AMERICAN REALTY TRUST INC, S-4/A, 1999-04-23

AMERICAN REALTY TRUST INC
S-4/A, 1999-04-23
REAL ESTATE OPERATORS (NO DEVELOPERS) & LESSORS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1999

Registration Statement No. 333-43777
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------

AMENDMENT NO. 5

TO
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
-------------------------

AMERICAN REALTY TRUST, INC.
(Exact name of registrant as specified in its governing instrument)

GEORGIA 6513 54-0697989
(State of Incorporation) (Prmary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)

10670 NORTH CENTRAL EXPRESSWAY, SUITE 300
DALLAS, TEXAS 75231
(214) 692-4700
(Address and telephone number of principal executive offices)
ROBERT A. WALDMAN, ESQ.
10670 NORTH CENTRAL EXPRESSWAY, SUITE 300
DALLAS, TEXAS 75231
(214) 692-4700
(Name, address and telephone number of agent for service)

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

Copy to:
THOMAS R. POPPLEWELL, ESQ.
ANDREWS & KURTH L.L.P.
1717 MAIN STREET, SUITE 3700
DALLAS, TEXAS 75201

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

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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(d)
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. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
==========================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock, $2.00 par value........... 99,212 SHARES $231,848 $64.45 (3)
- ----------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value.............. (2)
- ----------------------------------------------------------------------------------------------------------
</TABLE>

(1) Pursuant to Rules 457(f) and 457(c) under the Securities Act of 1933, as
amended, and estimated solely for the purpose of calculating the
registration fee, the proposed maximum aggregate offering price is equal to
the market value of the EQK Shares to be acquired

<PAGE> 2

by ART in connection with the Merger and is based upon $0.344, the average
of the closing bid and asked prices of the EQK Shares as reported on the
over-the-counter market as of April 20, 1999.

(2) The number of shares of Common Stock of the Registrant to be registered is
such currently indeterminate number of shares of Common Stock as may be
required for issuance upon conversion of the Preferred Stock being
registered hereunder. Such shares of Common Stock will, if issued, be
issued for no additional consideration and therefore, pursuant to Rule
457(g), no separate registration fee is required.

(3) ART has previously paid a registration fee of $1,550.36 in connection with
this filing.
================================================================================

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

<PAGE> 3

EQK REALTY INVESTORS I

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

3424 Peachtree Road, Suite 800
Atlanta, Georgia 30326

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

______________, 1999

Dear Shareholder:

You are cordially invited to attend the 1999 annual meeting (the "Meeting")
of the shareholders of EQK Realty Investors I ("EQK") to be held at the offices
of EQK, 3424 Peachtree Road, Suite 800 in Atlanta, Georgia 30326 on __________,
1999 at 9:00 a.m. Eastern Standard Time. At the Meeting, you will be asked to
consider and vote upon (1) an Amended and Restated Agreement and Plan of Merger,
dated as of August 25, 1998 (the "Merger Agreement"), pursuant to which ART
Newco, LLC ("ART Newco"), an affiliate of American Realty Trust, Inc., a Georgia
corporation ("ART"), is to merge with and into EQK (the "Merger"), with EQK
being the surviving entity (the "Merger Proposal"), (2) an amendment and
restatement of EQK's Amended and Restated Declaration of Trust (the "Declaration
Amendment Proposal"), (3) the termination of EQK's advisory agreement with Lend
Lease Portfolio Management, Inc. ("LLPM") and the execution by EQK of a new
advisory agreement with Basic Capital Management, Inc., an affiliate of ART, as
the advisor (the "New Advisory Agreement Proposal"), and (4) the election of the
Board of Trustees of EQK (the "Board Election Proposal" and, together with the
Merger Proposal, the Declaration Amendment Proposal and the New Advisory
Agreement Proposal, the "Proposals")) . If the Merger Proposal is approved by
the requisite number of EQK shareholders, you will retain each EQK Share you own
and you will be entitled to receive $0.14 per each EQK Share owned, consisting
of 0.014 of a share of Series F Cumulative Convertible Preferred Stock of ART
having a liquidation value of $10.00 per share (individually, an "ART Preferred
Share" and collectively, the "ART Preferred Shares") (the "EQK Merger
Consideration"). ART will be entitled to receive 673,976 newly-issued EQK
Shares. Immediately after the Merger, ART would own not more than 49% of EQK's
outstanding shares and would have significant influence over EQK. ART currently
intends (but is not obligated) to acquire the rest of the EQK Shares at some
time after the third anniversary of the consummation of the Merger for not less
than $0.486 per EQK Share in the form of an additional 0.0486 of an ART
Preferred Share.

Each of LLPM, Summit Ventures, L.P. ("Summit") and Sutter Opportunity Fund,
LLC ("Sutter") has agreed to vote their EQK Shares in favor of the Proposals,
other than the Board Election Proposal. LLPM, Summit, Sutter and Maurice A.
Halperin currently own 17.50%, 9.52%, 9.55% and 8.87%, respectively, of the
issued and outstanding EQK Shares. ART does not currently and will not own any
EQK Shares at the time of the EQK Annual Meeting.

EQK intends to sell Harrisburg East Mall, EQK's sole remaining real estate
asset, and to distribute EQK's net liquid assets after such sale. The completion
of the sale and the distribution of net assets are preconditions to the closing
of the merger.

Further information concerning the Meeting and the terms of the Proposals
are set forth in the enclosed Notice of Annual Meeting and Prospectus/Proxy
Statement. EQK's management will be in attendance at the annual meeting to
answer questions and to explain the proposed merger in detail.

Your vote on the Merger is of great importance. The affirmative vote of the
holders of three-quarters of the outstanding shares of beneficial interest of
EQK entitled to vote, among other conditions, is required for the approval of
the Proposals, other than the Board Election Proposal. Even if you plan to
attend the Meeting, we ask that you execute and promptly return your completed
proxy in the enclosed postage-paid envelope so that your vote can be recorded at
the meeting. If you attend the Meeting, you may withdraw your proxy and vote
your shares personally.

<PAGE> 4

The EQK Board of Trustees has considered and approved the Proposals,
including the Merger Proposal, and unanimously recommends that shareholders vote
FOR approval of the Proposals.

Very truly yours,

-------------------------------------
President and Chief Executive Officer

<PAGE> 5

EQK REALTY INVESTORS I
3424 Peachtree Road, Suite 800
Atlanta, Georgia 30326

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD __________, 1999

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

The 1999 annual meeting of the shareholders of EQK Realty Investors I (the
"Meeting") is to be held at the offices of EQK Realty Investors I ("EQK") at
3424 Peachtree Road, Suite 800, Atlanta, Georgia 30326 on __________, 1999 at
9:00 a.m. Eastern Standard Time, for the following purposes:

(1) To consider and vote upon an Amended and Restated Agreement and Plan of
Merger, dated as of August 25, 1998 (the "Merger Agreement"), which
provides for, among other things, the merger of ART Newco, LLC, an
affiliate of American Realty Trust, Inc., a Georgia corporation
("ART"), with and into EQK Realty Investors I (the "Merger"), with EQK
Realty Investors I being the surviving entity;

(2) To consider and vote on an amendment and restatement of EQK's Amended
and Restated Declaration of Trust, which includes provisions that would

o extend the duration of EQK,

o remove the current limitation on the number of
authorized shares of EQK,

o reduce the number of EQK shareholders and trustees
required to vote on certain matters,

o remove prohibitions and restrictions which currently
prohibit EQK from engaging in certain activities and
investments,

o remove prohibitions on the issuance of additional
shares of beneficial interest in EQK and other
securities,

o remove borrowing restrictions on EQK,

o revise certain trust governance provisions,

o implement an ownership limit on the number of shares
of EQK which may be owned by any single shareholder,
and

o change EQK's name;

(3) To consider and vote on the termination of EQK's advisory agreement
with Lend Lease Portfolio Management, Inc. and the execution by EQK of
a new advisory agreement between EQK and Basic Capital Management,
Inc., an affiliate of and advisor to ART;

(4) To consider and vote on the election of EQK's Board of Trustees; and

(5) To transact such other business as may properly come before the annual
meeting or any adjournment thereof.

In addition, none of the aforementioned matters to be considered and voted
upon will take effect unless EQK first completes the sale of its last remaining
real estate asset, the Harrisburg East Mall, and makes a distribution of EQK's
net liquid assets after such sale.

Only EQK shareholders of record at the close of business on May 20, 1999
are entitled to notice of and to vote at the Meeting. In the event that there
are insufficient shares represented to approve the Merger at the Meeting, the
Meeting may be adjourned to permit further solicitation. The Meeting was delayed
as a result of the negotiation of the Merger Agreement and related matters.

No statutory dissenter's appraisal rights will be available to EQK
shareholders in connection with the Merger and it is the position of EQK that no
common law dissenter's rights will be available in connection with the Merger;
however, any EQK shareholder who wishes to assert common law dissenter's
appraisal rights may file with EQK's Secretary a written notice stating such
shareholder's intent to dissent to the Merger at the Meeting and to assert such
rights. In the event that holders of more than 3% of the outstanding EQK Shares
assert such dissenter's appraisal rights, the Merger Agreement may be
terminated. For a detailed

<PAGE> 6

discussion of the procedures for asserting such rights, see "The Proposed Merger
and Related Matters -- Availability of Appraisal Rights" in the enclosed
Prospectus/Proxy Statement.

Even if you plan to attend the Meeting, we ask that you execute and
promptly return your completed proxy in the enclosed postage-paid envelope so
that your vote can be recorded at the Meeting. If you attend the Meeting, you
may withdraw your proxy and vote your shares personally.

By Order of the Board of Trustees,

----------------------------------
Secretary

Atlanta, Georgia
[DATE]

<PAGE> 7

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

PROSPECTUS/PROXY STATEMENT

SUBJECT TO COMPLETION, DATED APRIL 23, 1999

AMERICAN REALTY TRUST, INC.
SERIES F CUMULATIVE CONVERTIBLE PREFERRED STOCK
COMMON STOCK

This Prospectus/Proxy Statement relates to 99,212 shares of Series F
Cumulative Convertible Preferred Stock with a par value of $2.00 per share and a
stated liquidation value ("Liquidation Value") of $10.00 per share
(individually, an "ART Preferred Share" and collectively, the "ART Preferred
Shares"), of American Realty Trust, Inc., a Georgia corporation ("ART"), that
may be issued pursuant to an Amended and Restated Agreement and Plan of Merger,
dated as of August 25, 1998, as amended on April 22, 1999 (the "Merger
Agreement"), among ART, ART Newco, LLC, a Massachusetts limited liability
company ("ART Newco") of which ART and ART Newco Holdings LLC, a Texas limited
liability company that is a wholly owned subsidiary of ART, are the sole
members, and EQK Realty Investors I, a Massachusetts business trust ("EQK"). The
Merger Agreement provides for the merger of ART Newco with and into EQK (the
"Merger"), with EQK being the surviving entity (the "Trust"). As consideration
for the Merger, each holder of record of outstanding shares of beneficial
interest no par value of EQK (individually, an "EQK Share" and collectively, the
"EQK Shares") as of May 20, 1999 (the "EQK Record Date"), other than ART and its
affiliates, Lend Lease Portfolio Management, Inc. ("LLPM"), Summit Venture, L.P.
("Summit"), Sutter Opportunity Fund, LLC ("Sutter") and Mr. Maurice A. Halperin
("Halperin") (collectively, the "Public EQK Shareholders"), will be entitled to
retain the EQK Shares such holder holds and to receive for each EQK Share owned
by such holder 0.014 of an ART Preferred Share with a Liquidation Value for such
portion of a share of $0.14 (the "EQK Merger Consideration"). In addition, ART
currently intends (but is not obligated) to acquire the remaining EQK Shares
from the Public EQK Shareholders at some time after the third anniversary of the
consummation of the Merger for not less than 0.0486 of an ART Preferred Share
with a Liquidation Value for such portion of a share of $0.486 for each EQK
Share owned by the Public EQK Shareholders. As consideration for the Merger, ART
will be entitled to receive 673,976 newly-issued EQK Shares (the "ART Merger
Consideration" and, together with the EQK Merger Consideration, the "Merger
Consideration"). Immediately prior to the Merger, ART expects to purchase an
aggregate of 4,376,056 EQK Shares from LLPM, Summit, Sutter and Halperin
pursuant to the terms of separate stock purchase agreements (collectively, the
"Block Purchase") for consideration of 0.030 ART Preferred Shares per each EQK
Share owned by LLPM, Summit, Sutter or Halperin, as applicable (the "Block
Purchase Consideration"). Upon consummation of the Block Purchase and the
Merger, ART would own not more than 49% of the issued and outstanding EQK
Shares. If the Merger is consummated as described herein, the Public EQK
Shareholders will have effectively sold approximately 3.6% of their EQK Shares
to ART for a price per EQK Share equal to 0.214 of an ART Preferred Share with a
Liquidation Value of $2.14. The Merger will not take effect unless EQK first
completes the sale of its last remaining real estate asset, the Harrisburg East
Mall (the "Center"), and makes a distribution of EQK's net liquid assets after
such sale. As of the date hereof, Halperin has not agreed to sell his EQK Shares
to ART. After the Registration Statement to which this Prospectus/Proxy
Statement is a part has been declared effective by the Commission and before
this Prospectus/Proxy Statement is mailed to the holders of EQK Shares (the "EQK
Shareholders"), ART intends to file an amendment to the Registration Statement
if Halperin does not agree to sell his EQK Shares to ART.

This Prospectus/Proxy Statement relates to the ART Preferred Shares to
be paid as consideration to the Public EQK Shareholders and Halperin in
connection with the Merger and the Block Purchase, respectively. The ART
Preferred Shares to be paid as consideration to LLPM, Summit and Sutter pursuant
to the Block Purchase are not being offered hereby.

This Prospectus/Proxy Statement is being furnished to the EQK
Shareholders as of the EQK Record Date in connection with the solicitation of
proxies by the Board of Trustees of EQK (the "EQK Board") from EQK Shareholders,
for use at the 1999 annual meeting of EQK Shareholders (the "EQK Annual
Meeting") scheduled to be held on ________ __, 1999 at EQK's corporate offices
at 3424 Peachtree Road, Suite 800, Atlanta, Georgia at 9:00 a.m., Eastern
Standard Time, and at any adjournment or postponement thereof. This
Prospectus/Proxy Statement, together with the Notice of Annual Meeting of
Shareholders, Letter to Shareholders and Proxy Card, are first being mailed to
the EQK Shareholders on or about _______, 1999.

No statutory dissenter's appraisal rights will be available to EQK
shareholders in connection with the Merger and it is the position of EQK that no
common law dissenter's rights will be available in connection with the Merger;
however, any EQK shareholder who wishes to assert common law dissenter's
appraisal rights may file with EQK's Secretary a written notice stating such
shareholder's intent to dissent to the Merger at the EQK Annual Meeting and to
assert such rights. In the event that holders

<PAGE> 8

of more than 3% of the outstanding EQK Shares assert such dissenter's appraisal
rights, the Merger Agreement may be terminated.

This Prospectus/Proxy Statement also relates to the shares of ART
Common Stock ("ART Common Shares") issuable upon conversion of the ART Preferred
Shares that are part of the EQK Merger Consideration, as described herein.

ART has filed a registration statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") covering up to
99,212 ART Preferred Shares issuable in connection with the Merger and the ART
Common Shares issuable on conversion thereof. This Prospectus/Proxy Statement
constitutes the Prospectus of ART filed as part of the Registration Statement
with respect to such ART Preferred Shares and ART Common Shares. This
Prospectus/Proxy Statement is first being mailed to EQK Shareholders on or about
____________, 1999.

SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR MATERIAL RISKS THAT SHOULD
BE CONSIDERED BY THE EQK SHAREHOLDERS, INCLUDING:

o The potential conflicts of interest between EQK and its affiliate
LLPM and between ART and its affiliate and advisor, Basic Capital
Management, Inc. ("BCM").

o The listing and possible subsequent de-listing of ART Preferred
Shares.

o The reliance on the ART Board of Directors (the "ART Board") to
declare dividends on the ART Preferred Shares.

o The anti-takeover effect caused by ART's acquisition of EQK
Shares.

o The ability of the EQK Board of Trustees to make investment
policy changes without EQK Shareholder approval.

o The possible dilution of current EQK Shareholders' percentage of
equity in EQK through the issuance of additional EQK Shares.

o The possible loss of EQK's net operating losses.

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

The date of this Prospectus/Proxy Statement is April , 1999.

<PAGE> 9

THE EQK BOARD HAS UNANIMOUSLY CONCLUDED THAT THE MERGER IS FAIR AND IN THE
BEST INTERESTS OF EQK AND THE EQK SHAREHOLDERS, AND RECOMMENDS THAT EQK
SHAREHOLDERS APPROVE THE MERGER.

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

The EQK Shares were listed and traded on the New York Stock Exchange
("NYSE") prior to May 4, 1998. On April 23, 1998, the NYSE announced that
trading of the EQK Shares would be suspended prior to the opening of the NYSE on
May 4, 1998, as EQK had fallen below the NYSE's continued listing criteria for
net tangible assets available to common stock (less than $12 million) and 3-year
average net income (less than $600,000). On August 25, 1998, the last trading
day prior to the public announcement of the Merger Agreement, the average of the
closing bid and asked prices of the EQK Shares as reported on the
over-the-counter market was $1.00 per EQK Share, and on April 20, 1999, the most
recent date for which prices were available prior to the date of filing this
Prospectus/Proxy, the average of the bid and asked price of the EQK Shares as
reported in the over-the-counter market was $0.344 per EQK Share.

SEE "COMPARISON OF EQK SHARES TO ART PREFERRED SHARES" ON PAGE 108 FOR A
DESCRIPTION OF THE PRINCIPAL TERMS OF AND CERTAIN SIGNIFICANT CONSIDERATIONS
RELATING TO THE MERGER, THE ART PREFERRED SHARES AND THE EQK SHARES.

CERTAIN STATEMENTS, EXCLUDING THOSE MADE BY EQK, UNDER CAPTIONS "SUMMARY OF
TERMS," "RISK FACTORS," "THE BUSINESS OF ART" AND "ART MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ART,"
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
ART TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH
FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: GENERAL ECONOMIC AND BUSINESS
CONDITIONS, WHICH WILL, AMONG OTHER THINGS, AFFECT THE SUPPLY AND DEMAND FOR
COMMERCIAL REAL ESTATE, AVAILABILITY AND CREDITWORTHINESS OF PROSPECTIVE
TENANTS, LEASE RATES AND THE AVAILABILITY OF FINANCING; ADVERSE CHANGES IN THE
REAL ESTATE MARKETS INCLUDING, AMONG OTHER THINGS, COMPETITION WITH OTHER
COMPANIES, RISKS ASSOCIATED WITH REAL ESTATE ACQUISITIONS; GOVERNMENTAL ACTIONS
AND INITIATIVES; ENVIRONMENTAL/SAFETY REQUIREMENTS; AND OTHER CHANGES AND
FACTORS REFERENCED IN THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE.

AVAILABLE INFORMATION

ART and EQK are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, file reports and other information with the Commission. Reports and
proxy and information statements filed by ART and EQK with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: New York Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048; and Chicago Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants, including ART and EQK, that file
electronically with the Commission. The address of such Web site is
"http://www.sec.gov". In addition, reports, proxy statements and other
information concerning ART (symbol: "ARB") can be inspected and copied at the
offices of the New York Stock Exchange, Inc.,

-ii-

<PAGE> 10

20 Broad Street, New York, New York 10005-2601, on which the ART Common Shares
are currently listed and on which ART intends to seek listing of the ART
Preferred Shares.

ART has filed with the Commission the Registration Statement under the
Securities Act, with respect to the ART Preferred Shares and the ART Common
Shares. This Prospectus/Proxy Statement does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to ART, the ART Preferred Shares, the ART Common Shares
and EQK, reference is made to the Registration Statement and to the exhibits
thereto and the documents incorporated by reference herein. Statements contained
herein concerning the provisions of certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto may be inspected without
charge at the office of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies thereof may be obtained from the Commission upon payment of
the prescribed fees.

The information set forth or incorporated by reference herein concerning
ART has been furnished by ART and the information set forth herein concerning
EQK has been provided by EQK or derived from public filings previously made by
EQK. ART does not have independent knowledge of the matters set forth or
incorporated by reference herein concerning EQK. EQK does not have independent
knowledge of the matters set forth or incorporated by reference herein
concerning ART.

No person has been authorized to give any information or make any
representation other than those set forth or incorporated by reference herein
and, if given or made, such information must not be relied upon as having been
authorized by ART or EQK or any of their respective affiliates. This
Prospectus/Proxy Statement does not constitute an offer to, or a solicitation
of, any person in any jurisdiction in which such offer or solicitation is
unlawful.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

This Prospectus/Proxy Statement incorporates by reference documents not
presented herein or delivered herewith. Each of ART and EQK will provide without
charge to each person, including any EQK Shareholder, to whom a copy of this
Prospectus/Proxy Statement is delivered, upon the written or oral request of any
such person, a copy of any document described below (other than exhibits).
Requests for such copies should be directed to (i) in the case of ART, American
Realty Trust, Inc., 10670 North Central Expressway, Suite 300, Dallas, Texas
75231, Attention: Investor Relations, telephone number: (214) 692-4700, and (ii)
in the case of EQK, EQK Realty Investors I, Inc., 5775 Peachtree Dunwoody Road,
Suite 200D, Atlanta, Georgia 30342, Attention: Investor Relations, telephone
number (404) 303-6100. In order to ensure timely delivery of such documents, any
request for documents should be submitted not later than five business days
before the date of the EQK Annual Meeting.

The following documents, heretofore filed by ART with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference, except as
superseded or modified herein:

1. ART's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, as filed with the Commission on March 31, 1999, as amended by ART's Annual
Report on Form 10-K/A, as filed with the Commission on April 19, 1999.

2. The Annual Report on Form 10-K for Continental Mortgage and Equity Trust
("CMET") for the year ended December 31, 1998, as filed with the Commission on
March 25, 1999.

3. The Annual Report on Form 10-K for Income Opportunity Realty Investors,
Inc. ("IORI") for the year ended December 31, 1998, as filed with the Commission
on March 25, 1999.

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<PAGE> 11

4. The Annual Report on Form 10-K for Transcontinental Realty Investors,
Inc. ("TCI") for the year ended December 31, 1998, as filed with the Commission
on March 26, 1999.

5. TCI's Current Report on Form 8-K dated December 2, 1998, as filed with
the Commission on February 18, 1999.

6. The Annual Report on Form 10-K for National Realty, L.P. ("NRLP") for
the year ended December 31, 1998, as filed with the Commission on March 26,
1999.

7. The description of the Common Stock contained in ART's Registration
Statement under Section 12 of the Exchange Act and all amendments and reports
filed for the purpose of updating that description.

In addition, the following documents, heretofore filed by EQK with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:

1. EQK's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, as filed with the Commission on March 31, 1999.

Any statement contained herein or in a document that is deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus/Proxy Statement to the extent that a statement
contained herein or in any other subsequently filed amendment hereto modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus/Proxy Statement.

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<PAGE> 12

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION............................................................................................ii

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE...............................................................iii

SUMMARY OF TERMS..................................................................................................1
General.....................................................................................................1
Future Proposals of Stockholders............................................................................1
ART's Purpose for the Merger................................................................................1
Summary of Risk Factors.....................................................................................2
ART.........................................................................................................3
Business of ART.............................................................................................3
ART Newco...................................................................................................4
EQK.........................................................................................................4
Business of EQK.............................................................................................5
Merger Proposal.............................................................................................5
Declaration Amendment Proposal.............................................................................11
New Advisory Agreement Proposal............................................................................12
Board Election Proposal....................................................................................12
New York Stock Exchange Listing of ART Preferred Shares....................................................12
Regulatory Approval........................................................................................12
The EQK Annual Meeting.....................................................................................12
Federal Income Tax Considerations..........................................................................13
Description of ART Preferred Shares........................................................................13
Description of EQK Shares..................................................................................14
The Dealer Manager.........................................................................................15
Market and Trading Information.............................................................................15
Comparative Per Share Data.................................................................................16

RISK FACTORS.....................................................................................................18
Possible Detrimental Effects of the Merger.................................................................18
Dilution of Current EQK Shareholders and Likely Decline in Trading Price per EQK Share. ...............18
Anti-Takeover Effect. .................................................................................18
Leverage of EQK after the Merger........................................................................18
Benefits to LLPM. ......................................................................................18
Conflicts of Interest Between LLPM and EQK..............................................................18
Conflicts of Interest Between EQK and BCM...............................................................18
Pro Forma Net Losses and Accumulated Deficit for the Future Combined Entity.............................19
ART Preferred Shares.......................................................................................19
Application for the Listing and Trading of ART Preferred Shares and Possible Subsequent Delisting.......19
Reliance on the ART Board to Declare Dividends on the ART Preferred Shares..............................19
Risks Associated with Conversion Feature................................................................19
Possibility that an Active Trading Market Will Not Exist for the ART Common Shares When the ART
Preferred Shares are Converted.................................................................20
Potential Adverse Consequences of the Declaration Amendment Proposal.......................................20
Effect of Limits on Ownership and Issuance of Additional EQK Shares or other Securities.................20
Extension of Finite Life of EQK.........................................................................20
</TABLE>

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<TABLE>
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Changes in EQK's Policies without Shareholder Approval..................................................21
Removal of Prohibitions and Restrictions from Certain Activities and Investments........................21
Possible Issuance of Additional EQK Shares or Other Securities..........................................21
Potential Adverse Consequences Associated with Affiliate of Controlling Shareholder of New Advisor.........21
Correlation between the Value of the ART Preferred Shares and the Success of ART's Business................22
Recent Operating History................................................................................22
Changes in ART's Policies Without Stockholder Approval..................................................22
Investments in Real Property............................................................................22
Nature of Investments Made by ART May Involve High Risk; Illiquidity of Real Estate Investments.........22
Difficulty of Locating Suitable Investments; Competition................................................22
General Investment Risks Associated With Acquisition Activities.........................................23
Dependence on Rental Income from Real Property..........................................................23
Properties that Serve as Collateral for ART's Mortgage Notes Receivable.................................23
Operating Risks of ART's Properties.....................................................................24
Possible Inability to Meet Payments on Debt Financing...................................................24
Possible Inability to Refinance Existing Indebtedness...................................................24
Existing Debt Maturities................................................................................24
Rising Interest Rates on Variable Rate Debt.............................................................25
Covenants...............................................................................................25
Lack of Control and Other Risks of Equity Investments in and with Third Parties.........................25
Investments in Non-Recourse Mortgage Loans..............................................................25
Limitations on Remedies.................................................................................26
Possibility of Uninsured Loss on Uninsurable or Economically Uninsurable Properties.....................26
Costs of Compliance with the Americans with Disabilities Act and Similar Laws...........................26
Potential Environmental Liability Affecting ART.........................................................26
Noncompliance with Other Laws...........................................................................27
Changes in Laws.........................................................................................27
Dependence on Key Personnel.............................................................................27
Correlation between the Value of the EQK Shares and the Success of EQK's Business..........................27
Possible Loss of NOLs...................................................................................27

RATIO OF EARNINGS TO FIXED CHARGES...............................................................................28

USE OF PROCEEDS..................................................................................................28

THE EQK ANNUAL MEETING...........................................................................................28
Introduction...............................................................................................28
Date, Time and Place of Meetings...........................................................................28
Matters to Be Considered at the EQK Annual Meeting.........................................................28
Record Date and Vote Required..............................................................................28
Proxy......................................................................................................29
Solicitation of Proxies....................................................................................29
Other Matters..............................................................................................29

THE PROPOSED MERGER AND RELATED MATTERS..........................................................................30
Background of the Merger...................................................................................30
General....................................................................................................34
Effects of the Merger......................................................................................34
Effective Time of the Merger...............................................................................34
Terms of the Merger........................................................................................34
</TABLE>

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<TABLE>
<S> <C>
Cash in Lieu of Fractional Shares of ART Preferred Shares..................................................35
Availability of Appraisal Rights...........................................................................35
Conditions to the Merger; Termination; Waiver and Amendment................................................35
Solicitation Permitted; Board Action; Fees and Expenses....................................................36
Conduct of EQK's Businesses Pending Completion of the Merger...............................................37
Sale of the Center and Acquisition of Oak Tree Village.....................................................37
ART's Purposes for the Merger..............................................................................40
The EQK Board Recommendation...............................................................................40
Federal Income Tax Consequences............................................................................41
Dividend Payments.......................................................................................42
Redemption, Sales and Exchanges.........................................................................43
ART Preferred Shares; Conversion into ART Common Shares.................................................43
Redemption Premium......................................................................................43
Adjustment of Conversion Price..........................................................................44
Special Tax Rules Applicable to Foreign Holders.........................................................44
Dividends...............................................................................................44
Gain on Disposition of ART Preferred Shares or ART Common Shares........................................44
United States Federal Income Tax........................................................................45
Back-up Withholding.....................................................................................45
Effect of Merger on Market for EQK Shares; Registration Under the Exchange Act.............................45
Fees and Expenses in Connection with the Merger............................................................46
Accounting Treatment.......................................................................................46
Stock Exchange Listing.....................................................................................46
EQK Litigation.............................................................................................46

THE DECLARATION AMENDMENT PROPOSAL...............................................................................46
Extension of the Duration and Termination of the Trust..................................................47
Removal of Limitation of Number of Authorized EQK Shares................................................47
Reduction of the Number of EQK Shareholders Required to Vote on Certain Matters.........................47
Removal of Prohibitions and Restrictions from Certain Activities and Investments........................47
Removal of Prohibitions on the Issuance of EQK Shares and other Securities. ............................47
Removal of Borrowing Restrictions. .....................................................................47
Revision of Trustee Provisions..........................................................................47
Ownership Limit.........................................................................................47
Change the Name of EQK..................................................................................48
Reduction of the Number of EQK Trustees Required to Vote on Certain Matters.............................48
Change in Organizational Structure of EQK...............................................................48

THE NEW ADVISORY AGREEMENT PROPOSAL..............................................................................48

THE BOARD ELECTION PROPOSAL......................................................................................49

DESCRIPTION OF ART...............................................................................................52

EXECUTIVE COMPENSATION OF ART....................................................................................53

THE BUSINESS OF ART..............................................................................................54
General....................................................................................................54
Geographic Regions.........................................................................................56
Real Estate................................................................................................56
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<TABLE>
<S> <C>
Types of Real Estate Investments........................................................................56
Properties Held for Investment..........................................................................58
Properties Held for Sale................................................................................66
Competition.............................................................................................72
Mortgage Loans.............................................................................................72
Types of Mortgage Activity..............................................................................72
Types of Properties Subject to Mortgages................................................................72
First Mortgage Loans....................................................................................73
Wraparound Mortgage Loans...............................................................................74
Junior Mortgage Loans...................................................................................74
Investments in Real Estate Investment Trusts and Real Estate Partnerships..................................74
NRLP ...............................................................................................76
CMET ...............................................................................................78
IORI ...............................................................................................78
TCI ...............................................................................................79
River Trails II.........................................................................................79
R. G. Bond, Ltd.........................................................................................79
Campbell Center Associates, Ltd.........................................................................79
Highway 380/Preston Partners, Ltd.......................................................................80
Elm Fork Branch Partners, Ltd...........................................................................80

SELECTED FINANCIAL DATA OF ART...................................................................................81

ART MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF ART...........................................................................82
Introduction...............................................................................................82
Liquidity and Capital Resources............................................................................82
Notes Receivable........................................................................................83
Loans Payable...........................................................................................83
Equity Investments......................................................................................84
Results of Operations......................................................................................84
1998 Compared to 1997...................................................................................84
1997 Compared to 1996...................................................................................86
Environmental Matters......................................................................................88
Inflation..................................................................................................88
Year 2000..................................................................................................88

DESCRIPTION OF THE CAPITAL STOCK OF ART..........................................................................88
General....................................................................................................88
ART Preferred Shares.......................................................................................89
ART Common Shares..........................................................................................90
Special Stock..............................................................................................90
Series A Preferred Stock; Terminated Rights Plan........................................................90
Series B Preferred Stock................................................................................90
Series C Preferred Stock................................................................................91
Series D Preferred Stock................................................................................91
Series E Preferred Stock................................................................................91
Series G Preferred Stock................................................................................92
Series H Preferred Stock................................................................................92
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<TABLE>
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DESCRIPTION OF EQK...............................................................................................93

THE BUSINESS OF EQK..............................................................................................94
General....................................................................................................94
Mortgage Debt..............................................................................................94
Summary of the Existing Declaration of Trust...............................................................96
Trustees................................................................................................96
Shareholder Liability...................................................................................96
Redemption and Prohibition of Transfer of Shares........................................................97
Duration and Termination of EQK.........................................................................97
Transactions with Affiliates............................................................................97
Amendment of Declaration of Trust; Merger...............................................................97
Prohibited Activities and Investments...................................................................97
Property Management Agreement..............................................................................97

SELECTED FINANCIAL DATA OF EQK...................................................................................98

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF EQK......................................................101
Capital Resources.........................................................................................101
Liquidity.................................................................................................104
Year 2000.................................................................................................105
Results of Operations.....................................................................................105

DESCRIPTION OF THE EQK SHARES...................................................................................107

COMPARISON OF EQK SHARES TO ART PREFERRED SHARES................................................................108

DESCRIPTION OF THE HARRISBURG EAST MALL.........................................................................110
General...................................................................................................110
Location and Trade Area Overview..........................................................................110
Anchor Tenants............................................................................................111
Mall and Other Tenants....................................................................................111
Lease Expirations.........................................................................................112
Capital Requirements......................................................................................112
Occupancy Data and Average Effective Annual Rent..........................................................113
Competition...............................................................................................114
Debt ....................................................................................................115
Physical Description of Buildings.........................................................................115
Physical Improvements.....................................................................................115
Appraisal of the Center...................................................................................116
Real Estate Taxes ........................................................................................116
Depreciation..............................................................................................116
Additional Information....................................................................................117

SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF ART AND EQK......................................117

PLAN OF DISTRIBUTION............................................................................................126

LEGAL MATTERS...................................................................................................126
</TABLE>

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<TABLE>
<S> <C>
EXPERTS.........................................................................................................126

INDEX TO FINANCIAL STATEMENTS...................................................................................F-1
</TABLE>

APPENDICES:

APPENDIX A - Glossary of Select Terms
APPENDIX B - Amended and Restated Merger Agreement
APPENDIX C - New Advisory Agreement
APPENDIX D - Second Amended and Restated Declaration of Trust of EQK

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<PAGE> 18

SUMMARY OF TERMS

The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the documents
incorporated herein by reference. Certain capitalized terms used herein may be
defined elsewhere in this Prospectus/Proxy Statement. See "Glossary of Selected
Terms" included as Appendix A to this Prospectus/Proxy Statement.

GENERAL

This Prospectus/Proxy Statement relates to the EQK Annual Meeting at which
the EQK Shareholders will consider and vote upon the following proposals:

(1) The Merger Agreement and the Merger (the "Merger Proposal");

(2) An amendment and restatement of EQK's Amended and Restated Declaration
of Trust dated February 27, 1985, as amended on March 5, 1986 (the "Declaration
of Trust"), as described herein (the "Declaration Amendment Proposal");

(3) The termination of LLPM's rights and obligations under the advisory
agreement between LLPM and EQK (the "Advisory Agreement") and the execution by
EQK of a new advisory agreement (the "New Advisory Agreement") between EQK and
Basic Capital Management, Inc., a Nevada corporation and an affiliate of and
advisor to ART ("BCM"), as the new advisor to EQK (the "New Advisory Agreement
Proposal");

(4) The election of the EQK Board (the "Board Election Proposal"); and

(5) Such other business as may properly come before the EQK Annual Meeting
or any adjournment thereof.

The Board Election Proposal will require the affirmative vote of EQK
Shareholders representing a majority of the total votes authorized to be cast by
EQK Shares then outstanding which are present at the EQK Annual Meeting in
person or by proxy and entitled to vote thereon. The Merger Proposal, the
Declaration Amendment Proposal and the New Advisory Agreement Proposal
(collectively, the "Merger-Related Proposals") will each require the affirmative
vote of EQK Shareholders representing three-quarters of the total votes
authorized to be cast by EQK Shares then outstanding (the "Requisite Shareholder
Approval"). None of the Merger-Related Proposals will take effect unless all
such proposals receive the Requisite Shareholder Approval. In addition, none of
the Merger-Related Proposals will take effect unless EQK first completes the
sale of its last remaining real estate asset, the Center, and makes a
distribution of EQK's net liquid assets after such sale. The Board Election
Proposal and the Merger-Related Proposals are referred to herein collectively as
the "Proposals."

FUTURE PROPOSALS OF STOCKHOLDERS

Any proposal intended to be presented by an EQK Stockholder at the 2000
Annual Meeting of EQK Shareholders must be received at EQK's principal office
not later than ____ ___, ____, in order to be considered for that meeting.

ART'S PURPOSE FOR THE MERGER

ART intends to acquire an aggregate of 5,050,032 EQK Shares pursuant to the
Block Purchase and the Merger for the purpose of investment and in order to
achieve the listing of the ART Preferred Shares on the NYSE. The ART Board
believes that the issuance and the proposed listing of the ART Preferred Shares
on the NYSE in connection with the Merger would provide ART with greater access
to the public capital markets for future acquisition transactions. The ART Board
also considered the amount of EQK's net operating loss carryovers (the "NOLs")
which approximate $95,000,000 as of December 31, 1998 and the resulting benefits
to ART of acquiring an indirect interest in such NOLs through EQK pursuant to
the Merger. Assuming market conditions, industry conditions and EQK's business
and

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<PAGE> 19

financial condition do not suffer adversely in the interim, it is currently
ART's intention (but not obligation) to seek to acquire substantially all of the
remaining outstanding EQK Shares at some time after the third anniversary of the
consummation of the Merger for consideration of 0.0486 of an ART Preferred Share
(with a Liquidation Value for such portion of an ART Share of $0.486) per
currently outstanding EQK Share. Notwithstanding the foregoing, ART is not
obligated to make any further acquisition of EQK Shares and no assurance can be
given that ART will make any such acquisitions in the future. In addition, any
such acquisitions may be for a consideration per EQK Share which is greater or
less than the consideration offered in the Merger.

SUMMARY OF RISK FACTORS

In considering whether or not to vote in favor of the Merger-Related
Proposals, EQK Shareholders should carefully consider all of the information set
forth in this Prospectus/Proxy Statement and, in particular, should evaluate the
factors set forth under the caption "Risk Factors" herein. Such factors include,
among other things:

o Dilution of Current EQK Shareholders and Likely Decline in Trading
Price per EQK Share. If the Merger is consummated, the percentage ownership of
the Public EQK Shareholders in EQK will be diluted as a result of the issuance
of EQK Shares to ART as the ART Merger Consideration. Accordingly, after the
Merger, the trading price of the EQK Shares is likely to decline as a result of
such dilution.

o Application for the Listing and Trading of ART Preferred Shares and
Possible Subsequent Delisting. As of December 31, 1998, there were 3,350,000 ART
Preferred Shares outstanding, 2,200,000 of which are not held by affiliates of
ART (1,948,797 ART Preferred Shares have been reserved for issuance as future
consideration in various business transactions of ART); however, there is
currently no established public market for the ART Preferred Shares. While the
listing of the ART Preferred Shares on the NYSE is a condition precedent to
EQK's obligation to consummate the Merger, there can be no assurance that an
active market for the ART Preferred Shares will develop or be sustained in the
future on such exchange if the listing is approved. Listing of the ART Preferred
Shares will also depend upon the satisfaction of the NYSE's listing requirements
as described herein under "Risk Factors -- Risks Relating to the ART Preferred
Shares -- Risks Relating to the Listing and Trading of the ART Preferred
Shares."

o Reliance on the ART Board to Declare Dividends on the ART Preferred
Shares. Although dividends accrue cumulatively on the ART Preferred Shares from
the date of issuance, such dividends will not be paid unless and until they are
declared by the ART Board. Holders of ART Preferred Shares will not have the
authority to direct or compel the ART Board to declare dividends with respect to
the ART Preferred Shares.

o Potential Adverse Consequences of the Declaration Amendment Proposal.
Subject to the Requisite Shareholder Approval of the Declaration Amendment
Proposal, EQK's Declaration of Trust will be amended to provide for, among other
things, (i) the Ownership Limit; (ii) an extension of the finite life of EQK
through December 31, 2018, (iii) the ability to change investment, financing,
borrowing and distribution policies without shareholder approval, (iv) the
removal of prohibitions from certain activities and investments, and (v) the
ability to issue additional EQK Shares and other types of securities. Such
amendments will, among other things, expand the scope of the actions that may be
taken by the New EQK Board (as defined herein under "The Board Election
Proposal") without shareholder approval. See "Risk Factors -- Potential Adverse
Consequences of the Declaration Amendment Proposal" and "The Declaration
Amendment Proposal."

o Anti-Takeover Effect. If the Merger and the Block Purchase are
consummated, ART will acquire an aggregate of 5,050,032 EQK Shares, or
approximately 49% of the EQK Shares to be outstanding after the Merger. As a
result of the foregoing and the effect of the Ownership Limit (as defined below
under "--Declaration Amendment Proposal"), third party attempts to acquire
control of EQK may not be practicable. Accordingly, if the Merger is approved,
it is unlikely that an attempted take-over of EQK, which might result in an
increase in the price at which EQK Shares could be sold, will occur.

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<PAGE> 20

o The Value of the ART Preferred Shares is Substantially related to the
Success of ART's Business. The future value of the ART Preferred Shares will be
substantially dependent upon the results of ART's business, which is subject to
a number of risks as generally described herein under "Risk Factors -- Risks
Relating to ART's Business."

o The Value of the EQK Shares is Substantially Related to the Success
of EQK's Business. The future value of the EQK Shares will be substantially
dependent upon the results of EQK's business, which is subject to many of the
same risks to which ART is subject, in addition to the risks described below.
However, after the sale of the Center and the distribution of EQK's net liquid
assets to the EQK Shareholders, EQK will have limited assets and limited or no
capital.

o Possible Loss of NOLs. EQK currently has NOLs for federal income tax
purposes of approximately $95,000,000, prior to the anticipated utilization of a
portion of these NOLs to offset the taxable gain expected to be realized upon
the sale of Harrisburg East Mall. In general, such NOLs may be used to offset
any taxable gains realized upon the sale of EQK's assets so long as there is not
more than a 50 percentage point change in the ownership of the EQK Shares during
any three year period. In the event that there is more than a 50 percentage
point change in the ownership of EQK Shares during a three year period, the
availability of such NOLs to offset taxable gains or income would be reduced to
a very significant extent. Although it is not expected that the Merger, the
Block Purchase or the Standstill Agreements (as defined in "--Merger Proposal --
Conditions of the Merger") would reduce the availability of the NOLs, future
transfers of EQK Shares may be made over which ART will have no control. A
reduction in the availability of such NOLs could have a material adverse effect
on the market value of EQK and the EQK Shares.

o Sale of the Center. As described below under "--Business of EQK," EQK
has negotiated a forbearance agreement with the holder of its existing mortgage
debt (aggregating $45,374,000 as of December 31, 1998) until June 15, 1999.
Pursuant to the Merger Agreement, ART has agreed to permit EQK to sell the
Center and distribute the remaining net liquid assets to the EQK Shareholders
(including LLPM, Summit, Sutter and Halperin) as a condition precedent to the
Merger. Upon consummation of the sale of the Center and the distribution of the
net proceeds therefrom to the EQK Shareholders, the market value of the EQK
Shares will be substantially reduced and it is unlikely that EQK will have
sufficient net earnings available for future distributions to EQK Shareholders.

ART

ART, a Georgia corporation, is the successor to a District of Columbia
business trust organized pursuant to a declaration of trust dated July 14, 1961.
The business trust merged into ART on June 24, 1988. ART elected to be treated
as a real estate investment trust ("REIT") under applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code") during the period from
July 1, 1987 through December 31, 1990. ART allowed its REIT status to lapse in
1991.

ART, through a wholly owned subsidiary, Pizza World Supreme, Inc. ("PWSI"),
also operates and franchises pizza parlors featuring pizza delivery, carry-out
and dine-in under the trademark "Me-N-Ed's" in California and Texas. The first
Me-N-Ed's pizza parlor opened in 1962. At December 31, 1998, there were 57
Me-N-Ed's pizza parlors in operation, consisting of 51 owned and six franchised
pizza parlors. Seven of the owned pizza parlors were in Texas and the remainder
were in California.

ART's principal offices are located at 10670 North Central Expressway,
Suite 300, Dallas, Texas 75231. ART's telephone number is (214) 692-4700. See
"Description of ART."

BUSINESS OF ART

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<PAGE> 21

has invested in private and open market purchases in the equity securities of
CMET, IORI, TCI and NRLP, each of which is an affiliate of ART.

The ART Board has broad authority under ART's governing documents to make
all types of real estate investments, including investments in mortgage loans
and equity real estate investments, as well as investments in the securities of
other entities, regardless of whether such entities are engaged in real
estate-related activities.

Although the ART Board is directly responsible for managing ART's affairs
and for setting the policies which guide it, the day-to-day operations of ART
are conducted by BCM, an affiliate of and advisor to ART. BCM is a contractual
advisor to ART under the supervision of the ART Board. The duties of BCM
include, among other things, locating, investigating, evaluating and
recommending real estate and mortgage note investment and sales opportunities,
as well as financing and refinancing sources for ART. BCM also serves as a
consultant in connection with ART's business plan and investment policy
decisions made by the ART Board.

ART's businesses are not seasonal. With regard to real estate, ART is
seeking both current income and capital appreciation. ART's plan of operation is
to continue, to the extent its liquidity permits, to make equity investments in
income producing real estate such as apartment complexes and commercial
properties or equity securities of real estate-related entities and to continue
to service and hold for investment mortgage loans. ART also intends to pursue
higher risk, higher reward investments, such as unimproved land, where it can
obtain financing of a significant portion of a property's purchase price. In
addition, ART will continue to seek selected dispositions of certain of its
assets where the prices obtainable for such assets justify their disposition.
For a detailed description of ART's business, see "The Business of ART."

ART NEWCO

ART Newco is a limited liability company formed under the laws of the
Commonwealth of Massachusetts. The members of ART Newco consist of ART and ART
Newco Holdings, LLC, a Texas limited liability company, of which ART is the sole
member. ART Newco was formed specifically for purposes of the Merger and, as
described herein, subject to the Requisite Shareholder Approval, will be merged
with and into EQK pursuant to the Merger.

EQK

EQK was formed pursuant to the filing of its initial declaration of trust
on October 8, 1984. LLPM currently acts as the advisor (in such capacity, the
"Advisor") to EQK. On June 10, 1997, Lend Lease Corporation, an Australian
public property and financial services company, acquired Equitable Real Estate
Investment Management, Inc. ("ERE"), including two of its subsidiaries, LLPM
(formerly Equitable Realty Portfolio Management) and Compass Retail, Inc.
("Compass") from The Equitable Life Assurance Society of the United States
("Equitable"). ERE and certain of its business units, including the Advisor,
currently operate under the name "Lend Lease." Upon consummation of the Merger,
subject to Requisite Shareholder Approval of the Merger-Related Proposals, LLPM
has agreed to terminate its rights and duties as Advisor under the Advisory
Agreement, at which time BCM, an affiliate of and advisor to ART, will become
the new advisor to EQK (in such capacity, the "New Advisor") under the New
Advisory Agreement.

The principal executive offices of EQK and LLPM are located at 3424
Peachtree Road, Suite 800, Atlanta, Georgia, 30326, and their telephone number
is (404) 303-6100. See "Description of EQK."

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<PAGE> 22

BUSINESS OF EQK

EQK was formed for the purpose of acquiring three substantially unleveraged
income-producing properties. EQK sold two of such properties, one in
transactions in 1992 and 1993 and the other in transactions in 1991 and 1995.
The Center is currently EQK's only real estate investment. The Center is a
two-level enclosed regional mall shopping center located approximately three
miles from the central business district of Harrisburg, Pennsylvania. EQK is
currently a closed-end trust (i.e., it may not issue any additional EQK Shares
without the approval of holders of three-quarters of the outstanding EQK
Shares), and, except in limited circumstances, it may not make any additional
real estate investments and must distribute to its shareholders the net proceeds
from each sale and financing of any investment. Consequently, EQK is currently a
self-liquidating trust. As described below, upon consummation of the Merger,
subject to the Requisite Shareholder Approval, the Declaration of Trust will be
amended to extend the term of EQK until December 31, 2018 and to permit EQK to
issue additional equity securities and to make all types of real estate
investments, including, without limitation, acquisitions of additional real
property. See "Risk Factors -- Potential Adverse Consequences of the Declaration
Amendment Proposal -- Extension of Finite Life of EQK."

Pursuant to the Merger Agreement, ART has agreed to permit EQK to sell the
Center and to distribute the net liquid assets to the EQK Shareholders as a
condition precedent to the Merger. On March 5, 1999, EQK announced that it had
entered into a non-binding letter of intent (the "Letter of Intent") to sell the
Center to a private real estate group for $51 million. A second quarter closing
is anticipated. Closing is subject to a number of conditions, including the
satisfactory completion of due diligence, the purchaser's obtaining financing
and the execution of a definitive purchase and sale agreement. Accordingly,
there is no assurance that a sale will be completed at the current price or at
all. If the sale is completed at this price, a distribution to shareholders of
approximately $0.37 per share is expected to be made. The distribution may be
made in two or more disbursements, and the actual distribution may be a
materially different amount. The amount may be decreased by, among other
factors, a decrease in the sale price of the Center or an increase in
transaction costs or other liabilities beyond those currently estimated. The
amount may be increased by, among other factors, a favorable settlement of
transaction costs and other liabilities payable by EQK. In the event the ART
Merger is completed as described above, the EQK Merger Consideration will be in
addition to the actual distribution resulting from the Center's disposition. The
Letter of Intent provides that EQK may not solicit, negotiate or execute other
offers for the sale of the Center prior to May 15, 1999 unless the prospective
purchaser terminates negotiations under the Letter of Intent prior to that date.
Subject to Requisite Shareholder Approval of the Merger Related Proposals, EQK
has agreed to acquire from ART a retail shopping center known as "Oak Tree
Village" located in Lubbock, Texas ("Oak Tree Village") upon the terms and
conditions described herein under "The Proposed Merger and Related Matters --
Sale of the Center and Acquisition of Oak Tree Village."

MERGER PROPOSAL

Background of the Merger. On March 5, 1996, Mr. Doug Tibetts, President of
Equitable (formerly the indirect parent of LLPM which holds 1,685,556 EQK
Shares), met with ART representatives at ART's office in Dallas. The meeting was
general in nature without a formal agenda. Mr. Tibetts suggested that
representatives of ART speak with Mr. Gregory R. Greenfield, Executive Vice
President and Treasurer of EQK, concerning the possible sale of EQK. During
March and April of 1996, various telephone conversations were held between Mr.
Cooper B. Stuart, an Executive Vice President of BCM, an affiliate of and
advisor to ART, and Mr. Greenfield regarding the Center and a possible
transaction involving EQK.

In August of 1996, Messrs. Stuart and Greenfield had various additional
discussions regarding the possible sale of EQK. Mr. Greenfield informed Mr.
Stuart that EQK needed to focus on completing the sale of certain properties and
Messrs. Stuart and Greenfield agreed to discontinue their discussions until the
beginning of 1997.

On January 23, 1997, representatives of ART held a meeting with Mr. William
G. Brown, Vice President and Controller of EQK, and Mr. Greenfield to discuss a
proposed exchange offer by ART with respect to the EQK Shares. EQK agreed to
engage an independent financial advisor (the "Financial Advisor") to review the
fairness of the proposed exchange offer for the EQK Board.

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<PAGE> 23

On February 20, 1997, Mr. Stuart and Mr. A. Cal Rossi, Jr., an Executive
Vice President of BCM, met with Messrs. Greenfield and Brown to further discuss
the proposed exchange offer pursuant to which ART would offer to exchange a
combination of cash and ART Preferred Shares for up to 50% of the outstanding
EQK Shares.

On March 6, 1997, ART and EQK entered into a cost sharing agreement with
respect to the proposed exchange offer. Under the terms of such agreement, (i)
if ART and EQK do not execute a definitive agreement, EQK's liability would
shall be limited to the lesser of 50% of the actual transaction costs or $50,000
and ART shall be responsible for all additional transaction costs, (ii) if ART
and EQK agree upon the terms of and execute a definitive agreement and proceed
in good faith to complete the proposed transaction, but are unsuccessful in this
effort by reason of inadequate shareholder response to the related proxy
statement or otherwise, EQK's liability shall be limited to the lesser of 50% of
the actual transaction costs or $100,000, and ART shall be responsible for all
additional transaction costs, and (iii) if the proposed transaction is
ultimately initiated and successfully achieves the desired shareholder exchange
in accordance with the terms of a definitive agreement, EQK's liability shall be
limited to the lesser of 50% of the actual transaction costs or $150,000, and
ART shall be responsible for all additional transaction costs.

On March 24, 1997, representatives of the Financial Advisor visited ART's
offices to interview key personnel of both ART and BCM.

During April 1997, discussions continued between representatives of ART and
EQK concerning the terms of the ART Preferred Shares, the terms of the proposed
exchange offer and the fairness opinion. Although an offer was never extended,
ART informally proposed to offer to exchange a combination of (i) cash of
approximately $0.40/share and (ii) ART Preferred Shares having a liquidation
value of approximately $1.85 for up to 50% of the outstanding EQK Shares. EQK
had 9,264,344 shares outstanding and The Prudential Insurance Company of America
("Prudential"), the lender on the Center, held warrants to acquire 367,868
shares (the "Prudential Warrants"), for a total of 9,632,212 shares. The ART
Preferred Shares would pay a 10% annual dividend beginning August 16, 1998 and
have a stated liquidation value of $10.00 per ART Preferred Share, plus accrued
and unpaid dividends. If the proposed exchange offer was 100% successful and ART
acquired 4,632,172 shares of EQK and if the actual exchange offer was the same
as that informally discussed, ART would have paid $1,852,869 in cash and issued
856,952 ART Preferred Shares (having a liquidation value of $8,569,520). The
terms of the ART Preferred Shares have not changed in any material manner from
those preliminary discussions. For a description of the ART Preferred Shares see
"Description of the Capital Stock of ART -- ART Preferred Shares." On April 11,
1997, BCM received from EQK a copy of a draft appraisal with respect to the
leasehold interests in the Center. On May 7, 1997, the Financial Advisor orally
issued a fairness opinion with respect to the terms of the proposed exchange
offer. The EQK Board met on May 7, 1997 and approved the terms of the proposed
exchange offer from ART to the EQK Shareholders.

On June 10, 1997, Lend Lease Corporation acquired ERE, including its
subsidiaries, LLPM and Compass. In connection with such acquisition, the
ownership of LLPM's EQK Shares was transferred for tax purposes, thus
effectively limiting the number of EQK Shares that could be acquired by ART in
an exchange offer without limiting the availability of EQK's NOLs. As a result,
during June and July of 1997, Mr. Stuart and Mr. Brown held further discussions
regarding a proposed change in the structure of the transaction from an exchange
offer to a merger and two separate stock purchases between ART and each holder
of 5% or more of the EQK Shares (excluding ART) (each a "5% Holder") who had
acquired or experienced a change in ownership in EQK Shares during the past
three years. The merger would result in the EQK Shareholders (other than LLPM
and Greenspring Fund, Incorporated ("Greenspring") which would sell all of their
shares in the stock purchase transactions) retaining all of their EQK Shares and
receiving a combination of cash and ART Preferred Shares. The public EQK
Shareholders' aggregate percentage interest in EQK would be reduced as a result
of the issuance of EQK Shares to ART pursuant to the merger. This reduction in
percentage interest would effectively be equivalent to the sale by each public
EQK Shareholder of approximately 25% of such EQK Shareholder's shares at the
same price per share ($.40 in cash and a portion of an ART Preferred Share with
a Liquidation Value of $1.85) as was to be offered in the exchange offer. It was
then contemplated that LLPM and Greenspring would receive for each EQK Share
sold by them a portion of an ART Preferred Share with a Liquidation Value of
$2.25.

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<PAGE> 24

On July 9, 1997, ART and EQK entered into a revised cost sharing agreement
that reflected the change in the proposed structure of the transaction from an
exchange offer to a merger. The terms and conditions of the revised cost sharing
agreement remained substantially the same.

As a further condition precedent to the Merger, ART agreed to offer to
enter into a Standstill Agreement with each 5% Holder of EQK Shares (other than
LLPM and Greenspring) whereby ART would pay $0.10 per existing EQK Share held by
the two remaining 5% Holders (paid on a maximum of 2,156,600 shares or a maximum
of $215,660 in cash) as compensation for such holder's agreement not to sell any
of its EQK Shares or acquire any additional EQK Shares for a period of 42 months
after the consummation of the Merger.

As consideration for the Merger, the Public EQK Shareholders would have
been entitled to receive approximately 453,552 ART Preferred Shares (having a
liquidation value of $4,535,519) and $1,884,891 in cash. Each Public EQK
Shareholder would also have been entitled to retain its EQK Shares. In addition,
as consideration for the Merger, ART would be entitled to receive 4,804,761
newly-issued EQK Shares.

ART had also agreed to issue 333,500 ART Preferred Shares (having a
Liquidation Value of $3,335,000) to LLPM in settlement of deferred advisory and
disposition fees owed by EQK to LLPM under the Advisory Agreement. One-half of
the deferred advisory fee (136,000 ART Preferred Shares having a Liquidation
Value of $1,360,000) would have been paid to LLPM at closing, and the other half
would have been paid to LLPM three years after the Closing Date. BCM would act
as successor advisor to EQK under the terms and conditions of a new advisory
agreement.

On September 30, 1997, the Financial Advisor orally issued a revised
fairness opinion with respect to the proposed Merger.

On September 30, 1997 and November 13, 1997, the EQK Board and the ART
Board, respectively, approved the terms of the initial Agreement and Plan of
Merger (the "Original Merger Agreement").

In October 1997 Mr. Brown contacted Greenspring regarding its interest in
the Block Purchase. From September 30, 1997 until December 24, 1997 the parties
held numerous telephone conferences to finalize the definitive agreements for
the Merger and Block Purchase.

On December 24, 1997, ART and EQK issued a joint press release to the
effect that the Original Merger Agreement had been signed.

On January 6, 1998, ART filed the Registration Statement with the
Commission.

On January 21, 1998, ART filed Amendment No. 1 to the Registration
Statement.

In January 1998, Halperin filed a Schedule 13D with the Commission
disclosing that he had purchased 854,200 EQK Shares during the period from
December 26, 1997 through January 20, 1998 (the "Halperin Purchase"). During
January and February of 1998, Messrs. Stuart and Brown had several discussions
regarding the Halperin Purchase. After

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<PAGE> 25

consulting with its counsel, ART decided that it would make an offer to Halperin
to purchase his EQK Shares after the Registration Statement had been declared
effective by the Commission. Such offer would be made upon the same terms and
conditions as ART's offer to purchase the EQK Shares held by LLPM and
Greenspring. If Halperin declines such offer, ART will amend the Registration
Statement to reflect such fact, but the consideration to be paid to the Public
EQK Shareholders, LLPM and Greenspring in connection with the Merger and the
Block Purchase would remain the same.

On February 20, 1998, ART received the Commission's comments to the
Registration Statement.

During March and April 1998, ART and EQK prepared their respective
responses to the Commission's comments to the Registration Statement.

On March 19, 1998, Prudential gave EQK notice of its intent to exercise the
Prudential Warrants. The Prudential Warrants were exercised on April 8, 1998,
and on May 7, 1998, 367,868 EQK Shares were issued to Prudential.

On April 23, 1998, the NYSE announced that trading in the EQK Shares would
be suspended prior to the opening of the NYSE on May 4, 1998 because EQK had
fallen below the NYSE's continued listing criteria for net tangible assets
available to common stock (less than $12 million) and 3-year average net income
(less than $600,000).

During May 1998, Mr. Brown informed Mr. Stuart that the EQK Board had
decided that it was in the best interests of the EQK Shareholders to terminate
the Original Merger Agreement and to sell the Center and distribute the net
liquid assets to the EQK Shareholders. Mr. Brown stated that the EQK Board was
concerned that the Original Merger Agreement would hinder EQK's ability to
consummate a sale of the Center prior to December 15, 1998, the date on which
the forbearance agreement relating to the Center's mortgage terminates.

During May 1998, Mr. Brown and Mr. Stuart held various discussions
regarding the proposed termination of the Original Merger Agreement. On May 15,
1998, Mr. Stuart executed and delivered to Mr. Brown a letter setting forth
ART's desire to continue discussions with EQK for a modified structure and ART's
consent to the proposed sale of the Center prior to the consummation of the
Merger.

During May through August of 1998, Mr. Brown and Messrs. Stuart and Rossi
held further discussions regarding a revised structure for the Merger in which
ART would permit EQK to sell the Center prior to the consummation of the Merger
and EQK would agree to purchase the Oak Tree Village from ART upon terms that
were mutually acceptable to EQK and ART. The parties agreed to reduce the
consideration to be paid by ART in connection with the Merger and the Block
Purchase since the EQK Shareholders (including LLPM, Greenspring and Halperin)
would receive the net proceeds from the sale of the Center. The parties agreed
that the consideration to be paid to LLPM, Greenspring and Halperin in
connection with the Block Purchase would be a portion of an ART Preferred Share
with a liquidation value of $0.328 per EQK Share purchased and the consideration
to be paid to the Public EQK Shareholders would be a portion of an ART Preferred
Share with a liquidation value of $0.157 per EQK Share, with the Public EQK
Shareholders retaining all of their EQK Shares subject to the dilution resulting
from the issuance of additional EQK Shares as the ART Merger Consideration.

As a result of the revised structure and the sale of the Center prior to
the consummation of the Merger, the EQK Board determined that it would no longer
be practicable to obtain a fairness opinion with respect to the Merger. This
determination was based primarily on the fact that, upon the sale of the Center
and the resulting distribution to EQK Shareholders, EQK would have no assets
other than its NOLs, the availability of which is uncertain. Legg Mason
indicated to EQK that, under these circumstances, it would not be able to render
a fairness opinion. In this regard, EQK obtained the right to solicit and
negotiate regarding alternate proposals subject to the obligation to make
certain termination payments under certain specified circumstances as described
under "The Proposed Merger and Related Matters -- Solicitation Permitted; Board
Action; Fees and Expenses."

In August 1998, Summit and Sutter each filed a Schedule 13G with the
Commission disclosing that they had purchased an aggregate of 1,252,500 EQK
Shares (the "Summit/Sutter Purchases"). These purchases were from one

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<PAGE> 26

of the 5% Holders. During August 1998, Messrs. Stuart and Brown had several
discussions regarding the impact of the Summit/Sutter Purchases. One effect of
the Summit/Sutter purchases was to reduce, as a result of tax considerations,
the number of shares that ART could purchase that were held by Public EQK
Shareholders. As a result, the parties determined that the terms of the
consideration for the Merger and the Block Purchases should be adjusted so that
the consideration to be paid to LLPM, Greenspring, Summit, Sutter and Halperin
in connection with the Block Purchase would be a portion of an ART Preferred
Share with a liquidation value of $0.30 per EQK Share purchased and the
consideration to be paid to the Public EQK Shareholders would be a portion of an
ART Preferred Share with a liquidation value of $0.14 per EQK Share, with the
Public EQK Shareholders retaining all of their EQK Shares subject to the
dilution resulting from the issuance of additional EQK Shares as the ART Merger
Consideration. Upon reaching a preliminary agreement as to the consideration for
the Merger and the Block Purchases, ART then offered to purchase from Summit and
Sutter all of their respective EQK Shares upon the same terms and conditions as
the LLPM and Greenspring purchases. Each of Summit and Sutter has accepted ART's
purchase offer. Additionally, on August 27, 1998, Summit and Sutter each
purchased one half of Greenspring's total EQK shares, thereby increasing the
number of shares to be acquired by ART from Summit and Sutter pursuant to the
Block Purchases.

As a condition precedent to the Merger, ART also agreed to offer to enter
into a Standstill Agreement with the remaining 5% Holder (other than LLPM,
Summit, Sutter and Halperin) whereby ART would pay $0.10 per existing EQK Share
held by the such 5% Holder (paid on a maximum of 906,600 shares or a maximum of
$90,660 in cash) as compensation for such 5% Holder's agreement not to sell any
of its EQK Shares or acquire any additional EQK Shares for a period of 42 months
after the consummation of the Merger.

On August 25, 1998, ART and EQK executed the Merger Agreement.

On September 3, 1998, ART filed Amendment No. 2 to the Registration
Statement.

On December 2, 1998, ART filed Amendment No. 3 to the Registration
Statement.

On January 29, 1999, ART filed Amendment No. 4 to the Registration
Statement.

In March 1999, EQK entered into the Letter of Intent to sell the Center to
a private real estate group for $51 million. A second quarter closing is
anticipated. Closing is subject to a number of conditions, including the
satisfactory completion of due diligence, the purchaser's obtaining financing
and the execution of a definitive purchase and sale agreement. Accordingly,
there is no assurance that a sale will be completed at the current price or at
all. If the sale is completed at this price, a distribution to shareholders of
approximately $0.37 per share is expected to be made. The distribution may be
made in two or more disbursements, and the actual distribution may be a
materially different amount. The amount may be decreased by, among other
factors, a decrease in the sale price of the Center or an increase in
transaction costs or other liabilities beyond those currently estimated. The
amount may be increased by, among other factors, a favorable settlement of
transaction costs and other liabilities payable by EQK. In the event the ART
Merger is completed as described above, the EQK Merger Consideration will be in
addition to the actual distribution resulting from the Center's disposition. The
Letter of Intent provides that EQK may not solicit, negotiate or execute other
offers for the sale of the Center prior to May 15, 1999 unless the prospective
purchaser terminates negotiations under the Letter of Intent prior to that date.

EQK Board Recommendation. The EQK Board believes that the Merger is fair
to, and in the best interests of, EQK and the EQK Shareholders. The EQK Board
also believes that the proposed amendments to the Declaration of Trust as
described herein under "The Declaration Amendment Proposal" are in the best
interests of EQK and the EQK Shareholders in order to facilitate the Merger. The
EQK Board has unanimously approved the terms and conditions of the Merger and
the proposed amendments to the Declaration of Trust and the transactions
contemplated thereby as set forth in the Merger Agreement and unanimously
recommends that the EQK Shareholders vote FOR the Declaration Amendment
Proposal, the Merger Proposal and the New Advisory Agreement Proposal. See "The
Proposed Merger and Related Matters."

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<PAGE> 27

Conditions of the Merger. The Merger is conditioned upon, among other
things, (i) EQK's sale of the Center and distribution of the net liquid assets
to the EQK shareholders, (ii) the consummation of the Block Purchase, (iii) the
Requisite Shareholder Approval of the Merger-Related Proposals, (iv) the
acquisition by EQK from ART of the Oak Tree Village upon the terms and
conditions described herein under "The Proposed Merger and Related Matters --
Sale of the Center and Acquisition of Oak Tree Village," (v) the execution by
each 5% Holder (other than LLPM, Summit, Sutter and Halperin) of an agreement
pursuant to which such 5% Holder will receive $0.10 in cash per EQK Share held
by such 5% Holder in exchange for a restriction on the rights of such 5% Holder
to sell or purchase any EQK Shares for a period of 42 months after the
consummation of the Merger (a "Standstill Agreement"), (vi) the authorization of
the ART Preferred Shares for listing on the NYSE, subject to official notice of
issuance, (vii) no stop order suspending the effectiveness of the Registration
Statement having been issued and no proceedings for that purpose having been
initiated or threatened by the Commission, (viii) no order, injunction or decree
issued by any court or agency of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Merger, (ix) the receipt by
ART and EQK of all required material governmental authorizations, permits,
consents, orders or approvals, (x) the receipt of all licenses, permits,
consents, approvals and authorizations from all third parties and governmental
bodies and agencies which are necessary in connection with consummation of the
Merger and the conduct of EQK's business after the Merger (xi) EQK operating in
all respects in its ordinary course of business without any material adverse
change in its business, properties or financial condition, (xii) the receipt by
ART of written resignations from all members of the current EQK Board, (xiii)
the number of outstanding EQK Shares immediately prior to the Merger being
9,632,212 and no additional EQK Shares or other equity interests or any option,
warrant, right or other security exercisable for, convertible into or
exchangeable for EQK Shares or other equity interests in EQK being issued since
September 30, 1998, and (xiv) the representations and warranties of EQK in the
Merger Agreement being true, complete and accurate in all material respects as
of the date when made and as of the date the Merger is consummated. See "The
Proposed Merger and Related Matters -- Conditions to the Merger; Termination;
Waiver and Amendment."

ART and EQK may, by an appropriate instrument executed at any time prior to
the Effective Time (as defined below under "--The Merger Agreement"), whether
before or after the Requisite Shareholder Approval is obtained, amend the Merger
Agreement; provided that after the receipt of such approvals, no amendment or
modification may be made which alters the amount or changes the form of the EQK
Merger Consideration or ART Merger Consideration.

The parties to the Merger Agreement may, at any time prior to the Effective
Time, by action taken by their Board of Directors or Trustees, as applicable:
(i) extend the time for the performance of any of the obligations or other acts
of the other party; (ii) waive any inaccuracies in the representations and
warranties contained in the Merger Agreement or in any document delivered
pursuant thereto and (iii) subject to limitations on amendment, waive compliance
with any of the agreements or conditions contained in the Merger Agreement to
the extent permitted by law. EQK intends to resolicit shareholder approval for
the Merger if EQK desires to waive any material conditions to the Merger
Agreement.

Effect of Merger on Market for EQK Shares. The sale of the Center, the
resulting distribution of the net liquid assets to the EQK Shareholders, the
Block Purchase, the Merger and the Standstill Agreements will have the
cumulative effect of reducing the number of EQK Shares that are likely to trade
publicly. This may adversely affect the liquidity of the market for EQK Shares
after the Merger. As a result of this and the dilution resulting from the
issuance of additional EQK Shares as the ART Merger Consideration, the market
value of the remaining EQK Shares held by the Public EQK Shareholders is likely
to be materially adversely affected. See "The Proposed Merger and Related
Matters -- Effect of Merger on Market for EQK Shares; Registration Under the
Exchange Act." herein.

Regulatory and Foreign Approvals. To the best of ART's knowledge, ART is
not aware of any license or regulatory permit that appears to be material to its
business that might be adversely affected by its acquisition of EQK Shares in
connection with the Merger or of any approval or other action by any government
or governmental, administrative or regulatory authority or agency, domestic or
foreign, that would be required for the acquisition or ownership of EQK Shares
pursuant to the Merger. Should any such approval or other action be required,
ART currently contemplates that it will seek such approval or other action.
There can be no assurance that any such approval or other action, if needed,
would be obtained or would be obtained without substantial conditions or that
the failure to obtain

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<PAGE> 28

any such approval or other action might not result in adverse consequences to
ART's business. ART intends to make all required filings under the Securities
Act, the Exchange Act and state securities laws.

Availability of Appraisal Rights. No statutory dissenter's appraisal rights
will be available to EQK shareholders in connection with the Merger and it is
the position of EQK that no common law dissenter's rights will be available in
connection with the Merger; however, any EQK shareholder who wishes to assert
common law dissenter's appraisal rights may file with the Secretary of EQK
Realty Investors I a written notice stating such shareholder's intent to dissent
to the Merger at the EQK Meeting and to assert such rights. In the event that
holders of more than 3% of the outstanding EQK Shares assert such dissenter's
appraisal rights, the Merger Agreement may be terminated. For a detailed
discussion of the procedures that may be required to exercise this right should
it be available, see "The Proposed Merger and Related Matters -- Availability of
Appraisal Rights."

The Merger Agreement. The Merger Agreement provides that, subject to the
satisfaction or waiver of certain conditions, ART Newco will be merged with and
into EQK, whereupon the separate existence of ART Newco will cease and EQK will
be the surviving entity of the Merger. The Merger will become effective upon the
filing of a Certificate of Merger with the Secretary of the Commonwealth of
Massachusetts (the "Effective Time"). At the Effective Time, ART will pay the
EQK Merger Consideration to the EQK Shareholders and EQK will pay the ART Merger
Consideration to ART. See "The Proposed Merger and Related Matters."

The Merger Agreement may be terminated and the Merger abandoned prior to
the Effective Time, whether before or after the EQK Shareholder Approvals are
obtained, as follows: (i) by mutual written consent of ART, ART Newco and EQK;
(ii) by ART Newco or ART, on or after December 15, 1998, if any of the
conditions precedent to ART or ART Newco's obligations under the Merger
Agreement have not been met or, to the extent permitted by applicable law, have
not been waived in writing by ART and ART Newco prior to such date, (iii) by EQK
on or after July 30, 1999, if any of the conditions precedent to EQK's
obligations under the Merger Agreement have not been met or, to the extent
permitted by applicable law, have not been waived in writing by EQK prior to
such date; (iv) by EQK if EQK accepts a proposal from a party other the ART or
ART's affiliates concerning a merger, sale of substantial assets or similar
transaction involving EQK or the sale of any EQK Shares, (iv) by EQK upon a
determination by the EQK Board that, in the exercise of its fiduciary duties, it
can no longer recommend the approval of the Merger-Related Proposals to the EQK
Shareholders (a "Negative Determination"), or (v) by EQK if the EQK Board
determines that compliance with the Merger Agreement is reasonably likely to
materially impair or delay its ability to sell the Center or result in a
material reduction in the consideration that would be received by EQK or the EQK
Shareholders in connection with such sale.

Under the Merger Agreement, the EQK Board has agreed to propose and
recommend to the EQK Shareholders at the EQK Annual Meeting the adoption and
approval of the Declaration Amendment Proposal, the New Advisory Agreement
Proposal and the Merger Proposal, each as described herein.

DECLARATION AMENDMENT PROPOSAL

In connection with the Merger, subject to the Requisite Shareholder
Approval, EQK's Declaration of Trust will be amended and restated (such
Declaration of Trust, as so amended and restated, the "Amended Declaration of
Trust") to, among other things, (i) extend the finite life of EQK until December
31, 2018, (ii) reduce the number of EQK Shareholders required to vote on the
duration of EQK and approve certain other amendments of the Declaration of Trust
from three-quarters to a majority, (iii) remove certain prohibitions on
investments and activities, including (a) prohibitions on the issuance of
additional EQK Shares or other securities, (b) restrictions on additional
investments in the fee ownership of real estate and investments in mortgage
loans and unimproved, non-income producing real property, and (c) aggregate
borrowing restrictions, (iv) authorize an unlimited number of EQK Shares, (v)
revise certain provisions with respect to the number of trustees unaffiliated
with EQK and voting requirements in respect thereof, (vi) add specific
provisions restricting the ownership of more than 4.9% of the outstanding EQK
Shares by any single shareholder, other than ART and E.I. duPont de Nemours Co.
Inc. Trust Fund ("duPont") (the "Ownership Limit"), (vii) change the name of EQK
to "ART Realty Investors I," and (viii) reduce the number of members of the EQK
Board (each, a "Trustee") required to approve certain matters. See "Risk Factors
- -- Potential Adverse Consequences of the

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<PAGE> 29

Declaration of Amendment Proposal" and "Declaration of Trust -- Statement of
Policy" and "--Amendment Procedure." The full text of the Amended Declaration of
Trust is attached hereto as Appendix D.

NEW ADVISORY AGREEMENT PROPOSAL

Upon consummation of the Merger and subject to Requisite Shareholder
Approval of the Merger-Related Proposals by the New EQK Board (as defined herein
under "The Board Election Proposal"), LLPM will terminate its rights and duties
as Advisor under the Advisory Agreement and BCM, an affiliate of and advisor to
ART, will enter into the New Advisory Agreement pursuant to which BCM will
become the New Advisor of EQK. See "The New Advisory Agreement Proposal" herein.
The full text of the New Advisory Agreement is attached hereto as Appendix C.

BOARD ELECTION PROPOSAL

The term of office of each Trustee expires at the EQK Annual Meeting or
when the respective successor is elected and qualifies. At the EQK Annual
Meeting, the EQK Shareholders, voting together as a class, will be asked to
consider and vote upon the Board Election Proposal. The Board Election Proposal
will require the affirmative vote of EQK Shareholders representing a majority of
the total votes authorized to be cast by EQK Shares then outstanding which are
present at the meeting in person or by proxy and entitled to vote thereon. See
"The Board Election Proposal."

NEW YORK STOCK EXCHANGE LISTING OF ART PREFERRED SHARES

Following the execution of the Merger Agreement by EQK, ART will promptly
take such actions as are necessary and within its control to cause the ART
Preferred Shares to become listed on the NYSE. Approval of the listing of such
shares for trading on the NYSE is a condition to the respective obligations of
ART and EQK to consummate the Merger. See "The Proposed Merger and Related
Matters -- Conditions to the Merger; Termination, Waiver and Amendment."

REGULATORY APPROVAL

Other than (i) the Commission's declaring the Registration Statement
effective , (ii) certain approvals in connection with compliance with applicable
Blue Sky or state securities laws, (iii) the filing of the Certificate of Merger
with the Secretary of the Commonwealth of Massachusetts, (iv) the filing of such
reports under Section 13(a) of the Exchange Act as may be required subsequent to
the Merger in connection with the Merger Agreement, and (v) such filings as may
be required in connection with the payment of any transfer taxes, neither ART's
nor EQK's management believes that any filing with or approval of any
governmental authority is necessary in connection with the consummation of the
Merger.

THE EQK ANNUAL MEETING

The EQK Annual Meeting will be held at the corporate offices of EQK, 3424
Peachtree Road, Suite 800, Atlanta, Georgia on ________ __, 1999, at 9:00 a.m.,
Eastern Standard Time. At the EQK Annual Meeting, the EQK Shareholders, voting
together as a class, will be asked to consider and vote upon the Proposals. A
special meeting of EQK Shareholders (the "Special Meeting") was held on February
23, 1999, at which the EQK Shareholders voted to extend EQK's term until March
2001.

The Board Election Proposal will require the affirmative vote of EQK
Shareholders representing a majority of the total votes authorized to be cast by
EQK Shares then outstanding which are present at the EQK Annual Meeting in
person or by proxy and entitled to vote thereon. The Merger-Related Proposals
will each require the Requisite Shareholder Approval. None of the Merger-Related
Proposals will take effect unless all such proposals receive the Requisite
Shareholder Approval. LLPM, Summit and Sutter have agreed to vote their EQK
Shares in favor of the Merger-Related Proposals. LLPM, Summit, Sutter and
Halperin currently own 17.50%, 9.52%, 9.55% and 8.9%, respectively, of the
issued and outstanding EQK Shares. ART does not currently and will not own any
EQK Shares at the time of the EQK Annual Meeting.

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<PAGE> 30

As of December 31, 1998, Trustees and executive officers of EQK as a group
beneficially held EQK Shares representing less than 1% of all the votes entitled
to be cast by EQK Shareholders at the EQK Annual Meeting and as of the EQK
Record Date, such persons as a group held outstanding EQK Shares representing
less than 1% of such shares. The Block Purchase will not be consummated unless
the EQK Shareholders first approve the Merger-Related Proposals at the EQK
Annual Meeting. See "The EQK Annual Meeting."

A proxy may indicate that all or a portion of the shares represented by
such proxy are not being voted with respect to a specific proposal. This could
occur, for example, when a broker is not permitted to vote shares held in street
name on certain proposals in the absence of instructions from the beneficial
owner. Such broker non-votes and abstentions will be considered as not present
and entitled to vote on such proposal, even though such shares will be
considered present for purposes of determining a quorum and voting on other
proposals. BECAUSE APPROVAL OF THE MERGER-RELATED PROPOSALS AT THE EQK ANNUAL
MEETING REQUIRES THE AFFIRMATIVE VOTE OF THREE QUARTERS OF THE OUTSTANDING EQK
SHARES AS DESCRIBED MORE FULLY IN "THE EQK ANNUAL MEETING--MATTERS TO BE
CONSIDERED AT THE EQK ANNUAL MEETING," ANY BROKER NON-VOTES OR ABSTENTIONS ON
THE PROPOSALS WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER-RELATED
PROPOSALS AND ACCORDINGLY WILL AFFECT WHETHER THE MERGER-RELATED PROPOSALS WILL
BE APPROVED.

FEDERAL INCOME TAX CONSIDERATIONS

In the opinion of Andrews & Kurth L.L.P. ("Tax Counsel"), the issuance of
(i) the ART Preferred Shares and cash to the Public EQK Shareholders as the EQK
Merger Consideration and (ii) the EQK Shares to ART as the ART Merger
Consideration pursuant to the Merger will be treated as a taxable transaction
for Federal income tax purposes. Such opinion is not binding on the Internal
Revenue Service or any court and is subject to the accuracy of certain facts and
assumptions stated and referenced therein, and no ruling has been sought from
the Internal Revenue Service as to the Federal income tax consequences of the
Merger.

In general, a Public EQK Shareholder will recognize a gain equal to the
fair market value of the EQK Merger Consideration over the adjusted tax basis of
EQK Shares deemed sold in the taxable Merger. It is expected that such Public
EQK Shareholders will be deemed to have sold approximately 3.6% of their
respective EQK Shares held before the Merger. Such gain will be treated as a
capital gain if the EQK Shares are capital assets in the hands of the Public EQK
Shareholder.

The tax consequences described in the preceding paragraphs may not apply to
certain non-resident aliens and foreign corporations and stockholders who are
otherwise subject to special tax treatment under the Code.

The Federal income tax consequences set forth above are for general
information only. Each Public EQK Shareholder is urged to consult his own tax
advisor to determine the particular tax consequences to him of the Merger,
including the applicability and effect of state, local and other tax laws. See
"The Merger -- Federal Income Tax Consequences" herein.

DESCRIPTION OF ART PREFERRED SHARES

The ART Board has designated and authorized the issuance of 15,000,000 ART
Preferred Shares with a par value of $2.00 per share and a preference on
liquidation equal to the Liquidation Value ($10.00 per share) plus the amount of
any accrued and unpaid dividends. The Liquidation Value plus such amount is
referred to as the "Adjusted Liquidation Value." The ART Preferred Shares are
non-voting except (i) as provided by law, (ii) with respect to an amendment to
ART's articles of incorporation or bylaws that would materially alter or change
the existing terms of the ART Preferred Shares, and (iii) at any time or times
when all or any portion of the dividends on the ART Preferred Shares for any six
quarterly dividends, whether or not consecutive, shall be in arrears and unpaid.
In the latter event, the number of directors constituting the ART Board shall be
increased by two and the holders of ART Preferred Shares, voting separately as a
class, shall be entitled to elect two directors to fill such newly created
directorships with each

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<PAGE> 31

holder being entitled to one vote in such election for each share of ART
Preferred Shares held. ART is not obligated to maintain a sinking fund with
respect to the ART Preferred Shares.

The ART Preferred Shares are convertible, at the option of the holder, into
fully paid and nonassessable ART Common Shares at any time and from time to
time, in whole or in part, after the earliest to occur of (i) the August 15,
2003; (ii) the first business day, if any, occurring after a Quarterly Dividend
Payment Date (as defined below) on which dividends equal to or in excess of 5%
of the Liquidation Value (i.e., $0.50 per ART Preferred Share) are accrued and
unpaid, or (iii) ART becomes obligated to mail a statement, signed by an officer
of ART, to the holders of record of each of the ART Preferred Shares because of
a proposal by ART, to merge or consolidate with or into any other corporation
(unless ART is the surviving entity and holders of ART Common Shares continue to
hold such ART Common Shares without modification and without receipt of any
additional consideration), or to sell, lease, or convey all or substantially all
its property or business, or to liquidate, dissolve or wind up. The ART
Preferred Shares are convertible into that number of shares of ART Common Shares
obtained by multiplying the number of ART Preferred Shares being converted by
$10.00, then adding all accrued and unpaid dividends, then dividing such sum by
(in most instances) 90% of the simple average of the daily closing price of the
ART Common Shares for the 20 business days ending on the last business day of
the calendar week immediately preceding the date of conversion on the principal
stock exchange on which such ART Common Shares are then listed (the "Conversion
Price"). Notwithstanding the foregoing, ART, at its option, may elect to redeem
any ART Preferred Shares sought to be so converted by paying the holder of such
ART Preferred Shares cash in an amount equal to the Conversion Price.

The ART Preferred Shares bear a cumulative, compounded dividend per share
equal to 10% per annum of the Accumulated Liquidation Value, payable quarterly
on the 15th day of the month following the end of each calendar quarter (each, a
"Quarterly Dividend Payment Date"), and commencing accrual on the date of
issuance to and including the date on which the redemption price of such shares
is paid, whether or not such dividends have been declared and whether or not
there are profits, surplus or other funds of ART legally available for the
payment of such dividends. Dividends on the ART Preferred Shares are in
preference to and with priority over dividends upon the ART Common Shares.
Except as described in the following sentence, the ART Preferred Shares rank on
a parity as to dividends and upon liquidation, dissolution or winding up with
all other Special Stock (as defined herein under "Description of Capital Stock
of ART") issued by ART. ART will not issue any shares of Special Stock of any
series which are superior to the ART Preferred Shares as to dividends or rights
upon liquidation, dissolution or winding up of the corporation as long as any
ART Preferred Shares are issued and outstanding, without the prior written
consent of the holders of at least 662/3% of such ART Preferred Shares then
outstanding voting separately as a class. As of December 31, 1998, ART had
outstanding 3,350,000 ART Preferred Shares (1,948,797 ART Preferred Shares have
been reserved for issuance as future consideration in various business
transactions of ART) and 1,000 shares of Series G 10% Cumulative Convertible
Preferred Stock.

ART may redeem any or all of the ART Preferred Shares at any time and from
time to time, at its option, for cash upon no less than 20 days nor more than 30
days prior notice thereof. The redemption price of ART Preferred Shares to be
redeemed shall be an amount per share equal to (i) 104% of the Adjusted
Liquidation Value of such shares during the period from August 16, 1998 through
August 15, 1999; and (ii)103% of the Adjusted Liquidation Value of such shares
at any time on or after August 16, 1999.

There is no established trading market for the ART Preferred Shares. While
the listing of the ART Preferred Shares on the NYSE is a condition precedent to
EQK's obligation to consummate the Merger, there can be no assurance that an
active market for the ART Preferred Shares will develop or be sustained in the
future on the NYSE or otherwise. There is no assurance that the ART Preferred
Shares will have a market value at or near their Adjusted Liquidation Value if
they are listed on the NYSE. See "Risk Factors -- ART Preferred Shares."

DESCRIPTION OF EQK SHARES

EQK is currently authorized to issue 10,055,555 EQK Shares, and the EQK
Board may not currently issue any additional EQK Shares unless such issuance is
approved by the holders of three-quarters of the outstanding EQK Shares. As of
December 31, 1998, there were 9,632,212 EQK Shares issued and outstanding.
Subject to Requisite Shareholder

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<PAGE> 32

Approval, EQK's Declaration of Trust will be amended to remove all limitations
on the authorized number of EQK Shares that may be issued by the EQK Board. See
"Risk Factors -- Potential Adverse Consequences of the Declaration Amendment
Proposal -- Possible Issuance of Additional EQK Shares or Other Securities." The
EQK Shareholders are entitled to receive and to participate ratably in
dividends, when and as declared by the EQK Board out of any funds legally
available for such purpose and, in the event of termination of EQK or upon the
distribution of its net assets, to receive and to participate ratably in
payments and distributions. All EQK Shares have equal voting rights. The EQK
Shares do not have any preference, appraisal, conversion, exchange or preemptive
rights. Outstanding EQK Shares are freely transferable, subject to the Ownership
Limit (if the Declaration Amendment Proposal is adopted and implemented) and
except that, in certain limited circumstances, the EQK Board currently may
refuse to transfer EQK Shares or may compel redemption of EQK Shares. See
"Description of the EQK Shares." The outstanding EQK Shares have been legally
issued and are fully paid and nonassessable, except to the extent of any
personal liability of the EQK Shareholders as described herein under
"Description of the EQK Shares."

THE DEALER MANAGER

Interfirst Capital Corporation, a California corporation that is an
affiliate of ART and BCM, will act as dealer manager ("Dealer Manager") for the
Merger. The Dealer Manager will be responsible for distributing the EQK Merger
Consideration to the Public EQK Shareholders in certain jurisdictions to the
extent required by applicable state law. The Dealer Manager will be entitled to
receive a reasonable and customary fee for such services, plus reimbursement for
out-of-pocket expenses, and ART will indemnify the Dealer Manager against
certain liabilities and expenses in connection with the Merger, including
liabilities under federal securities laws. The telephone number of the Dealer
Manager is (214) 692-4713.

MARKET AND TRADING INFORMATION

Prior to May 4, 1998, the EQK Shares were listed and traded on the NYSE. On
April 23, 1998, the NYSE announced that trading of the EQK Shares would be
suspended prior to the opening of the NYSE on May 4, 1998, as EQK had fallen
below the NYSE's continued listing criteria for net tangible assets available to
common stock (less than $12 million) and 3-year average net income (less than
$600,000). The EQK Shares are currently included for quotation on the OTC
Bulletin Board. The over-the-counter market quotations reflect interdealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions. The following table sets forth for the calendar
periods indicated the high and low per share closing sales prices for the EQK
Shares as reported in published financial sources:

<TABLE>
<CAPTION>
Year Ended December 31, 1999 HIGH LOW
---- ---
<S> <C> <C>
First Quarter $0.813 $0.375
</TABLE>

<TABLE>
<CAPTION>
Year Ended December 31, 1998 HIGH LOW
---- ---
<S> <C> <C>
First Quarter $2.063 $1.000
Second Quarter 1.313 0.250
Third Quarter 1.063 0.625
Fourth Quarter 0.844 0.625
</TABLE>

<TABLE>
<CAPTION>
Year Ended December 31, 1997 HIGH LOW
---- ---
<S> <C> <C>
First Quarter $1.625 $1.375
Second Quarter 1.500 1.125
Third Quarter 1.250 1.062
Fourth Quarter 1.250 0.813
</TABLE>

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<PAGE> 33

EQK has not paid any dividends with respect to the EQK Shares since 1991.
On August 25, 1998, the last trading day prior to the public announcement of the
Merger Agreement, the closing sales price of the EQK Shares as reported in the
over-the-counter market was $1.00 per EQK Share, and on April 20, 1999, the most
recent date for which prices were available prior to the date of filing this
Prospectus/Proxy, the average of the bid and asked price of the EQK Shares as
reported in the over-the-counter market was $0.344 per EQK Share. EQK
Shareholders are urged to obtain a current market quotation for the EQK Shares.
See "Risk Factors -- Delisting of the EQK Shares and Adverse Effect on Trading".

HOLDERS OF EQK SHARES ARE URGED TO OBTAIN CURRENT INFORMATION WITH RESPECT
TO THE SALES PRICES OF THE EQK SHARES.

While the listing of the ART Preferred Shares on the NYSE is a condition
precedent to EQK's obligation to consummate the Merger, there can be no
assurance that an active market for the ART Preferred Shares will develop or be
sustained in the future on the NYSE or otherwise. Listing will depend upon the
satisfaction of the NYSE's listing requirements with respect to the ART
Preferred Shares. Accordingly, no assurance can be given as to the liquidity of,
or trading for, the ART Preferred Shares.

COMPARATIVE PER SHARE DATA

The following table sets forth per share data of the ART Common Shares and
EQK Shares on both historical and pro forma combined bases. This table should be
read in conjunction with the historical and financial statements and notes
thereto contained in ART's Annual Report on Form 10-K (the "ART Form 10-K") for
the year ended December 31, 1998 and EQK's Annual Report on Form 10-K (the "EQK
Form 10-K") for the year ended December 31, 1998, each of which is incorporated
by reference herein, and in conjunction with the unaudited pro forma combined
financial information appearing elsewhere in this Prospectus/Proxy Statement.

Pro forma combined per share data reflects the historical results of ART
combined with EQK under the equity method of accounting as if the Merger had
been consummated for all periods presented. This information has been prepared
on the basis of accounting for the Merger as a purchase and is based on the
assumptions set forth in the notes thereto. The pro forma share data is not
necessarily indicative of actual results had the Merger been consummated on such
dates or of future expected result.

ART COMMON SHARES

<TABLE>
<CAPTION>
Historical Proforma Combined
---------- -----------------
<S> <C> <C>
(Loss) per share
Fiscal year ended
December 31, 1998 $ (2.24) $ (2.31)

Cash dividends per Common share

Fiscal year ended
December 31, 1998 $ 0.20 $ 0.20

Book Value per Common share

December 31, 1998 $ 0.44 $ 0.44
</TABLE>

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<PAGE> 34

EQK SHARES

<TABLE>
<CAPTION>
Historical Proforma Combined
---------- -----------------
<S> <C> <C>
Income (loss) per share

Fiscal year ended
December 31, 1998 $ 0.02 $ (0.04)

Cash dividends per Common Share

Fiscal year ended
December 31, 1998 $ -- $ --

Book Value per Common Share

December 31, 1998 $ (0.50) $ 0.00
</TABLE>

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<PAGE> 35

RISK FACTORS

EQK Shareholders should consider, among other things, the following risk
factors in connection with the transactions contemplated by the Merger. These
factors are intended to identify the significant sources of risk affecting an
investment in the ART Preferred Shares and the EQK Shares.

POSSIBLE DETRIMENTAL EFFECTS OF THE MERGER

Dilution of Current EQK Shareholders and Likely Decline in Trading Price
per EQK Share. The sale of the Center and the resulting distribution to EQK
Shareholders, as well as the issuance of EQK Shares to ART as the ART Merger
Consideration, is likely to result in the trading price of EQK Shares declining
substantially. As a result of the distribution to EQK Shareholders and the
acquisition of Oak Tree Village for a note in the full amount of the purchase
price, EQK is not expected to have any net worth after the Merger.

Anti-Takeover Effect. Consummation of the Merger and the Block Purchase
will result in the acquisition by ART of an aggregate of 5,050,032 EQK Shares
(or approximately 49% of the EQK Shares to be outstanding after the Merger). As
a result of the foregoing and the effect of the Ownership Limit described herein
under "The Declaration Amendment Proposal -- Addition of Excess Share
Provisions," third party attempts to acquire control of EQK may not be
practicable. Accordingly, if the Merger is approved, it is unlikely that an
attempted take-over of EQK, which might result in an increase in the price at
which EQK Shares could be sold, will occur.

Leverage of EQK after the Merger. If the Center is sold, the net proceeds
distributed to EQK Shareholders, and if the Merger is consummated, EQK's only
real estate asset would be Oak Tree Village which would be subject to two
mortgages which, in the aggregate, would equal to its purchase price. EQK's high
degree of leverage may have significant consequences, including the following:
(i) the ability of EQK to obtain additional financing for acquisitions, working
capital, capital expenditures or other purposes, if necessary, may be impaired
or such financing may not be on terms favorable to the surviving entity; (ii) a
substantial portion of EQK's cash flow will be used to pay its interest expense,
which will reduce the funds that would otherwise be available to EQK for its
operations and future business opportunities; (iii) a substantial decrease in
operating cash flow or an increase in expenses of EQK could make it difficult
for EQK to meet its debt service requirements and force it to modify its
operations; (iv) EQK's high level of debt and resulting interest expense may
place it at a competitive disadvantage with respect to certain competitors with
lower amounts of indebtedness; and (v) EQK's high degree of leverage may make it
more vulnerable to downturn in its business or the economy generally.

Benefits to LLPM. LLPM has entered into an agreement (the "LLPM/ART Stock
Purchase Agreement") with ART to sell all of its 1,685,556 EQK Shares to ART for
50,566 ART Preferred Shares with an aggregate Liquidation Value of $505,660. The
Block Purchase with LLPM is conditioned upon the consummation of the Merger.

Conflicts of Interest Between LLPM and EQK. The management of EQK is
subject to conflicts of interest in recommending the Merger and approval of the
Merger-Related Proposals because most members of management of EQK also are
members of the management of LLPM, which is receiving the benefits described
above under "-- Benefits to LLPM."

Conflicts of Interest Between EQK and BCM. Management of BCM (including
Karl L. Blaha, Al Gonzalez, Thomas A. Holland, A. Cal Rossi, Jr. and Cooper B.
Stuart, who are expected to become the Trustees of EQK upon consummation of the
Merger) will be subject to conflicts of interest in carrying out its duties as
New Advisor to EQK because: (i) properties owned by the affiliates of BCM (the
"BCM Affiliates") may compete with the properties that EQK may acquire for
tenants; (ii) BCM Affiliates may compete with EQK in connection with the
acquisition of properties; (iii) BCM's personnel and other resources must be
allocated among EQK and other BCM Affiliates; (iv) decisions may have to be made
with respect to the extension, termination or modification of the New Advisory
Agreement with BCM; and (v) BCM will be subject to conflicts between its
obligations as New Advisor and its interests in and as an affiliate of and
advisor to ART in light of ART's intended purchase of additional EQK Shares
three years after the date of the consummation of the Merger. See "The Proposed
Merger and Related Matters -- ART's Purposes for the Merger."

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<PAGE> 36

Pro Forma Net Losses and Accumulated Deficit for the Future Combined
Entity. The unaudited pro forma combined financial information of ART and EQK
for the fiscal year ended December 31, 1998 indicates that the consummation of
the Merger will likely result in net losses and accumulated deficit for the
combined entity. See "Selected Unaudited Pro Forma Combined Financial
Information of ART and EQK."

ART PREFERRED SHARES

Application for the Listing and Trading of ART Preferred Shares and
Possible Subsequent Delisting. As of December 31, 1998, there were 3,350,000 ART
Preferred Shares outstanding (1,948,797 ART Preferred Shares have been reserved
for issuance as future consideration in various business transactions of ART);
however, there is currently no established public market for the ART Preferred
Shares. While the listing of the ART Preferred Shares on the NYSE is a condition
precedent to EQK's obligation to consummate the Merger, there can be no
assurance that an active market for the ART Preferred Shares will develop or be
sustained in the future on such exchange if the listing is approved. Listing
will also depend upon the satisfaction of the NYSE's listing requirements with
respect to the ART Preferred Shares. Although the NYSE has not established any
minimum numerical criteria for the listing of preferred stock, it has published
certain numerical delisting criteria therefor. Pursuant to such criteria, the
NYSE will consider suspending or delisting a series of preferred stock if the
aggregate market value of publicly-held shares of such preferred stock is less
than $2,000,000 and the number of publicly-held shares of such preferred stock
is less than 100,000. Upon consummation of the Merger, the aggregate number and
aggregate value of the ART Preferred Shares will satisfy the NYSE listing
requirements; however, since the ART Preferred Shares are subject to conversion
or redemption as described herein under "Description of the Capital Stock of ART
- -- ART Preferred Shares," there can be no assurance that the ART Preferred
Shares will continue to satisfy the NYSE's continued listing requirements. In
addition, no assurance can be given as to the liquidity of, or trading for, the
ART Preferred Shares. The trading price of ART Preferred Shares is likely to be
below their Liquidation Value and there is no assurance as to the price at which
the ART Preferred Shares will actually trade.

Reliance on the ART Board to Declare Dividends on the ART Preferred Shares.
Although dividends will accrue cumulatively on the ART Preferred Shares from the
date of issuance, such dividends will not be paid unless and until they are
declared by the ART Board. Holders of ART Preferred Shares will not have the
authority to direct or compel the ART Board to declare dividends with respect to
the ART Preferred Shares. The ART Preferred Shares are non-voting except (i) as
provided by law, (ii) with respect to an amendment to ART's articles of
incorporation or bylaws that would materially alter or change the existing terms
of the ART Preferred Shares, and (iii) at any time or times when all or any
portion of the dividends on the ART Preferred Shares for any six quarterly
dividends, whether or not consecutive, shall be in arrears and unpaid. In the
latter event, the number of directors constituting the ART Board shall be
increased by two and the holders of ART Preferred Shares, voting separately as a
class, shall be entitled to elect two directors to fill such newly created
directorships with each holder being entitled to one vote in such election for
each share of ART Preferred Shares held.

Risks Associated with Conversion Feature. The ART Preferred Shares are
convertible into ART Common Shares as described herein under "Summary of Terms
- -- Description of ART Preferred Shares" and "Description of the Capital Stock of
ART -- ART Preferred Shares." The Articles of Amendment of ART's Articles of
Incorporation that authorize the ART Preferred Shares provide that a number of
authorized ART Common Shares sufficient to provide for the conversion of the
outstanding ART Preferred Shares as described herein shall at all times be
reserved for such conversion. However, the number of ART Common Shares into
which an ART Preferred Share is convertible is dependent upon the then-current
market price of the ART Common Shares. Therefore, if at the time a holder of ART
Preferred Shares seeks to convert such ART Preferred Shares, ART has failed to
reserve a sufficient number of authorized ART Common Shares to effect such
conversion and assuming that ART does not elect to redeem such ART Preferred
Shares as described herein, such holder would be unable to effect such
conversion. In addition to the ART Preferred Shares, ART has authorized and
issued other preferred stock that may be converted from time to time into ART
Common Shares. See "Description of the Capital Stock of ART." In the future, ART
expects to authorize and issue additional preferred stock or other securities
that may be converted from time to time into ART Common Shares. Certain of the
preferred stock that has been authorized by ART (including the ART Preferred
Shares) is, and securities that may be issued by ART in the future may be,
convertible into a number of ART Common Shares calculated by reference to the
price of ART Common Shares (i.e., the lower the price of the ART Common Shares,
the higher the number of ART Common Shares to be received upon conversion of the
applicable security). At any given time, a

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<PAGE> 37

decrease in the price of ART Common Shares below a certain level could result in
the number of authorized ART Common Shares being insufficient to provide for the
conversion of all of ART's convertible securities, including the ART Preferred
Shares. So long as management of ART and affiliates of ART own a majority of the
ART Common Shares, management expects that ART will have the ability to increase
the number of authorized ART Common Shares to a number sufficient to provide for
the conversion of its convertible preferred stock. However, there can be no
assurance that management and affiliates of ART will continue to own a majority
of the ART Common Shares. The actual basis for calculating the number of ART
Common Shares issuable upon conversion of ART's authorized preferred stock is
described under "Description of the Capital Stock of ART."

Possibility that an Active Trading Market Will Not Exist for the ART Common
Shares When the ART Preferred Shares are Converted. In the event that ART
Preferred Shares are converted into ART Common Shares, there can be no assurance
as to the existence of an active trading market for the ART Common Shares at the
time of such conversion or that the trading price of the ART Common Shares will
not decline substantially after such conversion.

POTENTIAL ADVERSE CONSEQUENCES OF THE DECLARATION AMENDMENT PROPOSAL

Subject to the Requisite Shareholder Approval of the Declaration Amendment
Proposal, EQK's Declaration of Trust will be amended to provide for, among other
things, (i) the Ownership Limit; (ii) an extension of the finite life of EQK
through December 31, 2018, (iii) the ability to change investment, financing,
borrowing and distribution policies without shareholder approval, (iv) the
removal of prohibitions on certain activities and investments, and (v) the
ability to issue additional EQK Shares and other types of securities, in each
case as more fully described below. See "The Declaration Amendment Proposal."

Effect of Limits on Ownership and Issuance of Additional EQK Shares or
other Securities. In order to maintain EQK's qualification as a REIT under the
Code, subject to Requisite Shareholder Approval of the Merger-Related Proposals,
the Declaration of Trust will be amended to prohibit ownership of more than 4.9%
of the outstanding EQK Shares by any single shareholder other than ART and the
current 5% Holders. Under the Amended Declaration of Trust, the EQK Board may
exempt a proposed transferee from this restriction upon receipt of a ruling from
the Internal Revenue Service, an opinion of counsel or other evidence
satisfactory to the EQK Board that ownership of EQK shares by a proposed
transferee will not adversely affect EQK's qualification as a REIT under the
Code, and upon such other conditions as the EQK Board may direct.

The Ownership Limit, as well as the ability of EQK to issue additional EQK
Shares or other securities (which may have rights and preferences senior to the
EQK Shares), may discourage a change of control of EQK and may also (i) deter
future tender or exchange offers for the EQK Shares, which offers may be
advantageous to EQK Shareholders, and (ii) limit the opportunity for EQK
Shareholders to receive a premium for their EQK Shares that might otherwise
exist if an investor were attempting to assemble a block of EQK Shares in excess
of the Ownership Limit or otherwise effect a change of control of EQK.

Extension of Finite Life of EQK. The self liquidating provisions included
in EQK's Declaration of Trust reflected an intention of the original EQK Board
to liquidate EQK's assets by March of 1999 and the Declaration of Trust also
provided that no additional investments will be made beyond such latter date. At
some time on or before the date on which EQK would be required to terminate its
operations, EQK's investments would be liquidated and the proceeds thereof, net
of taxes, selling expenses and disposition fees, would be distributed to the EQK
Shareholders. The EQK Shareholders voted to extend EQK's term at the Special
Meeting until March 2001.

Subject to Requisite Shareholder Approval, EQK's Declaration of Trust will
be amended to extend the duration of EQK until December 31, 2018 and to revise
the liquidation provisions to which EQK is subject. Following such amendment, if
any asset of EQK is sold, the net proceeds thereof, if any, are expected to be
reinvested in additional assets rather than being distributed to the EQK
Shareholders. As a result of the extension of the finite life of EQK, the EQK
Shareholders will have to sell their EQK Shares in the market to realize any
remaining value of their investment after the distribution to be made to EQK
Shareholders after the sale of the Center. In addition, the extension of EQK's
duration will likely increase the amount of fees paid to BCM, which is expected
to succeed LLPM as EQK's Advisor.

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<PAGE> 38

Changes in EQK's Policies without Shareholder Approval. EQK's Declaration
of Trust currently provides that, in general, none of EQK's policies may be
amended without the approval of holders of three-quarters of the outstanding EQK
Shares. Subject to Requisite Shareholder Approval of the Merger-Related
Proposals, EQK's Declaration of Trust will be amended to provide that the EQK
Board, which will be composed of the ART Designated Trustees (as defined herein
under "The Board Election Proposal"), may change EQK's investment policies from
time to time without the approval of EQK's Shareholders. Accordingly, EQK
Shareholders will be relying upon the discretion of ART's affiliate and advisor,
BCM, as EQK's New Advisor, and the EQK Board in making changes to any existing
investment policies and selecting any additional investments. Any such change in
existing investment policies may affect EQK's financing, borrowing and
distribution policies and may adversely affect EQK's financial condition,
results of operations and the market price of the EQK Shares without the
approval of the EQK Shareholders. The potential conflicts of interest in the
relationship between ART and BCM are described herein under "-- Possible
Detrimental Effects of the Merger -- Conflicts of Interest between EQK and BCM."

Removal of Prohibitions and Restrictions from Certain Activities and
Investments. The Declaration of Trust currently provides that EQK may acquire
additional real properties, but only under very limited circumstances. The
Amended Declaration of Trust will remove all restrictions on EQK's ability to
acquire additional real or personal property and other debt and equity
investments, although except for the acquisition of the Oak Tree Village from
ART, it is not currently intended that EQK will make any further acquisitions or
additional investments in the foreseeable future. Accordingly, EQK Shareholders
will be relying upon the discretion of ART's affiliate and advisor, BCM, as
EQK's New Advisor, and the EQK Board in making changes to any existing
investment policies and selecting any additional investments. The removal of
such restrictions could adversely affect EQK's financial condition, results of
operations and the market price of the EQK Shares without the approval of the
EQK shareholders. See "The Business of EQK -- Summary of the Existing
Declaration of Trust -- Prohibited Activities and Investments."

Possible Issuance of Additional EQK Shares or Other Securities. Subject to
Requisite Shareholder Approval, EQK's Declaration of Trust will be amended to
remove prohibitions relating to the issuance of additional EQK Shares or other
types of securities, including securities with preferential rights senior to the
EQK Shares. Any such issuance of additional EQK Shares would require the
affirmative vote of the holders of not less than a majority of the then
outstanding EQK Shares. Any such issuance of other types of securities would not
require the approval of the EQK Shareholders. In the event that additional EQK
Shares or other equity securities are so issued by EQK, holders of outstanding
EQK Shares will incur dilution in their percentage of equity in EQK.

POTENTIAL ADVERSE CONSEQUENCES ASSOCIATED WITH AFFILIATE OF CONTROLLING
SHAREHOLDER OF NEW ADVISOR

Upon consummation of the Merger, LLPM and EQK will terminate the Advisory
Agreement and EQK will enter into the New Advisory Agreement with BCM, an
affiliate of and advisor to ART, pursuant to which BCM will become the New
Advisor. BCM is a privately held Nevada corporation owned by a trust established
for the benefit of the children of Gene E. Phillips. Mr. Phillips currently
serves as a representative of such trust and, in such capacity, has substantial
contact with the management of BCM and input with respect to BCM's performance
of advisory services. Mr. Phillips reviews proposals for the acquisition or
disposition of assets and provides advice to BCM's management on financing
transactions and other material business matters relating to the entities
advised by BCM. However, Mr. Phillips is not an officer or director of BCM or
any of the entities BCM advises. Mr. Phillips is the former chairman of
Southmark Corporation ("Southmark"), a real estate syndicator and parent of San
Jacinto Savings Association ("San Jacinto"). Mr. Phillips resigned his positions
with Southmark and certain of its affiliates in January 1989. Southmark filed a
voluntary petition of bankruptcy under Chapter 11 of the United States
Bankruptcy Code in July 1989. In November 1990, San Jacinto was placed under
conservatorship of the Resolution Trust Corporation ("RTC") by federal banking
authorities. Mr. Phillips was named as a defendant in a number of lawsuits
brought by the RTC and private plaintiffs in which the allegations made against
Mr. Phillips included breach of fiduciary duty and other misconduct, which
allegations were denied by Mr. Phillips. All of these actions have been
dismissed or settled. See "Description of ART" and "The Business of ART --
Investments in Real Estate Investment Trusts and Real Estate Partnership."

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<PAGE> 39

CORRELATION BETWEEN THE VALUE OF THE ART PREFERRED SHARES AND THE SUCCESS OF
ART'S BUSINESS

As part of the Merger Consideration and pursuant to the Merger, EQK
Shareholders will receive ART Preferred Shares (and subsequently may receive ART
Common Shares upon conversion of the ART Preferred Shares) as described herein,
the value of which will be substantially dependent upon the success of ART's
business. Set forth below is a summary of potential risks relating to ART's
business.

Recent Operating History. ART has experienced net losses of $22,805,000,
$2,428,000, $5,554,000, $2,836,000 and $2,426,000, respectively, for each of the
fiscal years ended December 31, 1998, 1997, 1996, 1995 and 1994, and ART had an
accumulated deficit at December 31, 1998 of $51,880,000. During the fiscal year
ended December 31, 1998, ART paid a cumulative dividend of $0.20 with respect to
each ART Common Share and during 1997, ART paid a cumulative dividend of $0.20
with respect to each ART Common Share, and during 1996, ART paid a cumulative
dividend of $0.15 with respect to each ART Common Share. From 1993 through 1995,
ART paid no dividends in respect of the ART Common Shares. There can be no
assurance that ART will be able to pay dividends in respect of the ART Preferred
Shares or the ART Common Shares in the future.

Changes in ART's Policies Without Stockholder Approval. The investment,
financing, borrowing and distribution policies of ART and its policies with
respect to all other activities, growth, debt, capitalization and operations,
will be determined by the ART Board. Although it has no present intention to do
so, the ART Board may amend or revise these policies at any time and from time
to time at its discretion without a vote of the stockholders of ART. A change in
these policies could adversely affect the market price of the ART Preferred
Shares or the ART Common Shares. See "The Business of ART -- General."

Investments in Real Property. Real property investments are subject to
varying degrees of risk and are relatively illiquid. Income from real property
investments and ART's resulting ability to pay dividends to its shareholders may
be adversely affected by a number of factors, including general economic climate
and local real estate conditions (such as oversupply of or reduced demand for
space and changes in market rental rates); the perceptions of prospective
tenants of the safety, convenience and attractiveness of ART's properties; the
ability of ART or the owner of such properties to provide adequate management,
maintenance and insurance; energy and supply shortages; the ability to collect
on a timely basis all rent from tenants and interest from borrowers; the expense
of periodically renovating, repairing and reletting spaces; and increasing
operating costs (including real estate taxes and utilities) which may not be
passed through to tenants. Certain significant expenditures associated with
investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) are generally not reduced when circumstances
cause a reduction in rental revenues from the investment. If a property of ART
is mortgaged to secure the payment of indebtedness and if ART or an entity in
which ART invests or to which it lends is unable to meet its mortgage payments,
a loss could be sustained as a result of foreclosure on the property or the
exercise of other remedies by the mortgagee. Real estate values and income from
properties are also affected by such factors as compliance with laws, including
tax laws, interest rate levels and the availability of financing.

Nature of Investments Made by ART May Involve High Risk; Illiquidity of
Real Estate Investments. ART may make investments in real estate-related assets
and businesses which have experienced severe financial difficulties, which
difficulties may never be overcome. Since such investments may involve a high
degree of risk, poor performance by any such investments could severely affect
the financial condition and results of operations of ART.

The illiquid nature of ART's real estate investments may limit the ability
of ART to modify its portfolio in response to changes in economic or other
conditions. Such illiquidity may result from the absence of an established
market for ART's investments as well as legal or contractual restrictions on
their resale by ART.

Difficulty of Locating Suitable Investments; Competition. Identifying,
completing and realizing on real estate investments has from time to time been
highly competitive, and involves a high degree of uncertainty. ART competes for
investments with many public and private real estate investment vehicles,
including financial institutions (such as mortgage banks, pension funds and real
estate investment trusts) and other institutional investors, as well as
individuals. There can be no assurance that ART will continue to be able to
locate and complete investments which satisfy ART's objectives or realize upon
their value or that it will be able to fully invest its available capital.

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<PAGE> 40

Many of those with whom ART competes for investments and its services are
far larger than ART, may have greater financial resources than ART and may have
management personnel with more experience than the officers of ART.

General Investment Risks Associated With Acquisition Activities. From time
to time, ART will acquire existing properties to the extent that they can be
acquired on advantageous terms and meet ART's investment criteria. Acquisitions
of properties entail general investment risks associated with any real estate
investment, including the risk that investments will fail to perform as
expected, that estimates of the cost of improvements to bring an acquired
property up to standards established for the intended market position may prove
inaccurate and the occupancy rates and rents achieved may be less than
anticipated.

Dependence on Rental Income from Real Property. ART's cash flow, results of
operations and value of its assets would be adversely affected if a significant
number of tenants of ART's properties failed to meet their lease obligations or
if ART or the owner of a property in which ART has an interest were unable to
lease a significant amount of space on economically favorable terms. In the
event of a default by a lessee, the owner may experience delays in enforcing its
rights as lessor and may incur substantial costs in protecting its investment.
The bankruptcy or insolvency of a major tenant may have an adverse effect on a
property. At any time, a tenant may also seek protection under the bankruptcy
laws, which could result in rejection and termination of such tenant's lease and
thereby cause a reduction in the cash flow of the property. If a tenant rejects
its lease, the owner's claim for breach of the lease would (absent collateral
securing the claim) be treated as a general unsecured claim. Generally, the
amount of the claim would be capped at the amount owed for unpaid pre-petition
lease payments unrelated to the rejection, plus the greater of one year's lease
payments or 15% of the remaining lease payments payable under the lease (but not
to exceed the amount of three years' lease payments). No assurance can be given
that the properties in which ART has an interest will not experience significant
tenant defaults in the future.

Properties that Serve as Collateral for ART's Mortgage Notes Receivable. A
substantial portion of ART's assets have been invested in mortgage notes
receivable, principally those secured by income producing real estate. The
income producing real estate properties have included apartment complexes,
hotels, office buildings and shopping centers. Those properties are located in
the Midwest, Mountain, Southeast and Southwest regions of the United States.
Certain geographic regions of the United States from time to time will
experience weaker regional economic conditions and housing markets, and,
consequently, will experience higher rates of loss and delinquency on mortgage
loans generally. Any concentration of loan assets in such a region may present
risk considerations in addition to those generally present for similar
mortgage-backed or asset-backed securities without such concentration. See "The
Business of ART -- Geographic Regions" for a description of the geographic
regions.

Market values of apartment complexes can be affected significantly by the
supply and demand in the geographic market for such properties securing the loan
and, therefore, may be subject to adverse economic conditions. Market values on
apartment complexes may vary as a result of economic events or governmental
regulations outside the control of the borrower or lender. Governmental
regulations such as rent control laws may impact the future cash flow of the
apartment complex.

Like any income producing property, the income generated by a hotel
property is subject to several factors such as local, regional and national
economic conditions and competition. However, because such income is primarily
generated by room occupancy and such occupancy is usually for short periods of
time, the level of such income may respond more quickly to conditions such as
those described above. Such sensitivity to competition may require more frequent
improvements and renovations than other properties. To the extent a hotel is
affiliated to, or associated with, a regional, national, or international chain,
changes in the public perception of such chain may have an impact on the income
generated by the related property. The hotel industry is also generally
seasonal. This will result in fluctuation in the income generated by hotel
properties.

The market value of properties such as office buildings and shopping
centers are subject to risks that, upon expiration, leases for space in the
office buildings and shopping centers may not be renewed, the space may not be
released, or the terms of renewal or re-lease (including the cost of required
renovations or concessions to tenants) may be less favorable than current lease
terms.

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<PAGE> 41

Operating Risks of ART's Properties. The properties in which ART has an
interest are subject to operating risks common to the particular property type,
any and all of which may adversely affect occupancy or rental rates. Such
properties are subject to increases in operating expenses such as cleaning;
electricity; heating, ventilation and air-conditioning; elevator repair and
maintenance; insurance and administrative costs; and other general costs
associated with security, landscaping, repairs and maintenance. While commercial
tenants are often obligated to pay a portion of these escalating costs, there
can be no assurance that they will agree to pay such costs or that the portion
that they agree to pay will fully cover such costs. If operating expenses
increase, the local rental market may limit the extent to which rents may be
increased to meet increased expenses without decreasing occupancy rates. To the
extent rents cannot be increased or costs controlled, the cash flow of ART and
its financial condition may be adversely affected.

Possible Inability to Meet Payments on Debt Financing. ART's debt-to-equity
ratio, inclusive of margin debt, was 4.97 to 1 as of December 31, 1997, and
21.00 to 1 as of December 31, 1998. Under certain circumstances, ART's cash flow
may be insufficient to meet required payments of principal, interest on its debt
and dividend distributions. If a property is mortgaged to secure payment of
indebtedness and ART is unable to meet mortgage payments, the lender could
foreclose upon the property, appoint a receiver and receive an assignment of
rents and leases or pursue other remedies, all with a consequent loss of income
and asset value to ART. If ART defaults on secured indebtedness, the lender may
foreclose and ART could lose its entire investment in the security for such
loan. Because ART may engage in portfolio financings where several investments
are cross-collateralized, multiple investments may be subject to the risk of
loss. As a result, ART could lose its interests in performing investments in the
event such investments are cross- collateralized with poorly performing or
nonperforming investments. In addition, recourse debt may subject other assets
of ART to risk of loss. Any such losses would adversely affect ART's ability to
make distributions in respect of the ART Preferred Shares. Distributions in
respect of the ART Preferred Shares will be subordinate in right of payment to
ART's debt obligations which, as of December 31, 1998, have an aggregate
outstanding principal balance of approximately $804.0 million. Substantially all
of ART's mortgage notes receivable, real estate, equity security holdings in
CMET, IORI, TCI and NRLP and its trading portfolio of equity securities has been
pledged to secure ART's outstanding indebtedness. Such borrowings increase ART's
risk of loss because they represent a prior claim on ART's assets and require
fixed payments regardless of profitability. If ART defaults on such secured
indebtedness, the lender may foreclose on ART's assets securing such
indebtedness, and ART could lose its investment in the pledged assets.

Possible Inability to Refinance Existing Indebtedness. ART may not be able
to refinance existing indebtedness or the terms of such refinancing may not be
as favorable as the terms of current indebtedness and ART may not be able to
finance necessary capital expenditures for renovations and other improvements on
favorable terms or at all. If ART were unable to refinance its indebtedness on
acceptable terms, or at all, ART might be forced to dispose of one or more of
its properties on disadvantageous terms, which might result in losses to ART and
might adversely affect the cash available for distributions to its shareholders.
If interest rates or other factors at the time of the refinancing result in
higher interest rates upon refinancing, ART's interest expense would increase,
which would affect ART's ability to make distributions to its shareholders.
Substantially all of ART's real estate equity investments utilize a leveraged
capital structure, in which case a third party lender would be entitled to cash
flow generated by such investments prior to ART receiving a return. As a result
of such leverage, in addition to the risks described above, ART would be subject
to the risk that existing debt (which in most cases will not have been fully
amortized at maturity) will not be able to be refinanced or that the terms of
such refinancings will not be as favorable to ART and the risk that necessary
capital expenditures for such purposes as renovations and other improvements
will not be able to be financed on favorable terms or at all. While such
leverage may increase returns or the funds available for investment by ART, it
also will increase the risk of loss on a leveraged investment. The
organizational documents of ART do not contain any limitation on the amount of
indebtedness ART may incur. Accordingly, ART could become even more highly
leveraged than it currently is, thus resulting in an increase in debt service
that could increase the risk of default on ART's indebtedness.

Existing Debt Maturities. As of December 31, 1998, approximately $164.2
million of ART's outstanding indebtedness became due within the next twelve
months. During the first quarter of 1999, ART either extended, refinanced, paid
down, paid off or received commitments from lenders to extend or refinance $66.8
million of the debt scheduled to mature in 1999. If ART is unable to refinance
any of the foregoing indebtedness on acceptable terms, ART may be forced to
dispose of properties on disadvantageous terms, which could result in losses to
ART and adversely affect the amount of cash available for further investment, to
make payments on its outstanding indebtedness or to make distributions in
respect of the ART Preferred Shares.

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<PAGE> 42

Rising Interest Rates on Variable Rate Debt. As of December 31, 1998,
approximately 3.5% and 96.5% of ART's indebtedness is subject to variable
interest rates and fixed interest rates, respectively. ART may incur
indebtedness in the future that also bears interest at a variable rate or may be
required to refinance its debt at higher rates. Accordingly, increases in
variable interest rates could increase ART's interest expense and adversely
effect the financial condition and results of operations of ART. In the event
that ART's financial condition and results of operations are adversely affected,
the value of the ART Preferred Shares will likely decline.

Covenants. Various debt obligations may require ART to comply with a number
of customary financial and other covenants on an ongoing basis. Failure to
comply with such covenants may limit ART's ability to borrow funds or may cause
a default under its then-existing indebtedness. Various ART debt obligations
contain specific covenants, which provide that if ART should be declared in
default of any of its debt obligations, and such default is not cured in the
time allowed, then the debt obligations containing such covenant would also be
declared in default, as a result of which, among other consequences, all such
debt would become due and payable.

Lack of Control and Other Risks of Equity Investments in and with Third
Parties. ART may invest in shares or other equity interests of real estate
investment trusts or other entities that invest in real estate assets. In such
cases, ART will be relying on the assets, investments and management of the real
estate investment trust or other entity in which it is investing. Such entities
and their properties will be subject to the other risks affecting the ownership
and operation of real estate set forth herein.

ART may also co-invest with third parties through partnerships, joint
ventures or other entities, acquiring non-controlling interests in or sharing
responsibility for managing the affairs of a property, partnership, joint
venture or other entity and, therefore, will not be in a position to exercise
sole decision-making authority regarding the property, partnership, joint
venture or other entity.

Investments in partnerships, joint ventures, or other entities may, under
certain circumstances, involve risks which would not be present were a third
party not involved, including the possibility that ART's partners or
co-venturers might become bankrupt or otherwise fail to fund their share of
required capital contributions, that such partners or co-venturers might at any
time have economic or other business interests or goals which are inconsistent
with the business interests or goals of ART, and that such partners or
co-venturers may be in a position to take action contrary to the instructions or
the requests of ART and contrary to ART's policies or objectives. Such
investments may also have the potential risk of impasse on decisions, such as a
sale, because neither ART nor the partner or co-venturer would have full control
over the partnership or joint venture. Consequently, actions by such partner or
co-venturer might result in subjecting properties owned by the partnership or
joint venture to additional risk. In addition, ART may in certain circumstances
be liable for the actions of its third-party partners or co-venturers.

Investments in Non-Recourse Mortgage Loans. To the extent ART invests in
mortgage loans, such mortgage loans may or may not be recourse obligations of
the borrower and generally will not be insured or guaranteed by governmental
agencies or otherwise. In the event of a default under such obligations, ART may
have to foreclose its mortgage or protect its investment by acquiring title to a
property and thereafter making substantial improvements or repairs in order to
maximize the property's investment potential. Borrowers may contest enforcement
of foreclosure or other remedies, seek bankruptcy protection against such
enforcement and/or bring claims for lender liability in response to actions to
enforce mortgage obligations. Relatively high "loan-to-value" ratios and
declines in the value of the mortgaged property may prevent ART from realizing
an amount equal to its mortgage loan upon foreclosure.

ART may participate in loans originated by other financing institutions. As
a participant, ART may not have the sole authority to declare a default under
the mortgage or to control the management or disposition of the related property
or any foreclosure proceedings in respect thereof.

Any investments in junior mortgage loans which are subordinate to liens of
senior mortgages would involve additional risks, including the lack of control
over the collateral and any related foreclosure proceeding. In the event of a
default on a senior mortgage, ART may make payments to prevent foreclosure on
the senior mortgage without necessarily improving ART's position with respect to
the subject real property. In such event, ART would be entitled to share in the
proceeds only after satisfaction of the amounts due to the holder of the senior
mortgage.

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<PAGE> 43

Limitations on Remedies. Although ART will have certain contractual
remedies upon the default by borrowers under certain debt instruments, such as
foreclosing on the underlying real estate or collecting rents generated
therefrom, certain legal requirements (including the risks of lender liability)
may limit the ability of ART to effectively exercise such remedies.

The right of a mortgage lender to convert its loan position into an equity
interest may be limited or prevented by certain common law or statutory
prohibitions.

Possibility of Uninsured Loss on Uninsurable or Economically Uninsurable
Properties. ART carries comprehensive liability, fire, extended coverage and
rental loss insurance with respect to all of the improved real property that it
owns, with policy specifications, insured limits and deductibles customarily
carried for similar properties. There are, however, certain types of losses
(such as losses arising from acts of war or relating to pollution) that are not
generally insured because they are either uninsurable or not economically
insurable. Should an uninsured loss or a loss in excess of insured limits occur,
ART could lose its capital invested in a property, as well as the anticipated
future revenue from such property and would continue to be obligated on any
mortgage indebtedness or other obligations related to the property. Any such
loss could adversely affect the financial condition and results of operations of
ART.

With respect to those properties in which ART holds an interest through a
mortgage, as well as those properties owned by entities to whom ART makes
unsecured loans, the borrowers will most likely be obligated to maintain
insurance on such properties and to arrange for ART to be covered as a named
insured on such policies. The face amount and scope of such insurance coverage
may be less comprehensive than ART would carry if it held the fee interest in
such property. Accordingly, in such circumstances, or in the event that the
borrowers fail to maintain required coverage, uninsured or underinsured losses
may occur, which could have an adverse impact on ART's cash flow or financial
condition.

Costs of Compliance with the Americans with Disabilities Act and Similar
Laws. Under the Americans with Disabilities Act of 1980 (the "ADA"), places of
public accommodations and commercial facilities are required to meet certain
federal requirements related to access and use by disabled persons. Compliance
with ADA requirements could require both structural and non-structural changes
to the properties in which ART invests and noncompliance could result in
imposition of fines by the United States government or an award of damages to
private litigants. Although management of ART believes that its properties are
substantially in compliance with present requirements of the ADA, ART may incur
additional costs of compliance in the future. A number of additional Federal,
state and local laws exist which impose further burdens or restrictions on
owners with respect to access by disabled persons and may require modifications
to properties in which ART invests, or restrict certain further renovations
thereof. The ultimate amount of the cost of compliance with the ADA or other
such laws is not currently ascertainable. While such costs are not expected to
have a material effect on ART, they could be substantial. If required changes
involve greater expense than ART currently anticipates, ART's financial
condition and results of operations could be adversely affected.

Potential Environmental Liability Affecting ART. Under various Federal,
state and local environmental laws, ordinances and regulations, an owner of real
estate may be liable for the costs of removal or remediation of certain
hazardous or toxic substances on such property. These laws often impose
environmental liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The
presence of such substances, or the failure properly to remediate such
substances, may adversely affect the owner's ability to sell or rent the
property or to borrow using the property as collateral. Persons who arrange for
the disposal or treatment of hazardous or toxic substances may also be liable
for the costs of removal or remediation of such substances at a disposal or
treatment facility, whether or not such facility is owned or operated by such
person. Certain laws impose liability for release of asbestos- containing
materials ("ACMs") into the air and third parties may seek recovery from owners
or operators of real properties for personal injury associated with ACMs. In
connection with the ownership (directly or indirectly through its lending
activities), operation, management and development of real properties, ART may
be considered an owner or operator of such properties or as having arranged for
the disposal or treatment of hazardous or toxic substances and, therefore,
potentially liable for removal or remediation costs, as well as for certain
other related costs, including governmental fines and injuries to persons and
property.

ART's management is not aware of any environmental matters affecting its
properties or investments that would have a material adverse effect on ART's
business, assets or results of operations.

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<PAGE> 44

No assurance can be given that existing environmental assessments with
respect to any of ART's properties reveal all environmental liabilities, that
any prior owner of a property did not create any material environmental
condition not known to ART, or that a material environmental condition does not
otherwise exist with respect to any one or more properties of ART.

Noncompliance with Other Laws. Real estate properties are also subject to
various Federal, state and local regulatory requirements, such as state and
local fire and life safety requirements. Failure to comply with these
requirements could result in the imposition of fines by governmental authorities
or awards of damages to private litigants. ART believes that its properties are
currently in material compliance with all such regulatory requirements. However,
there can be no assurance that these requirements will not be changed or that
new requirements will not be imposed which would require significant
unanticipated expenditures by ART and could have an adverse effect on ART's
results of operations.

Changes in Laws. Increases in real estate taxes, income taxes and service
or other taxes generally are not passed through to tenants under existing leases
and may adversely affect ART's cash flow from operations and its ability to make
distributions to shareholders. Similarly, changes in laws increasing the
potential liability for environmental conditions existing on properties or
increasing the restrictions on discharges or other conditions may result in
significant unanticipated expenditures, which would adversely affect ART's funds
from operations and thus its ability to make payments on its outstanding
indebtedness and to make distributions to its shareholders.

Dependence on Key Personnel. ART will be dependent on the efforts of its
executive officers and the executive officers of BCM, an affiliate of and
advisor to ART. While ART believes that it and BCM could find replacements for
these key personnel, the loss of their services may have a temporary adverse
effect on the operations of ART. Only Randall M. Paulson, the President of BCM,
has an employment agreement with BCM. None of the other officers has entered or
is expected to enter into employment agreements with ART or BCM.

CORRELATION BETWEEN THE VALUE OF THE EQK SHARES AND THE SUCCESS OF EQK'S
BUSINESS

EQK Shareholders are subject to many of the risks described above under
"--Risks Relating to ART's Business," as they may also pertain to the business
of EQK. The value of the EQK Shares may be affected by such risks and the risks
set forth below. In addition, as a result of the sale of the Center, the
resulting distribution to EQK Shareholders and the acquisition of Oak Tree
Village for a note in the full amount of the purchase price, EQK is not expected
to have any net worth after the Merger.

Possible Loss of NOLs. EQK currently has NOLs of approximately $95,000,000
prior to the anticipated utilization of a portion of these NOLs to offset the
taxable gain expected to be realized upon the sale of Harrisburg East Mall. In
general, such NOLs may be used to offset any taxable gains realized upon the
sale of EQK's assets so long as there is not or more than a 50 percentage point
change in the ownership of the EQK Shares during any three year period. In the
event that there is more than a 50 percentage point change in the ownership of
EQK Shares during a three year period, the availability of such NOLs to offset
taxable gains or income would be reduced to a very significant extent. Although
it is not expected that the Merger, the Block Purchase or the Standstill
Agreements would reduce the availability of the NOLs, a reduction in the
availability of such NOLs could have a material adverse effect on the market
value of EQK and the EQK Shares. For purposes of determining possible
limitations on the availability of the NOLs, since December 31, 1997, there as
been a 21.9% change in the ownership of EQK's Shares. In addition, prior to
December 31, 1997, but within the last three years, an additional 23.5% change
in ownership has occurred. If the Merger is approved, new EQK Shares will be
issued to ART, which will result in a 3.6% ownership change. In the aggregate,
all such ownership changes represent less than 50% of EQK's Shares during the
three-year period preceding the date of the Merger.

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<PAGE> 45

RATIO OF EARNINGS TO FIXED CHARGES

The following table summarizes the ratio of ART's earnings to combined
fixed charges and preferred stock dividends for each of the five fiscal years
ended December 31, 1998:

<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED * * * * *
STOCK DIVIDENDS
</TABLE>

* Earnings were inadequate to cover fixed charges and preferred stock dividends
by $4,887,000, $8,474,000, $4,819,000, $189,000 and $1,390,000 in 1998, 1997,
1996, 1995 and 1994, respectively.

USE OF PROCEEDS

Neither ART nor EQK will receive any cash proceeds from the Merger. ART
plans to hold the EQK Shares that it receives as the ART Merger Consideration
for investment purposes. See "The Proposed Merger and Related Matters --
Purposes of the Merger".

THE EQK ANNUAL MEETING

INTRODUCTION

This Prospectus/Proxy Statement is being furnished in connection with the
solicitation of proxies by the EQK Board for use in connection with the EQK
Annual Meeting and any adjournments or postponements of such meeting.

It is anticipated that the mailing of this Prospectus/Proxy Statement to
EQK Shareholders will commence on _________ __, 1999.

DATE, TIME AND PLACE OF MEETINGS

The EQK Annual Meeting is scheduled to be held at the corporate offices of
EQK, 5775 Peachtree Dunwoody Road, Suite 200D, Atlanta, Georgia on ________ __,
1999 at 9:00 a.m. Eastern Standard Time.

MATTERS TO BE CONSIDERED AT THE EQK ANNUAL MEETING

At the EQK Annual Meeting, the EQK Shareholders, voting together as a
single class, will be asked to consider and vote upon the Proposals. The Board
Election Proposal will require the affirmative vote of EQK Shareholders
representing a majority of the total votes authorized to be cast by EQK Shares
then outstanding which are present at the EQK Annual Meeting in person or by
proxy and entitled to vote thereon. The Merger-Related Proposals will each
require the Requisite Shareholder Approval. None of the Merger-Related Proposals
will take effect unless all such proposals receive the Requisite Shareholder
Approval.

RECORD DATE AND VOTE REQUIRED

The EQK Board has fixed the close of business on May 20, 1999 as the EQK
Record Date for the EQK Annual Meeting. As of such date, there were
_________________ EQK Shares issued and outstanding.

The presence, in person or by proxy, of EQK Shareholders owning EQK Shares
representing a majority of all the votes entitled to be cast by EQK Shareholders
at the EQK Annual Meeting is necessary to constitute a quorum at such meeting.

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The Board Election Proposal will require the affirmative vote of EQK
Shareholders representing a majority of the total votes authorized to be cast by
EQK Shares then outstanding which are present at the EQK Annual Meeting in
person or by proxy and entitled to vote thereon. The Merger-Related Proposals
will each require the Requisite Shareholder Approval. None of the Merger-Related
Proposals will take effect unless all such proposals receive the Requisite
Shareholder Approval. LLPM, Summit and Sutter have agreed to vote their EQK
Shares in favor of the Merger-Related Proposals. LLPM, Summit, Sutter and
Halperin currently own 17.50%, 9.52%, 9.55% and 8.9%, respectively, of the
issued and outstanding EQK Shares. The number of affirmative votes required for
approval of the Proposals at the EQK Annual Meeting is also described above
under "--Matters to be Considered at the EQK Annual Meeting."

As of December 31, 1998, Trustees and executive officers of EQK as a group
beneficially held outstanding EQK Shares representing less than 1% of all the
votes entitled to be cast by EQK Shareholders at the EQK Annual Meeting and each
such person has advised ART that he or she intends to vote to approve and adopt
the Proposals.

A proxy may indicate that all or a portion of the shares represented by
such proxy are not being voted with respect to a specific proposal. This could
occur, for example, when a broker is not permitted to vote shares held in street
name on certain proposals in the absence of instructions from the beneficial
owner. Such broker non-votes and abstentions will be considered as not present
and entitled to vote on such proposal, even though such shares will be
considered present for purposes of determining a quorum and voting on other
proposals. BECAUSE APPROVAL OF THE MERGER-RELATED PROPOSALS AT THE EQK ANNUAL
MEETING REQUIRES THE AFFIRMATIVE VOTE OF THREE QUARTERS OF THE OUTSTANDING EQK
SHARES AS DESCRIBED MORE FULLY ABOVE IN "--MATTERS TO BE CONSIDERED AT THE EQK
ANNUAL MEETING," ANY BROKER NON-VOTES OR ABSTENTIONS ON THE PROPOSALS WILL HAVE
THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER-RELATED PROPOSALS AND ACCORDINGLY
WILL AFFECT WHETHER THE MERGER-RELATED PROPOSALS WILL BE APPROVED.

PROXY

Enclosed is a form of proxy which should be completed, dated, signed and
returned by each EQK Shareholder before the EQK Annual Meeting to ensure that
such stockholder's shares will be voted at such meeting. Any EQK Shareholder
signing and delivering a proxy has the power to revoke the proxy at any time
prior to its use by filing with the corporate secretary of EQK a written
revocation of the proxy or a duly executed proxy bearing a later date or by
attending and voting in person at the meetings.

Shares represented by a properly executed proxy will be voted in accordance
with the instructions indicated on such proxy with respect to the proposal at
the EQK Annual Meeting, and at the discretion of the proxy holders on all other
matters to come properly before such meeting. If an EQK Shareholder executes a
proxy with no instructions indicated thereon, shares represented by such proxy
will be voted in favor of the Proposals.

SOLICITATION OF PROXIES

ART will bear the expense of the proxy solicitation. ART has retained
Shareholder Communications Corporation (the "Proxy Solicitor") to act as proxy
solicitor in connection with the Merger. The Proxy Solicitor may contact EQK
Shareholders by mail, telephone, telex, telegraph and personal interviews and
may request brokers, dealers and other nominee stockholders to forward the proxy
materials to beneficial owners of EQK Shares. The Proxy Solicitor will receive a
fee estimated not to exceed $9,500 for such services, plus reimbursement of
out-of-pocket expenses, and ART will indemnify the Proxy Solicitor against
certain liabilities and expenses in connection with the Merger, including
liabilities under federal securities laws. The telephone number of the Proxy
Solicitor is 1-800-221-5724.

OTHER MATTERS

The EQK Board of Trustees knows of no matters, other than those described
in this Prospectus/Proxy Statement, which are to be brought before the EQK
Annual Meeting. However, if any other matters properly come before such

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meeting, it is the intention of the persons named in the enclosed form of proxy
to vote such proxy in accordance with their judgment on such matters.

THE PROPOSED MERGER AND RELATED MATTERS

BACKGROUND OF THE MERGER

On March 5, 1996, Mr. Doug Tibetts, President of Equitable (formerly the
indirect parent of LLPM which holds 1,685,556 EQK Shares), met with ART
representatives at ART's office in Dallas. The meeting was general in nature
without a formal agenda. Mr. Tibetts suggested that representatives of ART speak
with Mr. Gregory R. Greenfield, Executive Vice President and Treasurer of EQK,
concerning the possible sale of EQK. During March and April of 1996, various
telephone conversations were held between Mr. Cooper B. Stuart, an Executive
Vice President of BCM, an affiliate of and advisor to ART, and Mr. Greenfield
regarding the Center and a possible transaction involving EQK.

On January 23, 1997, representatives of ART held a meeting with Mr. William
G. Brown, Vice President and Controller of EQK, and Mr. Greenfield to discuss a
proposed exchange offer by ART with respect to the EQK Shares. EQK agreed to
engage the Financial Advisor to review the fairness of the proposed exchange
offer for the EQK Board.

On March 24, 1997, representatives of the Financial Advisor visited ART's
offices to interview key personnel of both ART and BCM.

During April 1997, discussions continued between representatives of ART and
EQK concerning the terms of the ART Preferred Shares, the terms of the proposed
exchange offer and the fairness opinion. Although an offer was never extended,
ART informally proposed to offer to exchange a combination of (i) cash of
approximately $0.40 per share and (ii) ART Preferred Shares having a liquidation
value of approximately $1.85 for up to 50% of the outstanding EQK Shares. EQK
had 9,264,344 shares outstanding and Prudential, the lender on the Center, held
the Prudential Warrants, for a total of 9,632,212 shares. The ART Preferred
Shares would pay a 10% annual dividend beginning August 16, 1998 and have a
stated liquidation value of $10.00 per ART Preferred Share, plus accrued and
unpaid dividends. If the proposed exchange offer was 100% successful and ART
acquired 4,632,172 shares of EQK and if the actual exchange offer was the same
as that informally discussed, ART would have paid $1,852,869 in cash and issued
856,952 ART Preferred Shares (having a liquidation value of $8,569,520). The
terms of the ART Preferred Shares have not changed in any material manner from
those preliminary discussions. For a description of the ART Preferred Shares see
"Description of the Capital Stock of ART -- ART Preferred Shares." On April 11,
1997, BCM received from EQK a copy of a draft appraisal with respect to the
leasehold interests in the Center. On May 7, 1997, the Financial Advisor

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<PAGE> 48

orally issued a fairness opinion with respect to the terms of the proposed
exchange offer. The EQK Board met on May 7, 1997 and approved the terms of the
proposed exchange offer from ART to the EQK Shareholders.

On June 10, 1997, Lend Lease Corporation acquired ERE, including its
subsidiaries, LLPM and Compass. In connection with such acquisition, the
ownership of LLPM's EQK Shares was transferred for tax purposes, thus
effectively limiting the number of EQK Shares that could be acquired by ART in
an exchange offer without limiting the availability of EQK's NOLs. As a result,
during June and July of 1997, Mr. Stuart and Mr. Brown held further discussions
regarding a proposed change in the structure of the transaction from an exchange
offer to a merger and two separate stock purchases between ART and 5% Holder who
had acquired or experienced a change in ownership in EQK Shares during the past
three years. The merger would result in the EQK Shareholders (other than LLPM
and Greenspring which would sell all of their shares in the stock purchase
transactions) retaining all of their EQK Shares and receiving a combination of
cash and ART Preferred Shares. The public EQK Shareholders' aggregate percentage
interest in EQK would be reduced as a result of the issuance of EQK Shares to
ART pursuant to the merger. This reduction in percentage interest would
effectively be equivalent to the sale by each public EQK Shareholder of
approximately 25% of such EQK Shareholder's shares at the same price per share
($.40 in cash and a portion of an ART Preferred Share with a Liquidation Value
of $1.85) as was to be offered in the exchange offer. It was then contemplated
that LLPM and Greenspring would receive for each EQK Share sold by them a
portion of an ART Preferred Share with a Liquidation Value of $2.25.

During August and September 1997, the Financial Advisor evaluated the
revised structure of the transaction and recommended that the consideration to
be paid to LLPM and Greenspring in connection with the Block Purchase should be
reduced to 0.185 shares of ART Preferred Stock per EQK Share. This
recommendation was adopted and, as a result, the non-cash consideration per
share to other EQK Shareholders was increased from .0492 to 0.0616 of an ART
Preferred Share. The Financial Advisor evaluated the initial revised structure
and noted that the value of the consideration to be paid in the Block Purchase
(as derived by the Financial Advisor) exceeded the value of (i) the
consideration to be paid to the Public EQK Shareholders plus (ii) their retained
interest in the diluted EQK Shares (also as derived by the Financial Advisor).
The Financial Advisor then recommended that the consideration to be paid in the
Block Purchase be reduced to approximate the value of the consideration to be
paid to the Public EQK Shareholders plus their retained interest. Accordingly,
the terms of the Block Purchase were revised to provide that ART would purchase
all of the EQK shares held by LLPM and Greenspring (2,269,356 shares or
approximately 23.56% of the outstanding EQK Shares prior to the Merger) in
exchange for 0.185 ART Preferred Shares (having a Liquidation Value of $1.85 per
share) per each EQK Share for an aggregate of 419,831 ART Preferred Shares
(having an aggregate Liquidation Value of $4,198,309). Together with the EQK
Shares it proposed to acquire in connection with the merger, ART would own 49%
of the issued and outstanding EQK Shares.

As a further condition precedent to the Merger, ART agreed to offer to
enter into a Standstill Agreement with each 5% Holder of EQK Shares (other than
LLPM and Greenspring) whereby ART would pay $0.10 per existing EQK Share held by
the two remaining 5% Holders (paid on a maximum of 2,156,600 EQK Shares or a
maximum of $215,660 in cash) as compensation for such holder's agreement not to
sell any of its EQK Shares or acquire any additional EQK Shares for a period of
42 months after the consummation of the Merger.

ART had also agreed to issue 333,500 ART Preferred Shares (having a
Liquidation Value of $3,335,000) to LLPM in settlement of deferred advisory and
disposition fees owed by EQK to LLPM under the Advisory Agreement. One- half of
the deferred advisory fee (136,000 ART Preferred Shares having a Liquidation
Value of $1,360,000) would have been paid to LLPM at closing, and the other half
would have been paid to LLPM three years after the Closing Date. BCM would act
as successor advisor to EQK under the terms and conditions of a new advisory
agreement.

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On September 30, 1997, the Financial Advisor orally issued a revised
fairness opinion with respect to the proposed Merger.

On September 30, 1997 and November 13, 1997, the EQK Board and the ART
Board, respectively, approved the terms of the Original Merger Agreement.

On December 24, 1997, ART and EQK issued a joint press release to the
effect that the Original Merger Agreement had been signed.

On January 6, 1998, ART filed the Registration Statement with the
Commission.

On January 21, 1998, ART filed Amendment No. 1 to the Registration
Statement.

In January 1998, ART and EQK learned of the Halperin Purchase from a
Schedule 13D filing made by Halperin. During January and February of 1998,
Mssrs. Stuart and Brown had several discussions regarding the Halperin Purchase.
After consulting with its counsel, ART decided that it would make an offer to
Halperin to purchase his EQK Shares after the Registration Statement had been
declared effective by the Commission. Such offer would be made upon the same
terms and conditions as ART's offer to purchase the EQK Shares held by LLPM and
Greenspring. If Halperin declined such offer, ART would amend the Registration
Statement to reflect such fact, but the consideration to be paid to the Public
EQK Shareholders, LLPM and Greenspring pursuant to the Merger and the Block
Purchase would remain the same.

On February 20, 1998, ART received the Commission's comments to the
Registration Statement.

During March and April 1998, ART and EQK prepared their respective
responses to the Commission's comments to the Registration Statement.

On March 19, 1998, Prudential gave EQK notice of its intent to exercise the
Prudential Warrants. The Prudential Warrants were exercised on April 8, 1998 and
on May 7, 1998, 367,868 EQK Shares were issued to Prudential.

During May 1998, Mr. Brown informed Mr. Stuart that the EQK Board had
decided that it was in the best interests of the EQK Shareholders to terminate
the Original Merger Agreement and to sell the Center and distribute the net
liquid assets to the EQK Shareholders. Mr. Brown stated that the EQK Board was
concerned that the Original Merger Agreement would hinder EQK's ability to
consummate a sale of the Center by December 15, 1998, the date on which the
forbearance agreement relating to the Center's mortgage terminates.

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proceeds from the sale of the Center. The parties agreed that the consideration
to be paid to LLPM, Greenspring and Halperin in connection with the Block
Purchase would be a portion of an ART Preferred Share with a Liquidation Value
of $0.328 per EQK Share purchased and the consideration to be paid to the Public
EQK Shareholders would be a portion of an ART Preferred Share with a Liquidation
Value of $0.157 per EQK Share, with the Public EQK Shareholders retaining all of
their EQK Shares subject to the dilution resulting from the issuance of
additional EQK Shares as the ART Merger Consideration.

In August 1998, Summit and Sutter each filed a Schedule 13G with the
Commission disclosing the Summit/Sutter Purchases. These purchases were from one
of the 5% Holders. During August 1998, Messrs.. Stuart and Brown had several
discussions regarding the impact of the Summit/Sutter Purchases. One effect of
the Summit/Sutter purchases was to reduce, as a result of tax considerations,
the number of shares that ART could purchase that were held by Public EQK
Shareholders. As a result, the parties determined that the terms of the
consideration for the Merger and the Block Purchases should be adjusted so that
the consideration to be paid to LLPM, Greenspring, Summit, Sutter and Halperin
in connection with the Block Purchase would be a portion of an ART Preferred
Share with a liquidation value of $0.30 per EQK Share purchased and the
consideration to be paid to the Public EQK Shareholders would be a portion of an
ART Preferred Share with a liquidation value of $0.14 per EQK Share, with the
Public EQK Shareholders retaining all of their EQK Shares subject to the
dilution resulting from the issuance of additional EQK Shares as the ART Merger
Consideration. Upon reaching a preliminary agreement as to the consideration for
the Merger and the Block Purchases, ART then offered to purchase from Summit and
Sutter all of their respective EQK Shares upon the same terms and conditions as
the LLPM and Greenspring purchases. Each of Summit and Sutter has accepted ART's
purchase offer. Additionally, on August 27, 1998, Summit and Sutter each
purchased one half of Greenspring's total EQK shares, thereby increasing the
number of shares to be acquired by ART from Summit and Sutter pursuant to the
Block Purchases.

On August 25, 1998, ART and EQK executed the Merger Agreement.

On September 3, 1998, ART filed Amendment No. 2 to the Registration
Statement.

On December 2, 1998, ART filed Amendment No. 3 to the Registration
Statement.

On January 29, 1999, ART filed Amendment No. 4 to the Registration
Statement.

In March 1999, EQK announced that it had entered into a non-binding Letter
of Intent to sell the Center to a private real estate group for $51 million. A
second quarter closing is anticipated. Closing is subject to a number of
conditions, including the satisfactory completion of due diligence, the
purchaser's obtaining financing and the execution of a definitive purchase and
sale agreement. Accordingly, there is no assurance that a sale will be completed
at the current price or at all. If the sale is completed at this price, a
distribution to shareholders of approximately $0.37 per share is expected to be
made. The distribution may be made in two or more disbursements, and the actual
distribution may be a materially different amount. The amount may be decreased
by, among other factors, a decrease in the sale price of

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the Center or an increase in transaction costs or other liabilities beyond those
currently estimated. The amount may be increased by, among other factors, a
favorable settlement of transaction costs and other liabilities payable by EQK.
In the event the ART Merger is completed as described above, the EQK Merger
Consideration will be in addition to the actual distribution resulting from the
Center's disposition. The Letter of Intent provides that EQK may not solicit,
negotiate or execute other offers for the sale of the Center prior to May 15,
1999 unless the prospective purchaser terminates negotiations under the Letter
of Intent prior to that date.

GENERAL

The following description of the Merger and the Merger Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached as Appendix B to this
Prospectus/Proxy Statement and incorporated herein by reference. EQK
Shareholders are urged to read the Merger Agreement in its entirety.

EFFECTS OF THE MERGER

The Merger Agreement provides that, subject to the Requisite Shareholder
Approval of the Merger-Related Proposals and the satisfaction or waiver of the
other conditions to the Merger, ART Newco will be merged with and into EQK,
whereupon the separate existence of ART Newco will cease and EQK will be the
surviving corporation of the Merger. At the Effective Time, the payment of the
EQK Merger Consideration will be effected as described below. The Amended
Declaration of Trust and the Trustees' Regulations, as in effect at the
Effective Time, will continue to be the Declaration of Trust and Trustees'
Regulations of EQK after consummation of the Merger. Following completion of the
Merger, the New EQK Board (as defined herein under "The Board Election
Proposal") will be comprised of the individuals identified in "The Board
Election Proposal."

EFFECTIVE TIME OF THE MERGER

Following the adoption of the Merger Agreement by the EQK Shareholders and
subject to satisfaction or waiver of the terms and conditions thereof, the
Merger will become effective upon the filing of a Certificate of Merger filed
with the Secretary of the Commonwealth of Massachusetts at the Effective Time.

TERMS OF THE MERGER

At the Effective Time, ART will pay the EQK Merger Consideration to the EQK
Shareholders and EQK will pay the ART Merger Consideration to ART.

Following the Effective Time, American Stock Transfer and Trust Company,
which will act as Merger Agent (the "Merger Agent") in connection with the
Merger, shall distribute or shall cause the Dealer Manager, an affiliate of ART
and BCM, to distribute the EQK Merger Consideration to each EQK Shareholder of
record. In addition, following the Effective Time, EQK will distribute the ART
Merger Consideration to ART. No interest will be paid or accrued on the Merger
Consideration. No EQK Shareholder will be entitled to dividends or other rights
in respect of any fractional interests. See "--Cash in Lieu of Fractional Shares
of ART Preferred Shares."

ART or the Merger Agent shall be entitled to deduct and withhold from the
EQK Merger Consideration otherwise payable pursuant to the Merger Agreement to
any EQK Shareholder such amounts as ART or the Merger Agent is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. To the extent that amounts
are so withheld by ART or the Merger Agent, such withheld amounts shall be
treated for all purposes as having been paid to the holder of the EQK Shares in
respect of which such deduction and withholding was made by ART or the Merger
Agent. See "The Proposed Merger and Related Matters -- Federal Income Tax
Consequences."

None of ART, ART Newco, EQK or the Merger Agent shall be liable to any
person in respect of any EQK Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.

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The ART Preferred Shares to be issued to EQK Shareholders in connection
with the Merger will be freely transferable under the Securities Act, except for
shares issued to any person who may be deemed to be an "affiliate" of ART or EQK
within the meaning of Rule 145 under the Securities Act. It is expected that the
affiliates of ART and EQK will be able to sell such shares without registration
in accordance with the applicable limitations of Rule 145 under the Securities
Act.

CASH IN LIEU OF FRACTIONAL SHARES OF ART PREFERRED SHARES

No certificates representing fractional shares of ART Preferred Shares will
be issued pursuant to the Merger. In lieu thereof, each EQK Shareholder who
would otherwise be entitled to a fractional ART Preferred Share will receive, on
the date the EQK Merger Consideration is paid to such EQK Shareholder, cash in
an amount equal to such fraction (expressed as a decimal and rounded to the
nearest 0.01 of a share) multiplied by the Liquidation Value of an ART Preferred
Share.

AVAILABILITY OF APPRAISAL RIGHTS

The EQK Board has been advised that no statutory appraisal rights are
available to EQK Shareholders in connection with the Merger under Massachusetts
law. However, in at least one case, the Massachusetts Supreme Judicial Court
held that shareholders of a merging corporation were entitled to common law
appraisal rights. Neither ART nor EQK believes that the Merger would give rise
to such common law appraisal rights. However, any EQK Shareholder may, by
written notice prior to the EQK Annual Meeting, assert his or her entitlement to
common law dissenter's appraisal rights. EQK intends to oppose any such
assertion of such rights. In the event that holders of more than 3% of the
outstanding EQK Shares assert common law dissenter's appraisal rights, the
Merger Agreement may be terminated.

All written notices of an EQK Shareholder's assertion of common law
dissenter's appraisal rights with respect to the Merger, if any, should be
addressed to: EQK Realty Investors I, Inc., 5775 Peachtree Dunwoody Road, Suite
200D, Atlanta, Georgia 30342, Attention: Secretary, and should be executed by,
or with the consent of, the holder of record. In the notice, the EQK
Shareholder's name should be stated as it appears on his or her stock
certificates(s). If the EQK Shares are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, such notice should be executed by
or for the fiduciary. If the EQK Shares are owned of record by or for more than
one person, as in a joint tenancy or tenancy in common, such notice should be
executed by or for all joint owners. An authorized agent, including an agent for
two or more joint owners, may execute the notice for an EQK Shareholder of
record; however, the agent should identify the record owner(s) and expressly
disclose the fact that, in sending the notice, he is acting as agent for the
record owners.

CONDITIONS TO THE MERGER; TERMINATION; WAIVER AND AMENDMENT

In addition to the Requisite Shareholder Approval, the obligations of ART
Newco on the one hand and EQK on the other to consummate the Merger are subject
to the satisfaction or waiver of certain other conditions including, among
others: (i) the consummation of the Block Purchase, (ii) the Requisite
Shareholder Approval of the Merger-Related Proposals, (iii) the acquisition by
EQK from ART of the Oak Tree Village upon the terms and conditions described
herein under "--Sale of the Center and Acquisition of Oak Tree Village," (iv)
EQK's sale of the Center and distribution of the net liquid assets to the EQK
shareholders, (v) the execution by each 5% Holder (other than LLPM, Summit,
Sutter and Halperin) of a Standstill Agreement, (vi) the authorization of the
ART Preferred Shares for listing on the NYSE, subject to official notice of
issuance, (vii) no stop order suspending the effectiveness of the Registration
Statement having been issued and no proceedings for that purpose having been
initiated or threatened by the Commission, (viii) no order, injunction or decree
issued by any court or agency of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Merger, (ix) the receipt by
ART and EQK of all required material governmental authorizations, permits,
consents, orders or approvals, (x) the receipt of all licenses, permits,
consents, approvals and authorizations from all third parties and governmental
bodies and agencies which are necessary in connection with consummation of the
Merger and the conduct of EQK's business after the Merger (xi) EQK operating in
all respects in its ordinary course of business without any material adverse
change in its business, properties or financial condition, (xii) the receipt by
ART of written resignations from all members of the current EQK Board, (xiii)
the number of outstanding EQK Shares immediately prior to the Merger being
9,632,212 and no additional EQK Shares or other equity interests or any option,
warrant, right or other security exercisable for, convertible into or
exchangeable

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for EQK Shares or other equity interests in EQK being issued since September 30,
1998, and (xiv) the representations and warranties of EQK in the Merger
Agreement being true, complete and accurate in all material respects as of the
date when made and as of the date the Merger is consummated. EQK intends to
resolicit shareholder approval for the Merger if EQK desires to waive any
material condition specified above.

The obligations of ART to consummate the Merger are subject to the
satisfaction or waiver of certain other conditions including, among others: (i)
the continuing accuracy in all material respects of the representations and
warranties made by EQK in the Merger Agreement; (ii) the performance in all
material respects of all agreements and covenants to be performed by EQK or LLPM
under the Merger Agreement; (iii) the receipt of certain opinions of counsel;
(iv) the exercise in full, termination or cancellation of any options or
warrants (or other derivative or convertible interests in the equity securities
of EQK) for EQK Shares, and (v) there having been no change in EQK's business,
results of operations or financial condition which would have a material adverse
effect on EQK.

The obligations of EQK to consummate the Merger are subject to the
satisfaction or waiver of certain other conditions including, among others: (i)
the continuing accuracy in all material respects of the representations and
warranties made by ART in the Merger Agreement; (ii) the performance in all
material respects of all agreements and covenants to be performed by ART under
the Merger Agreement; and (iii) there having been no change in ART's business,
results of operations or financial condition had occurred which would have a
material adverse effect on ART.

The Merger Agreement may be terminated and the Merger abandoned prior to
the Effective Time, whether before or after the Requisite Shareholder Approval:
(i) by mutual written consent of ART, ART Newco and EQK; (ii) by ART Newco or
ART, on or after July 30, 1999, if any of the conditions precedent to ART or ART
Newco's obligations under the Merger Agreement have not been met or, to the
extent permitted by applicable law, have not been waived in writing by ART and
ART Newco prior to such date, (iii) by EQK on or after July 30, 1999, if any of
the conditions precedent to EQK's obligations under the Merger Agreement have
not been met or, to the extent permitted by applicable law, have not been waived
in writing by EQK prior to such date; (iv) by EQK if EQK accepts a proposal from
a party other the ART or ART's affiliates concerning a merger, sale of
substantial assets or similar transaction involving EQK or the sale of any EQK
Shares, (iv) by EQK upon a Negative Determination, or (v) by EQK if the EQK
Board determines that compliance with the Merger Agreement is reasonably likely
to materially impair or delay its ability to sell the Center or result in a
material reduction in the consideration that would be received by EQK in
connection with such sale.

ART and EQK may, by an appropriate instrument executed at any time prior to
the Effective Time, whether before or after the Requisite Shareholder Approval
is obtained, amend the Merger Agreement; provided that after the receipt of such
approvals, no amendment or modification may be made which alters the amount or
changes the form of the EQK Merger Consideration or ART Merger Consideration.

The parties to the Merger Agreement may also, at any time prior to the
Effective Time, by action taken by its Board of Directors or Trustees, as
applicable: (i) extend the time for the performance of any of the obligations or
other acts of the other party; (ii) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant thereto and (iii) subject to limitations on
amendment, waive compliance with any of the agreements or conditions contained
in the Merger Agreement to the extent permitted by law.

SOLICITATION PERMITTED; BOARD ACTION; FEES AND EXPENSES

The Merger Agreement provides that EQK and those acting on its behalf may
solicit, encourage, or initiate any discussions with, or provide any information
to, any person or entity concerning any merger, sale of substantial assets, or
similar transaction involving EQK, or any sale of any of the EQK Shares. EQK
must notify ART in writing of all of the relevant details relating to all
inquiries and proposals which it may receive relating to any of such matters. In
the event that EQK accepts such an offer or proposal from a party other than ART
or its affiliates and, as a result terminates the Merger Agreement, EQK must pay
ART a termination or "break-up" fee of $200,000, plus EQK's share of any
expenses related to the Merger in accordance with the terms of the Cost Sharing
Agreement.

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<PAGE> 54
CONDUCT OF EQK'S BUSINESSES PENDING COMPLETION OF THE MERGER

The Merger Agreement provides that, prior to the Effective Time or the
termination of the Merger Agreement pursuant to its terms, unless ART shall
otherwise consent in writing, EQK will conduct its operations according to its
ordinary and usual course of business and will not (i) enter into or agree to
any transaction outside the ordinary course of business, (ii) incur any
additional indebtedness for borrowed money except pursuant to existing lines of
credit and in the ordinary course of business and except in connection with the
acquisition of the Oak Tree Village from ART, (iii) pay dividends on or make
other distributions or payments in respect of its capital stock other than in
connection with the sale of the Center, (iv) issue any additional equity
securities or any option, warrant, right or other security exercisable for,
convertible into or exchangeable for any equity securities, (v) increase or
agree to increase the salary, compensation, bonus or benefits of any officer,
Trustee or employee of EQK other than in the ordinary course of business (except
for reasonable consideration to be granted to Trustees upon their retirement
from the EQK Board) or (vi) sell or otherwise dispose of any of its properties,
with the exception of the Center, other than in the ordinary course of business.

SALE OF THE CENTER AND ACQUISITION OF OAK TREE VILLAGE

Pursuant to the Merger Agreement, ART has consented to (i) the acquisition
by EQK of the Oak Tree Village upon the terms and conditions described below,
(ii) the sale of the Center by EQK upon such terms and conditions as EQK shall
determine, (iii) the retirement of the mortgage debt on the Center, (iv) the
payment of all other obligations of EQK (other than those associated with the
Oak Tree Village), (v) all actions that EQK determines are necessary and
appropriate to effectuate the foregoing actions, and (vi) the distribution of
the net proceeds from the sale of the Center to the EQK Shareholders. In March
1999, EQK entered into the Letter of Intent to sell the Center to a private real
estate group for $51 million. A second quarter closing is anticipated. The
Letter of Intent provides that EQK may not solicit, negotiate or execute other
offers for the sale of the Center prior to May 15, 1999 unless the prospective
purchaser terminates negotiations under the Letter of Intent prior to that date.

Subject to Requisite Shareholder Approval of the Merger-Related Proposals,
EQK has agreed to acquire the Oak Tree Village from ART. Oak Tree Village is a
retail shopping center located in Lubbock, Texas. The municipal address of Oak
Tree Village is 3701 19th Street and 3702 20th Street, Lubbock, Lubbock County,
Texas. Although the Oak Tree Village is classified as a "retail shopping
center," its usage includes both retail and medical office applications. One
tenant, American Home Patient, occupies ten percent or more of the rentable
square footage of the Oak Tree Village and the principal nature of business of
such tenant is the sale of home health care equipment. The principal business
carried on in or from the Oak Tree Village is the retail sale of goods and
professional services. ART acquired the Oak Tree Village for investment
purposes. ART currently has no plans to renovate, improve or further develop the
Oak Tree Village.

As of December 31, 1998, the Oak Tree Village was encumbered by a first
lien mortgage in the principal amount of $1,507,000 in favor of Midland Loan
Services (the "Lender"). In connection with the Merger, ART will sell the Oak
Tree Village to EQK pursuant to the terms of a real estate purchase and sale
agreement which will provide for, among other things, the purchase by EQK of the
Oak Tree Village for a total consideration of $2,757,000, consisting of an
assumption by EQK of $1,507,000 in existing debt (subject to Lender's approval)
and a non-recourse promissory note (the "Note") by EQK payable to ART in the
amount of $1,250,000 that shall bear interest at a rate of 12% per annum and
shall be payable quarterly in installments of interest only over a term of five
years with a final principal payment being due on December 15, 2003. If the
Lender approves the terms of the transaction, the Note will be secured by a
second lien mortgage on the Oak Tree Village in favor of ART.

Pursuant to the Real Estate Purchase and Sale Agreement, ART will agree to
indemnify and hold EQK harmless from and against any liabilities to which EQK
may become subject that cannot be satisfied by the disposition of the Oak Tree
Village.

Upon the sale of the Center and the acquisition of the Oak Tree Village by
EQK, the Oak Tree Village will be the sole real estate asset of EQK.

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<PAGE> 55

The principal tenants of the Oak Tree Village are American Home Patient,
Southwest Hematology Oncology and Uniform Today. The principal tenants of the
Oak Tree Village lease their space and the underlying land pursuant to leases
which are summarized below.

<TABLE>
<CAPTION>
Principal Tenant Area Minimum Expiration Renewal
---------------- (Sq. Ft.) Annual Rent Date Options
--------- ----------- ---- -------
<S> <C> <C> <C> <C>
Uniform Today 3,973 $44,061 2/28/02 No
Bless Your Heart 3,288 37,784 10/31/00 Yes
Microage 3,030 33,330 9/30/99 Yes
</TABLE>

The following table shows lease expiration information for the tenants of
the Oak Tree Village at December 31, 1998:

<TABLE>
<CAPTION>
Gross 1998 % of
Number of Leased Minimum Aggregate 1998
Leases Area Annual Minimum
Year Expiring (a) (Sq. Ft.) Rent Annual Rent
---- ------------ --------- ------ ------------
<S> <C> <C> <C> <C>
Month to Month -- -- $ -- --
1999 7 9,769 83,110 22.89
2000 6 11,548 111,116 38.62
2001 2 4,925 37,946 13.19
2002 2 5,922 55,527 19.30
--- ---------- ---------- ------
TOTAL 17 32,164 $ 287,699 100.00
=== ========== ========== ======
</TABLE>

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

(a) Assumes no renewal options will be exercised in order to show the earliest
termination of the leases.

ART has received an appraisal (the "Brown Appraisal") from Brown &
Associates, an unaffiliated third-party appraiser ("Brown & Associates") with
respect to the market value of Oak Tree Village. Based upon the analysis set
forth in the Brown Appraisal, Brown & Associates estimated that the market value
of the leased fee estate in the Oak Tree Village in its as is condition as of
May 20, 1997 was $2,265,000. In arriving at such appraised value, Brown &
Associates considered relevant economic and market factors, including
population, employment and other demographic factors and the impact of
competition from other shopping centers in the Lubbock metropolitan statistical
area ("MSA").

The Brown Appraisal indicates that considerable movement is occurring
within the Lubbock, Texas area as businesses relocate from center to center and
because certain businesses are relocating in anticipation of losing space in
connection with the construction of a new east/west freeway. As a result of the
construction of such new freeway, access to the Oak Tree Village and the
surrounding neighborhood will be greatly enhanced, according to the Brown
Appraisal. In addition, according to the Brown Appraisal, the average rent for
retail space in the Lubbock area increased $0.14 per square foot during the
period from January 1996 to June 1997 to an average rental rate of $9.18 per
square foot.

In addition, according to a survey of the Lubbock, Texas commercial real
estate market prepared by Blosser Appraisal, an unaffiliated third-party
appraiser ("Blosser") in February of 1998 (the "Blosser Survey"), retail vacancy
for multi-tenant shopping centers in the Lubbock, Texas MSA increased
approximately 1% to 14.87% since 1997 and the market appeared to be stabilizing
at a 14% to 15% vacancy level. The Blosser Survey indicated that rental rates
have been fairly stable during 1997 and there were few sales of retail centers
in the Lubbock, Texas MSA during 1997. Overall, the Lubbock retail sector is
doing fairly well, with several factors indicating a stabilizing picture for the
near term, according to the Blosser Survey.

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<PAGE> 56

In October 1997, ART refinanced, at maturity, the $1.4 million mortgage
debt secured by the Oak Tree Village for $1.5 million. ART received no net
financing proceeds after the payoff of the existing mortgage and the payment of
various closing costs associated with the refinancing. The new loan bears
interest at a rate of 8.48% per annum, requires monthly principal and interest
payments of $13,344 and matures in October 2007. If the new loan is voluntarily
prepaid, the related mortgage provides that the following prepayment
consideration will be payable to the lender:

Years 1-3: The greater of (i) three percent (3%) of the outstanding
principal balance of the mortgage note at the time of
prepayment or (ii) the Yield Maintenance Amount (as defined
below).

Year 4: The greater of (i) two percent (2%) of the outstanding
principal balance of the mortgage note at the time of
prepayment or (ii) the Yield Maintenance Amount.

Year 5-9: The greater of (i) one percent (1%) of the outstanding
principal balance of the mortgage note at the time of
prepayment or (ii) the Yield Maintenance Amount.

Year 10
through
maturity: No prepayment consideration is required.

The "Yield Maintenance Amount" is the present value, as of the date of
prepayment, of the remaining scheduled payments of principal and interest from
the date of prepayment through the maturity date of the loan(including any
balloon payment) determined by discounting such payments at the Discount Rate
(hereinafter defined), less the amount of principal being prepaid. The "Discount
Rate" is that rate which, when compounded monthly, is equal to the Treasury Rate
(hereinafter defined) when compounded semi-annually. The "Treasury Rate" is the
yield calculated by the linear interpolation of the yields, as reported in
Federal Reserve Statistical Release H.15-Selected Interest Rates under the
heading U.S. Government Securities/Treasury Constant Maturities for the week
ending prior to the date of prepayment, of U.S. Treasury constant maturities
with maturity dates (one longer and one shorter) most nearly approximating the
maturity date of the new loan.

Real estate taxes are levied against the Oak Tree Village for county and
township, and school tax purposes. The Oak Tree Village was assessed $53,770 in
real estate taxes in 1998. The 1998 millage rate was 2.42/100. ART estimates
that the Oak Tree Village will owe approximately $54,000 in real estate taxes in
1999. Real estate taxes are substantially reimbursed by the tenants through real
estate tax recovery billings.

As of December 31, 1998, for Federal income tax purposes, ART depreciates
the New Property under the MACRS as follows:

Buildings:

Gross Federal Income Tax Basis $1,430,781
Accumulated Depreciation $ 114,554
Depreciation Method MACRS - Straight Line ("SL")
Depreciable Life 40 years

Land Improvements:

Not Applicable.

Personal Property:

Not applicable.

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<PAGE> 57

ART'S PURPOSES FOR THE MERGER

ART intends to acquire an aggregate of 5,050,032 EQK Shares pursuant to the
Merger and the Block Purchase primarily for the purpose of investment and in
order to achieve the listing of the ART Preferred Shares on the NYSE. The ART
Board believes that the issuance and the proposed listing of the ART Preferred
Shares on the NYSE in connection with the Merger would provide ART with greater
access to the public capital markets for future acquisition transactions. The
ART Board also considered the amount of EQK's NOLs which currently approximate
$95,000,000 and the resulting benefits to ART of acquiring an indirect interest
in such NOLs through EQK pursuant to the Merger. Assuming market conditions,
industry conditions and EQK's business and financial condition do not suffer
adversely in the interim, it is currently ART's intention (but not obligation)
to seek to acquire substantially all of the remaining outstanding EQK Shares at
some time after the third anniversary of the consummation of the Merger for
consideration of 0.0486 of an ART Preferred Share (with a Liquidation Value of
$0.486) per currently outstanding EQK Share. Notwithstanding the foregoing, ART
is not obligated to make any further acquisitions of EQK Shares and no assurance
can be given that ART will make any such acquisitions in the future. In
addition, any such acquisitions may be for a consideration per EQK Share which
is greater or less than the consideration offered in the Merger or set forth
above.

THE EQK BOARD RECOMMENDATION

The EQK Board believes that the Merger is fair to, and in the best
interests of, EQK and the holders of EQK Shares. By unanimous vote, the EQK
Board approved the Merger and the transactions contemplated thereby and
unanimously recommend that the EQK Shareholders approve the Merger.

In approving the Merger Agreement and determining to recommend that the EQK
Shareholders approve the Merger, the EQK Board considered certain information,
including primarily the following:

(i) The financial condition, results of operations, business and prospects
of EQK.

(ii) Certain publicly available information regarding the financial
condition, results of operations, business and properties of ART.

The following factors were deemed by the EQK Board to be reasons supporting
its recommendation that the EQK Shareholders approve the Merger.

(i) Based upon available information and taking into account that the
Center is expected to be sold and the remaining assets of EQK
distributed prior to the Merger, the EQK Merger Consideration appears
to represent, in the judgment of the EQK Board, the highest available
return to EQK Shareholders. The EQK Board recognized that, because ART
would be acquiring an interest in EQK at a time when EQK would have no
assets other than the NOLs which may not be available in the future,
it was difficult to value the transaction. The EQK Board concluded
that, given all the surrounding circumstances, including that no other
offers had been received for the entity without the Center and that
EQK retained the ability to terminate the Merger Agreement if a better
offer is received, the terms of the Merger Agreement are fair to EQK.

(ii) ART has indicated its intention, without legal obligation, to purchase
all or substantially all of the remaining EQK Shares approximately
three years after the Merger for additional ART Preferred Shares with
a Liquidation Value of $0.486 per EQK Share.

(iii) The Merger-Related Proposals are subject to Requisite Shareholder
Approval (i.e., a 75% supermajority vote).

(iv) EQK has the right to solicit competing offers for the EQK Shares,
subject to the obligation to make specified termination payments to
ART in certain circumstances if a competing offer is accepted.

(v) EQK has the right to terminate the Merger Agreement if it determines
that compliance with the Merger Agreement is reasonably likely to
materially impair or delay its ability to dispose of the Mall, or
result in a

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<PAGE> 58
material reduction in the consideration that would be received by EQK
or the EQK Shareholders in connection with such disposition.

(vi) The Merger has been structured to preserve the availability of EQK's
accumulated NOLs, although the EQK Board recognizes that there is no
assurance that some or all of such availability will not be lost as a
result of future changes in the ownership of EQK Shares or otherwise.

(vii) The ART Preferred Shares received as the EQK Merger Consideration
will entitle the recipients thereof to quarterly dividend payments,
whereas the EQK Shares have not been paying dividends.

The following factors were deemed by the EQK Board to be reasons that would
weigh against recommending that the EQK Shareholders accept the Offer (see "Risk
Factors" for a further discussion of certain of these considerations):

(i) The ART Preferred Shares may not trade at or near their Liquidation
Value. Furthermore, the ART Preferred Shares will be subject to the
risks of ART's business, including those described under "Risk Factors
-- Risks Relating to ART's Business."

(ii) It is not practicable to obtain a fairness opinion with respect to the
EQK Merger Consideration and there is no readily ascertainable market
value for the EQK Shares after the sale of the Center.

(iii) There is no assurance that the EQK Shares will have any significant
value after the Merger.

(iv) ART and BCM, an affiliate of and advisor to ART, and certain of their
management personnel had relationships with Southmark Corporation,
which underwent bankruptcy proceedings beginning in July 1989 and was
the subject of various legal proceedings. For a further description of
such bankruptcy and certain related and other legal proceedings, see
the discussion under the caption "Description of ART." See "Risk
Factors -- Potential Risks Associated With Affiliate of Controlling
Shareholder of New Advisor."

(v) Certain conflicts of interest exist with regard to the approval of the
Merger-Related Transactions and the resulting control of EQK by ART.
See "Risk Factors -- Risks Relating to Merger -- Conflicts of Interest
Between LLPM and EQK" and "Risk Factors -- Risks Relating to Merger --
Conflicts of Interest Between EQK and BCM" herein.

The foregoing discussion of the information and factors considered and
given weight by the Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Merger
Agreement and the Merger, the Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination. In addition, individual members of the Board may
have given different weights to different factors.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of material Federal income tax consequences of
the Merger. This summary may not apply to certain classes of persons, including,
without limitation, foreign persons, insurance companies, tax-exempt
organizations, financial institutions, dealers in securities, persons who
acquired EQK Shares pursuant to the exercise of employee stock options or rights
or otherwise as compensation and persons who hold EQK Shares as part of a
straddle or conversion transaction. This summary is based upon laws,
regulations, rulings and decisions, all of which are subject to change (possibly
with retroactive effect), and no ruling has been or will be requested from the
Internal Revenue Service on the tax consequences of the Merger.

In the opinion of Andrews & Kurth L.L.P., special tax counsel to ART, which
opinion is based upon certain assumptions made with the consent of ART, the
payment of the EQK Merger Consideration to the Public EQK Shareholders pursuant
to the Merger will be treated as a taxable transaction for Federal income tax
purposes.

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<PAGE> 59

The Federal income tax consequences set forth above are for general
information only. Each EQK Shareholder is urged to consult his own tax advisor
to determine the particular tax consequences to him or her of the Merger,
including the applicability and effect of state, local and other tax laws.

DIVIDEND PAYMENTS. A distribution made with respect to ART Common Shares or
ART Preferred Shares (other than a distribution in redemption of such stock or
in liquidation of ART) will be a dividend for federal income tax purposes to the
extent made out of the current or accumulated earnings and profits, as
determined for federal income tax purposes, of ART. If a distribution exceeds
the current or accumulated earnings and profits of ART, such distribution will
be treated first as a return of capital to the extent of the holder's adjusted
basis in the stock on which the distribution was made (the basis of such stock
would be reduced by the amount of the distribution) and will be treated second
as an amount received from the sale or exchange of the stock on which the
distribution was made.

A domestic corporation which holds ART Common Shares or ART Preferred
Shares will be entitled to the 70% dividends received deduction with respect to
dividends received thereon, subject however to generally applicable limitations
thereon which are discussed below. The special rule that the dividends received
deduction is 80% for a stockholder who owns 20% by vote and value of the stock
of ART is not discussed here. The dividends received deduction (taking into
account dividends received from ART and from other corporations) may not exceed
70% of the taxable income (adjusted as provided in Section 246(b) of the Code)
of the corporate stockholder. Moreover, the dividends received deduction is
completely disallowed if the stock with respect to which the dividend is paid is
not held for 46 days or more during the 90-day period beginning on the date
which is 45 days before the stock becomes ex-dividend (91 days or more during
the 180 day period beginning 90 days before the date on which the stock becomes
ex-dividend, if the dividends are with respect to ART Preferred Shares and are
attributable to a period or periods of 366 days or more) or the holder of such
stock is obligated to make related payments with respect to a position in
substantially similar or related property. The holding period of stock includes
the day of disposition of the stock but not the day of acquisition, does not
include any day which is more than 45 days (or 90 days in the case of ART
Preferred Shares) after the date on which the stock becomes ex-dividend, and is
determined without regard to Section 1223(4) of the Code with respect to wash
sales. A holder may not count toward the required holding period any period
during which it (a) has an option to sell, is under a contractual obligation to
sell, or has made (and not closed) a short sale of substantially identical stock
or securities, (b) is the grantor of an option (other than a qualified covered
call) to buy substantially identical stock or securities, or (c) has diminished
its risk of loss by holding one or more other positions with respect to
substantially similar or related property (with respect to the meaning of which
regulations have recently been proposed). The dividends received deduction is
reduced under Section 246A of the Code to the extent that a holder incurs
indebtedness directly attributable to its investment in the stock with respect
to which the dividend is received. A corporate holder must reduce its basis, but
not below zero, in stock with respect to which an extraordinary dividend is
received by the amount of the extraordinary dividend which is not subject to tax
by reason of the dividends received deduction. An extraordinary dividend is,
with an exception that excludes qualified preferred dividends within the meaning
of Section 1059(e)(3) of the Code from classification thereas, a dividend with
respect to stock held for two years or less on the dividend announcement date
(i) exceeds 5% (10%, in the case of ART Common Shares) of the holder's basis in
the stock, treating all dividends having ex-dividend dates within an 85-day
period as one dividend or (ii) that exceed 20% of the holder's basis in the
stock, treating all dividends having ex-dividend dates within a 365-day period
as one dividend. Fair market value, if it can be established by the holder to
the satisfaction of the IRS, may be substituted for basis for purposes of the
preceding sentence. In addition, an amount treated as a dividend in the case of
a redemption that is either not pro rata as to all stockholders, an amount which
is a dividend and is part of a partial liquidation, and an amount which is a
dividend with respect to stock the issue price of which exceeds its liquidation
rights or its stated redemption price is an extraordinary dividend without
regard to the length of time that the stock has been held. A holder disposing of
stock with respect to which one or more extraordinary dividends has been paid
will recognize gain upon such disposition, in addition to the gain which would
otherwise be recognized upon such disposition, in an amount which is equal to
the untaxed portion of the extraordinary dividends, if any, which were in excess
of the basis in the stock at the time of the distribution.

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<PAGE> 60

Dividend income that is not subject to regular corporate taxation as a
consequence of the dividends received deduction may give rise to alternative
minimum tax liability. Holders of ART Preferred Shares or ART Common Shares may
be liable for state and local income taxes with respect to dividends or other
distributions paid on the ART Preferred Shares or ART Common Shares. Because a
state or locality may not allow, or may limit, a dividends received deduction,
each prospective purchaser of ART Preferred Shares or ART Common Shares is
advised to consult its own tax advisor concerning state and local taxes.

REDEMPTION, SALES AND EXCHANGES. Generally, any redemption of ART Common
Shares or ART Preferred Shares will be treated as a sale or exchange thereof if
the redemption (a) results in a complete termination of the holder's stock
interest in ART, (b) is substantially disproportionate with respect to the
holder or (c) is not essentially equivalent to a dividend with respect to the
holder, in each case within the meaning of Section 302(b) of the Code. In
determining whether any of these tests has been met, stock which is
constructively owned by reason of Section 318 of the Code (pursuant to which a
holder will be deemed to own stock owned (actually or constructively) by certain
related individuals and entities and to own stock subject to option), as well as
stock actually owned is taken into account. A distribution will generally be
treated as substantially disproportionate if the percentage of the voting stock
of ART which is owned immediately after the redemption is less than 80% of the
percentage of the voting stock of ART which is owned immediately before the
redemption and if the percentage of the ART Common Shares of ART which is owned
by such person is also so reduced. A distribution will be not essentially
equivalent to a dividend if it results in a "meaningful reduction" in a holder's
stock interest in ART. The IRS has stated in published rulings that a redemption
that results in a reduction in the actual and constructive stock interest of a
minority stockholder, whose relative actual and constructive stock interest is
minimal and who exercises no control over corporate affairs, will generally be
treated as not essentially equivalent to a dividend. If a redemption does not
satisfy any of the Section 302 tests, the amount received in the redemption will
be treated as a distribution which is made by ART with respect to the stock so
redeemed which is taxable as provided in "Dividend Payments" above, and the
adjusted tax basis of the stock so redeemed will be transferred to any retained
stock interest in ART.

The amount of gain or loss which is recognized upon the sale or exchange
(including a redemption which is treated as a sale or exchange) of ART Common
Shares or ART Preferred Shares is the difference between the amount realized and
the adjusted basis in the ART Common Shares or ART Preferred Shares so sold or
exchanged. Reductions in adjusted basis which are the result of distributions as
discussed above will increase the amount of gain recognized or reduce the amount
of loss recognized upon the sale thereof. Any gain or loss so recognized upon
such a disposition of ART Common Shares or ART Preferred Shares will be a
capital gain or loss if such stock is a capital asset.

ART PREFERRED SHARES; Conversion into ART Common Shares. No gain or loss
will be recognized upon the conversion of ART Preferred Shares into shares of
ART Common Shares except as noted below. As discussed below, special rules apply
to Foreign Holders. Any cash which is received in lieu of a fractional share
upon any such conversion will be treated under the current advance ruling policy
of the IRS as an amount received in exchange of the fractional share. Moreover,
if dividends on the ART Preferred Stock are in arrears at the time of conversion
into ART Common Shares, a portion of the ART Common Shares so received the value
of which is less than or equal to the amount of such arrearage may be includible
in income as a dividend (to the extent of ART's current or accumulated earnings
and profits).

The adjusted tax basis of the shares of ART Common Shares received upon
such a conversion (excluding any shares the receipt of which was taxable because
of dividend arrearages) will be equal to the adjusted tax basis of the ART
Preferred Shares converted (exclusive of any tax basis allocated to a fractional
share in lieu of which cash was received). The holding period of the shares of
ART Common Shares which are held with a carryover basis will include the holding
period of the ART Preferred Shares converted, if the ART Preferred Shares were
held as a capital asset at the time of the exchange. The holding period of any
shares the receipt of which was taxable because of dividend arrearages will
begin the day after the receipt thereof.

Redemption Premium. Under Section 305 of the Code and applicable
regulations, any excess of the redemption price of the ART Preferred Shares over
the issue price thereof is includible in income as a dividend (to the extent of
ART's current or accumulated earnings and profits) on a constant yield to
maturity base under current regulations (in accordance with the economic accrual
principles of Section 1272 of the Code under regulations which are to be
prescribed) even though no cash is received in respect thereof units if (i)
based on all of the facts and circumstances as

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<PAGE> 61

of the issue date, the redemption pursuant to ART's call right is more likely
than not to occur and (ii) the premium is not solely in the nature of a penalty
for premature redemption. Although the issue is not free from doubt, ART intends
to take the position that no such accrual will be required. A redemption premium
for the ART Preferred Shares is reasonable if it is in the nature of a penalty
for premature redemption and if it does not exceed the amount which ART would be
required to pay for such redemption right under market conditions existing at
the time of issuance of the ART Preferred Shares. ART believes that the
redemption premium on the ART Preferred Shares satisfies this standard.

Adjustment of Conversion Price. Under applicable Treasury regulations
certain adjustments to the conversion price of convertible preferred stock, such
as adjustments to reflect taxable distributions of cash or property on the
related common stock, will be treated as a constructive distribution of stock
and will be treated as a dividend to the holders of the preferred stock to the
extent of the current or accumulated earnings and profits of the corporation.
The formula for the conversion price of the ART Preferred Stock is not adjusted
to reflect such distributions, however, the actual conversion price may be
adjusted through changes in the value of the ART Common Stock as a result of
such distributions. Adjustments to reflect nontaxable stock splits or
distributions to the holders of ART Common Shares of stock, stock warrants or
stock rights will, however, generally not be so treated. The failure to adjust
fully the conversion price for the ART Preferred Shares to reflect distributions
of stock, stock warrants or stock rights with respect to the ART Common Shares
may result in a taxable dividend to holders of ART Common Shares or ART
Preferred Shares.

SPECIAL TAX RULES APPLICABLE TO FOREIGN HOLDERS. As used herein in the
discussion of U.S. federal income tax matters, a "Foreign Holder" is a person
who, for United States federal income tax purposes, is a foreign corporation, a
nonresident alien individual, a foreign estate, a foreign trust, or a foreign
partnership. Foreign Holders seeking benefits under applicable tax treaties or
an exemption from United States withholding tax for "effectively connected
income," as described below, will be required to comply with certain
certification and other requirements in order to establish their entitlement to
such benefits or exemption. Additional or different rules, not discussed herein,
may apply in light of the circumstances of a particular Foreign Holder.
Accordingly, each prospective Foreign Holder should discuss these matters with
its own tax advisors.

Dividends. Dividends on the ART Preferred Shares or the ART Common Shares
which are paid to a Foreign Holder and which are not effectively connected with
the conduct of a trade or business in the United States will be subject to
United States withholding tax at a rate of 30% (or such lower rate as may be
prescribed by an applicable tax treaty). If the dividends on the ART Preferred
Shares or the ART Common Shares are effectively connected with the conduct of a
trade or business carried on in the United States, such dividends will be
subject to tax at the rates and in the manner applicable to United States
persons and may also be subject to an additional "branch profits tax" at a 30%
rate (or such lower rate as may be specified by an applicable income tax
treaty).

Gain on Disposition of ART Preferred Shares or ART Common Shares. Foreign
Holders will not be subject to U.S. federal income tax on gain realized on a
disposition of the ART Preferred Shares or the ART Common Shares unless (a) the
gain is effectively connected with the conduct of a trade or business in the
United States in which case such gain will be subject to tax at the rates and in
the manner applicable to United States persons (the branch profits tax described
above may also apply if the holder is a foreign corporation), (b) in the case of
an individual Foreign Holder, such holder is present in the United States for at
least 183 days in the taxable year of the disposition and either the income from
the disposition is attributable to an office or other fixed place of business
maintained by the holder in the United States or the holder has a tax home, as
defined in Section 911(d)(3) of the Code, in the United States or (c) the gain
is subject to tax under Section 897 of the Code.

Gain realized by a Foreign Holder on a disposition of ART Preferred Shares
(including a disposition by conversion or redemption) will not be subject to tax
under Section 897 of the Code if the Foreign Holder, after taking into account
certain constructive ownership rules, does not own and has not owned within the
five-year period ending on the date of the disposition more than five percent of
the outstanding ART Preferred Shares assuming that the ART Preferred Shares are
regularly traded on an established securities market, within the meaning of
Section 897(c)(3) of the Code. Similarly, gain realized by a Foreign Holder on a
disposition of ART Common Shares will not be subject to tax under Section 897 of
the Code if the Foreign Holder after taking into account certain constructive
ownership rules has not owned within the five year period ending on the date of
the disposition more than five percent of the outstanding ART Common Shares
assuming that the ART Common Shares is regularly traded on an established
securities market, within the meaning of Section 897 of the Code. If the
exemption which is discussed in the two preceding sentences is not

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available, then a Foreign Holder of ART Preferred Shares or of ART Common Shares
should discuss the effect of Section 897 of the Code with its tax advisors.

United States Federal Income Tax. Unless otherwise provided in an
applicable estate tax treaty, shares of ART Preferred Shares and ART Common
Shares will be considered property situated in the United States for federal
estate tax purposes and will be subject to U.S. federal estate tax.

BACK-UP WITHHOLDING. A noncorporate holder of ART Preferred Shares or ART
Common Shares may be subject to backup withholding at the rate of 31 percent
with respect to dividends paid on ART Preferred Shares or ART Common Shares or
the proceeds of a sale, exchange or redemption thereof if (i) the payee fails to
furnish a taxpayer identification number ("TIN") to the payor, (ii) the IRS
notifies the payor that the TIN furnished by the payee is incorrect, (iii) there
has been a notified payee under reporting with respect to interest, dividends or
original issue discount described in Section 3406(c) of the Code, or (iv) there
has been a failure of the payee to certify under penalty of perjury that the
payee is not subject to back-up withholding.

The payment of the proceeds of a sale of ART Preferred Shares or ART Common
Shares to or through the foreign office of a broker generally will not be
subject to back-up withholding. However, information reporting requirements will
apply to a payment of proceeds from the sale of shares of ART Preferred Shares
or ART Common Shares through a foreign office of a broker that is a United
States person or of certain foreign brokers unless the broker has documentary
evidence in its files that the owner is a non-United States holder and the
broker has no actual knowledge to the contrary.

Any amounts withheld under the back-up withholding rules from a payment to
a holder will be allowed as a refund or a credit against the holder's U.S.
federal income tax liability, provided that the required information is
furnished to the IRS.

EFFECT OF MERGER ON MARKET FOR EQK SHARES; REGISTRATION UNDER THE EXCHANGE ACT

The cumulative effect of the sale of the Center, the resulting distribution
of the net liquid assets to the EQK Shareholders, the Merger, the Block Purchase
and the Standstill Agreements will reduce the number of EQK Shareholders and the
number of EQK Shares that might otherwise trade publicly and, thus, the
liquidity and market value of the EQK Shares are likely to be adversely
affected. As a result of the distribution to EQK Shareholders and the
acquisition of Oak Tree Village for a note in the full amount of the purchase
price, EQK is not expected to have any net worth after the Merger.

Prior to May 4, 1998, the EQK Shares were listed and traded on the NYSE. On
April 23, 1998, the NYSE announced that trading of the EQK Shares would be
suspended prior to the opening of the NYSE on May 4, 1998, as EQK had fallen
below the NYSE's continued listing criteria for net tangible assets available to
common stock (less than $12 million) and 3-year average net income (less than
$600,000). The EQK Shares are currently traded in the over-the-counter market.
The extent of the public market for such EQK Shares and the availability of
price quotations in respect thereof from time to time depends upon such factors
as the number of EQK Shareholders, the interest in maintaining a market in the
EQK Shares on the part of securities firms, the trading value of the EQK Shares,
the possible termination of registration of EQK Shares under the Exchange Act,
as described below, and other factors.

The EQK Shares are currently registered under the Exchange Act. Such
registration may be terminated by EQK upon application to the Commission if the
outstanding EQK Shares are not listed on a national securities exchange and if
there are fewer than 300 holders of record of EQK Shares. As of March 26, 1999,
EQK had 206 holders of record. Although legally permissible, pursuant to the
Merger Agreement, EQK will agree not to affirmatively deregister the EQK Shares.
Termination of registration of the EQK Shares under the Exchange Act would
reduce the information required to be furnished by EQK to its shareholders and
to the Commission and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b) and the requirement
of furnishing a proxy statement in connection with shareholders' meetings
pursuant to Section 14(a) and the related requirement of furnishing an annual
report to shareholders, no longer applicable with respect to the EQK Shares.
Furthermore, the ability of "affiliates" of EQK and persons holding "restricted
securities" of EQK to dispose of such securities pursuant

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to Rules 144 or 145 under the Securities Act may be impaired or eliminated if
the EQK Shares were deregistered under the Act.

FEES AND EXPENSES IN CONNECTION WITH THE MERGER

ART has retained Shareholder Communications Corporation to act as Proxy
Solicitor in connection with the Merger. The Proxy Solicitor may contact EQK
Shareholders by mail, telephone, telex, telegraph and personal interviews and
may request brokers, dealers and other nominee stockholders to forward the
Merger materials to beneficial owners of EQK Shares. The Proxy Solicitor will
receive a fee estimated not to exceed $9,500 for such services, plus
reimbursement of out-of-pocket expenses, and ART will indemnify the Proxy
Solicitor against certain liabilities and expenses in connection with the
Merger, including liabilities under federal securities laws.

ART will pay the Merger Agent and the Dealer Manager, an affiliate of ART
and BCM, reasonable and customary compensation for their respective services in
connection with the Merger, plus reimbursement for their out-of-pocket expenses,
and will indemnify each of them against certain liabilities and expenses in
connection therewith, including liabilities under the federal securities laws.
ART will not pay any fees or commissions to any broker or dealer or other person
(other than the Proxy Solicitor and the Dealer Manager) for soliciting proxies
in connection with the Merger. Brokers, dealers, commercial banks and trust
companies will be reimbursed by ART for customary mailing and handling expenses
incurred by them in forwarding material to their customers.

ART and EQK have entered into an expense sharing agreement (the "Expense
Sharing Agreement") whereby each of ART and EQK will share the costs and
expenses associated with the Merger. Under the terms of the Expense Sharing
Agreement, if EQK and ART enter into the Merger Agreement and proceed in good
faith to complete the Merger but are unsuccessful in such effort by reason of an
inadequate EQK Shareholder response to this Prospectus/Proxy Statement or
otherwise, EQK's liability under the Expense Sharing Agreement shall be limited
to the lesser of 50% of the actual transaction costs or $100,000, and ART shall
be responsible for all additional transaction costs. In addition, if the Merger
is consummated in accordance with the terms of the Merger Agreement, EQK's
liability shall be limited to the lesser of 50% of the actual transaction costs
or $150,000 and ART shall be responsible for all additional transaction costs.

ACCOUNTING TREATMENT

Since ART may be considered to have the ability to exercise significant
influence over the operating policies of EQK upon consummation of the Merger,
ART will account for its investment in EQK using the equity method.

STOCK EXCHANGE LISTING

Application will be made to list the ART Preferred Shares to be issued
pursuant to the Merger on the NYSE. See "Risk Factors -- ART Preferred Shares --
Application for the Listing and Trading of ART Preferred Shares and Possible
Subsequent Delisting."

EQK LITIGATION

Each of EQK, the EQK Trustees and the Advisor have been named as defendants
in a purported class action complaint filed in Massachusetts state court which
seeks to enjoin the Merger. The complaint also seeks other relief including
unspecified damages.

THE DECLARATION AMENDMENT PROPOSAL

The following is a brief summary of proposed amendments to the Declaration
of Trust that will be reflected in the Amended Declaration of Trust. All of the
amendments contemplated by the Amended Declaration of Trust are subject to the
Requisite Shareholder Approval of the Merger-Related Proposals. The full text of
the Amended Declaration of Trust is attached hereto as Appendix D.

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Extension of the Duration and Termination of the Trust. The Declaration of
Trust provided that the term of EQK would expire in March 1999. The EQK
Shareholders voted at the Special Meeting to extend EQK's term to March 2001.
The Amended Declaration of Trust will permit the existence of EQK to continue
until December 31, 2018, unless sooner terminated as otherwise provided under
"The Business of EQK -- Summary of the Existing Declaration of Trust -- Duration
and Termination oF the Trust".

Removal of Limitation of Number of Authorized EQK Shares. The Declaration
of Trust currently provides that the total number of authorized EQK Shares is
10,055,555. There will be no limitation on the number of authorized EQK Shares
under the Amended Declaration of Trust.

Reduction of the Number of EQK Shareholders Required to Vote on Certain
Matters. The Declaration of Trust currently provides that each of the following
amendments to the Declaration of Trust shall require the affirmative vote of the
holders of three-quarters of the outstanding EQK Shares: (i) increases in the
number of authorized EQK Shares, (ii) amendments to the investment policies of
EQK, (iii) any plan for the termination of EQK which contemplates the
distribution to the EQK Shareholders of securities or other property-in-kind
(other than the right promptly to receive cash), and (iv) any amendments which
would reduce the percentage vote required to approve any amendments to the
amendment provisions of the Declaration of Trust. The Amended Declaration of
Trust will remove restrictions on the number of authorized EQK Shares and will
allow the Trustees to amend EQK's investment policies without the approval of
the EQK Shareholders. In addition, the Amended Declaration of Trust will reduce
the number of affirmative votes of EQK Shareholders required to amend the
Amended Declaration of Trust in all other instances to a majority. See "The
Business of EQK -- Summary of the Existing Declaration of Trust -- Duration and
Termination of the Trust."

Removal of Prohibitions on the Issuance of EQK Shares and other Securities.
Under the Declaration of Trust, EQK is currently prohibited from issuing any
additional EQK Shares or any rights, warrants or options to subscribe to,
purchase or acquire any EQK Shares. The Amended Declaration of Trust will allow
EQK to issue additional EQK Shares and other types of securities from time to
time, including securities with preferential rights to the EQK Shares, provided
that any issuance of additional EQK Shares will require the affirmative vote of
holders of not less than a majority of the then outstanding EQK Shares entitled
to vote thereon.

Removal of Borrowing Restrictions. The Declaration of Trust currently
restricts the aggregate amount of secured or unsecured borrowings that EQK may
incur to 75% of EQK's total assets (other than intangibles). The Amended
Declaration of Trust will eliminate such borrowing restrictions.

Revision of Trustee Provisions. The Declaration of Trust currently provides
that the number of Trustees must be no fewer than five and no more than twelve
and that a majority of the Trustees shall be unaffiliated with EQK and its
affiliates. The Amended Declaration of Trust will reduce the maximum number of
Trustees to seven, with at least one trustee being unaffiliated with EQK and/or
its affiliates. See "The Business of EQK -- Summary of the Existing Declaration
of Trust -- Trustees."

Ownership Limit. The Declaration of Trust currently contains provisions
which allow the Trustees to restrict ownership of EQK Shares in order to
maintain EQK's qualification as a REIT under the Code. The Amended Declaration
of Trust will specifically prohibit ownership of more than 4.9% of the
outstanding EQK Shares by any single shareholder, other than ART and duPont.
Under the Amended Declaration of Trust, the EQK Board may exempt a proposed
transferee from this restriction upon receipt of a ruling from the Internal
Revenue Service, an opinion of counsel or other evidence satisfactory to the EQK
Board that ownership of EQK by a proposed transferee will not adversely affect
EQK's qualification as a REIT under the Code, and upon such other conditions as
the EQK Board may direct.

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Change the Name of EQK. The Amended Declaration of Trust will change the
name of EQK from "EQK Realty Investors I" to "ART Realty Investors I" to
eliminate any reference to EQK or LLPM or any of their affiliates.

Reduction of the Number of EQK Trustees Required to Vote on Certain
Matters. The Declaration of Trust currently requires the approval of two-thirds
of the EQK Board to amend the Declaration of Trust, without the vote or consent
of EQK Shareholders, in order to conform the Declaration of Trust to the
requirements of (a) the REIT provisions of the Code, (b) other applicable
Federal laws or regulations or (c) any state securities or "blue sky" laws or
requirements of administrative agencies thereunder in connection with the
initial public offering of EQK Shares. The Amended Declaration of Trust will
require only a majority vote of the New EQK Board (as defined herein under "The
Board Election Proposal") to approve amendments to the Declaration of Trust with
respect to the aforementioned conformity issues. The Declaration of Trust will
also be amended to require only a majority vote of the New EQK Board (as defined
herein under "The Board Election Proposal"), without EQK Shareholder approval,
to change the investment policies of EQK from time to time, in keeping with the
other provisions of the Declaration of Trust. See "The Business of EQK --
Summary of the Existing Declaration of Trust - Amendment of Declaration of
Trust; Merger."

Change in Organizational Structure of EQK. The Amended Declaration of Trust
will provide that, upon a vote of a majority of the New EQK Board (as defined
herein under "The Board Election Proposal"), and with the affirmative vote of
the holders of a majority of the outstanding EQK Shares, the New EQK Board shall
have the power to cause to be organized or to assist in organizing a corporation
or corporations under the laws of any jurisdiction or any other trust,
partnership, association, or other organization to take over the trust estate of
EQK or any part or parts thereof or to carry on any business in which EQK shall
directly or indirectly have any interest, and to sell, convey and transfer the
trust estate of EQK or any part or parts thereof to any such corporation, trust,
partnership, association, or organization in exchange for the EQK Shares or
securities issued by EQK or otherwise, and to lend money to, subscribe for the
EQK Shares or securities issued by EQK, and enter into any contracts with any
such corporation, trust, partnership, association, or organization, or any
corporation, trust partnership, association, or organization in which EQK holds
or is about to acquire shares or any other interest. The New EQK Board may also
cause a merger or consolidation between EQK or any successor thereto and any
such corporation if and to the extent permitted by law, provided that under the
law then in effect, the federal income tax benefits available to qualified real
estate investment trusts and their shareholders, or substantially similar
benefits, are also available to such corporation, trust, partnership,
association, or organization and its stockholders or members, and provided that
the resulting investment would be substantially equal in quality and
substantially the same in type as an investment in the EQK Shares.

The EQK Board believes that the Amended Declaration of Trust is fair to,
and in the best interests of, EQK and the holders of EQK Shares. By unanimous
vote, the EQK Board approved the Declaration Amendment Proposal and unanimously
recommends that the EQK Shareholders approve the Declaration Amendment Proposal.

THE NEW ADVISORY AGREEMENT PROPOSAL

EQK has entered into an agreement with LLPM, a wholly owned subsidiary of
ERE, to act as its "Advisor." The Advisor makes recommendations to EQK
concerning investments, administration and day-to-day operations.

Under the terms of the Advisory Agreement, the Advisor receives a
management fee that is based upon the average daily per share price of EQK's
shares plus the average daily balance of outstanding mortgage indebtedness. Such
fee is calculated using a factor of 42.5 basis points (0.425%) and generally has
been payable monthly without subordination. Commencing with the December 1995
extension of debt and continuing with the December 1996 debt extension,
Prudential requested, and the Advisor agreed to, a partial deferral of payment
of its fee. Whereas the fee continues to be computed as described above,
payments to the Advisor are limited to $37,500 per quarter. Accrued but unpaid
amounts will be eligible for payment upon the repayment of the Mortgage Note (as
defined in "The Business of EQK -- General"). For the years ended December 31,
1998, 1997 and 1996, portfolio management fees were $232,000, $242,000 and
$250,000, respectively. The balance of deferred advisory fees at December 31,
1998 was $299,000. The deferred advisory fees will be paid to the Advisor upon
the consummation of the sale of the Center.

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Upon consummation of the Merger and subject to Requisite Shareholder
Approval of the Merger-Related Proposals, LLPM will terminate its rights and
duties as Advisor under the Advisory Agreement and BCM, an affiliate of and
advisor to ART, will become the New Advisor to EQK under the New Advisory
Agreement.

The duties of the New Advisor under the New Advisory Agreement will
include, among other things, locating, investigating, evaluating and
recommending real estate and mortgage note investment and sales opportunities,
as well as financing and refinancing sources for EQK. The New Advisor will also
serve as a consultant to EQK in connection with EQK's business plan and
investment policy decisions to be made by the New EQK Board.

The New Advisory Agreement provides that the New Advisor shall receive base
compensation at the rate of 0.0625% per month (0.75% on an annualized basis) of
EQK's gross asset value in the form of a gross asset fee. In addition to base
compensation, the New Advisory Agreement provides that the New Advisor, or an
affiliate of the New Advisor, shall be entitled to receive an acquisition fee
for locating, leasing or purchasing real estate for EQK; a net income fee for
the investment and management of EQK's assets; a loan arrangement fee; an
incentive fee equal to 10% of net income for the year in excess of a 10% return
on shareholders' equity, and 10% of the excess of net capital gains over net
capital losses, if any; and a mortgage placement fee, on mortgage loans
originated or purchased. The New Advisory Agreement further provides that the
New Advisor shall bear the cost of certain expenses of its employees not
directly identifiable to EQK's assets, liabilities, operations, business or
financial affairs; and miscellaneous administrative expenses relating to the
performance by the New Advisor of its duties under the New Advisory Agreement.

If and to the extent that EQK shall request the New Advisor, or any
director, officer, partner or employee of the New Advisor, to render services to
EQK other than those required to be rendered by the New Advisor under the New
Advisory Agreement, such additional services, if performed, will be compensated
separately on terms agreed upon between such party and EQK from time to time.

The New Advisory Agreement automatically renews from year to year unless
terminated in accordance with its terms.

The EQK Board believes that the New Advisory Agreement is fair to, and in
the best interests of, EQK and the holders of EQK Shares. By unanimous vote, the
EQK Board approved the New Advisory Agreement Proposal and unanimously recommend
that the EQK Shareholders approve the New Advisory Agreement Proposal.

THE BOARD ELECTION PROPOSAL

At the EQK Annual Meeting, the EQK Shareholders, voting together as a
class, will be asked to consider and vote upon the members of the EQK Board
pursuant to the Board Election Proposal. The Board Election Proposal will
require the affirmative vote of EQK Shareholders representing a majority of the
total votes authorized to be cast by EQK Shares then outstanding which are
present at the EQK Annual Meeting in person or by proxy and entitled to vote
thereon.

The current members of the EQK Board are described below. The term of
office of each member of the EQK Board expires at the 1999 annual meeting of the
EQK Board or when the respective successor is elected and qualifies. Upon
majority approval of the Board Election Proposal by the EQK Shareholder, the
current members of the EQK Board shall be re-elected and shall serve until the
earlier of (i) the 2000 annual meeting of EQK, or (ii) the appointment of the
New EQK Board.

Sylvan M. Cohen, age 84, has been a Trustee since 1988. Mr. Cohen has
been Chairman, Chief Executive Officer, and Trustee of Pennsylvania Real
Estate Investment Trust, an American Stock Exchange-listed real estate
investment trust, since 1994 and was President and Trustee since its
inception in 1960. Mr. Cohen has been Of Counsel to the law firm Drinker
Biddle & Reath since 1995. For more than five years prior thereto, Mr.
Cohen was a partner in the Philadelphia law firm of Cohen, Shapiro,
Polisher, Shiekman and Cohen. Mr. Cohen is formerly a director of Fidelity
Bank, Philadelphia, Pennsylvania, and is currently a director of FPA
Corporation, an American Stock Exchange-listed real estate development
company. Mr. Cohen was a managing trustee of Arbor Property Trust, a
NYSE-listed real estate investment trust and successor in interest

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to EQK Green Acres, L.P., until December 1997. He formerly served as
President of the National Association of Real Estate Investment Trusts and
the International Council of Shopping Centers.

Alton G. Marshall, age 77, has been a Trustee since the Trust's
inception in 1985. Mr. Marshall has been President of Alton G. Marshall
Associates, Inc. a New York City real estate investment firm since 1971. He
was formerly a Senior Fellow of the Nelson A. Rockefeller Institute of
Government in Albany, New York. He was also Chairman of the Board and Chief
Executive Officer of The Lincoln Savings Bank, FSB from March 1984 through
December 1990. From 1971 to 1981, he was President of the Rockefeller
Center, Inc., a real estate, manufacturing and entertainment company. Mr.
Marshall is currently a director of the Hudson River Trust and the New York
State Electric & Gas Corp., and was a managing trustee of Arbor Property
Trust until December 1997. He is an independent partner of Equitable
Capital and Equitable Capital Retirement Fund.

George R. Peacock, age 75, has been a Trustee since 1988. Mr. Peacock
has been sole-owner and President of Carluke, Inc., a real estate
investment consulting firm, since 1988. Mr. Peacock had retired from ERE, a
wholly-owned subsidiary of Equitable in August 1988 after serving as
Chairman and Chief Executive Officer. Mr. Peacock is a past member of
Equitable's Investment Policy Committee. Prior to his retirement, he was
also a Senior Vice President of Equitable for approximately twelve years.
He is also a former director of ERE and was a managing trustee of Arbor
Property Trust until December 1997.

Phillip E. Stephens, age 51, has been a Trustee since 1990 and is
currently Chairman of Stephens Property Group, Inc. Mr. Stephens was
Chairman and Chief Executive Officer of Compass, a subsidiary of ERE, from
February 1996 to June 1997 and was President and Chief Executive Officer
from January 1992 to January 1996. Mr. Stephens was Executive Vice
President of Compass from January 1990 to December 1991. He has also served
as President of LLPM, EQK's advisor and a wholly-owned subsidiary of ERE,
from December 1989 to June 1997. Prior to that date and since October 1987,
he was President of EQK Partners, the predecessor in interest to LLPM.
Prior to that date and since its inception in September 1983, he was Senior
Vice President and subsequently President of EQK Partners. Mr. Stephens was
also a managing trustee of Arbor Property Trust until December 1997.

Robert C. Robb, Jr., age 53, has been a Trustee since 1991. Mr. Robb
has been President of and partner in the management and financial
consulting firm of Lewis, Eckert, Robb & Company since 1981. Mr. Robb is
currently a director of PNC Bank, N.A., Pittsburgh, Pennsylvania, Tamaqua
Cable Products Company, and Brynwood Partners, and is a former director of
Brinks, Inc. of Darien, Connecticut.

Samuel F. Hatcher, age 53, has been a Trustee since January 15, 1999.
He has been Senior Executive Vice President and General Counsel for Lend
Lease Real Estate Investments, Inc. and its predecessor ERE Yarmouth since
June 1997 and, prior thereto, was Executive Vice President and General
Counsel of ERE since June 1989. Prior to joining ERE, he was a partner in
the real estate practice group of Alston & Bird, an Atlanta law firm. Mr.
Hatcher is also a member of the American College of Real Estate Lawyers,
National Association of Real Estate Investment Managers, American Corporate
Counsel Association and National Association of Public Pension Attorneys.
Mr. Hatcher has more than 28 years of legal experience and holds an AB from
Davidson College and a JD from Yale Law School.

Subject to Requisite Shareholder Approval of the Merger-Related Proposals,
upon completion of the Merger, pursuant to the Merger Agreement, all of the
members of the then current EQK Board will resign and the related vacancies
shall be filled with persons designated by ART (the "ART Designated Trustees"),
at least one of whom shall be unaffiliated with ART or its affiliates (the
"Independent Trustee"). The ART Designated Trustees shall constitute the new
board of EQK (the "New EQK Board"). ART currently intends to designate Thomas A.
Holland, A. Cal Rossi, Jr., Cooper B. Stuart, Karl L. Blaha and Al Gonzalez as
the ART Designated Trustees. To the extent that the current ART Designated
Trustees are unwilling or unable to continue to serve as Trustees of EQK, their
successors will generally be nominated by the remaining ART Designated Trustees.
See "The Declaration Amendment Proposal -- Revision of Trustee Provisions".

Set forth below are descriptions of the members of the proposed New EQK
Board.

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Karl L. Blaha, age 51, has served as a director of ART since June 1996.
Mr. Blaha has served as President of ART since October 1993 and as
Executive Vice President and Director of Commercial Management of ART from
April 1992 to October 1993. Since July 1997, Mr. Blaha has served as
Executive Vice President - Commercial Asset Management of BCM, TCI, CMET,
IORI, and Syntek Asset management, Inc. ("SAMI"), and since January 1998,
of NRLP Management Corp. ("NMC"), which is the general partner of NRLP and
National Operating, L.P. ("NOLP") the operating partnership of NRLP and a
wholly-owned subsidiary of ART and from April 1992 to August 1995, Mr.
Blaha served as an Executive Vice President and Director of Commercial
Management of BCM, TCI, CMET, IORI and SAMI. Since November 1998, Mr. Blaha
has served as the sole Director of SAMI since October 1998, as Director of
Garden National Realty, Inc. and since December 1998, as a Director of NMC.
From October 1992 to July 1997, Mr. Blaha served as Executive Vice
President of Carmel Realty, Inc., a company owned by First Equity
Properties, Inc. ("First Equity"), which is 50% owned by a subsidiary of
BCM. Since 1996, Mr. Blaha has served as a Director and President of First
Equity. From April 1992 to February 1994, Mr. Blaha served as Executive
Vice President and Director of Commercial Management of NIRT and VPT. From
August 1988 to March 1992, Mr. Blaha was a Partner and Director of the
National Real Estate Operations of First Winthrop Corporation. From April
1984 to August 1988, Mr. Blaha served as a Vice President of Southmark.

Thomas A. Holland, age 56, has served ART as Executive Vice President
and Chief Financial Officer since August 1995, and Senior Vice President
and Chief Accounting Officer from July 1990 to August 1995. Mr. Holland has
also served BCM, SAMI, CMET, IORI and TCI as Executive Vice President and
Chief Financial Officer since August 1995 and Senior Vice President and
Chief Accounting Officer from July 1990 to August 1995. He has been
Secretary of CMET, IORI and TCI since February 1997 and Executive Vice
President and Chief Financial Officer of NMC since January 1998. Mr.
Holland was Senior Vice President and Chief Accounting Officer of NIRT and
VPT from July 1990 to February 1994.

A. Cal Rossi, Jr., age 61, currently serves as Executive Vice President
and Director of Capital Markets at BCM. He joined BCM as a permanent
employee on March 1, 1996. Mr. Rossi is the President of the Rossi Group of
Companies and has created world-class hotels and resorts throughout the
United States.

Cooper B. Stuart, age 47, currently serves as Executive Vice President
at BCM, where he commenced employment in early 1994. Mr. Stuart currently
works in the Capital Markets area of BCM where he is principally involved
in both debt and equity transactions including public offerings. Mr. Stuart
was also Managing Director of InveQuest Realty Corporation. He was also
President of InveQuest Ventures, Inc., InveQuest Incorporated and its
subsidiary, InveQuest Properties, Inc., and a General Partner of numerous
real estate syndications involving land, office and apartment development.
Mr. Stuart served as Senior Vice President of First Financial Equities
Corporation from 1988 to 1989. Mr. Stuart is a licensed real estate broker
and worked for Moore Myers & Associates from 1980 to 1981. He was employed
by Xerox Corporation as a sales executive in the New York and Connecticut
areas from 1975 to 1979.

Al Gonzalez, age 62, has been a director of ART since 1989 and has
served as President of AGE Refining, Inc. , a petroleum refining and
marketing firm, since March 1991. From January 1988 to March 1991, Mr.
Gonzalez served as President of Moody-Day Inc., a company that sells and
leases construction equipment and supplies; owner and President of Gulf-Tex
Construction Company; and owner and lessor of two restaurant sites in
Dallas, Texas. Mr. Gonzalez has served as a director since April of 1990 of
Avacelle, Inc. ("Avacelle") which is 53% owned by ART and 47% owned by BCM.
From 1988 to 1992, Mr. Gonzalez served as a director of Greenbriar Corp.
From 1987 to 1989, Mr. Gonzalez served as a member of the Dallas City
Council. On March 18, 1992, Avacelle filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code and an Order confirming its
Plan of Reorganization was entered October 18, 1993 by the United States
Bankruptcy Court, Northern Division of Oklahoma. On April 21, 1997,
Avacelle again filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code. Avacelle voluntarily dismissed the petition in
1998.

Pursuant to the Amended Declaration of Trust, the unanimous consent of a
committee of the New EQK Board consisting of the Independent Trustee and at
least two other ART Designated Trustees shall be required to approve (i)

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<PAGE> 69

transactions between EQK and ART and any of their respective affiliates and
other related persons (other than transactions between related parties pursuant
to the New Advisory Agreement), and (ii) any amendments to EQK's organizational
documents. The New EQK Board will not review the New Advisory Agreement because
the New Advisory Agreement is one of the three Merger-Related Proposals and
therefore voted on before the election of the New EQK Board under the Board
Election Proposal.

DESCRIPTION OF ART

ART, a Georgia corporation, is the successor to a District of Columbia
business trust organized pursuant to a declaration of trust dated July 14, 1961.
The business trust merged into ART on June 24, 1988. ART invests in equity
interests in real estate (including equity securities of real estate-related
entities), leases, joint venture development projects and partnerships and
finances real estate and real estate activities through investments in mortgage
loans. ART has invested in private and open market purchases in the equity
securities of CMET, IORI, TCI and NRLP.

The ART Board has broad authority under ART's governing documents to make
all types of real estate investments, including mortgage loans and equity real
estate investments, as well as investments in the securities of other entities,
whether or not such entities are engaged in real estate-related activities.

Although the ART Board is directly responsible for managing the affairs of
ART and for setting the policies which guide it, the day-to-day operations of
ART are performed by BCM, an affiliate of and advisor to ART. BCM is a
contractual advisor under the supervision of the ART Board. The duties of BCM
include, among other things, locating, investigating, evaluating and
recommending real estate and mortgage note investment and sales opportunities,
as well as financing and refinancing sources for ART. BCM also serves as a
consultant in connection with ART's business plan and investment policy
decisions made by the ART Board.

BCM, an affiliate of and advisor to ART, is a company owned by a trust for
the benefit of the children of Gene E. Phillips, the Chairman of the Board and a
Director of ART until November 16, 1992. Gene E. Phillips served as a director
of BCM until December 22, 1989 and as Chief Executive Officer of BCM until
September 1, 1992. Gene E. Phillips currently serves as a representative of the
trust that owns BCM for the benefit of his children and, in such capacity, Gene
E. Phillips has substantial contact with the management of BCM and input with
respect to BCM's performance of advisory services to ART. As of March 31, 1999,
BCM owned 5,753,072 ART Common Shares, representing approximately 54.5% of the
ART Common Shares then outstanding. BCM has been providing advisory services to
ART since February 6, 1989. BCM also serves as advisor to CMET, IORI and TCI.
Karl L. Blaha, Randall M. Paulson, Bruce A. Endendyk, Steven K. Johnson and
Thomas A. Holland, executive officers of ART, are also executive officers of
CMET, IORI and TCI. Karl L. Blaha also serves as a Director of ART and as a
director of NMC, the general partner of NRLP and NOLP. On December 18, 1998,
NMC, a wholly-owned subsidiary of ART, was elected general partner of NRLP and
NOLP. BCM performs certain administrative functions for NRLP and NOLP on a cost
reimbursement basis.

Gene E. Phillips is the former chairman of Southmark, a real estate
syndicator and parent of San Jacinto. As a result of a deadlock on Southmark's
Board of Directors, Mr. Phillips, among others, reached an agreement whereby he
resigned his positions with Southmark and certain of Southmark's subsidiaries
and affiliates in January 1989. Southmark filed a voluntary petition in
bankruptcy under Chapter 11 of the United States Bankruptcy Code in July 1989.
In November 1990, San Jacinto was placed under conservatorship of the RTC by
federal banking authorities. In December 1990, San Jacinto was converted into a
Federal Association and placed in receivership. Mr. Phillips has been named as a
defendant in a number of lawsuits brought by the RTC and private plaintiffs in
which the allegations made against Mr. Phillips included breach of fiduciary
duty and other misconduct, which allegations were denied by Mr. Phillips. These
actions have been dismissed or settled.

Since February 1, 1990, affiliates of BCM have provided property management
services to ART. Currently, Carmel Realty Services, Ltd. ("Carmel, Ltd.")
provides such property management services. Carmel, Ltd. subcontracts with other
entities for the provision of the property-level management services to ART at
various rates. The general partner of Carmel, Ltd. is BCM. The limited partners
of Carmel, Ltd. are (i) First Equity which is 50% owned by a subsidiary of BCM,
(ii) Gene E. Phillips, and (iii) a trust for the benefit of the children of Gene
E. Phillips. Carmel, Ltd.

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<PAGE> 70

subcontracts the property-level management of 15 of ART's commercial properties
(shopping centers, office buildings and a merchandise mart) and its hotels to
Carmel Realty, Inc. ("Carmel Realty") which is a company owned by First Equity.
Carmel Realty is entitled to receive property and construction management fees
and leasing commissions in accordance with the terms of its property-level
management agreement with Carmel, Ltd.

Affiliates of BCM are also entitled to receive real estate brokerage
commissions in accordance with the terms of the advisory agreement between ART
and BCM.

ART has no employees itself, but PWSI, a wholly-owned food service
subsidiary of ART, had 865 employees and a majority owned development subsidiary
of ART had five employees as of December 31, 1998. Employees of BCM render
services to ART.

ART's principal offices are located at 10670 North Central Expressway,
Suite 300, Dallas, Texas 75231. ART's telephone number is (214) 692-4700.

EXECUTIVE COMPENSATION OF ART

ART itself has no employees, payroll or employee benefit plans and pays no
compensation to executive officers of ART. The Directors and executive officers
of ART who are also officers or employees of BCM are compensated by BCM. Such
affiliated Directors and executive officers of ART perform a variety of services
for BCM and the amount of their compensation is determined solely by BCM. BCM
does not allocate the cash compensation of its officers among the various
entities for which it serves as advisor.

The only direct remuneration paid by ART is to those Directors who are not
officers or employees of BCM or its affiliated companies. Until April 1, 1998,
ART compensated such Independent Directors at a rate of $5,000 per year, plus
$500 per meeting attended and $300 per Audit Committee meeting attended.
Effective April 1, 1998, ART compensates Independent Directors at the rate of
$20,000 per year, plus $300 per Audit Committee meeting attended. In addition,
the Chairman of the Audit Committee receives an annual fee of $500. During 1998,
$65,600 was paid to Independent Directors in total Directors' fees for all
meetings, as follows: Roy E. Bode, $21,900; Al Gonzalez, $22,400; and Cliff
Harris, $21,300.

In September 1997, the ART Board, including all of the Independent
Directors, approved ART's 1997 Stock Option Plan (the "Plan"). The Plan was
approved by the ART stockholders at ART's annual meeting on January 19, 1998.
The Plan is intended principally as an incentive for and as a means of
encouraging ownership of ART Common Stock, by eligible persons, including
certain Directors and officers of ART. Options may be granted either as
incentive stock options (which qualify for certain favorable tax treatment), or
as non-qualified stock options. Incentive stock options cannot be granted to,
among others, persons who are not employees of ART, or of any parent or
subsidiary of ART, or to persons who fail to satisfy certain criteria concerning
ownership of less than 10% of the shares of ART. The Plan is administered by the
Stock Option Committee, which currently consists of three Independent Directors
of ART. The exercise price per share of an option will not be less than 100% of
the fair market value per share on the date of grant thereof. ART receives no
consideration for the grant of an option. As of December 31, 1998, there were
276,750 stock options outstanding under the Plan.

In January 1999, ART's shareholders approved the Director Stock Option Plan
("Director Plan") which provides for options to purchase up to 40,000 ART Common
Shares. Options granted pursuant to the Director Plan are immediately
exercisable and expire on the earlier of the first anniversary of the date on
which a Director ceases to be a Director or ten years from the date of grant.
Each independent Director was granted an option to purchase 1,000 shares at an
exercise price of $16.25 per share on January 11, 1999, the date stockholders
approved the plan. Each independent Director will be awarded an option to
purchase an additional 1,000 shares on January 1 of each year.

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<PAGE> 71

THE BUSINESS OF ART

GENERAL

ART, a Georgia corporation, is the successor to a District of Columbia
business trust. ART elected to be treated as a REIT under Sections 856 through
860 of the Code, during the period July 1, 1987 through December 31, 1990.
ART allowed its REIT tax status to lapse in 1991.

ART's primary business is investing in equity interests in real estate
(including equity securities of real estate- related entities), leases, joint
venture development projects and partnerships and financing real estate and real
estate activities through investments in mortgage loans, including first,
wraparound and junior mortgage loans. The ART Board has broad authority under
ART's governing documents to make all types of real estate investments,
including mortgage loans and equity real estate investments, as well as
investments in the securities of other entities, whether or not such entities
are engaged in real estate-related activities. ART does not have a policy
limiting the amount or percentage of assets that may be invested in any
particular property or type of property or in any geographic area. ART's
governing documents do not contain any limitation on the amount or percentage of
indebtedness ART may incur.

Effective December 18, 1998, NMC, a wholly-owned subsidiary of ART, was
elected general partner of NRLP and NOLP. NRLP is a publicly traded master
limited partnership which was formed under the Delaware Uniform Limited
Partnership Act on January 29, 1998. It commenced operations on September 18,
1987 when, through NOLP, it acquired all of the assets, and assumed all of the
liabilities, of 35 public and private limited partnership. NRLP is the sole
limited partner of NOLP and owns 99% of the beneficial interest in NOLP. NRLP
and NOLP operate as an economic unit and, unless the context otherwise requires,
all references herein to the Partnership shall constitute references to NRLP and
NOLP as a unit. Until December 18, 1998, the general partner and owner of 1% of
the beneficial interest in each of NRLP and NOLP was Syntek Asset Management,
L.P. ("SAMLP"), a Delaware limited partnership, of which ART is a 96% limited
partner. With its election as general partner, NMC succeeded to SAMLP's 1%
beneficial interest in each of NRLP and NOLP. NMC also assumed liability for
SAMLP's note for its capital contribution to the Partnership. In addition, NMC
assumed liability for a note which requires the repayment of the $11.4 million
paid by the Partnership under the Moorman litigation settlement plus the
$808,000 in court ordered attorney's fees and the $30,000 paid to Joseph B.
Moorman. This note requires repayment over a ten-year period, bears interest at
a variable rate, currently 7.2% per annum, and is guaranteed by ART.

At December 31, 1998, in addition to its general partner interest, ART
owned approximately 55.0% of the outstanding limited partner units of NRLP.
Prior to NMC being elected general partner, ART accounted for its investment in
the Partnership under the equity method. As of December 31, 1998, ART has
consolidated the Partnership's accounts and will consolidate its operations
subsequent to such date. NMC, has discretion in determining methods of obtaining
funds for the Partnership's operations, and the acquisition and disposition of
its assets.

ART, through PWSI, also operates and franchises pizza parlors featuring
pizza delivery, carry-out and dine-in under the trademark "Me-N-Ed's" in
California and Texas. The first Me-N-Ed's pizza parlor opened in 1962. At
December 31, 1998, there were 57 Me-N-Ed's pizza parlors in operation,
consisting of 51 owned and six franchised pizza parlors, seven of the owned
pizza parlors were in Texas and the remainder were in California.

ART's businesses are not seasonal. With regard to real estate investments,
ART is seeking both current income and capital appreciation. ART's plan of
operation is to continue, to the extent its liquidity permits, to make equity
investments in income producing real estate such as apartment complexes and
commercial properties or equity securities of real estate-related entities. ART
also intends to pursue higher risk, higher reward investments, such as improved
and unimproved land where it can obtain financing of substantially all of a
property's purchase price. ART intends to seek selected dispositions of certain
of its assets, in particular certain of its land holdings, where the prices
obtainable for such assets justify their disposition. ART has determined that it
will no longer actively seek to fund or purchase mortgage loans. It may,
however, in selected instances, originate mortgage loans or it may provide
purchase money financing in conjunction with a property sale. The Partnership,
however, has increased its lending activity, funding 16 loans in 1998, including
a $95.0 million loan commitment to ART and a $12.2 million loan assumed by NMC
in connection with the Moorman Settlement Agreement (as defined herein).

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<PAGE> 72

ART may purchase or lease properties for long-term investment, develop or
redevelop its properties or sell such properties, in whole or in part, when
circumstances warrant. ART currently participates and may continue to
participate with other entities in property ownership, through joint ventures or
other types of co-ownership. Equity investments may be subject to existing
mortgage financing and other indebtedness that have priority over ART's equity
interest.

ART may repurchase or otherwise reacquire ART Common Shares, Special Stock
(as defined under "Description of the Capital Stock of ART -- General") or other
securities and may also invest in securities of other entities engaged in real
estate activities or securities of other issuers. ART may invest in the
securities of other issuers in connection with acquisitions of indirect
interests in real estate (normally general or limited partnership interests in
special purpose partnerships owning one or more properties). ART may in the
future acquire all or substantially all of the securities or assets of real
estate investment trusts, management companies or similar entities where such
investments would be consistent with its investment policies. ART may also
invest in securities of other issuers from time to time for the purpose of
exercising control. It is not intended that ART's investments in securities will
require it to register as an "investment company" under the Investment Company
Act of 1940, as amended, and it is intended that ART would divest securities
before any such registration would be required.

The ART Board may devote available assets to particular investments or
types of investments, without restriction on the amount or percentage of ART's
assets that may be so devoted to a single investment or to any particular type
of investment, and without limit on the percentage of securities of any one
issuer that ART may acquire. ART's investment objectives and policies may be
changed at any time by the ART Board without the approval of ART's stockholders.
See "Risk Factors -- Risks Relating to ART's Business -- Changes in ART's
Policies Without Stockholder Approval."

To the extent that the ART Board determines to seek additional capital, ART
may raise such capital through additional equity offerings, debt financing or
retention of cash flow, or a combination of these methods. If the ART Board
determines to raise additional equity capital, it may, without stockholder
approval, issue additional shares of ART Common Stock or Special Stock up to the
amount of its authorized capital in any manner (and on such terms and for such
consideration) as it deems appropriate, including in exchange for property. Such
securities may be senior to the outstanding ART Common Shares and may include
additional series of Special Stock (which may be convertible into ART Common
Shares). Existing stockholders of ART will have no preemptive right to purchase
shares in any subsequent offering of securities by ART, and any such offering
could cause a dilution of a stockholder's investment in ART.

To the extent that the ART Board determines to obtain additional debt
financing, ART intends to do so generally through mortgages on properties. Such
mortgages may be recourse, non-recourse or cross-collateralized. ART does not
have a policy limiting the number or amount of mortgages that may be placed on
any particular property, but mortgage financing instruments usually limit
additional indebtedness on such properties. ART may also borrow funds through
bank borrowings, publicly and privately placed debt instruments, or purchase
money obligations to the sellers of properties, any of which indebtedness may be
unsecured or may be secured by any or all of the assets of ART or any existing
or new property-owning entity in which ART holds an interest and may have full
or limited recourse to all or any portion of the assets of ART, or any such
existing or new property-owning entity.

ART may seek to obtain unsecured or secured lines of credit or may
determine to issue debt securities (which may be convertible into capital stock
or be accompanied by warrants to purchase capital stock), or to sell or
securitize its receivables. The proceeds from any borrowings may be used to
finance acquisitions, to develop or redevelop properties, to refinance existing
indebtedness or for working capital or capital improvements. ART also may
determine to finance acquisitions through the exchange of properties or issuance
of additional ART Preferred Shares, ART Common Shares, Special Stock or other
securities.

ART has made and may in the future make loans to joint ventures or other
entities in which it participates. ART does not intend to engage in (i) trading,
underwriting or agency distribution or sale of securities of other issuers and
(ii) the active trade of loans and investments, other than in connection with
acquisitions of additional interests in CMET, IORI, TCI and NRLP.

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<PAGE> 73

Except as required under the Exchange Act, and the rules and regulations of
the NYSE, ART is not required to make annual or other reports to its
securityholders.

The specific composition of ART's real estate and mortgage notes receivable
portfolios from time to time depends largely on the judgment of ART's management
as to changing investment opportunities and the level of risk associated with
specific investments or types of investments. ART's management intends to
continue to maintain real estate and mortgage notes receivable portfolios
diversified by location and type of property. In addition to its equity
investments in real estate and mortgage notes, ART has also invested in private
and open market purchases of the equity securities of CMET, IORI, TCI and NRLP.

GEOGRAPHIC REGIONS

For purposes of its investments, ART has divided the continental United
States into the following six geographic regions.

Northeast region comprised of the states of Connecticut, Delaware, Maine,
Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania,
Rhode Island and Vermont, and the District of Columbia. As of December 31,
1998, ART had no properties in this region.

Southeast region comprised of the states of Alabama, Florida, Georgia,
Mississippi, North Carolina, South Carolina, Tennessee and Virginia. As of
December 31, 1998, ART had 42 apartment complexes and two hotels in this
region.

Southwest region comprised of the states of Arizona, Arkansas, Louisiana,
New Mexico, Oklahoma and Texas. As of December 31, 1998, ART had 20
apartment complexes and five commercial properties in this region.

Midwest region comprised of the states of Illinois, Indiana, Iowa, Kansas,
Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio,
South Dakota, West Virginia and Wisconsin. As of December 31, 1998, ART had
24 apartment complexes, two commercial properties and one hotel in this
region.

Mountain region comprised of the states of Colorado, Idaho, Montana,
Nevada, Utah and Wyoming. As of December 31, 1998, ART had two apartment
complexes, three commercial properties and two hotels in this region.

Pacific region comprised of the states of Alaska, California, Oregon and
Washington. As of December 31, 1998, ART had three apartment complexes,
three commercial properties and four hotels in this region.

Excluded from the above are a single family residence in Dallas, Texas and 59
parcels of improved and unimproved land as described below.

REAL ESTATE

At December 31, 1998, approximately 80% of ART's assets were invested in
real estate and the equity securities of real estate entities. ART has invested
in real estate located throughout the continental United States, either on a
leveraged or nonleveraged basis. ART's real estate portfolio consists of
properties held for investment, investments in partnerships, properties held for
sale and investments in equity securities of CMET, IORI and TCI.

Types of Real Estate Investments. ART's real estate consists of apartments,
commercial properties (office buildings, shopping centers and a merchandise
mart), hotels and improved and unimproved land. In selecting new real estate
investments, the location, age and type of property, gross rents, lease terms,
financial and business standing of tenants, operating expenses, fixed charges,
land values and physical condition are among the factors considered. ART may
acquire properties subject to or assume existing debt and may mortgage, pledge
or otherwise obtain financing for its properties. The ART Board may alter the
types of and criteria for selecting new real estate investments and for
obtaining financing without a vote of ART's stockholders.

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Although ART has typically invested in developed real estate, ART may also
invest in new construction or development either directly or in partnership with
nonaffiliated parties or affiliates (subject to approval by the ART Board). To
the extent that ART invests in construction and development projects, ART would
be subject to business risks, such as cost overruns and construction delays,
associated with such higher risk projects.

During 1998, ART completed construction of One Hickory Center, a 102,615
square foot office building in Farmers Branch, Texas. In December 1998, ART
commenced construction of Two Hickory Center, a 102,607 sq. ft.
office building also in Farmers Branch, Texas.

In the opinion of ART's management, the properties owned by ART are
adequately covered by insurance.

The following table sets forth the percentages, by property type and
geographic region, of ART's owned real estate (excluding the 59 parcels of
improved and unimproved land, and a single family residence, described below) at
December 31, 1998.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Region Apartments Commercial Properties Hotels
------ ---------- --------------------- -------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Midwest 32.6% 34.7% 13.9%
- --------------------------------------------------------------------------------
Mountain 4.2 26.6 11.4
- --------------------------------------------------------------------------------
Pacific 2.5 9.5 45.9
- --------------------------------------------------------------------------------
Southeast 29.1 16.8 28.8
- --------------------------------------------------------------------------------
Southwest 31.6 12.4 --
------ ------ ------
- --------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------
</TABLE>

The foregoing table is based solely on the number of apartment units,
commercial square footage and hotel rooms owned by ART, as applicable, and does
not reflect the value of ART's investment in each region. Excluded from the
above table are a single family residence in Dallas, Texas and 59 parcels of
improved and unimproved land consisting of: one developed residential lot in a
residential subdivision in Fort Worth, Texas, a 46.1 acre land parcel in Las
Colinas, Texas; a 3.5 acre land parcel in downtown Atlanta, Georgia; a 329.4
acre land parcel in Denver, Colorado; seven parcels of land in Dallas County,
Texas, totaling 436.0 acres; three parcels of land in Irving, Texas, totaling
294.1 acres; a 420.0 acre land parcel in Duchense, Utah; a 82.4 acre land parcel
in Oceanside, California; four parcels of land in Tarrant County, Texas,
totaling 1,688.0 acres; two parcels of land in Harris County, Texas, totaling
456.4 acres; nine parcels of land in Collin County, Texas, totaling 743.4 acres;
eight parcels of land in Farmers Branch, Texas, totaling 101.24 acres; three
parcels of land in Plano, Texas, totaling 175.4 acres; a 1,448 acre land parcel
in Austin, Texas; three parcels of land in Palm Desert, California, totaling
946.8 acres; a 41.8 acre land parcel in Travis County, Texas; two parcels of
land in Houston, Texas, totaling 139.5 acres; a 54.2 acre land parcel in Fort
Worth, Texas; a 160.0 acre land parcel in Lewisville, Texas; a 7.7 acre land
parcel in Carrollton, Texas; a 19.4 acre land parcel in Santa Clarita,
California; and six additional land parcels totaling approximately 113.5 acres.

A summary of the activity in ART's owned real estate portfolio during 1998
was as follows:

<TABLE>
<S> <C>
Owned properties in real estate portfolio at January 1, 1998.. 56
Partnership properties........................................ 66
Properties purchased.......................................... 56
Property constructed.......................................... 1
Property obtained through foreclosure......................... 1
Properties sold............................................... (3)

Owned properties in real estate portfolio at
---
December 31, 1998........................................... 177
===
</TABLE>

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<PAGE> 75

Properties Held for Investment. Set forth below are ART's properties
held for investment and the monthly rental rate for apartments and the average
annual rental rate for commercial properties and the average daily room rate and
total room revenue divided by total available rooms for hotels and occupancy at
December 31, 1998, 1997, 1996, 1995 and 1994 for apartments and commercial
properties and average occupancy during such periods for hotels:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Rent per Square Foot
Units/Square -------------------------------------------------------
Property Location Footage 1998 1997 1996 1995 1994
-------- -------- ------- ---- ---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apartments:
Ashford Tampa, FL 56 units/42,196 sq. ft. $.74 $ * $ * $ * $ *
Bay Anchor Panama City, FL 12 units/10,700 sq. ft. .54 * * * *
Carriage Park Tampa, FL 46 units/36,750 sq. ft. .80 * * * *
Chateau Bayou Ocean Springs, MS 122 units/105,536 sq. ft. .71 * * * *
Concord Indianapolis, IN 198 units/129,380 sq. ft. .19 * * * *
Conradi House Tallahassee, FL 98 units/49,900 sq. ft. .71 * * * *
Country Squire Indianapolis, IN 225 units/158,625 sq. ft. .15 * * * *
Crossing Church Tampa, FL 52 units/40,024 sq. ft. .73 * * * *
Daluce Tallahassee, FL 112 units/95,432 sq. ft. .59 * * * *
Edgewater
Gardens Biloxi, MS 140 units/148,900 sq. ft. .56 * * * *
Falcon House Ft. Walton, FL 82 units/71,220 sq. ft. .62 * * * *
Georgetown Panama City, FL 44 units/36,160 sq. ft. .61 * * * *
Governor Square Tallahassee, FL 168 units/146,550 sq. ft. .60 * * * *
Grand Lagoon Panama City, FL 54 units/47,460 sq. ft. .73 * * * *
Greenbriar Tallahassee, FL 50 units/36,600 sq. ft. .70 * * * *
Lake Chateau Thomasville, GA 98 units/65,800 sq. ft. .56 * * * *
Landings/Marina Pensacola, FL 52 units/34,464 sq. ft. .67 * * * *
Lee Hills Tallahassee, FL 16 units/14,720 sq. ft. .54 * * * *
Med Villas San Antonio, TX 140 units/158960 sq. ft. .49 * * * *
Morning Star Tallahassee, FL 82 units/41,000 sq. ft. .76 * * * *
Northside Villas Tallahassee, FL 81 units/134,000 sq. ft. .57 * * * *
Oak Hill Tallahassee, FL 92 units/81,240 sq. ft. .60 * * * *
Park Avenue Tallahassee, FL 121 units/78979 sq. ft. .79 * * * *
Pinecrest Tallahassee, FL 48 units/46,400 sq. ft. .57 * * * *
Regency Tampa, FL 78 units/55,810 sq. ft. .81 * * * *
Rolling Hills Tallahassee, FL 134 units/115,730 sq. ft. .61 * * * *
Seville Tallahassee, FL 62 units/63,360 sq. ft. .56 * * * *
Stonegate Tallahassee, FL 83 units/34,900 sq. ft. .77 * * * *
Sunset Odessa, TX 240 units/160,400 sq. ft. .46 * * * *
Valley Hi Tallahassee, FL 54 units/27,800 sq. ft. .71 * * * *
Villager Ft. Walton, FL 33 units/22,840 sq. ft. .71 * * * *
Waters Edge III Gulfport, MS 238 units/212,216 sq. ft. .59 * * * *
Westwood Mary Ester, FL 120 units/93,000 sq. ft. .67 * * * *
Westwood Parc Tallahassee, FL 94 units/55,950 sq. ft. .69 * * * *
White Pines Tallahassee, FL 85 units/17,000 sq. ft. .74 * * * *
Windsor Tower Ocala, FL 64 units/66,000 sq. ft. .45 * * * *
Arlington Place Pasadena, TX 230 units/205,476 sq. ft. .64 .63 .62 .60 .60
Barcelona Tampa, FL 368 units/346,144 sq. ft. .52 .50 .49 .47 .49
Bavarian Middletown, OH 259 units/229,560 sq. ft. .63 .63 .62 .60 .59
Bent Tree Addison, TX 292 units/244,480 sq. ft. .73 .70 .66 .60 .56
Blackhawk Ft. Wayne, IN 209 units/190,520 sq. ft. .57 .54 .53 .53 .53
Bridgestone Friendswood, TX 76 units/65,519 sq. ft. .67 .64 .64 .62 .62
Candlelight Square Lenexa, KS 119 units/114,630 sq. ft. .61 .58 .55 .53 .51
Chalet I Topeka, KS 162 units/131,791 sq. ft. .65 .62 .61 .61 .61
Chalet II Topeka, KS 72 units/49,164 sq. ft. .70 .68 .67 .67 *
Chateau Bellevue, NE 115 units/99,220 sq. ft. .71 .69 .63 .60 .59
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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<PAGE> 76

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Rent per Square Foot
Units/Square -------------------------------------------------------
Property Location Footage 1998 1997 1996 1995 1994
-------- -------- ------- ---- ---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Club Mar Sarasota, FL 248 units/230,180 sq. ft. $.65 $.61 $.59 $.57 $.59
Confederate Point Jacksonville, FL 206 units/277,860 sq. ft. .58 .46 .45 .44 .42
Country Place Round Rock, TX 152 units/119,808 sq. ft. .72 .71 .71 .68 .63
Covered Bridge Gainesville, FL 176 units/171,416 sq. ft. .64 .64 .63 .60 .57
Fair Oaks Euless, TX 208 units/166,432 sq. ft. .65 .61 .58 .55 .52
Four Seasons Denver, CO 384 units/254,900 sq. ft. .86 .80 .78 .77 .74
Fox Club Indianapolis, IN 336 units/317,600 sq. ft. .56 .54 .54 .54 .54
Foxwood Memphis, TN 220 units/212,000 sq. ft. .57 .54 .51 .49 .46
Hidden Valley Grand Rapids, MI 176 units/260,970 sq. ft. .54 .52 .52 .51 .49
Horizon East Dallas, TX 166 units/141,081 sq. ft. .55 .53 .52 .50 .48
Kimberly Woods Tucson, AZ 279 units/249,678 sq. ft. .59 .57 .55 .54 .52
La Mirada Jacksonville, FL 320 units/341,400 sq. ft. .52 .51 .50 .47 .46
Lake Nora Arms Indianapolis, IN 588 units/429,380 sq. ft. .68 .65 .63 .61 .60
Lantern Ridge Richmond, VA 120 units/112,296 sq. ft. .54 .53 .51 .50 .49
Mallard Lake Greensboro, NC 336 units/295,560 sq. ft. .64 .63 .62 .59 .57
Manchester
Commons Manchester, MO 280 units/331,820 sq. ft. .56 .53 .50 .49 .46
Mesa Ridge Mesa, AZ 480 units/386,336 sq. ft. .68 .65 .65 .61 .57
Nora Pines Indianapolis, IN 254 units/254,676 sq. ft. .60 .59 .57 .55 .55
Oak Hollow Austin, TX 409 units/290,072 sq. ft. .90 .87 .87 .81 .75
Oak Tree Grandview, MO 189 units/160,591 sq. ft. .90 .57 .54 .52 .52
Olde Towne Middletown, OH 199 units/179,395 sq. ft. .60 .57 .57 .57 .57
Pheasant Ridge Bellevue, NE 264 units/243,960 sq. ft. .58 .61 .56 .51 .51
Pines Little Rock, AR 257 units/221,981 sq. ft. .62 .41 .41 .39 .37
Place One Tulsa, OK 407 units/302,263 sq. ft. .42 .57 .51 .49 .47
Quail Point Huntsville, AL 184 units/202,602 sq. ft. .58 .42 .42 .41 .41
Regency Lincoln, NE 106 units/111,700 sq. ft. .44 .63 .60 .56 .56
Regency Falls San Antonio, TX 546 units/348,692 sq. ft. .67 .63 .63 .63 .60
Rockborough Denver, CO 345 units/249,723 sq. ft. .64 .73 .70 .70 .67
Santa Fe Kansas City, MO 225 units/180,416 sq. ft. .80 .56 .53 .52 .51
Shadowood Addison, TX 184 units/134,616 sq. ft. .58 .74 .69 .66 .64
Sherwood Glen Urbandale, IA 180 units/143,745 sq. ft. .76 .77 .75 .74 .72
Stonebridge Florissant, MO 100 units/140,576 sq. ft. .79 .45 .43 .46 .46
Summerwind Reseda, CA 172 units/114,711 sq. ft. .46 .90 .90 .97 .97
Sun Hollow El Paso, TX 216 units/156,000 sq. ft. .93 .65 .64 .63 .63
Tanglewood Arlington
Heights, IL 838 units/612,816 sq. ft. 1.07 1.03 .99 .96 .96
Timber Creek Omaha, NE 180 units/162,252 sq. ft. .70 .66 .64 .60 .59
Villa Del Mar Wichita, KS 162 units/128,004 sq. ft. .60 .58 .58 .58 .57
Villas Plano, TX 208 units/156,632 sq. ft. .80 .77 .73 .70 .67
Whispering Pines Canoga Park, CA 102 units/61,671 sq. ft. 1.05 1.01 1.00 .98 .98
Whispering Pines Topeka, KS 320 units/299,264 sq. ft. .51 .49 .49 .49 .49
Windridge Austin, TX 408 units/281,778 sq. ft. .89 .88 .88 .85 .80
Windtree I & II Reseda, CA 159 units/109,062 sq. ft. .93 .90 .90 .90 .90
Woodlake Carrollton, TX 256 units/210,208 sq. ft. .77 .73 .68 .66 .63
Woodsong II Smyrna, GA 190 units/207,460 sq. ft. .56 .54 .54 .51 .46
Woodstock Dallas, TX 320 units/222,112 sq. ft. .63 .60 .56 .54 .51
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

-59-
<PAGE> 77

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Rent per Square Foot
Units/Square -------------------------------------------------------
Property Location Footage 1998 1997 1996 1995 1994
-------- -------- ------- ---- ---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office Buildings:
56 Expressway Oklahoma City, OK 54,649 sq. ft. $ 9.53 $ 8.64 $ 8.21 $ 7.94 $7.77
Executive Court Memphis, TN 41,840 sq. ft. 10.64 9.79 10.11 9.87 9.91
Marina Playa Santa Clara, CA 124,322 sq. ft. 21.55 20.54 19.54 18.11 17.00
Melrose Business
Park Oklahoma City, OK 124,200 sq. ft. 3.03 2.88 2.76 2.65 2.59
One Hickory Farmers
Center Branch, TX 102,615 sq. ft. -- * * * *
Rosedale Towers Minneapolis, MN 84,798 sq. ft. 15.48 15.03 14.88 13.16 14.46
University Square Anchorage, AK 22,260 sq. ft. 13.83 14.07 15.07 13.16 13.81
- -----------------------------------------------------------------------------------------------------------------------------------
Shopping Centers:
Collection Denver, CO 267,812 sq. ft. 8.92 9.46 * * *
Cross County Mall Mattoon, IL 304,575 sq. ft. 4.99 4.88 4.90 4.86 4.39
Cullman Cullman, AL 92,466 sq. ft. 3.91 3.87 3.86 3.83 3.82
Harbor Plaza Aurora, CO 45,863 sq. ft. 9.86 9.44 8.73 8.42 7.82
Katella Plaza Orange, CA 52,169 sq. ft. 9.79 9.20 7.73 9.97 11.34
Oak Tree Village Lubbock, TX 45,623 sq. ft. 8.27 8.17 7.98 7.34 *
Preston Square Dallas, TX 35,508 sq. ft. 16.04 15.26 * * *
Regency Point Jacksonville, FL 67,410 sq. ft. 12.36 12.07 11.39 11.26 10.63
Westwood Tallahassee, FL 149,855 sq. ft. 6.77 6.44 6.42 5.31 5.00
- -----------------------------------------------------------------------------------------------------------------------------------
Merchandise Mart:
Denver Mart Denver, CO 509,008 sq. ft. 11.35 14.75 15.33 14.53 14.18
- -----------------------------------------------------------------------------------------------------------------------------------
Average Room Rate
Hotels: -------------------------------------------------------
Best Western
Oceanside Virginia Beach, VA 110 Rooms 92.65 90.44 41.11 * *
Continental Las Vegas, NV 371 Rooms ** * * * *
Holiday Inn Kansas City, MO 196 Rooms 65.38 70.73 66.46 61.66 52.47
Piccadilly Airport Fresno, CA 185 Rooms 68.53 62.98 * * *
Piccadilly Chateau Fresno, CA 78 Rooms 55.18 50.86 * * *
Piccadilly Shaw Fresno, CA 194 Rooms 70.63 64.07 * * *
Piccadilly Fresno, CA 190 Rooms 67.42 62.22 * * *
University
Quality Inn Denver, CO 161 Rooms 54.07 53.15 46.66 44.69 42.38
Williamsburg
Hospitality House Williamsburg, VA 296 Rooms 85.87 81.87 * * *
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Property was acquired in 1995, 1996, 1997 or 1998.

** Leased to a licensed casino operator.

-60-
<PAGE> 78

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Total Room Revenues Divided
by Total Available Rooms
-------------------------------------------------------------
Property 1998 1997 1996 1995 1994
-------- ---- ---- ---- ---- ----
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hotels:
Best Western
Oceanside $60.37 $54.03 $17.69 $ * $ *
Continental ** * * * *
Holiday Inn 51.38 54.13 52.63 46.31 39.27
Piccadilly Airport 41.68 35.94 * * *
Piccadilly Chateau 33.19 27.74 * * *
Piccadilly Shaw 46.71 41.17 * * *
Piccadilly University 39.42 35.65 * * *
Quality Inn 32.95 28.02 16.80 17.79 17.73
Williamsburg
Hospitality House 54.85 55.30 * * *
- ---------------------------------------------------------------------------------------------
</TABLE>

* Property was acquired in 1995, 1996, 1997 or 1998.

** Leased to a licensed casino operator.

-61-
<PAGE> 79

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Occupancy %
-------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Property 1998 1997 1996 1995 1994
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Villager 97 * * * *
Waters Edge III 96 * * * *
Westwood 91 * * * *
Westwood Parc 100 * * * *
White Pines 94 * * * *
Windsor Tower 96 * * * *
Arlington Place 98 95 91 95 88
Barcelona 91 94 93 96 85
Bavarian 90 92 96 92 95
Bent Tree 93 96 97 100 99
Blackhawk 94 96 95 94 96
Bridgestone 97 99 94 97 93
Candlelight Square 96 94 97 96 92
Chalet I 97 96 96 94 87
Chalet II 91 93 89 97 *
Chateau 94 95 99 97 94
Club Mar 93 99 91 95 92
Confederate Point 93 91 94 98 92
Country Place 94 88 93 95 97
Covered Bridge 97 98 94 100 99
Fair Oaks 93 96 96 98 96
Four Seasons 96 98 94 93 96
Fox Club 89 95 88 91 95
Foxwood 90 94 93 95 97
Hidden Valley 96 96 93 97 96
Horizon East 96 93 92 94 93
Kimberly Woods 92 92 93 94 95
La Mirada 99 91 93 98 93
Lake Nora Arms 94 95 91 95 94
Lantern Ridge 97 93 95 93 98
Mallard Lake 91 93 95 97 98
Manchester Commons 91 95 93 95 94
Mesa Ridge 95 98 88 92 95
Nora Pines 95 92 94 97 95
Oak Hollow 97 94 91 97 99
Oak Tree 99 95 94 96 95
Olde Towne 90 94 92 91 94
Pheasant Ridge 89 93 94 97 85
Pines 92 90 93 90 88
Place One 93 92 96 96 92
Quail Point 89 91 96 86 90
Regency 87 98 95 88 97
Regency Falls 82 92 93 93 90
Rockborough 94 94 92 92 96
Santa Fe 92 93 91 92 90
Shadowood 94 96 97 97 98
Sherwood Glen 90 94 96 93 93
Stonebridge 95 100 98 92 92
Summerwind 97 96 92 91 92
Sun Hollow 93 97 90 96 92
Tanglewood 92 93 92 95 96
Timber Creek 97 95 98 94 91
Villa Del Mar 92 97 94 90 89
Villas 94 98 95 95 97
- -------------------------------------------------------------------------------------------
</TABLE>

-62-
<PAGE> 80

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Occupancy %
------------------------------------------------
Property 1998 1997 1996 1995 1994
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Whispering Pines 93 94 92 93 93
Whispering Pines 95 95 89 90 92
Windridge 94 95 93 95 96
Windtree I & II 95 96 94 91 24
Woodlake 97 98 99 98 99
Woodsong II 99 96 85 99 97
Woodstock 95 92 95 96 94
- ---------------------------------------------------------------------------------
Office Buildings:
56 Expressway 91 94 88 93 85
Executive Court 96 96 95 92 92
Marina Playa 97 100 99 97 95
Melrose Business 80 93 90 97 81
Park 0 * * * *
One Hickory Center 94 93 91 90 94
Rosedale Towers 81 100 84 90 82
University Square
- ---------------------------------------------------------------------------------
Shopping Centers:
Collection 94 82 * * *
Cross County Mall 90 89 90 95 87
Cullman 98 97 98 100 96
Harbor Plaza 86 94 97 78 87
Katella Plaza 71 71 71 71 71
Oak Tree Village 70 90 89 91 *
Preston Square 77 92 * * *
Regency Point 91 83 84 81 95
Westwood 93 93 74 59 81
- ---------------------------------------------------------------------------------
Merchandise Mart:
Denver Mart 92 93 95 96 97
- ---------------------------------------------------------------------------------
Hotels:
Best Western
Oceanside 65 60 42 * *
Continental ** * * * *
Holiday Inn 79 77 79 75 75
Piccadilly Airport 61 50 * * *
Piccadilly Chateau 60 49 * * *
Piccadilly Shaw 66 62 * * *
Piccadilly University 59 49 * * *
Quality Inn 61 53 36 40 42
Williamsburg
Hospitality House 64 60 * * *
- ---------------------------------------------------------------------------------
</TABLE>

* Property was acquired in 1995, 1996, 1997 or 1998.

** Leased to a licensed casino operator.

Occupancy presented above is without reference to whether leases in effect
are at, below or above market rates.

-63-
<PAGE> 81

As of December 31, 1998, none of ART's properties had a book value which
exceeded 10% of ART's total assets. For the fiscal year ended December 31, 1998,
the revenues of the Denver Merchandise Mart exceeded 10% of ART's total
revenues.

Denver Merchandise Mart. The Denver Merchandise Mart is a wholesale trade
mart located in Denver, Colorado. No tenant occupies ten percent or more of the
rentable square footage of the Denver Merchandise Mart. The principal business
carried on in or from the Denver Merchandise Mart is wholesale sales of goods.

The following table shows lease expiration information for the tenants of
the Denver Merchandise Mart at December 31, 1998:

<TABLE>
<CAPTION>
Number of Gross Leased % of Aggregate
Leases Area 1998 Minimum 1998 Minimum
Year Expiring (a) (Sq. Ft.) Annual Rent Annual Rent
---- ------------ --------- ----------- -----------
<S> <C> <C> <C> <C>
Month to Month 9 8,877 $ 136,992 2.57
1999 189 109,463 1,788,744 31.61
2000 132 106,017 1,739,616 30.62
2001 168 118,870 1,907,796 34.33
2002 2 754 -- .22
2003 -- -- -- --
2004 -- -- -- --
2005 -- -- -- --
2006 1 2,278 -- --
--- ------- ----------- -----
TOTAL 501 346,259 $ 5,573,148 100.0
=== ======= =========== =====
</TABLE>

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

(a) Assumes no renewal options will be exercised in order to show the earliest
termination of the leases.

In October 1997, ART refinanced the mortgage debt secured by the Denver
Merchandise Mart for $25.0 million. The new loan is secured by a mortgage
against the Denver Merchandise Mart. ART received net refinancing proceeds of
$10.2 million after the payoff of $14.8 million in existing mortgage debt that
was scheduled to mature in October 1997. The new loan bears interest at 8.3% per
annum, requires monthly principal and interest payments of $198,000 and matures
in October 2012. The principal balance of the mortgage debt as of September 30,
1998 was $24.7 million. ART substantially completed a renovation and expansion
of the Denver Merchandise Mart in December 1997.

In October 1997, ART contributed the Denver Merchandise Mart to a limited
partnership in exchange for $6.0 million in cash, a 1% managing general partner
interest in the partnership, all of the Class B limited partner units in the
partnership and the partnership's assumption of the mortgage debt secured by
such property. The existing general and limited partners converted their general
and limited partner interests into Class A limited partner units in the
partnership. The Class A units have an agreed value of $1.00 per unit and are
entitled to a fixed preferred return of 10% per annum, paid quarterly. The Class
A units may be converted into a total of 529,000 ART Preferred Shares at any
time after the first but not later than the sixth anniversary of the closing, on
the basis of one ART Preferred Share for each ten Class A units.

Real estate taxes are levied against the Denver Merchandise Mart for county
and township, and school tax purposes. Denver Merchandise Mart paid $305,746 in
real estate taxes in 1997. The 1997 millage rate was 8.4042/100. ART estimates
that Denver Merchandise Mart will owe approximately $312,175 in real estate
taxes in 1998. Real estate taxes are substantially reimbursed by the tenants
through real estate tax recovery billings.

-64-
<PAGE> 82

As of December 31, 1998, for Federal income tax purposes, ART depreciates
the Denver Merchandise Mart under the Modified Accelerated Cost Recovery System
("MACRS") as follows:

Buildings:

Gross Federal Income Tax Basis $27,189,850
Accumulated Depreciation $ 9,505,055
Depreciation Method MACRS - Straight Line ("SL")
Depreciable Life Various

Land Improvements:

Gross Federal Income Tax Basis $ 207,070
Accumulated Depreciation $ 32,984
Depreciation Method MACRS - 150% Declining Balance ("DB")
Depreciable Life 15 years

Personal Property:

Gross Federal Income Tax Basis $ 954,189
Accumulated Depreciation $ 660,168
Depreciation Method MACRS - 200% DB
Depreciable Life Various

In November 1994, ART and an affiliate of BCM an affiliate of and advisor
to ART, sold five apartment complexes with a total of 880 units to a newly
formed limited partnership in exchange for $3.2 million in cash, a 27% limited
partner interest in the partnership and two mortgage notes receivable, secured
by one of the properties sold. ART had the option to reacquire the properties at
any time after September 1997 for their original sales prices. Accordingly, a
deferred gain of $5.6 million which was offset against ART's investment in the
partnership. In February 1998, ART reacquired three of the properties for $7.7
million. ART paid $4.0 million in cash and assumed the existing mortgages of
$3.7 million. Simultaneously ART refinanced the three properties for a total of
$7.8 million, receiving net cash of $3.9 million after paying off of $3.7
million in mortgage debt and the payment of various costs. The new mortgages
bear interest at 9.5% per annum, require monthly principal and interest payments
of a total of $66,000 and mature in February 2008. In June 1998, the remaining
two properties were reacquired for $8.6 million. ART paid $2.1 million in cash
and assumed the existing mortgages of $6.5 million. The mortgages bear interest
at 8.73% per annum, require monthly principal and interest payments of a total
of $57,000 and mature in January 2019.

In April 1998, ART foreclosed on the Continental Hotel and Casino in Las
Vegas, Nevada, the collateral securing a wraparound mortgage note with a
principal balance of $22.7 million at March 31, 1998. The property is classified
as held for investment. See "Mortgage Loans," below.

In May 1998, but effective April 1, 1998, ART purchased, in a single
transaction, 29 apartment complexes (collectively, the "IGI Properties")
totaling 2,441 units in Florida and Georgia for $55.8 million. ART acquired the
properties through three newly-formed Texas limited partnerships. The
partnerships paid a total of $6.1 million in cash, assumed $43.4 million in
existing mortgage debt and issued a total of $6.6 million in Class A Limited
Partner units in the acquiring partnerships, having ART as the Class B Limited
Partner and a wholly-owned subsidiary of ART, as the Managing General Partner.
The Class A Limited Partners were entitled to an annual preferred return of $.08
per unit in 1998 and are entitled to an annual preferred return of $.09 per unit
in 1999 and $.10 per unit in 2000 and thereafter. The units are exchangeable at
any time into ART Preferred Shares on the basis of ten units for one ART
Preferred Share. The mortgages bear interest at rates ranging between 7.86% and
11.22% per annum, require monthly principal and interest payments totaling
$384,000 and mature between July 1, 2000 and September 1, 2017.

-65-
<PAGE> 83

In November 1998, ART purchased two apartment complexes with a total of 423
units in Indianapolis, Indiana for $7.2 million. The properties were acquired
through a newly-formed controlled partnership. The partnership paid a total of
$14,000 in cash, assumed $5.9 million in mortgage debt and issued $1.3 million
in class A limited partner units in the acquiring partnership, in which ART is
the Class B limited partner and a wholly-owned subsidiary of ART is the Managing
General Partner. The Class A units are exchangeable after November 18, 1999,
into ART Preferred Shares on the basis of ten units for one ART Preferred Share.
The assumed mortgages bear interest at 9.95% per annum and 10.75% per annum, one
requires monthly payments of interest and principal of $25,000 and matures in
October 2012 and the other requires monthly interest only payments and matures
in June 1999.

At December 31, 1997, ART had under construction One Hickory Center, a
102,615 sq. ft. office building in Farmers Branch, Texas. Construction was
completed in December 1998, at a cost of $7.8 million.

In January 1999, the Partnership sold the 199 unit Olde Towne Apartments in
Middleton, Ohio, for $4.6 million, receiving net cash of $4.4 million after the
payment of various closing costs. a gain will be recognized on the sale.

In February 1999, the Partnership sold the 225 unit Santa Fe Apartments in
Kansas City, Missouri, for $4.6 million, receiving net cash of 44.3 million
after the payment of various closing costs. A gain will be recognized on the
sale.

Also in February 1999, the Partnership sold the 480 unit Mesa Ridge
Apartments in Mesa, Arizona, for $19.5 million, receiving net cash of $793,000
after the payment of various closing costs and remitting $17.8 million to the
lender to hold in escrow pending a substitution of collateral. Such funds will
be released when substitute collateral is approved. If substitute collateral is
not provided by August 1999, $13.0 million of the escrow will be applied against
the mortgage's principal balance, approximately $885,000 will be retained by the
lender as a prepayment penalty and the remaining $3.9 million will be returned
to the Partnership. A gain will be recognized on the sale.

Properties Held for Sale. Set forth below are ART's properties held for
sale, at December 31, 1998, primarily undeveloped, partially developed and
undeveloped land:

<TABLE>
<CAPTION>
Property Location Acres
-------- -------- -----
<S> <C> <C>
Atlanta Atlanta, GA 3.5 Acres
Bad Lands Duchense, UT 420.0 Acres
Bonneau Dallas County, TX 8.4 Acres
Chase Oaks Plano, TX 39.0 Acres
Croslin Dallas, TX .8 Acres
Dalho Farmers Branch, TX 3.4 Acres
Dessert Wells Palm Dessert, CA 420.0 Acres
Dowdy Collin County, TX 165.0 Acres
Eldorado Parkway Collin County, TX 8.5 Acres
FRWM Cummings Farmers Branch, TX 6.4 Acres
Hollywood Casino Farmers Branch, TX 51.7 Acres
HSM Farmers Branch, TX 6.2 Acres
Jeffries Ranch Oceanside, CA 82.4 Acres
JHL Connell Carrollton, TX 7.7 Acres
Katrina Palm Dessert, CA 454.8 Acres
Katy Road Harris County, TX 130.6 Acres
Keller Tarrant County, TX 811.8 Acres
Lacy Longhorn Farmers Branch, TX 17.1 Acres
Las Colinas I Las Colinas, TX 46.1 Acres
Marine Creek Fort Worth, TX 54.2 Acres
Mason/Goodrich Houston, TX 244.8 Acres
McKinney Corners I Collin County, TX 30.4 Acres
McKinney Corners II Collin County, TX 173.9 Acres
</TABLE>

-66-
<PAGE> 84

<TABLE>
<CAPTION>
Property Location Acres
-------- -------- -----
<S> <C> <C>
McKinney Corners III Collin County, TX 15.5 Acres
McKinney Corners IV Collin County, TX 31.3 Acres
McKinney Corners V Collin County, TX 9.7 Acres
Mendoza Dallas, TX .35 Acres
Messick Palm Springs, CA 72.0 Acres
Pantex Collin County, TX 182.5 Acres
Parkfield Denver, CO 329.4 Acres
Pioneer Crossing Austin, TX 1,448.0 Acres
Plano Parkway Plano, TX 81.2 Acres
Rasor Plano, TX 141.7 Acres
Santa Clarita Santa Clarita, CA 19.5 Acres
Scoggins Tarrant County, TX 314.5 Acres
Scout Tarrant County, TX 546.0 Acres
Stagliano Farmers Branch, TX 3.2 Acres
Stone Meadow Houston, TX 13.5 Acres
Thompson Farmers Branch, TX 4.0 Acres
Thompson II Dallas County, TX 3.5 Acres
Tomlin Farmers Branch, TX 9.2 Acres
Tree Farm - LBJ Dallas County, TX 10.4 Acres
Valley Ranch Irving, TX 319.8 Acres
Valley Ranch III Irving, TX 12.5 Acres
Valley Ranch IV Irving, TX 12.4 Acres
Valwood Dallas, TX 280.0 Acres
Van Cattle McKinney, TX 126.6 Acres
Vineyards Grapevine, TX 15.8 Acres
Vista Business Park Travis County, TX 41.8 Acres
Vista Ridge Lewisville, TX 160.0 Acres
Walker Dallas County, TX 132.6 Acres
Yorktown Harris County, TX 325.8 Acres
Other (7 properties) Various 113.5 Acres
</TABLE>

In January 1998, ART purchased El Dorado Parkway land, a 8.5 acre parcel of
unimproved land in McKinney, Texas, for $952,000. ART paid $307,000 in cash,
assumed the existing mortgage of $164,000, and obtained seller financing of the
remaining $481,000 of the purchase price. The mortgage bears interest at 10% per
annum, requires semiannual payments of principal and interest of $18,000 and
matures in May 2005. The seller financing bears interest at 8% per annum,
requires semiannual principal and interest payments of $67,000 and matures in
January 2002.

Also in January 1998, ART purchased Valley Ranch IV land, a 12.3 acre
parcel of unimproved land in Irving, Texas, for $2.0 million. ART paid $500,000
in cash and obtained seller financing of the remaining $1.5 million of the
purchase price. The financing bears interest at 10% per annum, requires
quarterly payments of interest only and matures in December 2000.

Further in January 1998, ART purchased JHL Connell land, a 7.7 acre parcel
of unimproved land in Carrollton, Texas, for $1.3 million in cash.

In February 1998, ART purchased Scoggins land, a 314.5 acre parcel of
unimproved land in Tarrant County, Texas, for $3.0 million. ART paid $1.5
million in cash and obtained mortgage financing of $1.5 million. The mortgage
bore interest at 14% per annum, required quarterly payments of interest only,
required a principal paydown of $300,000 in May 1998, which was paid, and
matured in February 1999. In May 1998, ART refinanced the mortgage debt along
with the debt secured by its Scout land parcel under the Las Colinas I term
loan, as discussed below.

Also in February 1998, ART purchased Bonneau land, a 8.4 acre parcel of
unimproved land in Dallas County, Texas, for $1.0 million. ART obtained mortgage
financing of $1.0 million. The mortgage bore interest at 18.5% per

-67-
<PAGE> 85

annum with principal and interest due at the maturity in February 1999. ART's
JHL Connell land was pledged as additional collateral for this loan. In March
1999, ART refinanced the mortgage debt secured by the property along with the
mortgage debt secured by the Dalho and Stagliano land parcels under the Las
Colinas I term loan in the amount of $703,000. ART paid an additional $1.5
million in cash to pay off the $2.1 million in mortgage debt and accrued but
unpaid interest.

Further in February 1998, ART financed its unencumbered Kamperman land in
the amount of $1.6 million, receiving net cash of $1.5 million after the payment
of various closing costs. The mortgage bears interest at 9.0% per annum,
requires monthly payments of interest only and matures in February 2000.

In February 1998, ART financed its unencumbered Valley Ranch land in the
amount of $4.3 million, receiving net cash of $4.1 million after the payment of
various closing costs. The mortgage bears interest at 9.0% per annum, requires
monthly payments of interest only and matures in February 2000.

Also in February 1998, ART refinanced the mortgage debt secured by its
Vineyards land in the amount of $3.4 million, receiving net cash of $2.3
million, after paying off mortgage debt of $540,000 and the payment of various
closing costs. The new mortgage bears interest at 9.0% per annum, requires
monthly payments of interest only and matures in February 2000.

In March 1998, ART financed its unencumbered Stagliano and Dalho land in
the amount of $800,000 with the lender on the Bonneau land, described above,
receiving net cash of $790,000 after the payment of various closing costs. The
mortgage bore interest at 18.5% per annum with principal and interest due at
maturity in February 1999. ART's JHL Connell land was pledged as additional
collateral for this loan. In March 1999, ART refinanced the mortgage debt
secured by the property along with the mortgage debt secured by the Dalho and
Stagliano land parcels under the Las Colinas I term loan in the amount of
$703,000. ART paid an additional $1.5 million in cash to pay off the $2.1
million in mortgage debt and accrued but unpaid interest.

Also in March 1998, ART purchased Desert Wells land, a 420 acre parcel of
unimproved land in Palm Desert, California, for $12.0 million. ART paid $400,000
in cash, obtained mortgage financing of $10.0 million and obtained seller
financing of the remaining $1.6 million of the purchase price. The mortgage bore
interest at 4.5% above the prime rate, currently 12.25% per annum, required
monthly payments of interest only and matured in March 1999. The seller
financing bore interest at 10% per annum, required monthly payments of interest
only and matured in July 1998. The seller financing was paid off at maturity in
July 1998. The mortgage lender has agreed to an extension of its matured
mortgage to March 2000. All other terms would remain unchanged.

Further in March 1998, ART refinanced the mortgage debt secured by the
McKinney Corners I, II, III, IV and V and Dowdy land in the amount of $20.7
million, receiving net cash of $5.9 million after the payoff of $2.5 million in
existing mortgage debt, the paydown of $10.2 million on the Las Colinas I term
loan and the payment of various closing costs. ART also pledged 800,000 ART
Preferred Shares as additional security for the loan. The new mortgage bore
interest at 12% per annum, required monthly payments of interest only and
matured in March 1999. The lender has agreed to extend its mature mortgage to
January 2000, for a 2% fee and a paydown of any net refinancing proceeds
received by ART from refinancing the Williamsburg Hospitality House. All other
terms would remain unchanged.

In April 1998, ART purchased Yorktown land, a 325.8 acre parcel of
unimproved land in Harris County, Texas, for $7.4 million. ART paid $3.0 million
in cash and obtained seller financing of the remaining $4.4 million of the
purchase price. The seller financing bore interest at 8.5% per annum, required
monthly payments of interest only and matured in February 1999. ART has received
a written commitment from a lender to refinance the matured mortgage in the
amount of $4.8 million. The new mortgage financing closed on April 5, 1999.

Also in April 1998, ART sold a 77.7 acre tract of its Lewisville land
parcel, for $6.8 million , receiving net cash of $153,000 after paying off first
and second lien mortgages totaling $5.9 million and the payment of various
closing costs. ART recognized a gain of $1.9 million on the sale.

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<PAGE> 86

Further in April 1998, ART obtained a second lien mortgage of $2.0 million
secured by its BP Las Colinas land from the limited partner, at the time, in a
partnership that owned approximately 15.8% of the outstanding shares of ART's
Common Stock. The mortgage bore interest at 12% per annum, with principal and
interest due at maturity in October 1998.

In April 1998, ART refinanced the mortgage debt secured by its Parkfield
land in the amount of $7.3 million, receiving net cash of $1.2 million after
paying off $5.0 million in mortgage debt and the payment of various closing
costs. The new mortgage bears interest at 9.5% per annum, requires monthly
payments of interest only and matures in April 2000.

In May 1998, ART sold a 15.4 acre tract of its Valley Ranch land parcel,
for $1.2 million, receiving no net cash after paying down by $1.1 million the
mortgage secured by such land parcel and the payment of various closing costs.
ART recognized a gain of $663,000 on the sale.

Also in May 1998, ART purchased the FRWM Cummings land, a 6.4 acre parcel
of unimproved land in Farmers Branch, Texas, for $1.2 million in cash.

Further in May 1998, ART sold a 21.3 acre tract of the Parkfield land
parcel, for $1.3 million, receiving no net cash after paying down by $1.1
million the mortgage secured by such land parcel and the payment of various
closing costs. ART recognized a gain of $670,000 on the sale.

In May 1998, ART refinanced the mortgage debt secured by its Scout and
Scoggins land in the amount of $10.4 million under the Las Colinas I term loan,
receiving net cash of $6.6 million after paying off $1.4 million in mortgage
debt on the Scout land and $1.5 million in mortgage debt on the Scoggins land, a
pay down of $250,000 on the Keller land mortgage, and the payment of various
closing costs. ART also pledged 250,000 shares of its Common Stock and BCM, an
affiliate of and advisor to ART, pledged 177,000 shares of ART's Common Stock as
additional security on the term loan.

In June 1998, ART sold a 21.6 acre tract of its Chase Oaks land, for $3.3
million, receiving net cash of $418,000 after paying down by $2.0 million the
mortgage secured by such land parcel and the payment of various closing costs.
ART recognized a gain of $848,000 on the sale.

Also in June 1998, ART sold a 150.0 acre tract of its Rasor land, for $6.8
million, receiving net cash of $1.4 million after paying down by $5.3 million
the mortgage secured by such land parcel and the payment of various closing
costs. ART recognized a gain of $789,000 on the sale.

Further in June 1998, ART sold its entire 315.2 acre Palm Desert land
parcel, for $17.2 million, receiving net cash of $8.6 million after paying off
$7.2 million in mortgage debt and the payment of various closing costs. ART
recognized a gain of $3.9 million on the sale.

In July 1998, ART purchased Thompson II land, a 3.5 acre parcel of
unimproved land in Dallas County, Texas, for $471,000 in cash.

Also in July 1998, ART purchased, through a newly formed partnership, the
Katrina land, a 454.8 acre parcel of improved land in Palm Desert, California,
for $38.2 million. The partnership issued $23.2 million of Class A limited
partner units and obtained mortgage financing of $15.0 million. The Class A
limited partners were entitled to an annual preferred return of $.07 per unit in
1998, and are entitled to an annual preferred return of $.08 per unit in 1999,
$.09 per unit in 2000 and $.10 per unit in 2001 and thereafter. The Class A
units may be converted into shares of ART's Series H Preferred Stock anytime
after July 13, 1999 on the basis of 100 Class A units for each share of Series H
Preferred Stock. The Series H Preferred Stock may be converted into ART Common
Stock using a 90% factor starting in December 2000.

Further, in July 1998, ART purchased Walker land, a 132.6 acre parcel of
unimproved land in Dallas County, Texas, for $12.8 million in cash. Also in
July, ART obtained mortgage financing of $13.3 million, receiving net cash

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of $12.8 million after the payment of various closing costs. The mortgage bears
interest at 15.5% per annum, requires monthly payments of interest only and
matures in July 1999. The mortgage is also secured by the FRWM Cummings land.

In July 1998, ART sold a 2.5 acre tract of its Las Colinas I land parcel,
for $1.6 million, receiving net cash of $605,000 after paying down by $750,000
the Las Colinas I term loan secured by such land parcel and the payment of
various closing costs. ART recognized a gain of $869,000 on the sale.

In August 1998, ART financed its unencumbered Keller land in the amount of
$5.0 million under the Las Colinas I term loan, receiving net cash of $4.9
million after the payment of various closing costs.

In September 1998, a newly formed controlled limited partnership, in which
ART has a combined 95% general and limited partner interest, purchased the
Messick land, a 72.0 acre parcel of unimproved land in Palm Springs, California,
for $3.5 million. ART paid $1.0 million in cash and obtained seller financing of
the remaining $2.5 million of the purchase price. The seller financing bears
interest at 8.5% per annum, requires quarterly payments of interest only,
principal payments of $300,000 in July 1999 and July 2000, and matures in July
2001.

Also in September 1998, ART sold a 60.0 acre tract of its Parkfield land
parcel, for $1.5 million, receiving no net cash after paying down by $1.4
million the mortgage secured by such land parcel and the payment of various
closing costs. ART recognized a gain of $44,000 on the sale.

Further in September 1998, ART purchased HSM land, a 6.2 acre parcel of
unimproved land in Farmers Branch, Texas, for $2.2 million in cash.

In September 1998, ART sold the remaining 10.5 acres of its BP Las Colinas
land for $4.7 million, receiving net cash of $1.8 million after paying off $2.6
million in mortgage debt and the payment of various closing costs. ART
recognized a gain of $3.4 million on the sale.

Also in September 1998, ART purchased Vista Ridge land, a 160 acre parcel
of unimproved land in Lewisville, Texas, for $15.6 million. ART paid $3.1
million in cash and obtained mortgage financing of $12.5 million. The mortgage
bears interest at 15.5% per annum, requires monthly interest only payments at a
rate of 12.5% per annum with the deferred interest and principal due at maturity
in July 1999.

Further in September 1998, ART sold its entire 30.0 acre Kamperman land
parcel for $2.4 million, receiving net cash of $584,000 after paying down by
$1.6 million the Las Colinas I term loan secured by such parcel and the payment
of various closing costs. ART recognized a gain of $969,000 on the sale.

In September 1998, ART sold a 1.1 acre tract of its Santa Clarita land
parcel for $543,000, receiving net cash of $146,000 after paying down by
$350,000 the Las Colinas I term loan secured by such land parcel and the payment
of various closing costs. ART recognized a gain of $409,000 on the sale.

Also in September 1998, ART purchased Marine Creek land, a 54.2 acre parcel
of unimproved land in Fort Worth, Texas, for $2.2 million in cash.

Further in September 1998, ART obtained second lien financing of $5.0
million secured by its Katy Road land from the limited partner, at the time, in
a partnership that owned approximately 15.8% of the outstanding shares of ART's
Common Stock. The second lien mortgage bears interest at 12.5% per annum,
compounded monthly, with principal and interest due at maturity in April 1999.
The loan is guaranteed by Gene E. Phillips.

In October 1998, ART purchased Vista Business Park land, a 41.8 acre parcel
of unimproved land in Travis County, Texas, for $3.0 million. ART paid $730,000
in cash and obtained mortgage financing of $2.3 million. The mortgage bears
interest at 8.9% per annum, requires monthly payments of interest only and
matures in September 2000.

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Also in October 1998, ART purchased Stone Meadows land, a 13.5 acre parcel
of unimproved land in Houston, Texas, for $1.6 million. ART paid $491,000 in
cash and obtained seller financing for the remaining $1.1 million of the
purchase price. The seller financing bears interest at 10% per annum, requires
quarterly principal and interest payments of $100,000 and matures in October
1999.

Further in October 1998, ART financed its unencumbered Rasor land in the
amount of $15.0 million, receiving net cash of the $13.5 million after the
payment of various closing costs. Portions of ART's Las Colinas I and Valwood
land parcels are included as additional collateral for this loan. ART used the
proceeds from this loan along with an additional $1.8 million to payoff the
$15.8 million in mortgage debt secured by its Las Colinas I and Valwood land
parcels. The new mortgage bears interest at 14% per annum, required a principal
reduction payment of $3.0 million in November 1998, requires monthly interest
only payments and matures in September 1999.

In October 1998, ART purchased Mendoza land, a .35 acre parcel of
unimproved land in Dallas, Texas, for $180,000. ART paid $27,000 in cash and
obtained seller financing for the remaining $153,000 of the purchase price. The
seller financing bears interest at 10% per annum, requires quarterly interest
only payments and matures in October 2001.

Also in October 1998, ART purchased Croslin land, a .8 acre parcel of
unimproved land in Dallas, Texas, for $306,000. ART paid $46,000 in cash and
obtained seller financing for the remaining $260,000 of the purchase price. The
seller financing bears interest at 10% per annum, requires quarterly interest
only payments and matures in October 2001.

Further in October 1998, ART financed its unencumbered Marine Creek and HSM
land in the amount of $2.8 million under the Las Colinas I term loan, receiving
net cash of $2.7 million after the payment of various closing costs.

In November 1998, ART obtained a $95.0 million line of credit from Garden
Capital, L.P. ("GCLP"), a partnership controlled by NOLP. ART received fundings
of $18.9 million in November 1998, $31.1 million in December 1998, and an
additional $26.7 million in the first quarter of 1999. The line of credit is
secured by second liens on ART's Waters Edge III, Edgewater Gardens, Chateau
Bayou and Sunset Apartments, Rosedale Towers Office Building, Katy Road land and
the stock of its wholly-owned subsidiaries, NMC, the general partner of the
Partnership, and ART Holdings, Inc., which owns 3,349,535 NRLP units of limited
partner interest. The loan bears interest at 12% per annum, requires monthly
interest only payments and matures in November 2003. ART accounted for its
investment in the Partnership under the equity method until December 1998 when
NMC was elected general partner of the Partnership. As of December 31, 1998, the
accounts of the Partnership are consolidated with those of ART. The line of
credit is eliminated in consolidation.

Also in November 1998, ART purchased Mason/Goodrich land, a 265.5 acre
parcel of unimproved land in Houston, Texas, for $10.9 million. ART paid $3.7
million in cash and obtained mortgage financing of $7.2 million. The mortgage
bore interest at 8.9% per annum, required monthly interest only payments and
matured in February 1999. In March 1999, ART sold two tracts of its
Mason/Goodrich land parcel totaling 9.9 acres for $956,000, receiving net cash
of $4,000 after paying down by $860,000 the mortgage secured by such land parcel
and the payment of various closing costs. A gain will be recognized on the sale.
The lender has agreed to extend its matured mortgage to September 1999, for a
$500,000 principal paydown. All other terms of the loan would remain unchanged.

In December 1998, ART purchased Plano Parkway land, a 81.2 acre parcel of
unimproved land in Plano, Texas, for $11.1 million. ART paid $2.2 million in
cash and obtained seller financing of the remaining $8.9 million of the purchase
price. The seller financing bore interest at 10% per annum and required the
payment of principal and interest at maturity in January 1999. In February 1999,
ART sold a 4.6 acre tract for $1.2 million. A gain will be recognized on the
sale. Simultaneously with the sale, the debt securing the parcel was refinanced
in the amount of $7.1 million. The new mortgage bears interest at the prime rate
plus 4.5%, currently 12.25% per annum, requires monthly interest only payments
and matures in January 2000. The net cash from the sale and refinancing along
with an additional $921,000 were used to pay off the mortgage.

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Also in December 1998, ART purchased Van Cattle land, a 126.6 acre parcel
of unimproved land in McKinney, Texas, for $2.0 million. ART paid $500,000 in
cash and obtained seller financing for the remaining $1.5 million of the
purchase price. The seller financing bears interest at 10% per annum, requires
monthly interest only payments and matures in December 2000.

Further in December 1998, ART sold two tracts totaling 63.1 acres of its
Valley Ranch land parcel for $4.2 million, receiving net cash of $135,000 after
a $3.0 million paydown on the mortgage secured by such land parcel and the
payment of various closing costs. No gain or loss was recognized on the sales.

In December 1998, ART financed its unencumbered Valwood land in the amount
of $12.0 million, receiving net cash of $4.7 million after paying down by $5.5
million the Rasor land mortgage and the payment of various closing costs. The
mortgage bears interest at 13% per annum, requires monthly payments of interest
only and matures in December 2000.

In the third and fourth quarters of 1998, provisions for loss of $3.0
million and $916,000, respectively, were recorded to write down the Valley Ranch
land to its estimated realizable value less estimated costs of sale. Such write
downs were necessitated by an increase in the acreage designated as flood plain.

In February 1999, ART purchased Frisco Bridges land, a 336.8 acre parcel of
unimproved land in Collin County, Texas, for $46.8 million. ART paid $7.8
million in cash and obtained mortgage financing totaling $39.0 million. Seller
financing in the amount of $22.0 million, secured by 191.5 acres of the parcel,
bears interest at 14% per annum, requires monthly interest only payments and
matures in January 2000. A mortgage in the amount of $15.0 million, secured by
125.0 acres of the parcel, bears interest at the prime rate plus 4.5%, currently
12.25% per annum, requires three quarterly principal reduction payments of $3.0
million on each of May 1, August 1 and November 1, 1999 in addition to monthly
interest payments and matures in February 2000. Another mortgage in the amount
of $2.0 million, secured by 13.5 acres of the parcel, bears interest at 14% per
annum, requires monthly interest only payments and matures in January 2000.
ART's Double O land in Las Colinas, Texas and its Desert Wells land in Palm
Desert, California are pledged as additional collateral for these loans. ART
drew down $6.0 million under its line of credit with the GCLP, for a portion of
the cash requirement.

In March 1999, ART sold a 13.7 acre tract of its McKinney Corners II and IV
land parcels, for $7.7 million, receiving no net cash after paying down by $5.5
million the mortgage debt secured by such land parcels, the funding of required
escrows and the payment of various closing costs. A gain will be recognized on
the sale.

Competition. Identifying, completing and realizing on real estate
investments has from time to time been highly competitive, and involves a high
degree of uncertainty. ART competes for investments with many public and private
real estate investment vehicles, including financial institutions (such as
mortgage banks, pension funds and real estate investment trusts) and other
institutional investors, as well as individuals. Many of those with whom ART
competes for investments and its services are far larger than ART, may have
greater financial resources than ART and may have management personnel with more
experience than the officers of ART.

MORTGAGE LOANS

In addition to real estate, a substantial portion of ART's assets have been
and are expected to continue to be invested in mortgage notes receivable,
principally those secured by income-producing real estate. ART's mortgage notes
receivable consist of first, wraparound, and junior mortgage loans.

Types of Mortgage Activity. In addition to originating its own mortgage
loans, ART may acquire existing mortgage loans either directly from builders,
developers or property owners, or through mortgage banking firms, commercial
banks or other qualified brokers. BCM, an affiliate of and advisor to ART,
services ART's mortgage notes receivable in its capacity as a mortgage servicer.

Types of Properties Subject to Mortgages. The types of properties securing
ART's mortgage notes receivable portfolio at December 31, 1998 consisted of
commercial properties (an office building and shopping centers),

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unimproved land and partnership interests. The ART Board may alter the types of
properties subject to mortgages in which ART invests without a vote of ART's
stockholders.

At December 31, 1998, the obligors on $594,000 or 1.1% of ART's mortgage
notes receivable portfolio were affiliates of ART. Also at that date, $9.2
million or 16.8% of ART's mortgage notes receivable portfolio was nonperforming.

The following table sets forth the percentages (based on the outstanding
mortgage loan balance at December 31, 1998), by geographic region, of the
commercial properties that serve as collateral for ART's mortgage notes
receivable, excluding $43.8 million of mortgage notes secured by unimproved land
and other security.

<TABLE>
<CAPTION>
Commercial
Region Properties
------ ----------
<S> <C>
Midwest................................ 53.8%
Northeast.............................. 17.4
Southwest.............................. 28.8
------
100.0%
</TABLE>

A summary of the activity in ART's mortgage notes receivable portfolio
during 1998 is as follows:

<TABLE>
<S> <C>
Loans in mortgage notes receivable portfolio
at January 1, 1998.................. 11*
Partnership loans....................... 24
Loans funded............................ 1
Loans collected in full................ (6)
Loans sold............................. (3)
Loan foreclosed........................ (1)

Loans in mortgage notes receivable portfolio
at December 31, 1998............... 26*
===
</TABLE>

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

* Includes a mortgage note receivable collateralized by two condominium
mortgage loans in 1997 and one condominium mortgage loan in 1998.

During 1998, ART collected $188,000 in interest and $7.9 million in
principal on its mortgage notes receivable. ART plans, for the foreseeable
future, to hold, to the extent its liquidity permits, rather than to sell in the
secondary market, the remainder of the mortgage notes in its portfolio.

First Mortgage Loans. ART may invest in first mortgage loans, with either
short-, medium- or long-term maturities. First mortgage loans generally provide
for level periodic payments of principal and interest sufficient to
substantially repay the loan prior to maturity, but may involve interest-only
payments or moderate or negative amortization of principal or all interest and a
"balloon" principal payment at maturity. With respect to first mortgage loans,
it is ART's general policy to require that the borrower provide a title policy
or an acceptable legal opinion of title as to the validity and the priority of
ART's mortgage lien over all other obligations, except liens arising from unpaid
property taxes and other exceptions normally allowed by first mortgage lenders
in the relevant area. ART may grant to other lenders participations in first
mortgage loans originated by ART.

The following discussion briefly describes the events that affected
previously funded first mortgage loans during 1998.

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As of December 31, 1998, ART sold a matured first mortgage note at its
carrying value of $124,000 to BCM, an affiliate of and advisor to ART. No gain
or loss was recognized on the sale. See "Junior Mortgage Loans," below.

Wraparound Mortgage Loans. ART may invest in wraparound mortgage loans,
sometimes called all-inclusive loans, made on real estate subject to prior
mortgage indebtedness. A wraparound mortgage note is a mortgage note having an
original principal amount equal to the outstanding balance under the prior
existing mortgage loan plus the amount actually advanced under the wraparound
mortgage loan. Wraparound mortgage loans may provide for full, partial or no
amortization of principal. ART's policy is to make wraparound mortgage loans in
amounts and on properties as to which it would otherwise make a first mortgage
loan.

The following discussion briefly describes events that affected previously
funded wraparound mortgage loans during 1998.

In December 1997, ART sold its Pin Oak Land, a 567.6 acre parcel of
unimproved land in Houston, Texas, for $11.4 million. In connection with such
sale, ART provided $6.9 million in short term purchase money financing that was
paid in full in January 1998.

In June 1992, ART sold the Continental Hotel and Casino in Las Vegas,
Nevada, for among other consideration, a $22.0 million wraparound mortgage note.
In March 1997, the wraparound note was modified and extended in exchange for,
among other things, the borrower's commitment to invest $2.0 million in
improvements to the hotel and casino within four months of March 1997, and an
additional $2.0 million prior to December 1997. The borrower stopped making the
required payments in April 1997, and did not make the required improvements. In
December 1997, the borrower filed for bankruptcy protection. In February 1998, a
hearing was held to allow ART to foreclose on the hotel and casino. At the
hearing, the bankruptcy court allowed the borrower 90 days to submit a
reorganization plan and beginning March 2, 1998 required the borrower to make
monthly payments of $175,000 to ART. ART received only the first such payment.
ART's wraparound mortgage note had a principal balance of $22.7 million at March
31, 1998. In April 1998, the bankruptcy court allowed ART to foreclose on the
hotel and casino. ART did not incur a loss on foreclosure as the fair value of
the property exceeded the carrying value of ART's mortgage note receivable.

Junior Mortgage Loans. ART may invest in junior mortgage loans. Such notes
are secured by mortgages that are subordinate to one or more prior liens either
on the fee or a leasehold interest in real estate. Recourse on such notes
ordinarily includes the real estate which secures the note, other collateral and
personal guarantees of the borrower.

The following discussion briefly describes the events that affected
previously funded junior mortgage notes during 1998.

In December 1997, ART sold two tracts of Valley Ranch land, totaling 25.1
acres, for $3.3 million. In conjunction with the sale, ART provided $891,000 in
purchase money financing. The purchase money financing bore interest at 10.0%
per annum and matured in January 1998. ART received a $624,000 paydown on the
purchase money financing in January 1998, with the remaining $267,000 being
received in February 1998.

As of December 31, 1998, ART sold two matured second lien mortgage notes at
their carrying values totaling $504,000 to BCM, an affiliate of and advisor to
ART. No gain or loss was recognized on the sale. See "First Mortgage Loans,"
above.

INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS AND REAL ESTATE PARTNERSHIPS

ART's investment in real estate entities includes (1) equity securities of
three publicly traded real estate investment trusts (collectively the
"Affiliated REITs"), CMET, IORI and TCI, (2) units of limited partner interest
of NRLP, and (3) interests in real estate joint venture partnerships. On
December 18, 1998, NMC, a wholly-owned subsidiary of ART, was elected general
partner of NRLP and NOLP. NRLP and NOLP operate as an economic unit and, unless
the context otherwise requires, all references herein to the Partnership shall
constitute references to NRLP and NOLP as a unit. BCM, an affiliate of and
advisor to ART, also serves as advisor to the Affiliated REITs, and performs
certain administrative and management functions for the Partnership on behalf of
NMC.

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Since acquiring its initial investments in the equity securities of the
Affiliated REITs and NRLP in 1989, ART has made additional investments in the
equity securities of these entities through private and open market purchases.
ART's cost with respect to shares of the Affiliated REITs at December 31, 1998
totaled $22.0 million, and its cost with respect to units of limited partner
interest in NRLP totaled $24.1 million. The aggregate carrying value (cost plus
or minus equity in income or losses and less distributions received) of such
equity securities of the Affiliated REITs was $29.0 million at December 31, 1998
and the aggregate market value of such equity securities was $43.5 million. The
aggregate investee book value of the equity securities of the Affiliated REITs
based upon the December 31, 1998 financial statements of each such entity was
$71.0 million.

The ART Board has authorized the expenditure by ART of up to an aggregate
of $35.0 million to acquire, in open market purchases, units of NRLP and shares
of the Affiliated REITs, excluding private purchase transactions which were
separately authorized. As of December 31, 1998, ART had expended $4.4 million to
acquire units of NRLP and a total of $6.4 million to acquire shares of the
Affiliated REITs, in open market purchases, in accordance with these
authorizations. ART expects to make additional investments in the equity
securities of the Affiliated REITs and NRLP.

The purchases of the equity securities of the Affiliated REITs and NRLP
were made for the purpose of investment and were based principally on the
opinion of ART's management that the equity securities of each were and are
currently undervalued. The determination by ART to purchase additional equity
securities of the Affiliated REITs and NRLP is made on an entity-by-entity basis
and depends on the market price of each entity's equity securities relative to
the value of its assets, the availability of sufficient funds and the judgment
of ART's management regarding the relative attractiveness of alternative
investment opportunities. Substantially all of the equity securities of the
Affiliated REITs and NRLP owned by ART are pledged as collateral for borrowings.
Pertinent information regarding ART's investment in the equity securities of the
Affiliated REITs and NRLP, at December 31, 1998, is summarized below (dollars in
thousands):

<TABLE>
<CAPTION>
Percentage Carrying Equivalent
of ART's Value of Investee Market Value
Ownership at Investment at Book Value at of Investment at
Investee December 31, 1998 December 31, 1998 December 31, 1998 December 31, 1998
- -------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NRLP....... 55.0% $ 33,589 $ * $ 79,081
CMET....... 40.9 15,550 35,727 25,052
IORI....... 30.0 3,132 7,068 3,034
TCI........ 31.0 10,291 28,251 15,398
</TABLE>

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

* ART accounted for its investment in the Partnership under the equity method
until December 1998 when NMC, a wholly-owned subsidiary of ART, was elected
general partner of NRLP and NOLP, as more fully discussed in "NRLP", below.
As of December 31, 1998, the accounts of the Partnership are consolidated
with those of ART.

Each of the Affiliated REITs and NRLP own a considerable amount of real
estate, much of which, particularly in the case of NRLP, has been held for many
years. Because of depreciation, these entities may earn substantial amounts in
periods in which they sell real estate and will probably incur losses in periods
in which they do not. ART's reported income or loss attributable to these
entities will differ materially from its cash flow attributable to them. ART
does not have a controlling equity interest in any of the Affiliated REITs and
therefore it cannot, acting by itself, determine either the individual
investments or the overall investment policies of such investees. However, due
to ART's equity investments in, and the existence of common officers with, each
of the Affiliated REITs, and that the Affiliated REITs have the same advisor as
ART and that Mr. Randall M. Paulson, an Executive Vice President of ART, is also
the President of the Affiliated REITs and BCM, an affiliate of and advisor to
ART. ART may be considered to have the ability to exercise significant influence
over the operating and investing policies of these entities. ART accounts for
its investment in the Affiliated REITs using the equity method. Under the equity
method, ART recognizes its proportionate share of the income or loss from the
operations of the Affiliated REITs currently, rather than when realized through
dividends or on sale. ART discontinued accounting for its investment in the
Partnership under the equity method as of December 31, 1998, due to the election
of NMC, a wholly-owned subsidiary of ART, as general partner of NRLP and

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NOLP, as more fully discussed in "NRLP" below. The carrying value of ART's
investment in the Affiliated REITs, as set forth in the table above, is the
original cost of each such investment adjusted for ART's proportionate share of
each entity's income or loss and distributions received.

The difference between the carrying value of ART's investment and the
equivalent investee book value is being amortized over the life of the
properties held by each investee.

ART's management continues to believe that the market value of each of the
Affiliated REITs and NRLP undervalues their assets and ART may, therefore,
continue to increase its ownership in these entities in 1999.

The following is a summary description of each of NRLP and the Affiliated
REITs, based upon information publicly reported by such entities.

NRLP. NRLP is a publicly traded master limited partnership which was formed
under the Delaware Uniform Limited Partnership Act on January 29, 1987. It
commenced operations on September 18, 1987 when, through NOLP, it acquired all
of the assets, and assumed all of the liabilities, of 35 public and private
limited partnerships. NRLP is the sole limited partner of NOLP and owns 99% of
the beneficial interest in NOLP. In December 1998, NMC, a wholly-owned
subsidiary of ART, was elected general partner and succeeded to SAMLP's 1%
beneficial interest in each of NRLP and NOLP. NMC also assumed liability for
SAMLP's note for its capital contribution. In addition, NMC assumed liability
for a note which requires the repayment of the $11.4 million paid by the
Partnership under the Moorman litigation settlement plus the $808,000 in court
ordered attorney's fees and the $30,000 paid to Joseph B.
Moorman.

In November 1992, NOLP transferred 52 apartment complexes and a wraparound
mortgage note receivable to GCLP, a Delaware limited partnership in which NOLP
owns a 99.3% limited partner interest. Concurrent with such transfer, GCLP
refinanced all of the mortgage debt associated with the transferred properties
and the wraparound mortgage note. Effective August 1998, a wholly-owned
subsidiary of ART acquired the .7% managing general partner interest of Garden
Capital Management Incorporated in GCLP and the 1% general partner interest of
Garden Capital Incorporated in 50 single asset limited partnerships in which
GCLP is the 99% limited partner, in exchange for 250,000 ART Preferred Shares.

At December 31, 1998, ART owned approximately 55.0% of the outstanding
limited partner units of NRLP.

NMC as general partner, has discretion in determining methods of obtaining
funds for the Partnership's operations, and the acquisition and disposition of
its assets. The Partnership's governing documents place no limitation on the
amount of leverage that the Partnership may incur either in the aggregate or
with respect to any particular property or other investment. At December 31,
1998, the aggregate loan-to-value ratio of the Partnership's real estate
portfolio was 63.5% computed on the basis of the ratio of total property-related
debt to aggregate estimated current values. As of December 31, 1998 NRLP owned
66 properties located in 21 states. These properties consisted of 55 apartment
complexes comprising 13,957 units, five office buildings with an aggregate of
367,271 sq. ft. and six shopping centers with an aggregate of 712,388 sq. ft.

The Partnership reported net income of $47.5 million in 1998 compared to
net income of $8.7 million in 1997. The Partnership had a loss from operations,
prior to gains on sale of real estate, of $5.1 million in 1998 compared to
income of $362,000 in 1997. The decline in the Partnership's 1998 income from
operations was due to $13.0 million of GCLP deferred borrowing costs written off
on the refinancing of the GCLP properties in 1998 and the sale of 10 apartments
and two shopping centers by the Partnership in 1998. The decline was mitigated
by a 4% increase in average rental rates at the Partnership's apartments and an
average 4% increase in rental rates at the Partnership's commercial properties
coupled with an average 1% decrease in occupancy at the Partnership's apartments
and an average 3.5% decrease in occupancy at the Partnership's commercial
properties.

The Partnership's cash flow from property operations (rents collected less
payments for property operations) decreased to $42.9 million in 1998 from $50.5
million in 1997. At December 31, 1998, the Partnership had total assets of
$337.8 million, which consisted of $167.4 million of real estate held for
investment, $114.5 million of notes and

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interest receivable, $46.9 million of investments in equity securities and other
assets and $9.0 million in cash and cash equivalents.

The Partnership has paid quarterly distributions to unitholders since the
fourth quarter of 1993. In 1998, ART received a total of $7.2 million in
distributions from the Partnership including $5.5 million that was accrued at
December 31, 1997.

ART owns a 96% limited partner interest in SAMLP. SAMLP was the general
partner of the Partnership until December 18, 1998 when NMC, a wholly-owned
subsidiary of ART, was elected general partner. Gene E. Phillips, a Director and
Chairman of the ART Board until November 16, 1992, is also a general partner of
SAMLP.

The Partnership, SAMLP and Mr. Phillips, were among the defendants in a
class action lawsuit arising out of the formation of the Partnership. An
agreement settling such lawsuit as to the above named defendants, (the "Moorman
Settlement Agreement"), became effective on July 5, 1990. The Moorman Settlement
Agreement provided for, among other things, the appointment of an oversight
committee for the Partnership (the "NRLP Oversight Committee") and the
establishment of specified annually increasing targets for a five-year period
relating to the price of NRLP units of limited partner interest.

The Moorman Settlement Agreement provided for the resignation and
replacement of SAMLP as general partner if the unit price targets were not met
for two consecutive anniversary dates. NRLP did not meet the unit price targets
for the first and second anniversary dates. On July 8, 1992, SAMLP notified the
NRLP Oversight Committee of the failure to meet the unit price targets for two
successive years and that it expected to resign as general partner of NRLP and
NOLP.

The Moorman Settlement Agreement provided that the withdrawal of SAMLP as
general partner would require the Partnership to purchase SAMLP's general
partner interest (the "Redeemable General Partner Interest") at its then fair
value, and to pay certain fees and other compensation as provided in the
partnership agreement. SAMI, the managing general partner of SAMLP, calculated
the fair value of such Redeemable General Partner Interest to be $49.6 million
at December 31, 1997 before reduction for the principal balance ($4.2 million at
December 31, 1997) and accrued interest ($7.2 million at December 31, 1997) on
the note receivable from SAMLP for its original capital contribution to the
Partnership.

On July 15, 1998, NRLP, SAMLP and the NRLP Oversight Committee executed an
Agreement for Cash Distribution and Election of Successor General Partner (the
"Cash Distribution Agreement") which provides for the nomination of an entity
affiliated with SAMLP to be the successor general partner of NRLP, for the
distribution of $11.4 million to the plaintiff class members and for the
resolution of all related matters under the Moorman Settlement Agreement. The
Cash Distribution Agreement was submitted to the Court on July 23, 1998. On
August 4, 1998, the Court entered an order granting preliminary approval of the
Cash Distribution Agreement. On September 9, 1998, a notice was mailed to the
plaintiff class members describing the Cash Distribution Agreement. On October
16, 1998, a hearing was held to consider any objections to the Cash Distribution
Agreement. On October 23, 1998, the Court entered an order granting final
approval of the Cash Distribution Agreement. The Court also entered orders
requiring NRLP to pay $404,000 in attorney's fees to Joseph B. Moorman's legal
counsel, $30,000 to Joseph B. Moorman and $404,000 in attorney's fee to Robert
A. McNeil's legal counsel.

Pursuant to the order, $11.4 million was deposited by the Partnership into
an escrow account and then transferred to the control of an independent
settlement administrator. The distribution of the cash shall be made to the
plaintiff class members pro rata based upon the number of units originally
issued to each plaintiff class member upon the formation of the Partnership in
1987. On March 10, 1999, the Court entered an order providing for the initial
distribution of the cash not later than March 31, 1999. The distribution of cash
commenced on March 24, 1999 and is under the control of the independent
settlement administrator.

The proposal to elect NMC, a wholly-owned subsidiary of ART, as the
successor general partner was submitted to the unitholders of NRLP for a vote at
a special meeting held on December 18, 1998. All units of NRLP owned by
affiliates of ART and SAMLP (approximately 61.8% of the outstanding limited
partner units of NRLP as of the

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<PAGE> 95

November 27, 1998 record date) were voted pro rata with the vote of the other
limited partners. NMC was elected by a majority vote of the NRLP unitholders. On
December 18, 1998, SAMLP withdrew as general partner and NMC, as successor
general partner, took office. Upon the election and taking of office of NMC as
the successor general partner, the Moorman Settlement Agreement terminated.

Under the Cash Distribution Agreement, SAMLP waived its right under the
Moorman Settlement Agreement to receive any payment from NRLP for its Redeemable
General Partner Interest and fees it was entitled to receive upon the election
of a successor general partner. In addition, pursuant to the Cash Distribution
Agreement, the NRLP partnership agreement was amended to provide that, upon
voluntary resignation of the general partner, the resigning general partner
shall not be entitled to the repurchase of its general partner interest under
Paragraph 17.9 of the NRLP partnership agreement.

Under the Cash Distribution Agreement, NMC as successor general partner
assumed liability for the note from SAMLP for its capital contribution to NRLP.
In addition, NMC assumed liability for a note which requires the repayment to
NRLP of the $11.4 million paid by NRLP under the Cash Distribution Agreement
plus the $808,000 in Court ordered attorney's fees and the $30,000 paid to
Joseph B. Moorman. This note requires repayment over a ten-year period, bears
interest at a variable rate, currently 7.2% per annum and is guaranteed by ART,
which is the parent of NMC and (as of December 31, 1998) was the owner of
approximately 55.0% of the outstanding units of NRLP. As of December 31, 1998,
ART discontinued accounting for its investment in the Partnership under the
equity method upon the election of NMC as general partner of the Partnership and
the settlement of the Moorman litigation. ART began consolidation of the
Partnership's accounts at that date and its operations subsequent to that date.

In August 1996, ART consolidated its existing NRLP margin debt held by
various brokerage firms into a single margin loan. ART pledged 3,349,169 of its
NRLP units as security for such margin loan which had a principal balance of
$10.6 million at September 30, 1998. The margin loan was currently due and
payable. Subsequent to September 30, 1998, ART paid down such loan by $5.0
million. At December 31, 1998, the loan had a principal balance of $5.0 million.
In February 1999, the loan was paid off.

CMET. CMET is a California business trust which was organized on August 27,
1980 and commenced operations on December 3, 1980. CMET's business is investing
in real estate through direct equity investments and partnerships and financing
real estate and real estate-related activities through investments in mortgage
notes. CMET holds equity investments in apartment complexes and commercial
properties (office buildings, industrial warehouses and shopping centers)
throughout the continental United States. CMET's apartment complexes and
commercial properties are concentrated in the Southeast, Southwest and Midwest
regions of the continental United States. At December 31, 1998, CMET owned 57
income producing properties located in 14 states consisting of 34 apartment
complexes comprising of 6,158 units, 11 office buildings with an aggregate of
2.1 million sq. ft., 11 industrial warehouses with an aggregate of 1.6 million
sq. ft. and a shopping center with 133,558 sq. ft. CMET also holds mortgage
notes receivable secured by real estate located in the Southeast, Southwest and
Midwest regions of the continental United States, with a concentration in the
Southeast and Southwest regions.

CMET reported net income of $347,000 in 1998 as compared to net income of
$4.2 million in 1997. CMET's 1998 net income included gains on the sale of real
estate of $6.1 million, whereas its 1997 net income included gains on the sale
of real estate of $8.2 million. CMET's cash flow from property operations
improved to $28.9 million in 1998 from $23.7 million in 1997. At December 31,
1998, CMET had total assets of $333.8 million, which consisted of $294.2 million
of real estate held for investment, $3.3 million of real estate held for sale,
$3.4 million of notes and interest receivable, $30.7 million of investments in
marketable equity securities and other assets and $2.2 million in cash and cash
equivalents. On September 25, 1998, CMET and TCI announced that they had reached
an agreement for CMET to be acquired by TCI. TCI will issue 1.181 shares of its
common stock for each share of CMET. The transaction is expected to be completed
in the second quarter of 1999.

CMET has paid quarterly distributions since the first quarter of 1993. ART
received a total of $868,000 in distributions from CMET in 1998.

IORI. IORI is a Nevada corporation which was originally organized on
December 14, 1984 as a California business trust and commenced operations on
April 10, 1985. Like CMET, IORI's business is investing in real estate through

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direct equity investments and partnerships. IORI holds equity investments in
apartment complexes and commercial properties (office buildings) in the Pacific,
Southeast and Southwest regions of the continental United States. At December
31, 1998, IORI owned 14 income producing properties located in four states.
These properties consisted of four apartment complexes comprising 654 units and
ten office buildings with an aggregate of 620,577 sq. ft.

IORI reported a net loss of $679,000 in 1998 as compared to net income of
$3.3 million in 1997. IORI's net income in 1997, is attributable to $4.0 million
of gains on sale of real estate. IORI had no such gains in 1998. IORI's cash
flow from property operations increased to $7.9 million in 1998 from $6.5
million in 1997. At December 31, 1998, IORI had total assets of $88.7 million,
which consisted of $83.7 million, which consisted of $83.7 million in real
estate held for investment, $4.9 million in investments in partnerships and
other assets and $103,000 in cash and cash equivalents.

IORI has paid quarterly dividends since the first quarter of 1993. ART
received a total of $264,000 in dividends from IORI in 1998.

TCI. TCI is a Nevada corporation which was originally organized on
September 6, 1983, as a California business trust, and commenced operations on
January 31, 1984. TCI also has investment policies similar to those of CMET and
IORI. TCI holds equity investments in apartment complexes, commercial properties
(office buildings, industrial warehouses and shopping centers) and hotels
throughout the continental United States with a concentration in the Southeast
and Southwest regions. At December 31, 1998, TCI owned 72 income producing
properties located in 14 states. These properties consisted of 38 apartment
complexes comprising 7,000 units, 19 office buildings with an aggregate of 1.6
million sq. ft., six industrial warehouses with an aggregate of 1.5 million sq.
ft., five shopping centers with an aggregate of 489,103 sq. ft. and four hotels
with a total of 209 rooms. TCI also holds mortgage notes receivable secured by
real estate located in the Southeast and Southwest regions of the continental
United States.

TCI reported net income of $6.9 million in 1998 as compared to net income
of $12.6 million in 1997. TCI's net income for 1998 included gains on the sale
of real estate of $12.6 million whereas its net income for 1997 included gains
on the sale of real estate of $21.4 million. TCI's cash flow from property
operations increased to $29.8 million in 1998 as compared to $16.2 million in
1997. At December 31, 1998, TCI had total assets of $382.2 million, which
consisted of $347.4 million in real estate held for investment, $1.4 million in
real estate held for sale, $3.4 million in investments in real estate entities,
$19.5 million in notes and interest receivable and other assets and $10.5
million in cash and cash equivalents. At December 31, 1998, TCI owned 345,728
shares of IORI's common stock, approximately 22.7% of IORI's shares then
outstanding. On September 25, 1998, TCI and CMET announced that they had reached
agreement for TCI to acquire CMET. TCI will issue 1.181 shares of its common
stock for each share of CMET. The transaction is expected to be completed in the
second quarter of 1999.

TCI has paid quarterly dividends since the fourth quarter of 1995. In 1998,
ART received a total of $1.9 million in dividends from TCI, including $1.2
million accrued in December 31, 1997.

River Trails II. In January 1992, ART entered into a partnership agreement
with an entity affiliated with a limited partner, at the time, in a partnership
that owned approximately 15.8% of ART's outstanding shares of Common Stock, to
acquire 287 developed residential lots adjacent to ART's other residential lots
in Fort Worth, Texas. The partnership agreement designates ART as managing
general partner. The partnership agreement also provides each of the partners
with a guaranteed 10% return on their respective investments. Through December
31, 1997, 214 residential lots had been sold. During 1998, an additional 52 lots
were sold and at December 31, 1998, 21 lots remained to be sold. During 1998,
each partner received $418,000 in return of capital distributions from the
partnership and $493,000 in profit distributions.

R. G. Bond, Ltd. In June 1995, ART purchased the corporate general partner
of a limited partnership which owned apartment complexes in Illinois, Florida
and Minnesota, with a total of 900 units. In August 1998, in conjunction with
the sale of the apartment complexes, ART sold its general partner interest for
$903,000 in cash. ART recognized a gain of $270,000 on the sale. In December
1998, ART received a return of capital distribution of $100,000.

Campbell Center Associates, Ltd. In April 1996, ART purchased a 28% general
partner interest in Campbell Center Associates, Ltd. ("Campbell Associates")
which in turn had a 56.25% interest in Campbell Centre Joint Venture, which

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owned at the time a 413,175 sq. ft. office building in Dallas, Texas. The
purchase price of the general partner interest was $550,000 in cash and a
$500,000 note. In January 1997, ART exercised its option to purchase an
additional 28% general partner interest in Campbell Associates. The purchase
price was $300,000 in cash and a $750,000 note. In July 1997, ART purchased an
additional 9% general partner interest in Campbell Associates for $868,000 in
cash. In March 1998, Consolidated Equity Properties, Inc., a wholly -owned
subsidiary of ART, acquired a 30% limited partner interest in Campbell
Associates for $500,000 in cash. In June 1998, ART purchased the remaining 5%
general partner interest in Campbell Associates for $1.1 million in cash. Also
in June 1998, Campbell Centre Joint Venture sold the office building for $32.2
million in cash. Campbell Associates, as a partner, received net cash of $13.2
million from the sales proceeds and escrowed an additional $190,000 for pending
parking lot issues. Campbell Associates recognized a gain of $8.2 million on the
sale.

Highway 380/Preston Partners, Ltd. In June 1996, a newly formed limited
partnership, of which ART is 1% general partner, purchased 580 acres of
unimproved land in Collin County, Texas for $5.7 million in cash. ART
contributed $100,000 in cash to the partnership with the remaining $5.6 million
being contributed by the limited partner. The partnership agreement designates
ART as the managing general partner. At January 1, 1998, 251.9 acres remained to
be sold. In January 1998, the partnership sold a 155.4 acre tract for $2.9
million. The partnership received $600,000 in cash and provided financing of an
additional $2.2 million. Of the net sales proceeds, $300,000 was distributed to
the limited partner and $300,000 was distributed to ART as general partner in
accordance with the partnership agreement. The seller financing bore interest at
12% per annum, required monthly payments of interest only and matured in July
1998. The seller financing was collected at maturity, with the net proceeds
being distributed $1.1 million to the limited partner and $1.1 million to the
ART as general partner. The partnership recognized a gain of $1.2 million on the
sale. In September 1998, the partnership sold the remaining 96.5 acres for $1.3
million in cash. Of the net proceeds, $587,000 was distributed to the limited
partner and $587,000 was distributed to ART as general partner. The partnership
recognized a gain of $128,000 on the sale.

Elm Fork Branch Partners, Ltd. In September 1997, a newly formed limited
partnership of which ART is a 1% general partner and 21.5% limited partner,
purchased a 422.4 acre parcel of unimproved land in Denton County, Texas, for
$16.0 million in cash. ART contributed $3.6 million in cash to the partnership
with the remaining $12.4 million being contributed by the other limited
partners. The partnership agreement designates ART as the managing general
partner. In September 1997, the partnership obtained mortgage financing of $6.5
million secured by the 422.4 acres of land. The mortgage bears interest at 10%
per annum, requires quarterly payments of interest only and matures in September
2001. The net financing proceeds were distributed to the partners, ART receiving
a return of $2.9 million of its initial investment. The partnership agreement
also provides that the limited partners receive a 12% preferred cumulative
return on their investment before any sharing of partnership profits occurs. One
of the limited partners in the partnership was, at the time, also a limited
partner in a partnership that owned 15.8% of the outstanding shares of ART
Common Stock.

[Remainder of Page Intentionally Left Blank]

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SELECTED FINANCIAL DATA OF ART

<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
(dollars in thousands, except per share)
<S> <C> <C> <C> <C> <C>
EARNINGS DATA
Revenue ................................ $ 87,086 $ 57,031 $ 41,522 $ 22,952 $ 23,070
Expense ................................ 165,111 90,252 52,601 28,314 26,490
------------ ------------ ------------ ------------ ------------
(Loss) from operations ................. (78,025) (33,221) (11,079) (5,362) (3,420)
Equity in income (loss)
of investees ..................... 37,966 10,497 1,485 (851) 292
Gain on sale of real estate ............ 17,254 20,296 3,659 2,594 379
------------ ------------ ------------ ------------ ------------
(Loss) before extraordinary
gain ............................. (22,805) (2,428) (5,935) (3,619) (2,749)
Extraordinary gain ..................... -- -- 381 783 323
------------ ------------ ------------ ------------ ------------
Net (loss) ............................. (22,805) (2,428) (5,554) (2,836) (2,426)
Preferred Dividend
Requirement ...................... (1,177) (206) (113) -- --
------------ ------------ ------------ ------------ ------------
(Loss) applicable to
Common Shares .................... $ (23,982) $ (2,634) $ (5,667) $ (2,836) $ (2,426)
============ ============ ============ ============ ============
PER SHARE DATA
(Loss) before extraordinary
gain .......................... $ (2.24) $ (.22) $ (.46) $ (.31) $ (.23)
Extraordinary Gain ..................... -- -- .03 .07 .03
------------ ------------ ------------ ------------ ------------
Net (loss) ............................. $ (2.24) $ (.22) $ (.43) $ (.24) $ (.20)
============ ============ ============ ============ ============
Dividends per share .................... $ .20 $ .20 $ .15 $ -- $ --
Weighted average shares
outstanding ...................... 10,695,388 11,710,013 12,765,082 11,716,656 12,208,876
============ ============ ============ ============ ============
</TABLE>

<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(dollars in thousands, except per share)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Notes and interest
receivable, net ................... $ 52,053 $ 25,526 $ 48,485 $ 49,741 $ 45,664
Real estate, net ....................... 734,907 302,453 119,035 59,424 47,526
Total assets ........................... 918,605 433,799 239,783 162,033 137,362
Notes and interest
payable ........................... 768,272 261,986 127,863 61,163 45,695
Margin borrowings ...................... 35,773 53,376 40,044 34,017 26,391
Stockholders'
equity ............................ 38,272 63,453 47,786 53,058 55,894
Book value per
share ............................. $ .44 $ 3.53 $ 3.74 $ 4.53 $ 4.77
</TABLE>

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

Shares and per share data have been adjusted for the 2 for 1 forward Common
Stock splits effected January 2, 1996 and February 17, 1997.

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<PAGE> 99

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

INTRODUCTION

ART was organized in 1961 to provide investors with a professionally
managed, diversified portfolio of equity real estate and mortgage loan
investments selected to provided opportunities for capital appreciation as well
as current income.

LIQUIDITY AND CAPITAL RESOURCES

General. Cash and cash equivalents at December 31, 1998 aggregated $11.5
million, compared with $5.3 million at December 31, 1997. Although ART
anticipates that during 1999 it will generate excess cash from property
operations, as discussed below, such excess cash is not sufficient to discharge
all of ART's debt obligations as they mature. ART will therefore again rely on
externally generated funds, including aggressive land sales, selected property
sales, refinancing of properties and, to the extent necessary, borrowings to
meet its debt service obligations, pay taxes, interest and other non-property
related expenses.

Notes payable totaling $164.2 million are scheduled to mature during 1999.
During the first quarter of 1999, ART either extended, refinanced, paid down,
paid off or received commitments from lenders to extend or refinance $66.8
million of the debt scheduled to mature in 1999.

ART expects an increase in cash from property operations in 1999. The
increase is expected to be derived from a full year of operations of the 36
apartment complexes that it acquired during 1998. ART is also expecting
substantial land sales and selected property sales to generate additional cash.

Net cash from operating activities decreased to a deficit of $23.0 million
in 1998 from a deficit of $18.0 million in 1997. Fluctuations in the components
of cash from operating activities are discussed in the paragraphs that follow.

Net cash from pizza operations (sales less cost of sales) decreased to $2.4
million in 1998 from $5.0 million in 1997. The decrease was due to higher labor
and pizza ingredient costs, primarily cheese.

Net cash from property operations (rents collected less payments for
expenses applicable to rental income) increased to $21.5 million in 1998 from
$5.4 million in 1997. This increase was primarily attributable to a full year of
operations of the five hotels and two shopping centers acquired in 1997 and to
the 36 apartment complexes acquired in 1998. The increase was partially offset
by $1.3 million of costs related to the 16 land parcels purchased in 1998.

Interest collected decreased to $188,000 in 1998 from $2.6 million in 1997.
The decrease was attributable to the sale of two notes receivable and the
foreclosure of the collateral securing a third note receivable in 1997 and the
foreclosure of the collateral securing a wraparound mortgage note receivable in
1998.

Interest paid increased to $34.1 million in 1998 from $19.1 million in
1997. The increase was due to a full year of interest on the debt associated
with the five hotels, two shopping centers and 24 parcels of land acquired in
1997 and with 36 apartment complexes and 16 land parcels acquired in 1998.

Advisory and servicing fees paid increased to $3.8 million in 1998 from
$2.7 million in 1997. The increase is due to an increase in ART's gross assets,
the basis for such fee.

General and administrative expenses paid increased to $8.5 million in 1998
from $7.8 million in 1997. The increase was primarily attributable to the
general and administrative expenses of ART's development subsidiary established
in 1998.

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<PAGE> 100

Other cash from operating activities decreased to a use of $5.5 million in
1998 from a use of $537,000 in 1997. The decrease was due to a decrease in
property prepaids, other miscellaneous property receivables and property
escrows.

Distributions from equity investees' increased to $10.3 million in 1998
from $5.7 million in 1997. Included in 1998 distributions were special
distributions totaling $6.7 million from two equity investees. The special
distributions were accrued at December 31, 1997, but were not paid until 1998.

Distributions to minority interest holders increased to $3.2 million in
1998 from $2.1 million in 1997. These distributions represented preferred
returns paid to limited partner unitholders of controlled consolidated
partnerships.

Net cash of $2.2 million in 1998 and $4.6 million in 1997 was used in
marketable equity securities trading activities.

In 1998, ART sold a total of 789.2 acres of land in Collin County, Irving,
Las Colinas, Lewisville and Plano, Texas, Denver, Colorado, Palm Desert and
Santa Clarita, California in 13 separate transactions for a total of $51.6
million. ART received net cash of $15.4 million, after paying off or paying down
$36.2 million in mortgage debt secured by such properties.

In 1998, ART purchased a total of 2,497.1 acres of land in Palm Desert,
California and Carrollton, Dallas County, Farmers Branch, Fort Worth, Houston,
Irving, Lewisville, McKinney, Plano and Tarrant County, Texas, for a total of
$141.6 million. ART paid $30.3 million in cash and obtained mortgage or seller
financing of $88.1 million and issued $23.2 million of Class A limited partner
units in controlled consolidated partnerships.

ART expects that funds from existing cash resources, aggressive sales of
land and selected property sales, refinancing of real estate, and borrowings
against its real estate and marketable equity securities will be sufficient to
meet the cash requirements associated with its current and anticipated level of
operations, maturing debt obligations and existing commitments. To the extent
that ART's liquidity permits or financing sources are available, ART will make
investments in real estate, primarily investments in improved and unimproved
land, continue making additional investments in real estate entities and
marketable equity securities, and fund or acquire mortgage notes.

In February 1999, ART purchased Frisco Bridges land, a 336.8 acre parcel of
unimproved land in Collin County, Texas, for $46.8 million. ART paid $7.8
million in cash and obtained mortgage financing totaling $39.0 million. ART drew
down $6.0 million under the line of credit described below, for a portion of the
cash requirement.

ART expects that it will be necessary for it to sell $120.0 million, $48.0
million and $17.0 million of its land holdings during each of the next three
years to satisfy the debt on such land as it matures. If ART is unable to sell
at least the minimum amount of land to satisfy the debt obligations on such land
as it matures, ART, if it was not able to extend such debt, would either sell
other of its assets to pay such debt or return the property to the lender.

Notes Receivable. In June 1992, ART sold the Continental Hotel and Casino
in Las Vegas, Nevada for, among other consideration, a $22.0 million wraparound
mortgage note. In March 1997, the wraparound note was modified and extended in
exchange for, among other things, the borrower's commitment to invest $2.0
million in improvements to the hotel and casino within four months of March
1997, and an additional $2.0 million prior to December 1997. The borrower
stopped making the payments required by the note in April 1997, and did not make
the required improvements. In December 1997, the borrower filed for bankruptcy
protection. In February 1998, a hearing was held to allow foreclosure of the
hotel and casino. At the hearing, the bankruptcy court allowed the borrower 90
days to submit a reorganization plan and beginning March 2, 1998, required the
borrower to make monthly payments of $175,000. ART received only the first such
payment. The wraparound mortgage note had a principal balance of $21.0 million
at March 31, 1998. In April 1998, the bankruptcy court allowed the foreclosure
of the hotel and casino. No loss was incurred on foreclosure as the fair value
of the property exceeded the carrying value of ART's mortgage note.

Loans Payable. ART has margin arrangements with various brokerage firms
which provide for borrowings of up to 60% of the market value of marketable
equity securities. The borrowings under such margin arrangements are secured by
such equity securities and bear interest rates ranging from 7.0% to 11.0%.
Margin borrowings totaled $35.8

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million (approximately 43.9% of market value) at December 31, 1998, compared to
$53.4 million at December 31, 1997.

In 1998, ART obtained a $95.0 million line of credit from a partnership
controlled by NOLP, the operating partnership of NRLP. ART received fundings of
$18.9 million in November 1998, $31.1 million in December 1998, and an
additional $26.7 million in the first quarter of 1999. The line of credit is
secured by second liens on ART's Waters Edge III, Edgewater Gardens, Chateau
Bayou and Sunset Apartments, Rosedale Towers Office Building, Katy Road land and
the stock of its wholly-owned subsidiaries, NMC, the general partner of NRLP and
NOLP, and ART Holdings, Inc., which owns 3,349,535 NRLP units of limited partner
interest. The loan bears interest at 12% per annum, requires monthly interest
only payments and matures in November 2003. ART accounted for its investment in
the Partnership under the equity method until December 1998 when NMC was elected
general partner of the Partnership. As of December 31, 1998, the accounts of the
Partnership are consolidated with those of ART. Such line of credit is
eliminated in consolidation.

Equity Investments. During the fourth quarter of 1988, ART began purchasing
shares of the Affiliated REITs which have the same advisor as ART, and units of
limited partner interest in NRLP. It is anticipated that additional equity
securities of NRLP and the Affiliated REITs will be acquired in the future
through open-market and negotiated transactions to the extent ART's liquidity
permits.

Equity securities of the Affiliated REITs and NRLP held by ART may be
deemed to be "restricted securities" under Rule 144 of the Securities Act of
1933 ("Securities Act"). Accordingly, ART may be unable to sell such equity
securities other than in a registered public offering or pursuant to an
exemption under the Securities Act for a one year period after they are
acquired. Such restrictions may reduce ART's ability to realize the full fair
market value of such investments if ART attempted to dispose of such securities
in a short period of time.

ART's cash flow from these investments is dependent on the ability of each
of the entities to make distributions. In 1998, ART received total distributions
from the Affiliated REITs of $1.8 million and $1.8 million from NRLP and an
additional $6.7 million, which was accrued at December 31, 1997, was received in
January 1998. ART anticipates receiving distributions totaling $4.0 million from
the REITs and $1.7 million from NRLP in 1999.

In June 1996, ART resumed quarterly dividend payments on its Common Stock.
ART paid dividends totaling $2.3 million or $.20 per share in 1998.

ART's management reviews the carrying values of ART's properties and
mortgage notes receivable at least annually and whenever events or a change in
circumstances indicate that impairment may exist. Impairment is considered to
exist if, in the case of a property, the future cash flow from the property
(undiscounted and without interest) is less than the carrying amount of the
property. For notes receivable impairment is considered to exist if it is
probable that all amounts due under the terms of the note will not be collected.
In those instances where impairment is found to exist, a provision for loss is
recorded by a charge against earnings. The mortgage note receivable review
includes an evaluation of the collateral property securing each note. The
property review generally includes selective property inspections and
discussions with the manager of the property and visits to selected properties
in the surrounding area and a review of the following: (1) the property's
current rents compared to market rents; (2) the property's expenses; (3) the
property's maintenance requirements; and, (4) the property's cash flow.

RESULTS OF OPERATIONS

1998 Compared to 1997. ART reported a net loss of $22.8 million in 1998 as
compared to a net loss of $2.4 million in 1997. The primary factors contributing
to ART's net loss are discussed in the following paragraphs.

Sales and cost of sales were $28.9 million and $24.8 million in 1998 and
$25.0 million and $20.0 million, respectively, in 1997. These items of revenue
and cost relate to PWSI. PWSI experienced lower profit margins in 1998 due to
higher labor and pizza ingredient costs, primarily cheese. Cheese prices have
declined since January 1, 1999.

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Rents increased to $63.5 million in 1998 from $29.1 million in 1997. Rent
from commercial properties increased to $16.5 million in 1998 from $13.9 million
in 1997, rent from hotels increased to $32.2 million in 1998 from $14.9 million
in 1997 and rent from apartments was $14.2 million in 1998. The increase in rent
from hotels was primarily attributable to a full year of operations of the five
hotels acquired in 1997, the increase in rent from commercial properties was
primarily attributable to a full year of operations of the two shopping centers
acquired in 1997 and apartment rent was due to the 36 apartments acquired in
1998. ART owned no apartments in 1997. Rental income is expected to increase
significantly in 1999 as a result of the consolidation of the Partnership's
operations subsequent to December 31, 1998.

Property operations expense increased to $49.2 million in 1998 from $24.2
million in 1997. Property operations expense for commercial properties of $9.7
million in 1998 approximated the $10.0 million in 1997, for hotels such expense
increased to $24.4 million in 1998 from $11.2 million in 1997, for land it
increased to $6.3 million in 1998 from $3.0 million in 1997 and for apartments
was $8.8 million in 1998. The increase in hotel property operations expense was
primarily due to a full year of operations of the five hotels acquired in 1997,
the increase for land was primarily due to the 16 land parcels acquired in 1998.
Property operations expense for apartments was due to the 36 apartments acquired
in 1998. ART owned no apartments in 1999. Property operations expense is
expected to increase significantly in 1999 as a result of the consolidation of
the Partnership's operation subsequent to December 31, 1998.

Interest income decreased to $188,000 in 1998 from $2.8 million in 1997.
The decrease was attributable to the sale of two notes receivable and the
foreclosure of the collateral securing a third note receivable in 1997 and the
foreclosure of the collateral securing a wraparound mortgage note receivable in
1998. Interest income is expected to increase significantly in 1999 as a result
of the consolidation of the Partnership's operations subsequent to December 31,
1998.

Other income decreased to a loss of $5.5 million in 1998 from income of
$168,000 in 1997. This decrease was due to recognizing an unrealized loss on
marketable equity securities of $6.1 million in 1998, compared to an unrealized
loss of $850,000 in 1997. Also contributing to the decrease was a decrease in
dividend income and net gains on sales of marketable equity securities of
$15,000 and $260,000, respectively.

Interest expense increased to $51.6 million in 1998 from $30.2 million in
1997. Of this increase, $7.5 million was due to a full year of interest on the
debt secured by the five hotels, two shopping centers and 24 parcels of land
acquired in 1997 and an additional $10.4 million was due to debt secured by 36
apartment complexes and 16 parcels of land acquired in 1998. Interest on margin
debt also increased by $1.5 million and deferred borrowing costs by $3.5
million. Interest is expected to increase significantly in 1999 as a result of
the consolidation of the Partnership's operations subsequent to December 31,
1998.

Advisory and mortgage servicing fees increased to $3.8 million in 1998 from
$2.7 million in 1997. The increase was attributable to the increase in ART's
gross assets, the basis for such fee. Such fee will continue to increase as
ART's gross assets increase.

General and administrative expenses increased to $8.5 million in 1998 from
$7.8 million in 1997. The increase was primarily attributable to the general and
administrative expenses of a development subsidiary established in 1998. General
and administrative expenses are expected to increase significantly in 1999 as a
result of the consolidation of the Partnership's operations subsequent to
December 31, 1998.

Depreciation and amortization increased to $7.0 million in 1998 from $3.5
million in 1997. The increase was due to a full year of depreciation on the five
hotels and two shopping centers acquired in 1997 and 36 apartment complexes
acquired in 1998. Depreciation and amortization is expected to increase
significantly in 1999 as a result of the consolidation of the Partnership's
results subsequent to December 31, 1998.

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In December 1998, upon the election of NMC, a wholly-owned subsidiary of
ART, as general partner of the Partnership, NMC assumed liability for certain
legal settlement payments. Such obligation is included in litigation expense in
the accompanying Consolidated Statement of Operations.

Minority interest increased to $3.2 million in 1998 from $1.4 million in
1997. Minority interest is the preferred return paid on limited partner units of
certain controlled limited partnerships. Minority interest in 1997 was
attributable to the preferred returns paid on a limited partner units of Ocean
Beach Partners, L.P., Valley Ranch, L.P., Grapevine American, L.P., Edina Park
Plaza Associates, L.P. and Hawthorne Lakes Associations, L.P. In 1998 preferred
returns paid on limited partner units for ART Florida Portfolio III and ART
Palm, L.L.C. also were included.

Equity in income of investees increased to $38.0 million in 1998 from $10.5
million in 1997. The increase in equity income was attributable to an increase
totaling $55.2 million in gains on sale of real estate in IORI, the Partnership
and TCI, offset in part by a decrease of $1.2 million in CMET. ART's equity
share of such gains was $33.3 million. This net increase was offset by decreased
operating income totaling $7.5 million in IORI, the Partnership and CMET offset
in part by an increase in operating income of $3.1 million in TCI. ART's equity
share of equity investees' net operating losses was $6.9 million. Equity in
income of investees is expected to decrease significantly in 1999 as a result of
the consolidation of the Partnership's operations subsequent to December 31,
1998.

Gains on sale of real estate decreased to $17.3 million in 1998 from $20.3
million in 1997. In 1998, ART recognized gains of $663,000 on the sale of three
tracts totaling 78.5 acres of its Valley Ranch land in Irving, Texas; $1.9
million on its Lewisville land in Lewisville, Texas; $714,000 on a 21.3 acre
tract of its Parkfield land in Denver, Colorado; $848,000 on a 21.6 acre tract
of its Chase Oaks land in Plano, Texas; $789,000 on a 150.0 acre tract of its
Rasor land in Plano, Texas; $3.9 million on its Palm Desert land in Palm Desert,
California; $869,000 on a 2.5 acre tract of its Las Colinas I land in Las
Colinas, Texas; $898,000 on its Kamperman land in Collin County, Texas; $3.4
million on its final 10.5 acre tract of BP Las Colinas land in Las Colinas,
Texas; $409,000 on a 1.1 acre tract of its Santa Clarita land in Santa Clarita,
California; $2.6 million on a 20.8 acre tract of its Mason Goodrich land in
Houston, Texas, and ART recognized a $179,000 previously deferred gain on a sale
of its Valley Ranch land in 1997. In 1997, ART recognized gains of $5.9 million
on the sale of a 49.7 acre tract of BP Las Colinas land in Las Colinas, Texas;
$3.5 million on the sale of tracts totaling 116.8 acres of Valley Ranch land in
Irving, Texas; $2.7 million on the sale of a 12.5 acre tract of Las Colinas I
land in Las Colinas, Texas; $3.6 million on the sale of Pin Oak land in Houston,
Texas; $216,000 on the sale of a 99.7 acre tract of Kamperman land in Collin
County, Texas; $371,000 on the sale of a 32.0 acre tract of Parkfield land in
Denver, Colorado; $211,000 on the sale of a 86.5 acre tract of Rasor land in
Plano, Texas; $106,000 on the sale of Park Plaza Shopping Center in Manitowoc,
Wisconsin; $480,000 on the sale of the Mopac Building in St. Louis, Missouri;
and $172,000 on the sale of a mortgage note receivable. ART also recognized a
previously deferred gain of $3.0 million on the sale of Porticos Apartments.

1997 Compared to 1996. ART reported a net loss of $2.4 million in 1997 as
compared to a net loss of $5.6 million in 1996. The primary factors contributing
to ART's net loss are discussed in the following paragraphs.

Sales and cost of sales were $25.0 million and $20.0 million in 1997 and
$14.4 million and $11.0 million in 1998. ART had no sales or cost of sales prior
to April 1996. These items of revenue and cost relate to PWSI. In April 1996, a
wholly-owned subsidiary of ART acquired 80% of the outstanding common stock of
PWSI.

Rents increased from $20.7 million in 1996 to $29.1 million in 1997. Rent
from hotels increased from $6.1 million in 1996 to $14.9 million in 1997 and
rent from commercial properties increased from $12.4 million in 1996 to $13.8
million 1997. The increase in rent from hotels as due to the acquisition of four
hotels in October 1997 and the obtaining of a fifth hotel through foreclosure in
September 1997. The increase in rent from commercial properties was due to the
acquisition of a shopping center in September 1997.

Property operations expense increased from $15.9 million in 1996 to $24.2
million in 1997. Property operations expense for hotels increased from $4.8
million in 1996 to $11.2 million in 1997, for commercial properties it decreased
from $10.4 million in 1996 to $10.0 million in 1997 and for land such expense
increased from $735,000 in 1996 to $3.0 million in 1997. The increase in hotel
property operations expense was due to the acquisition of the four hotels in
October 1997 and the obtaining of a fifth hotel through foreclosure in September
1997, the decrease for commercial

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properties was due to control of property operations expenses, primarily at
ART's merchandise mart and the increase for land was due to 24 land parcels
acquired in 1997.

Interest income decreased from $4.8 million in 1996 to $2.8 million in
1997. This decrease is primarily attributable to the sale of two notes
receivable and the collection of a third note receivable in 1997.

Other income decreased from $1.7 million in 1996 to $168,000 in 1997. This
decrease is due in part to recognizing a unrealized gain on marketable equity
securities of $486,000 in 1996 compared to an unrealized loss of $850,000 in
1997. This decrease was also attributable in part to a decrease in dividend
income and net gains on sales of marketable equity securities of $67,000 and
$56,000, respectively.

Interest expense increased from $16.5 million in 1996 to $30.2 million in
1997. Of this increase, $10.8 million is due to the debt secured by the Best
Western Oceanside Hotel acquired in 1996 and the Williamsburg Hospitality House,
Piccadilly Hotels, Pin Oak land, Scout land, Katy land, McKinney land, Lacy
Longhorn land, Santa Clarita land, Chase Oaks land, Pioneer Crossing land,
Pantex land, Keller land, Perkins land, Rasor land, Dowdy land, Palm Desert land
and LBJ land acquired in 1997, $2.0 million is due to additional borrowings and
a full years interest on the loan secured by NRLP units and $1.1 million is due
to refinancing the debt secured by the Kansas City Holiday Inn and Denver
Merchandise Mart.

Advisory and mortgage servicing fees increased from $1.5 million in 1996 to
$2.7 million in 1997. The increase was attributable to the increase in ART's
gross assets, the basis for such fee.

General and administrative expenses, increased from $3.9 million in 1996 to
$7.8 million in 1997. The increase was attributable to a $1.1 million increase
in legal fees and travel expenses in 1997 relating to potential acquisitions,
financings and refinancings, a $1.1 million increases in advisor cost
reimbursements and $1.3 million attributable to a full year of general and
administrative expenses of PWSI.

Depreciation and amortization increased from $2.4 million in 1996 to $3.5
million in 1997 due to the acquisition of six properties in 1997.

Minority interest in 1997 is the preferred return paid on limited partner
units of Ocean Beach Partners, L.P., Valley Ranch, L.P., Grapevine American,
L.P., Edina Park Plaza Associates, L.P. and Hawthorne Lakes Associates, L.P.

Equity in income of investees improved from $1.5 million in 1996 to $10.5
million in 1997. The increase in equity income is primarily attributable to an
increase of $32.1 million in gains on sale of real estate in IORI, NRLP and TCI
offset by a decrease of $1.9 million in CMET. ART's equity share of such gains
was $13.5 million. The increase is also attributable to an improvement in income
from property operations for the Affiliated REITs and NRLP, from increased
rental rates and operating expense control.

Gains on the sale of real estate increased from $3.7 million in 1996 to
$20.3 million in 1997. In 1996, ART recognized a $2.0 million gain on the sale
of a 32.3 acre tract of BP Las Colinas land in Las Colinas, Texas, and a $1.1
million gain on the sale of a 4.6 acre tract of Las Colinas I land also in Las
Colinas, Texas. In 1997, the Company recognized gains of $5.9 million on the
sale of a 49.7 acre tract of BP Las Colinas land in Las Colinas, Texas; $3.5
million on the sale of tracts totaling 116.8 acres of Valley Ranch land in
Irving, Texas; $2.7 million on the sale of a 12.5 acre tract of Las Colinas I
land in Las Colinas, Texas; $3.6 million on the sale of Pin Oak land in Houston,
Texas; $216,000 on the sale of a 99.7 acre tract of Kamperman land in Collin
County, Texas; $371,000 on the sale of a 32.0 acre tract of Parkfield land in
Denver, Colorado; $211,000 on the sale of a 86.5 acre tract of Rasor land in
Plano, Texas; $106,000 on the sale of Park Plaza Shopping Center in Manitowoc,
Wisconsin; $480,000 on the sale of the Mopac Building in St. Louis, Missouri;
and $172,000 on the sale of a mortgage note receivable. ART also recognized a
previously deferred gain of $3.0 million on the sale of Porticos Apartments.

ART reported $381,000 in extraordinary gains in 1996 compared to no
extraordinary gains in 1997. The 1996 extraordinary gains were ART's share of
equity investees' extraordinary gains from the early payoff of debt and gain
from an insurance settlement.

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ENVIRONMENTAL MATTERS

Under various federal, state and local environmental laws, ordinances and
regulations, ART may be potentially liable for removal or remediation costs, as
well as certain other potential costs relating to hazardous or toxic substances
(including governmental fines and injuries to persons and property) where
property-level managers have arranged for the removal, disposal or treatment of
hazardous or toxic substances. In addition, certain environmental laws impose
liability for release of asbestos-containing materials into the air, and third
parties may seek recovery from ART for personal injury associated with such
materials.

ART's management is not aware of any environmental liability relating to
the above matters that would have a material adverse effect on ART's business,
assets or results of operations.

INFLATION

The effects of inflation on ART's operations are not quantifiable. Revenues
from property operations fluctuate proportionately with inflationary increases
and decreases in housing costs. Fluctuations in the rate of inflation also
affect the sale values of properties and the ultimate gains to be realized from
property sales. To the extent that inflation affects interest rates, earnings
from short-term investments and the cost of new financings as well as the cost
of variable interest rate debt will be affected.

YEAR 2000

BCM, an affiliate of and the advisor to ART, has informed ART's management
that its computer hardware operating system and computer software have been
certified as year 2000 compliant.

Carmel, Ltd., an affiliate of BCM that performs property management
services for ART's properties, has informed ART's management that effective
January 1, 1999, it began using year 2000 compliant computer hardware and
property management software for ART's commercial properties. With regard to
ART's apartment complexes, Carmel, Ltd. has informed ART management that its
subcontractors either have in place or will have in place in the first quarter
of 1999, year 2000 compliant computer hardware and property management software.

ART has not incurred, nor does it expect to incur, any costs related to its
computer hardware and accounting and property management software being
modified, upgraded or replaced in order to make it year 2000 compliant. Such
costs have been or will be borne by either BCM, Carmel, Ltd. or the property
management subcontractors of Carmel, Ltd.

ART's management has completed its evaluation of ART's computer controlled
building systems, such as security, elevators, heating and cooling, etc. to
determine what systems are not year 2000 compliant. ART's management believes
that necessary modifications to such systems are insignificant and do not
require significant expenditures to make the affected system year 2000
compliant, as enhanced operating systems are readily available.

ART has or will have in place the year 2000 compliant systems that will
allow it to operate. The risks ART faces are that certain of its vendors will
not be able to supply goods or services and that financial institutions and
taxing authorities will not be able to accurately apply payments made to them.
ART's management believes that other vendors are readily available and that
financial institutions and taxing authorities will, if necessary, apply monies
received manually. The likelihood of the above having a significant impact on
ART's operations is negligible.

DESCRIPTION OF THE CAPITAL STOCK OF ART

GENERAL

ART is authorized by its Articles of Incorporation, as amended, to issue up
to 100,000,000 ART Common Shares and 20,000,000 shares of a special class of
stock, $2.00 par value per share (the "Special Stock"), which may be designated
by the ART Board from time to time. The ART Preferred Shares are a series of the
Special Stock.

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ART PREFERRED SHARES

On August 13, 1997, the ART Board designated and authorized the issuance of
a total of 7,500,000 ART Preferred Shares with a par value of $2.00 per share
and a preference on liquidation of $10.00 per share plus payment of accrued and
unpaid dividends. On October 23, 1998, the ART Board authorized the issuance of
an additional 7,500,000 ART Preferred Shares, thereby increasing the total
number of authorized and issued ART Preferred Shares to 15,000,000. The ART
Preferred Shares are non-voting except (i) as provided by law, (ii) with respect
to an amendment to ART's articles of incorporation or bylaws that would
materially alter or change the existing terms of the ART Preferred Shares, and
(iii) at any time or times when all or any portion of the dividends on the ART
Preferred Shares for any six quarterly dividends, whether or not consecutive,
shall be in arrears and unpaid. In the latter event, the number of directors
constituting the board of directors of ART shall be increased by two and the
holders of ART Preferred Shares, voting separately as a class, shall be entitled
to elect two directors to fill such newly created directorships with each holder
being entitled to one vote in such election for each share of ART Preferred
Shares held. ART is not obligated to maintain a sinking fund with respect to the
ART Preferred Shares.

The ART Preferred Shares are convertible, at the option of the holder, into
ART Common Shares at any time and from time to time, in whole or in part, after
the earliest to occur of (i) August 15, 2003; (ii) the first business day, if
any, occurring after a Quarterly Dividend Payment Date, on which an amount equal
to or in excess of 5% of the $10.00 liquidation value (i.e., $.50 per ART
Preferred Share) is accrued and unpaid, or (iii) when ART becomes obligated to
mail a statement, signed by an officer of ART, to the holders of record of each
of the ART Preferred Shares because of a proposal by ART at any time before all
of the ART Preferred Shares have been redeemed by or converted into ART Common
Shares, to merge or consolidate with or into any other corporation (unless ART
is the surviving entity and holders of ART Common Shares continue to hold such
ART Common Shares without modification and without receipt of any additional
consideration), or to sell, lease, or convey all or substantially all its
property or business, or to liquidate, dissolve or wind up. The ART Preferred
Shares are convertible into the Conversion Price which is that number of shares
of ART Common Shares obtained by multiplying the number of shares being
converted by $10.00, then adding all accrued and unpaid dividends, then dividing
such sums by (in most instances) 90% of the simple average of the daily closing
price of the ART Common Shares for the 20 business days ending on the last
business day of the calendar week immediately preceding the date of conversion
on the principal stock exchange on which such ART Common Shares are then listed.
Notwithstanding the foregoing, ART, at its option, may elect to redeem any ART
Preferred Shares sought to be so converted by paying the holder of such ART
Preferred Shares cash in an amount equal to the Conversion Price.

The ART Preferred Shares bear a cumulative compounded dividend per share
equal to 10% per annum of the Adjusted Liquidation Value, payable on each
Quarterly Dividend Payment Date, and commencing accrual on the date of issuance
to and including the date on which the redemption price of such shares is paid,
whether or not such dividends have been declared and whether or not there are
profits, surplus or other funds of ART legally available for the payment of such
dividends. Dividends on the ART Preferred Shares are in preference to and with
priority over dividends upon the ART Common Shares. Except as provided in the
following sentence, the ART Preferred Shares rank on a parity as to dividends
and upon liquidation, dissolution or winding up with all other Special Stock
issued by ART. ART will not issue any shares of Special Stock of any series
which are superior to the ART Preferred Shares as to dividends or rights upon
liquidation, dissolution or winding up of the Corporation as long as any ART
Preferred Shares are issued and outstanding, without the prior written consent
of the holders of at least 662/3 %of such shares of the ART Preferred Shares
then outstanding voting separately as a class. As of December 31, 1998, the
outstanding Special Stock of ART consisted of 3,350,000 ART Preferred Shares
(1,948,797 ART Preferred Shares have been reserved for issuance as future
consideration in various business transactions of ART), and 1,000 shares of its
Series G Cumulative Convertible Preferred Stock (as described below).

In addition to ART's redemption right in connection with conversions of ART
Preferred Shares as described above, ART may redeem any or all of the ART
Preferred Shares at any time and from time to time, at its option, for cash upon
no less than 20 days nor more than 30 days prior notice thereof. The redemption
price of the ART Preferred Shares shall be an amount per share equal to (i) 104%
of the Adjusted Liquidation Value during the period from August 16, 1998 through
August 15, 1999; and (ii)103% of the Adjusted Liquidation Value at any time on
or after August 16, 1999. Each ART Preferred Share will be convertible, at the
option of the holder, into fully paid and nonassessable ART Common Shares.

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The ART Preferred Shares constitute a new issue of securities with no
established trading market. While the listing of the ART Preferred Shares on the
NYSE is a condition precedent to EQK's obligation to consummate the Merger,
there can be no assurance that an active market for the ART Preferred Shares
will develop or be sustained in the future on the NYSE if the listing is
approved. Moreover, to the extent that EQK Shares are tendered and accepted in
the Merger, the liquidity and trading market for the EQK Shares could be
adversely affected. See "Risk Factors -- ART Preferred Shares -- Application for
the Listing and Trading of ART Preferred Shares and Possible Subsequent
Delisting."

ART COMMON SHARES

All of the ART Common Shares are entitled to share equally in dividends
from funds legally available therefor, when declared by the ART Board, and upon
liquidation or dissolution of ART, whether voluntary or involuntary (subject to
any prior rights of holders of the Special Stock), and to share equally in the
assets of ART available for distributions to shareholders. Each holder of ART
Common Shares is entitled to one vote for each share held on all matters
submitted to the shareholders. There is no cumulative voting, redemption right,
sinking fund provision or right of conversion with respect to the ART Common
Shares. The holders of ART Common Shares do not have any preemptive rights to
acquire additional ART Common Shares when issued. All outstanding ART Common
Shares are fully paid and nonassessable. As of March 31, 1999, 10,561,586 ART
Common Shares were outstanding.

SPECIAL STOCK

The following is a description of certain general terms and provisions of
the Special Stock, including the Series D Preferred Stock, the Series E
Preferred Stock, the Series G Preferred Stock and the Series H Preferred Stock,
as defined below.

Article 5 of the Articles of Incorporation of ART, as amended, authorizes
the issuance of up to 20,000,000 shares of Special Stock in one or more series
with such preferences, limitations and rights as the ART Board determines. In
particular, the ART Board may fix and determine, among other things, the
dividend payable with respect to such shares of Special Stock (including whether
and in what manner such dividend shall be accumulated); whether such shares
shall be redeemable, and if so, the prices, terms and conditions of such
redemption; the amount payable on such shares in the event of voluntary or
involuntary liquidation; the nature of any purchase, retirement or sinking fund
provisions; the nature of any conversion rights with respect to such shares; and
the extent of the voting rights, if any, of such shares. Certain provisions of
the Special Stock may, under certain circumstances, adversely affect the rights
or interests of holders of ART Common Shares. For example, the ART Board could,
without shareholder approval, issue a series of Special Stock with voting and
conversion rights which could adversely affect the voting power of the common
shareholders. In addition, the Special Stock may be issued under certain
circumstances as a defensive device to thwart an attempted hostile takeover of
ART.

Through the date of this Prospectus/Proxy Statement, ART has amended its
Articles of Incorporation to designate eight series of the Special Stock as
described below. Each series of Special Stock now outstanding ranks on a parity
as to dividends and upon liquidation, dissolution or winding up with all other
shares of Special Stock.

Series A Preferred Stock; Terminated Rights Plan. On April 11, 1990, the
ART Board designated 500,000 shares of the Series A Cumulative Participating
Preferred Stock (the "Series A Preferred Stock"), adopted a preferred share
purchase rights plan and approved the distribution to shareholders of a dividend
of one preferred share purchase right on each outstanding ART Common Share. On
February 27, 1997, ART filed articles of amendment to its articles of
incorporation reducing the number of authorized shares of Series A Preferred
Stock to zero and eliminating such designation.

Series B Preferred Stock. On April 3, 1996, the ART Board designated 4,000
shares of Series B 10% Cumulative Convertible Preferred Stock (the "Series B
Preferred Stock") with a par value of $2.00 per share and a preference on
liquidation of $100 per share plus payment of accrued and unpaid dividends. On
May 27, 1998, ART filed articles of amendment to its articles of incorporation
reducing the number of authorized shares of Series B Preferred Stock to zero and
eliminating such designation.

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Series C Preferred Stock. On May 23, 1996, the ART Board designated 16,681
shares of Series C 10% Cumulative Convertible Preferred Stock (the "Series C
Preferred Stock") with a par value of $2.00 per share and a preference on
liquidation of $100 per share plus all accrued and unpaid dividends.

ART redeemed all of the outstanding shares of Series C Preferred Stock at
their liquidation value of $100 per share plus all accrued and unpaid dividends
on November 24, 1998. On January 11, 1999, ART filed articles of amendment to
its articles of incorporation reducing the number of authorized shares of Series
C Preferred Stock to zero and eliminating such designation.

Series D Preferred Stock. The ART Board designated 91,000 shares of Series
D 9.50% Cumulative Preferred Stock (the "Series D Preferred Stock") on August 2,
1996, with a par value of $2.00 per share and a preference on liquidation of
$20.00 per share plus payment of accrued and unpaid dividends. The Series D
Preferred Stock is non-voting except as required by law and is not convertible.
ART is not required to maintain a sinking fund for such stock.

Each Share of Series D Preferred Stock has a cumulative dividend per share
of 9.50% per annum of the $20.00 liquidation preference, payable quarterly in
equal installments of $0.475. Dividends on the Series D Preferred Stock are in
preference to and with priority over dividends upon the ART Common Shares. The
Series D Preferred Stock ranks on a parity as to dividends and upon liquidation,
dissolution or winding up with all other shares of Special Stock.

ART may from time to time after June 1, 2001 redeem any or all of the
Series D Preferred Stock upon payment of the liquidation value of $20.00 per
share plus all accrued and unpaid dividends. There is no restriction on the
repurchase or redemption of the Series D Preferred Stock by ART while there is
any arrearage in payment of dividends except that at the time of such repurchase
or redemption ART must pay all accrued and unpaid dividends on the shares being
redeemed. As of December 31, 1998, there were no shares of Series D Preferred
Stock issued or outstanding.

The Series D Preferred Stock is reserved for issuance upon the conversion
Class A units held by the limited partners of Ocean Beach Partners L.P.

Series E Preferred Stock. On December 3, 1996, the ART Board designated
80,000 shares of Series E 10% Cumulative Convertible Preferred Stock (the
"Series E Preferred Stock") with a par value of $2.00 per share and a preference
on liquidation of $100 per share plus payment of all accrued and unpaid
dividends. The Series E Preferred Stock is non-voting except as required by law.
ART is not required to maintain a sinking fund for such stock.

Each share of Series E Preferred Stock is convertible into that number of
ART Common Shares obtained by multiplying the number of shares being converted
by $100, then adding all accrued and unpaid dividends on such shares, then
dividing such sum by (in most instances) 80% of the ART Common Share's
then-recent average trading price for the 20 business days ending on the last
business day of the calendar week immediately preceding the date of conversion
on the principal stock exchange on which such ART Common Shares are then listed
or admitted to trading as determined by ART. The schedule pursuant to which
shares of Series E Preferred Stock may be so converted is as follows: up to
30,000 shares of the Series E Preferred Stock may be converted beginning as of
November 4, 1998 and thereafter; up to an additional 10,000 shares of the Series
E Preferred Stock may be converted beginning as of November 4, 1999; and up to
an additional 40,000 shares of the Series E Preferred Stock may be converted
beginning as of November 4, 2001.

The Series E Preferred Stock bears a cumulative dividend per share equal to
$10.00 per annum, payable quarterly in equal installments of $2.50 for the
period from date of issuance to November 4, 1999, and $11.00 per annum ($2.75
per quarter) thereafter. Dividends on the Series E Preferred Stock are in
preference to and with priority over dividends upon the ART Common Shares. The
Series E Preferred Stock ranks on a parity as to dividends and upon liquidation,
dissolution or winding up with all other shares of Special Stock.

ART may redeem any or all of the shares of Series E Preferred Stock from
time to time upon payment of $100.00 per share plus all accrued and unpaid
dividends. There is no restriction on the repurchase or redemption of the Series
E Preferred Stock by ART while there is any arrearage in payment of dividends
except that at the time of such repurchase or redemption ART must pay all
accrued and unpaid dividends on the shares being redeemed. As of December 31,
1998, there were no shares of Series E Preferred Stock issued or outstanding.

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The Series E Preferred Stock is reserved for issuance upon the conversion
of Class A units held by the limited partners in the Valley Ranch Limited
Partnership.

Series G Preferred Stock. On September 18, 1997, the ART Board designated
11,000 shares of Series G Cumulative Convertible Preferred Stock (the "Series G
Preferred Stock") with a par value of $2.00 per share and a preference on
liquidation of $100 per share plus all accrued and unpaid dividends. On May 27,
1998, ART filed articles of amendment to its articles of incorporation
increasing the number of authorized shares of Series G Preferred Stock from
11,000 to 12,000. The Series G Preferred Stock is non-voting except as required
by the Georgia Business Code. The Georgia Business Code grants the holders of
the outstanding shares of a class the authority to vote as a separate voting
group on a proposed amendment if that amendment would effect a detrimental
reclassification of the existing shares, create a new class with preferences
over the existing shares, or cancel or otherwise affect the rights to
distributions and dividends. ART is not required to maintain a sinking fund for
such stock.

Each share of Series G Preferred Stock is convertible, but only after
October 6, 2000, into that number of ART Common Shares obtained by multiplying
the number of shares of Series G Preferred Stock being converted by $100 and
then dividing such sum by (in most instances) 90% of the simple average of the
daily closing price of the ART Common Shares for the 20 trading days ending on
the last trading day of the calendar week immediately preceding the conversion
on the market where the ART Common Shares are then regularly traded. The right
of conversion shall terminate upon receipt of the notice of redemption from ART
and on the earlier of (i) the commencement of any liquidation, dissolution or
winding up of ART or (ii) the adoption of any resolution authorizing the
commencement thereof. ART may elect to redeem the shares of Series G Preferred
Stock sought to be converted instead of issuing shares of ART Common Stock.

The Series G Preferred Stock bears a cumulative dividend per share equal to
$10.00 per annum, payable in arrears in quarterly equal installments of $2.50,
and commencing accrual on the date of issuance to and including the date on
which the redemption price of such shares is paid. Dividends on the Series G
Preferred Stock are in preference to and with priority over dividends upon the
ART Common Shares. The Series G Preferred Stock ranks on a parity as to
dividends and upon liquidation, dissolution or winding up with all other shares
of Special Stock.

ART may redeem any or all of the shares of the Series G Preferred Stock at
any time and from time to time, at its option, for cash upon no less than twenty
(20) days nor more than thirty (30) days prior notice thereof. The redemption
price of the shares of the Series G Preferred Stock shall be an amount per share
equal to the $100 liquidation value plus all accrued and unpaid dividends on
such shares through the redemption date. The right of ART to redeem shares of
Series G Preferred Stock remains effective notwithstanding prior receipt by ART
of notice by any holder of Series G Preferred Stock of such holder's intent to
convert shares of Series G Preferred Stock. As of December 31, 1998 there were
1,000 issued and outstanding shares of Series G Preferred Stock.

11,000 shares of Series G Preferred Stock have been reserved for issuance
upon the conversion of Class A units held by the limited partners in Grapevine
American, Ltd.

Series H Preferred Stock. On June 26, 1998, the ART Board designated
231,750 shares of Series H Cumulative Convertible Preferred Stock (the "Series H
Preferred Stock") with a par value of $2.00 per share and a preference on
liquidation of $10 per share plus all accrued and unpaid dividends. The Series H
Preferred Stock is non-voting except as required by the Georgia Business Code.
The Georgia Business Code grants the holders of the outstanding shares of a
class the authority to vote as a separate voting group on a proposed amendment
if that amendment would effect a detrimental reclassification of the existing
shares, create a new class with preferences over the existing shares, or cancel
or otherwise affect the rights to distributions and dividends. ART is not
required to maintain a sinking fund for such stock.

Each share of Series H Preferred Stock is convertible at the option of the
holders thereof in the following amounts at any time on or after the respective
dates (i) 25,000 shares on or after December 31, 2000, (ii) 25,000 shares on or
after June 30, 2002, (iii) 25,000 shares on or after June 30, 2003, (iv) 25,000
shares on or after December 31, 2005, and (v) all remaining outstanding shares
on or after December 31, 2006 into that number of ART Common Shares obtained by
multiplying the number of shares of Series H Preferred Stock being converted by
$10 and then dividing such sum by (in most instances) 90% of the simple average
of the daily closing price of the ART Common Shares for the 20

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trading days ending on the last trading day of the calendar week immediately
preceding the conversion on the market where the ART Common Shares are then
regularly traded. The right of conversion shall terminate upon receipt of the
notice of redemption from ART and on the earlier of (i) the commencement of any
liquidation, dissolution or winding up of ART or (ii) the adoption of any
resolution authorizing the commencement thereof. ART may elect to redeem the
shares of Series H Preferred Stock sought to be converted instead of issuing
shares of ART Common Stock.

The Series H Preferred Stock bears a cumulative quarterly dividend per
share in an amount equal to (i) 7% per annum during the period from issuance to
June 30, 1999, (ii) 8% per annum during the period from July 1, 1999 to June 30,
2000, (iii) 9$ per annum during the period from July 1, 2000 to June 30, 2001,
and (iv) 10% per annum from July 1, 2001 and thereafter, in each case calculated
on the basis of the adjusted liquidation value of the Series H Preferred Stock,
payable in arrears in cash on each Quarterly Dividend Payment Date, and
commencing accrual on the date of issuance to and including the date on which
the redemption price of such shares is paid. Dividends on the Series H Preferred
Stock are in preference to and with priority over dividends upon the ART Common
Shares. The Series H Preferred Stock ranks on a parity as to dividends and upon
liquidation, dissolution or winding up with all other shares of Special Stock.

ART may redeem all or a portion of the shares of the Series H Preferred
Stock issued and outstanding at any time after January 1, 1999 and from time to
time, at its option, for cash upon no less than twenty (20) days nor more than
thirty (30) days prior notice thereof. The redemption price of the shares of the
Series H Preferred Stock shall be an amount per share equal to the sum of (i)
(a) 105% of liquidation value during the period from issuance through December
31, 1999; (b) 104% of liquidation value during the period from January 1, 2000
through December 31, 2000; (c) 103% of liquidation value during the period from
January 1, 2001 through December 31, 2001; (d) 102% of liquidation value during
the period from January 1, 2002 through December 31, 2002; (e) 101% of
liquidation value during the period from January 1, 2003 through December 31,
2003; and (f) 100% of liquidation value from January 1, 2004 and thereafter, and
(ii) all accrued and unpaid dividends on such shares through the redemption
date. The right of ART to redeem shares of Series H Preferred Stock remains
effective notwithstanding prior receipt by ART of notice by any holder of Series
H Preferred Stock of such holder's intent to convert shares of Series H
Preferred Stock. As of December 31, 1998 there were no issued or outstanding
shares of Series H Preferred Stock.

The Series H Preferred Stock is reserved for issuance upon the conversion
of Class A units held by the limited partners in ART Palm, Ltd.

The description of the foregoing provisions of each series of the Special
Stock does not purport to be complete and is subject to and qualified in its
entirety by reference to the definitive Articles of Amendment of the Articles of
Incorporation relating to such series of Special Stock.

DESCRIPTION OF EQK

EQK (sometimes referred to herein as the "Trust") was formed pursuant to
the Declaration of Trust. LLPM, (successor in interest to EQK Partners),
currently acts as the Advisor to EQK. LLPM is a wholly owned subsidiary of ERE,
itself an indirect wholly owned subsidiary of Equitable. Upon consummation of
the Merger, BCM, an affiliate of and advisor to ART, will assume the role of New
Advisor to EQK. See "The New Advisory Agreement Proposal" herein.

EQK has transacted its affairs so as to qualify as, and has elected to be
treated as, a REIT under applicable provisions of the Code. Under the Code, a
REIT that meets applicable requirements is not subject to Federal income tax on
that portion of its taxable income that is distributed to its shareholders. EQK
is currently a closed-end trust (i.e., it may not issue any additional EQK
Shares without the approval of holders of three-quarters of the outstanding EQK
Shares), and, except in limited circumstances, it may not make any additional
real estate investments and is required to distribute to its shareholders the
net proceeds from each sale and financing of any investment. Consequently, EQK
is currently a self-liquidating trust. However, upon consummation of the Merger,
subject to the Requisite Shareholder Approval, the Declaration of Trust will be
amended to extend the term of EQK through December 31, 2018. See "The
Declaration Amendment Proposal" herein.

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The principal executive offices of EQK and of the Advisor are located at
3424 Peachtree Road, Suite 800, Atlanta, Georgia, 30326, and their telephone
number is (404) 303-6100.

THE BUSINESS OF EQK

GENERAL

EQK was formed for the purpose of acquiring for a finite holding period a
specified portfolio of substantially unleveraged, institutional quality real
estate in order to maximize current distributions of cash flow from operations,
to realize long-term capital appreciation for distribution and to protect its
shareholders' capital. None of EQK's policies may be amended without the
approval of holders of three-quarters of the outstanding EQK Shares. See "The
Declaration Amendment Proposal" herein.

EQK consummated the public offering of its EQK Shares on March 12, 1985.
Certain of the net proceeds to EQK from such offering were expended to acquire
certain properties on March 13, 1985 (which were comprised of the Center as
described below, as well as two properties subsequently sold: Castleton Park
("Castleton"), an office park in Indianapolis, Indiana, which was sold in
transactions in 1991 and 1995, and Peachtree Dunwoody Pavilion ("Peachtree"), an
office complex in Atlanta, Georgia, which was sold in transactions in 1992 and
1993).

The Declaration of Trust provides for EQK's existence and a maximum holding
period for its real estate investments of 14 years. The Declaration of Trust
further provides that this 14 year term may be extended by up to two years upon
the recommendation of the Trustees and the affirmative vote of a majority of the
EQK Shareholders. Recognizing that the disposition of the Center would not be
completed prior to the initial termination date of EQK's term (March 5, 1999),
the EQK Board recommended a two year extension of EQK's life (through March 5,
2001). This recommendation was approved by the EQK Shareholders at the Special
Meeting held on February 23, 1999. In March 1999, EQK announced that it had
entered into a non-binding Letter of Intent to sell the Center to a private real
estate group for $51 million. A second quarter closing is anticipated. Closing
is subject to a number of conditions, including the satisfactory completion of
due diligence, the purchaser's obtaining financing and the execution of a
definitive purchase and sale agreement. Accordingly, there is no assurance that
a sale will be completed at the current price or at all. If the sale is
completed at this price, a distribution to shareholders of approximately $0.37
per share is expected to be made. The distribution may be made in two or more
disbursements, and the actual distribution may be a materially different amount.
The amount may be decreased by, among other factors, a decrease in the sale
price of the Center or an increase in transaction costs or other liabilities
beyond those currently estimated. The amount may be increased by, among other
factors, a favorable settlement of transaction costs and other liabilities
payable by EQK. In the event the ART Merger is completed as described above, the
EQK Merger Consideration will be in addition to the actual distribution
resulting from the Center's disposition. The Letter of Intent provides that EQK
may not solicit, negotiate or execute other offers for the sale of the Center
prior to May 15, 1999 unless the prospective purchaser terminates negotiations
under the Letter of Intent prior to that date. For a description of the Center
and certain proposed amendments to the Declaration of Trust, see "Description of
the Center" and "The Declaration Amendment Proposal" herein.

MORTGAGE DEBT

Since December 15, 1992, EQK has had in place a "Mortgage Note" with the
Prudential Insurance Company of America ("Mortgage Note Lender"), which had an
initial balance of $75,689,000 and an original maturity date of December 15,
1995. The interest rates on the Mortgage Note averaged 9.79% over its initial
three-year term. However, the Mortgage Note required monthly payments of
interest only at the rate of 8.54% per annum.

The additional interest charges were accrued and added to principal over
this initial term of the Mortgage Note. Absent any prepayments of debt arising
from property dispositions, the amount of principal due on the original maturity
date of December 15, 1995 would have been $78,928,000. In December 1995, EQK
used net proceeds from the sale of Castleton to retire a portion of the Mortgage
Note. The remaining principal balance of the Mortgage Note as of December 15,
1995 was $44,125,000.

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In connection with the December 15, 1992 debt financings, EQK issued
1,675,000 previously repurchased EQK Shares to its Advisor for consideration of
$6,700,000 or $4.00 per Share. EQK may, at its discretion, reissue an additional
423,343 EQK Shares previously repurchased. Any issuance of EQK Shares in excess
of the EQK Shares previously repurchased would require shareholder approval.

Under the terms of the Mortgage Note, the Mortgage Note Lender received
warrants to purchase 367,868 EQK Shares of EQK for $.0001 per EQK Share. On
March 19, 1998, the Mortgage Note Lender exercised its warrants for 367,868 EQK
Shares at $.0001 per EQK Share. Such EQK Shares were issued to the Mortgage Loan
Lender on May 7, 1998 which brought the total number of issued and outstanding
EQK Shares to 9,632,212.

EQK also has had a "Term Loan" with PNC Bank N.A. ("Term Loan Lender") in
place since December 15, 1992 bearing interest at 8.33% per annum and requiring
payments at the same annual rate of 8.54% as was required under the Mortgage
Note. The Term Loan is collateralized by a subordinate lien on the Center. The
payments made in excess of the interest rate were applied to the principal
balance of the Term Loan such that the original principal balance of $2,859,000
would have been reduced over its three year term to $2,839,000, absent any
prepayments arising from property dispositions. In December 1995, EQK used
proceeds from the sale of Castleton to retire a portion of the Term Loan. The
remaining principal balance of the Term Loan as of December 15, 1995 was
$1,587,000.

EQK's Mortgage Note Lender and Term Loan Lender have agreed to extend the
maturity date of these loans twice; first, for a period of one year through
December 15, 1996, and second, for a period of 18 months through June 15, 1998.
The Mortgage Note remains collateralized by a first mortgage lien on the Center,
an assignment of leases and rents, and certain cash balances. The Term Loan
remains collateralized by a subordinate lien on the Center.

Following the June 15, 1998 scheduled maturity date, the Mortgage Note
Lender granted two six-month forbearance arrangements (through December 15, 1998
and then through June 15, 1999) wherein it agreed not to exercise remedies for
non-payment of the outstanding principal balance. The Term Loan Lender also has
granted two six-month extensions of its maturity dates so as to coincide with
such forbearance periods. The forbearance and extension arrangements are
conditioned upon, among other things, EQK continuing to make timely debt service
payments in monthly amounts equal to those amounts stipulated in the December
1996 debt extension agreements.

EQK's expiration date of its forbearance and extension arrangements is June
15, 1999. EQK has entered into a non-binding letter of intent to sell the Center
for approximately $51 million, although there is no assurance that the sale will
be completed. EQK's Management believes that the proceeds from the sale of the
Center will be sufficient to allow EQK to repay the Mortgage Note and Term Loan,
although there can be no assurance a sale will be completed by June 15, 1999. In
the event the sale of the Center is not completed by June 15, 1999, EQK's
Management will propose to its lenders that further forbearance and extensions
be granted. However, no assurances can be given that the lenders will grant such
relief.

The Mortgage Note was amended effective December 16, 1996 to provide for
monthly payments of interest only accruing at the rate of 8.88% per annum
($324,000 per month). This interest rate reflects an increase from the 8.54%
interest rate in effect during the initial extension period (December 16, 1995
to December 15, 1996).

The Term Loan reflects the same pay rate of 8.88%, effective December 16,
1996, that is applicable to the Mortgage Note, but accrues interest at a rate
that re-sets periodically. The accrual rate is computed at EQK's discretion at
either 25/8% above the Euro-Rate (as defined) or 11/8% above the Prime Rate (as
defined). The accrual rate in effect as of March 15, 1999 was 7.69%. The
difference between the accrual rate and the pay rate is reflected in the
principal balance of the Term Loan as of December 31, 1998.

In consideration for the extension of the maturity date of the Mortgage
Note through June 15, 1998, EQK paid an up-front application fee of $165,000 and
agreed to pay a back-end fee of $272,900, plus interest thereon at the contract
rate of 8.88% at maturity. On June 15, 1998, EQK paid the back-end fee plus
interest in the aggregate amount of $309,200 to the Mortgage Note Lender. In
consideration for the extension of the maturity date of the Term Loan, EQK paid
an extension fee of $23,800 in 1997 and paid additional loan fees of $88,100 to
the Term Loan Lender on June 15, 1998.

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In consideration for the extension of the forbearance agreement relating to
the Mortgage Note through June 15, 1999, EQK paid an extension fee of $25,000.
In consideration for the extension of the maturity date of the Term Loan through
June 15, 1999, EQK agreed to pay an extension fee of $8,000.

In connection with the December 15, 1992 debt financings, EQK issued
1,675,000 previously repurchased EQK Shares to the Advisor for consideration of
$6,700,000, or $4.00 per share. EQK may, at its discretion, reissue the
remaining 791,211 EQK Shares previously repurchased. Any issuance of EQK Shares
in excess of the EQK Shares previously repurchased would require shareholder
approval.

Subject to certain restrictions, EQK is permitted to make additional real
estate investments involving the expansion of its existing properties. EQK has
no intentions of acquiring additional real estate interests, except for the
acquisition of the Oak Tree Village upon the terms and conditions described in
"The Proposed Merger and Related Matters--Sale of the Center and Acquisition of
Oak Tree Village," EQK will make certain capital expenditures required to
maintain or enhance the value of the Center, including tenant allowances
associated with leasing activity.

EQK may make secured or unsecured borrowings to make distributions to its
shareholders and for normal working capital needs, including tenant alterations
and/or allowances and the repair and maintenance of properties in which it has
invested. The Declaration of Trust currently prohibits EQK's aggregate
borrowings from exceeding 75% of its total asset value, as defined therein. See
"The Declaration Amendment Proposal."

EQK will not engage in any business not related to its real estate
investments and, as described below, the Declaration of Trust currently imposes
certain prohibitions and investment restrictions on various investment practices
or activities of EQK. See "The Declaration Amendment Proposal."

SUMMARY OF THE EXISTING DECLARATION OF TRUST

The following is a brief summary of provisions of the Declaration of Trust
not described elsewhere in this Prospectus/Proxy Statement. EQK's Declaration of
Trust provides that each person who becomes an EQK Shareholder shall as a result
thereof be deemed to have agreed to and be bound by the provisions of the
Declaration of Trust. Reference is made to the Declaration of Trust.

Trustees. The Declaration of Trust provides that the number of Trustees may
be fixed from time to time by the Trustees or by the holders of EQK Shares, with
a minimum of five and a maximum of 12 Trustees, a majority of whom must be
unaffiliated with EQK or LLPM (each, an "Unaffiliated Trustee"). There are
currently seven Trustees, including four Unaffiliated Trustees. Trustees
continue in office until the next annual meeting of shareholders and until their
successors are duly elected and qualified. Vacancies may be filled by a majority
of the remaining Trustees, except that a vacancy among the Unaffiliated Trustees
shall be filled by a majority of the remaining Unaffiliated Trustees, or by the
holders of EQK Shares. Any Trustee may be removed with cause by all the
remaining Trustees, or with or without cause by holders of a majority of the
outstanding EQK Shares.

The Declaration of Trust provides that no Trustee or officer of EQK, shall
be liable to any party (including EQK and its holders of EQK Shares), except for
liability arising from his own bad faith, willful misfeasance, gross negligence
or reckless disregard of his duties. The Declaration of Trust also provides for
indemnification of the Trustees and officers against expense or liability in any
action arising out of such person's activities on behalf of EQK, except with
respect to conduct of the types described above. Therefore, EQK Shareholders may
be entitled to more limited rights of action than those to which they otherwise
would have been entitled absent the limitation on the Trustees' and officers'
liability set forth in the Declaration of Trust.

Shareholder Liability. The Declaration of Trust provides that the EQK
Shareholders shall not be subject to any liability for the acts or obligations
of EQK and that, as far as practicable, each written agreement of EQK is to
contain a provision to that effect. With respect to all types of claims in such
jurisdictions and with respect to tort claims, contract claims whereas the
shareholder liability is not disavowed as described above, claims for taxes and
certain statutory liabilities in other jurisdictions, an EQK Shareholder may be
held personally liable to the extent that claims are not satisfied by EQK.
However, the Declaration of Trust provides that, upon payment of any such
liability, the EQK

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Shareholder will be entitled to reimbursement from EQK's general assets. The
Trustees intend to continue to maintain appropriate insurance and to conduct the
operations of EQK, with the advice of counsel, in such a way as to avoid, as far
as practicable, the ultimate liability of the EQK Shareholders.

Redemption and Prohibition of Transfer of Shares. For EQK to continue to
qualify as a REIT under the Code in any taxable year, not more than 50% of its
outstanding EQK Shares may be owned by five or fewer individuals at any time
during the last half of the taxable year, and the EQK Shares must be owned by
100 or more persons during at least 335 days of a taxable year of 12 months or
during a proportionate part of a shorter taxable year. In order to meet these
requirements, the Trustees have power to redeem or prohibit the transfer of a
sufficient number of EQK Shares selected in a manner deemed appropriate to
maintain or bring the ownership of the EQK Shares into conformity with such
requirements. The price to be paid in the event of the redemption of the EQK
Shares will be the last reported sale price of the EQK Shares on the last
business day prior to the redemption date on the NYSE.

Duration and Termination of EQK. If the Merger-Related Proposals do not
receive the Requisite Shareholder Approval, the duration of EQK will terminate
in March 2001. The Declaration of Trust also permits the holders of a majority
of the outstanding EQK Shares to terminate EQK at any time. Termination by the
Trustees may be effected without any action or consent of the shareholders,
except that any plan for the termination of EQK which contemplates the
distribution to shareholders of securities or other property in kind, other than
the right to receive cash, also requires the affirmative vote of the holders of
three-quarters of the outstanding EQK Shares. See "The Declaration Amendment
Proposal."

Transactions with Affiliates. Affiliates of the Advisor may perform
leasing, property management, or other similar services for EQK, provided that
any such transactions are approved by a majority of the Unaffiliated Trustees
who determine that the compensation is not in excess of any compensation paid to
such affiliates by nonaffiliates for comparable services in the same geographic
area and that the compensation paid is not greater than that generally charged
by competent nonaffiliates for comparable services in the same geographic area.
No properties will be sold to affiliates of the Advisor unless the transaction
is approved by a majority of the Unaffiliated Trustees and of the holders of a
majority of the outstanding EQK Shares. In addition, no such sale is permitted
unless the sale price is equal to or greater than the independently appraised
value of the property being sold.

Amendment of Declaration of Trust; Merger. The Declaration of Trust may be
amended, or EQK may be merged into a successor entity, by the majority vote of
the Trustees (including a majority vote of the Unaffiliated Trustees in the case
of a merger) and by vote of the holders of a majority of the outstanding EQK
Shares, except that the holders of three-quarters of the outstanding EQK Shares
must approve any amendment that would alter any of EQK's investment or
operational policies. In addition, two-thirds of the Trustees may, without the
approval or consent of the shareholders, adopt any amendment which they in good
faith determine to be necessary to permit EQK to continue to qualify as a REIT
under the Code, or to comply with other Federal laws or regulations or to comply
with state securities laws or the requirements of administrative agencies
thereunder. The Trustees may also, without the vote or consent of the
shareholders, change the name of EQK to a name that does not include any name
similar to that of LLPM or any affiliate thereof.

Prohibited Activities and Investments. EQK may not currently engage in any
business not related to its real estate investments and, in that regard, the
Declaration of Trust currently imposes certain prohibitions and investment
restrictions on various investment practices or activities of EQK, including a
prohibition against investing in any mortgage, other than purchase money
mortgages designed to facilitate the sale of EQK's real estate investments,
provided that the term of any such purchase money mortgage does not exceed the
remaining term of EQK as described above under "--Duration and Termination of
EQK."

PROPERTY MANAGEMENT AGREEMENT

EQK entered into a property management agreement with ERE Yarmouth Retail,
Inc. (the "Property Manager", formerly Compass), for the on-site management of
the Center. ERE Yarmouth, Inc. is a wholly-owned subsidiary of Lend Lease Real
Estate Investments, Inc. On September 30, 1998, Lend Lease Real Estate
Investments, Inc. sold the Property Manager to LaSalle Partners, Incorporated.
An affiliate of LaSalle Partners, Incorporated currently manages the Center
pursuant to the terms of the original management agreement. Management fees paid
to the Property Manager

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<PAGE> 115

are generally based upon a percentage of rents and certain other charges. EQK
believes that such fees are comparable to those charged by unaffiliated
third-party management companies providing comparable services. For the years
ended December 31, 1997, 1996, and 1995, management fees paid to the Property
Manager were $307,000, $297,000, and $291,000, respectively. For the nine months
ended September 30, 1998, management fee expense attributable to services
rendered by the Property Manager was $228,000.

In connection with the redevelopment of the Center's outparcel building,
the Property Manager received a $150,000 development fee in 1995.

SELECTED FINANCIAL DATA OF EQK

The selected historical financial data of EQK set forth below has been
derived from the financial statements of EQK as they appeared in EQK's Forms
10-K filed with the Commission for each of the five fiscal years in the period
ended December 31, 1998.

[Remainder of Page Intentionally Left Blank]

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<PAGE> 116

<TABLE>
<CAPTION>
As of and for the YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues from rental
operations (a) ................ $ 6,191 $ 6,158 $ 6,174 $ 15,761 $ 16,512

Write down of
investments in real
estate (b) .................... -- -- -- (3,200) --

Income (loss) before gain
on sales of real estate and
extraordinary loss (c) ........ 150 (1,961) (1,488) (6,575) (3,459)

Gain on sales of
real estate (d) ............... -- -- -- 229 --

Net income (loss) ................ $ 150 $ (1,961) $ (1,488) $ (6,346) $ (3,459)

Per share data (e):
Income (loss) per share:
Income (loss) before
gain ............................. $ 0.02 $ (0.21) $ (0.16) $ (0.71) $ (0.37)
on sales of real estate

Net income (loss) ........... $ 0.02 $ (0.21) $ (0.16) $ (0.68) $ (0.37)

Total assets ..................... 45,102 45,067 46,830 48,209 90,258

Long-term obligations:
Mortgage notes payable,
net of imputed interest
and discount .................. 45,374 45,379 45,379 45,712 80,032

Shareholders' equity
(deficit) ..................... (4,832) (4,982) (3,021) (1,533) 4,813
</TABLE>

(a) the decline in revenues from operations for 1996 is mainly attributable to
the sale of Castleton Park, which accounted for revenues of $9,554,000 for
the year ended December 31, 1995.

(b) A write-down was recorded in 1995 related to EQK's investment in Castleton
Park to adjust the net investment to EQK's estimate of net realizable
value. As discussed in Note 2 to the financial statements, EQK reviews its
investments for impairment on a quarterly basis, and records write-downs or
reserves when appropriate.

(c) The 1998 results reflect the cessation of depreciation and amortization of
the Center's assets as a result of EQK's real estate being classified as
"held for sale" as of April 1, 1998.

(d) In 1995, EQK sold its remaining interest in Castleton and recognized a gain
on the sale of $229,000.

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<PAGE> 117

(e) Calculation is based on 9,264,344 weighted average shares outstanding
during all periods presented, except for the twelve months ended December
31, 1998 during which there were 9,502,222 weighted average shares
outstanding. EQK had 9,632,212 shares outstanding as of December 31, 1998.

[Remainder of Page Intentionally Left Blank]

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<PAGE> 118

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

FINANCIAL CONDITION

CAPITAL RESOURCES

Background

EQK was formed pursuant to an Amended and Restated Declaration of Trust
dated February 27, 1985, as amended March 5, 1986, to acquire certain
income-producing real estate investments. On March 13, 1985, EQK acquired
Harrisburg East Mall (the "Center"), a regional shopping mall located in
Harrisburg, Pennsylvania; Castleton, an office park located in Indianapolis,
Indiana; and Peachtree, an office park located in Atlanta, Georgia.

EQK's has completed the disposition of two of its three real estate
investments. The office buildings comprising Peachtree were sold in three
separate transactions during 1992 and 1993. Two of the office buildings at
Castleton were sold in 1991 while the remaining 44 office buildings at Castleton
were sold in December 1995.

As discussed more completely below under "Harrisburg East Mall Disposition
Plan" and "Mortgage Debt Extensions", EQK's management intends to dispose of its
remaining real estate investment, the Center, as soon as commercially
practicable. EQK's management is hopeful that such disposition will be completed
prior to the June 15, 1999 expiration dates of its forbearance and extension
arrangements with its lenders, although no such assurances can be given at this
time.

Proposed Merger with ART

Effective December 23, 1997, EQK entered into an Agreement and Plan of
Merger (the "Original Merger Agreement"), pursuant to which an affiliate of ART
is to merge with and into EQK (the "Merger"), with EQK being the surviving
entity. The Merger contemplates, among other things, a 20-year extension of the
life of EQK.

The Original Merger Agreement was amended on August 25, 1998 (the "Merger
Agreement") to provide for, among other matters, the right of EQK to sell the
Center and distribute proceeds of such sale to EQK shareholders prior to
completing the Merger and a corresponding reduction in the Merger consideration
to be paid to EQK shareholders.

The Merger consideration will be comprised entirely of ART Preferred Shares
with a par value of $2.00 per share and a liquidation value of $10.00 per share.
The Merger will be effected by (i) ART's acquisition of 4,376,056 shares
currently held by four EQK shareholders (the "Selling Shareholders") and (ii)
ART's receipt of 673,976 newly issued EQK Shares, the combined effect of which
will give ART an approximate 49% interest in EQK. The Selling Shareholders will
receive for each EQK Share sold 0.030 of an ART Preferred Share with a
corresponding liquidation value of $0.30 per EQK Share sold. The remaining EQK
Shareholders will be entitled to retain their EQK Shares at the time of the
Merger, but will be compensated for the dilution in their percentage ownership
interest through the receipt of 0.014 of an ART Preferred Share with a
corresponding liquidation value of $0.14 per EQK Share held. In addition, ART
currently intends (but is not legally obligated) to acquire the remaining EQK
Shares from such other EQK Shareholders at some time after the third anniversary
of the consummation of the Merger for not less than 0.0486 of an ART Preferred
Share with a liquidation value of $0.486 for each EQK Share tendered.

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<PAGE> 119

According to the terms of the Merger Agreement, upon completion of the sale
of the Center and receipt of the Requisite Shareholder Approval, the Merger
would be completed. Immediately prior to the closing of the Merger, ART will
convey one of its properties to EQK. The total consideration paid by EQK to ART
for this property will be a $1,250,000 non-recourse five-year promissory note.
EQK will also assume approximately $1,500,000 of existing debt.

ART has agreed to permit EQK to continue to solicit, or respond to, offers
from third parties for EQK. In the event EQK accepts an offer from a party other
than ART and elects not to proceed with the Merger, EQK generally will be
obligated to pay ART a break-up fee of $200,000 plus its share of transaction
expenses (collectively, the "Break-Up Consideration").

If the Merger is not completed by July 30, 1999, the Merger Agreement will
be terminable by either ART or EQK. The Merger Agreement also may be terminated
by EQK if: (i) EQK secures a more favorable offer from another party subject to
the payment of the Break-Up Consideration; or (ii) the Merger Agreement in any
way impairs or delays the sale of the Center, or is likely to result in a
material reduction in proceeds.

Proceeds from the sale of the Center and, if applicable, the completion of
the Merger, will be distributed to the EQK Shareholders in one or more payments
once EQK's liabilities have been settled (including retirements of its Mortgage
Note and Term Loan) and related transaction costs have been paid.

The Merger is contingent upon, among other things, ART's Registration
Statement relating to the ART Preferred Shares to be issued pursuant to the
Merger Agreement being declared effective by the Securities Exchange Commission,
and the affirmative vote of the holders of 75% of the outstanding Shares.

EQK, its Trustees, and its Advisor have been named as defendants in a
purported class action complaint filed in Massachusetts State court, which seeks
to enjoin the Merger. The complaint also seeks other relief including
unspecified damages. EQK's management is pursuing its legal defenses and
believes that the disposition of this matter will not have a material adverse
effect on the financial position of EQK.

Harrisburg East Mall Disposition Plan

EQK's management commenced marketing and sales activities relating to the
Center during the second quarter of 1998, which included the retention of an
outside broker. Since the commencement of sales activities, changing conditions
in the capital markets have had an adverse effect on the market for real estate,
and especially on the market for regional shopping malls. This unfavorable
environment has been characterized by a reduction in available sources of
financing for real estate transactions and by reduced purchasing interest on the
part of many traditional buyers, including many of the public real estate
investment trusts.

On March 5, 1999, EQK announced that it has entered into a non-binding
Letter of Intent to sell the Center to a private real estate group for $51
million. The sale is anticipated to close during the second quarter of 1999.

Closing is subject to a number of conditions, including the satisfactory
completion of due diligence, the purchaser's obtaining financing and the
execution of a definitive purchase and sale agreement. Accordingly, there is no
assurance that a sale will be completed at the current price or at all. If the
sale is completed at this price, a distribution to shareholders of approximately
$0.37 per share is expected to be made. The distribution may be made in two or
more disbursements, and the actual distribution may be a materially different
amount. The amount may be decreased by, among other factors, a decrease in the
sale price of the Center or an increase in transaction costs or other
liabilities beyond those currently estimated. The amount may be increased by,
among other factors, a favorable settlement of transaction costs and other
liabilities payable by EQK. In the event the ART Merger is completed as
described above, the EQK Merger Consideration will be in addition to the actual
distribution resulting from the Center's disposition.

The Letter of Intent provides that EQK may not solicit, negotiate or
execute other offers for the sale of the Center prior to May 15, 1999, unless
the prospective purchaser terminates negotiations under the Letter of Intent
prior to that date.

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<PAGE> 120

EQK understands that two of its former officers are affiliated with a
company that has entered into a relationship with the prospective buyer in
connection with this transaction.

Mortgage Debt Extensions

EQK's debt structure is comprised of a Mortgage Note and a Term Loan with
outstanding principal balances of $43,794,000 and $1,585,000, respectively at
December 31, 1998. As described below, the Mortgage Note Lender and the Term
Loan Lender have granted EQK relief through June 15, 1999 from the debt
instruments' initial maturity date of December 15, 1995 through a series of
extensions and forbearance arrangements.

The Mortgage Note and Term Loan facilities originated on December 15, 1992,
and provided for an initial maturity date of December 15, 1995. EQK's Mortgage
Note Lender and Term Loan Lender have agreed to extend the maturity date of
these loans twice; first, for a period of one year through December 15, 1996,
and second, for a period of 18 months through June 15, 1998. The Mortgage Note
remains collateralized by a first mortgage lien on the Center, an assignment of
leases and rents, and certain cash balances. The Term Loan is collateralized by
a subordinate lien on the Center.

EQK's expiration date of its forbearance and extension arrangements is June
15, 1999. EQK has entered into a non-binding Letter of Intent to sell the Center
for approximately $51 million, although there is no assurance that the sale of
the Center will be completed. EQK's management believes that the proceeds from
the sale of the Center will be sufficient to allow EQK to repay the Mortgage
Note and Term Loan, although there can be no assurance a sale will be completed
by June 15, 1999. In the event the sale of the Center is not completed by June
15, 1999, EQK's management will propose to its lenders that further forbearance
and extensions be granted. However, no assurances can be given that the Mortgage
Note Lender and Term Loan Lender will grant such relief.

The Term Loan reflects the same pay rate of 8.88%, effective December 16,
1996, that is applicable to the Mortgage Note, but accrues interest at a rate
that re-sets periodically. The accrual rate is computed at EQK's discretion at
either 2 5/8% above the Euro-Rate (as defined) or 1 1/8% above the Prime Rate
(as defined). The accrual rate in effect as of March 15, 1999 was 7.69%. The
difference between the accrual rate and the pay rate is reflected in the
principal balance of the Term Loan as of December 31, 1998.

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<PAGE> 121

One of the conditions of the Mortgage Note was the establishment of a
capital reserve account, which is maintained by a third-party escrow agent and
from which expenditures must be approved by the Mortgage Note Lender. The cash
balance of EQK's capital reserve account at December 31, 1998 was $1,425,000.
EQK believes the current cash balance in this account, coupled with additional
cash flows projected to be generated from operations, will be sufficient to fund
the Center's capital expenditure requirements discussed below.

LIQUIDITY

General

EQK's Mortgage Note Lender and Term Loan Lender have granted EQK relief
through June 15, 1999 from the debt instruments' initial maturity date of
December 15, 1995.

During 1998, EQK generated cash flows from operating activities of
$1,597,000, an increase of $1,365,000 from the prior year's operating cash flows
of $232,000. This increase is attributable to the timely receipt of real estate
tax ($385,000) and utility income ($288,000) recoveries for 1998. In addition,
EQK received certain reimbursements from ART in accordance with the Revised
Merger Agreement ($367,000) and lease termination fees from a tenant ($200,000)
in 1998.

During 1997, EQK generated cash flows from operating activities of
$232,000, a decrease of $1,150,000 from the prior year's operating cash flow of
$1,382,000. Operating cash flow comparisons were impacted by two 1996
non-recurring events which essentially offset one another, the refund of
previously paid real estate taxes at Peachtree Dunwoody Pavilion ($268,000) and
the repayment of a $300,000 loan to the Advisor in 1996. The decrease in
operating cash flows from 1996 was primarily attributable to a decrease in the
Center's cash flows from operations due to the receipt of lease cancellation
income ($451,000) in 1996. Also contributing to the decrease is an increase in
accounts receivable from certain anchor tenants of $390,000 due to the timing of
collection of the 1997-1998 tax reimbursements. Additionally, interest payments
in 1997 increased by $136,000 from 1996. The increase in interest is a result of
an increase in the Mortgage Note interest rate to 8.88% from 8.54% effective
with the December 15, 1996 Mortgage Note extension agreement.

Cash flows used in investing activities during 1998 were $652,000. The 1998
results reflect the payment of build out costs for certain tenants ($435,000),
costs associated with roof replacement ($148,000) and parking lot resurfacing
($69,000).

Cash flows used in investing activities during 1997 were $546,000. The 1997
results reflect the costs associated with a parking lot repavement project and
the payment of build out allowances to tenants at the Center. Cash flows used in
investing activities during 1996 ($195,000) were primarily for the payment of
tenant allowances.

Cash flows used in financing activities during 1998 amounted to $407,000,
which represented payments made for loan fees to the Mortgage Note Lender
($298,000) and the Term Loan Lender ($104,000), and principal payments on the
Term Loan ($5,000). Cash flows used in financing activities during 1997
($24,000) were for payments of loan fees to the Term Loan Lender. Payments made
on the Mortgage Note for 1998 and 1997 were limited to interest payments,
pursuant to the mortgage debt extension effective December 15, 1996.

Cash flows used in financing activities during 1996 ($498,000) were
comprised of scheduled principal payments on EQK's debt ($333,000) and payments
of loan fees ($165,000) to the Term Loan Lender.

EQK will make certain capital expenditures to maintain or enhance the value
of the Center, including tenant allowances associated with leasing activity. EQK
anticipates making capital expenditures in 1999 of $1,690,000, which include
budgeted tenant allowances of $1,337,000. Certain of these expenditures are
discretionary in nature and, therefore, may be deferred into future periods.

In addition to capital expenditure requirements described above, liquidity
requirements for 1999 will also include principal and interest payments of
$2,015,000 through June 15, 1999 pursuant to existing loan extension and
forbearance

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<PAGE> 122

agreements. These loan agreements are scheduled to be repaid on June 15, 1999,
at which time the outstanding principal balance of approximately $45,374,000 on
the loans will be due.

EQK's cash management agreement stipulates that all rental payments from
tenants are to be made directly to a third party escrow agent that also funds
monthly operating expenses in accordance with a budget approved by the Mortgage
Note Lender. EQK believes that its cash flow for 1999 will be sufficient to fund
its various operating requirements, including budgeted capital expenditures and
monthly principal and interest payments, although its discretion with respect to
cash flow management will be limited by the terms of the cash management
agreement. EQK believes that its current cash reserves, coupled with additional
cash flow projected to be generated from operations, will permit EQK to meet its
operating, capital and monthly debt service requirements.

EQK intends to sell the Center and, therefore, has classified its real
estate as held for sale at December 31, 1998. Accordingly, the investment in
real estate, including deferred leasing costs, is recorded at the lower of cost
or estimated fair market value, less estimated costs to sell. EQK has not
written up the cost basis of its investment in the Center to its substantially
higher fair value. Therefore, EQK does not believe that its deficit in
shareholders' equity of $4,832,000 at December 31, 1998 is indicative of its
current liquidity or the net distribution that its shareholders would receive
upon liquidation.

YEAR 2000

The inability of computers, software and other equipment to recognize and
properly process data fields containing a two-digit year is commonly referred to
as the Year 2000 compliance issue ("Y2K"). As the year 2000 approaches, such
systems may be unable to accurately process certain date-based information.

Y2K exposures of EQK and the Center are currently being assessed. Potential
critical exposures include reliance on third party vendors and building systems
that are not Y2K compliant. EQK has begun to communicate with its third party
service vendors such as Lend Lease and LaSalle Partners Incorporated in an
effort to assess their Y2K compliance status and the adequacy of their Y2K
efforts.

The Center is being assessed in an effort to identify Y2K issues. Any
required remediation strategy will depend on the outcome of the assessment and
therefore will not be developed until the assessment is complete. EQK
anticipates the majority of critical property assessments to be completed and
remediation efforts to be underway by the end of the second quarter of 1999.

Neither EQK nor the Center has incurred any material costs to date relating
to Y2K; therefore, no costs were accrued at December 31, 1998. The total
assessment cost is expected to total approximately $16,000. Remediation costs
cannot be reasonably estimated until the assessment is complete and a
remediation strategy is determined.

The failure to adequately address the Year 2000 issue may result in the
closure of the Center. In order to reduce the potential impact on the operations
of EQK and the Center, contingency plans are expected to be developed once Y2K
exposures have been assessed.

A building contingency plan is expected to be developed once the assessment
has been completed. A contingency plan may involve but not be limited to the
engagement of additional security services, the disconnect of system interfacing
(that does not significantly impact Center operations) and the identification
and engagement of alternative service vendors.

RESULTS OF OPERATIONS

For the year ended December 31, 1998, EQK reported net income of $150,000
($.02 per share) compared to net losses of $1,961,000 ($.21 per share) and
$1,488,000 ($.16 per share) for the years ended December 31, 1997 and 1996,
respectively.

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<PAGE> 123

EQK's revenues for 1998 were $6,191,000, which represents a $33,000
increase from the 1997 amount of $6,158,000. Percentage rents increased by
$150,000 as a result of increased sales by percentage-rent-paying tenants at the
Center for 1998. In addition, in 1998 EQK recognized a non-recurring lease
cancellation fee of approximately $200,000. These increases in income are
substantially offset by a decrease in income in 1998 due to a non-recurring
adjustment made in 1997 to record the recovery of income from one of the
Center's anchor stores. This offset also includes other decreases in income,
none of which are individually significant.

EQK's revenues for 1997 were $6,158,000, which represented a $16,000
decrease from the 1996 amount of $6,174,000. Rental revenues in 1997 increased
by approximately $379,000 over 1996. A portion of this increase, $103,000, was a
result of increased rent payments from certain tenants whose payment obligations
had been reduced in prior years pursuant to the exercise of co-tenancy
provisions in their lease agreements and short-term rent relief agreements
associated with anchor store vacancies. With the opening of Lord & Taylor on
March 10, 1997, such provisions and agreements expired and these tenants
reverted to paying fixed minimum rent. The remaining increase in rental revenues
from 1996 ($276,000) is attributable to a non-cash adjustment to straight-line
rents made in 1996. The increases in 1997 rental revenues, however, were offset
by the non-recurrence of lease termination fees and other miscellaneous income
recorded in 1996.

Operating expenses (net of reimbursements from tenants) for 1998 were
$769,000, which represents a decrease of $314,000 from the 1997 amount of
$1,083,000. This decrease is primarily due to an increase in common area
maintenance expense recoveries ($130,000) due to a higher reimbursement ratio
for 1998. The higher reimbursement ratio is attributable to a higher average
occupancy ratio at the Center as compared to the prior year. This variance is
also due to a decrease in bad debt expense over the prior year due to several
tenant bankruptcies that occurred in 1997. Also contributing to this variance is
the sum of other operating expense variances, none of which is individually
significant.

Operating expenses (net of reimbursements from tenants) for 1997 were
$1,083,000, which represented an increase of $196,000 from the 1996 amount of
$887,000. This increase is primarily due to a decrease in common area
maintenance expense recoveries of $84,000 due to lower average occupancy levels
in 1997. Also, bad debt expenses increased by $82,900 from 1996 due to tenant
bankruptcies.

Depreciation and amortization expense for 1998 ($588,000) was significantly
lower than the expense for 1997 ($2,181,000) due to the cessation of
depreciation and amortization expense relating to the real estate investment and
deferred leasing costs effective April 1, 1998.

Other income of $268,000 was recorded in 1996 relating to refunds of
previously paid real estate taxes for Peachtree Dunwoody Pavilion and Castleton.
No such similar events occurred during 1998 and 1997.

Interest expense for 1998, 1997 and 1996 was $4,219,000, $4,397,000 and
$4,075,000, respectively. Interest expense decreased in 1998 compared to 1997
due to lower amortization of deferred financing costs in 1998 since the majority
of these costs were fully amortized by June 1998. A full year of amortization
was recognized during 1997. The increase in interest expense in 1997 as compared
to 1996 is due to an increase in the Mortgage Note interest rate to 8.88% from
8.54% effective with the December 15, 1996 Mortgage Note extension agreement.

Other expenses-net consists of portfolio management fees, other costs
related to the operation of EQK, and interest income earned on cash balances.
Other expenses in 1998 were not materially different from 1997. Other expenses
decreased $298,000 in 1997 from 1996 amounts. This decrease is primarily
attributable to the recognition of imputed interest on deferred advisory fees in
1996 of $302,000.

As discussed in the liquidity section above, EQK believes that its existing
cash reserves and its anticipated cash flow generated from operations will be
sufficient to meet its capital and monthly debt service requirements. This
belief is predicated upon EQK completing the sale of the Center and repaying its
Mortgage Note and Term Loan prior to their June 15, 1999 maturity dates, or in
the event such sale is not completed by June 15, 1999, securing further relief
from its lenders. Losses incurred in prior years are primarily a result of the
effects of non-cash accounting (principally depreciation and amortization). With
the cessation of depreciation and amortization expense as a result of EQK's
investment in real estate being reclassified as "held for sale" in May 1998, EQK
believes it will generate some level of

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<PAGE> 124

net income in future periods. There is no assurance that future results will not
be materially affected (positively or negatively) by, among other factors,
changes in mall occupancy and rental rates, significant deviations in operating
expenses, changes in interest rates and transaction costs incurred in connection
with sale and financing transactions.

DESCRIPTION OF THE EQK SHARES

EQK is currently authorized to issue 10,055,555 EQK Shares, and the EQK
Board may not currently issue any additional EQK Shares unless such issuance is
approved by the holders of three-quarters of the outstanding EQK Shares. Upon
consummation of the Merger, the Declaration of Trust will be amended to remove
all limitations on the number of EQK Shares that EQK shall have the authority to
issue. See "The Declaration Amendment Proposal." The EQK Shareholders are
entitled to receive and to participate ratably in dividends, when and as
declared by the EQK Board out of any funds legally available for such purpose,
and, in the event of termination of EQK or upon the distribution of its net
assets, to receive and to participate ratably in payments and distributions. All
EQK Shares have equal voting rights. The EQK Shares do not have any preference,
appraisal, conversion, exchange or preemptive rights. Outstanding EQK Shares are
freely transferable, except that in certain limited circumstances the EQK Board
may refuse to transfer EQK Shares or may compel redemption of EQK Shares. See
"The Business of EQK -- Summary of the Existing Declaration of Trust --
Redemption and Prohibition of Transfer of Shares." The outstanding EQK Shares
have been legally issued and are fully paid and nonassessable, except to the
extent of any personal liability of the EQK Shareholders as described herein
under "The Business of EQK -- Summary of the Existing Declaration of Trust --
Shareholder Liability." At any meeting of the holders of EQK Shares, each EQK
Shareholder is entitled to one vote for each EQK Share owned without cumulative
voting with respect to the election of Trustees and with respect to all other
matters as to which the vote of the EQK Shareholders may from time to time be
required or permitted under the Declaration of Trust. The EQK Shareholders may
vote by proxy provided that proxies are placed on file with EQK before the time
of voting.

According to EQK's Annual Report on Form 10-K for the year ended December
31, 1998, there were 9,632,212 outstanding EQK Shares. It is a condition of the
Merger that 9,632,212 EQK Shares are outstanding immediately prior to the
consummation of the Merger. In addition, according to EQK's Annual Report on
Form 10-K for the year ended December 31, 1998, there were 206 holders of record
of EQK Shares, as of March 26, 1999. Although EQK does not know the exact number
of beneficial holders of its shares, EQK estimates that the number exceeds
1,500.

EQK has appointed Chase Mellon Shareholder Services as its registrar and
transfer agent.

On April 23, 1998, the New York Stock Exchange announced that trading in
the common stock of EQK Realty Investors I would be suspended prior to the
opening of the NYSE on May 4, 1998, as it had fallen below the NYSE's continued
listing criteria. The EQK Shares are currently traded in the over-the-counter
market.

[Remainder of Page Intentionally Left Blank]

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COMPARISON OF EQK SHARES TO ART PREFERRED SHARES

The following is a brief summary comparison of certain of the principal
terms of the EQK Shares and the ART Preferred Shares.

<TABLE>
<CAPTION>
EQK Shares ART Preferred Shares
---------- --------------------
<S> <C> <C>
Interest/Dividend Rate No stated rate. Each EQK Share 10% per annum, payable
is entitled to receive quarterly quarterly, on a cumulative,
distributions of cash flow compounded basis, and
generated from operations in commencing accrual on the date
excess of operating expenses, of issuance.
capital expenditures, debt service,
working capital and reasonable
reserves. No dividends have been
paid in respect of the EQK Shares
since 1994.

Optional Redemption Not applicable, except that the EQK ART may redeem any or all of the
Board has the power to redeem or ART Preferred Shares at any time
prohibit the transfer of a and from time to time, at its
sufficient number of EQK Shares option, for cash upon no less than
selected in a manner deemed 20 days nor more than 30 days prior
appropriate to maintain or bring notice thereof. The redemption
the ownership of the EQK Shares price of the ART Preferred Shares
into conformity with the real shall be an amount per share equal
estate investment trust to (i) 104% of the Adjusted
requirements of the Code. Liquidation Value during the period
from August 16, 1998 through August
15, 1999; and (ii) 103% of the
Adjusted Liquidation Value at any
time on or after August 16, 1999.

Ranking The EQK Shares are the only class Shall rank on a parity as to
of shares currently authorized by dividends and upon liquidation,
the Declaration of Trust. However, dissolution or winding up with all
upon completion of the Merger, the other shares of Special Stock
Declaration of Trust may be amended issued by ART and shall be senior
to provide for the issuance of to ART Common Shares. ART shall not
Additional EQK Shares or other issue any shares of Special Stock
types of securities, certain of of any series which are superior to
which may have preferences senior the ART Preferred Shares as to
to the EQK Shares. dividends or rights upon
liquidation, dissolution or winding
up of ART as long as any shares of
the ART Preferred Shares are issued
and outstanding, without the prior
written consent of the holders of
66 2/3% of such ART Preferred
</TABLE>

-108-
<PAGE> 126

<TABLE>
<CAPTION>
EQK Shares ART Preferred Shares
---------- --------------------
<S> <C> <C>
Shares then outstanding and voting
separately as a class.

Voting Rights One vote per EQK Share. Non-voting except (i) as provided
by law, (ii) with respect to an
amendment to ART's articles of
incorporation or bylaws that would
materially alter or change the
existing terms of the ART Preferred
Shares, and (iii) at any time or
times when all or any portion of
the dividends on the ART Preferred
Shares for any six quarterly
dividends, whether or not
consecutive, shall be in arrears
and unpaid.

New York Stock Exchange Listing On May 4, 1998 the EQK Shares were Application will be made to list
delisted from the NYSE. the ART Preferred Shares on the
NYSE.

Dividends Received Distributions on the EQK Shares are Dividends on the ART Preferred
Deductions not eligible for the dividends Shares are eligible for the
received deduction for corporate dividends received deduction for
holders. corporate holders. The dividends
received deduction is not
applicable to individual,
non-corporate holders.

Conversion Not Applicable. Convertible into ART Common Shares
at the option of the holder after
the earliest to occur of (i) August
15, 2003; (ii) the first business
day, if any, occurring after a
Quarterly Dividend Payment Date on
which dividends equal to or in
excess of 5% of the Liquidation
Value is accrued and unpaid, or
(iii) ART becomes obligated to mail
a statement to the holders of
record of each of the ART Preferred
Shares because of a proposal by ART
to merge or consolidate with or
into any other corporation (unless
ART is the surviving entity), or to
sell, lease, or convey all or
substantially all its property or
business, or to liquidate, dissolve
or wind up. Each ART Preferred
Share is convertible (in most
instances) into that number of ART
Common Shares obtained by dividing
(i) the sum of the Adjusted
Liquidation Value of such ART
Preferred
</TABLE>

-109-
<PAGE> 127

<TABLE>
<CAPTION>
EQK Shares ART Preferred Shares
---------- --------------------
<S> <C> <C>
Share plus all accrued and unpaid
dividends on such ART Preferred
Share to the date of conversion by
(ii) the Conversion Price. The
Conversion Price will be the amount
(rounded upward to the nearest
cent) equal to 90% of the simple
average of the daily closing price
of the ART Common Shares for the
twenty business days ending on the
last business day of the calendar
week immediately preceding the date
of conversion on the principal
stock exchange on which such ART
Common Shares are then listed. ART
may elect to redeem ART Preferred
Shares that are submitted for
conversion as described herein.
</TABLE>

DESCRIPTION OF THE HARRISBURG EAST MALL

GENERAL

The Center is a two-level enclosed regional mall shopping center located
approximately three miles from the central business district of Harrisburg,
Pennsylvania, the state capital. It contains approximately 836,000 gross
leasable square feet anchored by three major department stores: J.C. Penney,
Hecht's, and Lord & Taylor. The Center is located on a site of approximately 64
acres with paved surface parking for approximately 4,933 automobiles (5.9 spaces
per 1,000 gross leasable square feet).

The total building area of the Center is allocated as shown in the table
below.

<TABLE>
<CAPTION>
Approximate
Number of Gross
Store Spaces at Leasable Area % of Total Occupancy at
Dec.31, 1998 (Sq. Ft.) Building Area Dec. 31, 1998
--------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Gross Leasable area
Anchor stores 3 498,948 50.8% 100.0%
Mall stores 106 284,499 29.0 83.4
Free-standing building 3 52,345 5.3 87.8
------ --------- ------ ------
Total Gross leasable area 112 835,792 85.1 93.6%
=== ------- ------ =======
Common area 146,371 14.9
------- ------
Total building area 982,163 100.0%
======= ======
</TABLE>

LOCATION AND TRADE AREA OVERVIEW

The Center is located in Dauphin County, Pennsylvania, near the
intersection of Paxton Street (U.S. Route 322) and Interstate 83. The Center is
adjacent to Pennsylvania Route 441, approximately five miles from the
Pennsylvania Turnpike and three miles from the central business district of
Harrisburg. Access to the site from Interstate 83, the major north-south traffic
corridor serving Harrisburg, is provided by the Paxton Street interchange.
Access from the

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<PAGE> 128

Pennsylvania Turnpike, the major east-west traffic corridor serving Harrisburg,
is provided by the Interstate 283 interchange.

The primary trade area for the Center encompasses the populated section of
Dauphin County, Pennsylvania, and along with small adjacent portions of
Cumberland and Perry Counties, Pennsylvania, comprises the Harrisburg
Metropolitan Statistical Area (the "Harrisburg M.S.A."). In total, the
Harrisburg M.S.A. encompasses 1,991 square miles.

Harrisburg, the capital of the Commonwealth of Pennsylvania, is situated in
south-central Pennsylvania on the banks of the Susquehanna River, between
Philadelphia and Pittsburgh. The Harrisburg M.S.A. is ranked 85th in regard to
size among metropolitan areas in the United States. The Harrisburg M.S.A. is an
area which has experienced moderate economic and demographic growth in the
recent past. Historically a center for agriculture and manufacturing, the area's
economy has become increasingly more diversified with strong job growth
experienced in services-related employment. In addition, as the state capital,
the area is a center for government and government related employment. Similar
to many areas nationally, demographic growth in the Harrisburg M.S.A. is
projected to occur at a more moderate rate relative to past levels. However, the
Harrisburg M.S.A. remains economically vital.

ANCHOR TENANTS

The Center has three department stores, J.C. Penney and two divisions of
May Department Stores Co. ("May Company"), Hecht's and Lord & Taylor. Hecht's
replaced Hess' in October 1995. Lord & Taylor opened on March 10, 1997,
replacing John Wanamaker, which had closed in October 1995 following Woodward &
Lothrop's (the owner of John Wanamaker) sale of certain department stores in its
retail chain to May Company pursuant to an August 1995 bankruptcy court auction.

The following chart presents tenants that occupy more than 10% of the
Center's square footage, along with certain provisions contained in their
leases:

<TABLE>
<CAPTION>
Lease
Leased Area Rent Expiration Renewal
Tenant (Sq. Ft.) Per Annum Date Options (1)
- ------ --------- --------- ---------- ----------------
<S> <C> <C> <C> <C>
Hecht's 187,280 $200,000 1/31/2007 3-10 yr. options
J.C. Penney 153,770 $300,000 3/31/2001 6-5 yr. options
Lord & Taylor 157,898 $150,000 10/31/2005 3-10 yr. options
</TABLE>

(1) Hecht's and Lord & Taylor have operating covenants that require them to
continue to remain open and operate through December 2004 and October
2005, respectively. J.C. Penney's operating covenant has expired.

MALL AND OTHER TENANTS

At December 31, 1998, the Center had 82 in-line mall and outparcel tenants
(excluding anchor store tenants) occupying approximately 284,000 square feet of
gross leasable area, representing an occupancy rate of approximately 84%. Other
than the anchor store spaces, which are occupied by J.C. Penney, Hecht's and
Lord & Taylor, only Toys 'R' Us, which occupies approximately 45,950 square feet
of space as the anchor tenant in the Center's outparcel building, occupies more
than five percent of the gross leasable area of the Center. Other than The
Limited Inc., which operates seven stores at the Center and which contributed
14.2% of the Center's 1998 rental revenues, no other tenants, or group of
affiliated tenants, contribute more than 10% to the Center's total rental
revenues.

[Remainder of Page Intentionally Left Blank]

-111-
<PAGE> 129

LEASE EXPIRATIONS

The lease expiration schedule for mall and outparcel stores as of December
31, 1998 is shown below:

<TABLE>
<CAPTION>
% of
Gross 1998 Aggregate 1998
Number of Leased Minimum Minimum
Leases Area Annual Annual
Year Expiring (a) (Sq. Ft.) Rent Rent
---- ------------ --------- -------- --------------
<S> <C> <C> <C> <C>
Month to Month 6 11,046 200,130 3.9%
1999 4 5,637 148,558 2.9%
2000 10 32,761 535,452 10.4%
2001 11 25,507 522,058 10.1%
2002 6 15,452 223,406 4.3%
2003 14 31,143 684,433 13.3%
2004 5 8,794 225,516 4.4%
2005 7 59,271 637,112 12.4%
2006 6 24,874 457,584 8.9%
2007 4 7,361 135,008 2.6%
2008 and thereafter 9 61,506 650,611 12.6%
-- ------- ---------- -----
TOTAL 82 283,352 4,419,868 85.9%
== ======= ========= =====
</TABLE>

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

(a) Assumes no renewal options will be exercised in order to present the
earliest point of termination of the leases.

CAPITAL REQUIREMENTS

EQK will make certain capital expenditures to maintain or enhance the value
of The Center, including tenant allowances associated with leasing activity. EQK
anticipates making capital expenditures in 1999 of $1,690,000, which include
budgeted tenant allowances of $1,337,000. Certain of these expenditures are
discretionary in nature and therefore may be deferred into future periods.

One of the conditions of the Mortgage Note was the establishment of a
capital reserve account, which is maintained by a third-party escrow agent and
from which expenditures must be approved by the Mortgage Note Lender. The
balance of this account at December 31, 1998 was $1,425,000. EQK believes the
current cash balance in this account, coupled with additional cash flows
projected to be generated from operations, will be sufficient to fund the
Center's capital expenditures requirements.

-112-
<PAGE> 130

OCCUPANCY DATA AND AVERAGE EFFECTIVE ANNUAL RENT

Information regarding occupancy rates and average effective annual rent for
the property, including anchor and outparcel tenants, is set forth below:

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Occupancy Rate (a) ............... 93.6% 92.8% 93.7% 73.6% 94.3%
============= ============= ============= ============= =============

Total Annual Minimum Rent (b) .... $ 5,146,957 $ 5,005,603 $ 4,902,122 $ 5,110,162 $ 5,973,828

Total Percentage Rent ............ 272,421 122,298 179,474 269,558 294,591
------------- ------------- ------------- ------------- -------------

Total Annual Effective Rent ...... $ 5,419,378 $ 5,127,901 $ 5,081,596 $ 5,379,720 $ 6,268,419
============= ============= ============= ============= =============

Average Annual Rent
Per Square Foot: (c)

Mall Anchor Tenants .............. $ 1.30 $ 1.29 $ 1.37 $ 1.32(d) $ 1.67
Outparcel Stores ................. 8.12 7.38 7.44 6.91 5.69
Mall Tenants ..................... 18.44 18.18 17.08 16.46 16.55
All Tenants ...................... $ 6.91 $ 6.58 $ 6.26 $ 6.44(d) $ 7.49
</TABLE>

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

(a) Occupancy rate at December 31, 1995 reflects vacancy of the former John
Wanamaker anchor space. Excluding the effect of the vacancy, the occupancy rate
on a pro forma basis at December 31, 1995 was 95.8%. On May 13, 1996, EQK and
May Company executed a lease agreement that provided for the opening of a Lord &
Taylor department store. The December 31, 1996 occupancy rate includes the
occupancy of Lord & Taylor, which opened for business on March 10, 1997.

(b) Total minimum annual rent represents actual tenant rental income for each
calendar year, and does not include non-cash adjustments for stipulated rent
increases in accordance with Generally Accepted Accounting Principles.

(c) Anchor and outparcel rent per square foot data is based on actual leased
square footage during each calendar year presented. Mall tenant rent per square
foot data is based on leased square footage at December 31 of each year
presented.

(d) The decrease in mall anchor tenant rent per square foot in 1995 and rent per
square foot for all tenants is due to the closure of the Hess department store
with Hecht's in November 1994 prior to the re-opening of Hecht's in October
1995. Hecht's now occupies 187,280 square feet (which includes expansion space
in the adjacent basement area) and pays rent of $1.07 per square foot, whereas
Hess formerly occupied 139,656 square feet at $2.18 per square foot.

-113-
<PAGE> 131

COMPETITION

The following table provides selected information with respect to the
Mall's primary competitors. Each property is located within eight miles of the
Property.

<TABLE>
<CAPTION>
Gross Leasable
Shopping Center Type of Center Area (Sq. Ft.) Anchor Stores
<S> <C> <C> <C>
Colonial Park Plaza Enclosed one level 775,000 Sears, The Bon Ton, Boscov's
regional mall

Capital City Mall Enclosed one level 722,000 Sears, Hecht's, JC Penney
regional mall

Camp Hill Shopping Center Enclosed one level mall 506,000 Boscov's, Montgomery Ward,
Giant Grocery Store

Union Square Power Center 309,000 Dunham Sports, Office Max,
Gabriel Bros., Weis, Chuck E.
Cheese's

Power Center 433,000 Giant Grocery Store, Service
Colonial Commons Merchandise, Montgomery
Ward, AMC Theater, RX
Place

Point Shopping Center Power Center 277,000 U.S. Factory Outlet,
Burlington Coat Factory,
Lone Star Steakhouse
</TABLE>

The boundaries of the trade area for the Center are influenced by the
existence of natural boundaries, competing developments, and demographic
characteristics. The Susquehanna River splits the Center's market in two,
creating the East and West shores. The Center is located in Dauphin County in
the East shore area. Its primary trade area consists of all of Dauphin County,
while the secondary trade area includes sections of Lebanon and Lancaster
counties on the East shore and sections of Perry and Cumberland counties on the
West shore.

Primary competition for the Center consists of three regional centers
located in the Harrisburg trade area: Colonial Park Mall, Capital City Mall, and
Camp Hill Shopping Center.

Colonial Park Plaza, which opened in 1960, is located approximately five
miles north of the Center in the primary trade area. It contains 775,000 square
feet of gross leasable area, 90 mall stores, and is anchored by Bon-Ton, Sears,
and Boscov's. This center was renovated and expanded with a food court and some
specialty shops during 1990. In addition, new skylights and some exterior
redesign have enhanced Colonial Park's appeal. Colonial Park continues to be the
Center's primary competitor due to the strength of Boscov's and its in-line
tenant mix, which is comparable to that found at the Mall. The occupancy
percentage for this mall is 98%.

Capital City Mall, located ten miles to the west of the Center's secondary
trade area, contains approximately 722,000 square feet of gross leasable area
and 94 mall stores. This center opened in 1974 and is anchored by Hecht's, JC
Penney, and Sears. The center was first renovated in 1986 and a second
renovation, completed in May 1998, included new flooring, plantings, seating,
skylights, and a food court area. This center is currently 90% occupied.

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<PAGE> 132

Camp Hill Shopping Center, a former community center was originally
constructed in 1958 and completely enclosed and renovated in 1986. This center
is located approximately ten miles west of the Center in the secondary trade
area, and contains approximately 506,000 square feet of gross leasable area and
90 mall stores. The center is anchored by Boscov's and Montgomery Ward. The
occupancy is currently at 85%.

DEBT

As previously discussed, the Mortgage Note and Term Loan facilities
provided for an original maturity of December 15, 1995. EQK's Mortgage Note
Lender and Term Loan Lender have agreed to extend the maturity date of these
loans twice; first, for a period of one year through December 15, 1996 and
second, for a period of 18 months through June 15, 1998. Following the June 15,
1998 scheduled maturity date, the Mortgage Note Lender granted two six-month
forbearance arrangements (through December 15, 1998 and June 15, 1999). The Term
Loan Lender has granted two extensions of its maturity dates consistent with the
forbearance periods. The following table sets forth certain information
regarding the outstanding debt. Both the Mortgage Loan and the Term Loan may be
prepaid in full without penalty.

<TABLE>
<CAPTION>
Principal
Balance Principal
as of Balance
December 31, Annual Debt at
1998 Service Maturity Maturity
Loan Annual Rate (000's) (000's) Date (000's)
---- ----------- --------- --------- ------ --------
<S> <C> <C> <C> <C> <C>
Mortgage............. 8.88%(1) $43,794 $3,888 6/15/99 $43,794
Term................. 8.88%(2) 1,580 132 6/15/99 1,580
</TABLE>

(1) The Mortgage Note requires monthly interest only payments of $324,000, at
8.88%

(2) The Term Loan provides for the accrual interest rate to be re-set
periodically, and is computed at EQK's discretion at either 2 5/8% above
the Euro-Rate (as defined) or 1 1/8% above the Prime Rate (as defined). The
accrual rate in effect as of March 15, 1999 was 7.69%. The principal
balance of the Term Loan is adjusted for the differential between the
accrual rate and the pay rate of 8.88%.

PHYSICAL DESCRIPTION OF BUILDINGS

The enclosed shopping mall and the anchor stores are two-level buildings of
steel frame and masonry construction with reinforced concrete foundations and
four-ply built-up roofs. The free-standing building is a one-level building of
similar construction, containing convenience-type shops. The exterior of the
mall consists of stone and brick walls and the anchor stores are of
complimentary finishes. The mall's two levels are connected by two escalators
and two stairways. All mall tenants and the anchor stores have their own air
handling units which are supplied with chilled and hot water from a central
plant. The free-standing building is served by roof-top cooling units which are
predominantly of the packaged, self-contained type with gas heating sections.

PHYSICAL IMPROVEMENTS

Since acquiring the Center in 1985, EQK has undertaken several physical
improvement programs. In 1987, EQK converted approximately 51,400 square feet of
space in the basement of the former Hess's department store space into mall
tenant space, at which time it was leased to Toys 'R' Us. During 1988, a new
food court with approximately 13,000 square feet of gross leasable area was
added. In 1991, EQK completed the conversion of 47,960 square feet of space
previously occupied by JC Penney into approximately 31,500 square feet of new
leasable area leased at substantially higher rates.

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<PAGE> 133

In conjunction with the JC Penney conversion, the remaining area of the JC
Penney store was remodeled. In addition, the terms of the amended JC Penney
lease required EQK to renovate the common areas and the exterior facade of the
Center. This renovation was completed in 1993 for a cost of approximately
$4,000,000. The project included a complete refurbishment of the property's
interior common area, with new floors, finishes, and lighting throughout.

Upon the expansion of Hecht's into the basement space previously occupied
by Toys 'R' Us in 1995 (approximately 51,400 square feet), EQK renovated the
Center's outparcel building (approximately 52,000 square feet) to accommodate
the relocation of Toys 'R' Us for a cost of approximately $3,440,000. In
addition to the expansion of the anchor tenant space, Hecht's performed an
interior renovation of its new department store space.

Lord & Taylor opened in March 1997 in the former John Wanamaker anchor
space. May Company (Lord & Taylor's parent company) completed a major renovation
of this anchor store location. EQK's management believes that May Company has
spent approximately $10,000,000 on renovations and improvements.

APPRAISAL OF THE CENTER

EQK has received an appraisal from an unaffiliated third-party appraiser
(the "Independent Appraiser") with respect to the market value of the Center.
Based upon the analysis set forth in such appraisal, the Independent Appraiser
estimates that the market value of the leasehold interest (subject to occupancy
leases) of the Center, on a free and clear basis as of December 31, 1997, was
$62,300,000. In arriving at its appraised value for the Center, the Independent
Appraiser considered relevant economic and market factors, including population,
employment and other demographic factors and the impact of competition from
other shopping centers in the Harrisburg M.S.A.

REAL ESTATE TAXES

Real estate taxes are levied against the Center for county and township,
and school tax purposes. County and township taxes are payable March 31 and
school taxes are payable on August 31. Harrisburg paid $1,046,000 in real estate
taxes in 1998. The millage rate for 1998 was 28.39. Through an appeal with
Dauphin County, the assessed value of the Center was lowered in 1998. The
decrease in tax expense associated with the lower assessed value will be
reflected in the 1999 real estate tax invoices. Real estate taxes are
substantially reimbursed by the tenants through real estate tax recovery
billings.

DEPRECIATION

As of December 31, 1998, EQK depreciated its assets for Federal income tax
purposes, under the ACRS and the MACRS as follows:

Buildings:

Gross Federal Income Tax Basis $50,527,000
Accumulated Depreciation $17,028,000
Depreciation Method Straight Line
Depreciable Life 40 Years

Land Improvements:

Gross Federal Income Tax Basis $ 3,020,000
Accumulated Depreciation $ 318,000
Depreciation Method Straight Line
Depreciable Life 40 Years

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<PAGE> 134

Personal Property:

Gross Federal Income Tax Basis $ 185,000
Accumulated Depreciation $ 128,000
Depreciation Method Straight Line*
Depreciable Life 10 Years*

* Except for automobiles which are depreciated over a range of 3 to 7
years using the double declining balance method.

ADDITIONAL INFORMATION

For additional information concerning the Center, see EQK's 1998 Form 10-K,
filed with the Commission on March 31, 1999, which is incorporated by reference
herein.

SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF ART AND EQK

The following unaudited pro forma combined financial information of ART and
EQK presents the historical consolidated balance sheets and statements of
operations of ART and EQK after giving effect to the Merger. The unaudited pro
forma combined balance sheet data at December 31, 1998 gives effect to the
Merger as if it had occurred on December 31, 1998. The unaudited pro forma
combined statements of operations for the fiscal year ended December 31, 1998
gives effect to the Merger as if it had occurred on January 1, 1998. These
statements have been prepared on the basis of accounting for the Merger as a
purchase of an investment in an equity method investee and are based on the
assumptions set forth in the notes thereto.

The following unaudited pro forma combined financial information has been
prepared from, and should be read in conjunction with, the consolidated
financial statements and related notes thereto of ART as set forth herein and
the consolidated financial statements and related notes thereto of EQK included
elsewhere in this Prospectus/Proxy Statement. The following information is not
necessarily indicative of the financial position or operating results that would
have occurred had the Merger been consummated on the date as of which, or at the
beginning of the periods for which, the Merger is being given effect, nor is it
necessarily indicative of future operating results or financial position.
See "Incorporation of Certain Documents by Reference."

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<PAGE> 135

AMERICAN REALTY TRUST, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1998

<TABLE>
<CAPTION>
Proforma Proforma
Historical Adjustments Combined
---------- ------------ ---------
Assets (dollars in thousands, except per share)
<S> <C> <C> <C>
Notes and interest receivable, net of allowances
for estimated losses .......................... $ 52,053 $ 1,524 (4) $ 53,577
Real estate held for sale ........................... 282,301 -- 282,301
Real estate held for investment, net of
accumulated depreciation ...................... 452,606 (1,524)(4) 451,082
Pizza parlor equipment, net of accumulated
depreciation .................................. 6,859 -- 6,859
Marketable equity securities at market
value ......................................... 2,899 -- 2,899
Cash and cash equivalents ........................... 11,523 ((91)(3)) 10,932
((500)(5))
Investments in equity investees ..................... 34,433 (1,312 (1)) 37,328
(992 (2))
(91 (3))
(500 (5))
Intangibles, net of accumulated
amortization .................................. 14,776 -- 14,776
Other assets ........................................ 61,155 -- 61,155
--------- --------- ---------
Total Assets ........................................ $ 918,605 $ 2,304 $ 920,909
========= ========= =========
</TABLE>

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<PAGE> 136
AMERICAN REALTY TRUST, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET - CONTINUED
DECEMBER 31, 1998

<TABLE>
<CAPTION>
Proforma Proforma
Historical Adjustments Combined
---------- ---------- ----------
(dollars in thousands, except per share)
<S> <C> <C> <C>
Liabilities and Stockholders' Equity

Liabilities

Notes and interest payable ................... $ 768,272 $ -- $ 768,272

Margin borrowings ............................ 35,773 -- 35,773

Accounts payable and other liabilities ....... 38,321 -- 38,321
---------- ---------- ----------
842,366 -- 842,366
Minority interest ............................ 37,967 -- 37,967

Stockholders' Equity
Preferred Stock, $2.00 par value,
authorized 20,000,000 shares, issued
and outstanding

3,580,493 shares Series F .......... 6,100 (263(1)) 6,561
(liquidation preference $35,805) ...... (198(2))

1,000 shares Series G .............. 2 -- 2
(liquidation preference $100)

Common Stock, $.01 par value, authorized
100,000,000 shares, issued 13,298,802
shares ................................. 133 -- 133

Paid-in capital .............................. 83,945 (1,049(1)) 85,788
(794(2))
Accumulated(deficit) ......................... (51,880) -- (51,880)

Treasury stock at cost, 2,737,216 shares ..... (28) -- (28)
---------- ---------- ----------
Total Stockholders' Equity ................... 38,272 2,304 40,576
---------- ---------- ----------
Total Liabilities and Stockholders' Equity ... $ 918,605 $ 2,304 $ 920,909
========== ========== ==========
</TABLE>

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<PAGE> 137

AMERICAN REALTY TRUST, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1998

NOTE 1. Purchase of an aggregate of 1,685,556 EQK Shares from LLPM,
916,900 EQK Shares from Summit, 919,400 EQK Shares from Sutter
and 854,200 EQK Shares from Halperin at $0.30 per EQK Share,
paid in ART Preferred Shares valued for this purpose at the
liquidation value of $10.00 per ART Preferred Share. As
consideration for their EQK Shares LLPM will receive 50,566
ART Preferred Shares, Summit 27,507 ART Preferred Shares,
Sutter 27,582 ART Preferred Shares and Halperin 25,626
Preferred Shares.

NOTE 2. Purchase of 673,976 newly issued EQK Shares for consideration
of $1.47 per share in ART Preferred Shares, a total of 99,212
ART Preferred Shares, valued for this purpose at the
liquidation value of $10.00 per ART Preferred Share. Such ART
Preferred Shares are to be distributed to the EQK
Shareholders, other than ART, at the rate of $0.14 per EQK
Share owned, consisting of 0.014 of a share of ART Preferred
Stock.

NOTE 3. Cash payment of $0.10 per EQK Share held by remaining 5%
holder in consideration for its execution of Standstill
Agreement.

NOTE 4. Sale of Oak Tree Village to EQK for a $2,780,000 wraparound
mortgage note receivable. Deferred gain on sale of 1,256,000
offset against note receivable.

NOTE 5. Payment of remaining closing costs related to stock
purchase/merger transaction.

-120-
<PAGE> 138

AMERICAN REALTY TRUST, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
Proforma Proforma
Historical Adjustments Combined
------------ ------------ ------------
(dollars in thousands, except per share)
<S> <C> <C> <C>
Income
Sales .............................. $ 28,883 $ -- $ 28,883
Rents .............................. 63,491 (467)(1) 63,024
Interest ........................... 188 334 (2) 522
Other .............................. (5,476) -- (5,476)
------------ ------------ ------------
87,086 (133) 86,953

Expenses
Cost of sales ...................... 24,839 -- 24,839
Property operations ................ 49,193 (132)(1) 49,061
Interest ........................... 51,624 -- 51,624
Advisory and servicing fees ........ 3,845 -- 3,845
General and administrative ......... 8,521 -- 8,521
Depreciation and amortization ...... 6,990 (37)(1) 6,953
Litigation settlement .............. 13,026 -- 13,026
Provision for loss on real estate .. 3,916 -- 3,916
Minority interest .................. 3,157 -- 3,157
------------ ------------ ------------
165,111 (169) 164,942
------------ ------------ ------------

(Loss) from operations ................... (78,025) 36 (77,989)

Equity in income of investees ............ 37,966 ((218)(3)) 37,458
((290)(4))

Gain on sale of real estate .............. 17,254 -- 17,254
------------ ------------

Net (loss) ............................... (22,805) (472) (23,277)

Preferred dividend requirement ........... (1,177) (230)(5) (1,407)
------------ ------------

Net (loss) applicable to Common shares ... $ (23,982) $ (702) $ (24,684)
============ ============ ============

Earnings per share

Net (loss) ............................... $ (2.24) $ (2.31)
============ ============

Weighted average Common shares used in
computing earnings per share ....... 10,695,388 10,695,388
============ ============
</TABLE>

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<PAGE> 139
AMERICAN REALTY TRUST, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

NOTE 1. Elimination of rents, operating expenses and depreciation of
Oak Tree Village sold to EQK for a $2,780,000 wraparound
mortgage note receivable.

NOTE 2. Interest income on $2,780,000 wraparound mortgage note
receivable which bears interest at 12% per annum and is
secured by Oak Tree Village.

NOTE 3. Equity in net loss of EQK for the year needed December 31,
1998 (pro forma net loss of $(444,000) times ART's ownership
percentage of 49%).

NOTE 4. Amortization of cost in excess of net book value of EQK
Shares acquired (pro forma net book value at December 31, 1998
of zero plus purchase price assigned to EQK investment of
$2,895,000 equals $2,895,000 or ART's excess of cost over net
book value of EQK Shares) amortized over 10 years.

NOTE 5. Dividend requirement on ART Preferred Shares (230,493 shares
times $1.00 per share).

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<PAGE> 140

EQK REALTY INVESTORS 1
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------
DISPOSITION PURCHASE OF
OF OAK TREE
ASSETS HISTORICAL THE CENTER (a) SUBTOTAL VILLAGE (b) PRO FORMA
--------- ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Investment in real estate $ -- $ -- $ -- $ 2,780 $ 2,780
Real estate held for sale 39,360 (39,360) -- -- --
Cash and cash equivalents:
Cash Management Agreement 3,390 (3,390) -- -- --
Other 471 (398) 73 -- 73
Accounts receivable and other assets
(net of allowance of $67 in the historical
presentation) 1,881 (1,881) -- -- --
--------- --------- --------- --------- ---------
TOTAL ASSETS $ 45,102 $ (45,029) $ 73 $ 2,780 $ 2,853
========= ========= ========= ========= =========
LIABILITIES AND DEFICIT IN SHAREHOLDERS'
EQUITY
Liabilities:
Mortgage note payable $ 43,794 $ (43,794) $ -- $ 2,780 $ 2,780
Term loan payable to bank 1,580 (1,580) -- -- --
Accounts payable and other liabilities (including
amounts due affiliates of $3,107 in the
historical presentation) 4,560 (4,487) 73 -- 73
--------- --------- --------- --------- ---------
49,934 (49,861) 73 2,780 2,853
Deficit in Shareholders' Equity:
Shares of beneficial interest, without par value: 135,875 (135,875) -- --(e) --
10,055,555 shares authorized 9,632,212
shares issued and outstanding in the
historical presentation and an unlimited
number of shares authorized,
10,306,188 shares issued and
outstanding in the pro forma
presentation
Accumulated deficit (140,707) 140,707 -- -- --
--------- --------- --------- --------- ---------
(4,832) 4,832 -- -- --
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND DEFICIT IN
SHAREHOLDERS' EQUITY $ 45,102 $ 45,029 $ 73 $ 2,780 $ 2,853
========= ========= ========= ========= =========
</TABLE>

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<PAGE> 141

EQK REALTY INVESTORS 1
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------------
DISPOSITION PURCHASE OF
OF THE OAK TREE
HISTORICAL CENTER(c) SUBTOTAL VILLAGE(d) PRO FORMA
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues from rental operations $ 6,191 $ (6,191) $ -- $ 346 $ 346
Operating expenses, net of tenant reimbursements
(including property management fees
earned by an affiliate of $228 in the
historical presentation and $24 in the pro 769 (769) -- 13 13
forma presentation)
Depreciation and amortization 588 (588) -- 92 92
----------- ----------- ----------- ----------- -----------
Income from rental operations 4,834 (4,834) -- 241 241
Interest expense 4,219 (4,219) -- 310 310
Other expenses, net of interest income (including
portfolio management fees earned by an
affiliate of $232 in the historical
presentation and $21 in the pro forma 465 (111) 354 21 375
presentation)
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 150 $ (504) $ (354) $ (90) $ (444)
=========== =========== =========== =========== ===========
Weighted average shares outstanding 9,505,222 -- 9,505,222 673,976 10,179,198
Net income (loss) per share $ 0.02 $ (0.04) $ (0.04)
=========== =========== =========== =========== ===========
</TABLE>

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<PAGE> 142

EQK REALTY INVESTORS I
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION

The Unaudited Pro Forma Balance Sheet as of December 31, 1998 and the Unaudited
Pro Forma Statement of Operations of the year ended December 31, 1998 is derived
from the historical Balance Sheet and Statement of Operations included herein
and in the Annual Report on Form 10-K for the year ended December 31, 1998.

The pro forma financial information should be read in conjunction with the
Trust's historical Financial Statements and Notes thereto contained herein and
in the Annual Report on Form 10-K for the year ended December 31, 1998. The pro
forma financial information does not purport to be indicative of the results of
operations or the financial position which would have actually resulted if the
sale transaction had been consummated on the date indicated. In addition, the
pro forma financial information does not purport to be indicative of the results
of operations or financial position which may be obtained in the future.

The Unaudited Pro Forma Adjustments are comprised of the following:

(a) The December 31, 1998 Unaudited Balance Sheet Pro Forma Adjustments
reflecting the disposition of the Center have assumed a sale price enabling
EQK to recover the carrying value of its remaining assets and settle all of
its liabilities. Such a sale price is not necessarily indicative of a sale
price that could be achieved through negotiation between parties in a sale
transaction. The Merger is conditioned upon, among other things, EQK's sale
of the Center and distributions of the remaining net proceeds to the EQK
shareholders. It is Management's intent to sell the Center and distribute
any remaining net proceeds.

(b) The December 31, 1998 Unaudited Balance Sheet Proforma Adjustments
reflecting EQK's acquisition of Oak Tree Village from ART reflect total
consideration for the acquisition of The Oak Tree Village of $2,780,046 and
the assumption of existing debt of $1,530,046 and a non-recourse promissory
note by EQK payable to ART in the amount of $1,250,000.

(c) The Unaudited Proforma Statement of Operations adjustments reflecting the
Disposition of The Center for the year ended December 31, 1998, consist of:
(i) the elimination of the results of operations of The Center; (ii) the
elimination of interest expense on the debt of EQK which will be repaid
with the proceeds from the sale of The Center; and (iii) an adjustment to
management fees resulting from the disposal of The Center.

(d) The Unaudited Proforma Statement of Operations adjustments reflecting the
acquisition of Oak Tree Village for the year ended December 31, 1998,
consist of: (i) the addition of the historical results of operations of Oak
Tree Village; (ii) the elimination of historical depreciation and
amortization of Oak Tree Village; (ii) the elimination of historical
depreciation and amortization of Oak Tree Village; (iii) the addition of
depreciation and amortization of the purchase price of Oak Tree Village
using the historical depreciation and amortization policies of EQK; and
(iv) the addition of interest expense related to debt assumed as part of
the acquisition of Oak Tree Village.

(e) In conjunction with the Merger, EQK will issue 673,976 EQK Shares to ART.
ART will issue to the Public EQK Shareholders, for each EQK Share currently
owned, $0.14 per EQK Share in the form of 0.01400 of an ART Preferred Share
with a Liquidation Value of $10.00 per share.

(f) Under the terms of the Advisory Agreement between EQK Realty Investors I
and Basic Capital Management, the Advisor will receive an asset management
fee of 0.75% per year of the gross asset value of the Trust.

-125-
<PAGE> 143
PLAN OF DISTRIBUTION

The Dealer Manager, an affiliate of ART and BCM, will distribute the EQK
Merger Consideration to EQK Shareholders residing in the states of Florida,
Kansas, Missouri, New Jersey, North Carolina, North Dakota and Vermont on ART's
behalf. The Merger Agent will distribute the EQK Merger Consideration to all
other EQK Shareholders on ART's behalf.

The Dealer Manager and the Merger Agent will be entitled to
indemnifications by ART against certain civil liabilities, including liabilities
under the Securities Act, or to contribution by ART to payments they may be
required to make in respect thereof. The Dealer Manager is an affiliate of ART
and may engage in transactions with, or perform services for ART in the ordinary
course of business.

LEGAL MATTERS

The validity of the shares of ART Preferred Shares offered hereby has been
passed upon for ART by Holt Ney Zatcoff & Wasserman, LLP, Atlanta, Georgia.
Certain matters in connection with the Merger will be passed upon for EQK by its
special Massachusetts counsel, Palmer & Dodge, Boston, Massachusetts. The
federal income tax consequences of the Merger have been passed upon by Andrews &
Kurth L.L.P., Dallas, Texas.

EXPERTS

The financial statements and schedules of ART included and incorporated by
reference in this Prospectus/Proxy Statement have been audited by BDO Seidman,
LLP, independent certified public accountants, to the extent and for the period
set forth in their reports appearing elsewhere herein and in the Registration
Statement, and such reports are included herein in reliance upon the authority
of said firm as experts in auditing and accounting.

The financial statements as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998 and the related financial
statement schedule as of December 31, 1998 of EQK included and incorporated by
reference in this Prospectus/Proxy Statement have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is included
and incorporated by reference herein (which report expresses an unqualified
opinion and includes an explanatory paragraph describing an uncertainty related
to the substantial doubt about EQK's ability to continue as a going concern),
and has been so included and incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.

The references to the Brown Appraisal in this Prospectus/Proxy Statement
have been included in this Prospectus/Proxy Statement in reliance upon the
authority of Brown & Associates as expert independent appraisers with respect to
the Oak Tree Village.

The references to the Blosser Survey in this Prospectus/Proxy Statement
have been included in this Prospectus/Proxy Statement in reliance upon the
authority of the Blosser Appraisal Company as an expert independent appraiser
for the Lubbock, Texas MSA.

-126-
<PAGE> 144
APPENDIX A

GLOSSARY OF SELECT TERMS

<TABLE>
<CAPTION>
TERM DEFINED AS (PART OF PROXY STATEMENT/PROSPECTUS)
---- -----------------------------------------------
<S> <C>
5% Holder............................................. Each EQK Shareholder holding 5% or more of the
issued and outstanding EQK Shares, excluding
LLPM, Summit, Sutter and Halperin (Summary)

ACMs.................................................. Asbestos-containing materials (Risk Factors)

ADA................................................... Americans with Disabilities Act of 1980 (Risk
Factors)

Advisor............................................... LLPM, in its capacity as advisor to EQK (Summary)

Adjusted Liquidation Value............................ The Liquidation Value plus the amount of any
accrued and unpaid dividends (Summary)

Advisory Agreement.................................... Agreement between LLPM and EQK, with LLPM as
EQK's Advisor (Summary)

Affiliated REITs...................................... CMET, IORI and TCI (The Business of ART)

Amended Declaration of Trust.......................... ART Realty Investors I Second Amended and
Restated Declaration of Trust (Summary)

ART Board............................................. Board of Directors of American Realty Trust, Inc.
(Prospectus Cover Pages)

ART Common Shares..................................... Shares of ART Common Stock (Prospectus Cover
Pages)

ART Designated Trustees............................... Persons designated by ART to become the New EQK
Board (The Board Election Proposal)

ART Form 10-K......................................... ART's Annual Report on Form 10-K for the year
ended December 31, 1997 (Summary)

ART Merger Consideration.............................. 673,976 EQK Shares ART will be entitled to
receive as consideration for the Merger
(Prospectus Cover Pages)

ART Newco............................................. ART Newco, LLC, a Massachusetts limited liability
company (Prospectus Cover Pages)

ART Preferred Shares.................................. ART's Series F Cumulative Convertible Preferred
Stock with a par value of $2.00 per share and a
stated Liquidation Value of $10.00 per share
(Prospectus Cover Pages)

ART Realty Investors I................................ The Trust (Summary)

ART................................................... American Realty Trust, Inc., a Georgia
corporation (Prospectus Cover Pages)

Avacelle.............................................. Avacelle, Inc. (The Board Election Proposal)

BCM................................................... Basic Capital Management, Inc., a Nevada
corporation and an affiliate of ART (Summary)
</TABLE>

-127-
<PAGE> 145

<TABLE>
<CAPTION>
TERM DEFINED AS (PART OF PROXY STATEMENT/PROSPECTUS)
---- -----------------------------------------------
<S> <C>
BCM Affiliates......................................... The affiliates of BCM (Summary)

Block Purchase......................................... ART's purchase of an aggregate of 4,376,056 EQK
Shares from LLPM, Summit, Sutter and Halperin,
pursuant to separate stock purchase agreements
(Prospectus Cover Pages)

Block Purchase Consideration........................... Consideration of 0.030 ART Preferred Shares paid
by ART to LLPM, Summit, Sutter or Halperin for
each EQK Share they respectively own (Prospectus
Cover Pages)

Blosser................................................ Blosser Appraisal (The Proposed Merger and
Related Matters)

Blosser Survey......................................... Survey of the Lubbock, Texas commercial real
estate market performed by Blosser (The Proposed
Merger and Related Matters)

Board Election Proposal................................ Proposal to elect specific members to the EQK
Board at the EQK Annual Meeting. The Board
Election Proposal will require the affirmative
vote of EQK Shareholders representing a majority
of the total votes authorized to be cast by EQK
Shares then outstanding which are present at the
EQK Annual Meeting in person or by proxy and
entitled to vote thereon (Summary)

Brown Appraisal........................................ Oak Tree Village appraisal by Brown & Associates
(The Proposed Merger and Related Matters)

Brown & Associates..................................... Unaffiliated third-party appraiser hired to
appraise the market value of Oak Tree Village
(The Proposed Merger and Related Matters)

Break-Up Consideration................................. $200,000 plus ART's share of transaction
expenses, paid by EQK to ART under certain
conditions if EQK elects not to proceed with the
Merger (Management's Discussion and Analysis of
Financial Condition and Results of Operations of
EQK)

Campbell Associates.................................... Campbell Center Associates, Ltd. (The Business of
ART)

Carmel, Ltd............................................ Carmel Realty Services, Ltd., an affiliate of BCM
(Description of ART)

Carmel Realty.......................................... Carmel Realty, Inc., owned by First Equity
(Description of ART)

Cash Distribution Agreement............................ July 15, 1998 agreement between NRLP, SAMLP and
the NRLP Oversight Committee (The Business of
ART)

Castleton.............................................. Castleton Park (The Business of EQK)

Center................................................. Harrisburg East Mall, EQK's only current real
estate investment (Summary)

CMET................................................... Continental Mortgage and Equity Trust, an
affiliate of ART (Incorporation of Certain
Information by Reference)

Code................................................... Internal Revenue Code of 1986 (Summary)

Commission............................................. Securities and Exchange Commission (Prospectus
Cover Pages)

Compass................................................ Compass Retail, Inc., a subsidiary of ERE (n/k/a
ERE Yarmouth Retail, Inc.) (Summary)
</TABLE>

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<PAGE> 146

<TABLE>
<CAPTION>
TERM DEFINED AS (PART OF PROXY STATEMENT/PROSPECTUS)
---- -----------------------------------------------
<S> <C>
Conversion Price..................................... The number of shares of ART Common Shares
obtained by multiplying the number of ART
Preferred Shares being converted by $10.00, then
adding all accrued and unpaid dividends, then
dividing such sum by (in most instances) 90% of
the simple average of the daily closing price of
the ART Common Shares for the 20 business days
ending on the last business day of the calendar
week immediately preceding the date of conversion
on the principal stock exchange on which such ART
Common Shares are then listed. (Summary)

Declaration Amendment Proposal....................... Proposal to amend and restate the Declaration of
Trust (Summary)

Dealer Manager....................................... Interfirst Capital Corporation, a California
corporation and an affiliate of ART and BCM
(Summary)

Declaration of Trust................................. EQK's Amended and Restated Declaration of Trust,
dated February 27, 1985, as amended on March 5,
1986 (Summary)

Director Plan........................................ ART's Director Stock Option Plan, approved in
January 1999 (Executive Compensation of ART)

duPont............................................... E.I. duPont de Nemours Co. Inc. Trust Fund
(Summary)

Effective Time....................................... The time at which the Merger is filed on a
Certificate of Merger with the Secretary of State
of the Commonwealth of Massachusetts (Summary)

EQK Annual Meeting................................... Annual Meeting of the EQK Shareholders to be held
on __________ ___, 1999 (Prospectus Cover Pages)

EQK Board............................................ EQK's Board of Trustees (Prospectus Cover Page)

EQK Form 10-K........................................ EQK's Annual Report on Form 10-K for the year
ended December 31, 1997 (Summary)

EQK Merger Consideration............................. Consideration for the Merger, payable to each EQK
Shareholder consisting of 0.014 of an ART
Preferred Share with a Liquidation Value for such
portion of a share of $0.14 (Prospectus Cover
Pages)

EQK Record Date...................................... May 20, 1999 (Prospectus Cover Pages)

EQK Shareholders..................................... Holders of EQK Shares (Prospectus Cover Pages)

EQK Shares........................................... Shares of beneficial interest of EQK, par value
of $0.01 per share (Prospectus Cover Pages)

EQK.................................................. EQK Realty Investors I, a Massachusetts business
trust (Prospectus Cover Pages)

Equitable............................................ The Equitable Life Assurance Society of the
United States, former owner of Compass and LLPM
(Summary)
</TABLE>

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<PAGE> 147

<TABLE>
<CAPTION>
TERM DEFINED AS (PART OF PROXY STATEMENT/PROSPECTUS)
---- -----------------------------------------------
<S> <C>
ERE.................................................. Equitable Real Estate Investment Management,
Inc., current owner of LLPM and Compass (Summary)

Exchange Act......................................... Securities Exchange Act of 1934, as amended
(Available Information)

Expense Sharing Agreement............................ Agreement whereby each of ART and EQK will share
the costs and expenses associated with the Merger
(The Proposed Merger and Related Matters)

Financial Advisor.................................... The independent financial advisor engaged by the
EQK Board (Summary)

First Equity......................................... First Equity Properties, Inc. (The Board Election
Proposal)

GCLP................................................. Garden Capital, L.P., a Delaware limited
partnership in which NOLP owns a 99.3% limited
partner interest (The Business of ART)

Greenspring.......................................... Greenspring Fund, Incorporated (Summary)

Halperin............................................. Maurice A. Halperin (Prospectus Cover Pages)

Halperin Purchase.................................... Halperin's purchase of 854,200 EQK Shares during
the period from December 26, 1997 through January
20, 1998 (Summary)

Harrisburg M.S.A..................................... Harrisburg Metropolitan Statistical Area
(Description of the Harrisburg East Mall)

IGI Properties....................................... Twenty-nine apartment complexes in Florida and
Georgia, purchased by ART in April 1998 (The
Business of ART)

Independent Appraiser................................ Unaffiliated third-party appraiser hired by EQK
to appraise the market value of the Center
(Description of the Harrisburg East Mall)

Independent Trustee.................................. Trustee unaffiliated with ART or its Affiliates
(The Board Election Proposal)

IORI................................................. Income Opportunity Realty Investors, Inc., an
affiliate of ART (Incorporation of Certain
Information by Reference)

ITAA................................................. Information Technology Association of America
(ART Management's Discussion and Analysis of
Financial Condition and Results of Operations of
ART)

Lender............................................... Midland Loan Services (The Proposed Merger and
Related Matters)

Letter of Intent..................................... Non-binding agreement entered into by EQK and a
prospective buyer of the Center (Summary)

Liquidation Value.................................... $10.00 per ART Preferred Share (Prospectus Cover
Pages)

LLPM................................................. Lend Lease Portfolio Management, Inc., EQK's
Advisor (Prospectus Cover Pages)

LLPM/ART Stock Purchase Agreement.................... Amended and Restated Stock Purchase Agreement
between LLPM and ART, dated 8/25/98 (Summary)

MACRS................................................ Modified Accelerated Cost Recovery System (The
Business of ART)
</TABLE>

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<PAGE> 148

<TABLE>
<CAPTION>
TERM DEFINED AS (PART OF PROXY STATEMENT/PROSPECTUS)
---- -----------------------------------------------
<S> <C>
May Company............................................ May Department Stores Co. (Description of the
Harrisburg East Mall)

Merger................................................. The merger of ART Newco with and into EQK, with
EQK being the surviving entity (Prospectus Cover
Pages)

Merger Agent........................................... American Stock Transfer and Trust Company (The
Proposed Merger and Related Matters)

Merger Agreement....................................... Amended and Restated Agreement and Plan of
Merger, dated as of August 25, 1998 among ART,
ART Newco, BCM, EQK and LLPM (Prospectus Cover
Pages)

Merger Consideration................................... The ART Merger Consideration and the EQK Merger
Consideration (Prospectus Cover Pages)

Merger Proposal........................................ Proposal for the Merger to be voted on at the EQK
Annual Meeting, requiring Requisite Shareholder
Approval (Summary)

Merger-Related Proposals............................... The Merger Proposal, the Declaration Amendment
Proposal and the New Advisory Agreement Proposal,
all of which are subject to Requisite Shareholder
Approval (Summary)

Merger................................................. The merger of ART Newco with and into EQK, with
EQK being the surviving entity (Prospectus Cover
Pages)

Moorman Settlement Agreement........................... An agreement settling a class action lawsuit as
to Gene E. Phillips, William S. Friedman, SAMLP,
NRLP and NOLP (The Business of ART)

Mortgage Note.......................................... EQK's mortgage note with Prudential (The Business
of EQK)

Mortgage Note Lender................................... Prudential Insurance Company of America (The
Business of EQK)

MSA.................................................... Metropolitan statistical area (The Proposed
Merger and Related Matters)

Nanook Limited Partner................................. A limited partner in Nanook Partners, L.P., a
limited partnership that owns approximately 15.6%
of the outstanding shares of ART's Common Stock
(The Business of ART).

Negative Determination................................. Determination by the EQK Board that it can no
longer recommend the approval of the
Merger-Related Proposals to the EQK Shareholders
(Summary)

New EQK Board.......................................... The three member board of trustees of EQK
consisting of the ART Designated Trustees (The
Board Election Proposal)

New Advisor............................................ BCM, under the New Advisory Agreement (Summary)

New Advisory Agreement................................. Agreement which replaces the Advisory Agreement
and makes BCM EQK's New Advisor (Summary)

NIRT................................................... National Income Realty Trust (The Board Election
Proposal)

New Advisory Agreement Proposal........................ Proposal to terminate the Advisory Agreement and
institute the New Advisory Agreement with BCM as
the New Advisor to EQK (Summary)
</TABLE>

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<PAGE> 149

<TABLE>
<CAPTION>
TERM DEFINED AS (PART OF PROXY STATEMENT/PROSPECTUS)
---- -----------------------------------------------
<S> <C>
NMC..................................................... NRLP Management Corp., a wholly-owned subsidiary
of ART (The Board Election Proposal)

NOLP.................................................... National Operating, L.P. (The Board Election
Proposal)

NOLs.................................................... Net operating losses (Summary)

Note.................................................... A non-recourse promissory note by EQK payable to
ART with respect to Oak Tree Village in the
amount of $1,250,000 that shall bear interest at
a rate of 12% per annum and shall be payable
quarterly in installments of interest only over a
term of five years with a final principal payment
being due on December 15, 2003 (The Proposed
Merger and Related Matters)

NRLP Oversight Committee................................ Oversight committee for NRLP created by the
Moorman Settlement Agreement (The Business of
ART)

NRLP.................................................... National Realty, L.P., an affiliate of ART
(Incorporation of Certain Information by
Reference)

NYSE.................................................... New York Stock Exchange (Prospectus Cover Pages)

NYSE Rules.............................................. NYSE's published guidelines (Summary)

Oak Tree Village........................................ Oak Tree Village Shopping Center, located in
Lubbock, Texas (Summary)

Original Merger Agreement............................... Agreement and Plan of Merger by and among ART,
ART Newco, BCM, EQK, Equity Realty Portfolio
Management, Inc. and Compass dated December 23,
1997 (Summary)

OTC Bulletin Board...................................... Over-the-Counter Bulletin Board (Summary)

Ownership Limit......................................... Specific provisions in the Declaration Amendment
Proposal restricting the ownership of more than
4.9% of the outstanding EQK Shares by any single
EQK Shareholder, other than ART (Summary)

Peachtree............................................... Peachtree Dunwoody Pavilion (The Business of EQK)

Plan.................................................... 1997 ART Stock Option Plan (Description of ART)

Property Manager........................................ LaSalle Partners Management, Inc. (successor to
ERE Yarmouth Retail, Inc.) (The Business of EQK)

Proposals............................................... The Merger Proposal, the Declaration Amendment
Proposal, the New Advisory Agreement Proposal and
the Board Election Proposal (Summary)

Proxy Solicitor......................................... Shareholder Communications Corporation (The EQK
Annual Meeting)

Prudential.............................................. Prudential Insurance Company of America (Summary)

Prudential Warrants..................................... Prudential's warrants to purchase 367,868 EQK
Shares (Summary)

Public EQK Shareholders................................. The EQK Shareholders other than ART and its
affiliates, LLPM, Summit, Sutter and Halperin
(Prospectus Cover Pages)
</TABLE>

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<PAGE> 150

<TABLE>
<CAPTION>
TERM DEFINED AS (PART OF PROXY STATEMENT/PROSPECTUS)
---- -----------------------------------------------
<S> <C>
PWSI.................................................... Pizza World Supreme, Inc., a wholly-owned
subsidiary of ART (Summary)

Quarterly Dividend Payment Rate......................... A cumulative, compounded dividend per ART
Preferred Share equal to 10% per annum of the
Accumulated Liquidation Value, payable quarterly
on the 15th day of the month following the end of
each calendar quarter (Summary)

Redeemable General Partner Interest..................... SAMLP's general partner interest in NOLP and NRLP
(The Business of ART)

Reform Act.............................................. Private Securities Litigation Reform Act of 1995
(Prospectus Cover Pages)

Registration Statement.................................. ART's Registration Statement on Form S-4,
Registration Statement No. 333-43777 (Prospectus
Cover Pages)

REIT.................................................... Real Estate Investment Trust (Summary)

Requisite Shareholder Approval.......................... Affirmative vote of EQK Shareholders representing
three-quarters of the total votes authorized to
be cast by EQK Shares then outstanding (Summary)

RTC..................................................... Resolution Trust Corporation (Risk Factors)

SAMI.................................................... Syntek Asset Management, Inc. (The Board Election
Proposal)

SAMLP................................................... Syntek Asset Management, L.P. (Description of
ART)

San Jacinto............................................. San Jacinto Savings Association (Risk Factors)

Securities Act.......................................... Securities Act of 1933, as amended (Prospectus
Cover Pages)

Selling Shareholders.................................... LLLP, Summit, Sutter and Halprin (Management's
Discussion and Analysis of Financial Conditions
and Results of Operations of EQK)

Series A Preferred Stock................................ ART's Series A Cumulative Participating Preferred
Stock (Description of the Capital Stock of ART)

Series D Preferred Stock................................ ART's Series D Cumulative Preferred Stock
(Description of the Capital Stock of ART)

Series E Preferred Stock................................ ART's Series E Cumulative Convertible Preferred
Stock (Description of the Capital Stock of ART)

Series G Preferred Stock................................ ART's Series G Cumulative Convertible Preferred
Stock (Description of the Capital Stock of ART)

Series H Preferred Stock................................ ART's Series H Cumulative Convertible Preferred
Stock (Description of the Capital Stock of ART)

Southmark............................................... Southmark Corporation (Risk Factors)

Special Stock........................................... 20,000,000 Shares of a special class of ART
stock, $2.00 per value per share (Description of
the Capital Stock of ART)

Special Meeting......................................... February 23, 1999 Meeting of the EQK Shareholders
(Summary)
</TABLE>

-133-
<PAGE> 151

<TABLE>
<CAPTION>
TERM DEFINED AS (PART OF PROXY STATEMENT/PROSPECTUS)
---- -----------------------------------------------
<S> <C>
Standstill Agreement...................................... Agreement with each 5% Holder (other than LLPM
and Greenspring) whereby ART would pay $0.10 per
existing EQK Share held by the two remaining 5%
Holders (paid on a maximum of 2,156,600 shares or
a maximum of $215,660 in cash) as compensation
for such holder's agreement not to sell any of
its EQK Shares or acquire any additional EQK
Shares for a period of 42 months after the
consummation of the Merger.

Summit.................................................... Summit Ventures, L.P. (Prospectus Cover Pages)

Summit/Sutter Purchases................................... Summit and Sutter's purchase of an aggregate of
1,252,500 EQK Shares (Summary)

Sutter.................................................... Sutter Opportunity Fund, LLC (Prospectus Cover)

Tax Counsel............................................... Andrews & Kurth L.L.P.

Term Loan................................................. EQK loan in place from December 15, 1992 with PNC
as the lender (The Business of EQK)

Term Loan Lender.......................................... PNC Bank Corp. (The Business of EQK)

TIN....................................................... Tax Identification Number (The Proposed Merger
and Related Matters)

Trust..................................................... ART Realty Investors I, the surviving entity of
the Merger (Prospectus Cover Pages)

Trustee................................................... A member of the EQK Board of Trustee (Summary)

Unaffiliated Trustee...................................... Trustees unaffiliated with EQK or LLPM under the
Declaration of Trust (Description of EQK)

VPT....................................................... Vinland Property Trust (Board Election Proposal)

Y2K....................................................... Year 2000 compliance issue (Management's
Discussion and Analysis of Financial Condition
and Results of Operations of EQK)
</TABLE>

-134-
<PAGE> 152
INDEX TO FINANCIAL STATEMENTS

FINANCIAL STATEMENTS OF AMERICAN REALTY TRUST, INC.:

Report of Independent Certified Public Accountants..............................................................F-2

Consolidated Balance Sheets -
December 31, 1998 and 1997...................................................................................F-3

Consolidated Statements of Operations -
Years Ended December 31, 1998, 1997 and 1996................................................................F-4

Consolidated Statements of Stockholders' Equity -
Years Ended December 31, 1998, 1997 and 1996.................................................................F-5

Consolidated Statements of Cash Flows -
Years Ended December 31, 1998, 1997 and 1996.................................................................F-7

Notes to Consolidated Financial Statements.....................................................................F-10

FINANCIAL STATEMENTS OF EQK REALTY INVESTORS I:

Report of Independent Certified Public Accountants.............................................................F-41

Balance Sheets at December 31, 1998 and 1997...................................................................F-42

Statements of Operations -
Years Ended December 31, 1998, 1997 and 1996................................................................F-43

Statements of Shareholders' Deficit -
Years Ended December 31, 1998, 1997 and 1996................................................................F-44

Statements of Cash Flows -
Years Ended December 31, 1998, 1997 and 1996................................................................F-45

Notes to Financial Statements, including
Supplementary Data..........................................................................................F-46

Financial Statement Schedule...................................................................................F-55
</TABLE>

All other schedules are omitted because they are not required, are not
applicable or the information required is included in the Financial Statements
or the notes thereto.

F-1

<PAGE> 153

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors of
American Realty Trust, Inc.

We have audited the accompanying consolidated balance sheets of American
Realty Trust, Inc. and Subsidiaries as of December 31, 1998 and 1997 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
American Realty Trust, Inc. and Subsidiaries as of December 31, 1998 and 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.

BDO Seidman, LLP

Dallas, Texas

March 30, 1999

F-2

<PAGE> 154

AMERICAN REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1997
------------ ------------
(dollars in thousands, except per share)
<S> <C> <C>
Assets
Notes and interest receivable
Performing (including $594 in 1998 and $1,307 in 1997 from affiliate) ...................... $ 47,823 $ 9,300
Nonperforming, nonaccruing ................................................................. 6,807 18,624
------------ ------------
54,630 27,924

Less - allowance for estimated losses ......................................................... (2,577) (2,398)
------------ ------------
52,053 25,526

Real estate held for sale ..................................................................... 282,301 178,938
Real estate held for investment net of accumulated depreciation ($208,396 in 1998
and $5,380 in 1997 ) ....................................................................... 452,606 123,515
Pizza parlor equipment, net of accumulated depreciation ($1,464 in 1998
and $905 in 1997) .......................................................................... 6,859 6,693
Marketable equity securities, at market value ................................................. 2,899 6,205
Cash and cash equivalents ..................................................................... 11,523 5,347
Investments in equity investees ............................................................... 34,433 45,851
Intangibles, net of accumulated amortization ($1,298 in 1998 and
$704 in 1997) .............................................................................. 14,776 15,230
Other assets .................................................................................. 61,155 26,494
------------ ------------
$ 918,605 $ 433,799
============ ============

Liabilities and Stockholders' Equity
Liabilities
Notes and interest payable ($12,600 in 1998 and $11,400 in 1997
to affiliates) ............................................................................. $ 768,272 $ 261,986
Margin borrowings ............................................................................. 35,773 53,376
Accounts payable and other liabilities (including $8,900 in 1998 and $22,900
in 1997 to affiliate) ...................................................................... 38,321 34,442
------------ ------------
842,366 349,804

Minority interest ............................................................................. 37,967 20,542
Commitments and contingencies
Stockholders' equity
Preferred Stock, $2.00 par value, authorized 20,000,000 shares, issued and outstanding
Series B, 4,000 shares in 1997 ............................................................. -- 8
Series C, 16,681 shares in 1997 ............................................................ -- 33
Series F, 3,350,000 shares in 1998 and 2,000,000 in 1997
(liquidation preference $33,500) ...................................................... 6,100 4,000
Series G, 1,000 shares in 1998 (liquidation preference $100) ............................... 2 --
Common Stock, $.01 par value, authorized 100,000,000 shares; issued 13,298,802
shares in 1998 and 13,479,348 in 1997 ...................................................... 133 135
Paid-in capital ............................................................................... 83,945 84,943
Accumulated (deficit) ......................................................................... (51,880) (25,638)
Treasury stock at cost, 2,737,216 shares in 1998 and 2,767,427 shares in 1997 ................. (28) (28)
------------ ------------
38,272 63,453
------------ ------------
$ 918,605 $ 433,799
============ ============
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-3

<PAGE> 155
AMERICAN REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
(dollars in thousands, except per share)
<S> <C> <C> <C>
Income
Sales .......................................................................... $ 28,883 $ 24,953 $ 14,386
Rents .......................................................................... 63,491 29,075 20,658
Interest (including $39 in 1998, $230 in 1997, and $539 in 1996 from
affiliates) ................................................................. 188 2,835 4,751
Other .......................................................................... (5,476) 168 1,727
------------ ------------ ------------
87,086 57,031 41,522

Expenses
Cost of sales .................................................................. 24,839 19,964 11,036
Property operations ($1,752 in 1998, $865 in 1997 and $892 in 1996
to affiliates) .............................................................. 49,193 24,195 15,874
Interest ($1,082 in 1998, $433 in 1997 and $418 in 1996
to affiliates) .............................................................. 51,624 30,231 16,489
Advisory and servicing fees to affiliate ....................................... 3,845 2,657 1,539
General and administrative ($1,832 in 1998, $1,809 in 1997 and $691
in 1996 to affiliate) ....................................................... 8,521 7,779 3,930
Depreciation and amortization .................................................. 6,990 3,542 2,367
Litigation Settlement .......................................................... 13,026 -- --
Provision for loss on real estate .............................................. 3,916 -- --
Minority interest .............................................................. 3,157 1,884 1,366
------------ ------------ ------------
165,111 90,252 52,601
------------ ------------ ------------

(Loss) from operations ............................................................ (78,025) (33,221) (11,079)
Equity in income of investees ..................................................... 37,966 10,497 1,485
Gain on sale of real estate ....................................................... 17,254 20,296 3,659
------------ ------------ ------------

(Loss) before income taxes ........................................................ (22,805) (2,428) (5,935)
Income tax expense ................................................................ -- -- --
------------ ------------ ------------
(Loss) before extraordinary gain .................................................. (22,805) (2,428) (5,935)
Extraordinary gain ................................................................ -- -- 381
------------ ------------ ------------

Net (loss) ........................................................................ (22,805) (2,428) (5,554)
Preferred dividend requirement .................................................... (1,177) (206) (113)
------------ ------------ ------------

Net (loss) applicable to Common shares ............................................ $ (23,982) $ (2,634) $ (5,667)
============ ============ ============

Earnings per share
(Loss) before extraordinary gain .................................................. $ (2.24) $ (.22) $ (.46)
Extraordinary gain ................................................................ -- -- .03
------------ ------------ ------------

Net (loss) applicable to Common shares ............................................ $ (2.24) $ (.22) $ (.43)
============ ============ ============

Weighted average Common shares used in computing earnings per share ............... $ 10,695,388 $ 11,710,013 $ 12,765,082
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-4

<PAGE> 156

AMERICAN REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Series B Series C Series F Series G
Preferred Preferred Preferred Preferred Common Treasury Paid-in Accumulated Stockholders'
Stock Stock Stock Stock Stock Stock Capital (Deficit) Equity
--------- --------- --------- -------- --------- ------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 ... $ -- $ -- $ -- $ -- $ 117 $ -- $ 66,661 $ (13,720) $ 53,058
Common Stock issued ........ -- -- -- -- 18 -- (18) -- --
Series B Preferred Stock
issued ................ 8 -- -- -- -- -- 392 -- 400
Series C Preferred Stock
issued ................ -- 30 -- -- -- -- 1,469 -- 1,469
Common Stock cash
dividend ($.15 per
share) ................ -- -- -- -- -- -- -- (1,491) (1,491)
Redemption of share
purchase rights ($.01
per right) ............ -- -- -- -- -- -- -- (101) (101)
Series B Preferred Stock
cash dividend ($6.46
per share) ............ -- -- -- -- -- -- -- (25) (25)
Series C Preferred Stock
stock dividend ($5.74
per share) ............ -- 2 -- -- -- -- 85 (87) --
Treasury stock, at
cost .................. -- -- -- -- -- (6) 6 -- --
Net (loss) ................. -- -- -- -- -- -- -- (5,554) (5,554)
--------- --------- --------- -------- --------- ------- --------- --------- ---------

Balance, December 31,
1996 .................. 8 32 -- -- 135 (6) 68,595 (20,978) 47,786
Series F Preferred Stock
issued ................ -- -- 4,000 -- -- -- 16,000 -- 20,000
Common Stock cash
dividend
($.20 per share) ...... -- -- -- -- -- -- -- (2,026) (2,026)
Series B Preferred Stock
cash dividend ($10.00
per share) ............ -- -- -- -- -- -- -- (40) (40)
Series C Preferred Stock,
stock and cash
dividend ($10.00
per share) ............ -- 1 -- -- -- -- 81 (166) (84)
Sale of Common Stock ....... -- -- -- -- -- -- 245 -- 245
Treasury stock, at
cost .................. -- -- -- -- -- (22) 22 -- --
Net (loss) ................. -- -- -- -- -- -- -- (2,428) (2,428)
--------- --------- --------- -------- --------- ------- --------- --------- ---------
</TABLE>

F-5

<PAGE> 157
AMERICAN REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Continued

<TABLE>
<CAPTION>
Series B Series C Series F Series G
Preferred Preferred Preferred Preferred Common Treasury Paid-in Accumulated Stockholders'
Stock Stock Stock Stock Stock Stock Capital (Deficit) Equity
--------- --------- --------- -------- --------- ------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1997 .................. 8 33 4,000 -- 135 (28) 84,943 (25,638) 63,453
Repurchase of Common
Stock issued ........ -- -- -- -- (2) -- (267) -- (269)
Series G Preferred Stock ... -- -- -- 2 -- -- 98 -- 100
issued
Series F Preferred Stock
issued ................ -- -- 2,100 -- -- -- 529 -- 2,629
Common Stock cash dividend
($.20 per share) ...... -- -- -- -- -- -- -- (2,261) (2,261)
Series B Preferred Stock
cash dividend ($2.50
per share) ............ -- -- -- -- -- -- -- (54) (54)
Series C Preferred Stock
cash dividend ($7.50
per share) ............ -- -- -- -- -- -- -- (148) (148)
Series F Preferred Stock
cash dividend ($.625
per share) ............ -- -- -- -- -- -- -- (966) (966)
Series G Preferred Stock
cash dividend ($7.50
per share) ............ -- -- -- -- -- -- -- (8) (8)
Sale of Common Stock
under dividend
reinvestment plan ..... -- -- -- -- -- -- 224 -- 224
Conversion of Series B
Preferred Stock to
Common Stock .......... (8) -- -- -- -- -- 53 -- 45
Series C Preferred Stock
redeemed .............. -- (33) -- -- -- -- (1,635) -- (1,668)
Net (loss) ................. -- -- -- -- -- -- -- (22,805) (22,805)
--------- --------- --------- -------- --------- ------- --------- --------- ---------
Balance, December 31,
1998 .................. $ -- $ -- $ 6,100 $ 2 $ 133 $ (28) $ 83,945 $ (51,880) $ 38,272
========= ========= ========= ======== ========= ======= ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-6

<PAGE> 158

AMERICAN REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For The Years Ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities
Pizza parlor sales collected ............................................ $ 28,173 $ 24,953 $ 14,386
Rents collected ......................................................... 64,029 28,199 19,013
Interest collected ($262 in 1997 and $385 in 1996
from affiliates) ..................................................... 188 2,592 4,331
Distributions from equity investees' operating activities ............... 10,274 5,689 9,054
Interest paid ........................................................... (34,139) (19,092) (9,640)
Payments for property operations ($1,752 in 1998, $865 in 1997
and $892 in 1996 to affiliate) ....................................... (42,551) (22,821) (15,034)
Payments for pizza parlor operations .................................... (25,765) (19,964) (11,036)
Advisory fee paid to affiliate .......................................... (3,845) (2,657) (1,539)
Distributions to minority interest holders .............................. (3,157) (2,088) (1,366)
Purchase of marketable equity securities ................................ (7,670) (15,147) (22,613)
Proceeds from sale of marketable equity securities ...................... 5,502 10,588 23,557
General and administrative expenses paid ($1,832 in 1998, $1,809
in 1997 and $691 in 1996 to affiliate) ............................... (8,489) (7,764) (4,313)
Other ................................................................... (5,538) (537) (642)
------------ ------------ ------------

Net cash provided by (used in) operating activities ..................... (22,988) (18,049) 4,158

Cash Flows From Investing Activities
Collections on notes receivable ($3,503 in 1997 and $1,166
in 1996 from affiliates) ............................................. 3,121 4,489 1,495
Proceeds from sale of notes receivable .................................. 599 16,985 --
Notes receivable funded ................................................. (594) (8,716) (250)
Proceeds from sale of real estate ....................................... 51,602 38,169 7,718
Contributions from minority interest holders ............................ -- 9,799 2,571
Distributions from equity investees activities .......................... 14,429 -- --
Acquisitions of real estate ............................................. (106,884) (123,074) (41,636)
Real estate improvements ................................................ (4,070) (10,993) (2,862)
Pizza parlor equipment purchased ........................................ (166) (2,695) (2,942)
Earnest money deposits .................................................. (577) (6,221) 577
Investment in real estate investees ..................................... (6,116) (1,331) (15,471)
------------ ------------ ------------

Net cash (used in) investing activities .............................. (48,656) (83,588) (50,800)

Cash Flows From Financing Activities
Proceeds from notes payable ............................................. 237,895 161,103 86,490
Margin borrowings (payments), net ....................................... (21,908) 8,914 2,981
Proceeds from issuance of Preferred Stock ............................... -- -- 400
Payments on notes payable ............................................... (120,394) (81,639) (30,003)
Deferred borrowing costs ................................................ (10,156) (5,174) (5,028)
Net advances (payments) to/from affiliates .............................. (2,913) 23,274 (4,979)
Redemption of Preferred Stock ........................................... (1,668) -- --
Sale of Common Stock under dividend reinvestment plan ................... 224 -- --
Dividends ............................................................... (3,260) (2,150) (1,617)
------------ ------------ ------------

Net cash provided by financing activities ............................... 77,820 104,328 48,244
------------ ------------ ------------
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-7

<PAGE> 159

AMERICAN REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

<TABLE>
<CAPTION>
For The Years Ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C>
Net increase in cash and cash equivalents ................................. $ 6,176 $ 2,691 $ 1,602
Cash and cash equivalents, beginning of year .............................. 5,347 2,656 1,054
------------ ------------ ------------

Cash and cash equivalents, end of year .................................... $ 11,523 $ 5,347 $ 2,656
============ ============ ============

Reconciliation of net (loss) to net cash provided by (used in)
operating activities
Net (loss) ................................................................ $ (22,805) $ (2,428) $ (5,554)
Adjustments to reconcile net (loss) to net cash provided by (used in)
operating activities
Extraordinary gain .............................................. -- -- (381)
Gain on sale of real estate ..................................... (17,254) (20,296) (3,659)
Depreciation and amortization ................................... 6,990 3,542 2,367
Amortization of deferred borrowing costs ........................ 8,916 4,042 2,692
Provision for loss .............................................. 3,916 -- --
Litigation settlement ........................................... 13,076 -- --
Equity in (income) losses of investees .......................... (37,966) (10,497) (1,485)
Distributions from equity investees' operating activities ....... 10,274 5,689 9,054
Increase (decrease) in marketable equity securities ............. (3,306) (4,559) 944
(Increase) decrease in accrued interest receivable .............. (2,269) 66 (117)
(Increase) decrease in other assets ............................. 20,201 634 (4,103)
Increase in accrued interest payable ............................ 2,537 1,019 1,417
Increase in accounts payable and other liabilities .............. (5,716) 4,978 2,908
Other ........................................................... 418 (239) 75
------------ ------------ ------------

Net cash provided by (used in) operating activities .......... $ (22,988) $ (18,049) $ 4,158
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-8

<PAGE> 160

AMERICAN REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

<TABLE>
<CAPTION>
For The Years Ended December 31,
----------------------------------
1998 1997 1996
--------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C>
Schedule of noncash investing and financing activities
Notes payable from acquisition of real estate ..................... $ 45,632 $ 44,151 $ 9,099
Stock dividends on Series C Preferred Stock ........................ -- 82 31
Issuance of Series G Preferred Stock ............................... 100 -- --
Series F Preferred Stock issued for real estate .................... 2,100 20,000 --
Dividend obligation on conversion of Series F Preferred Stock ...... 134 -- --
Current value of property obtained through foreclosure of note
receivable ...................................................... 20,985 20,226 --
Note receivable cancelled on acquisition of property ............... 1,300 2,737 --
Issurance of partnership units ..................................... 24,474 -- --
Note payable assumed on property obtained through foreclosure ...... -- 11,867 --
Carrying value of real estate exchanged ............................ -- 7,882 --
Notes payable from acquisition of minority interest in subsidiary .. -- 5,000 --
Conversion of Series B Preferred Stock into
Common Stock .................................................... 45 -- --

Consolidation of National Realty, L.P. ....................................
Carrying value of notes receivable ................................. 52,168 -- --
Carrying value of real estate ...................................... 228,042 -- --
Carrying value of investment in equity investee eliminated ......... 41,182 -- --
Carrying value of other assets ..................................... 32,571 -- --
Carrying value of minority interest ................................ 15,600 -- --
Carrying value of the Company Common
Stock eliminated ................................................ 269 -- --
Carrying value of notes and interest payable ....................... 295,743 -- --
Carrying value of accounts payable and other liabilities ........... 751 -- --

Acquisition of IGI properties
Carrying value of real estate ...................................... 51,820 -- --
Issuance of partnership units ...................................... 6,568 -- --
Carrying value of other assets ..................................... (1,122) -- --
Carrying value of notes payable and other liabilities .............. 43,713 -- --
Investment in partnerships ......................................... 1,980 -- --

Acquisition of Pizza World Supreme, Inc. ..................................
Carrying value of intangible ....................................... -- -- 9,768
Carrying value of pizza parlor equipment ........................... -- -- --
Carrying value of note receivable retired .......................... -- -- 10,286
Carrying value of accounts payable and other liabilities ........... -- -- 2,834
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

F-9

<PAGE> 161

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying Consolidated Financial Statements of American Realty
Trust, Inc. and consolidated entities (the "Company") have been prepared in
conformity with generally accepted accounting principles, the most significant
of which are described in NOTE 1. "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES."
These, along with the remainder of the Notes to Consolidated Financial
Statements, are an integral part of the Consolidated Financial Statements. The
data presented in the Notes to Consolidated Financial Statements are as of
December 31 of each year and for the year then ended, unless otherwise
indicated. Dollar amounts in tables are in thousands, except per share amounts.

Certain balances for 1996 and 1997 have been reclassified to conform to the
1998 presentation. Shares and per share data have been restated for a 2 for 1
forward Common Stock split effected February 17, 1997.

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and company business. American Realty Trust, Inc. ("ART"), a
Georgia corporation, is successor to a District of Columbia business trust, that
primarily invests in real estate and real estate-related entities and purchases
and originates mortgage loans.

Basis of consolidation. The Consolidated Financial Statements include the
accounts of ART, and all controlled subsidiaries and partnerships other than
National Realty, L.P. ("NRLP") prior to December 31, 1998. The Company used the
equity method to account for its investment in NRLP prior to December 31, 1998.
See NOTE 2. "SYNTEK ASSET MANAGEMENT, L.P." All significant intercompany
transactions and balances have been eliminated.

Accounting estimates. In the preparation of the Company's Consolidated
Financial Statements in conformity with generally accepted accounting principles
it was necessary for management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the Consolidated Financial Statements and
the reported amounts of revenues and expense for the year then ended. Actual
results could differ from these estimates.

Interest recognition on notes receivable. It is the Company's policy to
cease recognizing interest income on notes receivable that have been delinquent
for 60 days or more. In addition, accrued but unpaid interest income is only
recognized to the extent that the net realizable value of the underlying
collateral exceeds the carrying value of the receivable.

Allowance for estimated losses. Valuation allowances are provided for
estimated losses on notes receivable considered to be impaired. Impairment is
considered to exist when it is probable that all amounts due under the terms of
the note will not be collected. Valuation allowances are provided for estimated
losses on notes receivable to the extent that the Company's investment in the
note exceeds management's estimate of fair value of the collateral securing such
note.

Real estate held for investment and depreciation. Real estate held for
investment is carried at cost. Statement of Financial Accounting Standards No.
121 ("SFAS No. 121") requires that a property be considered impaired, if the sum
of the expected future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the property. If impairment exists, an
impairment loss is recognized by a charge against earnings, equal to the amount
by which the carrying amount of the property exceeds the fair value of the
property. If impairment of a property is recognized, the carrying amount of the
property is reduced by the amount of the impairment, and a new cost for the
property is established. Such new cost is depreciated over the property's
remaining useful life. Depreciation is provided by the straight-line method
over estimated useful lives, which range from 10 to 40 years.

F-10

<PAGE> 162
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Real estate held for sale. Foreclosed real estate is initially recorded at
new cost, defined as the lower of original cost or fair value minus estimated
costs of sale. SFAS No. 121 also requires that properties held for sale be
reported at the lower of carrying amount or fair value less costs of sale. If a
reduction in a held for sale property's carrying amount to fair value less costs
of sale is required, a provision for loss shall be recognized by a charge
against earnings. Subsequent revisions, either upward or downward, to a held for
sale property's estimated fair value less costs of sale is recorded as an
adjustment to the property's carrying amount, but not in excess of the
property's carrying amount when originally classified as held for sale. A
corresponding charge against or credit to earnings is recognized. Properties
held for sale are not depreciated.

Investments in equity investees. Because the Company may be considered to
have the ability to exercise significant influence over the operating and
investment policies of certain of its investees, they are accounted for by the
equity method. Under the equity method, the Company's initial investment,
recorded at cost, is increased by its proportionate share of the investee's
operating income and any additional investment and decreased by the Company's
proportionate share of the investee's operating losses and distributions
received.

Present value premiums/discounts. The Company provides for present value
premiums and discounts on notes receivable or payable that have interest rates
that differ substantially from prevailing market rates and amortizes such
premiums and discounts by the interest method over the lives of the related
notes. The factors considered in determining a market rate for notes receivable
include the borrower's credit standing, nature of the collateral and payment
terms of the note.

Revenue recognition on the sale of real estate. Sales of real estate are
recognized when and to the extent permitted by Statement of Financial Accounting
Standards No. 66, "Accounting for Sales of Real Estate" ("SFAS No. 66"). Until
the requirements of SFAS No. 66 for full profit recognition have been met,
transactions are accounted for using either the deposit, the installment, the
cost recovery, the financing or other method, whichever is appropriate.

Operating segments. Management has determined that the Company's reportable
operating segments are those that are based on the Company's method of internal
reporting, which disaggregates its operations by type of real estate.

Fair value of financial instruments. The Company used the following
assumptions in estimating the fair value of its notes receivable, marketable
equity securities and notes payable. For performing notes receivable, the fair
value was estimated by discounting future cash flows using current interest
rates for similar loans. For nonperforming notes receivable the estimated fair
value of the Company's interest in the collateral property was used. For
marketable equity securities fair value was based on the year end closing market
price of each security. For notes payable the fair value was estimated using
current rates for mortgages with similar terms and maturities.

Cash equivalents. For purposes of the Consolidated Statements of Cash
Flows, the Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.

Loss per share. Loss per share is presented in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". Loss per share is
computed based upon the weighted average number of shares of Common Stock
outstanding during each year, adjusted for a two for one forward Common Stock
split effected February 17, 1997.

NOTE 2. SYNTEK ASSET MANAGEMENT, L.P.

The Company owns a 96% limited partner interest in Syntek Asset Management,
L.P. ("SAMLP"). Until December 18, 1998, SAMLP was the general partner of
National Realty, L.P. ("NRLP") and National Operating, L.P. ("NOLP"), the
operating partnership of NRLP, (collectively the "Partnership"). Gene E.
Phillips, a Director and Chairman of the

F-11
<PAGE> 163
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Board of the Company until November 16, 1992, is also a general partner of
SAMLP. As of December 31, 1998, the Company owned approximately 55.0% of the
outstanding limited partner units of NRLP.

NRLP, SAMLP and Mr. Phillips were among the defendants in a class action
lawsuit arising from the formation of NRLP. An agreement settling such lawsuit
(the "Settlement Agreement") for the above named defendants became effective on
July 5, 1990. The Settlement Agreement provided for, among other things, the
appointment of an NRLP oversight committee and the establishment of specified
annually increasing targets for five years relating to the price of NRLP's units
of limited partner interest.

The Settlement Agreement provided for the resignation and replacement of
SAMLP as general partner if the unit price targets were not met for two
consecutive anniversary dates. NRLP did not meet the unit price targets for the
first and second anniversary dates. On July 8, 1992, SAMLP notified the NRLP
oversight committee of the failure of NRLP to meet the unit price targets for
two successive years and that it expected to resign as general partner of NRLP
and NOLP.

The Settlement Agreement provided that the withdrawal of SAMLP as general
partner would require NRLP to purchase SAMLP's general partner interest (the
"Redeemable General Partner Interest") at its then fair value, and to pay
certain fees and other compensation as provided in the NRLP partnership
agreement. Syntek Asset Management, Inc. ("SAMI"), the managing general partner
of SAMLP, calculated the fair value of such Redeemable General Partner Interest
to be $49.6 million at December 31, 1997, before reduction for the principal
balance ($4.2 million at December 31, 1997) and accrued interest ($7.2 million
at December 31, 1997) on the note receivable from SAMLP for its original capital
contribution to the partnership.

On July 15, 1998, NRLP, SAMLP and the NRLP oversight committee executed an
Agreement for Cash Distribution and Election of Successor General Partner (the
"Cash Distribution Agreement") which provides for the nomination of an entity
affiliated with SAMLP to be the successor general partner of NRLP, for the
distribution of $11.4 million to the plaintiff class members and for the
resolution of all related matters under the Settlement Agreement. The Cash
Distribution Agreement was submitted to the Court on July 23, 1998. On August 4,
1998, the Court entered an order granting preliminary approval of the Cash
Distribution Agreement. On September 9, 1998, a notice was mailed to the
plaintiff class members describing the Cash Distribution Agreement. On October
16, 1998, a hearing was held to consider any objections to the Cash Distribution
Agreement. On October 23, 1998, the Court entered an order granting final
approval of the Cash Distribution Agreement. The Court also entered orders
requiring NRLP to pay $404,000 in attorney's fees to Joseph B. Moorman's legal
counsel, $30,000 to Joseph B. Moorman and $404,000 in attorney's fees to Robert
A. McNeil's legal counsel.

Pursuant to the order, $11.4 million was deposited by NRLP into an escrow
account and then transferred to the control of an independent settlement
administrator. The distribution of the cash shall be made to the plaintiff class
members pro rata based upon the number of units originally issued to each
plaintiff class member upon the formation of NRLP in 1987. The distribution of
cash is under the control of the independent settlement administrator. On March
10, 1999, the Court entered an order providing for the initial distribution of
the cash not later than March 31, 1999.

The proposal to elect NRLP Management Corp. ("NMC"), a wholly-owned
subsidiary of the Company, as the successor general partner was submitted to the
unitholders of NRLP for a vote at a special meeting of unitholders held on
December 18, 1998. All units of NRLP owned by the Company and affiliates of
SAMLP (approximately 61.5% of the outstanding units of NRLP as of the November
27, 1998 record date) were voted pro rata with the vote of the other limited
partners. NMC was elected by a majority of the NRLP unitholders. The Settlement
Agreement remained in effect until December 18, 1998, when SAMLP resigned as
general partner and NMC was elected successor general partner and took office.

F-12
<PAGE> 164

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Under the Cash Distribution Agreement, SAMLP waived its right under the
Settlement Agreement to receive any payment from NRLP for its Redeemable General
Partner Interest and fees it was entitled to receive upon the election of a
successor general partner. As of December 31, 1997, the Redeemable General
Partner Interest was calculated to be $49.6 million. In addition, pursuant to
the Cash Distribution Agreement, the NRLP partnership agreement was amended to
provide that, upon voluntary resignation of the general partner, the resigning
general partner shall not be entitled to the repurchase of its general partner
interest under Paragraph 17.9 of the NRLP partnership agreement.

Under the Cash Distribution Agreement, NMC assumed liability for SAMLP's
note for its original capital contribution to NRLP. In addition, NMC assumed
liability for the note which requires the repayment of the $11.4 million paid by
NRLP under the Cash Distribution Agreement, plus the $808,000 in court ordered
attorney's fees and $30,000 paid to Joseph B. Moorman. This note requires
repayment over a ten-year period, bears interest at a variable rate, currently
7.0% per annum, and is guaranteed by the Company, the parent of NMC. The
liability assumed under the Cash Distribution Agreement was expensed as a
"litigation settlement" in the accompanying Consolidated Statement of
Operations.

As of December 31, 1998, the Company discontinued accounting for its
investment in the Partnership under the equity method upon the election of NMC
as general partner of the Partnership and the settlement of the class action
lawsuit. The Company began consolidation of the Partnership's accounts at that
date and its operations subsequent to that date. The consolidation of the
accounts of the Company with those of the Partnership (after intercompany
eliminations) resulted in an increase in the Partnership's net real estate of
$60.6 million. This amount was allocated to the individual real estate assets
based on their relative individual fair market value.

The Partnership's operating results for 1998 were as follows:

<TABLE>
<S> <C>
Revenues .................................... $ 113,834

Property operating expenses ................. 75,699
Interest .................................... 26,722
Depreciation ................................ 9,691
General and administrative expenses ......... 6,820
---------
118,932
---------
(Loss) from operations ...................... (5,098)
Gain on sales of real estate ................ 52,589
---------
Net income .................................. $ 47,491
=========
</TABLE>

F-13
<PAGE> 165
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 3. NOTES AND INTEREST RECEIVABLE

<TABLE>
<CAPTION>
1998 1997
------------------- --------------------
Estimated Estimated
Fair Book Fair Book
Value Value Value Value
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Notes Receivable
Performing (including $594 in 1998 and
$1,307 in 1997 from affiliates)....... $44,488 $45,310 $ 9,217 $ 9,340
Nonperforming.............................. 9,200 9,200 26,344 23,212
------- ------- -------- --------

$53,688 54,510 $35,561 32,552
======= =======

Interest receivable........................ 2,648 380
Unamortized premiums/(discounts)........... (72) (124)
Deferred gains............................. (2,456) (4,884)
------- -------

$54,630 $27,924
======= =======
</TABLE>

The Company recognizes interest income on nonperforming notes receivable on
a cash basis. For the years 1998, 1997 and 1996 unrecognized interest income on
such nonperforming notes receivable totaled $716,000, $2.2 million and $1.6
million, respectively.

Notes receivable at December 31, 1998, mature from 1999 to 2009 with
interest rates ranging from 7.2% to 18.0% per annum and a weighted average rate
of 11.9% per annum. Notes receivable are generally collateralized by real estate
or interests in real estate and personal guarantees of the borrower. A majority
of the notes receivable provide for interest to be paid at maturity. Scheduled
principal maturities of $37.0 million are due in 1999 of which $3.2 million is
due on nonperforming notes receivable.

In December 1997, the Company sold its Pin Oak land, a 567.6 acre parcel of
unimproved land in Houston, Texas, for $11.4 million, receiving net cash of $3.5
million and providing $6.9 million in short-term purchase money financing. The
purchase money financing was collected in full in January 1998, the Company
receiving net cash of $1.5 million after paying off $5.2 million in underlying
mortgage debt and the payment of various closing costs.

In December 1997, the Company sold a 25.1 acre tract of its Valley Ranch
land parcel, for $3.3 million, receiving net cash of $2.2 million and providing
$891,000 of short-term purchase money financing. The Company received a $624,000
paydown on the purchase money financing in January 1998 with the remaining
$267,000 being received in February 1998.

In June 1992, the Company sold the Continental Hotel and Casino in Las
Vegas, Nevada for, among other consideration, a $22.0 million wraparound
mortgage note. The Company recorded a deferred gain of $4.6 million on the sale
resulting from a disputed third lien mortgage being subordinated to the
Company's wraparound mortgage note. In March 1997, the wraparound note was
modified and extended in exchange for the borrower's commitment to invest

F-14
<PAGE> 166

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

$2.0 million in improvements to the hotel and casino within four months of March
1997, and an additional $2.0 million prior to December 1997. The borrower
stopped making the payments required by the note in April 1997, and did not make
the required improvements. In December 1997, the borrower filed for bankruptcy
protection. In February 1998, a hearing was held to allow foreclosure of the
hotel and casino. At the hearing, the bankruptcy court allowed the borrower 90
days to submit a reorganization plan and beginning March 2, 1998 required the
borrower to make monthly payments of $175,000. The Company received only the
first such payment. The wraparound mortgage note had a principal balance of
$22.7 million at March 31, 1998. In April 1998, the bankruptcy court allowed the
foreclosure of the hotel and casino. No loss was incurred on foreclosure as the
fair market value of the property exceeded the carrying value of the mortgage
note. The property is included in real estate held for investment in the
accompanying Consolidated Balance Sheet.

As of December 31, 1998, the Company sold to Basic Capital Management, Inc.
("BCM"), the Company's advisor, three matured mortgage notes at their carrying
value of $628,000. No gain or loss was recognized on the sale. See NOTE 11.
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

The borrower on a $1.7 million mortgage note receivable secured by land in
Osceola, Florida failed to pay the note on its November 1, 1993 maturity. The
Company instituted foreclosure proceedings and was awarded summary judgment in
January 1994. In April 1995, the borrower filed for bankruptcy protection. In
August 1996, the bankruptcy court's stay was lifted allowing foreclosure to
proceed. In February 1997, the Company sold its mortgage note receivable for
$1.8 million in cash. A gain of $171,000 was recognized on the sale.

In September 1997, the Company sold its $16.3 million wraparound mortgage
note receivable secured by the Las Vegas Plaza Shopping Center in Las Vegas,
Nevada, for $15.0 million. The Company received net cash of $5.5 million after
paying off $9.2 million in underlying debt. No loss was incurred on the sale in
excess of the reserve previously established.

In September 1997, the Company foreclosed on its $8.9 million junior
mortgage note receivable secured by the Williamsburg Hospitality House in
Williamsburg, Virginia. The Company obtained the property through foreclosure
subject to the first mortgage of $12.0 million. No loss was incurred on
foreclosure as the fair value of the property exceeded the carrying value of the
Company's mortgage note receivable and assumed mortgage debt. The property is
included in real estate held for investment in the accompanying Consolidated
Balance Sheet.

NOTE 4. ALLOWANCE FOR ESTIMATED LOSSES

Activity in the allowance for estimated losses on notes and interest
receivable was as follows:

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Balance January 1,......................... $ 2,398 $ 3,926 $ 7,254
Partnership allowance................. 1,910 -- --
Amounts charged off................... -- (1,528) --
Writedown of property................. (1,731) -- (3,328)
------- ------- -------

Balance December 31,....................... $ 2,577 $ 2,398 $ 3,926
======= ======= =======
</TABLE>

F-15
<PAGE> 167
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 5. REAL ESTATE

In January 1998, in separate transactions, the Company purchased (1) El
Dorado Parkway land, a 8.5 acre parcel of unimproved land in Collin County,
Texas, for $952,000, consisting of $307,000 in cash, assumption of the existing
mortgage of $164,000 which bears interest at 10% per annum, requires semi-annual
payments of principal and interest of $18,000 and matures in May 2005 and seller
financing of the remaining $481,000 of the purchase price which bears interest
at 8% per annum, requires semi-annual payments of principal and interest of
$67,000 and matures in January 2000; (2) Valley Ranch IV land, a 12.3 acre
parcel of unimproved land in Irving, Texas, for $2.0 million, consisting of
$500,000 in cash and seller financing of the remaining $1.5 million of the
purchase price which bears interest at 10% per annum, requires quarterly
payments of interest only and matures in December 2000; and, (3) JHL Connell
land, a 7.7 acre parcel of unimproved land in Carrollton, Texas, for $1.3
million in cash.

In February 1998, in separate transactions, the Company purchased (1)
Scoggins land, a 314.5 acre parcel of unimproved land in Tarrant County, Texas,
for $3.0 million, consisting of $1.5 million in cash and mortgage financing of
$1.5 million which bore interest at 14% per annum, required quarterly payments
of interest only and matured in February 1999; and, (2) Bonneau land, a 8.4 acre
parcel of unimproved land in Dallas County, Texas, for $1.0 million in mortgage
financing which bore interest at 18.5% per annum with principal and interest due
at maturity in February 1999. The Scoggins land was refinanced in May 1998 and
the Bonneau land was refinanced in March 1999.

In November 1994, the Company and an affiliate of BCM, sold five apartments
with a total of 880 units to a newly formed limited partnership in exchange for
$3.2 million in cash, a 27% limited partner interest and two mortgage notes
receivable, secured by one of the properties. The Company had the option to
reacquire the properties at any time after September 1997 for their original
sales prices. Accordingly, a deferred gain of $5.6 million was offset against
the Company's investment in the partnership. In February 1998, three of the
properties, one of which secured the two notes receivable, were reacquired, for
$7.7 million. The Company paid $4.0 million in cash and assumed the existing
mortgages of $3.7 million. Simultaneously, the Company refinanced the three
properties for a total of $7.8 million, receiving net cash of $3.9 million after
paying off $3.7 million in mortgage debt and the payment of various costs. The
new mortgage bears interest at 9.5% per annum, require monthly principal and
interest payments totaling $66,000 and mature in February 2008. In June 1998,
the remaining two properties were reacquired for $8.6 million. The Company paid
$2.1 million in cash and assumed the existing mortgages totaling $6.5 million.
The mortgages bear interest at 8.73% per annum, require monthly principal and
interest payments totaling $49,000 and mature in January 2019.

In March 1998, the Company purchased Desert Wells land, a 420 acre parcel
of unimproved land in Palm Desert, California, for $12.0 million. The Company
paid $400,000 in cash, obtained mortgage financing of $10.0 million and obtained
seller financing of the remaining $1.6 million of the purchase price. The
mortgage bore interest at the prime rate plus 4.5%, currently 12.25% per annum,
required monthly payments of interest only and matured in March 1999. The lender
has agreed to an extension of its matured mortgage to March 2000. All other
terms would remain unchanged. The seller financing bore interest at 10% per
annum, required monthly payments of interest only and matured in July 1998. The
debt was paid in full at maturity.

In April 1998, the Company purchased Yorktown land, a 325.8 acre parcel of
unimproved land in Harris County, Texas, for $7.4 million. The Company paid $3.0
million in cash and obtained seller financing of the remaining $4.4 million of
the purchase price. The seller financing bore interest at 8.5% per annum,
required monthly interest only payments and matured in February 1999. The
Company has received a written commitment from a lender to refinance the matured
mortgage in the approximate amount of $5.0 million. The new mortgage is
scheduled to close on or about April 15, 1999.

F-16
<PAGE> 168

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Also in April 1998, the Company sold a 77.7 acre tract of its Lewisville
land parcel for $6.8 million, receiving net cash of $153,000 after paying off
first and second lien mortgages totaling $5.9 million and the payment of various
closing costs. A gain of $1.9 million was recognized on the sale.

In May 1998, but effective April 1, 1998, the Company purchased, in a
single transaction, twenty-nine apartments with a total of 2,441 units
(collectively the "IGI properties") in Florida and Georgia for $56.1 million.
The properties were acquired through three newly-formed controlled limited
partnerships. The partnerships paid a total of $6.1 million in cash, assumed
$43.4 million in mortgage debt and issued a total of $6.6 million in Class A
limited partner units in the acquiring partnerships, which have the Company as
the Class B Limited Partner and a wholly-owned subsidiary of the Company as the
Managing General Partner. The Class A limited partners were entitled to a
preferred return of $.08 per unit in 1998 and are entitled to an annual
preferred return of $.09 per unit in 1999 and $.10 per unit in 2000 and
thereafter. The Class A units are exchangeable after April 1, 1999 into shares
of Series F Preferred Stock on the basis of ten Class A units for each preferred
share. The assumed mortgages bear interest at rates ranging from 7.86% and
11.22% per annum, require monthly principal and interest payments totaling
$384,000 and mature between June 1, 2000 and September 2017. See NOTE 13.
"PREFERRED STOCK."

Also in May 1998, the Company purchased the FRWM Cummings land, a 6.4 acre
parcel of unimproved land in Farmers Branch, Texas, for $1.2 million in cash.

Further in May 1998, in separate transactions, the Company sold (1) a 21.3
acre tract of the Parkfield land parcel, for $1.3 million, receiving no net cash
after paying down by $1.1 million the mortgage secured by such land parcel and
the payment of various costs and, (2) a 15.4 acre tract of the Valley Ranch land
parcel, for $1.2 million, receiving no net cash after paying down by $1.1
million the mortgage secured by such land parcel and the payment of various
closing costs. A gain of $670,000 was recognized on the Parkfield sale and a
gain of $663,000 was recognized on the Valley Ranch sale.

In June 1998, in separate transactions, the Company sold (1) a 21.6 acre
tract of the Chase Oaks land parcel, for $3.3 million, receiving net cash of
$418,000 after paying down by $2.0 million the mortgage secured by such land
parcel and the payment of various closing costs; (2) a 150.0 acre tract of the
Rasor land parcel, for $6.8 million, receiving net cash of $1.4 million after
paying down by $5.3 million the mortgage secured by such land parcel and the
payment of various closing costs; and, (3) the entire 315.2 acre Palm Desert
land parcel, for $17.2 million, receiving net cash of $8.6 million after paying
off $7.2 million in mortgage debt and the payment of various closing costs. A
gain of $848,000 was recognized on the Chase Oaks sale, a gain of $789,000 was
recognized on the Rasor sale and a gain of $3.9 million was recognized on the
Palm Desert sale.

In July 1998, in separate transactions, the Company purchased (1) the
Thompson II land, a 3.5 acre parcel of unimproved land in Dallas County, Texas,
for $471,000 in cash; and (2) the Walker land, a 132.6 acre parcel of unimproved
land in Dallas County, Texas, for $12.6 million in cash.

Also in July 1998, the Company purchased the Katrina land, a 454.8 acre
parcel of undeveloped land in Palm Desert, California, for $38.2 million. The
purchase was made by a newly formed controlled partnership of which a wholly-
owned subsidiary of the Company is the general partner and Class B limited
partner. The partnership issued $23.2 million Class A limited partnership units
and obtained mortgage financing of $15.0 million. The mortgage bears interest at
15.5% per annum, requires monthly payments of interest only and matures in July
1999. The Class A limited partners were entitled to an annual preferred return
of $.07 per unit in 1998, and are entitled to an annual preferred return of $.08
per unit in 1999, $.09 per unit in 2000 and $.10 per unit in 2001 and
thereafter. The Class A units may be converted into a total of 231,750 shares of
Series H Cumulative Convertible Preferred Stock after July 13, 1999, on the
basis of 100 Class A units for each preferred share. See NOTE 13. "PREFERRED
STOCK."

F-17
<PAGE> 169

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

In July 1998, the Company sold a 2.5 acre tract of its Las Colinas I land
parcel, for $1.6 million, receiving net cash of $605,000 after paying down by
$750,000 the Las Colinas I term loan secured by such land parcel and the payment
of various closing costs. A gain of $869,000 was recognized on the sale.

In September 1998, a newly formed controlled limited partnership, in which
the Company has a combined 95% general and limited partner interest, purchased
Messick land, a 72.0 acre parcel of unimproved land in Palm Springs, California,
for $3.5 million, paying $1.0 million in cash and obtaining seller financing of
the remaining $2.5 million of the purchase price. The seller financing bears
interest at 8.5% per annum, requires quarterly payments of interest only,
principal payments of $300,000 in July 1999 and July 2000, and matures in August
2001.

Also in September 1998, in separate transactions, the Company sold (1) a
60.0 acre tract of the Parkfield land parcel, for $1.5 million, receiving no net
cash after paying down by $1.4 million the mortgage secured by such land parcel
and the payment of various closing costs; (2) the remaining 10.5 acres of the BP
Las Colinas land parcel for $4.7 million, receiving net cash of $1.8 million
after paying off the $2.7 million mortgage secured by such land parcel and the
payment of various closing costs; (3) the entire 30.0 acre Kamperman land parcel
for $2.4 million, receiving net cash of $584,000 after paying down by $1.6
million the Las Colinas I term loan secured by such parcel and the payment of
various closing costs; and (4) a 1.1 acre tract of the Santa Clarita land parcel
for $543,000, receiving net cash of $146,000 after paying down by $350,000 the
Las Colinas I term loan secured by such land parcel and the payment of various
closing costs. A gain of $44,000 was recognized on the Parkfield sale, a gain of
$3.4 million was recognized on the BP Las Colinas sale, a gain of $969,000 was
recognized on the Kamperman sale and a gain of $409,000 was recognized on the
Santa Clarita sale.

Further in September 1998, in separate transactions, the Company purchased
(1) the HSM land, a 6.2 acre parcel of unimproved land in Farmers Branch, Texas,
for $2.2 million in cash; (2) the Vista Ridge land, a 160.0 acre parcel of
unimproved land in Lewisville, Texas, for $15.6 million, consisting of $3.1
million in cash and mortgage financing of $12.5 million which bears interest at
15.5% per annum, requires monthly interest only payments at a rate of 12.5% per
annum, with the deferred interest and principal due at maturity in July 1999;
and (3) the Marine Creek land, a 54.2 acre parcel of unimproved land in Fort
Worth, Texas, for $2.2 million in cash.

In October 1998, in separate transactions, the Company purchased (1) Vista
Business Park land, a 41.8 acre parcel of unimproved land in Travis County,
Texas, for $3.0 million, consisting of $730,000 in cash and mortgage financing
of $2.3 million which bears interest at 8.9% per annum, requires monthly
payments of interest only and matures in September 2000; (2) Mendoza land, a .35
acre parcel of unimproved land in Dallas, Texas, for $180,000, consisting of
$27,000 in cash and seller financing of the remaining $153,000 of the purchase
price which bears interest at 10% per annum, requires quarterly payments of
interest only and matures in October 2001; (3) Croslin land, a .8 acre parcel of
unimproved land in Dallas, Texas, for $306,000, consisting of $46,000 in cash
and seller financing of the remaining $260,000 of the purchase price which bears
interest at 10% per annum, requires quarterly payments of interest only and
matures in October 2001; and (4) Stone Meadows land, a 13.5 acre parcel of
unimproved land in Houston, Texas, for $1.6 million, consisting of $491,000 in
cash and seller financing of the remaining $1.1 million of the purchase price,
which bears interest at 10% per annum, requires quarterly principal and interest
payments of $100,000 and matures in October 1999.

In November 1998, the Company purchased Mason/Goodrich land, a 265.5 acre
parcel of unimproved land in Houston, Texas, for $10.9 million, consisting of
$3.7 million in cash and mortgage financing of $7.2 million. The mortgage bore
interest at 8.9% per annum, required monthly interest only payments and matured
in February 1999. The lender has agreed to extend its matured mortgage to
September 1999, for a $500,000 principal paydown. All other terms would remain
unchanged.

F-18
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AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

In November 1998, the Company purchased two apartments with a total of 423
units in Indianapolis, Indiana for $7.2 million. The properties were acquired
through a newly-formed controlled partnership. The partnership paid a total of
$14,000 in cash, assumed $5.9 million in mortgage debt and issued $1.3 million
in Class A limited partner units in the acquiring partnership, in which the
Company is the Class B limited partner and a wholly-owned subsidiary of the
Company is the Managing General Partner. The Class A limited partners are
entitled to a preferred return of $.07 per annum per unit. The Class A units are
exchangeable after November 18, 1999, into shares of Series F Cumulative
Convertible Preferred Stock on the basis of ten units for each preferred share.
The assumed mortgages bear interest at 9.95% per annum and 10.75% per annum, one
requires monthly payments of interest and principal of $25,000 and matures
October 2012 and the other requires monthly interest only payments and matures
in June 1999.

In December 1998, in separate transactions, the Company purchased (1) Plano
Parkway land, a 81.2 acre parcel of unimproved land in Plano, Texas, for $11.0
million, consisting of $2.2 million in cash and seller financing of the
remaining $8.9 million of the purchase price, which bore interest at 10% per
annum and required the payment of principal and interest at maturity in January
1999; and, (2) Van Cattle land, a 126.6 acre parcel of unimproved land in
McKinney, Texas, for $2.0 million, consisting of $500,000 in cash and seller
financing of the remaining $1.5 million of the purchase price, which bears
interest at 10% per annum, requires interest only payments and matures in
December 2000.

Also in December 1998, the Company sold two tracts totaling 63.1 acres of
the Valley Ranch land parcel for a total of $4.2 million, receiving net cash of
$135,000 after paying down by $3.0 million the mortgage secured by such land
parcel and the payment of various closing costs. No gain or loss was recognized
on the sales.

At December 31, 1997, the Company had under construction One Hickory
Center, a 102,615 sq. ft office building in Farmers Branch, Texas. Construction
was completed in December 1998, at cost of $7.8 million.

In the third and fourth quarters of 1998, provisions for loss of $3.0
million and $916,000, respectively, were recorded to write down the Valley Ranch
land to its estimated realizable value less estimated costs of sale. Such write
down was necessitated by an increase in the acreage designated as flood plain.

In September 1997, the Company purchased the Collection, a 267,812 sq. ft.
retail and commercial center in Denver, Colorado, for $19.5 million. The Company
paid $791,000 in cash, assumed existing mortgages totaling $14.7 million and
issued 400,000 shares of Series F Cumulative Convertible Preferred Stock. See
NOTE 13. "PREFERRED STOCK." A first mortgage in the amount of $14.2 million
bears interest at 8.64% per annum, requires monthly principal and interest
payments of $116,000 and matures in May 2017. A second lien mortgage in the
amount of $580,000 bears interest at 7% per annum until April 2001, 7.5% per
annum from May 2001 to April 2006, and 8% per annum from May 2006 to May 2010,
requires monthly principal and interest payments of $3,000 and matures in May
2010.

In October 1997, the Company contributed its Pioneer Crossing land in
Austin, Texas, to a limited partnership in exchange for $3.4 million in cash, a
1% managing general partner interest in the partnership, all of the Class B
limited partner units in the partnership and the partnership's assumption of the
$16.1 million mortgage debt secured by the property. The existing general and
limited partners converted their general and limited partner interests into
Class A limited partner units in the partnership. The Class A limited partner
units have an agreed value of $1.00 per unit and are entitled to a fixed
preferred return of 10% per annum, paid quarterly. The Class A units may be
converted into a total of 360,000 shares of Series F Cumulative Convertible
Preferred Stock at any time prior to the sixth anniversary of the closing, on
the basis of one share of Series F Preferred Stock for each ten Class A units.
See NOTE 13. "PREFERRED STOCK."

Also in October 1997, the Company contributed its Denver Merchandise Mart
in Denver, Colorado, to a limited partnership in exchange for $6.0 million in
cash, a 1% managing general partner interest in the partnership, all of the

F-19
<PAGE> 171

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Class B limited partner units in the partnership and the partnership's
assumption of the $23.0 million in mortgage debt secured by the property. The
existing general and limited partners converted their general and limited
partner interests into Class A limited partner units in the partnership. The
Class A units have an agreed value of $1.00 per unit and are entitled to a fixed
preferred return of 10% per annum, paid quarterly. The Class A units may be
converted into a total of 529,000 shares of Series F Cumulative Convertible
Preferred Stock at any time prior to the sixth anniversary of the closing, on
the basis of one share of Series F Preferred Stock for each ten Class A units.
See NOTE 13. "PREFERRED STOCK."

Further in October 1997, the Company purchased the Piccadilly Inns, four
hotels in Fresno, California, with a total of 697 rooms, for $33.0 million. The
Company issued 1.6 million shares of its Series F Cumulative Convertible
Preferred Stock for $16.0 million of the purchase price and obtained mortgage
financing of $19.8 million. See NOTE 13. "PREFERRED STOCK." The Company received
net financing proceeds of $2.2 million after the payment of various closing
costs. The mortgage bears interest at 8.40% per annum, requires monthly
principal and interest payments of $158,000 and matures in November 2012.

In October 1997, a newly formed controlled partnership, of which the
Company is the general partner and Class B limited partner, purchased Vineyards
land, a 15.8 acre parcel of unimproved land in Tarrant County, Texas, for $4.5
million. The partnership paid $800,000 in cash, assumed the existing mortgage of
$2.5 million and issued the seller $1.1 million of Class A limited partner units
in the partnership as additional consideration. The Class A units have an agreed
value of $1.00 per unit and are entitled to a fixed preferred return of 10% per
annum, paid quarterly. The Class A units may be exchanged for either shares of
the Company's Series G Preferred Stock on or after the second anniversary of the
closing at the rate of one share of Series G Preferred Stock for each 100 Class
A units exchanged, or on or after the third anniversary of the closing, the
Class A units may be exchanged for shares of the Company's Common Stock. The
assumed mortgage bore interest at 12.95% per annum required quarterly payments
of interest only and matured in June 1998. See NOTE 13.
"PREFERRED STOCK."

Also in October 1997, the Company sold a 11.6 acre tract of its Valley
Ranch land parcel for $1.2 million. The net cash proceeds of $990,000, after the
payment of various closing costs, were deposited in a certificate of deposit for
the benefit of the lender, in accordance with the term loan secured by such land
parcel. The certificate of deposit was released to the lender in December 1997,
in conjunction with the payoff of the loan. A gain of $629,000 was recognized on
the sale.

In November 1997, the Company sold two tracts of its Valley Ranch land,
totaling 8 acres, for $577,000. The net cash proceeds of $451,000, after the
payment of various closing costs, were deposited in a certificate of deposit for
the benefit of the lender, in accordance with the term loan secured by such land
parcel. The certificate of deposit was released to the lender in December 1997
in conjunction with the payoff of the loan. A gain of $216,000 was recognized on
the sale.

Also in December 1997, the Company exchanged a 43.0 acre tract of its
Valley Ranch land parcel for Preston Square, a 35,508 sq. ft. shopping center in
Dallas, Texas. In accordance with the provisions of the term loan securing the
Valley Ranch land parcel, the Company paid $2.8 million to the lender in
exchange for the lender's release of its collateral interest in such land.
Simultaneously, the Company obtained new mortgage financing of $2.5 million
secured by the shopping center. The mortgage bears interest at 8.2% per annum,
requires monthly payments of interest only and matures in December 1999. The
Company recognized no gain or loss on the exchange.

Also in 1997, the Company purchased 25 parcels of unimproved land; Scout,
546 acres in Tarrant County, Texas; Katy Road, 130.6 acres in Harris County,
Texas; McKinney Corners I, 30.4 acres in Collin County, Texas; McKinney Corners
II, 173.9 acres in Collin County, Texas; McKinney Corners III, 15.5 acres in
Collin County, Texas; Lacy Longhorn, 17.1 acres in Farmers Branch, Texas; Chase
Oaks, 60.5 acres in Plano, Texas; Pioneer Crossing, 1,448 acres

F-20
<PAGE> 172

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

in Austin, Texas; Kamperman, 129.6 acres in Collin County, Texas; Keller, 811.8
acres in Tarrant County, Texas; McKinney Corners IV, 31.3 acres in Collin
County, Texas; Pantex, 182.5 acres in Collin County, Texas; Dowdy/McKinney V,
174.7 acres in Collin County, Texas; Perkins, 645.4 acres in Collin County,
Texas; LBJ, 10.4 acres in Dallas County, Texas; Palm Desert, 315.2 acres in Palm
Desert, California; Thompson, 4 acres in Dallas County, Texas; Santa Clarita,
20.6 acres in Santa Clarita, California; Tomlin, 9.2 acres in Dallas County,
Texas; Rasor, 378.2 acres in Plano, Texas; Dalho, 3.4 acres in Farmers Branch,
Texas; Hollywood Casino, 51.7 acres in Farmers Branch, Texas; Valley Ranch III,
12.5 acres in Irving, Texas; and, Stagliano, 3.2 acres in Farmers Branch, Texas.
The Company paid a total of $44.4 million in cash and either obtained mortgage
financing or assumed existing mortgage debt for the remaining $77.2 million of
the purchase prices. In conjunction with the Rasor purchase, the Company
transferred its Perkins land to the seller as part of the purchase price.

In September 1997, the Company sold the Mopac Building, a 400,000 sq. ft.
office building, in St. Louis, Missouri, for $1.0 million, receiving net cash of
$1.0 million after the payment of various closing costs. In accordance with the
provisions of the Las Colinas I term loan, the Company applied $350,000 of the
net cash received to paydown the term loan in exchange for the lender's release
of its collateral interest in the property. A gain of $481,000 was recognized on
the sale.

In December 1997, the Company sold Park Plaza, a 105,507 sq. ft. shopping
center in Manitowoc, Wisconsin, for $4.9 million, receiving net cash of $1.6
million, after paying off $3.1 million in mortgage debt and the payment of
various closing costs. A gain of $105,000 was recognized on the sale.

Also in 1997, the Company sold all or portions of six land parcels; 12.6
acres of Las Colinas I in Irving, Texas; 40.2 acres of BP Las Colinas in Las
Colinas, Texas; 73.8 acres of Valley Ranch in Irving, Texas; 86.5 acres of Rasor
in Plano, Texas; 32.0 acres of Parkfield in Denver, Colorado; and 567.6 acres of
Pin Oak in Houston, Texas. The Company received $14.2 million in net cash after
paying off $15.7 million in mortgage debt and the payment of various closing
costs. Gains totaling $16.5 million were recognized on the sales.

In 1991, the Company purchased all of the capital stock of a corporation
which owned 198 developed residential lots in Fort Worth, Texas. Through
December 31, 1998, 197 of the residential lots had been sold.

NOTE 6. INVESTMENTS IN EQUITY INVESTEES

The Company's investment in equity investees at December 31, 1998, included
(1) equity securities of three publicly traded real estate investment trusts,
Continental Mortgage and Equity Trust ("CMET"), Income Opportunity Realty
Investors, Inc. ("IORI") and Transcontinental Realty Investors, Inc. ("TCI")
(collectively the "REITs"); and (2) interests in real estate joint venture
partnerships. BCM, the Company's advisor, serves as advisor to the REITs, and
performs certain administrative and management functions for NRLP and NOLP on
behalf of NMC. See NOTE 2. "SYNTEK ASSET MANAGEMENT, L.P."

The Company accounts for its investment in the REITs, the joint venture
partnerships and accounted for its investment in NRLP and NOLP prior to December
31, 1998, using the equity method as more fully described in NOTE 1. "SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES--Investments in equity investees." As of
December 31, 1998, the accounts of NRLP and NOLP are consolidated with those of
the Company. See NOTE 2. "SYNTEK ASSET MANAGEMENT, L.P."

Substantially all of the Company's equity securities of the REITs and NRLP
are pledged as collateral for borrowings. See NOTE 10. "MARGIN BORROWINGS."

F-21
<PAGE> 173

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The Company's investment in equity investees accounted for using the equity
method, at December 31, 1998 was as follows:

<TABLE>
<CAPTION>
Percentage Carrying Equivalent
of the Company's Value of Investee Market Value
Ownership at Investment at Book Value at of Investment at
Investee December 31, 1998 December 31, 1998 December 31, 1998 December 31, 1998
- -------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CMET................ 40.9% $15,550 $35,727 $25,052
IORI................ 30.0 3,132 7,068 3,034
TCI................. 31.0 10,291 28,251 15,398

28,973 $43,484
=======

Other............... 5,460
-------

$34,433
=======
</TABLE>

The Company's investment in equity investees accounted for using the equity
method, at December 31, 1997 was as follows:

<TABLE>
<CAPTION>
Percentage Carrying Equivalent
of the Company's Value of Investee Market Value
Ownership at Investment at Book Value at of Investment at
Investee December 31, 1997 December 31, 1997 December 31, 1997 December 31, 1997
- -------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NRLP..................... 54.4% $11,479 $ * $ 83,018
CMET..................... 40.6 14,939 35,745 25,733
IORI..................... 29.7 3,511 7,439 5,176
TCI...................... 30.6 8,378 26,652 20,664
------- --------
38,307 $134,591
========

General partner interest
in NRLP and NOLP......... 6,230
Other.................... 1,314
-------
$45,851
=======
</TABLE>

- ----------------
* At December 31, 1997, NRLP reported a deficit partners' capital. The
Company's share of NRLP's revaluation equity, however, was $198.9 million.
Revaluation equity is defined as the difference between the estimated
current value of the partnership's real estate, adjusted to reflect the
partnership's estimate of disposition costs, and the amount of the mortgage
notes payable and accrued interest encumbering such property as reported in
NRLP's Annual Report on Form 10-K for the year ended December 31, 1997.

F-22
<PAGE> 174

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The Company's management continues to believe that the market value of each
of the REITs and NRLP undervalues their assets and the Company has, therefore,
continued to increase its ownership in these entities in 1998, as its liquidity
has permitted.

In April 1996, the Company purchased a 28% general partner interest in
Campbell Center Associates, Ltd. ("Campbell Associates"), which in turn had a
56.25% interest in Campbell Centre Joint Venture, which owned a 413,175 sq. ft.
office building in Dallas, Texas, for $550,000 in cash and a $500,000 note. In
January 1997, the Company exercised its option to purchase an additional 28%
general partner interest in Campbell Associates, for $300,000 in cash and a
$750,000 note. In July 1997, the Company purchased an additional 9% general
partner interest in Campbell Associates, for $868,000 in cash. In March 1998,
Consolidated Equity Properties, Inc., a wholly-owned subsidiary of the Company,
acquired a 30% limited partner interest in Campbell Associates for $500,000 in
cash. In June 1998, the Company purchased the remaining 5% general partner
interest in Campbell Associates for $1.1 million in cash. In June 1998, Campbell
Centre Joint Venture sold the office building for $32.2 million in cash.
Campbell Associates, as a partner, received net cash of $13.2 million from the
sales proceeds and escrowed an additional $190,000 for pending parking lot
issues. Campbell Associates recognized a gain of $8.2 million on the sale.

In June 1996, a newly formed limited partnership, of which the Company is a
1% general partner, purchased 580 acres of unimproved land in Collin County,
Texas, for $5.7 million in cash. The Company contributed $100,000 in cash to the
partnership with the remaining $5.6 million being contributed by the limited
partner. The partnership agreement provided that the limited partner receive a
12% preferred cumulative return on his investment before any sharing of
partnership profits occurs. In April 1997, the partnership sold a 35.0 acre
tract for $1.3 million. Net cash of $1.2 million was distributed to the limited
partner. The partnership recognized a gain of $884,000 on the sale. In July
1997, the partnership sold a 24.6 acre tract for $800,000. Net cash of $545,000
was distributed to the limited partner. The partnership recognized a gain of
$497,000 on the sale. In September 1997, the partnership sold a 77.2 acre tract
for $1.5 million. No net cash was received. The partnership recognized a gain of
$704,000 on the sale. In October 1997, the partnership sold a 96.5 acre tract
for $1.7 million. Net cash of $1.1 million was distributed to the limited
partner in accordance with the partnership agreement. The partnership recognized
a gain of $691,000 on the sale. In December 1997, the partnership sold a 94.4
acre tract for $2.5 million. Of the net cash $1.8 million was distributed to the
limited partner and $572,000 was distributed to the Company as general partner
in accordance with the partnership agreement. The partnership recognized a gain
of $1.4 million on the sale. In January 1998, the partnership sold a 155.4 acre
tract for $2.9 million, receiving $721,000 in cash and providing financing of an
additional $2.2 million. Of the net cash, $300,000 was distributed to the
limited partner and $300,000 was distributed to the Company as general partner.
The seller financing was collected at maturity, in July 1998, with the net cash
distributed $1.1 million to the limited partner and $1.1 million to the Company
as general partner. The partnership recognized a gain of $1.2 million on the
sale. In September 1998, the partnership sold the remaining 96.59 acres for $1.3
million. Of the net cash $587,000 was distributed to the limited partner and
$587,000 was distributed to the Company as general partner. The partnership
recognized a gain of $128,000 on the sale.

In September 1997, a newly formed limited partnership, of which the Company
is a 1% general partner and 21.5% limited partner, purchased a 422.4 acre parcel
of unimproved land in Denton County, Texas, for $16.0 million in cash. The
Company contributed $3.6 million in cash to the partnership with the remaining
$12.4 million being contributed by the other limited partners. In September
1997, the partnership obtained financing of $6.5 million secured by the land.
The mortgage bears interest at 10% per annum, requires quarterly payments of
interest only and matures in September 2001. The net financing proceeds were
distributed to the partners, the Company receiving a return of $2.9 million of
its initial investment. The partnership agreement also provides that the limited
partners receive a 12% preferred cumulative return on their investment before
any sharing of partnership profits occurs. One of the limited partners in the
partnership was, at the time, a limited partner in a partnership that owned
approximately 15.8% of the Company's

F-23
<PAGE> 175
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

outstanding shares of Common Stock. See NOTE 11. "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS."

In January 1992, the Company entered into a partnership agreement with an
entity affiliated with, at the time, a limited partner in a partnership that
owned approximately 15.8% of the Company's outstanding shares of Common Stock,
that acquired 287 developed residential lots adjacent to the Company's other
residential lots in Fort Worth, Texas. The partnership agreement also provides
each of the partners with a guaranteed 10% return on their respective
investments. Through December 31, 1997, 214 of the residential lots had been
sold. During 1998, an additional 52 lots were sold with 21 lots remaining to be
sold at December 31, 1998. During 1997 and 1998, each partner received $21,000
and $418,000 in return of capital distributions and $12,000 and $493,000 in
profit distributions.

Set forth below are summary financial data for equity investees owned over
50%:

<TABLE>
<CAPTION>
1997
---------
<S> <C>
Property and notes receivable, net .................... $ 236,367
Other assets .......................................... 43,213
Notes payable ......................................... (339,102)
Other liabilities ..................................... (17,311)
---------

Equity ................................................ $ (76,833)
=========
</TABLE>

The above table includes the accounts of NRLP in 1997. In 1998, NRLP's
accounts are included in the accompanying Consolidated Balance Sheet. See NOTE
2. "SYNTEK ASSET MANAGEMENT, L.P."

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues .............................................. $ 113,834 $ 117,461 $ 109,501
Depreciation .......................................... (9,691) (10,214) (10,783)
Interest .............................................. (26,722) (34,481) (34,601)
Operating expenses .................................... (82,519) (74,195) (65,789)
--------- --------- ---------

Income (loss) before gains on sale of real
estate and extraordinary gains ....................... (5,098) (1,429) (1,672)
Gains on sale of real estate .......................... 52,589 8,356 61
--------- --------- ---------

Net income ............................................ $ 47,491 $ 6,927 $ (1,611)
========= ========= =========
</TABLE>

The difference between the carrying value of the Company's investment and
the equivalent investee book value is being amortized over the life of the
properties held by each investee.

F-24
<PAGE> 176

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The Company's equity share of:

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Income (loss) before gains on sale of real estate .......... $ (2,794) $ 654 $ (249)
Gains on sale of real estate ............................... 34,055 3,022 --
-------- -------- --------
Net income ................................................. $ 31,261 $ 3,676 $ (249)
======== ======== ========
</TABLE>

Set forth below are summary financial data for equity investees owned less
than 50%:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Property and notes receivable, net .................... $ 734,857 $ 631,825
Other assets .......................................... 69,829 80,789
Notes payable ......................................... (577,167) (483,064)
Other liabilities ..................................... (25,474) (28,326)
--------- ---------
Equity ................................................ $ 202,045 $ 201,224
========= =========
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues .............................................. $ 150,163 $ 129,531 $ 101,246
Depreciation .......................................... (20,954) (17,429) (14,408)
Provision for losses .................................. 506 (1,337) 844
Interest .............................................. (49,915) (38,537) (30,401)
Operating expenses .................................... (91,868) (85,387) (69,698)
--------- --------- ---------

(Loss) before gains on sale of real estate
and extraordinary gains .............................. (12,068) (13,159) (12,417)
Gains on sale of real estate .......................... 18,642 34,297 11,701
Extraordinary gains ................................... -- -- 1,068
--------- --------- ---------

Net income (loss) ..................................... $ 6,574 $ 21,138 $ 352
========= ========= =========
</TABLE>

F-25
<PAGE> 177
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The Company's equity share of:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(Loss) before gains on sale of real estate and
extraordinary gains .................................. $ (686) $ (3,703) $ (3,292)
Gains on sale of real estate .......................... 7,391 -- 4,645
Extraordinary gains ................................... -- 10,524 381
--------- --------- ---------
Net income (loss)................................ $ 6,705 $ 6,821 $ 1,734
========= ========= =========
</TABLE>

The Company's cash flow from the REITs and NRLP is dependent on the ability
of each of the entities to make distributions. CMET and IORI have been making
quarterly distributions since the first quarter of 1993, NRLP since the fourth
quarter of 1993 and TCI since the fourth quarter of 1995. In 1998, the Company
received distributions totaling $3.0 million from the REITs and $7.2 million
from NRLP, including distributions accrued at December 31, 1997, but not
received until 1998. In 1997, the Company received total distributions from the
REITs of $1.4 million and $1.4 million from NRLP and accrued an additional $6.7
million in NRLP and TCI distributions that were not received until January 1998.

The Company's investments in the REITs and NRLP were initially acquired in
1989. In 1998, the Company purchased an additional $1.1 million of equity
securities of the REITs and NRLP.

NOTE 7. MARKETABLE EQUITY SECURITIES--TRADING PORTFOLIO

In 1994, the Company began purchasing equity securities of entities other
than those of the REITs and NRLP to diversify and increase the liquidity of its
margin accounts. In 1998, the Company purchased $15.1 million and sold $5.2
million of such securities. These equity securities are considered a trading
portfolio and are carried at market value. At December 31, 1998, the Company
recognized an unrealized decline in the market value of the equity securities in
its trading portfolio of 6.1 million. In 1998, the Company realized a net loss
of $112,000 from the sale of trading portfolio securities and received 79,000 in
dividends. At December 31, 1997, the Company recognized an unrealized decline in
the market value of the equity securities in its trading portfolio of $850,000.
In 1997, the Company realized a net gain of $154,000 from the sale of trading
portfolio securities and received $107,000 in dividends. In 1996, the Company
realized a net gain of $29,000 from the sale of trading portfolio securities and
received $163,000 in dividends. At December 31, 1996, the Company recognized an
unrealized decline in the market value of the equity securities in its trading
portfolio of $486,000. Unrealized and realized gains and losses in the trading
portfolio are included in other income in the accompanying Consolidated
Statements of Operations.

NOTE 8. ACQUISITION OF PIZZA WORLD SUPREME, INC.

In April 1996, a wholly-owned subsidiary of the Company purchased, for
$10.7 million in cash, 80% of the common stock of Pizza World Supreme, Inc.
"PWSI", which in turn had acquired 26 operating pizza parlors in various
communities in California's San Joaquin Valley. Concurrent with the purchase,
the Company granted to an individual an option to purchase 36.25% of the
Company's subsidiary at any time for the Company's net investment in such
subsidiary. In May 1997, the Company acquired the remaining 20% of PWSI for $5.0
million, the sellers providing purchase money financing in the form of two $2.5
million term loans. The term loans bear interest at 8% per annum, require
quarterly payments of interest only and mature in May 2007.

F-26
<PAGE> 178

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 9. NOTES AND INTEREST PAYABLE

Notes and interest payable consisted of the following:

<TABLE>
<CAPTION>
1998 1997
------------------------- ----------------------
Estimated Estimated
Fair Book Fair Book
Value Value Value Value
----------- -------- --------- --------
<S> <C> <C> <C> <C>
Notes payable
Mortgage loans................. $723,567 $736,320 $ 84,050 $ 96,654
Borrowings from financial
institutions.................. 17,546 17,074 170,491 153,369
Notes payable to affiliates.... 5,519 5,049 7,342 4,570
-------- -------- -------- --------

$746,632 $758,443 $261,883 $254,593
======== ========

Interest payable ($5,440 in 1998
and $4,836 in 1997 to
affiliates)................... 9,829 7,393
-------- --------
$768,272 $261,986
======== ========
</TABLE>

Scheduled principal payments on notes payable are due as follows:

<TABLE>
<S> <C>
1999............................ $164,246
2000............................ 65,928
2001............................ 44,499
2002............................ 15,269
2003............................ 145,364
Thereafter...................... 323,137
--------
$758,443
========
</TABLE>

Stated interest rates on notes payable ranged from 6.2% to 18.5% per annum
at December 31, 1998, and mature in varying installments between 1999 and 2017.
At December 31, 1998, notes payable were collateralized by mortgage notes
receivable with a net carrying value of $22.7 million and by deeds of trust on
real estate with a net carrying value of $636.3 million. Excluded from interest
expense in the accompanying Consolidated Statement of Operations is capitalized
interest of $67,000 in 1997.

F-27
<PAGE> 179

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

In February 1998, the Company financed its unencumbered Kamperman land in
the amount of $1.6 million, receiving net cash of $1.5 million after the payment
of various closing costs. The mortgage bears interest at 9.0% per annum,
requires monthly payments of interest only and matures in February 2000.

Also in February 1998, the Company refinanced its Vineyards land in the
amount of $3.4 million, receiving net cash of $2.3 million, after paying off
$540,000 in mortgage debt and the payment of various closing costs. The new
mortgage bears interest at 9% per annum, requires monthly payments of interest
only and matures in February 2000.

Further in February 1998, the Company financed its unencumbered Valley
Ranch land in the amount of $4.3 million, receiving net cash of $4.1 million
after the payment of various closing costs. The mortgage bears interest at 9.0%
per annum, requires monthly payments of interest only and matures in February
2000.

In March 1998, the Company financed its unencumbered Stagliano and Dalho
land in the amount of $800,000, receiving net cash of $790,000 after the payment
of various closing costs. The mortgage bore interest at 18.5% per annum, with
principal and interest due at maturity in February 1999. The JHL Connell land
was pledged as additional collateral for this loan. In March 1999, the Company
refinanced the mortgage debt secured by these properties along with the mortgage
debt secured by its Bonneau land parcel under the Las Colinas I term loan in the
amount of $703,000. The Company paid an additional $1.5 million in cash to pay
off the $2.1 million in mortgage debt and accrued but unpaid interest.

Also in March 1998, the Company refinanced the mortgage debt secured by its
McKinney Corners I, II, III, IV and V and Dowdy land in the amount of $20.7
million, receiving net cash of $5.9 million after paying off $2.5 million in
mortgage debt, the paydown of $10.2 million on the Las Colinas I term loan and
the payment of various closing costs. The mortgage bore interest at 12.0% per
annum, required monthly payments of interest only and matured in March 1999. The
lender has agreed to extend its mature mortgage to January 2000, for a 2% fee
and a paydown of any net refinancing proceeds received by the Company from
refinancing the Williamsburg Hospitality House. All other terms would remain
unchanged.

In April 1998, the Company obtained a second lien mortgage of $2.0 million
secured by its BP Las Colinas land from the limited partner, at the time, in a
partnership that owned approximately 15.8% of the outstanding shares of the
Company's Common Stock. The second lien mortgage bore interest at 12% per annum
with principal and interest paid at maturity in October 1998. See NOTE 11.
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

Also in April 1998, the Company refinanced the mortgage debt secured by its
Parkfield land in the amount of $7.3 million, receiving net cash of $1.2 million
after paying off $5.0 million in mortgage debt and the payment of various
closing costs. The new mortgage bears interest at 9.5% per annum, requires
monthly payments of interest only and matures in April 2000.

In May 1998, the Company refinanced the mortgage debt secured by its Scout
and Scoggins land in the amount of $10.4 million under the Las Colinas I term
loan, receiving net cash of $6.6 million after paying off mortgage debt of $1.4
million on the Scout land and $1.5 million on the Scoggins land, a pay down of
$250,000 on the Keller land mortgage, and the payment of various closing costs.
The Company also pledged 250,000 shares of its Common Stock and BCM, the
Company's advisor, pledged 177,000 shares of the Company's Common Stock as
additional collateral on the term loan.

In July, the Company financed its unencumbered Walker land in the amount of
$13.3 million, receiving net cash of $12.8 million after the payment of various
closing costs. The mortgage bears interest at 15.5% per annum, requires

F-28
<PAGE> 180
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

monthly payments of interest only and matures in July 1999. The mortgage is also
secured by the FRWM Cummings land.

In August 1998, the Company financed its unencumbered Keller land in the
amount of $5.0 million under the Las Colinas I term loan, receiving net cash of
$4.9 million after the payment of various closing costs.

In September 1998, the Company obtained second lien financing of $5.0
million secured by its Katy Road land from the limited partner, at the time, in
a partnership that owned approximately 15.8% of the outstanding shares of the
Company's Common Stock. The second lien mortgage bears interest at 12.5% per
annum, compounded monthly, with principal and interest due at maturity in April
1999. See NOTE 11. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

In October 1998, the Company financed its unencumbered Rasor land in the
amount of $15.0 million, receiving net cash of $13.5 million after the payment
of various closing costs. Portions of the Company's Las Colinas and Valwood land
parcels are included as additional collateral. The Company used the proceeds
from this loan along with an additional $1.8 million to payoff the $15.8 million
in mortgage debt secured by its Las Colinas I and Valwood land parcels. The new
mortgage bears interest at 14% per annum, required a principal reduction payment
of $3.0 million in November 1998, requires monthly interest only payments and
matures in September 1999.

Also in October 1998, the Company financed its unencumbered Marine Creek
and HSM land in the amount of $2.8 million under the Las Colinas I term loan,
receiving net cash of $2.7 million after the payment of various closing costs.

In December 1998, the Company financed its unencumbered Valwood land in the
amount of $12.0 million, receiving net cash of $4.7 million after paying down by
$5.5 million the Rasor land mortgage and the payment of various closing costs.
The mortgage bears interest at 13% per annum, requires monthly interest only
payments and matures in December 2000.

Notes payable to affiliates at December 31, 1997 included a $4.2 million
note due to NRLP as payment for the general partner interest in NRLP. The note
bears interest at 10% per annum compounded semi-annually and matures in
September 2007. See NOTE 2. "SYNTEK ASSET MANAGEMENT, L.P."

In 1997, the Company financed six unencumbered properties and refinanced an
additional four properties in the total amount of $80.5 million, receiving net
cash of $32.7 million after paying off $42.7 million in debt. The mortgages bore
interest at rates ranging from 9.0% to 18.5% per annum and matured from February
1999 to December 2000.

NOTE 10. MARGIN BORROWINGS

The Company has margin arrangements with various brokerage firms which
provide for borrowings of up to 50% of the market value of marketable equity
securities. The borrowings under such margin arrangements are secured by equity
securities of the REITs, NRLP and the Company's trading portfolio of marketable
equity securities and bear interest rates ranging from 7.0% to 11.0% per annum.
Margin borrowings were $35.8 million at December 31, 1998, and $53.4 million at
December 31, 1997, 43.9% and 39.7%, respectively, of the market values of such
equity securities at such dates.

In August 1996, the Company consolidated its existing NRLP margin debt held
by various brokerage firms into a single loan of $20.3 million. In July 1997,
the lender advanced an additional $3.7 million, increasing the loan balance to
$24.0 million. The loan was secured by the Company's NRLP units with a market
value of at least 50% of the principal balance of the loan. The Company paid
down the loan by $14.0 million in September 1998 and an additional

F-29
<PAGE> 181
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

$5.0 million in October 1998. At December 31, 1998, the loan had a principal
balance of $5.0 million. In February 1999, the loan was paid off.

NOTE 11. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In November 1998, the Company obtained a $95.0 million line of credit from
Garden Capital, L.P. ("GCLP"), which is a partnership controlled by NOLP. The
Company received fundings of $18.9 million in November 1998, $31.1 million in
December 1998, and an additional $26.7 million in the first quarter of 1999. The
line of credit is secured by second liens on the Company's Waters Edge III,
Edgewater Gardens, Chateau Bayou, and Sunset Apartments, its Rosedale Towers
Office Building, Katy Road land and the stock of its wholly-owned subsidiaries,
NMC, the general partner of Partnership, and ART Holdings, Inc., which owns
3,349,535 NRLP units of limited partner interest. The loan bears interest at 12%
per annum, requires monthly interest only payments and matures in November 2003.
The Company accounted for its investment in the Partnership under the equity
method until December 1998 when NMC was elected general partner of the
Partnership. As of December 31, 1998, the accounts of the Partnership are
consolidated with those of the Company. The line of credit is eliminated in
consolidation. See NOTE 2 "SYNTEK ASSET MANAGEMENT, L.P."

In August 1996, the Company obtained a $2.0 million loan from a financial
institution secured by a pledge of equity securities of the REITs owned by the
Company and Common Stock of the Company owned by BCM, with a market value at the
time of $4.0 million. The Company received net cash of $2.0 million after the
payment of various closing costs. The loan was paid in full from the proceeds of
a new $4.0 million loan from another financial institution secured by a pledge
of equity securities of the REITs owned by the Company and Common Stock of the
Company owned by BCM with a market value at the time of $10.4 million. The
Company received net cash of $2.0 million after paying off the $2.0 million
loan. In January 1998, the lender made an additional $2.0 million loan. This
loan is also secured by a pledge of Common Stock of the Company owned by BCM
with a market value at the time of $4.7 million. The Company received net cash
of $2.0 million. The loans mature in February 2000.

In September 1996, the Company obtained a $2.0 million loan from a
financial institution secured by a pledge of equity securities of the REITs
owned by the Company and Common Stock of the Company owned by BCM with a market
value, at the time, of $9.1 million. The Company received net cash of $2.0
million after the payment of various closing costs. In October 1998, the lender
advanced an additional $1.0 million, increasing the loan balance to $3.0
million. The loan matures in January 2000.

In May, June and July 1997, the Company obtained a total of $8.0 million in
mortgage loans from entities and trusts affiliated with the limited partner, at
the time, in a partnership that owned approximately 15.8% of the Company's
outstanding shares of Common Stock. See NOTE 9. "NOTES AND INTEREST PAYABLE." In
January 1998, one of the loans in the amount of $2.0 million was paid off and in
April 1998, a second loan in the amount of $3.0 million was also paid off. In
April 1998, the Company obtained an additional $2.0 million loan from such
entities. In July 1998, the third loan of $3.0 million loan was paid off. In
September 1998, the Company obtained a $5.0 million loan from such entities. In
October 1998, the April $2.0 million loan was paid off. In December 1998, the
Company obtained a $2.0 million loan from such entities. At December 31, 1998,
loans with a principal balance of $7.0 million were outstanding,

F-30
<PAGE> 182
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

they bear interest at 12.5% per annum compounded monthly and mature in April
1999 and May 1999. See NOTE 9. "NOTES AND INTEREST PAYABLE."

As of December 31, 1998, the Company sold to BCM three matured mortgage
notes, at their carrying value of $628,000. No gain or loss was recognized on
the sale. See NOTE 3. "NOTES AND INTEREST RECEIVABLE."

NOTE 12. DIVIDENDS

In June 1996, the Board of Directors resumed the payment of quarterly
dividends on the Company's Common Stock. Common dividends totaling $2.3 million
or $.20 per share were declared in 1998, $2.0 million or $.20 per share in 1997
and $1.5 million or $.15 per share in 1996. The Company reported to the Internal
Revenue Service that 100% of the dividends paid in 1998 and 1996 represented a
return of capital and 100% of the dividends paid in 1997 represented ordinary
income.

NOTE 13. PREFERRED STOCK

The Company's Series B 10% Cumulative Convertible Preferred Stock consisted
of a maximum of 4,000 shares with a par value of $2.00 per share and a
liquidation preference of $100.00 per share. Dividends were payable at the rate
of $10.00 per year or $2.50 per quarter to stockholders of record on the 15th
day of each March, June, September and December when and as declared by the
Board of Directors. The Series B Preferred Stock was convertible between May 8,
1998 and June 8, 1998, into Common Stock of the Company at 90% of the average
daily closing price of the Company's Common Stock on the prior 30 trading days.
In May 1998, the 4,000 shares of Series B Preferred Stock outstanding were
converted into 30,211 shares of the Company's Common Stock.

The Company's Series C 10% Cumulative Convertible Preferred Stock consisted
of a maximum of 16,681 shares with a par value of $2.00 per share and a
liquidation preference of $100.00 per share. Dividends were payable at the rate
of $10.00 per year or $2.50 per quarter to stockholders of record on the 15th
day of each March, June, September and December when and as declared by the
Board of Directors. The Series C Preferred Stock was convertible between
November 25, 1998 and February 23, 1999, into Common Stock of the Company at 90%
of the average daily closing price of the Company's Common Stock on the prior 30
trading days. In November 1998, the 16,681 outstanding shares of Series C
Preferred Stock were redeemed at their liquidation preference of $100.00 per
share plus accrued and unpaid dividends.

The Company's Series D 9.5% Cumulative Preferred Stock consists of a
maximum of 91,000 shares with a par value of $2.00 per share and a liquidation
preference of $20.00 per share. Dividends are payable at the rate of $1.90 per
year or $.475 per quarter to stockholders of record on the 15th day of each
March, June, September and December when and as declared by the Board of
Directors. The Series D Preferred Stock is reserved for the conversion of the
Class A limited partner units of Ocean Beach Partners, L.P. The Class A units
may be exchanged for Series D Preferred Stock at the rate of 20 Class A units
for each share of Series D Preferred Stock. No more than one-third of the Class
A units may be exchanged prior to May 31, 2001. Between June 1, 2001 and May 31,
2006 all unexchanged Class A units are exchangeable.
At December 31, 1998, none of the Series D Preferred Stock was issued.

The Company's Series E 10% Cumulative Convertible Preferred Stock consists
of a maximum of 80,000 shares with a par value of $2.00 per share and a
liquidation preference of $100.00 per share. Dividends are payable at the rate
of $10.00 per year or $2.50 per quarter to stockholders of record on the 15th
day of each March, June, September and December when and as declared by the
Board of Directors, for periods prior to November 4, 1999 and $11.00 per year or
$2.75 per quarter thereafter. The Series E Preferred Stock is reserved for the
conversion of the Class A limited partner units of Valley Ranch, L.P. The Class
A units may be exchanged for Series E Preferred Stock at the rate of 100 Class A
units for each share of Series E Preferred Stock. The Series E Preferred Stock
is convertible into Common Stock of

F-31
<PAGE> 183
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

the Company at 80% of the average daily closing price of the Company's Common
Stock on the prior 20 trading days. Only 37.50% of the Series E Preferred Stock
may be converted prior to November 3, 1999. Between November 4, 1999 and
November 3, 2001 an additional 12.50% of the Series E Preferred Stock may be
converted, and the remainder may be converted on or after November 4, 2001. At
December 31, 1998, none of the Series E Preferred Stock was issued.

The Company's Series F 10% Cumulative Convertible Preferred Stock consists
of a maximum of 15,000,000 shares with a par value of $2.00 per share and a
liquidation preference of $10.00 per share. Dividends are payable at the rate of
$1.00 per year or $.25 per quarter to stockholders of record on the 15th day of
each March, June, September and December when and as declared by the Board of
Directors. The Series F Preferred Stock may be converted, after August 15, 2003,
into Common Stock of the Company at 90% of the average daily closing price of
the Company's Common Stock for the prior 20 trading days. At December 31, 1998,
3,350,000 shares of Series F Preferred Stock were issued and outstanding and
1,948,797 shares were reserved for issuance as future consideration in various
business transactions.

The Company's Series G 10% Cumulative Convertible Preferred Stock consists
of a maximum of 11,000 shares with a par value of $2.00 per share, and a
liquidation preference of $100.00 per share. Dividends are payable at the rate
of $10.00 per year or $2.50 per quarter to stockholders of record on the 15th
day of each March, June, September and December when and as declared by the
Board of Directors. 10,000 shares of the Series G Preferred Stock are reserved
for the conversion of the Class A limited partner units of Grapevine American,
L.P. The Class A units may be exchanged for Series G Preferred Stock at the rate
of 100 Class A units for each share of Series G Preferred Stock, on or after
October 6, 1999. The Series G Preferred Stock may be converted, after October 6,
2000, into Common Stock of the Company at 90% of the average daily closing price
of the Company's Common Stock for the 20 prior trading days. At December 31,
1998, 1,000 shares of the Series G Preferred Stock was issued.

The Company's Series H 10% Cumulative Convertible Preferred Stock consists
of a maximum of 231,750 shares with a par value of $2.00 per share, and a
liquidation preference of $10.00 per share. Dividends are payable quarterly at
the rate of $.70 per year until June 30, 1999, $.80 from July 1, 1999 through
June 30, 2000, $.90 per year from July 1, 2000 through June 30, 2001 and $.10
per year from July 1, 2001 and thereafter. The Series H Preferred Stock is
reserved for the conversion of the Class A limited partner units of ART Palm,
L.L.C. The Class A units may be exchanged for Series H Preferred Stock at the
rate of 100 Class A units for each share of Series H Preferred Stock at any time
after July 13, 1999. The Series H Preferred Stock may be converted into 25,000
shares of the Company's Common Stock after December 31, 2000, 25,000 shares on
or after June 30, 20002, 25,000 shares on or after June 30, 2003, 25,000 shares
on or after December 31, 2005 and all remaining outstanding shares on or after
December 31, 2006 at 90% of the average daily closing price of the Company's
Common Stock for the 20 prior trading days. At December 31, 1998, none of the
Series H Preferred Stock was issued.

NOTE 14. STOCK OPTIONS

In January 1998, the Company's shareholders approved the 1997 Stock Plan
("Option Plan"). Under the Option Plan, options have been granted to certain
Company officers and key employees of BCM and its affiliates. The Option Plan
provides for options to purchase up to 300,000 shares of the Company's Common
Stock. All grants are determined by the Option Committee of the Board of
Directors. Options granted pursuant to the Option Plan are exercisable beginning
one year after the date of grant and expire the earlier of three months after
termination of employment or ten years from the date of grant.

F-32
<PAGE> 184
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following table summarizes stock option activity:

<TABLE>
<CAPTION>
Options
Exercise ----------------------------
Price Outstanding Exercisable
------------ ------------ ------------
<S> <C> <C> <C>
January 1, 1998 ......... $ -- -- --
Options granted ......... 15.00 293,750 --
Options forfeited ....... 15.00 (17,000) --
------------ ------------ ------------

December 31, 1998 ....... $ 15.00 276,750 --
============ ============ ============
</TABLE>

In January 1999, the Company's stockholders approved the Director's Stock
Option Plan ("Director's Plan") which provides for options to purchase up to
40,000 shares of the Company's Common Stock. Options granted pursuant to the
Director's Plan are immediately exercisable and expire on the earlier of the
first anniversary of the date on which a Director ceases to be a Director or ten
years from the date of grant. Each Independent Director was granted an option to
purchase 1,000 shares at an exercise price of $16.25 per share on January 11,
1999, the date stockholders approved the plan. Each Independent Director will be
awarded an option to purchase an additional 1,000 shares on January 1 of each
year.

The Company applies Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees," and related Interpretations in accounting for
its Option Plans. All share options issued by the Company have exercise prices
equal to the market price of the shares at the dates of grant. Accordingly, no
compensation cost has been recognized for its option plans. Had compensation
cost for the Company's option plans been determined based on the fair value at
the grant dates consistent with the method of Statement of Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation,", the Company's net
loss and loss per share would have been increased to the pro forma amounts
indicated below.

<TABLE>
<CAPTION>
1998
-------------------------
As Reported Pro Forma
----------- ----------
<S> <C> <C>
Net (loss) applicable to common shares ................ $ (23,982) $ (24,374)
Net (loss) applicable to common shares, per share ..... (2.24) (2.38)
</TABLE>

F-33
<PAGE> 185

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
1998
----
<S> <C>
Dividend yield........................................ 1.25%
Expected volatility................................... 30%
Risk-free interest rate............................... 5.35%
Expected lives (in years)............................. 7
Forfeitures........................................... 10%
</TABLE>

The weighted average fair value per share of options granted in 1998 was
$5.67.

NOTE 15. ADVISORY AGREEMENT

Although the Board of Directors is directly responsible for managing the
affairs of the Company and for setting the policies which guide it, the day-
to-day operations of the Company are performed by BCM, a contractual advisor
under the supervision of the Board of Directors. The duties of the advisor
include, among other things, locating, investigating, evaluating and
recommending real estate and mortgage loan investment and sales opportunities as
well as financing and refinancing sources. BCM as advisor also serves as a
consultant in connection with the Company's business plan and investment policy
decisions made by the Board of Directors.

BCM has been providing advisory services to the Company since February 6,
1989. BCM is a company owned by a trust for the benefit of the children of Gene
E. Phillips. Mr. Phillips served as Chairman of the Board and as a Director of
the Company until November 16, 1992. Mr. Phillips also served as a director of
BCM until December 22, 1989, and as Chief Executive Officer of BCM until
September 1, 1992. Mr. Phillips serves as a representative of the trust for the
benefit of his children that owns BCM and, in such capacity, has substantial
contact with the management of BCM and input with respect to BCM's performance
of advisory services to the Company. Karl L. Blaha, President and a Director of
the Company serves as Executive Vice President--Commercial Asset Management of
BCM.

The Advisory Agreement provides that BCM shall receive base compensation at
the rate of 0.125% per month (1.5% on an annualized basis) of the Company's
Average Invested Assets. On October 23, 1991, based on the recommendation of
BCM, the Board of Directors approved a reduction in BCM's base advisory fee by
50% effective October 1, 1991. This reduction remains in effect until the
Company's earnings for the four preceding quarters equals or exceeds $.50 per
share.

In addition to base compensation, the Advisory Agreement provides that BCM,
or an affiliate of BCM, receive an acquisition fee for locating, leasing or
purchasing real estate for the Company; a disposition fee for the sale of each
equity investment in real estate; a loan arrangement fee; an incentive fee equal
to 10% of net income for the year in excess of a 10% return on stockholders'
equity, and 10% of the excess of net capital gains over net capital losses, if
any; and a mortgage placement fee, on mortgage loans originated or purchased.

The Advisory Agreement further provides that BCM shall bear the cost of
certain expenses of its employees not directly identifiable to the Company's
assets, liabilities, operations, business or financial affairs; and
miscellaneous administrative expenses relating to the performance of its duties
under the Advisory Agreement.

F-34
<PAGE> 186

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

If and to the extent that the Company shall request BCM, or any director,
officer, partner or employee of BCM, to render services to the Company other
than those required to be rendered by BCM under the Advisory Agreement, such
additional services, if performed, will be compensated separately on terms
agreed upon between such party and the Company from time to time. The Company
has requested that BCM perform loan administration functions, and the Company
and BCM have entered into a separate agreement, as described below.

The Advisory Agreement automatically renews from year to year unless
terminated in accordance with its terms. Management believes that the terms of
the Advisory Agreement are at least as fair as could be obtained from
unaffiliated third parties. Since October 4, 1989, BCM has acted as loan
administration/servicing agent for the Company, under an agreement terminable by
either party upon thirty days' notice, under which BCM services the Company's
mortgage notes and receives as compensation a monthly fee of .125% of the
month-end outstanding principal balances of the mortgage notes serviced.

NOTE 16. PROPERTY MANAGEMENT

Since February 1, 1990, affiliates of BCM have provided property management
services to the Company. Currently, Carmel Realty Services, Ltd. ("Carmel,
Ltd.") provides property management services for a fee of 5% or less of the
monthly gross rents collected on the properties under its management. Carmel,
Ltd. subcontracts with other entities for property-level management services to
the Company at various rates. The general partner of Carmel, Ltd. is BCM. The
limited partners of Carmel, Ltd. are (1) First Equity Properties, Inc. ("First
Equity"), which is 50% owned by a subsidiary of BCM, (2) Gene E. Phillips and
(3) a trust for the benefit of the children of Mr. Phillips. Carmel, Ltd.
subcontracts the property-level management of 15 of the Company's commercial
properties (office buildings, shopping centers and a merchandise mart) and its
hotels to Carmel Realty, Inc. ("Carmel Realty"), which is a company owned by
First Equity. Carmel Realty is entitled to receive property and construction
management fees and leasing commissions in accordance with the terms of its
property- level management agreement with Carmel, Ltd.

NOTE 17. ADVISORY FEES, PROPERTY MANAGEMENT FEES, ETC.

Fees and cost reimbursements to BCM and its affiliates were as follows:

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Fees
Advisory and mortgage servicing ...................... $ 3,845 $ 2,657 $ 1,539
Loan arrangement ..................................... 804 592 806
Brokerage commissions ................................ 7,450 7,586 1,889
Property and construction management and leasing
commissions* ........................................ 1,752 865 892
------------ ------------ ------------
$ 13,851 $ 11,700 $ 5,126
============ ============ ============
Cost reimbursements.................................. $ 1,832 $ 1,809 $ 691
============ ============ ============
</TABLE>

- ----------
* Net of property management fees paid to subcontractors, other than Carmel
Realty.

F-35
<PAGE> 187

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 18. OPERATING SEGMENTS

Significant differences among the accounting policies of the segments as
compared to the Company's consolidated financial statements principally involve
the calculation and allocation of administrative expenses. Management evaluates
the performance of its operating segments and allocates resources to them based
on net operating income and cash flow. The Company based reconciliation of
expenses that are not reflected in the segments is $8.2 million of
administrative expenses. There are no intersegment revenues and expenses and the
Company conducts all of its business within the United States.

The table below presents information about the reported operating income of
the Company for 1998 and 1997. Asset information by operating segment is also
presented below.

<TABLE>
<CAPTION>
Commercial
Properties Apartments Hotels Land PWSI Receivables Other Total
---------- ---------- ------ ---- ---- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998
Operating revenue..... $16,539 $ 14,230 $32,221 $ 501 $28,883 $ -- $ -- $ 92,374
Operating expenses.... 9,727 8,755 24,361 6,349 24,840 -- -- 74,032
Interest income....... -- -- -- -- -- 188 -- 188
------- -------- ------- ----- ------- ---------- ------- --------

Net operating income
(loss)............... 6,812 5,475 7,860 (5,848) 4,043 188 -- 18,530
Depreciation and
amortization......... 1,574 1,412 2,320 -- 1,273 -- 411 6,990
Interest on debt...... 3,803 4,396 7,560 29,058 579 -- 6,228 51,624
Capital expenditures... 110 -- 1,383 2,577 166 -- -- 4,236
Segment assets........ 87,581 286,317 78,455 282,300 24,449 52,053 253 811,408
</TABLE>

<TABLE>
<CAPTION>
Land
----
<S> <C>
Property sales:
Sales price........... $51,602
Cost of sales......... 34,348
-------
Gain on sale.......... $17,254
=======
</TABLE>

<TABLE>
<CAPTION>
Commercial
Properties Hotels Land PWSI Receivables Other Total
---------- ------ ---- ---- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1997

Operating revenue ............ $ 13,842 $ 14,944 $ 289 $ 24,953 $ -- $ -- $ 54,028
Operating expenses ........... 10,006 11,232 2,957 19,964 -- -- 44,159
Interest income .............. -- -- -- -- 2,835 -- 2,835
-------- -------- -------- -------- -------- -------- --------

Net operating income
(loss) ...................... 3,836 3,712 (2,668) 4,989 2,835 -- 12,704
Depreciation and
amortization ................ 1,266 973 -- 677 -- 626 3,542
Interest on debt ............. 3,252 2,698 20,573 935 -- 2,773 30,231
Capital expenditures ......... 8,855 1,568 570 2,695 -- -- 13,688
Segment assets ............... 50,185 73,072 178,938 18,271 25,526 258 346,250
</TABLE>

F-36
<PAGE> 188

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

<TABLE>
<CAPTION>
Commercial
Properties Land
---------- -------
<S> <C> <C>
Property sales:
Sales price .................. $10,986 $52,970
Cost of sales ................ 10,400 36,427
------- -------

Gain on sale ................. $ 586 $16,543
======= =======
</TABLE>

NOTE 19. INCOME TAXES

Financial statement loss varies from federal tax return loss, principally
due to the accounting for income and losses of investees, gains and losses from
asset sales, depreciation on owned properties, amortization of discounts on
notes receivable and the difference in the allowance for estimated losses. At
December 31, 1998, the Company had tax net operating loss carryforwards of $29.0
million expiring through 2018.

At December 31, 1998, the Company had a deferred tax benefit of $8.0
million due to tax deductions available to it in future years. However, due to,
among other factors, the Company's inconsistent earnings history, the Company
was unable to conclude that the future realization of such deferred tax benefit,
which requires the generation of taxable income, was more likely than not.
Accordingly, a valuation allowance for the entire amount of the deferred tax
benefit has been recorded.

NOTE 20. EXTRAORDINARY GAIN

In 1996, the Company recognized an extraordinary gain of $381,000
representing its equity share of equity investees' extraordinary gains from the
early payoff of debt and from an insurance settlement.

NOTE 21. RENTS UNDER OPERATING LEASES

The Company's operations include the leasing of commercial properties
(office buildings, shopping centers and a merchandise mart). The leases thereon
expire at various dates through 2013. The following is a schedule of minimum
future rents under non-cancelable operating leases as of December 31, 1998:

<TABLE>
<S> <C>
1999............................................................ $11,248
2000............................................................ 9,390
2001............................................................ 7,273
2002............................................................ 6,518
2003............................................................ 5,833
Thereafter...................................................... 16,294
-------
$56,556
=======
</TABLE>

PWSI conducts its operations from leased facilities which includes an
office, warehouse, and 57 pizza parlor locations for which a lease was signed
and the pizza parlor was either open at December 31, 1998 or scheduled to open

F-37
<PAGE> 189
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

thereafter. The leases expire over the next 14 years. PWSI also leases vehicles
under operating leases. The following is a schedule of minimum future rent
commitments under operating leases as of December 31, 1998:

<TABLE>
<S> <C>
1999............................................................ $ 2,318
2000............................................................ 2,271
2001............................................................ 2,130
2002............................................................ 2,039
2003............................................................ 1,922
Thereafter...................................................... 9,187
-------
$19,867
=======
</TABLE>

Total facilities and automobile rent expense relating to these leases was
$2.7 million in 1998 and $1.3 million in 1997.

NOTE 22. QUARTERLY RESULTS OF OPERATIONS

The following is a tabulation of the Company's quarterly results of
operations for the years 1998 and 1997 (unaudited):

<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------
March 31, June 30, September 30, December 31,
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1998
Revenue ..................................... $ 18,249 $ 22,690 $ 23,291 $ 22,856
Expense ..................................... 29,744 35,830 38,676 60,861
-------- -------- -------- --------

(Loss) from operations ...................... (11,495) (13,140) (15,385) (38,005)
Equity in income of investees ............... 2,387 8,943 6,099 10,537
Gains on sale of real estate ................ -- 8,974 5,718 2,562
-------- -------- -------- --------

Net income (loss) ........................... (9,108) 14,777 (3,568) (24,906)
Preferred dividend
requirement ................................ (51) (84) (502) (540)
-------- -------- -------- --------

Net income (loss) applicable to
Common shares .............................. $ (9,159) $ 14,693 $ (4,070) $(25,446)
======== ======== ======== ========

Earnings per share
Net income (loss) ........................... $ (.86) $ 1.38 $ (.38) $ (2.38)
======== ======== ======== ========
</TABLE>

F-38
<PAGE> 190

AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
1997
Revenue ................................ $ 12,126 $ 12,100 $ 15,039 $ 17,766
Expense ................................ 16,288 18,364 24,296 31,304
-------- -------- -------- --------

(Loss) from operations ................. (4,162) (6,264) (9,257) (13,538)
Equity in income of investees .......... 146 4,941 (145) 5,555
Gains on sale of real estate ........... 4,287 3,863 3,205 8,941
-------- -------- -------- --------

Net income (loss) ...................... 271 2,540 (6,197) 958
Preferred dividend
requirement .......................... (50) (49) (49) (58)
-------- -------- -------- --------

Net income (loss) applicable to
Common shares ........................ $ 221 $ 2,491 $ (6,246) $ 900
======== ======== ======== ========

Earnings per share
Net income (loss) ...................... $ .02 $ .21 $ (.52) $ .07
======== ======== ======== ========
</TABLE>

NOTE 23. COMMITMENTS AND CONTINGENCIES

Liquidity. Although the Company anticipated that it would generate excess
cash from operations in 1998, such excess cash did not materialize and,
therefore, was not sufficient to discharge all of the Company's debt obligations
as they became due. The Company relied on additional borrowings and, to a lesser
extent, land sales to meet its cash requirements. In 1999, the Company expects
that it will generate excess cash from operations, due to increased rental rates
and occupancy at its properties, however, such excess will not be sufficient to
discharge all of the Company's debt obligations as they mature. The Company will
also rely on aggressive land sales, selected property sales and, to the extent
necessary, additional borrowings to meet its cash requirements.

Litigation. The Company is involved in various lawsuits arising in the
ordinary course of business. In the opinion of the Company's management the
outcome of these lawsuits will not have a material impact on the Company's
financial condition, results of operations or liquidity.

NOTE 24. SUBSEQUENT EVENTS

In February 1999, the Company purchased Frisco Bridges land, a 336.8 parcel
of unimproved land in Collin County, Texas, for $46.8 million. The Company paid
$7.8 million in cash and obtained mortgage financing totaling $39.0 million.
Seller financing in the amount of $22.0 million, secured by 191.5 acres of the
parcel, bears interest at 14% per annum, requires monthly interest only payment,
and matures in January 2000. A mortgage in the amount of $15.0 million, secured
by 125.0 acres of the parcel, bears interest at the prime rate plus 4.5%,
currently 12.25% per annum,

F-39
<PAGE> 191
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

requires three quarterly principal reduction payments of $3.0 million on each of
May 1, August 1 and November 1, 1999 in addition to monthly interest payments
and matures in February 2000. Another mortgage in the amount of $2.0 million,
secured by 13.5 acres of the parcel, bears interest at 14% per annum, requires
monthly interest only payments and matures in January 2000. The Company's Double
O land in Las Colinas, Texas and its Desert Wells land in Palm Desert,
California are pledged as additional collateral for these loans. The Company
drew down $6.0 million under its line of credit with the CCLP, for a portion of
the cash requirement.

Also in February 1999, the Company sold a 4.6 acre tract of its Plano
Parkway land parcel, for $1.2 million. Simultaneously with the sale, the
mortgage debt secured by such land parcel was refinanced in the amount of $7.1
million. The new mortgage bears interest at the prime rate plus 4.5%, currently
12.25% per annum, requires monthly interest only payments and matures in January
2000. The net cash from the sale and refinancing along with an additional
$921,000 were used to payoff the $8.9 million mortgage secured by the land
parcel.

Further in February 1999, the Partnership sold the 225 unit Santa Fe
Apartments in Kansas City, Missouri, for $4.6 million, receiving net cash of
$4.3 million after the payment of various closing costs. A gain will be
recognized on the sale.

In February 1999, the Partnership sold the 480 unit Mesa Ridge Apartments
in Mesa, Arizona, for $19.5 million, receiving net cash of $793,000 after the
payment of various closing costs and remitting $17.8 million to the lender to
hold in escrow pending a substitution of collateral. Such funds will be released
when substitute collateral is approved. If substitute collateral is not provided
by August 1999, $13.0 million of the escrow will be applied against the
mortgage's principal balance, approximately $885,000 will be retained by the
lender as a prepayment penalty and the remaining $3.9 million will be returned
to the Partnership. A gain will be recognized on the sale.

Also in February 1999, GCLP funded a $5.0 million unsecured loan to
Davister Corp., which at December 31, 1998, owned approximately 15.8% of the
outstanding shares of the Company's Common Stock. The loan bears interest at
12.0% per annum and matures in February 2000. All principal and interest are due
at maturity. The loan is guaranteed by BCM.

In March 1999, the Company sold two tracts totaling 9.9 acres of its
Mason/Goodrich land parcel, for $956,000, receiving net cash of $33,000 after
paying down by $860,000 the mortgage secured by such land parcel and the payment
of various closing costs. A gain will be recognized on the sale.

Also in March 1999, the Company sold a 13.7 acre tract of its McKinney
Corners II and IV land parcels, for $7.7 million, receiving no net cash after
paying down by $5.5 million the mortgage debt secured by such land parcels, the
funding of required escrows and the payment of various closing costs. A gain
will be recognized on the sale.

F-40
<PAGE> 192

INDEPENDENT AUDITORS' REPORT

Board of Trustees and Shareholders
EQK Realty Investors I:

We have audited the accompanying balance sheets of EQK Realty Investors I (a
Massachusetts business Trust) as of December 31, 1998 and 1997 and related
statements of operations, shareholders' deficit, and cash flows for each of the
three years in the period ended December 31, 1998. Our audits also included the
financial statement schedule listed in the Index at F-1. These financial
statements and the financial statement schedule are the responsibility of the
Trust's management. Our responsibility is to express an opinion on the financial
statements and the financial statement schedule based on our audits.

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

In our opinion, such financial statements present fairly, in all material
respects, the financial position of EQK Realty Investors I as of December 31,
1998 and 1997 and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth herein.

The accompanying financial statements have been prepared assuming the Trust
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Trust's existing mortgage note and term loan mature on June 15,
1999. The potential inability of the Trust to refinance this debt or to generate
sufficient proceeds from property sales to repay the debt raises substantial
doubt about the Trust's ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Atlanta, Georgia
March 26, 1999

F-41
<PAGE> 193

EQK REALTY INVESTORS I
BALANCE SHEETS

<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
ASSETS (dollars in thousands, except share data)
<S> <C> <C>
Real Estate held for sale ............................. $ 39,360 $ --
Investment in real estate, at cost .................... -- 58,466
Less accumulated depreciation ................... -- 19,170
--------- ---------
Investment in real estate, net ........................ -- 39,296
Cash and cash equivalents:
Cash Management Agreement ....................... 3,390 2,486
Other ........................................... 471 837
Accounts receivable and other assets (net of
allowance of $67 and $214, respectively) ........ 1,881 2,448
--------- ---------
TOTAL ASSETS .......................................... $ 45,102 $ 45,067
========= =========

LIABILITIES AND DEFICIT IN SHAREHOLDERS' EQUITY:

Liabilities:
Mortgage note payable ........................... $ 43,794 $ 43,794
Term loan payable to bank ....................... 1,580 1,585
Accounts payable and other liabilities
(including amounts due affiliates of
$3,107 and $3,117, respectively) ............. 4,560 4,670
Commitments and Contingencies (Note 7)
Deficit in Shareholders' Equity:

Shares of beneficial interest, without par
value: 10,055,555 shares authorized,
9,632,212 and 9,264,344 shares issued
and outstanding in 1998 and 1997,
respectively ................................. 135,875 135,875
Accumulated deficit ............................. (140,707) (140,857)
--------- ---------
(4,832) (4,982)
--------- ---------
Total Liabilities and Deficit
in Shareholders' Equity ......................... $ 45,102 $ 45,067
========= =========
</TABLE>

See accompanying Notes to Financial Statements.

F-42
<PAGE> 194

EQK REALTY INVESTORS I
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Years ended December 31,
1998 1997 1996
------- ------- -------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Revenues from rental operations ..................................................... $ 6,191 $ 6,158 $ 6,174

Operating Expenses, net of tenant reimbursements
(including property management fees earned
by an affiliate of $228, $307 and $297,
respectively) ................................................................. 769 1,083 887

Depreciation and amortization ....................................................... 588 2,181 2,212
Other income ........................................................................ -- -- (268)
Income from rental operations ....................................................... 4,834 2,894 3,343
Interest expense .................................................................... 4,219 4,397 4,075

Other expenses, net of interest income
(including portfolio management fees
earned by an affiliate of $232, $242
and $250, respectively) ....................................................... 465 458 756
------- ------- -------

Net income (loss) ................................................................... $ 150 ($1,961) ($1,488)
======= ======= =======

Net income (loss) per share ......................................................... $ 0.02 $ (0.21) $ (0.16)
</TABLE>

See accompanying Notes to Financial Statements.

F-43
<PAGE> 195

EQK REALTY INVESTORS I
STATEMENTS OF SHAREHOLDERS' DEFICIT

<TABLE>
<CAPTION>
Number of Shares of
Shares Issued Beneficial Accumulated
and Outstanding Interest Deficit Total
--------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Balance, December 31, 1995 .................. 9,264,344 $ 135,875 ($137,408) $ (1,533)

Net Loss .................................... -- -- (1,488) (1,488)
--------- --------- --------- ---------

Balance, December 31, 1996 .................. 9,264,344 135,875 (138,896) (3,021)
--------- --------- ---------

Net Loss .................................... -- -- (1,961) (1,961)

Balance, December 31, 1997 .................. 9,264,344 135,875 (140,857) (4,982)

Shares Issued ............................... 367,868 -- -- --

Net Income .................................. -- -- 150 150

Balance, December 31, 1998 .................. 9,632,212 $ 135,875 $(140,707) $ (4,832)
========= ========= ========= =========
</TABLE>

See accompanying Notes to Financial Statements.

F-44
<PAGE> 196

EQK REALTY INVESTORS I
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For The Years Ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) ....................................... $ 150 $ (1,961) $ (1,488)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amoritzation ....................... 588 2,181 2,212
Amortization of deferred financing costs ............ 186 351 179
Imputed and deferred interest ....................... -- -- 302
Changes in assets and liabilities:
Increase in accounts
payable and other liabilities ................... 252 198 140
(Increase) decrease in accounts receivable
and other assets ................................ 421 (537) (37)
------------ ------------
Net cash provided by operating activities .................. 1,597 232 1,382
------------ ------------ ------------
Cash Flows from investing activities:
Additions to real estate investments .................... (652) (546) (195)
------------ ------------
Net cash used in investing activities ...................... (652) (546) (195)
------------ ------------ ------------
Cash flows from financing activities:
Scheduled repayments of debt ............................ (5) -- (333)
Payment of deferred financing costs ..................... (402) (24) (165)
------------ ------------ ------------
Net cash used in financing activities ...................... (407) (24) (498)
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents ........... 538 (338) 689
Cash and cash equivalents
beginning of year ....................................... 3,323 3,661 2,972
------------ ------------ ------------
Cash and cash equivalents
end of year ............................................. $ 3,861 $ 3,323 $ 3,661
============ ============ ============
Supplemental disclosure of cash flow information:
Interest paid ........................................... $ 4,058 $ 4,022 $ 3,886
============ ============ ============
</TABLE>

See accompanying Notes to Financial Statements.

F-45
<PAGE> 197

EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS

NOTE 1: DESCRIPTION OF BUSINESS

EQK Realty Investors I, a Massachusetts business trust (the "Trust"), was
formed pursuant to an Amended and Restated Declaration of Trust dated February
27, 1985, as amended on March 5, 1986, to acquire certain income-producing real
estate investments. Commencing with the period beginning April 1, 1985, the
Trust qualified for and elected real estate investment trust ("REIT") status
under the provisions of the Internal Revenue Code. Lend Lease Portfolio
Management, Inc. (formerly ERE Yarmouth Portfolio Management, Inc.) serves as
the "Advisor" to the Trust.

At December 31, 1998, the Trust's remaining real estate investment is
Harrisburg East Mall (the "Mall"), a regional shopping center in Harrisburg,
Pennsylvania, which is currently held for sale. On December 8, 1995, the Trust
sold its remaining interest in Castleton Park ("Castleton"), an office park in
Indianapolis, Indiana. The Trust sold office buildings comprising an office
complex located in Atlanta, Georgia, formerly known as Peachtree-Dunwoody
Pavilion ("Peachtree") during 1992 and 1993. In 1991, the Trust completed the
sale of two office buildings at Castleton.

The Declaration of Trust provides for the Trust's existence and a maximum
holding period for its real estate investments of 14 years. The Declaration of
Trust further provides that this 14-year term may be extended by up to two years
upon the recommendation of the Trustees and the affirmative vote of a majority
of its shareholders. Recognizing that the disposition of the Mall would not be
completed prior to the initial maturity date of the Trust's term (March 5,
1999), the Board of Trustees recommended a two-year extension of the Trust's
life (through March 5, 2001). As discussed in Note 9, this recommendation was
approved by the shareholders at a Special Meeting of Shareholders held on
February 23, 1999.

Effective December 23, 1997, the Trust entered into an Agreement and Plan
of Merger (the "Merger Agreement"), pursuant to which an affiliate of American
Realty Trust, Inc. ("ART") is to merge with and into the Trust (the "Merger"),
with the Trust being the surviving entity. The Merger contemplates, among other
things, a 20-year extension of the life of the Trust.

The Merger Agreement was amended on August 25, 1998 (the "Revised Merger
Agreement") to provide for, among other matters, the right of the Trust to sell
the Mall and distribute proceeds of such sale to the Trust's shareholders prior
to completing the Merger and a corresponding reduction in the Merger
consideration to be paid to the Trust's shareholders. As discussed in Note 9,
the Trust has entered into a non-binding letter of intent to sell the Mall to a
private real estate group.

The Merger consideration will be comprised entirely of ART Series F
Cumulative Convertible Preferred Stock with a par value of $2.00 per share and a
liquidation value of $10.00 per share. ("ART Preferred Shares"). The merger will
be effected by (i) ART's acquisition of 4,376,056 shares currently held by four
EQK shareholders (the "Selling Shareholders") and (ii) ART's receipt of 673,976
shares newly issued by the Trust (which, together with Shares currently
outstanding, constitutes "EQK Shares"), the combined effect of which will give
ART an approximate 49% interest in EQK. The Selling Shareholders will receive
for each EQK Share sold 0.030 of an ART Preferred Share with a corresponding
liquidation value of $0.30 per EQK Share sold. The remaining shareholders will
be entitled to retain their Shares at the time of the Merger, but will be
compensated for the dilution in their percentage ownership interest through the
receipt of 0.014 of an ART Preferred Share with a corresponding liquidation
value of $0.14 per EQK Share held. In addition, ART currently intends (but is
not legally obligated) to acquire the remaining EQK Shares from such other
shareholders at some time after the third anniversary of the consummation of the
Merger for not less than 0.0486 of an ART Preferred Share with a liquidation
value of $0.486 for each EQK Share tendered.

According to the terms of the Revised Merger Agreement, upon completion of
the sale of the Mall and receipt of shareholder approval, the Merger would be
completed. Immediately prior to the closing of the Merger, ART will convey

F-46
<PAGE> 198

EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS - CONTINUED

one of its properties to the Trust. The total consideration paid by the Trust to
ART for this property will be a $1,250,000 non-recourse five-year promissory
note. The Trust will also assume approximately $1,500,000 of existing debt.

ART has agreed to permit the Trust to continue to solicit, or respond to,
offers from third parties for the Trust. In the event the Trust accepts an offer
from a party other than ART and elects not to proceed with the Merger, the Trust
generally will be obligated to pay ART a break-up fee of $200,000 plus its share
of transaction expenses (collectively, the "Break-Up Consideration").

Because the Merger was not completed by December 15, 1998, the Revised
Merger Agreement is currently terminable by either ART or the Trust. The Revised
Merger Agreement also may be terminated by the Trust if (i) the Trust secures a
more favorable offer from another party subject to the payment of the Break-Up
Consideration; or (ii) the Revised Merger Agreement in any way impairs or delays
the sale of the Mall, or is likely to result in a material reduction in
proceeds.

Proceeds from the sale of the Mall and, if applicable, the completion of
the Merger, will be distributed to the shareholders of the Trust in one or more
payments once the Trust's liabilities have been settled (including retirements
of its Mortgage Note and Term Loan) and related transaction costs have been
paid.

The Merger is contingent upon, among other things, ART's registration
statement relating to the ART Preferred Shares to be issued pursuant to the
Revised Merger Agreement being declared effective by the Securities Exchange
Commission, and the affirmative vote of the holders of 75% of the outstanding
Shares.

The Trust, its trustees, and its Advisor have been named as defendants in a
purported class action complaint filed in Massachusetts State court, which seeks
to enjoin the Merger. The complaint also seeks other relief including
unspecified damages. The Management of the Trust is pursuing its legal defenses
and believes that the disposition of this matter will not have a material
adverse effect on the financial position of the Trust.

Trading in the Trust's Shares on the New York Stock Exchange ("NYSE")
terminated on May 4, 1998, as the Trust did not meet the NYSE's continued
listing criteria. The Trust's Shares are currently traded on the OTC Bulletin
Board System.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CAPITALIZATION, DEPRECIATION AND AMORTIZATION

Property additions are recorded at cost. Costs directly associated with
major renovations and improvements, including interest on funds borrowed to
finance construction, are capitalized to the point of substantial completion.
Costs incurred in connection with the execution of a new lease including leasing
commissions, costs associated with the acquisition or buyout of existing leases
and legal fees are deferred and amortized over the term of the new lease.

Depreciation of real estate investments was provided on a straight-line
basis over the estimated useful lives of the related assets, ranging generally
from 5 to 40 years. Tenant improvements were amortized over their estimated
useful lives, which do not exceed the terms of the respective tenant leases.
Intangible assets are amortized on a straight-line basis over their estimated
useful lives.

The Trust discontinued recording depreciation and amortization expense on
its investment in real estate when the investment was transferred to real estate
held for sale on April 1, 1998.

F-47
<PAGE> 199

EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS - CONTINUED

Additional depreciation recorded in the fourth quarter of 1998 represents
the write off a non-recoverable tenant allowance.

Deferred financing costs are included in accounts receivable and other
assets on the Balance Sheets. Deferred financing costs are amortized over the
life of the related debt and such amortization is included in interest expense
on the Statements of Operations.

VALUATION OF REAL ESTATE

At December 31, 1997 the investment in real estate was recorded at cost
less accumulated depreciation. In accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," the Trust considers, on a
quarterly basis, whether events or changes in circumstances indicate that the
carrying amount of its real estate investments may not be recoverable based on
estimates of future undiscounted cash flows without interest expense. In the
event such projected undiscounted future cash flows are less than the
depreciated cost of the property, the investment in real estate is written down
to its estimated fair market value.

The Trust is actively attempting to sell the Mall and, therefore, has
classified its investment in real estate on the balance sheet as held for sale
beginning April 1, 1998. Accordingly, all real estate assets, including deferred
leasing costs, are recorded at the lower of cost or estimated fair market value,
less estimated costs to sell. Depreciation is not recorded for real estate
assets held for sale. Therefore, the Trust discontinued recording depreciation
and amortization of real estate assets on April 1, 1998.

REVENUE RECOGNITION

Minimum rents are recognized on a straight-line basis over the term of the
related leases. Percentage rents are recognized on an accrual basis.

NET INCOME (LOSS) PER SHARE

The net income (loss) per Share calculation is based on the weighted
average number of Shares outstanding during the year, which was 9,505,222 for
1998 and 9,264,344 for both 1997 and 1996.

Share warrants issued in connection with the Trust's 1992 debt
restructuring (see Note 3) are considered common share equivalents. On March 19,
1998, The Prudential Insurance Company of America (Mortgage Note Lender)
exercised its warrants for 367,868 Shares of the Trust at $.0001 per Share. Such
Shares were issued to the Mortgage Note Lender on May 7, 1998, bringing the
total number of issued and outstanding Shares of the Trust to 9,632,212. As
such, these Shares were included in the net income per Share calculation for
1998. In 1997 and 1996, the warrants were not included in the net loss per Share
calculation since the effect on such calculation would be anti-dilutive.

INCOME TAXES

The Trust has complied with all applicable provisions established by the
Internal Revenue Code for maintaining its REIT status. Accordingly, no income
tax provision or benefit has been recognized in the accompanying financial
statements.

F-48
<PAGE> 200

EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS - CONTINUED

CASH EQUIVALENTS

Cash equivalents include short-term investments with an original maturity
of three months or less.

FAIR VALUES OF FINANCIAL INSTRUMENTS

The Trust values its financial instruments as required by Statement of
Financial Accounting Standards No. 107, "Disclosure about Fair Values of
Financial Instruments". Based on rates currently available to the Trust for
comparable financial instruments, the Trust believes the carrying amounts of
cash and cash equivalents, the Mortgage Note and the Term Loan approximate fair
value.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current
year presentation.

MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

NOTE 3: MORTGAGE DEBT AND RESTRUCTURING ACTIVITIES

Since December 15, 1992, the Trust has had in place a "Mortgage Note" with
the Mortgage Note Lender, which had an initial balance of $75,689,000, and an
original maturity date of December 15, 1995. The interest rates on the Mortgage
Note averaged 9.79% over its initial three year term. However, the Mortgage Note
required monthly payments of interest only at the rate of 8.54% per annum.

The additional interest charges were accrued and added to principal over
this initial term of the Mortgage Note. Absent any prepayments of debt arising
from property dispositions, the amount of principal due on the original maturity
date of December 15, 1995 would have been $78,928,000. In December 1995, the
Trust used net proceeds from the sale of Castleton to retire a portion of the
Mortgage Note. The remaining principal balance of the Mortgage Note as of
December 15, 1995 was $44,125,000.

In connection with the December 15, 1992 debt financings, the Trust issued
1,675,000 previously repurchased shares of its stock to its Advisor for
consideration of $6,700,000, or $4.00 per share. The Trust may, at its
discretion, reissue additional 423,343 shares previously repurchased. Any
issuance of shares in excess of the shares previously repurchased would require
shareholder approval.

Under the terms of the Mortgage Note, the Mortgage Note Lender received
warrants to purchase 367,868 Shares of the Trust at $.0001 per share. On March
19, 1998, the Mortgage Note Lender exercised the warrants. (See Note 2.)

The Trust also has had a "Term Loan" with PNC Bank N.A. ("Term Loan
Lender") in place since December 15, 1992 bearing interest at 8.33% per annum
and requiring payments at the same annual rate of 8.54% as was required under
the Mortgage Note. The Term Loan is collateralized by a subordinate lien on the
Mall. The payments made in excess of the interest rate were applied to the
principal balance of the Term Loan such that the original principal balance

F-49
<PAGE> 201

EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS - CONTINUED

of $2,859,000 would have been reduced over its three-year term to $2,839,000,
absent any prepayments arising from property dispositions. In December 1995, the
Trust used proceeds from the sale of Castleton to retire a portion of the Term
Loan. The remaining principal balance of the Term Loan as of December 15, 1995
was $1,587,000.

As part of the 1992 restructuring, the Trust entered into a Cash Management
Agreement with the Mortgage Note Lender and assigned all lease and rent receipts
to the Mortgage Note Lender as additional collateral. Pursuant to this
agreement, a third-party escrow agent has been appointed to receive all rental
payments from tenants and to fund monthly operating expenses in accordance with
a budget approved by the Mortgage Note Lender. As of December 31, 1998, a
balance of $1,965,000, was held by the third-party escrow agent in accordance
with the Cash Management Agreement. The agreement also provides for the
establishment of a capital reserve account, which is maintained by the escrow
agent. Disbursements from this account, which is funded each month with any
excess operating cash flow, are limited to capital expenditures approved by the
Mortgage Note Lender. As of December 31, 1998 the balance of the capital reserve
account was $1,425,000.

EXTENSIONS OF DEBT

The Trust's Mortgage Note Lender and Term Loan Lender have agreed to extend
the maturity date of the loans twice; first, for a period of one year through
December 15, 1996, and second, for a period of 18 months through June 15, 1998.
The Mortgage Note remains collateralized by a first mortgage lien on the Mall,
an assignment of leases and rents, and certain cash balances. The Term Loan
remains collateralized by a subordinate lien on the Mall.

Following the June 15, 1998 scheduled maturity date, the Mortgage Note
Lender granted two six-month forbearance arrangements (through December 15, 1998
and then through June 15, 1999) wherein it agreed not to exercise remedies for
non-payment of the outstanding principal balance. The Term Loan Lender has
granted two six-month extensions of its maturity dates so as to coincide with
such forbearance periods. The forbearance and extension arrangements are
conditioned upon, among other things, the Trust continuing to make timely debt
service payments in monthly amounts equal to those amounts stipulated in the
December 1996 debt extension agreements.

The Mortgage Note has been amended effective December 16, 1996 to provide
for monthly payments of interest only accruing at the rate of 8.88% per annum
($324,000 per month). This interest rate reflects an increase from the 8.54%
interest rate in effect during the initial extension period (December 16, 1995
to December 15, 1996).

The Term Loan reflects the same pay rate of 8.88%, effective December 16,
1996, that is applicable to the Mortgage Note, but accrues interest at a rate
that re-sets periodically. The accrual rate is computed at the Trust's
discretion at either 2 5/8% above the Euro-Rate (as defined) or 1 1/8% above the
Prime Rate (as defined). The accrual rate in effect as of March 15, 1999 was
7.69%. The difference between the accrual rate and the pay rate is reflected in
the principal balance of the Term Loan as of December 31, 1998.

In consideration for the extension of the maturity date of the Mortgage
Note through June 15, 1998, the Trust paid an up-front application fee of
$165,000 and agreed to pay a back-end fee of $272,900, plus interest thereon at
the contract rate of 8.88% at maturity. On June 15, 1998, the Trust paid the
back-end fee plus interest in the aggregate amount of $309,200 to the Mortgage
Note Lender. In consideration for the extension of the maturity date of the Term
Loan the Trust paid an extension fee of $23,800 in 1997 and paid additional loan
fees of $88,100 to the Term Loan Lender on June 15, 1998.

F-50
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EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS - CONTINUED

In consideration for the extension of the forbearance agreement relating to
the Mortgage Note through June 15, 1999, the Trust paid an extension fee of
$25,000. In consideration for the extension of the maturity date of the Term
Loan through June 15, 1999 the Trust agreed to pay an extension fee of $8,000.

As discussed above, the Trust's expiration date of its forbearance and
extension arrangements is June 15, 1999. The potential inability of the Trust to
refinance this debt or to generate sufficient proceeds from the sale of the Mall
to repay the debt raises substantial doubt about the Trust's ability to continue
as a going concern. The Trust has entered into a non-binding letter of intent to
sell the Mall for approximately $51 million (see Note 9), although there is no
assurance that the sale of the Mall will be completed. The Management of the
Trust believes that the proceeds from the sale of the Mall will be sufficient to
allow the Trust to repay the Mortgage Note and Term Loan, although there can be
no assurance a sale will be completed by June 15, 1999. In the event the sale of
the Mall is not completed by June 15, 1999, Management will propose to its
lenders that further forebearance and extensions be granted. However, no
assurance can be given that the lenders will grant such relief. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

NOTE 4: LEASING ARRANGEMENTS

The Trust leases shopping center space generally under non-cancelable
operating leases, some of which contain renewal options. The shopping center
leases generally provide for minimum rentals, plus percentage rentals based upon
the retail stores' sales volume. Percentage rentals amounted to $272,000,
$122,000, and $179,000 for the years ended December 31, 1998, 1997, and 1996,
respectively. In addition, the tenants pay certain utility charges to the Trust.
In most leases, tenants reimburse their proportionate share of real estate taxes
and common area expenses. Recoveries of common area and real estate tax expenses
amounted to $2,418,000, $2,299,000, and $2,313,000 for the years ended December
31, 1998, 1997, and 1996, respectively.

Future minimum rentals under existing, non-cancelable leases at December
31, 1998 are as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31, AMOUNT
------------------------- ------
<S> <C>
1999................................................. $ 4,828,000
2000................................................. 4,590,000
2001................................................. 3,864,000
2002................................................. 3,464,000
2003................................................. 3,039,000
Thereafter........................................... 9,468,000
-----------
$29,253,000
===========
</TABLE>

The Limited Inc. operates seven stores at the Mall. Revenues from these
tenants represented approximately 14.2% and 13.0% of the Mall's total revenues
in 1998 and 1997, respectively. No other individual tenant, or group of
affiliated tenants, contributed more than 10% to the Mall's total revenues in
any of the three years in the period ended December 31, 1998.

Prior to 1998, due to the temporary closure of two of the anchor stores
operating at the Mall, certain tenants exercised the right, as provided for
under co-tenancy provisions set forth in their respective leases, to pay
percentage rent in lieu of fixed minimum rents which amounted to $228,000 and
$663,000, for the years ended December 31, 1997

F-51
<PAGE> 203

EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS - CONTINUED

and 1996, respectively. The rental payment obligations of substantially all of
these tenants reverted back to fixed minimum rent upon the March 10, 1997
opening of a Lord & Taylor department store at the Mall.

NOTE 5: INVESTMENT IN REAL ESTATE

The Trust's investment in real estate at December 31, 1997 consisted of
the following:

<TABLE>
<S> <C>
Land................................................. $ 4,700,000
Buildings and improvements........................... 45,356,000
Deferred leasing costs............................... 5,692,000
Tenant improvements.................................. 2,555,000
Personal property.................................... 163,000
-----------
$58,466,000
===========
</TABLE>

Additions to real estate investments in 1997 primarily consisted of
minor building and tenant improvements to the Mall.

Deferred leasing costs include a 1990 payment of $5,500,000 made to an
anchor tenant at the Mall in exchange for the tenant relinquishing space that
was subsequently converted into leasable area for mall shops.

NOTE 6: ADVISORY AND MANAGEMENT AGREEMENTS

ADVISORY AGREEMENT

The Advisor is a wholly owned subsidiary of Lend Lease Real Estate
Investments, (formerly ERE Yarmouth, Inc.). The Advisor makes recommendations to
the Trust concerning investments, administration and day-to-day operations.

Under the terms of the advisory agreement, as amended in December 1989,
the Advisor receives a management fee that is based upon the average daily per
share price of the Trust's shares plus the average daily balance of outstanding
mortgage indebtedness. Such fee is calculated using a factor of 42.5 basis
points (0.425%) and generally has been payable monthly without subordination.
However, given the Shares of the Trust are no longer traded on a market with
readily available market values, the Trustees have agreed on a stipulated rate
of $0.75 per share to be used for purposes of calculating the management fee for
the period of May 4, 1998 through December 31, 1998.

Commencing with the December 1995 extension of debt and continuing with
the December 1996 debt extension (See Note 3), the Mortgage Note Lender has
requested, and the Advisor has agreed to, a partial deferral of payment of its
fee. Whereas the fee continues to be computed as described above, payments to
the Advisor are limited to $37,500 per quarter. Accrued but unpaid amounts will
be eligible for payment upon the repayment of the Mortgage Note. For the years
ended December 31, 1998, 1997 and 1996, portfolio management fees were $232,000,
$242,000, and $250,000, respectively. The balance of deferred advisory fees at
December 31, 1998 was $299,000.

As of December 31, 1989, portfolio management fees of $5,440,000
payable to the Advisor were deferred in accordance with subordination provisions
contained in the original advisory agreement. Pursuant to the amended advisory
agreement, the Advisor forgave one-half, or $2,720,000, of the deferred balance.
The remaining deferred fees are to be paid upon the disposition of the Trust's
properties. As of December 31, 1998, the liability for deferred management fees
was $2,720,000.

F-52
<PAGE> 204

EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS - CONTINUED

Upon the sale of all or any portion of any real estate investment of
the Trust, the Advisor will receive a disposition fee equal to 2% of the gross
sale price (including outstanding indebtedness taken subject to or assumed by
the buyer and any purchase money indebtedness taken back by the Trust). The
disposition fee will be reduced by the amount of any brokerage commissions and
legal expenses incurred by the Trust in connection with such sales. The Trust
incurred no disposition fees during the years ended December 31, 1998, 1997, and
1996.

In connection with the December 15, 1996 extension of debt (See Note
3), the Advisor earned a refinancing fee of $50,000, which will be paid upon the
retirement of the debt.

PROPERTY MANAGEMENT AGREEMENTS

The Trust has also entered into an agreement with ERE Yarmouth Retail,
Inc. (the "Manager"), formerly Compass Retail, Inc., for the on-site management
of the Mall. ERE Yarmouth Retail, Inc. is a wholly owned subsidiary of Lend
Lease Real Estate Investments, Inc. On September 30, 1998, Lend Lease Real
Estate Investments, Inc. sold the Manager to LaSalle Partners, Incorporated
("LaSalle"), which is not affiliated with the Trust or the Advisor. An affiliate
of LaSalle will continue to manage the Mall pursuant to the terms of the
original management agreement.

Management fees paid to the Manager are generally based upon a
percentage of rents and certain other charges. The Trust believes that such fees
and commissions are comparable to those charged by unaffiliated third-party
management companies providing comparable services. The Manager earned
management fees of $228,000 during the nine months ended September 30, 1998. For
the years ended December 31, 1997 and 1996, management fees paid to the Manager
were $307,000, and $297,000, respectively.

SHARE OWNERSHIP

In connection with a debt restructuring in December 1992, the Trust
issued 1,675,000 previously repurchased Shares to its Advisor for $6,700,000, or
$4.00 per Share. In total, the Advisor owns 1,685,556 Shares, or 17.5% of the
total Shares outstanding.

NOTE 7: COMMITMENTS AND CONTINGENCIES

On February 3, 1998, the Trust, its trustees, and its Advisor were
named as defendants in a purported class action complaint filed by a shareholder
in Massachusetts State court. The complaint seeks to enjoin the Merger and also
seeks other relief including unspecified damages. The Trust is vigorously
pursuing its legal defenses and believes that the disposition of this matter
will not have a material adverse affect on the financial position of the Trust.

F-53
<PAGE> 205

EQK REALTY INVESTORS I
NOTES TO FINANCIAL STATEMENTS - CONTINUED

NOTE 8: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of selected quarterly financial data for the
years ended December 31, 1998 and 1997:

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------
1998 MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
- ---- --------- -------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues from rental operations.................... $1,553 $1,337 $1,619 $1,682
Income from rental operations...................... 760 968 1,429 1,677
Net income (loss)(1)............................... (335) (145) 282 348
Net income (loss) per share........................ (.04) (.02) .03 .05
</TABLE>

- --------------------
(1) The 1998 results reflect the cessation of depreciation and amortization of
the Mall's assets as a result of the Trust's real estate being classified
as "held for sale" as of April 1, 1998.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------
1997 MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
- ---- --------- -------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues from rental operations.................... $1,413 $1,557 $1,545 $1,643
Income from rental operations...................... 628 727 625 563
Net loss .......................................... (478) (375) (565) (543)
Net loss per share................................. (.05) (.04) (.06) (.06)
</TABLE>

NOTE 9: SUBSEQUENT EVENTS

A Special Meeting of Shareholders was held on February 23, 1999, to
consider and vote upon a proposal to extend the Trust's existence for a period
of two years in accordance with the Trust's Amended and Restated Declaration of
Trust. An affirmative vote of the majority of the shareholders was received in
favor of extending the Trust's existence for a period of two years beyond March
5, 1999.

On March 5, 1999, the Trust entered into a non-binding letter of intent
to sell the Mall to a private real estate group for approximately $51 million.
The sale is expected to close during the second quarter of 1999. Closing is
subject to a number of conditions, however, including satisfactory completion of
due diligence, the purchaser's obtaining financing and the execution of a
definitive purchase and sale agreement. Accordingly, there is no assurance that
a sale will be completed at the current price or at all. The letter of intent
provides that the Trust may not solicit, negotiate or execute other offers for
the sale of the Mall prior to May 15, 1999, unless the prospective purchaser
terminates negotiations under the letter of intent prior to that date.

F-54
<PAGE> 206

- --------------------------------------------------------------------------------
FINANCIAL STATEMENT SCHEDULE
DECEMBER 31, 1998
(IN THOUSANDS)
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION (5)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Cost Capitalized Gross Amount
Subsequent to at which Carried
Initial Cost Acquisition at Close of Period(3)
------------ ----------- ---------------------

Deferred
Leasing Deferred
Bldg. & Costs & Bldg. & Leasing
Description Encumbrance Land Improv. Improvements Land Improvements Costs Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harrisburg East
Mall....... $45,374(1) $4,700(2) $31,287(2) $23,131 $4,700(2) $48,726(2) $5,692(2) $59,118
Harrisburg, PA
- -------------------------------------------------------------------------------------------------------------
$45,374 $4,700 $31,287 $23,131 $4,700 $48,726 $5,692 $59,118
=============================================================================================================

<CAPTION>
Life on which
Accumulated Depreciation
Depreciation in Latest
& Date of Date Income Stmt.
Description Amortization Construction Acquired is Computed
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Harrisburg East
Mall....... $19,758 1969(4) 3/13/85 30 yrs
Harrisburg, PA
- --------------------------------------------------------------------
$19,758
====================================================================
</TABLE>

(1) Encumbrance is a mortgage note payable constituting first lien on the Mall
and a term loan payable to a bank constituting subordinated lien on the
property.

(2) Initial cost is net of imputed interest of $5,280 at date of acquisition.

(3) The aggregate tax basis of the Trust's land and building is $54 million as
of December 31, 1998.

(4) Renovation of the Mall was completed in 1993.

(5) As discussed in Note 1, the Trust intends to sell the Mall and as such, its
investment in real estate is presented on the balance sheet as held for
sale at December 31, 1998. This asset includes deferred leasing costs, and
is carried at the lower of cost or fair value less cost to sell.
Depreciation and amortization of the Mall's assets ceased beginning April
1, 1998.

(6) Included in deferred leasing costs is a 1990 payment of $5,500,000 made to
an anchor tenant at the Mall in exchange for the tenant relinquishing space
that was subsequently converted into leasable area for mall shops.

RECONCILIATION OF GROSS CARRYING AMOUNT OF REAL ESTATE:

<TABLE>
<S> <C>
Balance, December 31, 1995 $ 57,725
Improvements and Additions 195
--------
Balance, December 31, 1996 57,920
Improvements and Additions 546
--------
Balance, December 31, 1997 58,466
Improvements and Additions 652
--------
Balance, December 31, 1998 $ 59,118
========
</TABLE>

RECONCILATION OF ACCUMULATED DEPRECIATION
AND AMORTIZATION:

<TABLE>
<S> <C>
Balance, December 31, 1995 $ 14,777
Depreciation and amortization expense 2,212
--------
Balance, December 31, 1996 16,989
Depreciation and amortization expense 2,181
--------
Balance, December 31, 1997 19,170
Depreciation and amortization expense 588
--------
Balance, December 31, 1998 $ 19,758
========
</TABLE>

F-55
<PAGE> 207

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article Thirteen of ART's Articles of Incorporation provides that, to the
fullest extent permitted by Georgia law, as the same exists or may be hereafter
be amended, no director of ART shall be personally liable to ART or the
shareholders of ART for monetary damages for breach of the duty of care as a
director, provided that Article Thirteen does not limit or eliminate liability
for (i) a breach of duty involving an appropriation of a business opportunity of
ART; (ii) an act or omission not in good faith or involving intentional
misconduct or a knowing violation of law; or (iii) a transaction from which the
director derived an improper personal benefit. In addition, a director's
liability will not be limited as to any payment of a dividend or approval of a
stock repurchase that is illegal under Section 14-2-640 of the Georgia Business
Corporation Code.

Article Thirteen applies only to claims against a director arising out of
his or her role as a director and not, if he or she is also an officer, his or
her role as an officer or in any other capacity. In addition, Article Thirteen
does not reduce the exposure of directors to liability under Federal securities
laws.

The Bylaws of ART require ART to indemnify any person who, by reason of
the fact that he is or was a director of ART, is made or is threatened to be
made a party to an action, including an action brought by ART or its
shareholders. The Bylaws provide that ART will indemnify such person against
reasonably incurred expenses (including, but not limited to, attorneys' fees and
disbursements, court costs, and expert witness fees), and against any judgments,
fines and amounts paid in settlement, provided that ART shall not indemnify such
person under circumstances in which the Georgia Business Corporation Code, as in
effect from time to time, would not allow indemnification.

The Bylaws of ART give the ART Board the power to cause ART to provide to
officers, employees, and agents of ART all or any part of the right to
indemnification afforded to directors of ART as set forth in the Bylaws, subject
to the conditions, limitations and obligations therein, upon a resolution to
that effect identifying such officer, employee or agent and specifying the
particular rights provided.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of ART
pursuant to the foregoing provisions, ART has been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

3.1 -- Articles of Incorporation (1)

3.2 -- Amendment to Articles of Incorporation dated September 15, 1989
(1)

3.3 -- Articles of Amendment setting forth Certificate of Designation of
Series A Cumulative Participating Preferred Stock dated as of April
11, 1990 (1)

3.4 -- Articles of Amendment dated December 10, 1990 to Articles of
Incorporation (1)

3.5 -- Amended By-laws of American Realty Trust, Inc., dated December
11, 1991 (1)

3.6 -- Articles of Amendment of the Articles of Incorporation of
American Realty Trust, Inc. setting forth the Certificate of
Designations, Preferences and Relative Participating or Optional or
Other Special Rights, and Qualifications, Limitations on
Restrictions thereof of Special Stock of American Realty Trust, Inc.
(Series B 10% Cumulative Preferred Stock) dated as of April 4, 1996
(1)

3.7 -- Articles of Amendment of the Articles of Incorporation of
American Realty Trust, Inc. setting forth the Certificate of
Designations, Preferences and Relative Participating or Optional or
Other Special Rights, and Qualifications, Limitations on
Restrictions thereof of Special Stock of American Realty Trust, Inc.
(Series C 10% Cumulative Preferred Stock) dated as of June 4, 1996
(1)

3.8 -- Articles of Amendment of the Articles of Incorporation of
American Realty Trust, Inc. setting forth the Certificate of
Designations, Preferences and Relative Participating or Optional or
Other Special Rights, and Qualifications, Limitations or
Restrictions thereof of Series D Cumulative Preferred Stock of
American Realty Trust, Inc. dated as of August 2, 1996 (1)

II-1
<PAGE> 208

3.9 -- Articles of Amendment of the Articles of Incorporation of
American Realty Trust, Inc. setting forth the Certificate of
Designations, Preferences and Relative Participating or Optional or
Other Special Rights, and Qualifications, Limitations or
Restrictions thereof of Series E Cumulative Convertible Preferred
Stock of American Realty Trust, Inc. dated as of December 3, 1996
(1)

3.10 -- Articles of Amendment of the Articles of Incorporation deleting
Certificate of Designation of Series A Cumulative Participating
Preferred Stock, dated as of February 28, 1997 (2)

3.11 -- Articles of Amendment of the Articles of Incorporation of
American Realty Trust, Inc. setting forth the Certificate of
Designations, Preferences and Relative Participating or Optional or
Other Special Rights, and Qualifications, Limitations or
Restrictions thereof of Series G Cumulative Convertible Preferred
Stock of American Realty Trust, Inc. dated as of September 18, 1997
(5)

3.12 -- Articles of Amendment to the Articles of Incorporation of
American Realty Trust, Inc. increasing the number of authorized
shares of Common Stock to 100,000,000 shares, dated March 26, 1998
(6)

3.13 -- Articles of Amendment to the Articles of Incorporation of
American Realty Trust, Inc. reducing the number of authorized shares
of Series B Preferred Stock to zero and eliminating such
designation, dated May 27, 1998 (5)

3.14 -- Articles of Amendment to the Articles of Incorporation of
American Realty Trust, Inc. increasing the number of authorized
shares of Series G Cumulative Convertible Preferred Stock from
11,000 to 12,000, dated May 27, 1998 (5)

3.15 -- Articles of Amendment of the Articles of Incorporation of
American Realty Trust, Inc. setting forth the Certificate of
Designations, Preferences and Relative Participating or Optional or
Other Special Rights, and Qualifications, Limitations or
Restrictions thereof of Series H Cumulative Convertible Preferred
Stock of American Realty Trust, Inc. dated as of June 24, 1998 (8)

3.16 -- Amended and Restated Articles of Amendment of the Articles of
Incorporation of American Realty Trust, Inc. setting forth the
Certificate of Designations, Preferences and Relative Participating
or Optional or Other Special Rights, and Qualifications, Limitations
or Restrictions thereof of Series F Cumulative Convertible Preferred
Stock of American Realty Trust, Inc. dated as of October 23, 1998
(9)

3.17 -- Articles of Amendment to the Articles of Incorporation Decreasing
the Number of Authorized Shares of and Eliminating Series C
Preferred Stock (10)

4.1 -- Instruments defining the rights of security holders (included in
Exhibit 3.16) (9)

5.1 -- Opinion of Holt Ney Zatcoff & Wasserman, LLP as to the legality
of the Preferred Stock being offered (3)

8.1 -- Opinion of Andrews & Kurth L.L.P. regarding tax matters (5)

11.1 -- Statement re: computation of per share earnings (4)

12.1 -- Statement re: computation of ratios (4)

15.1 -- Letter re: unaudited interim financial information (4)

21.1 -- Subsidiaries of the registrant (7)

23.1 -- Consent of BDO Seidman, LLP (American Realty Trust, Inc.) (11)

23.2 -- Consent of BDO Seidman, LLP (Continental Mortgage and Equity
Trust) (11)

23.3 -- Consent of BDO Seidman, LLP (Income Opportunity Realty Investors,
Inc.) (11)

23.4 -- Consent of BDO Seidman, LLP (Transcontinental Realty Investors,
Inc.) (11)

23.5 -- Consent of BDO Seidman, LLP (National Realty, L.P.) (11)

23.6 -- Consent of Holt Ney Zatcoff & Wasserman, LLP (5)

23.7 -- Consent of Deloitte & Touche LLP (EQK Realty Investors I) (11)

23.8 -- Consent of Blosser Appraisal (9)

23.9 -- Consent of Brown & Associates (9)

24.1 -- Power of Attorney (5)

II-2
<PAGE> 209

29.1 -- Financial Data Schedule (7)

99.1 -- Amended and Restated Agreement and Plan of Merger By and Among
American Realty Trust, Inc., ART Newco LLC, Basic Capital
Management, Inc., EQK Realty Investors I, and Lend Lease Portfolio
Management, Inc.(8)

99.2 -- Amended and Restated Stock Purchase Agreement by and between Lend
Lease Portfolio Management,Inc. and American Realty Trust, Inc. (8)

99.3 -- Stock Purchase Agreement by and between Summit Ventures, L.P. and
American Realty Trust, Inc. (8)

99.4 -- Stock Purchase Agreement by and between Sutter Opportunity Fund,
LLC and American Realty Trust, Inc. (8)

99.5 -- Second Amended and Restated Declaration of Trust of EQK (included
as Exhibit "A" to Exhibit 99.1) (8)

99.6 -- Advisory Agreement by and between EQK Realty Investors I and
Basic Capital Management, Inc. (included as Exhibit "B" to Exhibit
99.1) (8)

99.7 -- Form of Proxy Card (5)

99.8 -- First Amendment to August 25, 1998 Amended and Restated Agreement
and Plan of Merger By and Among American Realty Trust, Inc., ART
Newco LLC, Basic Capital Management, Inc., EQK Realty Investors I,
and Lend Lease Portfolio Management, Inc. (11)

- ----------
(1) Incorporated by reference to the Registrant's Registration Statement No.
333-21583 filed with the Commission on February 11, 1997.

(2) Incorporated by reference to Amendment No. 1. To the Registrant's
Registration Statement No. 333-21583 filed with the Commission on April 29,
1997.

(3) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement No. 333-21583 filed with the Commission
on September 8, 1997.

(4) Not applicable.

(5) Filed as an Exhibit to the Registrant's Registration Statement on Form S-4
(No. 333-43777), filed with the Commission on January 6, 1998 and
incorporated by reference therein.

(6) Filed as an Exhibit to the Reqistrant's Annual Report on Form 10-K for the
year ended December 31, 1997, as filed with the Commision on March 31, 1998
and incorporated by reference therein.

(7) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998, as filed with the Commission on March 31,
1999 and incorporated by reference therein.

(8) Filed as an Exhibit to the Registrant's Amendment No. 2 to Registration
Statement on Form S-4 (No. 333-43777), filed with the Commission on
September 3, 1998 and incorporated by reference herein.

(9) Filed as an Exhibit to the Registrant's Amendment No. 3 to Registration
Statement on Form S-4 (No. 333-43777), filed with the Commission on
December 2, 1998 and incorporated by reference herein.

(10) Filed as an Exhibit to the Registrant's Amendment No. 4 to Registration
Statement on Form S-4 (No. 333-43777), filed with the Commission on January
29, 1999 and incorporated by reference herein.

(11) Filed herewith.

ITEM 22. 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 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 charges in volume and price represent
no more than a 20%

II-3

<PAGE> 210

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 paragraphs (a)(1)(i) and (a)(1)(ii) above do
not apply if this Registration Statement is on Form S-3 or Form S-8, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the 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
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

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

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

(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant 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 of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

(d) For purposes of determining any liability under the 1933 Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the 1933 Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(e) For the purpose of determining any liability under the 1933 Act,
each post-effective-amendment that contains a form of prospectus shall be
deemed to be a new Registration Statement relating to the securities
offered therein and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4

<PAGE> 211

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Amendment No. 5 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas, on the 23rd
day of April, 1999.

AMERICAN REALTY TRUST, INC.

By: /s/ Karl L. Blaha
---------------------------------------
Karl L. Blaha
President (Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 5 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Karl L. Blaha President (Principal April 23, 1999
- -------------------------------------- Executive Officer) and
Karl L. Blaha Director

* Director April 23, 1999
- --------------------------------------
Roy E. Bode

Director April 23, 1999
- --------------------------------------
Collene C. Currie

* Director April 23, 1999
- --------------------------------------
Al Gonzalez

* Director April 23, 1999
- --------------------------------------
Cliff Harris

* Executive Vice President and April 23, 1999
- -------------------------------------- Chief Financial Officer
Thomas A. Holland (Principal Financial and
Accounting Officer)

*By: /s/ Karl L. Blaha
------------------------------
Karl L. Blaha
Attorney-in-Fact

</TABLE>

II-5
<PAGE> 212
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 -- Articles of Incorporation (1)

3.2 -- Amendment to Articles of Incorporation dated September 15, 1989
(1)

3.3 -- Articles of Amendment setting forth Certificate of Designation of
Series A Cumulative Participating Preferred Stock dated as of April
11, 1990 (1)

3.4 -- Articles of Amendment dated December 10, 1990 to Articles of
Incorporation (1)

3.5 -- Amended By-laws of American Realty Trust, Inc., dated December
11, 1991 (1)

<PAGE> 213

<TABLE>
<S> <C>
3.9 -- Articles of Amendment of the Articles of Incorporation of
American Realty Trust, Inc. setting forth the Certificate of
Designations, Preferences and Relative Participating or Optional or
Other Special Rights, and Qualifications, Limitations or
Restrictions thereof of Series E Cumulative Convertible Preferred
Stock of American Realty Trust, Inc. dated as of December 3, 1996
(1)

3.10 -- Articles of Amendment of the Articles of Incorporation deleting
Certificate of Designation of Series A Cumulative Participating
Preferred Stock, dated as of February 28, 1997 (2)

3.17 -- Articles of Amendment to the Articles of Incorporation Decreasing
the Number of Authorized Shares of and Eliminating Series C
Preferred Stock (10)

4.1 -- Instruments defining the rights of security holders (included in
Exhibit 3.16) (9)

5.1 -- Opinion of Holt Ney Zatcoff & Wasserman, LLP as to the legality
of the Preferred Stock being offered (3)

8.1 -- Opinion of Andrews & Kurth L.L.P. regarding tax matters (5)

11.1 -- Statement re: computation of per share earnings (4)

12.1 -- Statement re: computation of ratios (4)

15.1 -- Letter re: unaudited interim financial information (4)

21.1 -- Subsidiaries of the registrant (7)

23.1 -- Consent of BDO Seidman, LLP (American Realty Trust, Inc.) (11)

23.2 -- Consent of BDO Seidman, LLP (Continental Mortgage and Equity
Trust) (11)

23.3 -- Consent of BDO Seidman, LLP (Income Opportunity Realty Investors,
Inc.) (11)

23.4 -- Consent of BDO Seidman, LLP (Transcontinental Realty Investors,
Inc.) (11)

23.5 -- Consent of BDO Seidman, LLP (National Realty, L.P.) (11)

23.6 -- Consent of Holt Ney Zatcoff & Wasserman, LLP (5)

23.7 -- Consent of Deloitte & Touche LLP (EQK Realty Investors I) (11)

23.8 -- Consent of Blosser Appraisal (9)

23.9 -- Consent of Brown & Associates (9)

24.1 -- Power of Attorney (5)
</TABLE>

<PAGE> 214

<TABLE>
<S> <C>
29.1 -- Financial Data Schedule (7)

99.2 -- Amended and Restated Stock Purchase Agreement by and between Lend
Lease Portfolio Management,Inc. and American Realty Trust, Inc. (8)

99.3 -- Stock Purchase Agreement by and between Summit Ventures, L.P. and
American Realty Trust, Inc. (8)

99.4 -- Stock Purchase Agreement by and between Sutter Opportunity Fund,
LLC and American Realty Trust, Inc. (8)

99.5 -- Second Amended and Restated Declaration of Trust of EQK (included
as Exhibit "A" to Exhibit 99.1) (8)

99.6 -- Advisory Agreement by and between EQK Realty Investors I and
Basic Capital Management, Inc. (included as Exhibit "B" to Exhibit
99.1) (8)

99.7 -- Form of Proxy Card (5)

- ----------
(1) Incorporated by reference to the Registrant's Registration Statement No.
333-21583 filed with the Commission on February 11, 1997.

(2) Incorporated by reference to Amendment No. 1. To the Registrant's
Registration Statement No. 333-21583 filed with the Commission on April 29,
1997.

(3) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement No. 333-21583 filed with the Commission
on September 8, 1997.

(4) Not applicable.

(5) Filed as an Exhibit to the Registrant's Registration Statement on Form S-4
(No. 333-43777), filed with the Commission on January 6, 1998 and
incorporated by reference therein.

(6) Filed as an Exhibit to the Reqistrant's Annual Report on Form 10-K for the
year ended December 31, 1997, as filed with the Commision on March 31, 1998
and incorporated by reference therein.

(7) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998, as filed with the Commission on March 31,
1999 and incorporated by reference therein.

(8) Filed as an Exhibit to the Registrant's Amendment No. 2 to Registration
Statement on Form S-4 (No. 333-43777), filed with the Commission on
September 3, 1998 and incorporated by reference herein.

(9) Filed as an Exhibit to the Registrant's Amendment No. 3 to Registration
Statement on Form S-4 (No. 333-43777), filed with the Commission on
December 2, 1998 and incorporated by reference herein.

(10) Filed as an Exhibit to the Registrant's Amendment No. 4 to Registration
Statement on Form S-4 (No. 333-43777), filed with the Commission on January
29, 1999 and incorporated by reference herein.

(11) Filed herewith.

<PAGE> 1
EXHIBIT 23.1

Consent of Independent Certified Public Accountants

American Realty Trust, Inc.
Dallas, Texas

We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 30, 1999, relating to the
consolidated financial statements of American Realty Trust, Inc. for the year
ended December 31, 1998.

We also consent to the reference to us under the caption "Experts" in the
Prospectus.

/s/ BDO SEIDMAN, LLP
-----------------------------------
BDO Seidman, LLP

Dallas, Texas
April 23, 1999

<PAGE> 1

EXHIBIT 23.2

Consent of Independent Certified Public Accountants

American Realty Trust, Inc.
Dallas, Texas

We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March
25, 1999, relating to the consolidated financial statements and schedules of
Continental Mortgage and Equity Trust appearing in the Trust's Annual Report on
Form 10-K for the year ended December 31, 1998.

We also consent to the reference to us under the caption "Experts" in the
Prospectus.

/s/ BDO SEIDMAN, LLP
-----------------------------------
BDO Seidman, LLP

Dallas, Texas
April 23, 1999

<PAGE> 1

EXHIBIT 23.3

Consent of Independent Certified Public Accountants

American Realty Trust, Inc.
Dallas, Texas

We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March
24, 1999, relating to the consolidated financial statements and schedules of
Income Opportunity Realty Investors, Inc. appearing in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.

We also consent to the reference to us under the caption "Experts" in the
Prospectus.

/s/ BDO SEIDMAN, LLP
-----------------------------------
BDO Seidman, LLP

Dallas, Texas
April 23, 1999

<PAGE> 1

EXHIBIT 23.4

Consent of Independent Certified Public Accountants

American Realty Trust, Inc.
Dallas, Texas

We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March
24, 1999, relating to the consolidated financial statements and schedules of
Transcontinental Realty Investors, Inc. appearing in the Trust's Annual Report
on Form 10-K for the year ended December 31, 1998.

We also consent to the reference to us under the caption "Experts" in the
Prospectus.

/s/ BDO SEIDMAN, LLP
-----------------------------------
BDO Seidman, LLP

Dallas, Texas
April 23, 1999

<PAGE> 1

EXHIBIT 23.5

Consent of Independent Certified Public Accountants

American Realty Trust, Inc.
Dallas, Texas

We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March
24, 1999, relating to the consolidated financial statements and schedules of
National Realty, L.P. appearing in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1998.

We also consent to the reference to us under the caption "Experts" in the
Prospectus.

/s/ BDO SEIDMAN, LLP
-----------------------------------
BDO Seidman, LLP

Dallas, Texas
April 23, 1999

<PAGE> 1
EXHIBIT 23.7

INDEPENDENT AUDITOR'S CONSENT

We consent to the use in this Amendment No. 5 to Registration Statement No.
333-43777 of American Realty Trust, Inc. of our report dated March 26, 1999
(relating to the financial statements of EQK Realty Investors I ("EQK"), which
report expresses an unqualified opinion and includes an explanatory paragraph
describing an uncertainty related to the substantial doubt about EQK's ability
to continue as a going concern) including in the Annual Report on Form 10-K of
EQK for the year ended December 31, 1998, and to the use of such report
appearing in the Prospectus, which is a part of such Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.

/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
April 23, 1999

<PAGE> 1
FIRST AMENDMENT TO
AUGUST 25, 1998 AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER

This First Amendment to August 25, 1998 Amended and Restated Agreement
and Plan of Merger (the "FIRST AMENDMENT") is entered into as of April 22,
1999, by and among American Realty Trust, Inc. ("ART"), ART Newco, LLC
("NEWCO"), Basic Capital Management, Inc. ("BCM"), EQK Realty Investors I
("EQK") and Lend Lease Portfolio Management, Inc. ("LLPM").

R E C I T A L S:

A. ART, Newco, BCM, EQK and LLPM entered into that certain Amended and
Restated Agreement and Plan of Merger, dated August 25, 1998 (the "MERGER
AGREEMENT") relating to the Merger, as such term is defined in the Merger
Agreement.

B. ART, Newco, BCM, EQK and LLPM desire to amend the Merger Agreement
as set forth herein.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

1. Amendment to Section 7.01(b) of the Merger Agreement. Section
7.01(b) of the Merger Agreement is hereby amended by replacing the date
"December 15, 1998" in the first line of such section with the date "July 30,
1999", so that Section 7.01(b) reads as set forth in its entirety below:

"by Newco or ART, on or after July 30, 1999, if any of the
conditions provided in Section 6.01 hereof have not been met
or, to the extent permitted by applicable law, have not been
waived in writing by Newco and ART prior to such date;"

2. Amendment to Section 7.01(c) of the Merger Agreement. Section
7.01(c) of the Merger Agreement is hereby amended by replacing the date
"December 15, 1998" in the first line of such section with the date "July 30,
1999", so that Section 7.01(c) reads as set forth in its entirety below:

"by EQK, on or after July 30, 1999, if any of the conditions
provided in Section 6.02 hereof have not been met or, to the
extent permitted by applicable law, have not been waived in
writing by EQK prior to such date;"

-1-

<PAGE> 2

3. Effect of Amendment; Amendment Controls. Except as expressly stated
herein, the provisions of the Merger Agreement in effect as of the date of this
First Amendment shall remain in full force and effect. To the extent this First
Amendment is in conflict with any provision of the Merger Agreement, as
amended, the terms of this First Amendment shall control.

4. Binding Effect. The amendments contained in this First Amendment
shall inure to the benefit of the successors and assigns of the respective
parties hereto.

5. Defined Terms. All capitalized terms used herein and not otherwise
defined herein shall have the meanings given to such terms in the Merger
Agreement.

6. Governing Law. This First Amendment shall be governed by the
internal laws of the Commonwealth of Massachusetts without giving effect to the
conflict of laws principles thereof.

7. Counterparts. This First Amendment may be signed in any number of
counterparts, each of which, when taken together, shall constitute the
original.

[Remainder of page left intentionally blank]

-2-

<PAGE> 3

IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date first above written.

AMERICAN REALTY TRUST, INC.

By:/s/ Robert A. Waldman
------------------------------------------
Name:Robert A. Waldman
----------------------------------------
Title:Senior Vice President
---------------------------------------

ART NEWCO, LLC

By: American Realty Trust, Inc., as Manager

By:/s/ Robert A. Waldman
------------------------------------------
Name:Robert A. Waldman
----------------------------------------
Title:Senior Vice President
---------------------------------------

BASIC CAPITAL MANAGEMENT, INC.

By:/s/ Robert A. Waldman
------------------------------------------
Name:Robert A. Waldman
----------------------------------------
Title:Senior Vice President
---------------------------------------

EQK REALTY INVESTORS I

By:/s/ Don Henry
------------------------------------------
Name:Don Henry
----------------------------------------
Title:Vice President
---------------------------------------

LEND LEASE PORTFOLIO MANAGEMENT, INC.

By:/s/ Don Henry
------------------------------------------
Name:Don Henry
----------------------------------------
Title:Vice President
---------------------------------------

-3-