes on our income and property. In
addition, the Management Company is subject to federal, state and local income
tax at regular corporate rates on its net taxable income derived from its
management, leasing and related service business. If we have net income from a
prohibited transaction, such income will be subject to a 100% tax.
See "Federal Income Tax Considerations - Taxation of the Company as a REIT."

         We own a subsidiary REIT. One of our subsidiaries, Atlantic American
Properties Trust ("AAPT"), that indirectly holds approximately 35 of the
Properties, elected to be taxed as a REIT for the tax year ended December 31,
1997. So long as we seek to maintain AAPT's REIT status, AAPT will be subject to
all the requirements and risks associated with maintaining REIT status
summarized above, including the limitation on the ownership of more than 10% of 
the voting securities of any corporation (other than a qualified REIT subsidiary
or another REIT). AAPT indirectly owns non-voting common stock issued by a 
corporation which is neither a qualified REIT subsidiary nor a REIT. 

Environmental problems are possible and may be costly

         Federal, state and local laws, ordinances and regulations may require a
current or previous owner or operator of real estate to investigate and clean up
hazardous or toxic substances or releases at such property. The owner or
operator may be forced to pay for property damage and for investigation and
clean-up costs incurred by others in connection with environmental
contamination. Such laws typically impose clean-up responsibility and liability
without regard to whether the owner or operator knew of or caused the presence
of the contaminants. Even if more than one person may have been responsible for
the contamination, each person covered by the environmental laws may be held
responsible for all of the clean-up costs incurred. In addition, third parties
may sue the owner or operator of a site for damages and costs resulting from
environmental contamination emanating from that site. These costs may be
substantial and the presence of such substances may adversely affect the owner's
ability to sell or rent such property or to borrow using such property as
collateral.

         Independent environmental consultants have conducted a standard Phase I
or similar general environmental site assessment ("ESA") of each of our
Properties to identify potential sources of environmental contamination and
assess environmental regulatory compliance. For a number of the Properties, the
Phase I ESA either referenced a prior Phase II ESA obtained on such Property or
prompted us to have a Phase II ESA of such Property conducted. A Phase II ESA
generally involves invasive procedures, such as soil sampling and testing or the
installation and monitoring of groundwater wells. While the ESAs conducted have
identified environmental contamination on a few of the Properties, they have not
revealed any environmental contamination, liability or compliance concern that
we believe would have a material adverse effect on our cash flow or ability to
make distributions to shareholders.

         It is possible that the existing ESAs relating to the Properties do not
reveal all environmental contaminations, liabilities or compliance concerns
which currently exist. In addition, future properties which we acquire may be
subject to environmental conditions.

                                       -9-


<PAGE>
Some potential losses are not covered by insurance

         We carry comprehensive liability, fire, extended coverage and rental
loss insurance on all of our Properties. We believe the policy specifications
and insured limits of these policies are adequate and appropriate. There are,
however, certain types of losses, such as lease and other contract claims, that
generally are not insured. Should an uninsured loss or a loss in excess of
insured limits occur, we could lose all or a portion of the capital we have
invested in a property, as well as the anticipated future revenue from the
property. In such an event, we might nevertheless remain obligated for any
mortgage debt or other financial obligations related to the property.

We do not control the Management Company

          While we own substantially all (95%) of the economic interest in the
Management Company, to maintain our REIT qualification, certain of the executive
officers of the Company indirectly hold 95% of the voting common stock of the
Management Company. Therefore, we do not control the timing or amount of
distributions by, or the management and operation of, the Management Company. As
a result, decisions relating to the payment of distributions by, and the
business policies and operations of, the Management Company could be adverse to
our interests.

The Board of Trustees may change our policies without shareholder approval

         The Board of Trustees controls our policies concerning investment,
financing, borrowing and distribution, as well as our operational and growth
activities. The Board of Trustees may amend or revise such policies or
activities without notice to, or a vote of, our shareholders. Such amendments or
revisions may not fully serve the interests of all shareholders and could
adversely affect our distributions, financial condition, results of operations
or the market price of the Common Shares.

We are dependent upon our key personnel

         We are dependent upon the efforts of our executive officers,
particularly Anthony A. Nichols, Sr. and Gerard H. Sweeney. The loss of their 
services could have an adverse affect on our operations. Although we have 
employment agreements with Messrs. Nichols and Sweeney, such agreements do not 
restrict their ability to become employed by a competitor following the 
termination of their employment with us.

Certain limitations exist with respect to a third party's ability to acquire us
or effectuate a change in control

         Limitations imposed to protect our REIT status. In order to protect us
against loss of our REIT status, our Declaration of Trust limits any shareholder
from owning more than 9.8% in value of our outstanding shares, subject to
certain exceptions. If you or anyone else acquires shares in excess of the
ownership limit, we may:

          o    consider the transfer to be null and void;

          o    not reflect the transaction on our books;

          o    institute legal action to stop the transaction;

          o    not pay dividends or other distributions with respect to those
               shares;

          o    not recognize any voting rights for those shares; and

          o    consider the shares held in trust for the benefit of a person to
               whom such shares may be transferred.

         Limitation due to our ability to issue preferred shares. Our
Declaration of Trust authorizes the Board of Trustees to issue preferred shares.
The Board of Trustees may establish the preferences and rights of any preferred
shares issued which could have the effect of delaying or preventing someone from
taking control of us, even if a change in control were in our shareholders' best
interests.



                                      -10-


<PAGE>
         Limitations imposed by the Business Combination Law. The Maryland
General Corporation Law (the "MGCL"), as applicable to Maryland real estate
investment trusts, establishes special restrictions against "business
combinations" between a Maryland real estate investment trust and "interested
shareholders" or their affiliates unless an exemption is applicable. An
interested shareholder includes a person who beneficially owns, and an affiliate
or associate of the trust who, at any time within the two-year period prior to
the date in question, was the beneficial owner of, ten percent or more of the
voting power of our then-outstanding voting shares. Among other things, the law
prohibits (for a period of five years) a merger and certain other transactions
between the trust and an interested shareholder unless the board of trustees
approved the transaction before the party became an interested shareholder. The
five-year period runs from the most recent date on which the interested
shareholder became an interested shareholder. Thereafter, any such business
combination must be recommended by the board of trustees and approved by two
super-majority shareholder votes unless, among other conditions, the trust's
common shareholders receive a minimum price for their shares and the
consideration is received in cash or in the same form as previously paid by the
interested shareholder for its shares or unless the board of trustees approved
the transaction before the party in question became an interested shareholder.
The business combination statute could have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our shareholders' best interests.

         We have exempted any business combination involving SSI, The Nichols
Company ("TNC"), the Commonwealth of Pennsylvania State Employees' Retirement
System ("SERS") and a voting trust established for its benefit (the "SERS Voting
Trust"), Morgan Stanley Asset Management Inc. and two funds (the "Morgan Stanley
Funds") managed by it, Lazard Freres Real Estate Investors, L.L.C. ("Lazard"),
Gerard H. Sweeney (the Company's President and Chief Executive Officer) and any
of their respective affiliates or associates. As a result, these entities and
Mr. Sweeney and their affiliates and associates (including Anthony A. Nichols,
Sr., the Company's Chairman of the Board) may be able to enter into business
combinations with the Company which may not be in the best interest of the
shareholders.

         Limitations imposed by the Maryland Control Share Statute. The Maryland
General Corporation Law provides that "control shares" of a Maryland real estate
investment trust acquired in a "control share acquisition" have no voting rights
except to the extent approved by a vote of two-thirds of the votes entitled to
be cast on the matter, excluding shares of beneficial interest owned by the
acquiror, by officers or by trustees who are employees of the trust. If voting
rights are not approved at a meeting of shareholders or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the trust may redeem any or all
of the control shares (except those for which voting rights have previously been
approved) for fair value. If voting rights for control shares are approved at a
shareholders meeting and the acquiror becomes entitled to vote a majority of the
shares entitled to vote, all other shareholders may exercise appraisal rights.
The control share statute could have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our shareholders' best interests.

         We have exempted acquisitions by SSI, TNC, SERS, the SERS Voting Trust,
Morgan Stanley Asset Management Inc., the Morgan Stanley Funds and any current
or future affiliates or associates of theirs from the control shares statute. As
a result, these entities will be able to possess voting power not generally
available to other persons.

Sales of a substantial number of Common Shares, or the perception that such
sales could occur, could adversely affect prevailing prices for the Common
Shares

         As of December 1, 1998, we had reserved: (i) 4,955,107 Common Shares
for issuance upon redemption of Units, (ii) 3,005,808 Common Shares for issuance
upon exercise of outstanding options and warrants and (iii) 1,415,094 Common
Shares for issuance upon the conversion or redemption of Series A Preferred
Shares. Our Declaration of Trust permits the Board of Trustees to increase the
aggregate number of authorized shares of any class without shareholder approval.
We cannot predict the effect that future sales of Company securities, or the
perception that such sales could occur, will have on the market price of the
Common Shares.

The issuance of preferred shares may adversely affect the rights of holders of
Common Shares

         Because the Board of Trustees has the power to establish the
preferences and rights of each class or series of preferred shares, it may
afford the holders in any series or class of preferred shares preferences,
distributions, powers and rights, voting or otherwise, senior to the rights of
holders of Common Shares.



                                      -11-


<PAGE>

                      RATIOS OF EARNINGS TO COMBINED FIXED
                    CHARGES AND PREFERRED SHARE DISTRIBUTIONS

         The following table sets forth the ratios of earnings to combined fixed
charges and preferred share distributions for the Company for each of the five
years ended December 31, 1997, 1996, 1995, 1994 and 1993 and for the nine months
ended September 30, 1998 and 1997.


                             Brandywine Realty Trust
           Computation of Ratio of Earnings to Combined Fixed Charges
                        and Preferred Share Distributions
                                 (in thousands)
<TABLE>
<CAPTION>


                                                                                                     For the nine
                                                                                                     months ended
                                                        For the years ended December 31,            September 30,
                                                -----------------------------------------------     -------------
                                                1993      1994      1995       1996       1997      1997      1998
                                                ----      ----      ----       ----       ----      ----      ----
<S>                                               <C>      <C>       <C>       <C>        <C>       <C>       <C> 
Fixed Charge Coverage Ratio (1)                N/A(2)      (3)       (3)       (3)        2.71      2.53      2.36
                                             =====================================================================
</TABLE>


(1)  The fixed charge coverage ratio represents the number of times fixed
     charges were covered by earnings. The ratio is computed by dividing fixed
     charges and preferred share distributions into earnings before
     extraordinary items, plus fixed charges. Fixed charges include interest
     expense and amortization of debt issuance costs.

(2)  Ratio cannot be computed as there were no fixed charges during fiscal year
     1993.

(3)  Ratio calculated to be less than one-to-one coverage. The amount of the
     deficiency to cover fixed charges is $563,000, $824,000 and $1,841,000 for
     the years 1996, 1995 and 1994, respectively.


                  DESCRIPTION OF SHARES OF BENEFICIAL INTEREST

         The following summary of the terms of the shares of beneficial interest
of the Company does not purport to be complete and is subject to and qualified
in its entirety by reference to the Declaration of Trust and Bylaws of the
Company, as amended, which are incorporated by reference into the Registration
Statement of which this prospectus is a part.

General

         The Declaration of Trust of the Company provides that the Company is
authorized to issue up to 105,000,000 shares of beneficial interest of the
Company ("Shares"), consisting of 100,000,000 Common Shares and 5,000,000
preferred shares of beneficial interest, par value $.01 per share ("Preferred
Shares"). Seven hundred and fifty thousand of the Preferred Shares are
designated as 7.25% Series A Cumulative Convertible Preferred Shares and are
referred to in this Prospectus as the Series A Preferred Shares. The Declaration
of Trust may be amended by the Board of Trustees, without shareholder approval,
to increase or decrease the aggregate number of authorized Shares of any class
except for the Series A Preferred Shares. The authorized Common Shares and
undesignated Preferred Shares are available for future issuance without further
action by the Company's shareholders, unless such action is required by
applicable law, the rules of any stock exchange or automated quotation system on
which the Company's securities may be listed or traded or pursuant to the
preferential rights of the Series A Preferred Shares.

         Both Maryland statutory law governing real estate investment trusts
organized under Maryland law (the "Maryland REIT Law") and the Company's
Declaration of Trust provide that no shareholder of the Company will be
personally liable, by reason of his status as a shareholder of the Company, for
any obligation of the Company. The Company's Bylaws further provide that the
Company shall indemnify any shareholder or former shareholder against


                                      -12-


<PAGE>
any claim or liability to which such shareholder may become subject by reason of
his being or having been a shareholder, and that the Company shall reimburse
each shareholder who has been successful, on the merits or otherwise, in the
defense of a proceeding to which he has been made a party by reason of his
status as such for all reasonable expenses incurred by him in connection with
any such claim or liability. In addition, it is a requirement of the Declaration
of Trust that all written contracts to which the Company is a party shall
include a provision to the effect that shareholders shall not be personally
liable thereon.

         The Declaration of Trust provides that, subject to the provisions of
any class or series of preferred shares then outstanding (including the Series A
Preferred Shares) and to the mandatory provisions of applicable law, the
shareholders are entitled to vote only on the following matters: (i) election or
removal of Trustees; (ii) amendment of the Declaration of Trust (other than an
amendment to increase or decrease the aggregate number of authorized Shares of
any class); (iii) a determination by the Trust to invest in commodities
contracts (other than interest rate futures intended to hedge the Company
against interest rate risk), engage in securities trading (as compared to
investment) activities or hold properties primarily for sale to customers in the
ordinary course of business; and (iv) a merger of the Company with another
entity. Except with respect to the foregoing, no action taken by the
shareholders of the Company at any meeting shall in any way bind the Board of
Trustees. For a description of the rights and preferences of the Series A
Preferred Shares, see "-- Classification or Reclassification of Preferred Shares
- --Series A Preferred Shares."

Transfer Agent and Registrar

         The transfer agent and registrar for the Common Shares is The Bank of
New York.

Shares

         Common Shares of Beneficial Interest

         Each outstanding Common Share entitles the holder thereof to one vote
on all matters submitted to a vote of shareholders, including the election of
Trustees. There is no cumulative voting in the election of Trustees, which means
that, subject to (i) the voting rights of the Series A Preferred Shares and (ii)
such voting rights as may be granted by the Board of Trustees in connection with
the issuances of additional classes of Preferred Shares, the holders of a
majority of the outstanding Common Shares can elect all of the Trustees then
standing for election. Subject to (i) the preferential rights of the Series A
Preferred Shares and (ii) such preferential rights as may be granted by the
Board of Trustees of the Company in connection with the future issuances of
additional classes of Preferred Shares, holders of Common Shares are entitled to
such distributions as may be authorized and declared from time to time by the
Board of Trustees out of funds legally available therefor.

         Holders of Common Shares have no conversion, exchange, redemption or
preemptive rights to subscribe to any securities of the Company. All outstanding
Common Shares will be fully paid and nonassessable. In the event of any
liquidation, dissolution or winding-up of the affairs of the Company, subject to
(i) the preferential rights of the Series A Preferred Shares and (ii) such
preferential rights as may be granted by the Board of Trustees of the Company in
connection with the future issuances of additional classes of Preferred Shares,
holders of Common Shares will be entitled to share ratably in the assets of the
Company remaining after provision for payment of liabilities to creditors. All
Common Shares have equal dividend, distribution, liquidation and other rights.

         Preferred Shares of Beneficial Interest

         The Preferred Shares authorized by the Company's Declaration of Trust
may be issued from time to time in one or more series. Prior to the issuance of
Preferred Shares of each such series, the Board of Trustees is required by the
Maryland REIT Law and the Company's Declaration of Trust to set for each series
the terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms or conditions of
redemption, as are permitted by the Maryland REIT Law. Such rights, powers,
restrictions and limitations could include the right to receive specified
distributions and payments on liquidation prior to any such payments being made
to the holders of Common Shares. Under certain circumstances, the issuance of
Preferred Shares could have the effect of delaying, deferring or preventing a
change of control of the Company and may adversely affect the voting and other
rights of the holders of the Common Shares.



                                      -13-


<PAGE>

         Classification or Reclassification of Preferred Shares

         The Declaration of Trust authorizes the Trustees to classify or
reclassify, in one or more series, any unissued Preferred Shares by setting or
changing the number of Preferred Shares constituting such series and the
designation, preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions, qualifications or terms or
conditions of redemption of such Preferred Shares.

         Series A Preferred Shares. The Company currently has 750,000 Series A
Preferred Shares issued and outstanding. Each Series A Preferred Share has a
stated value (the "Stated Value") of $50.00 and is convertible into Common
Shares at the option of the holder at a conversion price (the "Conversion
Price") of $28.00. The Conversion Price will be reduced to $26.50 if the average
closing price of the Common Shares during the 60-trading day period ending on
December 31, 2003 is $23.00 or lower. At any time that the average market price
of the Common Shares is equal to or greater than 120% of the Conversion Price
for 60 consecutive trading days, the Company has the right to redeem all or any
part of the outstanding Series A Preferred Shares for an amount in cash equal to
the aggregate Stated Value of the Series A Preferred Shares to be redeemed (plus
accrued and unpaid distributions) or for a number of Common Shares equal to the
aggregate Stated Value of the Series A Preferred Shares to be redeemed divided
by the Conversion Price (plus accrued and unpaid distributions). In addition, at
any time on or after January 2, 2004, the Company has the right to redeem all or
any part of the outstanding Series A Preferred Shares for an amount in cash
equal to the aggregate Stated Value of the Series A Preferred Shares to be
redeemed (plus accrued and unpaid distributions) or, in the event that the
average closing price of the Common Shares is equal to or greater than 110% of
the Conversion Price for 60 consecutive trading days, for a number of Common
Shares equal to the aggregate Stated Value of the Series A Preferred Shares to
be redeemed divided by the Conversion Price (plus accrued and unpaid
distributions). Each Series A Preferred Share accrues distributions, payable in
cash and prior to the payment of any distribution on the Common Shares, in an
amount equal to the greater of (i) $0.9063 per quarter (equivalent to $3.625 per
annum) or (ii) the cash distributions paid or payable for the most recent
quarter on the number of Common Shares into which a Series A Preferred Share is
convertible. The holders of Series A Preferred Shares have no voting rights
except (i) with respect to actions which would have a material and adverse
effect on the rights of such holders and (ii) in the event quarterly
distributions on the Series A Preferred Shares are in arrears for six or more
quarters. In the event the quarterly distributions are so in arrears, the
holders of the Series A Preferred Shares have the right, voting together as a
single class with any other class of the Company's Preferred Shares ranking on a
parity with the Series A Preferred Shares, to elect two additional members to
the Board of Trustees. In the event of any liquidation, dissolution or
winding-up of the affairs of the Company, the holders of the Series A Preferred
Shares are entitled to receive from the assets remaining after provision for
payment of liabilities to creditors an amount equal to the aggregate Stated
Value of the Series A Preferred Shares then outstanding together with any
accrued and unpaid distributions thereon prior to the distribution of any such
assets to the holders of the Common Shares.

Restrictions on Transfer

         For the Company to qualify as a REIT under the Code, not more than 50%
in value of its outstanding Shares may be owned, directly or indirectly, by five
or fewer individuals (defined in the Code to include certain entities such as
qualified pension plans) during the last half of a taxable year and Shares must
be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of twelve months (or during a proportionate part of a shorter
taxable year).

         Because the Board of Trustees believes it is at present essential for
the Company to continue to qualify as a REIT, the Declaration of Trust, subject
to certain exceptions, contains provisions that restrict the number of Shares
that a person may own and that are designed to safeguard the Company against an
inadvertent loss of REIT status. In order to prevent any shareholder from owning
Shares in an amount that would cause more than 50% in value of the outstanding
Shares to be held by five or fewer individuals, the Board, pursuant to authority
granted in the Declaration of Trust, has passed a resolution that, subject to
certain exceptions described below, provides that no person may own, or be
deemed to own by virtue of the attribution provisions of the Code, more than
9.8% in value of the outstanding Shares, except for Safeguard Scientifics, Inc.
("SSI") which, pursuant to a separate agreement with the Company, may own no
more than 14.75% in value of the outstanding Shares (the "Ownership Limit"). The
Board of Trustees, subject to limitations, retains the authority to effect
additional increases to, or establish exemptions from, the Ownership Limit. The
Board of Trustees, pursuant to authority granted in the Declaration of Trust,
has passed resolutions that provide that, (i) for purposes of determining
applicable ownership limitations (a) the beneficiaries of SERS (in accord with
their actuarial interests therein), and not SERS or the SERS Voting Trust, shall
be deemed the direct owners of Shares held by the SERS Voting Trust and, (b) the
owners of the Morgan


                                      -14-


<PAGE>

Stanley Funds (in proportion to their ownership therein), and not such Morgan
Stanley Funds nor a related entity, shall be deemed the direct owners of Shares
held by such Morgan Stanley Funds and (ii) exempt Lazard (and their permitted
transferees) from the Ownership Limit, on the condition that, and for so long
as, such holders comply with certain representations, warranties and agreements
intended to ensure that no direct or indirect owner of Lazard owns more than
9.8% in value of the outstanding Shares.

         In addition, pursuant to the Declaration of Trust, no purported
transfer of Shares may be given effect if it would result in ownership of all of
the outstanding Shares by fewer than 100 persons (determined without any
reference to the rules of attribution) or result in the Company being "closely
held" within the meaning of Section 856(h) of the Code (the "Ownership
Restrictions"). In the event of a purported transfer or other event that would,
if effective, result in the ownership of Shares in violation of the Ownership
Limit or the Ownership Restrictions, such transfer would be deemed void ab
initio and such Shares would automatically be exchanged for "Excess Shares"
authorized by the Declaration of Trust, according to rules set forth in the
Declaration of Trust, to the extent necessary to ensure that the purported
transfer or other event does not result in the ownership of Shares in violation
of the Ownership Limit or the Ownership Restrictions.

         Holders of Excess Shares are not entitled to voting rights (except to
the extent required by law), dividends or distributions. If, after the purported
transfer or other event resulting in an exchange of Shares for Excess Shares and
prior to the discovery by the Company of such exchange, dividends or
distributions are paid with respect to Shares that were exchanged for Excess
Shares, then such dividends or distributions would be repayable to the Company
upon demand. While outstanding, Excess Shares would be held in trust by the
Company for the benefit of the ultimate transferee of an interest in such trust,
as described below. While Excess Shares are held in trust, an interest in that
trust may be transferred by the purported transferee or other purported holder
with respect to such Excess Shares only to a person whose ownership of the
Shares would not violate the Ownership Limit or the Ownership Restrictions, at
which time the Excess Shares would be automatically exchanged for Shares of the
same type and class as the Shares for which the Excess Shares were originally
exchanged. The Declaration of Trust contains provisions that are designed to
ensure that the purported transferee or other purported holder of the Excess
Shares may not receive in return for such a transfer an amount that reflects any
appreciation in the Shares for which such Excess Shares were exchanged during
the period that such Excess Shares were outstanding. Any amount received by a
purported transferee or other purported holder in excess of the amount permitted
to be received would be required to be turned over to the Company.

         The Declaration of Trust also provides that Excess Shares shall be
deemed to have been offered for sale to the Company, or its designee, which
shall have the right to accept such offer for a period of 90 days after the
later of: (i) the date of the purported transfer or event which resulted in an
exchange of Shares for such Excess Shares; and (ii) the date the Board of
Trustees determines that a purported transfer or other event resulting in an
exchange of Shares for such Excess Shares has occurred if the Company does not
receive notice of any such transfer. The price at which the Company may purchase
such Excess Shares would be equal to the lesser of: (i) in the case of Excess
Shares resulting from a purported transfer for value, the price per share in the
purported transfer that caused the automatic exchange for such Excess Shares or,
in the case of Excess Shares resulting from some other event, the market price
of such Shares on the date of the automatic exchange for Excess Shares; or (ii)
the market price of such Shares on the date that the Company accepts such Excess
Shares. Any dividend or distribution paid to a proposed transferee on Excess
Shares prior to the discovery by the Company that such Shares have been
transferred in violation of the provisions of the Declaration of Trust shall be
repaid to the Company upon demand. If the foregoing restrictions are determined
to be void or invalid by virtue of any legal decision, statute, rule or
regulation, then the intended transferee or holder of any Excess Shares may be
deemed, at the option of the Company, to have acted as an agent on behalf of the
Company in acquiring or holding such Excess Shares and to hold such Excess
Shares on behalf of the Company.

         The Trustees may waive the Ownership Restrictions if evidence
satisfactory to the Trustees and the Company's tax counsel or tax accountants is
presented showing that such waiver will not jeopardize the Company's status as a
REIT under the Code. As a condition of such waiver, the Trustees may require
that an intended transferee give written notice to the Company, furnish such
opinions of counsel, affidavits, undertakings, agreements and information as may
be required by the Trustees and/or an undertaking from the applicant with
respect to preserving the status of the Company. The Ownership Restrictions will
not apply if the Company determines that it no longer will attempt to qualify,
or continue to qualify, as a REIT. Any transfer of Shares, or any security
convertible into Shares that would: (i) create a direct or indirect ownership of
Shares in excess of the Ownership Limit; or (ii) result in the violation of the
Ownership Restrictions will be void with respect to the intended transferee and
will result in Excess Shares as described above.


                                      -15-


<PAGE>
         Neither the Ownership Restrictions nor the Ownership Limit will be
automatically removed even if the REIT provisions of the Code are changed so as
no longer to contain any ownership concentration limitation or if the ownership
concentration limitation is increased. Except as otherwise described above, any
change in the Ownership Restrictions would require an amendment to the
Declaration of the Trust. Amendments to the Declaration require the affirmative
vote of holders owning not less than a majority of the outstanding Shares
entitled to vote thereon. In addition to preserving the Company's status as a
REIT, the Ownership Restrictions and the Ownership Limit may have the effect of
precluding an acquisition of control of the Company without the approval of the
Board of Trustees.

         All persons who own, directly or by virtue of the applicable
attribution provisions of the Code, more than 4.0% of the value of any class of
outstanding Shares, must file an affidavit with the Company containing the
information specified in the Declaration by January 31 of each year. In
addition, each shareholder shall upon demand be required to disclose to the
Company in writing such information with respect to the direct, indirect and
constructive ownership of Shares as the Trustees deem necessary to comply with
the provisions of the Code applicable to REITs, to comply with the requirements
of any taxing authority or governmental agency or to determine any such
compliance.

         The Ownership Limit could have the effect of delaying, deferring or
preventing a transaction or a change in control of the Company that might
involve a premium price for the Common Shares or otherwise be in the best
interest of the shareholders of the Company.

         All certificates representing Shares that are hereafter issued will
bear a legend referring to the restrictions and limitations described above.


                    CERTAIN PROVISIONS OF MARYLAND LAW AND OF
                  THE COMPANY'S DECLARATION OF TRUST AND BYLAWS

         The following summary of certain provisions of Maryland law and of the
Declaration of Trust and Bylaws does not purport to be complete and is subject
to and qualified in its entirety by reference to Maryland law and to the
Declaration of Trust and Bylaws of the Company, as amended, which are
incorporated by reference into this Registration Statement.

Duration

         Under the Company's Declaration of Trust, the Company has a perpetual
term and will continue perpetually subject to the authority of the Board of
Trustees to terminate the Company's existence and liquidate its assets and
subject to termination pursuant to the Maryland REIT Law.

Board of Trustees

         The Company's Declaration of Trust provides that the number of Trustees
of the Company shall not be less than three nor more than 15. Any vacancy
(including a vacancy created by an increase in the number of Trustees) will be
filled, at any regular meeting or at any special meeting called for that
purpose, by a majority of the Trustees (although less than a quorum). The
Trustees will each serve for a term of one year (except that an individual who
has been elected to fill a vacancy will hold office only until the next annual
meeting of shareholders and until his successor has been duly elected and
qualified).

         The Declaration of Trust provides that a Trustee may be removed from
office only at a meeting of the shareholders called for that purpose, by the
affirmative vote of the holders of not less than a majority of the Shares
entitled to vote in the election of Trustees; provided, however, that in the
case of any Trustees elected solely by holders of a series of Preferred Shares,
such Trustees may be removed by the affirmative vote of a majority of the
Preferred Shares of that series then outstanding and entitled to vote in the
election of Trustees, voting together as a single class.



                                      -16-


<PAGE>

Meetings of Shareholders

         The Declaration of Trust requires the Company to hold an annual meeting
of shareholders for the election of Trustees and the transaction of any other
proper business. Special meetings of shareholders may be called upon the written
request of shareholders holding at least 10% of the Common Shares. Special
meetings of shareholders may also be called by the holders of Preferred Shares
to the extent, if any, determined by the Board of Trustees in connection with
the establishment of a class or series of Preferred Shares. Any action required
or permitted to be taken by shareholders must be taken at a duly called annual
or special meeting of shareholders and may not be effected by any consent in
writing of shareholders.

Business Combinations

         Under the MGCL, as applicable to Maryland real estate investment
trusts, certain "business combinations" (including certain mergers,
consolidations, share exchanges, or, in certain circumstances, asset transfers
or issuances or reclassifications of equity securities) between a Maryland real
estate investment trust and an "interested shareholder" or an affiliate of the
interested shareholder are prohibited for five (5) years after the most recent
date on which the interested shareholder becomes an interested shareholder. An
interested shareholder includes a person who beneficially owns, and an affiliate
or associate (as defined in the MGCL) of the trust who, at any time during the
two-year period prior to the date in question, who was the beneficial owner of
ten percent or more of the voting power of the trust's then outstanding voting
shares. Thereafter, any such business combination must be: (a) recommended by
the trustees of such trust and (b) approved by the affirmative vote of at least:
(i) 80% of the votes entitled to be cast by holders of outstanding voting shares
of beneficial interest of the trust; and (ii) two-thirds of the votes entitled
to be cast by holders of outstanding voting shares of beneficial interest other
than shares held by the interested shareholder with whom (or with whose
affiliate or associate) the business combination is to be effected, unless,
among other conditions, the trust's common shareholders receive a minimum price
(as defined in the MGCL) for their shares and the consideration is received in
cash or in the same form as previously paid by the interested shareholder for
its shares. These provisions of the MGCL do not apply, however, to business
combinations that are approved or exempted by the board of trustees of the trust
prior to the time that the interested shareholder becomes an interested
shareholder. An amendment to a Maryland REIT's declaration of trust electing not
to be subject to the foregoing requirements must be approved by the affirmative
vote of at least 80% of the votes entitled to be cast by holders of outstanding
voting shares of beneficial interest of the trust, voting together as a single
voting group, and two-thirds of the votes entitled to be cast by holders of
outstanding voting shares of beneficial interest other than shares of beneficial
interest held by interested shareholders. Any such amendment shall not be
effective until 18 months after the vote of shareholders and does not apply to
any business combination of the trust with an interested shareholder on the date
of the shareholder vote. The Board of Trustees has exempted any business
combinations involving SSI, TNC, SERS, the SERS Voting Trust, Morgan Stanley
Asset Management Inc., the Morgan Stanley Funds, Lazard, Gerard H. Sweeney and
their respective affiliates and associates from the business combination
provisions of the MGCL and, consequently, the five-year prohibition and the
super-majority vote requirements will not apply to business combinations between
any of them and the Company. As a result, they may be able to enter into
business combinations that may not be in the best interest of the shareholders
without compliance by the Company with the super-majority vote requirements and
the other provisions of the statute.

         The business combination statute could have the effect of delaying,
deferring or preventing offers to acquire the Company and of increasing the
difficulty of consummating any such offer.

Control Share Acquisitions

         The MGCL, as applicable to Maryland real estate investment trusts,
provides that "control shares" of a Maryland real estate investment trust
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on the
matter by shareholders, excluding shares owned by the acquiror, by officers or
by trustees who are employees of the trust in question. "Control shares" are
voting shares of beneficial interest which, if aggregated with all other shares
previously acquired by such acquiror or in respect of which the acquiror is able
to exercise or direct the exercise of voting power (except solely by virtue of a
revocable proxy), would entitle the acquiror to exercise the voting power in the
election of trustees within one of the following ranges of voting power: (a)
one-fifth or more but less than one-third, (b) one-third or more but less than a
majority, or (c) a majority or more of all voting power. Control shares do not
include shares the acquiring person is then entitled to vote as a result of
having previously obtained shareholder approval. A "control share acquisition"
means the acquisition of control shares, subject to certain exceptions.



                                      -17-


<PAGE>

         A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the trust's board of trustees to call a special meeting of
shareholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the trust may itself present
the question at any shareholders meeting.

         If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
statute, then, subject to certain conditions and limitations, the trust may
redeem any or all of the control shares, except those for which voting rights
have previously been approved, for fair value determined, without regard to the
absence of voting rights for the control shares, as of the date of the last
control share acquisition by the acquiror or of any meeting of shareholders at
which the voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a shareholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other shareholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition,
and certain limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share acquisition.

         The control share acquisition statute does not apply to shares acquired
in a merger, consolidation or share exchange if the trust is a party to the
transaction, or to acquisitions approved or exempted by the declaration of trust
or bylaws of the trust. Pursuant to the statute, the Company has exempted any
and all acquisitions of Shares by SSI, TNC, SERS, SERS Voting Trust, Morgan
Stanley Asset Management, Inc., the Morgan Stanley Funds and any current or
future affiliate or associate of theirs from the control share provisions of the
MGCL. As a result, they will be able to possess voting power not generally
available to other persons and the effect may be to further enhance their
ability to control the Company.

         The control share acquisition statute could have the effect of
delaying, deferring or preventing offers to acquire the Company and of
increasing the difficulty of consummating any such offer.

Amendment to the Declaration of Trust

         The Company's Declaration of Trust may be amended only by the
affirmative vote of the holders of not less than a majority of the Shares then
outstanding and entitled to vote thereon, except for the provisions of the
Declaration of Trust relating to (i) increases or decreases in the aggregate
number of Shares of any class (other than the Series A Preferred Shares), which
may be made by the Board of Trustees without shareholder approval and (ii) the
MGCL provisions on business combinations, amendment of which requires the
affirmative vote of the holders of not less than 80% of the Shares then
outstanding and entitled to vote. In addition, in the event that the Board of
Trustees shall have determined, with the advice of counsel, that any one or more
of the provisions of the Company's Declaration of Trust (the "Conflicting
Provisions") are in conflict with the Maryland REIT Law, the Code or other
applicable Federal or state law(s), the Conflicting Provisions shall be deemed
never to have constituted a part of the Declaration of Trust, even without any
amendment thereof.

Termination of the Company and REIT Status

         Subject to the rights of any outstanding Preferred Shares and to the
provisions of the Maryland REIT Law, the Company's Declaration of Trust permits
the Board of Trustees to terminate the Company and to discontinue the election
of the Company to be taxed as a REIT.

Transactions Between the Company and its Trustees or Officers

         The Company's Declaration of Trust provides that any contract or
transaction between the Company and one or more Trustees, officers, employees or
agents of the Company must be approved by a majority of the Trustees who have no
interest in the contract or transaction.



                                      -18-


<PAGE>

Limitation of Liability and Indemnification

         The Maryland REIT Law permits a Maryland real estate investment trust
to include in its Declaration of Trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders for money damages except
for liability resulting from (a) actual receipt of an improper benefit or profit
in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
Declaration of Trust of the Company contains such a provision which eliminates
such liability to the maximum extent permitted by the Maryland REIT Law.

         The Company's Bylaws require it to indemnify, without requiring a
preliminary determination of the ultimate entitlement to indemnification, (a)
any present or former Trustee, officer or shareholder who has been successful,
on the merits or otherwise, in the defense of a proceeding to which he was made
a party by reason of such status, against reasonable expenses incurred by him in
connection with the proceeding; (b) any present or former Trustee or officer
against any claim or liability to which he may become subject by reason of such
status unless it is established that (i) his act or omission was committed in
bad faith or was the result of active and deliberate dishonesty, (ii) he
actually received an improper personal benefit in money, property or services or
(iii) in the case of a criminal proceeding, he had reasonable cause to believe
that his act or omission was unlawful; and (c) each shareholder or former
shareholder against any claim or liability to which he may be subject by reason
of such status as a shareholder or former shareholder. However, under the MGCL,
a Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the Company's Bylaws
require it to pay or reimburse, in advance of final disposition of a proceeding,
reasonable expenses incurred by a present or former Trustee, officer or
shareholder made a party to a proceeding by reason of his status as a Trustee,
officer or shareholder provided that, in the case of a Trustee or officer, the
Company shall have received (i) a written affirmation by the Trustee or officer
of his good faith belief that he has met the applicable standard of conduct
necessary for indemnification by the Company as authorized by the Bylaws and
(ii) a written undertaking by him or on his behalf to repay the amount paid or
reimbursed by the Company if it shall ultimately be determined that the
applicable standard of conduct was not met. The Company's Bylaws also (i) permit
the Company, with the approval of its Trustees, to provide indemnification and
payment or reimbursement of expenses to a present or former Trustee, officer or
shareholder who served a predecessor of the Company in such capacity, and to any
employee or agent of the Company or a predecessor of the Company, (ii) provide
that any indemnification or payment or reimbursement of the expenses permitted
by the Bylaws shall be furnished in accordance with the procedures provided for
indemnification and payment or reimbursement of expenses under Section 2-418 of
the MGCL for directors of Maryland corporations and (iii) permit the Company to
provide such other and further indemnification or payment or reimbursement of
expenses as may be permitted by the MGCL for directors of Maryland corporations.

         The limited partnership agreement of the Operating Partnership also
provides for indemnification by the Operating Partnership of the Company, as
general partner, and its Trustees and officers for any costs, expenses or
liabilities incurred by them by reason of any act performed by them for or on
behalf of the Operating Partnership or the Company; provided that such person's
actions were taken in good faith and in the belief that such conduct was in the
best interests of the Operating Partnership and that such person was not guilty
of fraud, willful misconduct or gross negligence.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to Trustees and officers of the Company pursuant to the
foregoing provisions or otherwise, the Company has been advised that, although
the validity and scope of the governing statute has not been tested in court, 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 addition, indemnification may be limited by state securities
laws.

Maryland Asset Requirements

         To maintain its qualification as a Maryland real estate investment
trust, the Maryland REIT Law requires that the Company hold, either directly or
indirectly, at least 75% of the value of its assets in real estate assets,
mortgages or mortgage related securities, government securities, cash and cash
equivalent items, including high-grade short-term securities and receivables.
The Maryland REIT Law also prohibits using or applying land for farming,
agricultural, horticultural or similar purposes.




                                      -19-


<PAGE>
                   POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

         The following is a discussion of certain investment, financing and
other policies of the Company. These policies have been determined by the
Company's Board of Trustees and may be amended or revised from time to time by
the Board of Trustees without a vote of shareholders. No assurance can be given
that the Company's investment objectives will be attained or that the value of
the Company will not decrease.

Investment Policies

         Investments in Real Estate or Interests in Real Estate. The Company's
business objective is to increase cash available for distribution and to
maximize shareholder value by: (i) maximizing cash flow through leasing
strategies designed to capture potential rental growth as rental rates increase
and as below-market leases are renewed; (ii) ensuring a high tenant retention
rate through an aggressive tenant services program responsive to the varying
needs of the Company's diverse base of tenants; (iii) broadening its geographic
and economic diversification while maximizing economies of scale; (iv) acquiring
high-quality office and industrial properties and portfolios of such properties
at attractive yields in selected submarkets within the Mid-Atlantic region
(including Delaware, Maryland, New Jersey, New York, Pennsylvania, Virginia and
the District of Columbia), which management expects will experience economic
growth; (v) capitalizing on management's redevelopment expertise to selectively
acquire, redevelop and reposition underperforming properties in desirable
locations; (vi) acquiring land in anticipation of developing office or
industrial properties on a build-to-suit basis, under circumstances where
significant pre-leasing can be arranged or as otherwise warranted by market
conditions; (vii) enhancing the Company's investment strategy through the
pursuit of joint venture opportunities with high quality partners having
attractive real estate holdings or significant financial resources; and (viii)
optimizing the use of debt and equity financing to create a flexible and
conservative capital structure that will enable the Company to continue its
aggressive growth strategy.

         In pursuit of its business objective of increasing cash available for
distribution and maximizing shareholder value, the Company has recently
experienced rapid growth. Between January 1, 1997 and December 1, 1998 the
Company has acquired 163 office properties containing approximately 12.5 million
net rentable square feet, 66 industrial facilities containing approximately 3.7
million net rentable square feet and one mixed use property containing
approximately 167,760 net rentable square feet and, together with the Company's
real estate ventures (the "Real Estate Ventures"), has acquired ownership of, or
rights to acquire, approximately 503.8 acres of undeveloped land. The aggregate
purchase price for the 230 Properties acquired by the Company between January 1,
1997 and December 1, 1998 was approximately $1.7 billion. During such period,
the Company also completed the development of two office properties and one
industrial facility containing an aggregate of approximately 288,177 net
rentable square feet for aggregate development costs of approximately $19.2
million. The Company believes that, through the expertise and extensive 
relationships of its management and its flexible capital structure, it will 
continue to identify and capitalize on substantial opportunities for additional 
real estate investments from a variety of sources, including institutional and 
private holders of real estate seeking liquidity or reduction in their holdings
or tax-deferred dispositions.

         The Company expects to continue to concentrate its real estate
activities in submarkets within the Mid-Atlantic region where it believes that:
(i) barriers to entry (such as zoning restrictions, utility availability,
infrastructure limitations, development moratoriums and limited developable
land) are likely to create supply constraints on office and industrial space;
(ii) current market rents do not justify new construction; (iii) it can maximize
market penetration by accumulating a critical mass of properties and thereby
enhance operating efficiencies; and (iv) there is potential for economic growth.

         The Company may develop, purchase or lease income-producing properties
for long-term investment, expand and improve the Properties presently owned or
other properties purchased, or sell such properties, in whole or in part, when
circumstances warrant. Although there is no limitation on the types of
development activities that the Company may undertake, the Company expects that
its development activities will generally be on a build-to-suit basis for
particular tenants, or where a significant portion of the building is pre-leased
before construction begins. The Company may also participate with other entities
in property ownership and development through joint ventures, such as the Real
Estate Ventures, or other types of co-ownership. Equity investments may be
subject to existing or future mortgage financing and other indebtedness that
will have priority over the equity interests in the Company.



                                      -20-


<PAGE>

         Securities of or Interests in Entities Primarily Engaged in Real Estate
Activities and Other Issuers. Subject to the percentage of ownership limitations
and gross income tests necessary for REIT qualification, the Company also may
invest in securities of other REITS, other entities engaged in real estate
activities or securities of other issuers. The Company may enter into additional
joint ventures or partnerships for the purpose of obtaining an equity interest
in a particular property in accordance with the Company's investment policies.

         Investments in Real Estate Mortgages. While the Company's current
portfolio consists of, and the Company's business objectives emphasize, equity
investments in commercial real estate, the Company may, in the discretion of the
Board of Trustees, invest in other types of equity real estate investments,
mortgages and other real estate interests. The Company may also invest in
participating or convertible mortgages if the Company concludes that it may
benefit from the cash flow or any appreciation in the value of the property.

         Investment through the Operating Partnership. The Company has made no
determination to conduct all of its activities through the Operating
Partnership. As of the date of this prospectus, the Company owns all of the
Properties or the economic interest therein indirectly through the Operating
Partnership. Although the Partnership Agreement of the Operating Partnership
contains no provision restricting the Company's ability to acquire additional
properties outside the Operating Partnership, the Partnership Agreement provides
that if the Company acquires additional properties outside the Operating
Partnership, the percentage of administrative fees of the Company allocated to
the Operating Partnership will be reduced to an amount that is fair and
equitable under the circumstances.

Dispositions

         The Company may sell properties in its portfolio if, based upon
management's periodic review of the Company's portfolio, the Board of Trustees
determines that such action would be in the best interests of the Company. 

Financing Policies

         The Company has adopted a policy to operate with a long-term average
debt-to-total market capitalization ratio (i.e., the total consolidated debt of
the Company as a percentage of the market value of issued and outstanding Shares
and Units plus total consolidated debt) of not more than 50%. As of December 1,
1998, the Company's debt-to-total market capitalization ratio was approximately
54.5%. The Company's Declaration of Trust and Bylaws do not, however, limit the
amount or percentage of indebtedness that the Company may incur. In addition,
the Company may, from time to time, modify its debt policy in light of current
economic conditions, relative costs of debt and equity capital, market values of
its properties, general conditions in the market for debt and equity securities,
fluctuations in the market price of its Common Shares, growth opportunities and
other factors. Accordingly, the Company may increase or decrease its
debt-to-market capitalization ratio beyond the limit described above. To the
extent that the Board of Trustees decides to obtain additional capital, the
Company may raise such capital through additional equity offerings (including
offerings of senior or convertible securities), debt financings or retention of
cash flow (subject to provisions in the Code concerning taxability of
undistributed REIT income), or a combination of these methods. Borrowing may be
unsecured or secured by any or all of the assets of the Company, the Operating
Partnership or any existing or new property-owning partnership and may have full
or limited recourse to all or any portion of the assets of the Company, the
Operating Partnership or any existing or new property-owning partnership.
Indebtedness incurred by the Company may be in the form of bank borrowing,
purchase money obligations to sellers of the properties, publicly or privately
placed debt instruments or financing from institutional investors or other
lenders. The proceeds from any borrowing by the Company may be used for working
capital, to refinance existing indebtedness, to finance acquisition, expansion
or development of new properties and for the payment of distributions. The
Company has not established any limit on the number or amount of mortgages that
may be placed on any single property or on its portfolio as a whole.

         The Company has established its debt policy relative to the total
market capitalization of the Company rather than relative to the book value of
its assets. The Company has used total market capitalization because it believes
that the book value of its assets (which to a large extent is the depreciated
value of real property, the Company's primary tangible asset) does not
accurately reflect its ability to borrow and to meet debt service requirements.
The market capitalization of the Company, however, is more variable than book
value, and does not necessarily reflect the fair market value of the underlying
assets of the Company at all times. The Company will also consider factors other
than market capitalization in making decisions regarding the incurrence of
indebtedness, such as the purchase price of properties to be acquired with debt
financing, the estimated market value of its properties


                                      -21-


<PAGE>

upon refinancing and the ability of particular properties and the Company as a
whole to generate cash flow to cover expected debt service.

Working Capital Reserves

         The Company will maintain working capital reserves (and when not
sufficient, access to borrowings) in amounts that the Board of Trustees
determines to be adequate to meet normal contingencies in connection with the
Company's business and investments.

Conflict of Interests Policies

         The Company has not adopted any formal or informal policies intended to
eliminate the influence of conflicts of interest. Under the Company's
Declaration of Trust, a transaction effected by the Company or any entity
controlled by the Company in which a Trustee or officer has a financial interest
may only be consummated if the transaction is first approved by a majority of
the Trustees who have no interest in the transaction.

Policies with Respect to Other Activities

         The Company has authority to offer Common Shares, Preferred Shares,
senior securities or options to purchase shares in exchange for property and, to
the extent permitted by applicable law, to repurchase or otherwise acquire its
Common Shares or other securities in the open market or otherwise and may engage
in such activities in the future. The Board of Trustees periodically evaluates
authorizing the Company to repurchase Common Shares and, as of the date of this
prospectus, has authorized the Company to repurchase up to 2.0 million Common
Shares (net of approximately 87,000 shares previously purchased). The Company
expects (but is not obligated) to issue Common Shares to holders of Units in the
Operating Partnership upon exercise of their redemption rights. The Company may
issue Preferred Shares from time to time, in one or more series, as authorized
by the Board of Trustees without the need for shareholder approval. The Company
has not engaged in trading, underwriting or agency distribution or sale of
securities of issuers, nor has the Company invested in the securities of issuers
(other than the Operating Partnership and its subsidiaries and the Real Estate
Ventures) for the purposes of exercising control, and does not intend to do so.
The Company intends to operate in a manner that will not subject it to
regulation as an investment company under the Investment Company Act. At all
times, the Company intends to make investments in such a manner as to qualify as
a REIT, unless because of circumstances or changes in the Code (or the Treasury
Regulations), the Board of Trustees determines that it is no longer in the best
interest of the Company to qualify as a REIT. The Company may make loans to
third parties, including, without limitation, to joint ventures in which it
participates. The Company's policies with respect to such activities may be
reviewed and modified or amended from time to time by the Company's Board of
Trustees without a vote of the shareholders.


                        FEDERAL INCOME TAX CONSIDERATIONS

         The following discussion of material Federal income tax considerations
is for general information only and is not tax advice. The following discussion
summarizes all material federal income tax considerations to a shareholder of
the Company. In the opinion of Arthur Andersen LLP, tax advisor to the Company
(the "Tax Advisor") the discussion below, insofar as it relates to Federal
income tax matters, is correct in all material respects, and fairly summarizes
the federal income tax considerations that are material to a shareholder. This
discussion does not purport to deal with all aspects of taxation that may be
relevant to particular shareholders in light of their personal investment or tax
circumstances, or to certain types of shareholders (including insurance
companies, tax-exempt organizations, financial institutions or broker dealers,
foreign corporations and persons who are not citizens or residents of the United
States, except to the extent discussed under "Taxation of Foreign Shareholders"
below) subject to special treatment under the Federal income tax laws. The
information in this section is based on the Code, current, temporary and
proposed Treasury Regulations thereunder, the legislative history of the Code,
current administrative interpretations and practices of the IRS (including its
practices and policies as endorsed in private letter rulings, which are not
binding on the IRS except with respect to a taxpayer that receives such a
ruling), and court decisions, all as of the date hereof. The Taxpayer Relief Act
of 1997 (the "1997 Act") was enacted on August 5, 1997. The 1997 Act contains
many provisions which generally make it easier to operate and to continue to
qualify as a REIT for taxable years beginning after the date of enactment
(which, for the Company, would be applicable commencing with its taxable year
beginning January 1, 1998).




                                      -22-


<PAGE>

         EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND
SALE OF SECURITIES AND OF THE COMPANY'S ELECTION TO BE TAXED AS A REAL ESTATE
INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.

General

         The Company first elected to be taxed as a REIT for its taxable year
ended December 31, 1986, and has operated and expects to continue to operate in
such a manner so as to remain qualified as a REIT for Federal income tax
purposes. In the opinion of the Tax Advisor, and based on certain factual
representations made by the Company relating to the organization and operation
of the Company, the Operating Partnership and AAPT, the Company will continue to
qualify as a REIT under the Code. However, the opinion of the Tax Advisor is not
binding upon the IRS and no absolute assurance can be given that the Company
will continue to operate in a manner so as to remain qualified as a REIT.

         The following is a general summary of the Code sections that govern the
Federal income tax treatment of a REIT and its shareholders. These sections of
the Code are highly technical and complex. This summary is qualified in its
entirety by the applicable Code provisions, rules and regulations promulgated
thereunder ("Treasury Regulations"), and administrative and judicial
interpretations thereof as currently in effect. There is no assurance that there
will not be future changes in the Code or administrative or judicial
interpretation thereof which could adversely affect the Company's ability to
continue to qualify as a REIT or adversely affect the taxation of shareholders
or which could further limit the amount of income the Company may derive from
the management, construction, development, leasing or sale of properties owned
by the Operating Partnership or by third parties or in partnerships with third
parties.

Taxation of the Company as a REIT

         An entity that qualifies for taxation as a REIT and distributes to its
shareholders at least 95% of its REIT taxable income is generally not subject to
Federal corporate income taxes on net income that it currently distributes to
shareholders. This treatment substantially eliminates the "double taxation" (at
the corporate and shareholder levels) that generally results from investment in
a corporation. However, the Company will be subject to Federal income tax as
follows:

         The Company will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains.

                  (i) Under certain circumstances, the Company may be subject to
the "alternative minimum tax" on its items of tax preference, if any.

                  (ii) If the Company has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property other than foreclosure property held primarily for sale to customers in
the ordinary course of business) such income will be subject to a 100% tax. See
"- Sale of Partnership Property."

                  (iii) If the Company should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), and has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amount by which the Company fails the 75% or
95% test, multiplied by a fraction intended to reflect the Company's
profitability.

                  (iv) If the Company should fail to distribute during each
calendar year at least the sum of (1) 85% of its REIT ordinary income for such
year, (2) 95% of its REIT capital gain net income for such year, and (3) any
undistributed taxable income from prior years, it would be subject to a 4%
excise tax on the excess of such required distribution over the amounts actually
distributed.

                  (v) If the Company has (1) net income from the sale or other
disposition of "foreclosure property" (which is, in general, property acquired
by the Company by foreclosure or otherwise or default on a loan secured by the
property) which is held primarily for sale to customers in the ordinary course
of business or (2) other


                                      -23-


<PAGE>
nonqualifying income from foreclosure property, it will be subject to tax on
such income at the highest corporate rate.

                  (vi) If the Company acquires any asset from a C corporation
(i.e., generally a corporation subject to tax at the corporate level) in a
transaction in which the basis of the asset in the Company's hands is determined
by reference to the basis of the asset (or any other property) in the hands of
the C corporation, and the Company recognizes gain on the disposition of such
asset during the 10-year period (the "Restriction Period") beginning on the date
on which such asset was acquired by the Company then, pursuant to guidelines
issued by the IRS, the excess of the fair market value of such property at the
beginning of the applicable Restriction Period over the Company's adjusted basis
in such asset as of the beginning of such Restriction Period will be subject to
a tax at the highest regular corporate rate. The results described above with
respect to the recognition of built-in gain assume that the Company will make an
election pursuant to IRS Notice 88-19 or applicable future administrative rules
or Treasury Regulations to avail itself of the benefits of the Restriction
Period.

Qualification of the Company as a REIT

         The Code defines a REIT as a corporation, trust or association:

                  (1) which is managed by one or more trustees or directors;

                  (2) the beneficial ownership of which is evidenced by
transferable shares or by transferable certificates of beneficial interest;

                  (3) which would be taxable as a domestic corporation but for
Sections 856 through 859 of the Code;

                  (4) which is neither a financial institution nor an insurance
company subject to certain provisions of the Code;

                  (5) which has the calendar year as its taxable year;

                  (6) the beneficial ownership of which is held by 100 or more
persons;

                  (7) during the last half of each taxable year not more than
50% in value of the outstanding stock of which is owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain exempt
organizations); and

                  (8) which meets certain income, asset and distribution tests,
described below.

                  Conditions (1) through (5), inclusive, must be satisfied
during the entire taxable year, and condition (6) must be satisfied during at
least 335 days of a taxable year of 12 months, or during a proportionate part of
a taxable year of less than 12 months. The Company has previously issued Common
Shares in sufficient proportions to allow it to satisfy requirements (6) and (7)
(the "100 Shareholder" and "five-or-fewer" requirements), respectively. In
addition, the Company's Declaration of Trust provides restrictions regarding the
transfer of its Shares that are intended to assist the Company in continuing to
satisfy the share ownership requirements described in (6) and (7) above. See
"Description of Shares of Beneficial Interest - Restrictions on Transfer."
However, these restrictions may not ensure that the Company will, in all cases,
be able to satisfy the share ownership requirements described in (6) and (7)
above. If the Company fails to satisfy such share ownership requirements, the
Company's status as a REIT will terminate. Pursuant to the 1997 Act, for the
Company's taxable years commencing on and after January 1, 1998, if the Company
complies with regulatory rules pursuant to which it is required to send annual
letters to certain of its shareholders requesting information regarding the
actual ownership of its Shares, but does not know, or exercising reasonable
diligence would not have known, whether it failed to meet the requirement that
it not be closely held, the Company will be treated as having met the "five or
fewer" requirement. If the Company were to fail to comply with these regulatory
rules for any year, it would be subject to a $25,000 penalty. If the Company's
failure to comply was due to intentional disregard of the requirements, the
penalty would be increased to $50,000. However, if the Company's failure to
comply was due to reasonable cause and not willful neglect, no penalty would be
imposed. See "- Failure to Qualify."



                                      -24-


<PAGE>

         A REIT is permitted to have a wholly-owned subsidiary (also referred to
as a "qualified REIT subsidiary"). A qualified REIT subsidiary is not treated as
a separate entity for Federal income tax purposes. Rather, all of the assets and
items of income, deductions and credit of a qualified REIT subsidiary are
treated as if they were those of the REIT. The Company has formed several
qualified REIT subsidiaries and may in the future form one or more qualified
REIT subsidiaries. For the Company's 1997 taxable year, all of the stock of such
subsidiaries must be owned by the Company from the commencement of each such
subsidiary's existence. For taxable years of the Company beginning on and after
January 1, 1998, the Company must own all of the stock of each such subsidiary,
although it will not be required to own such stock of such subsidiary from the
commencement of such subsidiary's existence.

         A REIT is deemed to own its proportionate share of the assets of a
partnership in which it is a partner and is deemed to receive its proportionate
share of the income of the partnership. Thus, the Company's proportionate share
of the assets and items of income of the Operating Partnership and each of the
Title Holding Partnerships will be treated as assets and items of income of the
Company for purposes of applying the requirements described herein, provided
that the Operating Partnership and its subsidiary partnerships are treated as
partnerships for Federal income tax purposes. In addition, the character of the
assets and gross income of such partnerships shall retain the same character in
the hands of the REIT for purposes of the requirements applicable to REITs under
the Code including satisfying the income tests and the asset tests. See "Income
Taxation of the Operating Partnership, the Title Holding Partnerships and Their
Partners."

Income Tests

         To maintain qualification as a REIT, there are three gross income
requirements that must be satisfied annually. First, at least 75% of the
Company's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property" and interest on obligations secured by a mortgage on real
property) or from "qualified temporary investment income" (described below).
Second, at least 95% of the Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from investments
qualifying under the 75% test above, and from dividends, interest, and gain from
the sale or disposition of stock or securities or from any combination of the
foregoing. Third, for taxable years beginning on or before August 5, 1997,
short-term gain from the sale or other disposition of stock or securities, gain
from prohibited transactions, and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary conversions and
sales of foreclosure property) must represent less than 30% of the Company's
gross income (including gross income from prohibited transactions) for each
taxable year. In applying these tests, the Company will be treated as realizing
its share of any income and bearing its share of any loss of the Operating
Partnership and the character of such income or loss, as well as other
partnership items, will be determined at the partnership level.

         Rents received by the Company will qualify as "rents from real
property" for purposes of satisfying the 75% and 95% gross income tests only if
several conditions are met. First the amount of rent must not be based in whole
or in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, the Code provides that rents received from a
tenant will not qualify as "rents from real property" if the REIT, or an owner
of 10% or more of the REIT, directly or constructively owns 10% or more of such
tenant (a "Related Party Tenant"). For the Company's taxable year which begins
on January 1, 1998 and for all taxable years thereafter, only partners who own
25% or more of the capital or profits interest in a partnership are included in
the determination of whether a tenant is a "Related Party Tenant." Third, if
rent attributable to personal property, leased in connection with a lease of
real property, is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not qualify
as "rents from real property." Finally, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an "independent contractor" who is adequately compensated and from whom
the REIT does not derive any income; provided, however, that the Company may
directly perform certain customary services (e.g., furnishing water, heat, light
and air conditioning, and cleaning windows, public entrances and lobbies) other
than services which are considered rendered to the occupant of the property
(e.g., renting parking spaces on a reserved basis to tenants).

         For taxable years of the Company beginning after August 5, 1997, if the
Company provides services to a tenant that are other than those usually or
customarily provided in connection with the rental of space for occupancy only,
amounts received or accrued by the Company for any such services will not be
treated as "rents from real


                                      -25-


<PAGE>
property" for purposes of the REIT gross income tests but will not cause other
amounts received with respect to the property to fail to be treated as "rents
from real property" if the amounts received in respect of such services,
together with amounts received for certain management services, do not exceed 1%
of all amounts received or accrued by the Company during the taxable year with
respect to such property. If the 1% threshold is exceeded, then all amounts
received or accrued by the Company with respect to the property will not qualify
as "rents from real property," even if the impermissible services are provided
to some, but not all, of the tenants of the property.

         The Company has represented that the Company's real estate investments,
which include its allocable share of income from the Operating Partnership, will
give rise to income that qualifies as "rents from real property" for purposes of
the 75 percent and 95 percent gross income tests, other than rents received from
a Related Party Tenant. In addition, the Company has represented that the rents
received from Related Party Tenants, in addition to all other income which is
not qualifying income for the 75 percent and 95 percent gross income tests, does
not exceed five percent of the Company's gross income, and therefore, the
Company's status as a REIT should not be jeopardized.

         The Company has represented that it does not and will not (i) charge
rent for any property that is based in whole or in part on the income or profits
of any person (other than being based on a percentage of receipts or sales);
(ii) receive rents in excess of a de minimis amount from Related Party Tenants;
(iii) derive rents attributable to personal property which constitute greater
than 15% of the total rents received under the lease; or (iv) perform services
considered to be rendered to the occupant of property, other than through an
independent contractor from whom the Company derives no income.

         The Operating Partnership owns 5% of the voting common stock, and all
of the preferred stock of the Management Company, a corporation that is taxable
as a regular corporation. The Management Company performs management,
development and leasing services for the Operating Partnership and other real
properties owned in whole or in part by third parties. The income earned by and
taxed to the Management Company would be nonqualifying income if earned directly
by the Company. As a result of the corporate structure, the income will be
earned by and taxed to the Management Company and will be received by the
Company only indirectly as dividends. Although interest and dividends are
generally qualifying income under the 95% test, the IRS has announced a
no-ruling policy on this issue when the dividends and interest are earned in
this manner.

         If the Company fails to satisfy one or both of the 75% of 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will be generally available if (i) the Company's failure
to meet such tests was due to reasonable cause and not due to willful neglect,
(ii) the Company attaches a schedule of the sources of its income to its return,
and (iii) any incorrect information on the schedule was not due to fraud with
intent to evade tax. It is not possible, however, to state whether in all
circumstances the Company would be entitled to the benefit of these relief
provisions. As discussed above in "Taxation of the Company as a REIT," even if
these relief provisions apply, a tax would be imposed with respect to the excess
net income. No similar mitigation provision applies to provide relief if the 30%
income test is failed, and if such test is not met for the taxable years of the
Company beginning before January 1, 1998, the Company would cease to qualify as
a REIT. See "-- Failure to Qualify."

Asset Tests

         In order for the Company to maintain its qualification as a REIT, at
the close of each quarter of its taxable year it must also satisfy three tests
relating to the nature of its assets. First, at least 75% of the value of the
Company's total assets must be represented by real estate assets (which for this
purpose include (i) its allocable share of real estate assets held by
partnerships in which the Company or a "qualified REIT subsidiary" of the
Company owns an interest and (ii) stock or debt instruments purchased with the
proceeds of a stock offering or a long-term (at least five years) debt offering
of the Company and held for not more than one year from the date the Company
receives such proceeds), cash, cash items, and government securities. Second,
not more than 25% of the Company's total assets may be represented by securities
other than those described above in the 75% asset class. Third, of the
investments included in the 25% asset class, the value of any one issuer's
securities owned by the Company may not exceed 5% of the value of the Company's
total assets, and the Company may not own more than 10% of any one issuer's
outstanding voting securities (excluding securities of a qualified REIT
subsidiary, of which the REIT is required to own all of such stock, or another
REIT).

         The Company anticipates that it will be able to comply with these asset
tests. The Company is deemed to hold directly its proportionate share of all
real estate and other assets of the Operating Partnership and should be
considered to hold its proportionate share of all assets deemed owned by the
Operating Partnership through its


                                      -26-


<PAGE>
ownership of partnership interests in other partnerships. As a result, the
Company plans to hold more than 75% of its assets as real estate assets. In
addition, the Company does not plan to hold any securities representing more
than 10% of any one issuer's voting securities, other than any qualified REIT
subsidiary of the Company or another REIT, nor securities of any one issuer
exceeding 5% of the value of the Company's gross assets (determined in
accordance with generally accepted accounting principles). As previously
discussed, the Company is deemed to own its proportionate share of the assets of
a partnership in which it is a partner so that the partnership interest, itself,
is not a security for purposes of this asset test.

         After initially meeting the asset tests at the close of any quarter,
the Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. The Company intends to maintain adequate records of the value of
its assets to ensure compliance with the asset tests, and to take such other
action within 30 days after the close of any quarter as may be required to cure
any noncompliance. However, there can be no assurance that such other action
will always be successful. If the Company fails to cure any noncompliance with
the asset test within such time period, its status as a REIT would be lost.

         As noted above, one of the requirements for qualification as a REIT is
that a REIT not own more than 10 percent of the voting stock of a corporation
other than the stock of a qualified REIT subsidiary (of which the REIT is
required to own all of such stock) and stock in another REIT. The Operating
Partnership will own only approximately 5 percent of the voting stock and all of
the non-voting preferred stock of the Management Company and therefore will
comply with this rule. However, the IRS could contend that the Company's
ownership, through its interest in the Operating Partnership, of all of the
non-voting preferred stock in the Management Company should be viewed as voting
stock because of its substantial economic position in the Management Company. If
the IRS were to be successful in such a contention, the Company's status as a
REIT would be lost and the Company would become subject to federal corporate
income tax on its net income, which would have a material adverse affect on the
Company's cash available for distribution. The Company does not have the ability
to designate a seat on the Board of Directors of the Management Company. The
Company does not believe that it will be viewed as owning in excess of 10
percent of the voting stock of the Management Company.

Administration's Proposed Changes to REIT Asset Tests

         On February 2, 1998, the Clinton Administration released a summary of
its proposed budget plan, which contained provisions that, if enacted, would
affect REITs, including the Company (the "REIT Proposals"). One such provision
would prohibit REITs from owning more than ten percent of the vote or value of
all classes of stock of any corporation (other than a "qualified REIT
subsidiary" or another REIT). This provision would be effective with respect to
stock acquired on or after the date of the first committee action. However,
under the proposal, existing ownership arrangements such as the Company's
ownership of shares of the Management Company would be grandfathered, provided
that the subsidiary does not enter into a new trade or business or acquire
substantial new assets after the effective date of the change in the law.
Because the Company owns more than 10% of the value of the Management Company,
the REIT Proposals could adversely affect the manner in which the Company
structures its ownership of the Management Company and the magnitude of the
property management activities conducted by the Company in the future. It is
important to note that the REIT Proposals are only precursors to the first stage
in the lengthy legislative process that may or may not culminate in the passage
of legislation affecting REITs. Therefore, the Company is unable to determine
whether the REIT Proposals will be enacted into legislation and, if enacted, the
impact any final legislation may have on the Company.

Annual Distribution Requirements

         The Company, in order to maintain its qualification as a REIT, is
required to distribute dividends (other than capital gain dividends) to its
shareholders in an amount at least equal to (A) the sum of (i) 95% of the
Company's "REIT taxable income" (computed without regard to the dividends paid
deduction and the REIT's net capital gain) and (ii) 95% of the net income (after
tax), if any, from foreclosure property, minus (B) the excess of the sum of
certain items of non-cash income (income attributable to leveled stepped rents,
original issue discount on purchase money debt, or a like-kind exchange that is
later determined to be taxable (plus, for the Company's 1998 taxable year and
thereafter, income from cancellation of indebtedness, original issue discount,
and coupon interest) over 5% of the amount determined under clause (i) above).
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before the Company timely files its tax
return for such


                                      -27-


<PAGE>
year and if paid on or before the first regular dividend payment after such
declaration. To the extent that the Company does not distribute all of its net
capital gain or distributes at least 95%, but less than 100%, of its "REIT
taxable income," as adjusted, it will be subject to tax on the undistributed
amount at regular capital gains and ordinary corporate tax rates. Furthermore,
if the Company should fail to distribute during each calendar year at least the
sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
net capital gain income for such year, and (iii) any undistributed taxable
income from prior periods, the Company would be subject to a 4% excise tax on
the excess of such required distribution over the amounts actually distributed.

         For the Company's taxable year beginning on January 1, 1998 and for all
taxable years thereafter, undistributed capital gains may be so designated by
the Company and are includable in the income of the shareholders. Such
shareholders are treated as having paid the capital gains tax imposed on the
Company on the designated amounts included in their income as long-term capital
gains. Such shareholders would receive an increase in their basis for income
recognized and a decrease in their basis for taxes paid by the Company. See "--
Taxation of Taxable Domestic Shareholders."

         The Company intends to make timely distributions sufficient to satisfy
the annual distribution requirements. In this regard, the limited partnership
agreement of the Operating Partnership authorizes the Company, as general
partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is possible that the
Company, from time to time, may not have sufficient cash or other liquid assets
to meet the 95% distribution requirement due primarily to the expenditure of
cash for nondeductible items such as principal amortization or capital
expenditures. In order to meet the 95% distribution requirement, the Company may
borrow or may cause the Operating Partnership to arrange for short-term or other
borrowing to permit the payment of required distributions or attempt to declare
a consent dividend, which is a hypothetical distribution to shareholders out of
the earnings and profits of the Company. The effect of such a consent dividend
(which, in conjunction with distributions actually paid, must not be
preferential to those shareholders who agree to such treatment) would be that
such shareholders would be treated for federal income tax purposes as if they
had received such amount in cash, and they then had immediately contributed such
amount back to the Company as additional paid-in capital. This would result in
taxable income to those shareholders without the receipt of any actual cash
distribution but would also increase their tax basis in their Shares by the
amount of the taxable income recognized.

         Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirement for a certain year by paying
"deficiency dividends" to shareholders in a later year that may be included in
the Company's deduction for distributions paid for the earlier year. Thus, the
Company may be able to avoid being taxed on amounts distributed as deficiency
dividends; however, the Company will be required to pay to the IRS interest
based upon the amount of any deduction taken for deficiency dividends.

Failure to Qualify

         If the Company fails to qualify for taxation as a REIT in any taxable
year and the relief provisions do not apply, the Company will be subject to tax
(including any applicable corporate alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to shareholders in any year in
which the Company fails to qualify will not be deductible by the Company, nor
will they be required to be made. In such event, to the extent of current and
accumulated earnings and profits, all distributions to shareholders will be
taxable to them as ordinary income, and, subject to certain limitations of the
Code, corporate distributees may be eligible for the dividends received
deduction. Unless entitled to relief under specific statutory provisions, the
Company also will be disqualified from taxation as a REIT for the four taxable
years following the year during which qualification was lost. It is not possible
to state whether in all circumstances the Company would be entitled to such
statutory relief.

Income Taxation of the Operating Partnership, the Title Holding Partnerships and
Their Partners

         The following discussion summarizes certain Federal income tax
considerations applicable to the Company's investment in the Operating
Partnership and its subsidiary partnerships (referred to herein as the "Title
Holding Partnerships") .



                                      -28-


<PAGE>
Classification of the Operating Partnership and Title Holding Partnerships as
Partnerships

         As of the date of this prospectus, the Company owns all of the
Properties or the economic interests therein through the Operating Partnership.
The Company will be entitled to include in its income its distributive share of
the income and to deduct its distributive share of the losses of the Operating
Partnership (including the Operating Partnership's share of the income or losses
of the Title Holding Partnerships) only if the Operating Partnership and the
Title Holding Partnerships (collectively, the "Partnerships") are classified for
Federal income tax purposes as partnerships rather than as associations taxable
as corporations. For taxable periods prior to January 1, 1997, an organization
formed as a partnership was treated as a partnership for Federal income tax
purposes rather than as a corporation only if it had no more than two of the
four corporate characteristics that the Treasury Regulations used to distinguish
a partnership from a corporation for tax purposes. These four characteristics
were continuity of life, centralization of management, limited liability, and
free transferability of interests.

         Neither the Operating Partnership nor any of the Title Holding
Partnerships requested a ruling from the IRS that they would be treated as
partnerships for Federal income tax purposes. The Company received an opinion of
the Tax Advisor, which is not binding on the IRS, that the Operating Partnership
and the Title Holding Partnerships will each be treated as partnerships for
Federal income tax purposes and not as an association or publicly traded
partnership taxable as a corporation. The opinion of the Tax Advisor is based on
the provisions of the limited partnership agreement of the Operating Partnership
and the limited partnership agreements of the Title Holding Partnerships,
respectively, and certain factual assumptions and representations described in
the opinion.

         Effective January 1, 1997, newly promulgated Treasury Regulations
eliminated the four-factor test described above and, instead, permit
partnerships and other non-corporate entities to be taxed as partnerships for
federal income tax purposes without regard to the number of corporate
characteristics possessed by such entity. Under those Regulations, both the
Operating Partnership and each of the Title Holding Partnerships will be
classified as partnerships for federal income tax purposes unless an affirmative
election is made by the entity to be taxed as a corporation. The Company has
represented that no such election has been made, or is anticipated to be made,
on behalf of the Operating Partnership or any of the Title Holding Partnerships.
Under a special transitional rule in the Treasury Regulations, the IRS will not
challenge the classification of an existing entity such as the Operating
Partnership or a Title Holding Partnership for periods prior to January 1, 1997
if: (i) the entity has a "reasonable basis" for its classification; (ii) the
entity and each of its members recognized the federal income tax consequences of
any change in classification of the entity made within the 60 months prior to
January 1, 1997; and (iii) neither the entity nor any of its members had been
notified in writing on or before May 8, 1996 that its classification was under
examination by the IRS. Neither the Operating Partnership nor any of the Title
Holding Partnerships changed their classification within the 60 month period
preceding May 8, 1996, nor was any one of them notified that their
classification as a partnership for federal income tax purposes was under
examination by the IRS.

         If for any reason the Operating Partnership or a Title Holding
Partnership was classified as an association taxable as a corporation rather
than as a partnership for Federal income tax purposes, the Company would not be
able to satisfy the income and asset requirements for REIT status. See "--
Income Tests" and "-- Asset Tests." In addition, any change in any such
Partnership's status for tax purposes might be treated as a taxable event, in
which case the Company might incur a tax liability without any related cash
distribution. See "-- Annual Distribution Requirements." Further, items of
income and deduction of any such Partnership would not pass through to its
partner (e.g., the Company), and its partners would be treated as shareholders
for tax purposes. Any such Partnership would be required to pay income tax at
corporate tax rates on its net income and distributions to its partners would
constitute dividends that would not be deductible in computing such
Partnership's taxable income.

Partnership Allocations

         Although a partnership agreement will generally determine the
allocation of income and losses among partners, such allocations will be
disregarded for tax purposes if they do not comply with the provisions of
Section 704(b) and the Treasury Regulations promulgated thereunder, which
require that partnership allocations respect the economic arrangement of the
partners.

         If an allocation is not recognized for Federal income tax purposes, the
item subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership, which will be determined by taking into
account all of the facts and circumstances relating to the economic arrangement
of the partners with respect to such item. The Operating Partnership's
allocations of taxable income and loss are intended to comply with the
requirements of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder.


                                      -29-


<PAGE>
Tax Allocations With Respect to Contributed Properties

         The Company has represented that the fair market values of 98 of the
Properties contributed directly or indirectly to the Operating Partnership in
various transactions were different than the tax basis of such Properties.
Pursuant to Section 704(c) of the Code, items of income, gain, loss, and
deduction attributable to appreciated or depreciated property that is
contributed to a partnership in exchange for an interest in the partnership must
be allocated for Federal income tax purposes in a manner such that the
contributor is charged with or benefits from the unrealized gain or unrealized
loss associated with the property at the time of the contribution. The amount of
such unrealized gain or unrealized loss is generally equal to the difference
between the fair market value of the contributed property at the time of
contribution and the adjusted tax basis of such property at the time of
contribution (the "Pre-Contribution Gain or Loss"). The partnership agreement of
the Operating Partnership requires allocations of income, gain, loss and
deduction attributable to such contributed property to be made in a manner that
is consistent with Section 704(c) of the Code. Thus, if the Operating
Partnership sells contributed property at a gain or loss, such gain or loss will
be allocated to the contributing partners, and away from the Company, generally
to the extent of the Pre-Contribution Gain or Loss.

         The Treasury Department has issued final regulations under Section
704(c) of the Code (the "Regulations") which give partnerships great flexibility
in ensuring that a partner contributing property to a partnership receives the
tax benefits and burdens of any Pre-Contribution Gain or Loss attributable to
the contributed property. The Regulations permit partnerships to use any
"reasonable method" of accounting for Pre-Contribution Gain or Loss. The
Regulations specifically describe three reasonable methods, including (i) the
"traditional method" under current law, (ii) the traditional method with the use
of "curative allocations" which would permit distortions caused by
Pre-Contribution Gain or Loss to be rectified on an annual basis, and (iii) the
"remedial allocation method" which is similar to the traditional method with
"curative allocations." The Partnership Agreement permits the Company, as a
general partner, to select one of these methods to account for Pre-Contribution
Gain or Loss.

Depreciation

         The Operating Partnership's assets other than cash consist largely of
appreciated property contributed by its partners. Assets contributed to a
partnership in a tax-free transaction generally retain the same depreciation
method and recovery period as they had in the hands of the partner who
contributed them to the partnership. Accordingly, the Operating Partnership's
depreciation deductions for its real property are based largely on the historic
tax depreciation schedules for the Properties prior to their contribution to the
Operating Partnership. The Properties are being depreciated over a range of 15
to 40 years using various methods of depreciation which were determined at the
time that each item of depreciable property was placed in service. Any real
property purchased by the Partnerships will be depreciated over 40 years. In
certain instances where a partnership interest rather than real property is
contributed to the Partnership, the real property may not carry over its
recovery period but rather may, similarly, be subject to the lengthier recovery
period.

         Section 704(c) of the Code requires that depreciation as well as gain
and loss be allocated in a manner so as to take into account the variation
between the fair market value and tax basis of the property contributed. Thus,
because most of the property contributed to the Operating Partnerships is
appreciated, the Company will generally receive allocations of tax depreciation
in excess of its percentage interest in the Operating Partnership. Depreciation
with respect to any property purchased by the Operating Partnership subsequent
to the admission of its partners, however, will be allocated among the partners
in accordance with their respective percentage interests in the Partnerships.

         As described above (see "--Tax Allocations with Respect to Contributed
Properties"), the Treasury Department's Regulations give partnerships
flexibility in ensuring that a partner contributing property to a partnership
receives the tax benefits and burdens of any Pre-Contribution Gain or Loss
attributable to the contributed property.

         As described previously, the Company, as a general partner, may select
any permissible method to account for Pre-Contribution Gain or Loss. The use of
certain of these methods may result in the Company being allocated lower
depreciation deductions than if a different method were used. The resulting
higher taxable income and earnings and profits of the Company, as determined for
federal income tax purposes, should decrease the portion of distributions by the
Company which may be treated as a return of capital. See "- Annual Distribution
Requirements."



                                      -30-


<PAGE>
Basis in Operating Partnership Interest

         The Company's adjusted tax basis in each of the partnerships in which
it has an interest generally (i) will be equal to the amount of cash and the
basis of any other property contributed to such partnership by the Company, (ii)
will be increased by (a) its allocable share of such partnership's income and
(b) its allocable share of any indebtedness of such partnership, and (iii) will
be reduced, but not below zero, by the Company's allocable share of (a) such
partnership's loss and (b) the amount of cash and the tax basis of any property
distributed to the Company and by constructive distributions resulting from a
reduction in the Company's share of indebtedness of such partnership.

         If the Company's allocable share of the loss (or portion thereof) of
any partnership in which it has an interest would reduce the adjusted tax basis
of the Company's partnership interest in such partnership below zero, the
recognition of such loss will be deferred until such time as the recognition of
such loss (or portion thereof) would not reduce the Company's adjusted tax basis
below zero. To the extent that distributions from a partnership to the Company,
or any decrease in the Company's share of the nonrecourse indebtedness of a
partnership (each such decrease being considered a constructive cash
distribution to the partners), would reduce the Company's adjusted tax basis
below zero, such distributions (including such constructive distributions) would
constitute taxable income to the Company. Such distributions and constructive
distributions normally would be characterized as long-term capital gain if the
Company's interest in such partnership has been held for longer than the
long-term capital gain holding period (currently 12 months).

Sale of Partnership Property

         Generally, any gain realized by a partnership on the sale of property
held by the partnership for more than 12 months will be long-term capital gain,
except for any portion of such gain that is treated as depreciation or cost
recovery recapture. However, under the requirements applicable to REITS under
the Code, the Company's share as a partner of any gain realized by the Operating
Partnership on the sale of any property held as inventory or other property held
primarily for sale to customers in the ordinary course of a trade or business
will be treated as income from a prohibited transaction that is subject to a
100% penalty tax. See "- Taxation of the Company as a REIT." Such prohibited
transaction income will also have an adverse effect upon the Company's ability
to satisfy the income tests for REIT status. See "-- Income Tests." Under
existing law, whether property is held as inventory or primarily for sale to
customers in the ordinary course of a trade or business is a question of fact
that depends on all the facts and circumstances with respect to the particular
transaction. A safe harbor to avoid classification as a prohibited transaction
exists as to real estate assets held for the production of rental income by a
REIT for at least four years where in any taxable year the REIT has made no more
than seven sales of property or, in the alternative, the aggregate of the
adjusted bases of all properties sold does not exceed 10% of the adjusted bases
of all of the REIT's properties during the year and the expenditures includable
in a property's net sales price. The Company, as general partner of the
Operating Partnership, has represented that the Operating Partnership and the
Title Holding Partnerships intend to hold the Properties for investment with a
view to long-term appreciation, to engage in the business of acquiring,
developing, owning, and operating and leasing properties and to make such
occasional sales of the properties as are consistent with the Company's and the
Operating Partnership's investment objectives. No assurance can be given,
however, that every property sale by the Partnerships will constitute a sale of
property held for investment.

Taxation of Taxable Domestic Shareholders

         As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. shareholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be dividends taxable
to such U.S. shareholders as ordinary income and will not be eligible for the
dividends received deduction for corporations. Distributions that are designated
as long-term capital gain dividends will be taxed as long-term capital gains (to
the extent they do not exceed the Company's actual net capital gain for the
taxable year) without regard to the period for which the shareholder has held
its shares of beneficial interest. However, corporate shareholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. Distributions in excess of current and accumulated earnings and profits
will not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's Shares, but rather will reduce the adjusted
basis of such Shares. To the extent that distributions in excess of current and
accumulated earnings and profits exceed the adjusted basis of a shareholder's
Shares, such distributions will be included in income as long-term capital gain
(or short-term capital gain if the Shares have been held for 12 months or less)
assuming the Shares are a capital asset in the hands of the shareholder. In
addition, any distribution declared by the Company in October, November or
December of any year


                                      -31-


<PAGE>
payable to a shareholder of record on a specified date in any such month shall
be treated as both paid by the Company and received by the shareholder on
December 31 of such year, provided that the distribution is actually paid by the
Company during January of the following calendar year. Shareholders may not
include in their individual income tax returns any losses of the Company.

         For taxable years of the Company beginning after August 5, 1997, U.S.
shareholders holding Shares at the close of the Company's taxable year will be
required to include, in computing their long-term capital gains for the taxable
year in which the last day of the Company's taxable year falls, such amount as
the Company may designate in a written notice mailed to its shareholders. The
Company may not designate amounts in excess of the Company's undistributed net
capital gain for the taxable year. Each U.S. shareholder required to include
such a designated amount in determining such shareholder's long-term capital
gains will be deemed to have paid, in the taxable year of the inclusion, the tax
paid by the Company in respect of such undistributed net capital gains. U.S.
shareholders subject to these rules will be allowed a credit or a refund, as the
case may be, for the tax deemed to have been paid by such shareholders. U.S.
shareholders will increase their basis in their Shares by the difference between
the amount of such includable gains and the tax deemed paid by the shareholder
in respect of such gains.

         In general, any loss upon a sale or exchange of Shares by a shareholder
who has held such Shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss to the extent such
shareholder has received distributions from the Company required to be treated
as long-term capital gain.

         Distributions from the Company and gain from the disposition of Shares
will not be treated as passive activity income and, therefore, shareholders may
not be able to apply any "passive losses" against such income. Dividends from
the Company (to the extent they do not constitute a return of capital or capital
gain dividends) and, on an elective basis, capital gain dividends and gain from
the disposition of Shares will generally be treated as investment income for
purposes of the investment income limitation.

Backup Withholding

         The Company will report to its U.S. shareholders and the IRS the amount
of distributions paid during each calendar year, and the amount of tax withheld,
if any. Under the backup withholding rules, a shareholder may be subject to
backup withholding at the rate of 31% with respect to distributions paid unless
such shareholder (a) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A shareholder that does not provide the Company with his
correct taxpayer identification number may also be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against the
shareholder's income tax liability. In addition, the Company may be required to
withhold a portion of capital gain distributions to any shareholders who fail to
certify their non-foreign status to the Company. See "- Taxation of Foreign
Shareholders."

Taxation of Tax-Exempt Shareholders

         Distributions by the Company to a shareholder that is a tax-exempt
entity should not constitute "unrelated business taxable income" ("UBTI"), as
defined in Section 512(a) of the Code provided that the tax-exempt entity has
not financed the acquisition of its shares with "acquisition indebtedness"
within the meaning of the Code and the shares are not otherwise used in an
unrelated trade or business of the tax-exempt entity.

         In the case of a "qualified trust" (generally, a pension or
profit-sharing trust) holding shares in a REIT, the beneficiaries of such a
trust are treated as holding shares in the REIT in proportion to their actuarial
interests in the qualified trust, instead of treating the qualified trust as a
single individual (the "look-through exception"). A qualified trust that holds
more than 10 percent of the shares of a REIT is required to treat a percentage
of REIT dividends as UBTI if the REIT incurs debt to acquire or improve real
property. This rule applies, however, only if (i) the qualification of the REIT
depends upon the application of the "look through" exception (described above)
to the restriction on REIT shareholdings by five or fewer individuals, including
qualified trusts (see "Description of Shares of Beneficial Interest -
Restrictions on Transfer") and (ii) the REIT is "predominantly held" by
qualified trusts, i.e., if either (x) a single qualified trust holds more than
25 percent by value of the interests in the REIT or (y) one or more qualified
trusts, each owning more than 10 percent by value, holds in the aggregate more
than 50 percent of the interests in the REIT. The percentage of any dividend
paid (or treated as paid) to such a qualified trust that is treated as UBTI is
equal to the amount of modified gross income (gross income less directly
connected expenses) from the unrelated trade or business of the REIT (treating
the REIT as if it were a qualified trust), divided


                                      -32-


<PAGE>
by the total modified gross income of the REIT. A de minimis exception applies
where the percentage is less than 5 percent.

Taxation of Foreign Shareholders

         The rules governing United States Federal income taxation of
nonresident alien individuals, foreign corporations, foreign partnerships and
other foreign shareholders (collectively, "Non-U.S. Shareholders") are complex
and no attempt will be made herein to provide more than a summary of such rules.
Prospective Non-U.S. Shareholders should consult with their own tax advisors to
determine the impact of Federal, state and local income tax laws with regard to
an investment in Shares, including any reporting requirements.

         Distributions that are not attributable to gain from sales or exchanges
by the Company of United States real property interests and not designated by
the Company as capital gains dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions will ordinarily be subject to a
withholding tax equal to 30% of the gross amount of the distribution unless an
applicable tax treaty reduces or eliminates that tax. However, if income from
the investment in the Shares is treated as effectively connected with the
Non-U.S. Shareholder's conduct of a United States trade or business, the
Non-U.S. Shareholder generally will be subject to a tax at graduated rates, in
the same manner as U.S. shareholders are taxed with respect to such
distributions (and may also be subject to the 30% branch profits tax in the case
of a shareholder that is a foreign corporation). The Company expects to withhold
United States income tax at the rate of 30% on the gross amount of any such
distributions made to a Non-U.S. Shareholder unless (i) a lower treaty rate
applies or (ii) the Non-U.S. Shareholder files an IRS Form 4224 with the Company
claiming that the distribution is effectively connected income. Distributions in
excess of current and accumulated earnings and profits of the Company will not
be taxable to a shareholder to the extent that such distributions do not exceed
the adjusted basis of the shareholder's Shares, but rather will reduce the
adjusted basis of such Shares. To the extent that distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
Non-Shareholder's Shares, such distributions will give rise to tax liability if
the Non-U.S. Shareholder would otherwise be subject to tax on any gain from the
sale or disposition of his Shares in the Company, as described below. If it
cannot be determined at the time a distribution is made whether or not such
distribution will be in excess of current and accumulated earnings and profits,
the distributions will be subject to withholding at the same rate as dividends.
However, amounts thus withheld are refundable if it is subsequently determined
that such distribution was, in fact, in excess of current and accumulated
earnings and profits of the Company.

         For any year in which the Company qualifies as a REIT, distributions
that are attributable to gain from sales or exchanges by the Company of United
States real property interests will be taxed to a Non-U.S. Shareholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, distributions attributable to gain from sales of
United States real property interests are taxed to a Non-U.S. Shareholder as if
such gain were effectively connected with a United States business. Non-U.S.
Shareholders would thus be taxed at the normal capital gain rates applicable to
U.S. shareholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a foreign corporate shareholder not entitled to treaty exemption.
The Company is required by applicable Treasury Regulations to withhold 35% of
any distribution that could be designated by the Company as a capital gains
dividend. The amount is creditable against the Non-U.S. Shareholder FIRPTA tax
liability.

         Gain recognized by a Non-U.S. Shareholder upon a sale of Shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the shares of beneficial
interest was held directly or indirectly by foreign persons. It is currently
anticipated that the Company will be a "domestically controlled REIT," and
therefore the sale of Shares will not be subject to taxation under FIRPTA.
However, because the Shares may be traded, no assurance can be given that the
Company will continue to be a "domestically controlled REIT." Gain not subject
to FIRPTA will be taxable to a Non-U.S. Shareholder if (i) investment in the
Shares is effectively connected with the Non-U.S. Shareholder's United States
trade or business, in which case the Non-U.S. Shareholder will be subject to the
same treatment as U.S. shareholders with respect to such gain or (ii) the
Non-U.S. Shareholder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year, in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gains. If the gain on the sale of Shares were to be subject to taxation
under FIRPTA, the Non-U.S. Shareholder would be subject to the same treatment as
U.S. shareholders with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals).


                                      -33-


<PAGE>
Statement of Share Ownership

         The Company is required to demand annual written statements from the
record holders of designated percentages of its Shares disclosing the actual
owners of the Shares. The Company must also maintain, within the Internal
Revenue District in which it is required to file its federal income tax return,
permanent records showing the information it has received as to the actual
ownership of such Shares and a list of those persons failing or refusing to
comply with such demand.

Other Tax Consequences

         The Company, the Operating Partnership, the Title Holding Partnerships
and the Company's shareholders may be subject to state or local taxation in
various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company,
the Operating Partnership, the Title Holding Partnerships and the Company's
shareholders may not conform to the Federal income tax consequences discussed
above. Consequently, prospective shareholders should consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
the Company.

Possible Federal Tax Developments

         The rules dealing with Federal income taxation are constantly under
review by the IRS, the Treasury Department and Congress. New Federal tax
legislation or other provisions may be enacted into law or new interpretations,
rulings, Treasury Regulations or court decisions could be adopted, all of which
could adversely affect the taxation of the Company or of its shareholders. No
prediction can be made as to the likelihood of passage of any new tax
legislation or other provisions or court decisions either directly or indirectly
affecting the Company or its shareholders. Consequently, the tax treatment
described herein may be modified prospectively or retroactively by legislative,
judicial or administrative action.


                                 USE OF PROCEEDS

         The Company will not receive any proceeds from the Series A Preferred
Shares or Common Shares sold by the Selling Shareholders nor will any such
proceeds be available for use by the Company or otherwise for the Company's
benefit.


                              SELLING SHAREHOLDERS

Series A Preferred Shares

                  As of December 1, 1998, all of the outstanding Series A
Preferred Shares were held by Prometheus AAPT Holdings, L.L.C. Since Prometheus
AAPT Holdings, L.L.C. may sell all, some or none of the Series A Preferred
Shares, no estimate can be made of the aggregate number of Series A Preferred
Shares that are to be offered and sold hereunder or that will be owned by
Prometheus AAPT Holdings, L.L.C. at the completion of the offering to which this
prospectus relates.

<TABLE>
<CAPTION>


                                Number of                                       Number of             Percentage of
                           Series A Preferred           Number of          Series A Preferred       Series A Preferred
                           Shares Beneficially     Series A Preferred      Shares Beneficially     Shares Beneficially
                             Owned Prior to          Shares Offered            Owned After             Owned After
         Name                   Offering                 Hereby                 Offering                 Offering
         ----              -------------------     -------------------     -------------------      -------------------
<S>                            <C>                       <C>                        <C>                     <C>
Prometheus AAPT                750,000(1)                750,000                    0                       0%
   Holdings, L.L.C.
</TABLE>
- -----------------

(1)  Assumes none of the Series A Preferred Shares offered hereby have been
     converted into, or redeemed for, Common Shares.



                                      -34-


<PAGE>



Common Shares

         The following table provides the names of, and the number of Common
Shares beneficially owned by, each Selling Shareholder as of December 1, 1998.
Since the Selling Shareholders may sell all, some or none of their Common
Shares, no estimate can be made of the aggregate number of Common Shares that
are to be offered and sold hereunder or that will be owned by each Selling
Shareholder upon completion of the offering to which this prospectus relates.

<TABLE>
<CAPTION>


                                                                                        Number of         Percentage of
                                                Number of                                 Common             Common
                                              Common Shares          Number of            Shares             Shares
                                              Beneficially             Common          Beneficially       Beneficially
                                             Owned Prior to        Shares Offered      Owned After         Owned After
                  Name                          Offering               Hereby          the Offering       the Offering
                  ----                       --------------         -------------      ------------       ------------

<S>                                          <C>                        <C>                 <C>                 <C>
Prometheus AAPT Holdings, L.L.C.             1,415,094(1)             1,415,094              0                   0
Donald E. Axinn                              1,029,651(2)               928,651        101,000                   *
Morris Green                                    50,233(3)                50,233              0                   0
Calvin Axinn                                    40,927(3)                40,927              0                   0
Richard Bernhard                                40,927(3)                40,927              0                   0
Howard Kantor                                   31,505(3)                31,505              0                   0
Gloria Kantor                                   21,647(3)                21,647              0                   0
Arthur and Marion Eberstein, Joint                                                                                 
Tenants                                          7,513(3)                 7,513              0                   0
Lennard Axinn                                    2,156(3)                 2,156              0                   0
Hirschman Family Trust                           1,488(3)                 1,488              0                   0
Helen Geffner                                    1,488(3)                 1,488              0                   0
Leo Guthart                                        876(3)                   876              0                   0
Trust UTW of Theodore Geffner                      485(3)                   485              0                   0
</TABLE>
- --------------------

*    Less than 1%.

(1)  Assumes that all of the Series A Preferred Shares offered by this
     prospectus are converted into, or redeemed for, Common Shares. Excludes (i)
     an aggregate of up to 2,924,528 Common Shares which may be issued to
     certain affiliates of such holder upon the conversion or redemption of
     Series B Preferred Units of the Operating Partnership held by such
     affiliates and (ii) an aggregate of up to 754,716 Common Shares which may
     be issued to these affiliates upon conversion or redemption of additional
     Series B Units which the Operating Partnership is obligated to issue to
     them by January 31, 1999.

(2)  Consists of 1,000 Common Shares, 100,000 Common Shares issuable upon the
     exercise of outstanding options and 928,651 Common Shares issuable upon
     redemption of an equal number of Units, and assumes that all such Units are
     redeemed into Common Shares. Under the limited partnership agreement of the
     Operating Partnership, the holder of a Unit may require the Operating
     Partnership to redeem such Unit for cash. At its option, the Company may
     assume the Operating Partnership's obligation to redeem any such Unit and
     either pay the redemption price in cash or deliver one Common Share.


                                      -35-


<PAGE>
(3)  Consists solely of Common Shares issuable upon redemption of an equal
     number of Units and assumes that all such Units are redeemed into Common
     Shares.

                              PLAN OF DISTRIBUTION

         This prospectus relates to the offer and sale from time to time of up
to (i) 750,000 Series A Preferred Shares, (ii) 1,415,094 Common Shares issuable
upon conversion or redemption of such Series A Preferred Shares and (iii) an
additional 1,127,896 Common Shares issuable upon redemption of Units
(collectively, the "Securities") by the Selling Shareholders or by their
pledgees, donees, transferees or other successors in interest. The Company will
not receive any of the proceeds from the sale of any Securities offered and sold
pursuant to this prospectus. The distribution of the Securities may be effected
from time to time in one or more underwritten transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. Any such underwritten offering may be on a "best efforts" or a "firm
commitment" basis. In connection with any such underwritten offering,
underwriters or agents may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders or from purchasers of
the Securities for whom they may act as agents. Underwriters may sell the
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agents.

         Under agreements that may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of the Securities may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such underwriters, dealers or agents may be required to make
in respect thereof.

         The Selling Shareholders and any underwriters, dealers or agents that
participate in the distribution of the Securities may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the Securities by them and any discounts, commissions or concessions
received by any such underwriters, dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act.

         At a time a particular offer of the Securities is made, a prospectus
supplement, if required, will be distributed that will set forth the name and
names of any underwriters, dealers or agents and any discounts, commissions and
other terms constituting compensation from the Selling Shareholders and any
other required information.

         The sale of the Securities by the Selling Shareholders may also be
effected from time to time by selling the Securities directly to purchasers or
to or through broker-dealers. In connection with any such sale, any such
broker-dealer may act as agent for the Selling Shareholders or may purchase from
the Selling Shareholders all or a portion of the Securities as principal, and
any such sale may be made pursuant to any of the methods described below. Such
sales may be made on any exchange(s) on which the Securities are then traded, in
the over-the-counter market, in negotiated transactions or otherwise at prices
and at terms then prevailing or at prices related to the then-current market
prices or at prices otherwise negotiated.

         The Securities may also be sold in one or more of the following
transactions: (a) block transactions (which may involve crosses) in which a
broker-dealer may sell all or a portion of such Securities as agent but may
position and resell all or a portion of the block as principal to facilitate the
transaction; (b) purchases by any such broker-dealer as principal and resale by
such broker-dealer for its own account; (c) a special offering, an exchange
distribution or a secondary distribution in accordance with applicable stock
exchange rules; (d) ordinary brokerage transactions and transactions in which
any such broker-dealer solicits purchasers; (e) sales "at the market" to or
through a market maker or into an existing trading market, on an exchange or
otherwise, for such shares; and (f) sales in other ways not involving market
makers or established trading markets, including direct sales to purchasers. In
effecting sales, broker-dealers engaged by the Selling Shareholders may arrange
for other broker-dealers to participate. Broker-dealers will receive commissions
or other compensation from the Selling Shareholders in amounts to be negotiated
immediately prior to the sale that will not exceed those customary in the types
of transactions involved. Broker-dealers may also receive compensation from
purchasers of the Securities which is not expected to exceed that customary in
the types of transactions involved. The Securities may also be sold pursuant to
Rule 144 promulgated under the Securities Act.

         In order to comply with the securities laws of certain states, if
applicable, the Securities may be sold only through registered or licensed
brokers or dealers. In addition, in certain states, the Securities may not be
sold unless


                                      -36-


<PAGE>
they have been registered or qualified for sale in such state or an exemption
from registration or qualification requirement is available and is complied
with.

         All expenses incident to the offering and sale of the Securities, other
than commissions, discounts and fees of underwriters, broker-dealers or agents,
will be paid by the Company. The Company has agreed to indemnify the Selling
Shareholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.


                                     EXPERTS

         The audited financial statements and schedules (other than financial
statements identified in the next sentence) incorporated by reference in this
prospectus and elsewhere in the Registration Statement to the extent and for the
periods indicated in their reports have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. The financial
statements with respect to 1000/2000 West Lincoln Drive, 3000 West Lincoln Drive
and 4000/5000 West Lincoln Drive incorporated by reference in this prospectus
from the Current Report on Form 8-K of the Company, dated June 27, 1997, have
been audited by Zelenkofske, Axelrod & Co., Ltd., independent public
accountants, as indicated in their report and are included herein in reliance
upon the authority of said firm as experts in giving said report.

         Future financial statements of the Company and the reports thereon of
the Company's independent public accountants also will be incorporated by
reference in this prospectus in reliance upon the authority of that firm as
experts in giving those reports to the extent said firm has audited those
financial statements and consented to the use of their reports thereon.


                                  LEGAL MATTERS

         The validity of the Securities offered has been passed upon for the
Company by Pepper Hamilton LLP, Philadelphia, Pennsylvania. Pepper Hamilton LLP
has relied on Ballard Spahr Andrews & Ingersoll, LLP, Baltimore, Maryland, as to
certain matters of Maryland law.


                                   TAX MATTERS

         The opinion regarding the statements in this prospectus under the
caption "Federal Income Tax Considerations" has been rendered by Arthur Andersen
LLP, independent public accountants, and has been referred to in reliance upon
the authority of such firm as experts.


                                      -37-


<PAGE>


================================================================================



                                   PROSPECTUS



                                   ----------



                             BRANDYWINE REALTY TRUST




                        750,000 Series A Preferred Shares




                             2,542,990 Common Shares





                                [          ], 1998







================================================================================

         No dealer, salesperson or other individual has been authorized to give
any information or to make any representations not contained in this prospectus
in connection with the offering covered by this prospectus. If given or made,
such information or representations must not be relied upon as having been
authorized by the Company or the Selling Shareholders. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the Common
Shares, in any jurisdiction where, or to any person to whom, it is unlawful to
make any such offer or solicitation. Neither the delivery of this prospectus nor
any offer or sale made hereunder shall, under any circumstances, create an
implication that there has not been any change in the facts set forth in this
prospectus or in the affairs of the Company since the date hereof.

================================================================================



<PAGE>



                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

         The following table sets forth the costs and expenses for the
distribution of the securities being registered. Such costs and expenses do not
include amounts that may be incurred upon the issuance of certain types of
securities registered hereunder.

         SEC Registration Fee..................................     $ 16,011
         Printing and Duplicating Expenses.....................        5,000
         Legal Fees and Expenses (other than Blue Sky fees)....       15,000
         Accounting Fees and Expenses..........................       10,000
         Miscellaneous.........................................       10,000
                                                                    --------
         Total.................................................     $ 56,011
                                                                    ========

Item 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

         The Maryland REIT Law permits a Maryland real estate investment trust
to include in its Declaration of Trust a provision limiting the liability of its
Trustees and officers to the trust and its shareholders for money damages except
for liability resulting from (a) actual receipt of an improper benefit or profit
in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
Declaration of Trust of Brandywine Realty Trust (the "Company") contains such a
provision which eliminates such liability to the maximum extent permitted by the
Maryland REIT Law.

         The Company's Bylaws require it to indemnify, without a preliminary
determination of the ultimate entitlement to indemnification, (a) any present or
former Trustee, officer or shareholder who has been successful, on the merits or
otherwise, in the defense of a proceeding to which he was made a party by reason
of such status, against reasonable expenses incurred by him in connection with
the proceeding; (b) any present or former Trustee or officer against any claim
or liability to which he may become subject by reason of such status unless it
is established that (i) his act or omission was committed in bad faith or was
the result of active and deliberate dishonesty, (ii) he actually received an
improper personal benefit in money, property or services or (iii) in the case of
a criminal proceeding, he had reasonable cause to believe that his act or
omission was unlawful; and (c) each shareholder or former shareholder against
any claim or liability to which he may be subject by reason of such status as a
shareholder or former shareholder. However, under the MGCL, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the Company's Bylaws
require it to pay or reimburse, in advance of final disposition of a proceeding,
reasonable expenses incurred by a present or former Trustee, officer or
shareholder made a party to a proceeding by reason of his status as a Trustee,
officer or shareholder provided that, in the case of a Trustee or officer, the
Company shall have received (i) a written affirmation by the Trustee or officer
of his good faith belief that he has met the applicable standard of conduct
necessary for indemnification by the Company as authorized by the Bylaws and
(ii) a written undertaking by him or on his behalf to repay the amount paid or
reimbursed by the Company if it shall ultimately be determined that the
applicable standard of conduct was not met. The Company's Bylaws also (i) permit
the Company, with the approval of its Trustees, to provide indemnification and
payment or reimbursement of expenses to a present or former Trustee, officer or
shareholder who served a predecessor of the Company in such capacity, and to any
employee or agent of the Company or a predecessor of the Company, (ii) provide
that any indemnification or payment or reimbursement of the expenses permitted
by Bylaws shall be furnished in accordance with the procedures provided for
indemnification and payment or reimbursement of expenses under Section 2-418 of
the Maryland General Corporation Law ("MGCL") for directors of Maryland
corporations and (iii) permit the Company to provide such other and further
indemnification or payment or reimbursement of expenses as may be permitted by
the MGCL for directors of Maryland corporations.

         The limited partnership agreement of Brandywine Operating Partnership,
L.P. (the "Operating Partnership") also provides for indemnification by the
Operating Partnership of the Company and its Trustees and officers for any


                                      II-1




<PAGE>
costs, expenses or liabilities incurred by them by reason of any act performed
by them for or on behalf of the Operating Partnership or the Company; provided
that such person's conduct was taken in good faith and in the belief that such
conduct was in the best interests of the Operating Partnership and that such
person was not guilty of fraud, willful misconduct or gross negligence.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees and officers of the Trust pursuant to
the foregoing provisions or otherwise, the Company has been advised that,
although the validity and scope of the governing statute has not been tested in
court, in the opinion of the Commission, such indemnification is against public
policy as expressed in Securities Act and is, therefore, unenforceable. In
addition, indemnification may be limited by state securities laws.

ITEM 16.  EXHIBITS

        3.1       -        Amended and Restated Declaration of Trust of the
                           Company (Incorporated by reference to Exhibit 3.1 to
                           the Company's Current Report on Form 8-K dated June
                           9, 1997)

        3.2       -        Articles of Amendment to Declaration of Trust of the
                           Company (Incorporated by reference to Exhibit 3.1 to
                           the Company's Current Report on Form 8-K dated
                           September 10, 1997)

        3.3       -        Articles of Amendment to Declaration of Trust of the
                           Company (No. 2)(Incorporated by reference to Exhibit
                           3.1 to the Company's Current Report on Form 8-K dated
                           June 3, 1998)

        3.4       -        Articles Supplementary (Incorporated by reference to
                           Exhibit 3.1 to the Company's Current Report on Form
                           8-K dated October 13, 1998)

        3.5       -        Amended and Restated Bylaws of the Company
                           (Incorporated by reference to Exhibit 3.2 to the
                           Company's Annual Report on Form 10-K for the year
                           ended December 31, 1996)

        5.1       -        Opinion of Pepper Hamilton LLP regarding the validity
                           of securities being registered

        5.2       -        Opinion of Ballard Spahr Andrews & Ingersoll, LLP
                           regarding the validity of securities being registered

        8.1       -        Opinion of Arthur Andersen LLP regarding tax matters

       10.1       -        Registration Rights Agreement among the Company, the
                           Operating Partnership and Prometheus AAPT Holdings,
                           L.L.C. (Incorporated by reference to Exhibit 10.5 to
                           the Company's Quarterly Report on Form 10-Q for the
                           quarter ended June 30, 1998)

       10.2       -        Registration Rights Agreement among the Company, the
                           Operating Partnership, Donald E. Axinn and others
                           (Incorporated by reference to Exhibit 10.4 to the
                           Company's current report on Form 8-K dated July 30,
                           1998)

       12.1       -        Calculation of Ratios of Earnings to Combined Fixed
                           Charges and Preferred Share Distributions.

       23.1       -        Consent of Arthur Andersen LLP

       23.2       -        Consent of Zelenkofske, Axelrod & Co., Ltd.

       23.3       -        Consent of Pepper Hamilton LLP (contained in Exhibit
                           5.1)

       23.4       -        Consent of Ballard Spahr Andrews & Ingersoll, LLP
                           (contained in Exhibit 5.2)



                                      II-2

<PAGE>
       23.5       -        Consent of Arthur Andersen LLP regarding opinion as
                           to tax matters (contained in Exhibit 8.1)

       24         -        Power of Attorney (included on signature page to this
                           Registration Statement)


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;

                  (ii)     To reflect in the prospectus any facts or events
                           arising after the effective date of this 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 this registration 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 percent 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
                           this registration statement or any material change to
                           such information in this registration statement;

provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.

       (2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the Securities offered herein, 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.

(b) The undersigned Registrant hereby further undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the Securities offered herein, and the offering of such Securities
at that time shall be deemed to be the initial bona fide offering thereof.



                                      II-3




<PAGE>


(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the Securities being
registered, 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 them is against public
policy as expressed in such Act and will be governed by the final adjudication
6yof such issue.





                                      II-4




<PAGE>



                                   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 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 Philadelphia, Commonwealth of Pennsylvania, on
December 23, 1998.

                                         BRANDYWINE REALTY TRUST

                                         By: /s/ Gerard H. Sweeney   
                                             -----------------------------------
                                         Gerard H. Sweeney
                                         President and Chief Executive Officer


               KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints each of Anthony A. Nichols, Sr.
and Gerard H. Sweeney his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons on December 23, 1998,
in the capacities indicated.


            Signature                                  Title
            ---------                                  -----

  /s/ Anthony A. Nichols, Sr.            Chairman of the Board of Trustees
- ----------------------------------
   Anthony A. Nichols, Sr.

  /s/ Gerard H. Sweeney                  President, Chief Executive Officer and
- ----------------------------------
   Gerard H. Sweeney                     Trustee (Principal Executive Officer)

  /s/  Mark S. Kripke                    Chief Financial Officer (Principal
- ----------------------------------
   Mark S. Kripke                        Financial and Accounting Officer)

  /s/ Warren V. Musser                   Trustee
- ----------------------------------
   Warren V. Musser

  /s/  Walter D'Alessio                  Trustee
- ----------------------------------
   Walter D'Alessio

  /s/  Charles P. Pizzi                  Trustee
- ----------------------------------
   Charles P. Pizzi

  /s/  Murry N. Gunty                    Trustee
- ----------------------------------
   Murry N. Gunty





                                      II-5




<PAGE>



                                  EXHIBIT INDEX


          Exhibit                                Exhibit
          Number                               Description
          ------                               -----------
            5.1                         Opinion of Pepper Hamilton LLP
            
            5.2                         Opinion of Ballard Spahr Andrews
                                        & Ingersoll, LLP
            
            8.1                         Opinion of Arthur Anderson LLP
            
            12.1                        Calculation of Ratios of Earnings to
                                        Combined Fixed Charges and
                                        Preferred Share Distributions

            23.1                        Consent of Arthur Andersen LLP

            23.2                        Consent of Zelenkofske, Axelrod &
                                        Co., Ltd.
            
            

                                      II-6




<PAGE>



                                                                     Exhibit 5.1



                                December 23, 1998


Brandywine Realty Trust
14 Campus Boulevard
Newtown Square, PA  19073

                  Re:  Form S-3 Registration Statement
                       -------------------------------

Gentlemen:

              We have acted as counsel to Brandywine Realty Trust, a Maryland
real estate investment trust (the "Company"), in connection with the preparation
of a registration statement (the "Registration Statement") of the Company on
Form S-3 under the Securities Act of 1933, as amended (the "Act"), and the
filing of the Registration Statement with the Securities and Exchange Commission
(the "Commission"). The Registration Statement relates to the offer and sale
from time to time of up to: (i) 750,000 7.25% Series A Cumulative Convertible
Preferred Shares of Beneficial Interest, par value $.01 per share ("Series A
Preferred Shares"), of the Company, (ii) 1,415,094 Common Shares of Beneficial
Interest, par value $.01 per share ("Common Shares"), of the Company issuable
upon conversion or redemption of the Series A Preferred Shares and (iii) an
additional 1,127,896 Common Shares issuable upon redemption of Class A units of
limited partnership interest ("Units") in Brandywine Operating Partnership, L.P.

              In connection with this opinion, we have examined the originals or
copies, certified or otherwise identified to our satisfaction, of the
Registration Statement, the Declaration of Trust and the Bylaws of the Company,
as amended to date, resolutions of the Company's Board of Trustees and such
other documents and trust records relating to the Company as we have deemed
appropriate. Insofar as this opinion relates to matters of Maryland law, we have
relied exclusively upon the opinion of Ballard Spahr Andrews & Ingersoll, LLP
addressed to the Company, dated December 23, 1998.

              Based upon the foregoing, we are of the opinion that:

              1. The Series A Preferred Shares are validly issued, fully paid
and nonassessable.

              2. The Common Shares subject to issuance upon redemption or
conversion of the Series A Preferred Shares will, upon such issuance in
accordance with the terms of the Series A Preferred Shares, be validly issued,
fully paid and nonassessable.

              3. The Common Shares subject to issuance upon redemption of Units
will, upon such issuance in accordance with the terms of such Units, be validly
issued, fully paid and nonassessable.

              We assume no obligation to supplement this opinion if any
applicable law changes after the date hereof or if we become aware of any fact
that might change the opinion expressed herein after the date hereof.

              We hereby consent to the reference to our firm under the section
"Legal Matters" in the Prospectus included in the Registration Statement and to
the filing of this opinion as an exhibit to the Registration Statement. In
giving this consent, we do not admit that we are within the category of persons
whose consent is required by Section 7 of the 1933 Act.

                                           Very truly yours,



                                           /s/ Pepper Hamilton LLP            
                                           -----------------------             
                                           Pepper Hamilton LLP





<PAGE>



                                                                     Exhibit 5.2


                                December 23, 1998


Brandywine Realty Trust
14 Campus Boulevard
Newton Square, Pennsylvania 19073

         Re:      Registration Statement on Form S-3
                  ----------------------------------

Ladies and Gentlemen:

                We have served as Maryland counsel to Brandywine Realty Trust, a
Maryland real estate investment trust (the "Company"), in connection with
certain matters of Maryland law arising out of the registration of (i) 750,000
Series A Preferred Shares of Beneficial Interest, $.01 par value per share (the
"Preferred Shares"), which previously have been issued in connection with the
acquisition of a portfolio of properties (the "Acquisition") by the Operating
Partnership of which the Company is the general partner and (ii) 2,542,990
Common Shares of Beneficial Interest, $.01 par value per share (the "Common
Shares"), of the Company (collectively, the "Shares"), covered by a Registration
Statement on Form S-3, and all amendments thereto (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "1933 Act").
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings assigned to them in the Registration Statement.

         In connection with our representation of the Company, and as a basis
for the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (collectively, the "Documents"):

        1. The Registration Statement, including the related form of prospectus
included therein, in the form in which it was transmitted to the Securities and
Exchange Commission (the "Commission") under the 1933 Act;

        2. The Amended and Restated Declaration of Trust of the Company, as
amended (the "Declaration"), certified as of a recent date by the State
Department of Assessments and Taxation of Maryland (the "SDAT");

         3. The Bylaws of the Company, certified as of a recent date by its
Secretary;

        4. Resolutions adopted by the Board of Trustees, or a duly authorized
committee thereof, of the Company relating to the sale, issuance and
registration of the Shares, certified as of a recent date by the Secretary of
the Company;

         5. The form of certificate evidencing a Common Share, certified as of a
recent date by the Secretary of the Company;

         6. The form of certificate evidencing a Preferred Share, certified as
of a recent date by the Secretary of the Company;

         7. A certificate of the SDAT as to the good standing of the Company,
dated as of a recent date;

        8. A certificate executed December 23, 1998 by Brad A. Molotsky,
Secretary of the Company, which we have assumed is true and correct as of the
date hereof; and

        9. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.

         In expressing the opinion set forth below, we have assumed, and so far
as is known to us there are no facts inconsistent with, the following:

        1. Each individual executing any of the Documents, whether on behalf of
such individual or another person, is legally competent to do so.




<PAGE>



        2. Each individual executing any of the Documents on behalf of a party
(other than the Company) is duly authorized to do so.

        3. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding.

        4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all such Documents are genuine. All public
records reviewed or relied upon by us or on our behalf are true and complete.
All statements and information contained in the Documents are true and complete.
There has been no oral or written modification or amendment to any of the
Documents, and there has been no waiver of any provision of the Documents, by
action or omission of the parties or otherwise.

        5. The Shares will not be transferred in violation of any restriction or
limitation contained in the Declaration.

        6. The Company will be in good standing with the SDAT on the date on
which the Securities are actually issued.

              The phrase "known to us" is limited to the actual knowledge,
without independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.

         Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that:

        1. The Company is a real estate investment trust duly formed and
existing under and by virtue of the laws of the State of Maryland and is in good
standing with the SDAT.

        2. The Common Shares are duly authorized and (assuming that the sum of:
(a) all common shares of beneficial interest issued as of the date hereof (not
including any of the Common Shares), (b) any common shares of beneficial
interest issued between the date hereof and the date on which any of the Common
Shares are actually issued (not including any of the Common Shares) and (c) the
Common Shares, will not exceed the total number of common shares of beneficial
interest that the Company is then authorized to issue) will be, upon issuance in
accordance with their terms and resolutions of the Board of Trustees of the
Company authorizing their issuance, validly issued, fully paid and
nonassessable.

        3. The Preferred Shares issued by the Company in connection with the
Acquisition have been duly authorized and are validly issued, fully paid and
nonassessable.

              The foregoing opinion is limited to the laws of the State of
Maryland and we do not express any opinion herein concerning any other law. We
express no opinion as to the applicability or effect of any federal or state
laws, including the securities laws of the State of Maryland or federal or state
laws regarding fraudulent transfers. To the extent that any matter as to which
our opinion is expressed herein would be governed by any jurisdiction other than
the State of Maryland, we do not express any opinion on such matter.

             We assume no obligation to supplement this opinion if any
applicable law changes after the date hereof or if we become aware of any fact
that might change the opinion expressed herein after the date hereof.

         This opinion is being furnished to you solely for submission to the
Commission as an exhibit to the Registration Statement and, accordingly, may not
be relied upon by, quoted in any manner to, or delivered to any other person or
entity (other than Pepper Hamilton LLP, counsel to the Company) without, in each
instance, our prior written consent.




<PAGE>



                We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the use of the name of our firm therein. In
giving this consent, we do not admit that we are within the category of persons
whose consent is required by Section 7 of the 1933 Act.


                                      Very truly yours,

                                      /s/ Ballard Spahr Andrews & Ingersoll, LLP
                                      ------------------------------------------
                                      Ballard Spahr Andrews & Ingersoll, LLP




<PAGE>



                                                                     Exhibit 8.1


                                December 23, 1998



Brandywine Realty Trust
14 Campus Boulevard
Newtown Square, Pennsylvania 19073



Gentlemen:

We have acted as Tax Advisor to Brandywine Realty Trust (the "Company"), in
connection with the preparation of a registration statement on Form S-3 (the
"Registration Statement"), filed with the Securities and Exchange Commission on
December 23, 1998, with respect to the offering and sale (the "Offering") of:
(i) 750,000 7.25% Series A Cumulative Convertible Preferred Shares of Beneficial
Interest of the Company, (ii) 1,415,094 Common Shares of Beneficial Interest of
the Company issuable upon conversion or redemption of the Series A Preferred
Shares and (iii) 1,127,896 Common Shares issuable upon redemption of Class A
units of limited partnership interests in Brandywine Operating Partnership, L.P.
(collectively, the "Securities"). You have requested our opinion on certain
federal income tax matters in connection with the Offering. Capitalized terms
not otherwise defined herein shall have the meaning set forth in the
Registration Statement.

In rendering the opinions expressed herein, we have examined such documents and
other matters as we have deemed necessary or appropriate, including (but not
limited to) the Registration Statement and the Prospectus, representation
letters provided by the Company to us, and schedules prepared by the Company
which relate to the Company's compliance with various REIT qualification tests.
Further, we have obtained additional information and representations from
officers of the Company with respect to various factual matters relating to the
Company's operations and stock ownership and to the Company's expectations to
continue to meet certain diversity of ownership tests on a basis consistent with
past practice and of its intention to operate in a manner consistent with its
past operations, subject to any changes described in the Prospectus. We have
also relied on representations from Prometheus AAPT Holdings, L.L.C., LF
Strategic Realty Investors L.P. and Lazard Freres Real Estate Investors, L.L.C.
made to the Company with respect to various factual matters relating to the
operations and stock ownership of Atlantic American Properties Trust through
September 28, 1998. We have relied on the opinion of Pepper Hamilton LLP that
the shares of Non-Voting Preferred Stock issued by Brandywine Realty Services
Corporation to Brandywine Operating Partnership, L.P. do not constitute voting
securities for purposes of the Investment Company Act of 1940. We have also
relied on the opinion of Pepper Hamilton LLP that the shares of Non-Voting
Common Stock issued by Atlantic American Properties Management II, Inc. to AAPOP
1, L.P. do not constitute voting securities for purposes of the Investment
Company Act of 1940. We have also relied on good standing certificates obtained
from the Secretary of State that certain partnerships are in good standing under
the laws of their respective jurisdiction of formation. In addition, we have
relied upon the authenticity of the documents, and upon the accuracy of the
representations, described above.

Our past material professional relationship with the Company has consisted of
rendering opinions on the Company's financial statements under generally
accepted accounting principles from 1986 through the calendar year-ending
December 31, 1997. In addition, we prepared the Company's federal and state tax
returns for 1986, 1987, 1988, 1996, and 1997.

Based upon and subject to the foregoing, it is our opinion that:

         1.       The descriptions of the federal income tax conclusions
                  contained in the Prospectus under the caption "Federal Income
                  Tax Considerations" are correct in all material respects, and
                  the discussion contained therein fairly summarizes the federal
                  income tax considerations that may be material to the holders
                  of the Securities.

         2.       The Operating Partnership and the Title Holding Partnerships
                  have at all times been and will continue to be treated for
                  federal income tax purposes as partnerships and not as
                  associations taxable as corporations or as publicly traded
                  partnerships.

         3.       Beginning with its taxable year ended December 31, 1986, the
                  Company was organized and has operated in conformity with the
                  requirements for qualification as a REIT under the Code for
                  each



<PAGE>



                  of its taxable years and the Company's current method of
                  organization and operation will enable it to continue to so
                  qualify.

The opinion expressed herein is based upon the Code, the Treasury Department's
regulations which interpret the Code, and relevant judicial and administrative
precedent, all of which are subject to change, on a retroactive basis, at any
time. Any such changes could adversely impact the opinion rendered herein and
the tax consequences to the Company and the investors in the Securities. During
the course of our engagement, after reasonable investigation, nothing has come
to our attention which would cause us to question the accuracy of the documents
or other information provided to us by the Company or the veracity of the
information or representations provided to us by the Company or Company's
counsel. As noted above, the examination of these documents, the accumulation of
the information contained therein and representations of the Company and its
counsel formed a material part of the basis on which we formed our opinion.
Should anything occur, or already have occurred, that would compromise the
accuracy of the aforementioned documents or the veracity of the aforementioned
information and representations, our opinion as expressed herein may not be
relied upon.

Our opinion is valid as of the date of this letter. We have not been retained,
nor are we obligated, to monitor or update this opinion for future conditions
that may affect this opinion. Our opinion is limited to the tax matters
specifically enumerated within and we have not considered any other federal
income tax matters, any state or local income tax issues, nor any non U.S. tax
issues, potentially impacting upon an investment in the Securities. Potential
investors in the Securities are urged to seek and rely on the tax advice of a
qualified professional. The opinion expressed herein is not binding upon the IRS
and should not be construed to indicate IRS approval of the Company's qualifying
status as a REIT for the years considered herein. The opinions expressed herein
reflect our assessment of the outcome of litigation and other adversarial
proceedings based on an analysis of the existing tax authorities relating to the
issues. It is important to note, however, no assurance can be given that the
Company would in fact litigate any of the matters addressed herein.

We understand that our opinion will be attached as an Exhibit to the
Registration Statement and will be referred to in the Prospectus that is part of
the Registration Statement which will be delivered to prospective purchasers of
the Securities, and we hereby consent to such use of our opinion.




                                                     /s/ ARTHUR ANDERSEN LLP
                                                     -----------------------





<PAGE>



                                                                    Exhibit 12.1

                  RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
                        AND PREFERRED SHARE DISTRIBUTIONS

         The following table sets forth the ratios of earnings to fixed charges
for Brandywine Realty Trust for each of the five years ended December 31, 1997,
1996, 1995, 1994 and 1993 and for the nine months ended September 30, 1998 and
1997.

                             Brandywine Realty Trust
           Computation of Ratio of Earnings to Combined Fixed Charges
                        and Preferred Share Distributions
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                                        For the Nine Months
                                               For the Years Ended December 31,                         Ended September 30,
                               -----------------------------------------------------------------        -------------------
                                 1993           1994           1995         1996         1997             1997         1998
                                ------         ------         ------       ------       ------           ------       -----
<S>                             <C>           <C>             <C>         <C>             <C>                <C>       <C>    
EARNINGS:
     Net Income (Loss)          $   2,468     $   (1,841)     $   (824)   $    (162)      $15,001           $ 8,455    $26,781
     Interest Expense                  --           1,942           793        2,751        7,079             4,899     19,057
     Amortization of deferred                                                                                                  
        financing costs                --              62           413          113          915               619        594
                             ------------  --------------  ------------ ------------  -----------     ------------- ----------
                                $   2,468     $       163     $     382   $    2,702   $   22,995           $13,973    $46,432
                             ============  ==============  ============ ============  ===========     ============= ==========
FIXED CHARGES:
     Interest Expense           $      --     $     1,942     $     793   $    2,751   $    7,079           $ 4,899    $19,057
     Amortization of deferred                                                                                                  
       financing costs                 --              62           413          113          915               619        594
     Preferred share                                                                                                           
        distributions                  --              --            --          401           --               499         22
                             ------------  --------------  ------------ ------------  -----------     ------------- ----------
                                $      --     $     2,004     $   1,206   $    3,265   $    8,493           $ 5,518    $19,673
                             ============  ==============  ============ ============  ===========     ============= ==========
     Fixed Charge Coverage        
       Ratio(1)                   N/A (2)             (3)           (3)          (3)         2.71              2.53       2.36
                             ============  ==============  ============ ============  ===========     ============= ==========

</TABLE>



(1)  The fixed charge coverage ratio represents the number of times fixed
     charges were covered by earnings. The ratio is computed by dividing fixed
     charges and preferred share distributions into earnings before
     extraordinary items, plus fixed charges. Fixed charges include interest
     expense, and amortization of debt issuance costs.

(2)  Ratio cannot be computed as there were no fixed charges during fiscal year
     1993.

(3)  Ratio calculated to be a less than one-to-one coverage. The amount of the
     deficiency to cover fixed charges is $563,000, $824,000 and $1,841,000 for
     years 1996, 1995 and 1994, respectively.





<PAGE>



                                                                    Exhibit 23.1

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

     As independent public accountants, we hereby consent to the incorporation
by reference in the registration statement on Form S-3 (the "Registration
Statement") of Brandywine Realty Trust (the "Company") of: our report dated
March 4, 1998, on the consolidated financial statements of the Company, included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1997, as amended; our report dated February 11, 1997 on the combined financial
statements of revenue and certain expenses of Columbia Acquisition Properties
for the year ended December 31, 1996, included in the Company's Form 8-K/A
(No.1) dated February 13, 1997 and Form 8-K/A (No. 2) dated February 24, 1997 as
amended; our report dated January 29, 1997 on the combined financial statements
of revenue and certain expenses of Main Street Properties for the year ended
December 31, 1996, included in the Company's Form 8-K/A (No. 1) dated April 29,
1997; our report dated May 29, 1997 on the combined financial statements of
revenue and certain expenses of TA Properties for the year ended December 31,
1996, included in the Company's Form 8-K dated June 9, 1997; our report dated
June 3, 1997 on the combined financial statements of revenue and certain
expenses of Emmes Properties for the year ended December 31, 1996, included in
the Company's Form 8-K dated June 9, 1997; our report dated June 23, 1997 on the
combined financial statements of revenue and certain expenses of 748 & 855
Springdale Drive for the year ended December 31, 1996 included in the Company's
Form 8-K dated June 26, 1997; our report dated July 21, 1997 on the combined
financial statements of revenue and certain expenses of the Green Hills
Properties for the year ended December 31, 1996 included in the Company's Form
10-Q for the quarter ended June 30, 1997; our report dated July 21, 1997 on the
combined financial statements of revenue and certain expenses of the Berwyn Park
Properties for the year ended December 31, 1996, included in the Company's Form
10-Q for the quarter ended June 30, 1997; our report dated August 21, 1997 on
the combined financial statements of revenue and certain expenses of 500 & 501
Office Center Drive for the year ended December 31, 1996 included in the
Company's Form 8-K dated September 10, 1997; our report dated October 15, 1997
on the combined financial statements of revenue and certain expenses of
Metropolitan Industrial Center for the year ended December 31, 1996, included in
the Company's Form 8-K dated October 30, 1997; our report dated October 27, 1997
on the combined financial statements of revenue and certain expenses of Atrium I
for the year ended December 31, 1996, included in the Company's Form 8-K dated
October 30, 1997; our report dated November 14, 1997 on the combined financial
statements of revenue and certain expenses of Scarborough Properties for the
year ended December 31, 1996, included in the Company's Form 8-K dated December
17, 1997; our report dated December 3, 1997 on the financial statement of
revenue and certain expenses of Bala Pointe Office Centre for the year ended
December 15, 1996, included in the Company's Form 8-K dated December 17, 1997;
and our report dated December 13, 1997 on the combined financial statements of
revenue and certain expenses of GMH Properties for the year ended December 31,
1996, included in the Company's Form 8-K dated December 17, 1997; our report
dated January 22, 1998 on the combined financial statement of revenue and
certain expenses of the RREEF Properties for the year ended December 31, 1996,
included in the Company's Form 8-K dated January 27, 1998; our report dated
January 23, 1998 on the financial statement of revenue and certain expenses of
Three Christina Centre for the year ended December 31, 1996, included in the
Company's Form 8-K dated February 23, 1998; our report dated March 24, 1998 on
the financial statement of revenue and certain expenses of Three Christina
Centre for the year ended December 31, 1997, included in the Company's Form
8-K/A (No. 1) dated April 16, 1998; our report dated April 15, 1998 on the
combined financial statements of revenue and certain expenses of DKM Properties
for the year ended December 31, 1997, included in the Company's Form 8-K/A (No.
1) dated April 16, 1998; our report dated April 27, 1998 on the combined
financial statements of revenue and certain expenses of First Commercial
Properties for the year ended December 31, 1997, included in the Company's Form
8-K dated May 14, 1998 and Form 8-K/A (No. 1) dated July 30, 1998, as amended;
our report dated May 1, 1998 on the financial statement of revenue and certain
expenses of One Christina Centre for the year ended December 31, 1997, included
in the Company's Form 8-K dated May 14, 1998; our report dated May 15, 1998 on
the combined financial statements of revenue and certain expenses of the Axinn
Properties for the year ended December 31, 1997, included in the Company's Form
8-K dated July 30, 1998 and Form 8-K/A (No. 1) dated October 21, 1998, as
amended; our report dated July 31, 1998 on the combined financial statement of
revenue and certain expenses of the Lazard Properties for the year ended
December 31, 1997, included in the Company's Form 8- K/A (No. 1) dated October
21, 1998; and to all references to our Firm included in the Registration
Statement.

                                                     /s/  ARTHUR ANDERSEN LLP
                                                     ------------------------
                                                     Arthur Andersen LLP
Philadelphia, Pennsylvania
December  23, 1998




<PAGE>


                                                                    Exhibit 23.2


                          INDEPENDENT AUDITORS' CONSENT


     We hereby consent to the incorporation by reference in the registration
statement on Form S-3 (the "Registration Statement") of Brandywine Realty Trust
of our report dated June 19, 1997 included in the Current Report on Form 8-K
dated June 26, 1997 of Brandywine Realty Trust and to all references to our firm
and our report dated June 19, 1997 included in the prospectus in the
Registration Statement.


                                            /s/ Zelenkofske, Axelrod & Co., Ltd.
                                            ------------------------------------
                                            Zelenkofske, Axelrod & Co., Ltd.

Jenkintown, Pennsylvania
December  16, 1998





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