INTERVEST CORPORATION OF NEW YORK, 424B4, 1997-05-05

INTERVEST CORPORATION OF NEW YORK
424B4, 1997-05-05
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

Previous: RALPHS GROCERY CO /DE/, 10-K, 1997-05-05

Next: ORYX ENERGY CO, 10-Q, 1997-05-05

PROSPECTUS
- - ----------
INTERVEST CORPORATION OF NEW YORK
Maximum $8,500,000
Minimum $5,000,000

$500,000 Series 4/30/97 Registered Redeemable Subordinated Debentures
Due July 1, 1999

$8,000,000 Series 4/30/97 Registered Floating Rate
Redeemable Subordinated Debentures
Due October 1, 2005

Minimum Investment of $10,000 At Par

INTERVEST CORPORATION OF NEW YORK (the "Company") is offering $8,500,000
aggregate principal amount of its Series 4/30/97 Debentures (the "Debentures").
As more fully described under "Description of Debentures," the Debentures will
be issued in two maturities: $500,000 of Series 4/30/97 Registered Redeemable
Subordinated Debentures due July 1, 1999 and $8,000,000 of Series 4/30/97
Registered Floating Rate Redeemable Subordinated Debentures due October 1, 2005.
Of the $8,000,000 principal amount of Debentures maturing October 1, 2005,
$1,000,000 principal amount will be offered and sold after July 1, 1997.

Interest on the Debentures maturing July 1, 1999 will accrue each calendar
quarter at the higher of 9.0%, reflecting one-half of one percent over the prime
rate of Chase Manhattan Bank on the date of this prospectus, or one-half of one
percent over the prime rate of Chase Manhattan Bank on the date of First
Closing, as defined herein. In addition, interest will accrue each calendar
quarter on the balance of the accrued interest as of the last day of the
preceding calendar quarter at the same interest rate. All accrued interest on
the Debentures maturing July 1, 1999 will be payable at the maturity of the
Debentures, whether by acceleration, redemption or otherwise.

Interest on the principal amount of Debentures maturing October 1, 2005,
will be payable quarterly on the first day of each calendar quarter at one
percent over the prime rate of Chase Manhattan Bank, with a maximum interest
rate of 12%. At the date of this Prospectus, the rate of interest on the
Debentures maturing October 1, 2005 is 9.5%. Computations of interest are based
on the prime rate of Chase Manhattan Bank on the first day of the quarter for
which interest is accruing.

The Debentures are redeemable by the Company at any time, in whole or in
part, at the redemption prices set forth herein. See "Description of Debentures
- - - Redemption." There is currently no existing market for the Debentures and it
is not likely that such a market will develop. See "Risk Factors - Absence of
Public Market." The Debentures have not been rated by any rating agency.

The Debentures will be subordinated to all Senior Indebtedness (as defined). The
Indenture (as defined), pursuant to which the Debentures will be issued, does
not limit or restrict the amount of Senior Indebtedness to which the Debentures
may be subordinated. At December 31, 1996, there was no outstanding Senior
Indebtedness. See "Description of Debentures - Subordination."

THE DEBENTURES INVOLVE VARIOUS RISKS AS DESCRIBED HEREIN.
See "Risk Factors."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
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 ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

The Company intends to furnish to the holders of the Debentures annual
reports containing audited financial statements certified by independent
certified public accountants.

================================================================================
Price to Underwriting Fees Proceeds to
Public and Commissions(1) Company(1)(3)
- - --------------------------------------------------------------------------------
Per Debenture $ 10,000 $ 900(4) $ 9,100
- - --------------------------------------------------------------------------------
Minimum Offering(2) $5,000,000 $450,000(4) $4,550,000
- - --------------------------------------------------------------------------------
Maximum Offering $8,500,000 $732,500(4) $7,767,500
================================================================================
(See footnotes on page 2)

Sage, Rutty & Co., Inc.
The date of this Prospectus is April 30, 1997

<PAGE>

(Footnotes from previous page)
- - ------------------------ -----

(1) The Debentures are being offered on a "best efforts" basis by Sage,
Rutty & Co., Inc. (the "Underwriter"), and by other participating
broker/dealers who are members of the National Association of
Securities Dealers, Inc.. The Company will pay the Underwriter a
commission of 8% of the purchase price of each Debenture maturing
October 1, 2005 and 2% of the purchase price of each Debenture maturing
July 1, 1999 which are sold by the Underwriter or participating
broker/dealers. In addition, the Company will pay the Underwriter a fee
equal to 1% of the aggregate gross amount of Debentures maturing
October 1, 2005 and 1/2 of 1% of the aggregate gross amount of
Debentures maturing July 1, 1999, such fee to be paid upon completion
of the offering. The Company has agreed to indemnify the Underwriter
and participating broker/dealers against certain civil liabilities,
including certain liabilities under the Securities Act of 1933, as
amended. See "Plan of Offering."

(2) If at least $5,000,000 of Debentures, without regard to maturity, are
not sold within 75 days after the date this registration statement is
declared effective by the Securities and Exchange Commission (the
"Offering Termination Date"), all subscription documents and funds
(together with any interest earned thereon) will be promptly refunded
to subscribers and the offering will terminate. If at least $5,000,000
of Debentures, without regard to maturity, are sold prior to the
Offering Termination Date, the Company may close the offering as to
those subscribers (the "First Closing") and continue the offering of
unsold Debentures for up to 150 additional days. Until such initial
closing, all funds received from subscribers will be held in escrow by
First National Bank of Rochester, Rochester, New York for the benefit
of subscribers. See "Plan of Offering."

(3) In addition to underwriting fees and commissions, expenses of the
Offering payable by the Company are estimated to be approximately
$96,000. See "Use of Proceeds."

(4) Includes the payment by the Company of the Underwriter's fee of: 1% of
the aggregate gross amount of Debentures maturing October 1, 2005 sold
in the offering; and 1/2 of 1% of the aggregate gross amount of
Debentures maturing July 1, 1999 sold in the offering.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission. Reports and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60606-2511. Copies of such material can also be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
DC 20549, at prescribed rates. The Commission maintains a Website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of that
site is: http://www.sec.gov

A Registration Statement, including exhibits, relating to the Debentures
offered hereby on file with the Commission contains further information on the
Debentures and the Company.

Purchasers of Debentures will be furnished annual financial statements of
the Company, including a balance sheet and statement of profit and loss,
accompanied by a report of its independent accountants stating that (i) an audit
of such financial statements has been made in accordance with generally accepted
auditing principles, and (ii) the opinion of the accountants with respect to the
financial statements and the accounting principles and practices reflected
therein and as to the consistency of the application of the accounting
principles, and identifying any matters to which the accountants take exception
and stating, to the extent practicable, the effect of each such exception on the
financial statements.

WHO SHOULD INVEST

The purchase of the Debentures involves certain risks and, accordingly, is
suitable only for persons or entities of adequate means having no need for
liquidity in their investment. The Company has established a minimum suitability
standard which requires that an investor either (i) has a net worth of at least
$40,000 (exclusive of home, furnishings and automobiles) and had during his last
year or estimates that he will have during his current tax year an annual gross
income of at least $40,000, or (ii) has a net worth of at least $100,000
(exclusive of home, furnishings and automobiles), or (iii) that he is purchasing
in a fiduciary capacity for a person or entity meeting such conditions. In the
case of sales to fiduciary accounts, such conditions must be met by the
beneficiary of the account. Where the fiduciary is the donor of the funds for
investment, the fiduciary must meet the suitability standards.

<PAGE>

SUMMARY

The following summary is qualified in its entirety by reference to the
information included elsewhere in this Prospectus.

The Company. Intervest Corporation of New York is a New York corporation
which was incorporated in April, 1987. The Company presently owns mortgages on
real estate, and intends to acquire additional interests in real estate,
including the acquisition and origination of additional mortgages on real
estate. Substantially all of the mortgages of the Company are secured by
multi-family apartment buildings. The Company maintains its offices at 10
Rockefeller Plaza, Suite 1015, New York, New York 10020-1903, and its telephone
number is 212-757-7300.

Securities Offered. $8,500,000 principal amount of Series 4/30/97
Debentures, as follows: $500,000 principal amount of Registered Redeemable
Subordinated Debentures due July 1, 1999; and $8,000,000 principal amount of
Registered Floating Rate Redeemable Subordinated Debentures due October 1, 2005.
$1,000,000 principal amount of Debentures with a maturity date of October 1,
2005 will be offered and sold after July 1, 1997. Interest on the principal
amount of the Debentures maturing July 1, 1999 will accrue each calendar quarter
at the higher of 9.0%, reflecting one-half of one percent over the prime rate of
Chase Manhattan Bank on the date of this prospectus, or one-half of one percent
over the prime rate of Chase Manhattan Bank on the date of First Closing. In
addition, interest will accrue each calendar quarter on the balance of the
accrued interest at the same interest rate. All accrued interest is payable at
maturity. Interest on the principal amount of Debentures maturing October 1,
2005 will be paid on the first day of each calendar quarter at one percent (1%)
over the prime rate of Chase Manhattan Bank, with a maximum interest rate of
twelve percent (12%). The Debentures will be unsecured obligations of the
Company, and will be subordinated to all Senior Indebtedness. As of December 31,
1996, the Company had no Senior Indebtedness. There is no limitation on the
amount of Senior Indebtedness which may be issued by the Company. The Company
may issue additional unsecured indebtedness which is pari passu with the
Debentures. The Debentures will be redeemable, in whole or in part, at any time
at the option of the Company. See "Description of Debentures."

Use of Proceeds. The net proceeds from the sale of the Debentures, after
payment of expenses of the Offering, will be used to purchase additional
mortgages or interests in real estate in accordance with the mortgage investment
policy and real estate investment policies of the Company. See "Transactions
with Management" and "Use of Proceeds."

Summary Financial Information. The following summary financial information
is qualified in its entirety by the detailed information and financial
statements appearing elsewhere in this Prospectus.

Balance Sheet Summary
December 31,
------------
1996 1995
---- ----

Total Assets $92,223,000 $77,579,000
Cash 16,911,000 17,670,000
Mortgages 69,699,000 55,146,000
Total Long Term Obligations(1) 79,006,000 66,850,000
Stockholders' Equity 10,075,000 9,378,000

- - ------------------------------
(1)Includes current portion of long-term obligations.

<PAGE>

Income Statement Summary
Year Ended December 31
----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C>
Net Interest Income $2,444,000 $1,757,000 $1,777,000 $ 922,000 $ 441,000

Non-Interest Income 654,000 414,000 300,000 820,000 755,000

Net Income 697,000 442,000 536,000 545,000 313,000

Ratio of Earnings to
Fixed Charges 1.2 1.1 1.2 1.3 1.2

</TABLE>

Risk Factors. An investment in the Debentures involves certain risks and
prospective investors should carefully consider the various risk factors. See
"Risk Factors."

<PAGE>

RISK FACTORS

The purchase of the Debentures involves certain risk factors, including the
following:

Proceeds Not Committed to Specific Investments. None of the net proceeds of
the offering have yet been committed to specific investments by the Company.
This is customarily referred to as a blind pool. The Company intends to use the
proceeds to acquire mortgage interests in conformity with its mortgage
investment policies and its past practices. In addition, the Company may acquire
other interests in real properties in accordance with its real estate investment
policies. All determinations concerning the use and investment of the proceeds
will be made by management of the Company. The specific characteristics of any
such investments are presently unknown and there is a greater degree of
uncertainty concerning the return on any such investments than would be the case
if specific investments were identified. The Holders of Debentures will not have
the opportunity to evaluate any mortgages or other real property interests that
may be acquired with the proceeds. See "Use of Proceeds."

Risks of Junior Mortgages and Wraparound Mortgages. The mortgages owned by
the Company, which currently generate its income, are first mortgages and junior
mortgages. Substantially, all of the mortgages owned by the Company are
non-recourse. If the owner of a mortgaged property fails to make a payment due
on a senior mortgage where the Company is the owner of the junior mortgage, the
holder of the senior mortgage may commence foreclosure proceedings. There can be
no assurance that the Company will have funds available to cure a default on the
senior mortgage in order to prevent foreclosure on such senior mortgage. In the
event of a foreclosure on the senior mortgage, the Company as the owner of the
junior mortgage will only be entitled to share in the proceeds after
satisfaction of the amounts due to senior lienholders. The proceeds realized on
such foreclosure may be insufficient to pay all sums due on the senior mortgage,
other senior liens and on the mortgage held by the Company. It is also possible
that in some cases a "due-on-sale" clause included in a senior mortgage, which
accelerates the amount due under the senior mortgage in case of the sale of the
property, may be deemed to apply to the sale of the property upon foreclosure by
the Company of its junior mortgage, and may accordingly increase the risks to
the Company in the event of a default by the borrower on its junior mortgages.

The Company has in the past and may in the future own "wraparound
mortgages" under which the outstanding principal balance of the wraparound
mortgage includes the outstanding principal balance of a mortgage owed to
another party, with the Company required to make any payments due on such senior
underlying mortgage from the payments received on the wraparound mortgage. Such
a mortgage may entail a greater risk than if it were a first mortgage. If the
owner of the mortgaged property fails to make a payment on the wraparound
mortgage owned by the Company with the result that the Company in turn fails to
make the corresponding payment due on the senior underlying mortgage, the holder
of the senior underlying mortgage may commence foreclosure proceedings. In such
event, if the proceeds realized on such foreclosure are insufficient to pay all
sums due on the senior underlying mortgage and on the mortgage held by the
Company, the Company could lose part or all of its investment. See "History and
Business-Present Business" and "History and Business-Certain Characteristics of
the Company's Mortgage Investments."

Risks of Non-Recourse Mortgages. Substantially all of the mortgages owned
by the Company (and those it expects to acquire in the future) are non-recourse.
Under the terms of non-recourse mortgages, the owner of the property subject to
the mortgage has no personal obligation to pay the mortgage note which the
mortgage secures. Thus, on default, the Company's ability to recover its
investment is dependent solely upon the value of the property which it sells in
foreclosure of its mortgage and the amount of prior mortgages and liens which
must be paid from the net proceeds. See "History and Business - Certain
Characteristics of the Company's Mortgage Investments."

Conflicts of Interest. Four of the mortgages presently owned by the Company
are liens on real estate owned by affiliates of the Company. There are conflicts
of interest inherent in all dealings between the Company and such affiliates.
These conflicts could include, among other things, the acquisition by the
Company of mortgages or other interests in real property from affiliates of the
Company; the retention of affiliates to perform services, including real estate
management services and mortgage servicing, for the Company; and the pursuit of
remedies that might be necessitated by a default in any mortgage securing real
property owned by an affiliate of the Company. These conflicts will not be
resolved by arm's-length bargaining. Matters involving such a conflict of
interest will be approved or ratified by a majority vote of the Board of
Directors, including a majority of the "independent" directors of the Company
(i.e. those directors who are neither officers nor employees of the Company) in
attendance at any meeting considering such matters. No assurance can be given
that they will be resolved in the manner most favorable to Debenture holders, or
that the Company will pursue any rights or remedies which it may have against
such affiliate. See "History and Business."

<PAGE>

Subordination of Debentures. The Debentures will be unsecured obligations
of the Company, and will be subordinated to all Indebtedness of the Company
which (i) is secured, in whole or in part, by any asset or assets owned by the
Company or a Subsidiary, or (ii) arises from unsecured borrowings by the Company
from commercial banks, savings banks, savings and loan associations, insurance
companies, companies whose securities are traded in a national securities
market, or any wholly-owned subsidiary of any of the foregoing, or (iii) arises
from unsecured borrowings by the Company from any pension plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended), or (iv) arises from borrowings by the Company which are evidenced by
commercial paper, or (v) other unsecured borrowings by the Company which are
subordinate to Indebtedness of a type described in clauses (i), (ii) or (iv)
above if, immediately after the issuance thereof, the total capital, surplus and
retained earnings of the Company exceed the aggregate of the outstanding
principal amount of such indebtedness, or (vi) is a guarantee or other liability
of the Company of or with respect to Indebtedness of a Subsidiary of the type
described in clauses (ii), (iii) or (iv) above. As of December 31, 1996, the
Company had no Senior Indebtedness. There is no limitation or restriction in the
Debentures or the Indenture on the creation of Senior Indebtedness by the
Company or on the amount of such Senior Indebtedness to which the Debentures may
be subordinated. There is also no limitation on the creation of or the amount of
Indebtedness which is pari passu with (i.e. having no priority of payment over
and not subordinated in right of payment to) the Debentures ("Pari Passu
Indebtedness"). As of December 31, 1996, the Company had $75,500,000 aggregate
principal amount of Pari Passu Indebtedness. Accordingly, upon any distribution
of assets of the Company in connection with any dissolution, winding up,
liquidation or reorganization of the Company, the holders of all Senior
Indebtedness will first be entitled to receive payment in full of the principal
and premium, if any, thereof and any interest due thereon, before the holders of
the Debentures are entitled to receive any payment upon the principal of or
interest on the Debentures, and thereafter payments to Debenture holders will be
pro rata with payments to holders of Pari Passu Indebtedness. See "Description
of Debentures-Subordination."

Best Efforts Offering. No commitment exists on the part of the Underwriter
to purchase all or any part of the Debentures offered hereby and, therefore, no
assurance can be given that any such Debentures will be sold. If at least
$5,000,000 of Debentures are not sold by the Offering Termination Date, all
subscription funds will be refunded to subscribers, with interest in proportion
to the amount paid and without regard to the date paid. See "Plan of Offering."

Absence of Public Market. Investors should be aware that there is no
existing market for the Debentures and it is not likely that such a market will
develop. No broker-dealer presently expects to make a market in the Debentures.
Accordingly, it may be difficult to resell the Debentures.

No Sinking Fund. There is no sinking fund for retirement of the Debentures
at or prior to their maturity. The Company anticipates that it will redeem the
Debentures at maturity, at par, from the Company's working capital, or from the
proceeds of a refinancing of the Debentures, but no assurance can be given that
the Company will have sufficient available funds to make such redemption.

Concentration Risks. A substantial portion of the Company's assets are
invested in mortgages secured by multi-family apartment buildings located in the
City of New York. Many of the properties, moreover, are subject to rent control
and rent stabilization laws imposed in the City of New York. The Company
anticipates that a substantial portion of the real property interests that the
Company may acquire with the proceeds of this offering are also likely to be
geographically located in the New York metropolitan area. Any resulting lack of
diversity in the number, type or location of investments made by the Company may
increase the risk of loss to the Company. See "History and Business" and
"Management's Discussion and Analysis--Results of Operations."

Percentage of Funds Invested in Mortgages. The success of the Company, in
large part, depends on its ability to keep its assets continuously invested in
mortgages and, to a lesser extent, real property. The Company may be unable to
keep the optimum percentage of its assets so invested, which may result in lower
rates of return from the investment of its assets in other investments. See
"History and Business."

Risk of Balloon Payments. Certain mortgage loans owned by the Company have
balloon payments due at the time of their maturity. The Company may purchase
additional mortgage loans that have balloon payments due at the time of their
maturity. Volatile interest rates and/or erratic credit conditions and supply of
mortgage funds at that time may cause refinancing by the borrowers to be
difficult or impossible, regardless of the market value of the collateral at the
time such balloon payments are due. See "General Risks of Financing on Real
Estate."

Competition. In connection with the making of investments, the Company may
experience significant competition from banks, insurance companies, savings and
loan associations, mortgage bankers, pension funds, real estate investment
trusts, limited partnerships and other lenders and investors engaged in
purchasing mortgages or making real property investments with investment
objectives similar in whole or in part to those of the Company including
competition with certain related entities. An increase in the general
availability of funds may increase competition in the making of investments in
mortgages and real property and may reduce the yields available therefrom.

<PAGE>

Reliance on Management. All decisions with respect to the management of the
Company will be made exclusively by the officers and directors of the Company.
Holders of the Debentures have no right or power to take part in the management
of the Company. Accordingly, no person should purchase Debentures unless he is
willing to entrust all aspects of the management of the Company to the officers
and directors of the Company. Prospective investors will, therefore, be entirely
reliant on the officers and directors of the Company and will not be able to
evaluate for themselves the merits of proposed mortgage or other real estate
investments. Certain of the executive officers of the Company, moreover,
presently serve without compensation from the Company. Should the services of
any such officers be lost, the Company might be required to devote a portion of
its income to salary expense. See "Management."

General Risks of Financing on Real Estate. All mortgage loans are subject
to some degree of risk, including the risk of a default by the borrower on the
mortgage loans and the added responsibility on the part of the Company of
operating the property and/or foreclosing in order to protect its investment.
The borrower's ability to make payments due under a mortgage loan and the amount
the Company may realize after a default will be dependent upon the risks
generally associated with real estate investments, which are beyond the control
of the Company, including general or local economic conditions, neighborhood
values, interest rates, real estate tax rates, other operating expenses, the
supply of and demand for properties of the type involved, the inability of the
borrower to obtain or maintain full occupancy of the property, zoning laws, rent
control laws, other governmental rules and fiscal policies and acts of God.

Default by Mortgagor and Foreclosure. In the event of a default on a
mortgage loan which requires the Company to foreclose upon the property or
otherwise pursue its remedies in order to protect its investment, the Company
may seek to obtain a purchaser for the property upon such terms as it deems
reasonable. However, there can be no assurance that the amount realized upon any
such sale of the underlying property will result in financial profit or prevent
loss to the Company.

Risks of Floating Rate Debt. Interest on the Debentures maturing October 1,
2005 is calculated at a floating rate. A portion of the mortgages held by the
Company pay interest at fixed rates. To the extent that rising interest rates
result in higher interest payments on the Debentures by the Company, the Company
will have to devote a higher percentage of the fixed interest payments it
receives to meet the interest payments due on the Debentures and may not have
sufficient funds to acquire additional mortgages or to repay its Debentures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation-Impact of Inflation."

Risks of Ownership of Real Property. The Company may also be subject to the
risks inherent in the ownership of interests in any commercial, industrial,
retail or residential properties which it acquires directly or in a foreclosure
process, including, without limitation, fluctuations in occupancy rates and
operating expenses, variations in rental schedules, the character of the tenancy
and the possible effect on the cash flow from a property if its tenants incur
financial difficulties. Such events may, in turn, be adversely affected by
general and local economic conditions, the supply of and demand for properties
of the type in which the Company invests, zoning laws, federal and local rent
controls, federal and local environmental protection laws, including, without
limitation, laws relating to the use and maintenance of asbestos, other laws and
regulations and real property tax rates. Certain expenditures associated with
real estate equity investments (principally real estate taxes and maintenance
costs) are not necessarily decreased by events adversely affecting the Company's
income from such investments. Thus, the cost of operating a real property may
exceed the rental income earned thereon, and the Company may have to advance
funds in order to protect its investment or may be required to dispose of the
real property at a loss. The Company's ability to meet its debt and other
obligations will depend in part on these factors, and for these and other
reasons, no assurance of profitable operation of a real property can be made.

Impact of Prevailing Economic Conditions. The real estate industry in
general and the kinds of investments which will be made by the Company in
particular may be affected by prevailing interest rates, the availability of
funds and the generally prevailing economic environment. During the past few
years, there have been wide fluctuations in money market conditions and interest
rates charged on loans, including real estate loans. The direction of future
interest rates and the willingness of financial institutions to make funds
available for real estate financing in the future is difficult to predict. The
real property and the properties underlying any mortgages that may be acquired
with the proceeds of this Offering, and the properties underlying the Company's
present mortgage loans will also be affected by prevailing economic conditions
and the same factors noted in "Risks of Ownership of Real Property" above, which
may affect the Company's ability to collect rent and the borrower's ability to
repay, respectively. The Company is unable to predict what effect, if any, the
prevailing economic conditions will have on its ability to make mortgage loans
or on the operations of the properties subject to its investments or its own
real property.

<PAGE>

Risk of Prepayment of Mortgages. While many of the Company's mortgage loans
include penalties for prepayment, fluctuating interest rates may give rise to
prepayments and there can be no assurance that the Company would be able to
reinvest the proceeds of such prepayments at the same or higher interest rates.
See "General Risks of Financing on Real Estate."

Availability of Working Capital. To the extent that reserves maintained by
the Company are not sufficient to defray expenses and carrying costs which
exceed the income of the Company, it will be necessary to attempt to borrow such
amounts. In the event financing is not available on acceptable terms, the
Company may be forced to liquidate certain investments on terms which may not be
favorable to it.

Hazardous Waste and Environmental Liens. Recent federal and state statutes
impose liability on property owners or operators for the clean-up or removal of
hazardous substances found on their property. Courts have extended this
liability to lenders who have obtained title to properties through foreclosure
or have become involved in managing properties prior to obtaining title.
Additionally, such statutes allow the government to place liens for such
liability against affected properties, which liens will be senior in priority to
other liens, including mortgages against the properties. Federal and state laws
in this area are constantly evolving. The Company intends to monitor such laws
and take commercially reasonable steps to protect itself from the impact
thereof; however, there can be no assurance that the Company will be fully
protected from the impact of such laws.

USE OF PROCEEDS

The net proceeds of the Offering, after payment of underwriting fees and
commissions, are estimated at $7,767,500 if the maximum amount ($8,500,000) of
the Debentures are sold, and are estimated at $4,550,000 if the minimum amount
($5,000,000) of the Debentures are sold. Such proceeds will be held in trust for
the benefit of the purchasers of Debentures, and only used for the purposes set
forth herein. After payment of other expenses of the Offering estimated at
$96,000, such net proceeds will become part of the working capital of the
Company and will be used to purchase mortgages or interests in real estate in
accordance with the mortgage and real estate investment policies of the Company.

Pending investment of the net proceeds as specified above, the Company
plans to invest such proceeds in highly liquid sources, such as interest-bearing
bank accounts, bank certificates of deposit or other short term money market
instruments. It is presently anticipated that such short term investments would
be for a period not in excess of six months, although such time could be
extended if appropriate mortgages or other interests in real estate are not
identified for reinvestment.

It is presently anticipated that specified mortgage and/or real estate
investments will be identified over the course of approximately six months after
the completion of the Offering. Selected investments will meet the criteria and
characteristics embodied in the Company's present investment policies. See
"History of Business - Real Estate Investment Policies and Mortgage Investment
Policy". It is not anticipated that any single investment will be in an amount
which exceeds ten percent (10%) of the total assets of the Company or that more
than twenty percent (20%) of the net proceeds will be invested in a single
mortgage or real estate investment. In no event, will more than ten percent
(10%) of the proceeds be used to acquire interests in unimproved and/or
non-income-producing property.

In the event that any real estate that may be acquired is subsequently
resold or refinanced, any proceeds received therefrom will become part of the
working capital of the Company and will be available for reinvestment. Any fees
or commissions paid, directly or indirectly, to the Company or its affiliates in
connection with any such resale or refinancing, will be on terms comparable with
those that would be paid to unaffiliated parties. See "Transactions with
Management."

<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1996 and as adjusted to give effect to the sale of the Debentures
offered hereby:

As adjusted for the
Sale of the Debentures
----------------------
Minimum Maximum
Offering Offering
-------- --------
Long Term Debt:

Debenture Interest Payable at Maturity $ 3,506,000 $ 3,506,000
Outstanding Debentures 75,500,000 75,500,000
Debentures Offered 5,000,000 8,500,000
--------- ---------
84,006,000 87,506,000
---------- ----------

Stockholders' Equity:
Common Stock, No Par Value,
200 shares authorized,
31.84 shares issued and
outstanding $ 2,000,000 $ 2,000,000
Additional Paid-in Capital 3,509,000 3,509,000
Retained Earnings 4,566,000 4,566,000
--------- ---------
Total Stockholders' Equity 10,075,000 10,075,000
---------- ----------
Total Capitalization $94,081,000 $97,581,000
=========== ===========

<PAGE>

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

Liquidity and Capital Resources:

The Company is engaged in the real estate business, including the
origination and purchase of real estate mortgage loans, consisting of first
mortgage, junior mortgage and wraparound mortgage loans. The Company's current
investment policy emphasizes the investment in mortgage loans on income
producing properties. The majority of the Company's loans are expected to mature
within approximately five years.

The Company's liquidity is managed to ensure that sufficient funds are
available to meet maturities of borrowings or to make other investments, taking
into account anticipated cash flows and available sources of funds. The
Company's principal sources of funds have consisted of borrowings (principally
through the issuance of its subordinated debentures), mortgage repayments and
cash flow from ongoing operations. Total stockholders' equity at December 31,
1996 was $10,075,000. The Company considers its current liquidity and additional
sources of funds sufficient to satisfy its outstanding commitments and its
maturing liabilities.

Results of Operations:

Year Ended December 31, 1996 and 1995

Interest Income for 1996 was $9,497,000 as compared to $7,984,000 for 1995.
The increase of $1,513,000 resulted mainly from an increase in mortgages
receivable, offset in part by a decrease in interest rates subsequent to July
1995. Interest paid by the Company on its debentures, as well as the interest
earned on many of its mortgages, is keyed to the prime rate, which was 8 1/2% at
December 31, 1995, and decreased to 8 1/4% on February 1, 1996.

Interest expense for the 1996 period was $7,053,000 as compared to
$6,227,000 for the 1995 period. The increase of $826,000 resulted mainly from an
increase in long term obligations, offset in part by a decrease in interest
rates subsequent to July 1995.

General and administrative expenses for 1996 was $948,000 as compared to
$657,000 for 1995. The increase of $291,000 resulted mainly from an increase in
officer compensation and increased advertising expenses.

The provision for income taxes are $584,000 and $324,000 for 1996 and 1995,
respectively. These provisions represent 46% and 42% of pretax income for each
period.

Year Ended December 31, 1995 and 1994

Interest income for 1995 was $7,984,000 as compared to $6,368,000 for 1994.
The increase of $1,616,000 resulted mainly from a higher level of mortgages
receivable, together with an increase in interest rates in 1995. Mortgages
receivable were: $56,666,000 at December 31, 1994, $59,612,000 at March 31,
1995, $59,457,000 at June 30, 1995, $56,145,000 at September 30, 1995 and
$55,146,000 at December 31, 1995. Interest paid by the Company on its
debentures, as well as the interest earned on many of its mortgages, is keyed to
the prime rate, which varied from time to time during 1995, from 8 1/2% at
December 31, 1994 to a high of 9% and then returning to 8 1/2% at December 31,
1995.

Interest expense for the 1995 period was $6,227,000 as compared to
$4,591,000 for the 1994 period. The increase of $1,636,000 resulted mainly from
an increase in long term obligations and an increase in interest rates in 1995.

General and administrative expenses for 1995 was $657,000 as compared to
$483,000 for 1994. The increase of $174,000 resulted mainly from the payment of
officer compensation and the payment of office rental expenses.

The provision for income taxes decreased from $403,000 in 1994 to $324,000
in 1995. These provisions represent 43% and 42% of pretax income for each
period.

Since the Company intends to continue to expand its asset base, including
its mortgage portfolio, it is anticipated that its interest income will continue
to grow. To the extent that such growth is funded in reliance upon long-term
obligations, such as the Debentures, interest expense will likewise increase.
The size of any such increase will, of course, depend upon the principal amounts
of the additional assets or liabilities, as well as interest rates.

<PAGE>

Since the Company is engaged in the real estate business, its results of
operations are affected by general economic trends in real estate markets, as
well as by trends in the general economy and the movement of interest rates.
Since the properties underlying the Company's mortgages are concentrated in the
New York City area, the economic condition in that area can also have an impact
on the Company's operations.

The number of instances of prepayment of mortgage loans tends to increase
during periods of declining interest rates and tends to decrease during periods
of increasing interest rates. Certain of the Company's mortgages include
prepayment provisions, and others prohibit prepayment of indebtedness entirely.
In any event, the Company believes that it would be able to reinvest the
proceeds of any prepayments of mortgage loans in comparable mortgages so that
prepayments would not have any materially adverse effect on the Company's
business.

The rental housing market in New York City remains stable and the Company
expects that such properties will continue to appreciate in value with little or
no reduction in occupancy rates. The Company's mortgage portfolio is composed
predominantly of mortgages on multi-family residential properties, most of which
are subject to applicable rent control and rent stabilization statutes and
regulations. In both cases, any increases in rent are subject to specific
limitations. As such, properties of the nature of those constituting the most
significant portion of the Company's mortgage portfolio are not affected by the
general movement of real estate values in the same manner as other
income-producing properties.

Impact of Inflation:

The Company may lend at fixed interest rates that exceed the rates
applicable, from time to time, to the Debentures payable by the Company. Under
such circumstances inflation has not had a material effect on the Company's
continuing operations. Should inflation result in rising interest rates, the
Company would have to devote a higher percentage of the interest payments it
receives from its fixed rate mortgages to meet the interest payments due on the
Debentures. The extent to which the Company may be required to allocate the
interest payments it receives to the payment of the interest due on the
Debentures as a result of increasing interest rates is limited because the
interest payable on both principal and accrued interest on the Debentures may
not exceed a certain maximum percent per annum. Should the Company be required
to pay the maximum interest payable on the Debentures, the Company may be
required to use its working capital for purposes of interest payments.

The Company's mortgages are generally acquired or originated for investment
and not for resale in the secondary market, and it is, in general, the Company's
intention to hold such mortgages to maturity. The Company's mortgage loans
generally do not meet the criteria set forth by relevant federal agencies, and
as a result are not readily marketable in the secondary market.

Business:

The Company is engaged in the real estate business and has historically
invested primarily in real estate mortgage loans secured by income producing
real property. It is anticipated that a substantial portion of the loans to be
made by the Company will be loans with terms of up to approximately five years.
Such transactions typically require an understanding of the underlying real
estate transaction and rapid processing and funding as a principal basis for
competing in the making of these loans. The Company does not finance new
construction.

At December 31, 1996, 60% of the outstanding principal amount of the
Company's loans (net of discounts) were secured by properties located in the
greater New York metropolitan area. The balance of the Company's loans are
secured by properties located in Florida, Georgia, New Jersey, upstate New York,
Pennsylvania and Virginia.

Certain of the Company's real estate mortgage loans bear interest at a
fixed rate. The balance of such loans bear interest at fluctuating rates. As of
December 31, 1996, approximately 35% of the Company's mortgage portfolio was
comprised of fixed rate mortgages. Interest on the loans is usually payable
monthly.

At December 31, 1996, the Company's portfolio consisted of 52 real estate
mortgage loans totaling $70,601,000 in the aggregate face principal amount
($69,699,000 in carrying amount for financial reporting purposes, the difference
representing unearned discounts). Of the principal amount of real estate loans
outstanding at December 31, 1996, 89% represent first mortgage loans and 11%
represent junior mortgage loans.

<PAGE>

The Company may also, from time to time, acquire interests in real
property, including fee interests.

Investment Policy-Operations:

The Company's current investment policy related to mortgages emphasizes
investments in short-term real estate mortgages secured by income producing real
property, located primarily in the greater New York metropolitan area.

The properties to be mortgaged are personally inspected by management and
mortgage loans are made only on those properties where management is
knowledgeable as to operating income and expense. The Company generally relies
upon its management in connection with the valuation of properties. From time to
time, however, it may engage independent appraisers and other agents to assist
in determining the value of income-producing properties underlying mortgages, in
which case the costs associated with such services are generally paid by the
mortgagor.

The Company's current investment policy related to real estate acquisitions
emphasizes investments in income-producing properties located primarily in the
New York metropolitan area.

Current Loan Status:

At December 31, 1996, the Company had 52 real estate mortgage loans in its
portfolio, totaling $70,601,000 (face amount) in aggregate principal amount.
Interest rates on the mortgage portfolio range between 6% and 24% per annum.
Certain mortgages have been discounted utilizing rates between 12% and 18% per
annum.

Certain information concerning the Company's mortgage loans outstanding at
December 31, 1996 is set forth below:

Carrying
Amount of
Mortgage Prior No. of
Loans Liens Loans
----- ----- -----

First Mortgage Loans $62,013,000 $ 0 46
Junior Mortgages 7,686,000 20,983,000 6
----------- ----------- --
TOTAL $69,699,000 $20,983,000 52
=========== =========== ==

The historical cost of the mortgage loans which originated in connection
with the sale of real estate includes a discount to reflect an appropriate
market interest rate at the date of origination.

Competition:

The Company competes for acceptable investments with real estate investment
trusts, commercial banks, insurance companies, savings and loan associations,
pension funds and mortgage banking firms, many of which have greater resources
with which to compete for desirable mortgage loans.

<PAGE>

SELECTED FINANCIAL INFORMATION OF THE COMPANY

The following table presents certain historical financial data for the
Company. The data should be read in conjunction with the financial statements,
related notes and other financial information included herein.
<TABLE>
<CAPTION>

Income Statement Data

Year Ended December 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Revenue
<S> <C> <C> <C> <C> <C>
Interest income $ 9,497,000 $ 7,984,000 $ 6,368,000 $ 4,337,000 $ 3,345,000
Other income 372,000 332,000 283,000 802,000 735,000
Gain on early repayment of
discounted mortgages receivable 282,000 82,000 17,000 18,000 20,000
10,151,000 8,398,000 6,668,000 5,157,000 4,100,000
Expenses
Interest 7,053,000 6,227,000 4,591,000 3,415,000 2,904,000
General and administrative 948,000 657,000 483,000 188,000 194,000
Amortization of deferred debenture
offering costs 869,000 748,000 655,000 529,000 460,000
8,870,000 7,632,000 5,729,000 4,132,000 3,558,000

Income Before Income Taxes 1,281,000 766,000 939,000 1,025,000 542,000
Provision for Income Taxes 584,000 324,000 403,000 480,000 229,000
Net Income $ 697,000 $ 442,000 $ 536,000 $ 545,000 $ 313,000

Ratio of Earnings to
Fixed Charges (1) 1.2 1.1 1.2 1.3 1.2

(1) The actual ratio of earnings to fixed charges has been computed by dividing
earnings (before state and federal taxes and fixed charges) by fixed
charges. Fixed charges consist of interest incurred during the period and
amortization of deferred debenture offering costs.
</TABLE>

Balance Sheet Data

December 31,
------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Mortgages receivable $69,699,000 $55,146,000 $56,666,000 $41,521,000 $32,493,000
Total assets 92,223,000 77,579,000 64,745,000 54,650,000 45,140,000
Long term obligations 79,006,000 66,850,000 54,427,000 45,239,000 36,584,000
Stockholders' equity 10,075,000 9,378,000 8,936,000 8,400,000 7,855,000

</TABLE>

<PAGE>

HISTORY AND BUSINESS
The Company

Intervest Corporation of New York (the "Company") was incorporated under
the laws of the State of New York in April, 1987. The Company was founded and
organized by Lowell S. Dansker, Lawrence G. Bergman and Helene D. Bergman (see
"Transactions with Management"), and is privately held. The principal offices of
the Company are located at 10 Rockefeller Plaza, Suite 1015, New York, New York
10020-1903, and its telephone number is 212-757-7300. The Company presently owns
mortgages on real estate, and intends to acquire and originate additional
mortgages on real estate. The proceeds of this offering will be used to acquire
or originate additional mortgages on real estate, to acquire and retain
interests in real property, or to otherwise be used in the course of its
business operations. The Company may in the future engage in any aspect of the
real estate and mortgage finance business.

The Company also has two wholly-owned subsidiaries. See "History and
Business-Subsidiaries."

Present Business

The Company owns a portfolio of mortgages on improved real property. The
aggregate outstanding principal balance at December 31, 1996 due on such
mortgages is approximately $70,601,000 ($69,699,000 after adjusting for a
discount of $902,000).

For financial statement reporting purposes, all mortgages contributed or
sold to the Company by affiliates have been recorded at the historical cost of
the affiliate. The historical cost of the mortgage loans which originated in
connection with the sale of real estate includes a discount to reflect an
appropriate market interest rate at the date of origination.

Five mortgages owned by the Company are senior mortgages on net leased,
free standing commercial properties, thirty-five are senior mortgages on
multifamily residential apartment buildings, six are junior mortgages on
multifamily residential apartment buildings, one is a senior mortgage on land,
two are senior mortgages on office buildings and three are participations in
first mortgages on commercial properties. Five of the properties are commercial
properties which are located in various states, and each is leased by the
respective owner to a single commercial tenant under a long term net lease.

Thirty-one of the residential properties are located in New York City, four
are located in suburbs of New York City, five are located in the State of New
Jersey and one is located in the State of Pennsylvania. One of the Company's
mortgages is a blanket mortgage covering several residential properties located
in Philadelphia, Pennsylvania. Three of the residential properties are owned by
cooperative corporations (a form of owner-occupied apartment ownership in New
York City). Thirty-eight of the residential properties are rental properties,
nine of which have commercial space (stores) on the ground floor. Thirty-two of
the Company's mortgages on these properties are first mortgages, and six are
junior mortgages. Three of the mortgages are participations in first mortgages
on commercial properties in Florida. One of the mortgages is a first mortgage on
land located in the State of Florida.

Table 1 below presents, as of December 31, 1996, certain information
regarding each of the Company's mortgages. As of the date of this prospectus,
only one of the mortgages listed in Table 1 (item 51) was delinquent as to
payment of principal or interest. Those mortgages marked with an asterisk are on
properties owned by affiliates of the Company.

The five mortgages listed as items 1 through 5 in Table 1 are liens on net
leased, free standing commercial properties. Each is leased by the respective
owner to a single commercial tenant under a long term net lease.

The forty-one mortgages listed as items 6 through 39, 41 through 45, 47 and
49 in Table 1 are liens on multifamily residential apartment buildings. Item 51
is a mortgage on land and items 50 and 52 are mortgages on office buildings. The
properties listed as items 6, 7 and 8 are each owned by a cooperative
corporation (a form of owner-occupied apartment ownership in New York City). The
mortgages listed as items 40, 46 and 48 are participation interests in first
mortgages on commercial properties. The property listed as item 27 is a
condominium complex. The other thirty-seven properties are rental properties,
nine of which (items 16, 21, 25, 28, 29, 30, 32, 35 and 43) have commercial
space (stores) on the ground floor.

<PAGE>

<TABLE>
<CAPTION>
TABLE 1
MORTGAGES RECEIVABLE

Outstanding
Principal Type Effective Debt
Mortgage Balance at of Interest Service Maturity Principal Balance Prepayment
Number Address 12/31/96 Mortgage Rate Payments Date Due at Maturity Provisions
- - ------------------------------------------------------------------------------------------------------------------------------------

<C> <C> <C> <C> <C> <C> <C> <C> <C>
1 104 Main Street $209,088.00 First 12.25% See Footnote 1 12/08/2010 Self-liquidating No prepayment
New City, New York penalty

2 2860 Candler Road 263,011.00 First 13.00% See Footnote 2 4/01/2013 Self-liquidating No prepayment
Decatur, Georgia penalty

3 6623 Tara Boulevard 227,136.00 First 13.00% See Footnote 3 4/01/2013 Self-liquidating No prepayment
Jonesboro, Georgia penalty

4 Route 234 and 165,724.00 First 12.375% See Footnote 4 12/01/2005 Self-liquidating .5% prepayment
Coverstone Drive penalty
Manassas, Virginia

5 850 Ridge Road East 267,252.00 First 12.50% See Footnote 5 12/01/2012 Self-liquidating 1% prepayment
Irondequoit, New York penalty

6 168-70-72 East 90th Street 932,924.00 First 11.51% See Footnote 6 10/31/1997 927,006.37 No prepayment
New York, New York permitted

7 204-06-08 East 90th Street 850,000.00 First 11.51% See Footnote 7 7/31/1997 850,000.00 No prepayment
New York, New York permitted

8 126 East 12th Str 319,663.00 First 9.00% See Footnote 33 11/01/1999 269,221.35 No prepayment
New York, New York permitted

9 455 West 44th Streert 298,103.00 First 10.00%(A) See Footnote 37 5/01/2005 1,206,365.61 1% fee
New York, New York

10 3133 Rochambeau Avenue 994,815.00 First 12.50%(A) See Footnote 8 8/01/2010 Self-liquidating Not prepayable
Bronx, New York until balance
under $200,000

11 3165 Decatur Avenue 2,850,000.00 First 13.05%(A) See Footnote 17 9/01/2011 Self-liquidating Not prepayable
Bronx, New York until 3/1/2004
and
3341-45 Reservoir Oval West
Bronx, New York

12 2816 Heath Avenue 1,156,820.00 First 12.75%(A) See Footnote 18 1/01/2011 Self-liquidating No prepayment
Bronx, New York permitted

13 134 East Mosholu 2,237,296.00 First 10.50%(A) See Footnote 9 11/01/2012 Self-liquidating Not prepayable
Parkway South until 2/2003
Bronx, New York
and
2910 Grand Concourse
Bronx, New York

15
<PAGE>

14 2979 Marion Avenue 900,000.00 First 12.27%(A) See Footnote 24 8/01/2012 Self-liquidating Not prepayable
Bronx, New York until balance
under $200,000
2% fee on
unpaid balance

15 326 East 201st Street 595,133.00 First 13.50%(A) See Footnote 10 3/01/1997 592,000.00 No prepayment
Bronx, New York penalty

*16 220 West 93rd Street 1,050,000.00 Second 12.00% See Footnote 7 2/01/1999 1,050,000.00 No prepayment
New York, New York penalty

17 2855 Claflin Avenue 784,837.00 First 9.00%(A) See Footnote 11 7/01/2006 Self-liquidating Not prepayable
Bronx, New York until 1/1/2000

18 2847 Webb Avenue 637,242.00 First 13.50%(A) See Footnote 12 3/01/1997 634,000.00 No prepayment
Bronx, New York penalty

19 115-117 West 1,934,057.00 First 13.75%(A) See Footnote 13 6/01/2013 Self-liquidating No prepayment
197th Street permitted
Bronx, New York

20 3006 Decatur Avenue 1,188,373.00 First 9.00%(A) See Footnote 14 11/01/2015 Self-liquidating Not prepayable
Bronx, New York until 3/99

*21 222 West 83rd Street 3,300,000.00 Second 11.00% See Footnote 7 2/01/1997 3,300,000.00 No prepayment
New York, New York penalty

22 219-221 East 1,272,258.00 First (B) See Footnote 36 2/28/1997 1,265,398.27 1% fee
23rd Street
New York, New York

23 2980 Valentine Avenue 1,831,291.00 First 12.75%(A) See Footnote 15 11/01/2011 Self-liquidating Not prepayable
Bronx, New York until 1/1/2003

24 3154-3164 1,602,582.00 First 13.00%(A) See Footnote 19 1/01/2010 Self-liquidating Not prepayable
Grand Concourse until 10/1/2000
Bronx, New York

25 796-798 Ninth Avenue 1,445,000.00 First 10.00% See Footnote 7 10/01/2000 1,445,000.00 Not prepayable
New York, New York until 1/1/1997

26 3150 Rochambeau Avenue 4,510,000.00 First 12.77%(A) See Footnote 25 11/01/2013 Self-liquidating No prepayment
Bronx, New York permitted

27 Hyde Park Condo., Rt. 9 1,811,917.00 First (B) See Footnote 39 3/31/1997 1,764,329.14 1% fee
Hyde Park, New York

*28 203 West 90th Street 1,400,000.00 Second 10.50%(A) See Footnote 7 2/01/1998 1,400,000.00 No prepayment
New York, New York penalty

29 790 Ninth Avenue 425,000.00 First 10.00% See Footnote 7 10/01/2000 425,000.00 Not prepayable
New York, New York until 1/1/1997

16
<PAGE>

30 801/803 Ninth Avenue 1,083,366.00 First 11.00%(A) See Footnote 38 3/15/2010 Self-liquidating No prepayment
New York, New York penalty

*31 650 Main Street 500,000.00 Second 11.50%(A) See Footnote 7 3/01/1996 500,000.00 No prepayment
New Rochelle, New York penalty

32 676 Ninth Avenue 265,000.00 First 10.00% See Footnote 7 10/01/2000 265,000.00 Not prepayable
New York, New York until 1/1/1997

33 158 South Harrison Street 736,546.00 First (B) See Footnote 16 4/15/1998 693,103.08 Not prepayable
East Orange, New Jersey until 7/15/1997
then 1% fee

34 48-56 Beaver Street 1,556,966.00 First (B) See Footnote 20 4/30/1997 1,534,589.31(C) 1% fee
New York, New York

35 805 Ninth Avenue 286,292.00 First 11.00%(A) See Footnote 21 3/15/2010 Self-liquidating No prepayment
New York, New York penalty

36 200 Route 209 877,307.00 First (B) See Footnote 22 4/30/1997 847,283.76 1% fee
Ellenville, New York

37 21-14/21-70 1,149,028.00 Second (B) See Footnote 23 1/17/1999 1,066,217.42 One month's
Crescent Street interest
Astoria, New York

38 379 Princeton- 1,200,000.00 First (B) See Footnote 32 12/29/1997 1,184,741.43 One month's
Hightstown Road interest
East Windsor, New Jersey

39 80 Nassau Street 2,683,336.00 First (B) See Footnote 27 9/25/1998 2,555,850.38 Not prepayable
New York, New York until 6/26/1997
then one
month's
interest

40 Carrell Corners 348,712.00 (E) 8.75% See Footnote 28 9/24/2006 Self-liquidating No prepayment
Ft. Myers, Florida penalty

41 3051-91 Pleasant Street 1,010,661.00 First (B) See Footnote 29 7/01/1997 928,811.72 1% fee
Camden, New Jersey

42 320 West Branch Avenue 7,266,265.00 First (B) See Footnote 30 5/1/1999 6,266,296.82 Not prepayable
Pine Hill, New Jersey until 11/2/1997
then 1% fee

43 238-240 East 14th Street 1,100,000.00 First 11.00% See Footnote 7 3/01/1999 1,100,000.00 No prepayment
New York, New York penalty

44 189 Sunrise Highway 287,910.00 Second (B) See Footnote 31 3/31/1997 285,081.62 1% fee
Rockville Centre, New York

45 190 Fordham Street 346,395.00 First 24.00% See Footnote 7 9/30/1996 646,974.50 No prepayment
City Island, Bronx, New York penalty
17
<PAGE>

47 276-336 Eastern Parkway 242,396.00 First (B) See Footnote 35 8/01/1997 197,821.89(D) Not prepayable
Irvington, New Jersey until 5/1/1997,
then 1% fee

48 1512 E. Broward Blvd. 325,000.00 (E) 8.75% See Footnote 28 See Footnote 34 No prepayment
Ft. Lauderdale, Florida penalty

49 Blanket Mortgage 3,782,152.00 First (B) See Footnote 40 6/12/1999 3,292,797.15 Not prepayable
Apartment Buildings until 6/12/1997
then 1% fee
Philadelphia, Pennsylvania

50 4250 Veterans Highway 3,579,336.00 First (B) See Footnote 26 8/06/983 423,787.96 One month's
Bohemia, New York interest

51 Triple R Ranch 1,583,700.00 First (B) See Footnote 41 7/10/1997 1,563,597.70 1% fee
Kissimmee, Florida

52 Meridian Center 3,806,064.00 First (B) See Footnote 42 4/26/1997 3,797,877.79 1% fee
Two Industrial Way West
Eatontown, New Jersey

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

* Owned by an affiliate of the Company
</TABLE>

(A) The interest rates specified are the effective interest rates at December
31, 1996. These are floating rate mortgages and interest rates are adjusted
pursuant to the terms of the mortgage either at specified times and at
specified rates or based upon the prime rate or a specified increment over
the prime rate. The mortgages incorporate interest rate floors ranging from
6% to 13.75%.

(B) These are floating rate mortgages and the interest rate is the greater of
the then applicable rate or a specified increment over the prime rate,
which increment ranges from 5% to 7%.

(C) The full principal balance at December 31, 1996 was $2,306,966, including a
participation of $750,000 held by an unrelated third party. The full
balance at maturity is $2,284,589.31.

(D) The full principal balance at December 31, 1996 was $1,492,396, including a
participation of $1,250,000 held by an unrelated third party. The full
balance at maturity is $1,447,821.89.

(E) Participation interest in first mortgage loan held by an affiliated bank.

(1) $22,000.00 annually on December 15 each year, including annual interest in
advance.

(2) $2,509.75 per month, including interest.

(3) $2,167.50 per month, including interest.

(4) $24,287.16 annually on December 1 each year, including annual interest in
advance.

(5) $29,356.32 annually on December 1 each year, including annual interest in
advance.

(6) $9,505 per month, including interest.

(7) Debt service payments are interest only.

(8) Debt service payments increase from $11,000 per month to $13,000 per month
over the life of the mortgage.

(9) Debt service payments increase from $21,000 per month to $25,000 per month
over the life of the mortgage.

(See Additional Footnotes on Next Page)
18
<PAGE>

(10) Debt service payments increase from $5,000 per month to $5,800 per month
over the life of the mortgage.

(11) Debt service payments increase from $10,000 to $11,750 over the life of the
mortgage.

(12) Debt service payments increase from $5,525 per month to $6,325 per month
over the life of the mortgage.

(13) Debt service payments increase from $23,000 per month to $24,500 per month
over the life of the mortgage.

(14) Debt service payments increase from $10,000 per month to $12,917 per month
over the life of the mortgage.

(15) Debt service payments increase from $18,000 per month to $24,000 per month
over the life of the mortgage.

(16) $11,200 per month, including interest.

(17) Debt service payments increase from $31,000 per month to $44,000 per month
over the life of the mortgage.

(18) Debt service payments increase from $11,700 per month to $15,250 per month
over the life of the mortgage.

(19) Debt service payments increase from $17,500 per month to $24,000 per month
over the life of the mortgage.

(20) $36,500 per month including interest, reduced by interest payment at 10.75%
on $750,000 to participants of the mortgage.

(21) Debt service payments increase from $3,100 per month to $3,350.52 per month
over the life of the mortgage.

(22) Debt service payments increase from $17,400 per month to $18,400 per month
over the life of the mortgage.

(23) $16,700 per month, including interest.

(24) Debt service payments increase from $9,000 per month to $11,250 per month
over the life of the mortgage.

(25) Debt service payments increase from $48,000 per month (which are interest
payments only) to $80,000 per month (which includes payments of principal)
over the life of the mortgage.

(26) $50,000 per month, including interest.

(27) $38,000 per month, including interest.

(28) Monthly debt service payments include 100% principal and participation
interest.

(29) Debt service payments increase from $24,000 per month to $25,250 per month
over the life of the mortgage. (30) Debt service payments increase from
$50,000 per month to $104,000 per month over the life of the mortgage.

(31) $4,533 per month including interest.

(32) $15,725 per month, including interest.

(33) Debt service payments increase from $3,500 per month to $4,000 per month,
including interest.

(34) $319,580 principal amount received in January 1997, and the participation
was fully paid.

(35) $27,335 per month, including interest, reduced by interest payment at
10.25% on $1,250,000 to participants of the mortgage.

(36) $18,200 per month, including interest.

(37) Debt service payments increase from $10,950 per month to $11,950 per month
over the life of the mortgage.

(38) Debt service payments vary from $12,500 per month to $12,212.60 per month
over the life of the mortgage.

(39) $37,900 per month, including interest.

(40) Debt service payments increase from $50,000 per month to $65,000 per month
over the life of the mortgage.

(41) $21,500 per month, including interest.

(42) Debt service payments decrease from $83,200 per month to $48,200 per month
over the life of the mortgage.

<PAGE>

Property to be Acquired from Net Proceeds of Offering

The Company plans to apply the net cash proceeds of the offering to the
acquisition of additional mortgages and/or interests in real estate. See "Use of
Proceeds."

Future Business Operations

The Company plans to continue to engage in the real estate business,
including the acquisition and origination of mortgages. Such mortgages may be
purchased from affiliates of the Company or from unaffiliated parties. It is
anticipated that such mortgages will be acquired or originated using the
proceeds of additional debenture offerings and/or internally generated funds.

The Company intends to continue to originate new mortgages, to acquire
existing mortgages, and to acquire equity interests in real property. The
Company does not presently own any equity interests in real property nor has it
acquired any equity interest in real property since the date it commenced
business. However, the proceeds from this offering may be applied to such an
acquisition and the Company may purchase additional equity interests in real
property in the future or it may acquire such an equity interest pursuant to a
foreclosure upon a mortgage held by it.

The Company's mortgage loans may include: (i) wraparound mortgage loans;
(ii) junior mortgage loans; and (iii) first mortgage loans.

The Company's mortgage loans will generally be secured by income-producing
properties. In determining whether to make mortgage loans, the Company will
analyze relevant real property and financial factors which may in certain cases
include such factors as the condition and use of the subject property, its
income-producing capacity and the quality, experience and creditworthiness of
the owner of the property. The Company's mortgage loans will generally not be
personal obligations of the borrower and will not be insured or guaranteed by
governmental agencies or otherwise.

The Company anticipates its mortgage loans will typically mature within
approximately five years. However, the Company may also invest in mortgage loans
with longer maturities or shorter maturities. The Company anticipates that
generally its mortgage loans will provide for balloon payments due at the time
of their maturity.

With respect to the acquisition of equity interests in real estate, the
Company may acquire and retain title to properties or, may, directly or through
a subsidiary, retain an interest in a partnership formed to acquire and hold
title to real property.

While no such transactions are presently pending, the Company would, in
appropriate circumstances, consider the expansion of its business through
investments in or acquisitions of other companies engaged in real estate or
mortgage business activities.

The Company does not have any present intentions to issue senior
securities; to underwrite securities of other issuers; or to offer securities in
exchange for property. While no such transactions are currently contemplated,
the Company would, in appropriate circumstances and without the approval of the
Debenture Holders, consider the call or redemption of its outstanding debt
securities.

Real Estate Investment Policies

While the Company has not previously made acquisitions of real property or
managed income-producing property, its management has had substantial experience
in the acquisition and management of properties and, in particular, multifamily
residential properties. Three of the executive officers of the Company have been
actively involved in such activities for many years. (See "Management").

Real property that may be acquired will be selected by management of the
Company. The Board of Directors of the Company has not adopted any formal
policies regarding the percentage of the Company's assets that may be invested
in any single property, or in any type of property, or regarding the geographic
location of properties that may be acquired. No vote of any securities holders
of the Company is necessary for any investment in real estate.

The Company anticipates that any equity interests it may acquire will be in
income-producing properties, primarily multi-family residential properties
located in the New York metropolitan area. The acquisition of real estate may be
financed in reliance upon working capital, mortgage financing or a combination
of both. It is anticipated that properties selected for acquisition would have
potential for appreciation in value. While such properties would typically
generate cash flow from rentals, it is anticipated that income from properties
will generally be reinvested in capital improvements to the properties.

<PAGE>

While the Company would maintain close supervision over any properties that
it may own, independent managing agents may be engaged when deemed appropriate
by management. All such properties would, as a matter of policy, be covered by
property insurance in amounts deemed adequate in the opinion of management.

Mortgage Investment Policy

Future investments in mortgages will be selected by management of the
Company. The Board of Directors of the Company has not adopted any formal policy
regarding the percentage of the Company's assets which may be invested in any
single mortgage, or in any type of mortgage investment, or regarding the
geographic location of properties on which the mortgages owned by the Company
are liens. However, it is the present intention of the management of the Company
to maintain the diversification of the portfolio of mortgages owned by the
Company. No vote of any security holders of the Company is necessary for any
investment in a mortgage.

The Company anticipates that it will acquire or originate senior and junior
mortgages, primarily on multifamily residential properties. The Company
anticipates that the amount of each mortgage it may acquire in the future will
not exceed 85% of the fair market value of the property securing such mortgage.
Such mortgages generally will not be insured by the Federal Housing
Administration or guaranteed by the Veterans Administration or otherwise
guaranteed or insured in any way. The Company requires that all mortgaged
properties be covered by property insurance in amounts deemed adequate in the
opinion of management. The Company also acquires or originates mortgages which
are liens on other types of properties, including land and commercial and office
properties, and may resell mortgages.

Temporary Investments by Affiliates on Behalf of the Company

An affiliate of the Company may make a mortgage loan or purchase a mortgage
in its own name and temporarily hold such investment for the purpose of
facilitating the making of an investment of the Company, provided that any such
investment is acquired by the Company at a cost no greater than the cost of such
investment to the affiliate plus carrying costs and provided there is no other
benefit to the affiliate arising out of such transaction from compensation
otherwise than as permitted by this Prospectus.

Certain Characteristics of the Company's Mortgage Investments

Mortgages typically provide for periodic payments of interest and, in some
cases, principal during the term of the mortgage, with the remaining principal
balance and any accrued interest due at the maturity date. The majority of the
mortgages owned by the Company provide for balloon payments at maturity, which
means that a substantial part or all of the original principal of the mortgage
is due in one lump sum payment at maturity. The property on which the mortgage
is a lien provides the security for the mortgage. If the net revenue from the
property is not sufficient to make all debt service payments due on mortgages on
the property, or if at maturity or the due date of any balloon payment the owner
of the property fails to raise the funds to make the payment (by refinancing,
sale or otherwise), the Company could sustain a loss on its investment in the
mortgage. To the extent that the aggregate net revenues from the Company's
mortgage investments are insufficient to provide funds equal to the payments due
under the Company's debt obligations, including the Debentures, then the Company
would be required to utilize its working capital for such purposes or otherwise
obtain the necessary funds from outside sources. No assurance can be given that
such funds would be available to the Company. A failure to make any payments due
to the holders of Debentures would give rise to those remedies set out in the
Indenture. (See "Description of Debentures").

With respect to any wraparound mortgages which may be originated by the
Company in the future, such wraparound mortgages are generally negotiated and
structured on an individual, case by case basis, and may be structured to
include any or all of the following provisions:

(i) The Company may lend money to a real property owner who would be
obligated to repay the senior underlying mortgage debt as well as the new
wraparound indebtedness owed to the Company.

(ii) The Company may legally assume the obligation to make the payments
due on the senior underlying mortgage debt.

(iii) The real property owner-debtor may agree to make payments to the
Company in satisfaction of both the senior underlying mortgage debt and the
new wraparound indebtedness owed to the Company.

(iv) The Company may receive a mortgage on the real property to secure
repayment of the total amount of indebtedness (wraparound indebtedness and
the senior underlying mortgage indebtedness).

<PAGE>

The mortgages owned by the Company that are junior mortgages are
subordinate in right of payment to senior mortgages on the various properties.
The Company generally relies upon its management in connection with the
valuation of properties. From time to time, however, it may engage independent
appraisers and other agents to assist in determining the value of
income-producing properties underlying mortgages. In all cases, in the opinion
of management, the current value of the underlying property collateralizing the
mortgage loan is in excess of the stated amount of the mortgage loan. Therefore,
in the opinion of management of the Company, each property on which a mortgage
owned by the Company is a lien constitutes adequate collateral for the related
mortgage loan. Accordingly, in the event the owner of a property fails to make
required debt service payments, management believes that, based upon current
value, upon a foreclosure of the mortgage and sale of the property, the Company
would recover its entire investment. However, there can be no assurance that the
current value of the underlying property will be maintained.

Loan Loss Experience

For financial reporting purposes, the Company considers a loan as
delinquent or non-performing when it is contractually past due 90 days or more
as to principal or interest payments. To date, the Company has only experienced
a single default or delinquency in its mortgage portfolio. It is pursuing
foreclosure proceedings with respect to a single mortgage, the principal balance
of which mortgage is $1,583,700. The Company evaluates its portfolio of mortgage
loans on an individual basis, comparing the amount at which the investment is
carried to its estimated net realizable value. Since the Company has experienced
only a single default or delinquency, no allowance for loan losses is presently
maintained.

Tax Accounting Treatment of Payments Received on Mortgages

The Company derives substantially all of its cash flow from debt service
payments which it receives on mortgages owned by it. The tax accounting
treatment of such debt service payments, as income or return of capital, depends
on the particular mortgage. In the case of mortgages which pay interest only,
the entire debt service payment prior to maturity received by the Company is
treated as income and the repayment of principal is generally considered a
return of capital. In the case of mortgages which include amortization of
principal in the debt service payment received by the Company, the amount
representing amortization of principal is generally treated as a return of
capital for tax accounting purposes. However, the Company will report $199,000
of additional taxable income upon the collection of $875,000 of principal
applicable to five mortgages due to deferrals of taxable income in connection
with prior real estate transactions.

Financial Accounting Treatment of Payments Received on Mortgages

For financial reporting purposes, the Company's basis in mortgages
originated in connection with real estate sale transactions is less than the
face amount outstanding. This difference is attributable to discounts recorded
by the Company to reflect a market rate of interest at the date the loans were
originated. These discounts will be amortized over the lives of the mortgages.

Effect of Government Regulation

Investment in mortgages on real properties presently may be impacted by
government regulation in several ways. Residential properties may be subject to
rent control and rent stabilization laws. As a consequence, the owner of the
property may be restricted in its ability to raise the rents on apartments. If
real estate taxes, fuel costs and maintenance of and repairs to the property
were to increase substantially, and such increases are not offset by increases
in rental income, the ability of the owner of the property to make the payments
due on the mortgage as and when they are due might be adversely affected.

Laws and regulations relating to asbestos have been adopted in many
jurisdictions, including New York City, which require that whenever any work is
undertaken in a property in an area in which asbestos is present, the asbestos
must be removed or encapsulated in accordance with such applicable local and
federal laws and regulations. The cost of asbestos removal or encapsulation may
be substantial, and if there were not sufficient cash flow from the property,
after debt service on mortgages, to fund the required work, and the owner of the
property fails to fund such work from other sources, the value of the property
could be adversely affected, with consequent impairment of the security for the
mortgage.

Laws regulating the storage, disposal and clean up of hazardous or toxic
substances at real property have been adopted at the federal, state and local
levels. Such laws may impose a lien on the real property superior to any
mortgages on the property. In the event such a lien were imposed on any property
which serves as security for a mortgage owned by the Company, the security for
such mortgage could be impaired.

<PAGE>

Indemnification

Pursuant to the bylaws of the Company, the Company is obligated to
indemnify officers and directors of the Company against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
actually and necessarily incurred by such officers or directors as a result of
any action or proceeding, or any appeal therein, to the extent such
indemnification is permitted under the laws of the State of New York (in which
the Company is incorporated). Insofar as indemnification for liabilities under
the Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.

Litigation

Except with respect to foreclosure proceedings related to one of its
mortgages, the Company is not engaged in any litigation, nor does it presently
know of any threatened or pending litigation in which it is contemplated that
the Company will be made a party.

Subsidiaries

The Company has two wholly-owned subsidiaries. Intervest Distribution
Corporation is a servicing agent for distributions to investors and performs
distribution and record-keeping functions for the Company and its affiliates.
Intervest Realty Servicing Corporation is currently engaged in real estate
management and brokerage activities.

MANAGEMENT

Directors and Executive Officers

The current directors and executive officers of the Company are as follows:

Lawrence G. Bergman, age 52, serves as a Director, and as Vice President
and Secretary of the Company and has served in such capacities since the Company
was organized. Mr. Bergman received a Bachelor of Science degree and a Master of
Engineering (Electrical) degree from Cornell University, and a Master of Science
in Engineering and a Ph.D degree from The Johns Hopkins University. Mr. Bergman
is also a Director, Vice-President and Secretary of Intervest Bancshares
Corporation, and Co-Chairman of the Board of Directors and a member of the Loan
Committee of Intervest Bank. During the past five years, Mr. Bergman has been
actively involved in the ownership and operation of real estate and mortgages
through certain family-owned entities.

Michael A. Callen, age 56, serves as a Director of the Company, and has
served in such capacity since October, 1992. Mr. Callen received a Bachelor of
Arts degree from the University of Wisconsin in Economics and Russian. Mr.
Callen is Senior Advisor, The National Commercial Bank, Jeddah, Kingdom of Saudi
Arabia and prior to 1993 was a Director and Sector Executive at
Citicorp/Citibank, responsible for corporate banking activities in North
America, Europe and Japan. Mr. Callen is a Director of Intervest Bancshares
Corporation and a Director of AMBAC, Inc.

Jean Dansker, age 75, serves as Vice President of the Company and has
served in such capacity since June, 1996. Mrs. Dansker received a Bachelor of
Arts degree from Brooklyn College in Economics. Mrs. Dansker has been an active
investor in real estate and mortgages for more than five years.

Jerome Dansker, age 78, serves as a Director and as Executive Vice
President of the Company, and has served in such capacity since November, 1993.
Mr. Dansker became Chairman of the Board of Directors in June, 1996. Mr. Dansker
received a Bachelor of Science degree from the New York University School of
Commerce, Accounts and Finance, a law degree from the New York University School
of Law, and is admitted to practice as an attorney in the State of New York. Mr.
Dansker is a Director, Chairman of the Board and Executive Vice President of
Intervest Bancshares Corporation. He is also a Director and Chairman of the Loan
Committee of Intervest Bank. During the past five years, Mr. Dansker has been
actively involved in the ownership and operation of real estate and mortgages
through certain family-owned entities.

<PAGE>

Lowell S. Dansker, age 46, serves as a Director, and as President and
Treasurer of the Company, and has served in such capacities since the Company
was organized. Mr. Dansker received a Bachelor of Science in Business
Administration from Babson College, a law degree from the University of Akron
School of Law, and is admitted to practice as an attorney in New York, Ohio,
Florida and the District of Columbia. Mr. Dansker is also a Director, President
and Treasurer of Intervest Bancshares Corporation, an affiliated bank holding
company and Co-Chairman of the Board of Directors and a member of the Loan
Committee of Intervest Bank, a Florida state-chartered bank which is majority
owned by Intervest Bancshares Corporation. During the past five years, Mr.
Dansker has been actively involved in the ownership and operation of real estate
and mortgages through certain family-owned entities.

Milton F. Gidge, age 67, serves as a Director of the Company, and has
served in such capacity since December, 1988. Mr. Gidge received a Bachelor of
Business Administration degree in Accounting from Adelphi University and a
Masters Degree in Banking and Finance from New York University. Mr. Gidge
retired in 1994 and, prior to his retirement, was a Director and Chairman-Credit
Policy of Lincoln Savings Bank, F.S.B. (headquartered in New York City). He is
also a Director of Intervest Bancshares Corporation, Interboro Mutual Indemnity
Insurance Company and Vicon Industries, Inc. Mr. Gidge was an officer of Lincoln
Savings Bank, F.S.B. for more than five years.

William F. Holly, age 68, serves as a Director of the Company and has
served in such capacity since December, 1990. Mr. Holly received a Bachelor of
Arts degree in Economics from Alfred University. Mr. Holly is Chairman of the
Board and Chief Executive Officer of Sage, Rutty & Co., Inc., members of the
Boston Stock Exchange, with offices in Rochester, New York and Canandaigua, New
York, and is also a Director of Intervest Bancshares Corporation and a Trustee
of Alfred University. Mr. Holly has been an officer and director of Sage, Rutty
& Co., Inc. for more than five years.

David J. Willmott, age 58, serves as a Director of the Company, and has
served in such capacity since June, 1989. Mr. Willmott is a graduate of Becker
Junior College and attended New York University Extension and Long Island
University Extension of Southampton College. Mr. Willmott is the Editor and
Publisher of Suffolk Life Newspapers, which he founded more than 25 years ago.
Mr. Willmott is also a Director of Intervest Bancshares Corporation.

Wesley T. Wood, age 54, serves as a Director of the Company, and has served
in such capacity since April, 1992. Mr. Wood received a Bachelor of Science
degree form New York University, School of Commerce. Mr. Wood is President of
Marketing Capital Corporation, an international marketing consulting and
investment firm which he founded in 1973. He is also a Director of Intervest
Bancshares Corporation, a Director of the Center of Direct Marketing at New York
University, a member of the Marketing Committee at Fairfield University in
Connecticut, and a Trustee of St. Dominics in Oyster Bay, New York.

All of the directors of the Company have been elected to serve as directors
until the next annual meeting of the Company's shareholders. Each of the
officers of the Company has been elected to serve as an officer until the next
annual meeting of the Company's directors.

Mr. Bergman's wife is the sister of Lowell S. Dansker and Jerome Dansker is
the father of Lowell S. Dansker and Mrs. Bergman. Jean Dansker is the wife of
Jerome Dansker and the mother of Lowell S. Dansker and Mrs. Bergman.

In their capacities as general partners of Capital Holding Company, Messrs.
Dansker and Mr. Bergman are responsible for all aspects of that company's
operations and make all management decisions related to such operations. As a
result of their substantial experience in real estate activities, including the
ownership, acquisition and management of income-producing properties, for
affiliates of the Company, they have developed substantial expertise in the
valuation of such properties.

Executive Compensation

Prior to July 1, 1995, no compensation was paid to or accrued by the
Company for any executive officer or director of the Company (other than fees
paid to directors for attending Board meetings). Each of the directors receives
a fee of $250 for each meeting of the Board of Directors he attends. Effective
as of July 1, 1995, the Company entered into an employment agreement with Mr.
Jerome Dansker, its Executive Vice President. The agreement requires Mr. Dansker
to devote so much of his time to the affairs of the Corporation as in his
judgment the conduct of his duties shall require. The agreement is for a term of
ten years and provides for the payment of an annual salary in the present amount
of $132,500, which is subject to increase annually by six percent or by the
percentage increase in the consumer price index, if higher. The agreement also
provides for monthly expense account payments, the use of a car and medical
benefits. In the event of Mr. Dansker's death or disability, monthly payments of
one-half of the amount which otherwise would have been paid to Mr. Dansker will
continue until the greater of (i) the balance of the term of employment, and
(ii) three years. Mr. Dansker also received bonuses in the aggregate amount of
$100,000 in 1996.

<PAGE>

TRANSACTIONS WITH MANAGEMENT

The Company has in the past and may in the future acquire mortgages from
affiliated parties, including Capital Holding Company and New York Properties
Trust. The three shareholders of the Company, together with Mr. Jerome Dansker,
are the sole partners of Capital Holding Company. Mr. Bergman and Mr. Lowell
Dansker are the sole trustees of New York Properties Trust and were the trustees
of Central Properties Trust, which ceased doing business in 1995. City
Properties Company was a sole proprietorship owned by Jerome Dansker. Because of
such affiliations, management of the Company may have a conflict of interest in
establishing a fair price for the purchase of the mortgages representing liens
on properties owned by affiliates. Nevertheless, in the opinion of management of
the Company, the purchase prices for such mortgages have been and will be at
least as favorable to the Company as if the respective properties were owned by
unaffiliated third parties.

In addition, affiliates of the Company may enter into other transactions
with or render services for the benefit of the Company. For example an affiliate
of the Company provides mortgage servicing to the Company and a subsidiary of
the Company acts as servicing agent for distributions to investors and performs
distribution and record-keeping functions for the Company. Any future
transactions between the Company and any of its affiliates will be entered into
on terms at least as favorable as could be obtained from unaffiliated
independent third parties and will be subject to approval or ratification by a
majority of independent directors considering the transaction. To the extent
that the Company may, from time to time, make loans to its shareholders or other
affiliates, such loans will be: evidenced by notes; at interest rates comparable
to that charged by other lenders; repaid pursuant to amortization schedules
comparable to those used by other lenders for similar loans; made only if the
borrower is a satisfactory credit risk; and will be monitored in the same manner
as would be used by other lenders.

During 1994, New York Investment Company and Central Properties Trust sold
to third parties two properties subject to mortgages held by the Company. In
connection with those sales, the Company purchased a junior mortgage from an
unaffiliated party in the amount of $100,000, at a purchase price equal to its
then outstanding principal balance, and, the Company's mortgages were refinanced
and the Company acquired first mortgages totaling $5,610,000.

During 1994, the Company made mortgage loans in the amount of $2,400,000 on
properties owned by Capital Holding Company.

During 1995, Capital Holding Company, Central Properties Trust and New York
Properties Trust sold to third parties eight properties subject to mortgages
held by the Company. In connection with those sales the Company's mortgages were
refinanced and the Company acquired first mortgages totaling $9,670,000.

An annual mortgage servicing fee, based on the face value of its mortgages
receivable, is paid by the Company to Capital Holding Company, an affiliate of
the Company. The services provided to the Company by Capital Holding Company in
return for such mortgage servicing fee include (i) the collection of mortgages
receivable, (ii) the payment of mortgages payable, (iii) the payment of property
taxes for the mortgaged premises after receipt of such tax payments from
mortgagors and (iv) the payment of property insurance premiums for the mortgaged
properties after receipt of such insurance payments from mortgagors. For the
fiscal years ended December 31, 1994, 1995 and 1996, the mortgage servicing fees
paid by the Company to Capital Holding Company were $354,000, $342,000 and
$367,000 respectively. The fee is agreed to between Capital Holding Company and
the Company and is at a level deemed reasonable by the Company.

William F. Holly, who is a director of the Company, also serves as Chairman
of the Board and Chief Executive Officer of Sage, Rutty & Co., Inc., which firm
will act as Underwriter in connection with the offering and which firm has acted
as an underwriter in connection with the Company's prior offerings of
debentures.

<PAGE>

STOCKHOLDERS

The following table sets forth information concerning the ownership of the
outstanding common stock of the Company, all of which is beneficially owned by
the three persons listed below:

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

Lowell S. Dansker 15.92 shares (1) 50.0%
360 West 55th Street
New York, N.Y. 10019

Lawrence G. Bergman 3.79 shares 11.9%
201 East 62nd Street
New York, N.Y. 10021

Helene D. Bergman 12.13 shares (2) 38.1%
201 East 62nd Street
New York, N.Y. 10021
---------------- ------
Total Outstanding 31.84 shares 100.0%
================ ======

(1) Of the 15.92 shares beneficially owned by Mr. Dansker, 0.20 shares are
owned legally and of record by Mr. Dansker's wife, Randi O. Dansker, and
0.40 shares are owned by Mr. Dansker as custodian for his two children
under the Uniform Gifts to Minors Act of the State of New York.

(2) Of the 12.13 shares beneficially owned by Mrs. Bergman, 0.20 shares are
owned by her as custodian for one of her children under the Uniform Gifts
to Minors Act of the State of New York, and 0.20 shares are owned by an
adult child.

DESCRIPTION OF DEBENTURES

The Company will issue the Debentures under an Indenture to be dated as of
May 1, 1997 (the "Indenture"), between the Company and The Bank of New York, 101
Barclay Street, New York, New York 10286 (the "Trustee"). In the summary which
follows, parenthetical references to Articles and Sections are references to the
corresponding Articles and Sections in the Indenture, and parenthetical
references to paragraphs are references to the corresponding paragraphs in the
form of Debenture included in the Indenture. The terms and provisions of the
Debentures are stated in the Indenture. Such terms and provisions also include
certain provisions of the Trust Indenture Act of 1939 (as in effect on the date
of the Indenture) which are incorporated by reference into the Indenture.
Debenture Holders are referred to the Indenture and the Trust Indenture Act of
1939 for a more complete statement of such terms and provisions. The following
summary of certain provisions of the Indenture does not purport to be complete,
and where particular provisions of the Indenture are referred to, such
particular provisions are incorporated herein by reference, and such summary is
qualified in its entirety by such incorporated provisions. The form of the
Indenture is on file as an exhibit to the Registration Statement.

The Debentures will be issued in two maturities as follows: $500,000 due
July 1, 1999; and $8,000,000 due October 1, 2005. All of the Debentures will be
issued in fully registered form without coupons. The Debentures will be issued
only in denominations of $10,000 and multiples thereof, and with a minimum
purchase of $10,000.

<PAGE>

Interest on the Debentures maturing July 1, 1999 will accrue each calendar
quarter at the higher of 9.0%, reflecting one-half of one percent over the prime
rate of Chase Manhattan Bank on the date of this prospectus, or one-half of one
percent over the prime rate of Chase Manhattan Bank on the date of First
Closing. In addition, interest will accrue each calendar quarter on the balance
of the accrued interest as of the last day of the preceding calendar quarter at
the same interest rate. All accrued interest on the Debentures maturing July 1,
1999 will be payable at the maturity of the Debentures, whether by acceleration,
redemption or otherwise.

Interest on the Debentures maturing October 1, 2005 will be paid on the
first day of each calendar quarter at an annual rate equal to one percentage
point over the prime rate of Chase Manhattan Bank on the first day of the
calendar quarter for which interest is accruing, with a maximum interest rate of
12%. The current rate of interest on the Debentures maturing October 1, 2005 is
9.5%. An aggregate of $1,000,000 principal amount of the Debentures maturing
October 1, 2005 will be offered and sold after July 1, 1997.

Once the Company has received orders for at least $5,000,000 of Debentures,
the Company may close as to those Debentures. With respect to Debentures sold at
the First Closing, interest on the Debentures for the initial period will accrue
from the fifth day preceding the First Closing. With respect to Debentures sold
after the First Closing, interest for the initial period will accrue from the
first day of the month of sale, if the Debenture is sold on or before the
fifteenth day of the month, and will accrue from the sixteenth day of the month,
if the Debenture is sold after the fifteenth day of the month. Debentures sold
after the First Closing will be deemed sold on the date the Company (or the
Underwriter on its behalf) receives payment therefor. Notwithstanding the
foregoing, with respect to the $1,000,000 principal amount of Debentures
maturing October 1, 2005 offered and sold after July 1, 1997, interest will
accrue from the fifth day preceding the closing of such Debentures. The first
payment of interest shall be due on the first day of the second calendar quarter
following the date of sale of the Debenture, or such earlier date selected by
the Company without requirement of notice. The accrual of interest during any
quarter will be computed based on the Prime Rate (as defined) in effect on the
first day of the quarter for which it is accruing, provided, however, that all
interest accruing following the date of sale of any Debenture shall accrue based
upon the Prime Rate in effect on the first day of the quarter preceding the date
of the first interest payment. The "Prime Rate" shall mean the interest rate
that Chase Manhattan Bank publicly announces as its prime rate from time to time
at its principal office. In the event that Chase Manhattan Bank ceases to
designate any interest rate as its prime rate, there shall be substituted the
most nearly comparable interest rate for short term borrowings by corporate
borrowers which is publicly announced by such bank from time to time at its
principal office. (Par. 1). Interest will be computed on the basis of a 360-day
year of twelve 30-day months.

The Company will pay interest on the Debentures to the persons who are
registered holders of the Debentures ("Debenture Holder"). A determination of
the registered holders of the Debentures will be made at the close of business
on the tenth day of the second month of the calendar quarter preceding the
applicable interest payment date. (Par. 2). Principal and interest may be paid
by check. Payments of interest made by check may be mailed to a Debenture Holder
at the address shown on the records of the Company for such holder. Upon
maturity of the Debentures, or upon earlier redemption, Debenture Holders must
surrender the Debentures to any paying agent appointed by the Company (including
itself), to collect principal payments and payments of accrued interest on the
Debentures. (Par. 2). The Company will maintain an office or agency where the
Debentures may be presented for payment (the "Paying Agent") and an office or
agency where the Debentures may be presented for registration of transfer or for
exchange (the "Registrar"). The Company has appointed The Bank of New York as
the "Paying Agent."

Debentures of one Maturity may not be exchanged for Debentures of another
Maturity. The term "Maturity" is defined in the Indenture to mean either of the
two maturities of Debentures (July 1, 1999 or October 1, 2005) offered hereby
and issued pursuant to the Indenture.

The Debentures are transferable on the books of the Company by the
registered holders thereof upon surrender of the Debentures to the Registrar
appointed by the Company and, if requested by the Registrar, shall be
accompanied by a written instrument of transfer in form satisfactory to the
registrar. The Company has appointed The Bank of New York as the "Registrar" for
the Debentures. The person in whose name any Debenture is registered shall be
treated as the absolute owner of the Debenture for all purposes, and shall not
be affected by any notice to the contrary. Upon transfer, the Debentures will be
canceled, and one or more new registered Debentures, in the same aggregate
principal amount, of the same maturity and with the same terms, will be issued
to the transferee in exchange therefor. (Art. 2, Sec. 2.07(a)).

The Indenture does not contain any covenants or provisions that may afford
the Debenture Holders protection in the event of highly leveraged transactions.

Duties of the Trustee

The Indenture provides that in case an Event of Default (as defined) shall
occur and continue, the Trustee will be required to use the same degree of care
and skill as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs in the exercise of its power. While the Trustee
may pursue any available remedies to enforce any provision of the Indenture or
the Debentures, the holders of a majority in principal amount of all outstanding
Debentures may direct the time, method, and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any of the Debenture holders, unless they shall have offered
to the Trustee security and indemnity satisfactory to it.

<PAGE>

Authentication and Delivery of Debentures

The Registrar shall authenticate Debentures for original issue in the
aggregate principal amount of up to $8,500,000 (but not more than $500,000 of
Debentures maturing July 1, 1999 or $8,000,000 of Debentures maturing October 1,
2005) upon receipt of a written order of the Company, specifying the amount of
Debentures to be authenticated and the date of authentication, which is signed
by two officers of the Company. (Art. 2, Sec. 2.02). Certificates representing
the Debentures will be delivered to the purchasers of the Debentures promptly
after Closing.

Subordination

The Debentures are general unsecured obligations of the Company limited to
$8,500,000 principal amount. The Debentures will be subordinated in payment of
principal and interest to all Senior Indebtedness. The term "Senior
Indebtedness" is defined in the Indenture to mean all Indebtedness of the
Company, whether outstanding on the date of the Indenture or thereafter created,
which (i) is secured, in whole or in part, by any asset or assets owned by the
Company or by a corporation, a majority of whose voting stock is owned by the
Company or a subsidiary of the Company ("Subsidiary"), or (ii) arises from
unsecured borrowings by the Company from commercial banks, savings banks,
savings and loan associations, insurance companies, companies whose securities
are traded in a national securities market, or any wholly-owned subsidiary of
any of the foregoing, or (iii) arises from unsecured borrowings by the Company
from any pension plan (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended), or (iv) arises from borrowings by the
Company which are evidenced by commercial paper, or (v) other unsecured
borrowings by the Company which are subordinate to Indebtedness of a type
described in clauses (i), (ii) or (iv) above if, immediately after the issuance
thereof, the total capital, surplus and retained earnings of the Company exceed
the aggregate of the outstanding principal amount of such indebtedness, or (vi)
is a guarantee or other liability of the Company or of, or with respect to any
indebtedness of, a Subsidiary of the type described in clauses (ii), (iii) or
(iv) above. (Art. 10, Sec. 10.01). As of December 31, 1996, the Company had no
Senior Indebtedness and the Company's capital, surplus and retained earnings was
approximately $10,075,000. There is no limitation or restriction in the
Debentures or the Indenture on the creation of Senior Indebtedness by the
Company or on the amount of such Senior Indebtedness to which the Debentures may
be subordinated. There is also no limitation on the creation or amount of
indebtedness which is pari passu with (i.e. having no priority of payment over
and not subordinated in right of payment to) the Debentures ("Pari Passu
Indebtedness"). As of December 31, 1996, the Company had outstanding $2,000,000
aggregate principal amount of its Series 10/4/89 Registered Floating Rate
Redeemable Subordinated Debentures, $2,000,000 aggregate principal amount of its
Series 3/28/90 Registered Floating Rate Redeemable Subordinated Debentures,
$6,000,000 aggregate principal amount of its Series 5/13/91 Registered Floating
Rate Redeemable Subordinated Debentures, $4,500,000 aggregate principal amount
of its Series 2/20/92 Registered Floating Rate Redeemable Subordinated
Debentures, $7,000,000 aggregate principal amount of its Series 6/29/92
Registered Floating Rate Redeemable Subordinated Debentures, $8,000,000
aggregate principal amount of its Series 9/13/93 Registered Floating Rate
Redeemable Subordinated Debentures, $4,500,000 aggregate principal amount of its
Series 1/28/94 Registered Floating Rate Redeemable Subordinated Debentures,
$4,500,000 aggregate principal amount of its Series 10/28/94 Registered Floating
Rate Redeemable Subordinated Debentures, $10,000,000 aggregate principal amount
of its Series 5/12/95 Registered Floating Rate Redeemable Subordinated
Debentures, $10,000,000 aggregate principal amount of its Series 10/19/95
Registered Floating Rate Redeemable Subordinated Debentures, $11,000,000
aggregate principal amount of its Series 5/10/96 Registered Floating Rate
Redeemable Subordinated Debentures, and $6,000,000 aggregate principal amount of
its Series 10/15/96 Registered Floating Rate Redeemable Subordinated Debentures,
which are pari passu with the Debentures (Art. 4, Section 4.05).

Upon any distribution of assets of the Company in connection with any
dissolution, winding up, liquidation or reorganization of the Company, the
holders of all Senior Indebtedness will first be entitled to receive payment in
full of the principal and premium, if any, thereof and any interest due thereon,
before the holders of the Debentures are entitled to receive any payment upon
the principal of or interest on the Debentures, and thereafter payments to
Debenture holders will be pro rata with payments to holders of Pari Passu
Indebtedness. In the absence of any such events, the Company is obligated to pay
principal of and interest on the Debentures in accordance with their terms.

The Company will not maintain any sinking fund for the retirement of any of
the Debentures.

<PAGE>

Redemption

The Company may, at its option, at any time call all or any part of the
Debentures (including all or any part of the Debentures of any maturity) for
payment, and redeem the same at any time prior to the maturity thereof. The
redemption price for Debentures due July 1, 1999 will be the face amount. The
redemption price for Debentures due October 1, 2005 will be (i) face amount plus
a 2% premium if the date of redemption is prior to January 1, 1999, (ii) face
amount plus a 1% premium if the date of redemption is on or after January 1,
1999 and prior to January 1, 2000, and (iii) face amount if the date of
redemption is on or after January 1, 2000. In all cases, the Debenture Holder
will also receive interest accrued to the date of redemption. Notice of
redemption must be sent by first class mail, postage prepaid, to the registered
holders of the Debentures not less than 30 days nor more than 90 days prior to
the date the redemption is to be made. In the event of a call for redemption, no
further interest shall accrue after the redemption date on any Debentures called
for redemption. (Art. 3, Section 3.03, Paragraph 5). Since the payment of
principal of, interest on, or any other amounts due on the Debentures is
subordinate in right of payment to the prior payment in full of all Senior
Indebtedness upon the dissolution, winding up, liquidation or reorganization of
the Company, no redemption will be permitted upon the happening of such an
event.

Limitation On Dividends and Other Payments

The Indenture will provide that the Company will not declare or pay any
dividend or make any distribution on its Capital Stock (i.e. any and all shares,
interests, participations, rights or other equivalents of the Company's stock)
or to its shareholders (other than dividends or distributions payable in Capital
Stock), or purchase, redeem or otherwise acquire or retire for value, or permit
any Subsidiary to purchase or otherwise acquire for value, Capital Stock of the
Company, if at the time of such payment, or after giving effect thereto, an
Event of Default, as hereinafter defined, shall have occurred and be continuing
or a default shall occur as a result thereof; provided, however, that the
foregoing limitation shall not prevent (A) the payment of any dividend within 60
days after the date of declaration thereof, if at said date of declaration such
payment complied with the provisions of such limitation, or (B) the acquisition
or retirement of any shares of the Company's Capital Stock by exchange for, or
out of the proceeds of the sale of shares of, its Capital Stock. (Art. 4,
Section 4.04).

Discharge Prior to Redemption or Maturity

If the Company at any time deposits with the Trustee money or U.S.
Government Obligations sufficient to pay principal and interest on the
Debentures prior to their redemption or maturity, the Company will be discharged
from the Indenture, provided certain other conditions specified in the Indenture
are satisfied. In the event of such deposit, which is irrevocable, Debenture
Holders must look only to the deposited money and securities for payment. U.S.
Government Obligations are securities backed by the full faith and credit of the
United States. (Art. 8, Section 8.01(2)).

Access of Information to Security Holders

Debenture Holders may obtain from the Trustee information necessary to
communicate with other Debenture Holders. Upon written application to the
Trustee by any three or more Debenture Holders stating that such Debenture
Holders desire to communicate with other Debenture Holders with respect to their
rights under the Indenture or under the Debentures, and upon providing the
Trustee with the form of proxy or other communication which the Debenture
Holders propose to transmit, and upon receipt by the Trustee from the Debenture
Holders of reasonable proof that each such Debenture Holder has owned a
Debenture for a period of at least six months preceding the date of such
application, the Trustee shall, within five business days after the receipt of
such information, either (a) provide the applicant Debenture Holders access to
all information in the Trustee's possession with respect to the names and
addresses of the Debenture Holders; or (b) provide the applicant Debenture
Holders with information as to the number of Debenture Holders and the
approximate cost of mailing to such Debenture Holders the form of proxy or other
communication, if any, specified in the applicant Debenture Holders'
application, and upon written request from such applicant Debenture Holders and
receipt of the material to be mailed and of payment, the Trustee shall mail to
all the Debenture Holders copies of the from of proxy or other communication so
specified in the request. (Art. 2, Section 2.08).

Compliance with Conditions and Covenants

Upon any request by the Company to the Trustee to take any action under the
Indenture, the Company is required to furnish to the Trustee (i) an officers'
certificate of the Company stating that all conditions and covenants in the
Indenture relating to the proposed action have been complied with and (ii) an
opinion of counsel stating that, in the opinion of such counsel, all such
conditions and covenants have been complied with. (Art. 11, Sec. 11.03).

<PAGE>

Amendment, Supplement and Waiver

Subject to certain exceptions, the Indenture or the Debentures may be
amended or supplemented, and compliance by the Company with any provision of the
Indenture or the Debentures may be waived, with the consent of the holders of a
majority in principal amount of the Debentures outstanding. Without notice to or
consent of any holders of Debentures, the Company may amend or supplement the
Indenture or the Debentures to cure any ambiguity, omission, defect or
inconsistency, or to make any change that does not adversely affect the rights
of any holders of Debentures. However, without the consent of each holder of
Debentures affected, an amendment, supplement or waiver may not reduce the
amount of Debentures whose holders must consent to an amendment, supplement or
waiver, reduce the rate or extend the time for payment of interest on any
Debentures (except that the payment of interest on Debentures may be postponed
for a period not exceeding three years from its due date with the consent of
holders of not less than 75% in principal amount of Debentures at the time
outstanding, which consent shall be binding upon all holders), reduce the
principal of or extend the fixed maturity of any Debentures, make any Debentures
payable in money other than that stated in the Indenture, make any change in the
subordination provisions of the Indenture that adversely affects the rights of
any holder of Debentures or waive a default in the payment of principal of or
interest on, or other redemption payment on any Debentures. (Art. 9, Sec. 9.02).

Defaults and Remedies

Each of the following is an "Event of Default" under the Indenture: (a)
failure by the Company to pay any principal on the Debentures when due; (b)
failure by the Company to pay any interest installment on the Debentures within
thirty days after the due date; (c) failure to perform any other covenant or
agreement of the Company made in the Indenture or the Debentures, continued for
sixty days after receipt of notice thereof from the Trustee or the holders of at
least 25% in principal amount of the Debentures; and (d) certain events of
bankruptcy, insolvency or reorganization. (Art. 6, Sec. 6.01). If an Event of
Default (other than those described in clause (d) above) occurs and is
continuing, the Trustee or the holders of at least 25% in principal amount of
the Debentures, by notice to the Company, may declare the principal of and
accrued interest on all of the Debentures to be due and payable immediately. If
an Event of Default of the type described in clause (d) above occurs, all unpaid
principal and accrued interest on the Debentures shall automatically become due
and payable without any declaration or other act on the part of the Trustee or
any holder. (Art. 6, Sec. 6.02). Holders of Debentures may not enforce the
Indenture or the Debentures except as provided in the Indenture. The Trustee may
refuse to enforce the Indenture or the Debentures unless it receives indemnity
and security satisfactory to it. Subject to certain limitations, the holders of
a majority in principal amount of the Debentures may direct the Trustee in its
exercise of any trust or power conferred on the Trustee, and may rescind an
acceleration of the Debentures. The Trustee may withhold from holders of
Debentures notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interest. (Art. 6, Secs. 6.05 and 6.06).

The Indenture requires the Company to furnish to the Trustee an annual
statement, signed by specified officers of the Company, stating whether or not
such officers have knowledge of any Default under the Indenture, and, if so,
specifying each such Default and the nature thereof. (Art. 4, Sec. 4.03).

Federal Income Tax Consequences

Interest payments received by Holders of Debentures will be includible in
the income of such Debenture Holders for federal income tax purposes for the
taxable year in which the interest is received. Holders who hold the Debentures
for investment purposes should treat all reportable interest as portfolio income
under applicable Code provisions.

The Company's deposit of funds with the Trustee to effect the discharge of
the Company's obligations under the Debentures and the Indenture prior to
redemption or maturity of the Debentures, will have no effect on the amount of
income realized or recognized (gain or loss) by the Debenture Holders or the
timing of recognition of gain or loss for federal income tax purposes.

PLAN OF OFFERING

The Company has entered into an Underwriting Agreement with Sage, Rutty &
Co., Inc., a New York corporation (the "Underwriter"). Mr. William F. Holly, who
is a director of the Company, is the Chairman of the Board and Chief Executive
Officer of the Underwriter. Pursuant to the Underwriting Agreement, the
Underwriter will offer the Debentures for sale on a minimum ($5,000,000) and
maximum ($8,500,000) "best efforts" basis. Accordingly, the Underwriter will not
have any obligation to purchase any Debentures from the Company in the event it
is unable to effect the sale of part or all of the Debentures. Moreover, no
Debenture may be sold unless the Issuer has received orders for at least
$5,000,000 of Debentures. If, within 75 days after the Registration Statement is
declared effective by the Securities and Exchange Commission (the "Offering
Termination Date"), at least $5,000,000 of Debentures, without regard to
maturity, have been sold and subscriptions accepted by the Company, the Company
may close the Offering to those Debentures (the "First Closing"), and the
Underwriter may continue to offer the balance of the Debentures and
subscriptions will be accepted by the Company until 150 days after the minimum
has been sold. Of the Debentures maturing October 1, 2005, $1,000,000 in
aggregate principal amount will be offered and sold after July 1, 1997. The
Underwriter may enter into one or more Selected Dealer Agreements with other
broker/dealer firms which are members of the National Association of Securities
Dealers, Inc. (the "NASD"), pursuant to which such other broker/dealers may
offer part of the Debentures for sale.

<PAGE>

The Underwriter is one of ten (10) defendants in a civil proceeding
commenced in November, 1990, in the U.S. District Court, Western District of New
York (Civ. 90-1140). The plaintiffs in the action were purchasers of
participation units in a limited partnership formed to hold a first mortgage on
property in Philadelphia, Pennsylvania. The ten (10) defendants include the
limited partnership, its general partner, promoters, appraisers, escrow agents
and certain broker/dealers that acted as placement agents. Plaintiffs allege
violation by the ten (10) defendants of various provisions of the federal
securities laws, as well as related breaches of common law duties. The
Underwriter filed a pre-answer motion requesting various forms of relief, as a
result of which all of the plaintiffs' causes of action except one were
dismissed. The Underwriter denies the allegations with respect to the
aforementioned violations and believes they are without merit. The plaintiffs
have filed an amended complaint as to which the Underwriter has filed its answer
and denies all of the material allegations therein. The Underwriter intends to
vigorously defend this action. Neither the Company nor any of its affiliates is
a party to, or involved in any way with, this litigation.

The Company has agreed to indemnify the Underwriter and such broker/dealers
participating in the offering against certain civil liabilities, including
certain liabilities under the Securities Act of 1933, as amended.

The Company will pay to the Underwriter a commission equal to 8% of the
purchase price of Debentures due October 1, 2005 and 2% of the purchase price of
Debentures due July 1, 1999 which are sold by the Underwriter or participating
broker/dealers. In addition, the Company will pay the Underwriter a fee equal to
1% of the aggregate gross amount of Debentures due October 1, 2005 sold in the
offering and 1/2 of 1% of Debentures due July 1, 1999 sold in the offering, and
will pay the fee of Underwriter's counsel. Pursuant to the Selected Dealer
Agreements, the Underwriter will reallow to each of the other broker/dealers
referred to above a commission equal to 8% or 2%, as the case may be, of the
price of each Debenture sold by such broker/dealer. No additional discounts or
commissions are to be allowed or paid to such other broker/dealers. Certain
officers of the Company may also offer the debentures for sale and no
commissions or compensation shall be paid to such officers in connection with
Debentures sold by such officers.

Until the First Closing, subscription payments for Debentures should be
made payable to "First National Bank of Rochester as Escrow Agent for Intervest
Corporation of New York." After the First Closing, subscription payments for the
Debentures should be made payable to the Company. Payments received by the
Underwriter or participating broker/dealers will be promptly transmitted to
First National Bank of Rochester where they will be held for subscribers in a
segregated escrow account until acceptable subscriptions for at least $5,000,000
of Debentures have been received. At the First Closing, the funds in the escrow
account (including interest earned thereon but after deducting commissions due
to the Underwriter) will be delivered to the Company. If, on the Offering
Termination Date, at least $5,000,000 of Debentures have not been sold and
subscriptions accepted by the Company, subscription documents and funds will be
promptly refunded to subscribers and the Offering will terminate. With respect
to interest earned on the escrow account, such interest will, in the event of
such termination, be distributed to subscribers in proportion to the amount paid
by each subscriber without regard to the date when such subscription funds were
paid by the subscriber. It shall be a condition to the refund of subscription
funds that the subscriber furnish an executed IRS Form W-9 so that any interest
earned and distributed to such subscriber may be properly reported. Once the
Escrow Agent has received a minimum of $5,000,000 in subscriptions for
Debentures which have been accepted by the Company, the Company may close the
Offering as to those subscribers, and the Underwriter may continue to offer the
balance of the Debentures and subscriptions will be accepted by the Company
until 150 days after such minimum has been sold.

LEGAL OPINIONS

The legality of the issuance of the Debentures offered herewith has been
passed upon for the Company by Harris Beach & Wilcox, LLP, 130 East Main Street,
Rochester, New York 14604. Certain legal matters will be passed upon for the
Underwriter by Harter Secrest & Emery, 700 Midtown Tower, Rochester, New York
14604.

EXPERTS

The financial statements of the Company included in this Prospectus and
Registration Statement have been audited by Richard A. Eisner & Company, LLP,
independent auditors, for the periods indicated in their reports thereon which
appear elsewhere herein and in the Registration Statement. The financial
statements and schedules audited by Richard A. Eisner & Company, LLP, have been
included in reliance on their reports given on the authority of said firm as
experts in accounting and auditing.

<PAGE>

INDEX TO FINANCIAL STATEMENTS OF THE COMPANY

Report of Independent Auditors--1996 and 1995 F- 1

Balance Sheets as of December 31, 1996 and 1995 F- 2

Statements of Operations and Retained Earnings for
the Periods Ended December 31, 1996, 1995 and 1994 F- 3

Statements of Cash Flows for the Periods
Ended December 31, 1996, 1995 and 1994 F- 4

Notes to Financial Statements F- 5

Schedule IV--Mortgage Loans on Real Estate--
December 31, 1996 F-12

Other financial statement schedules and inapplicable periods with respect
to schedules listed above are omitted because the conditions requiring their
filing do not exist or the information required thereby is included in the
financial statements filed, including the notes thereto.

<PAGE>

INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

A S S E T S
------------
December 31,
------------
1996 1995
---- ----

Cash and cash equivalents $16,911,000 $17,670,000
Mortgages receivable, including
due from affiliates of
$6,250,000 in 1996 and 1995
(Notes 2, 4 and 5) 69,699,000 55,146,000
Deferred debenture offering costs,
net of accumulated amortization
of $2,262,000 and $2,343,000 (Note 2) 4,475,000 3,865,000
Other assets (Note 7) 1,138,000 898,000
------------ -----------

T O T A L $92,223,000 $77,579,000
============ ===========

L I A B I L I T I E S

Accounts payable and accrued expenses $ 406,000 $ 64,000
Mortgage escrow deposits 2,356,000 1,021,000
Mortgage payable 18,000
Subordinated debentures payable
(Note 3) 75,500,000 64,700,000
Debenture interest payable at maturity
(Note 3) 3,506,000 2,132,000
Deferred mortgage interest and fees 380,000 266,000
------------ -----------

Total liabilities 82,148,000 68,201,000
------------ -----------

Commitments and other matters (Note 6)

STOCKHOLDERS' EQUITY

Common stock, no par value;
authorized 200 shares; issued
and outstanding 32 shares 2,000,000 2,000,000
Additional paid-in capital 3,509,000 3,509,000
========= =========
Retained earnings 4,566,000 3,869,000
------------ -----------

Total stockholders' equity 10,075,000 9,378,000
------------ -----------

T O T A L $92,223,000 $77,579,000
============ ===========

See notes to financial statements.

F-2

INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS

-----------------------
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----

<S> <C> <C> <C>
Revenue:
Interest income:
Affiliates . . . . . . . . . . . . . . . $ 693,000 $ 985,000 $ 1,262,000
Others . . . . . . . . . . . . . . . . . 8,804,000 6,999,000 5,106,000
----------- ----------- -----------

T o t a l . . . . . . . . . . . . . 9,497,000 7,984,000 6,368,000

Other income (Note 5) . . . . . . . . . . . 372,000 332,000 283,000
Gain on early repayment of discounted
mortgages receivable (Note 4) . . . . . . 282,000 82,000 17,000
----------- ----------- -----------

10,151,000 8,398,000 6,668,000
----------- ----------- -----------

Expenses:
Interest . . . . . . . . . . . . . . . . . 7,053,000 6,227,000 4,591,000
General and administrative (Note 5) . . . . 948,000 657,000 483,000
Amortization of deferred debenture
offering costs (Note 2) . . . . . . . . . 869,000 748,000 655,000
----------- ----------- -----------

8,870,000 7,632,000 5,729,000
----------- ----------- -----------

Income before income taxes . . . . . . . . . . 1,281,000 766,000 939,000

Provision for income taxes (Note 7) . . . . . 584,000 324,000 403,000
----------- ----------- -----------

NET INCOME . . . . . . . . . . . . . . . . . . 697,000 442,000 536,000

Retained earnings - beginning of year . . . . 3,869,000 3,427,000 2,891,000
----------- ----------- -----------

RETAINED EARNINGS - END OF YEAR . . . . . . . $ 4,566,000 $ 3,869,000 $ 3,427,000
=========== =========== ===========

See notes to financial statements.
</TABLE>

F-3

INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,
------------------------
1996 1995 1994
------ ------ -----

<S> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . $ 697,000 $ 442,000 $ 536,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Amortization of discount on
mortgages receivable . . . . . . (421,000) (255,000) (210,000)
Amortization of deferred debenture
offering costs . . . . . . . . . 869,000 748,000 655,000
Amortization of premium on
municipal bonds . . . . . . . . 13,000
Gain on early repayment of
discounted mortgages . . . . . . (282,000) (82,000) (17,000)
Changes in operating assets and
liabilities:
(Increase) in other assets . . (240,000) (109,000) (167,000)
Increase (decrease) in
accounts payable and accrued
expenses . . . . . . . . . . 342,000 4,000 (171,000)
Increase in mortgage escrow
deposits . . . . . . . . . . 1,335,000 11,000 544,000
Increase (decrease) in
debenture interest payable
at maturity . . . . . . . . 1,374,000 (1,356,000) 1,004,000
Increase (decrease) in
deferred mortgage
interest and fees . . . . . 114,000 (46,000) (2,000)
------------ ------------ ------------
Net cash provided by (used
in) operating activities . 3,788,000 (643,000) 2,185,000
------------ ------------ ------------

Cash flows from investing activities:
Collection of mortgages receivable . . 20,924,000 18,981,000 3,762,000
Mortgages receivable acquired:
Properties owned by affiliates . . . (2,500,000)
Properties owned by others . . . . . (34,774,000) (17,124,000) (16,180,000)
Collection of loans to stockholders . 3,500,000
Principal payments of mortgages
payable . . . . . . . . . . . . . . (18,000) (21,000) (16,000)
Redemption of governmental obligations 985,000 2,655,000
Purchase of governmental obligations . (985,000)
------------ ------------ ------------
Net cash (used in) provided
by investing activities . (13,868,000) 2,821,000 (9,764,000)
------------ ------------ ------------

Cash flows from financing activities:
Proceeds from subordinated debenture
offerings . . . . . . . . . . . . . 17,000,000 20,000,000 10,000,000
Payment of debenture offering costs . (1,479,000) (1,784,000) (946,000)
Redemption of subordinated debentures (6,200,000) (6,200,000) (1,800,000)
------------ ------------ ------------
Net cash provided by
financing activities . . . 9,321,000 12,016,000 7,254,000
------------ ------------ ------------

(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . (759,000) 14,194,000 (325,000)

Cash and cash equivalents at beginning of
year . . . . . . . . . . . . . . . . . 17,670,000 3,476,000 3,801,000
------------ ------------ ------------

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 16,911,000 $ 17,670,000 $ 3,476,000
============ ============ ============
</TABLE>

See notes to financial statements.

F-4

<PAGE>

INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(NOTE 1) - The Company:
- - -----------------------

Intervest Corporation of New York (the "Company") was formed by Lowell
S. Dansker, Lawrence G. Bergman and Helene D. Bergman for the purpose of
engaging in the real estate business, including the acquisition and purchase of
real estate mortgage loans.

(NOTE 2) - Significant Accounting Policies:
- - -------------------------------------------

[a] Consolidation policy:

The financial statements include the accounts of all
subsidiaries. Material intercompany items are eliminated in consolidation.

[b] Unearned discount:

Unearned discount is amortized over the life of the related
receivables using the constant interest method.

[c] Allowance for possible losses:

Mortgages receivable are valued at the lower of cost or net
realizable value on an individual basis. The Company will recognize an
impairment loss if it determines that the net realizable value of the mortgage
receivable is below cost. This determination is made based upon the mortgagor's
continuing compliance with the terms of the mortgage and management's ability to
assess the operation of the underlying properties and the rental housing market
where such properties are located. For financial reporting purposes mortgages
are deemed to be delinquent when payment of either principal or interest is more
than 90 days past due.

[d] Deferred debenture offering costs:

Costs relating to offerings of debentures are amortized over the
terms of the debentures based on serial maturities. Deferred debenture offering
costs consist primarily of underwriters' commissions.

[e] Statement of cash flows:

For purposes of the statement of cash flows, the Company
considers all highly liquid instruments purchased with an original maturity of
three months or less to be cash equivalents. Interest and income taxes were paid
as follows:

Year Ended
December 31, Interest Income Taxes
------------ -------- ------------

1996 . . . . . . . . $5,679,000 $196,000
1995 . . . . . . . . 7,584,000 331,000
1994 . . . . . . . . 3,586,000 318,000

[f] Estimated fair value of financial instruments:

The Company considers the carrying amounts presented for
mortgages receivable and subordinated debentures payable on the consolidated
balance sheets to be reasonable approximations of fair value. The Company's
variable or floating interest rates on large portions of its receivables and
payables approximate those which would prevail in current market transactions.
Considerable judgement is necessarily required in interpreting market data to
develop the estimates of fair value, and accordingly, the estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market transaction.

(continued)

F-5

<PAGE>

INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(NOTE 2) - Significant Accounting Policies: (continued)

[g] Use of 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 and
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.

[h] Concentration of credit risk:

[1] The Company places its temporary cash investments with
higher credit-quality financial institutions and in governmental obligations.
Such investments are generally in excess of the FDIC insurance limit. The
Company has not experienced any losses from such investments.

[2] The Company's mortgage portfolio is composed predominantly
of mortgages on multi-family residential properties in the New York City area,
most of which are subject to applicable rent control and rent stabilization
statutes and regulations. In both cases, any increases in rent are subject to
specific limitations. As such, properties of the nature of those constituting
the most significant portion of the Company's mortgage portfolio are not
affected by the general movement of real estate values in the same manner as
other income-producing properties. The rental housing market in New York City
remains stable and the Company expects that such properties will continue to
appreciate in value with little or no reduction in occupancy rates.

(continued)

F-6

<PAGE>

INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(NOTE 3) - Subordinated Debentures Payable:

The Company's Registered Floating Rate Redeemable Debentures consist of
the following:

December 31,
------------
1996 1995
---- ----

Series 1989, interest at 2% above prime . . $ 1,200,000
Series 10/4/89, interest at 1% above prime. $ 2,000,000 4,000,000
Series 3/28/90, interest at 1% above prime. 2,000,000 4,000,000
Series 5/13/91, interest at 2% above prime. 6,000,000 6,000,000
Series 2/20/92, interest at 2% above prime. 4,500,000 4,500,000
Series 6/29/92, interest at 2% above prime. 7,000,000 7,000,000
Series 9/13/93, interest at 2% above prime. 8,000,000 8,000,000
Series 1/28/94, interest at 1% above prime. 500,000
Series 1/28/94, interest at 2% above prime. 4,500,000 4,500,000
Series 10/28/94, interest at 1% above prime 500,000
Series 10/28/94, interest at 2% above prime 4,500,000 4,500,000
Series 5/12/95, interest at 1% above prime. 1,000,000 1,000,000
Series 5/12/95, interest at 2% above prime. 9,000,000 9,000,000
Series 10/19/95, interest at 1% above prime 1,000,000 1,000,000
Series 10/19/95, interest at 2% above prime 9,000,000 9,000,000
Series 5/10/96, interest at 1% above prime. 1,000,000
Series 5/10/96, interest at 2% above prime. 10,000,000
Series 10/15/96, interest at 1% above prime 500,000
Series 10/15/96, interest at 2% above prime 5,500,000
----------- -----------

$75,500,000 $64,700,000
=========== ===========

"Prime" refers to the prime rate of Chase Manhattan Bank.

Prime was 8 1/4% on December 31, 1996. Minimum interest is 9 1/2% and
maximum interest is 15% on Series 10/4/89, 3/28/90 and 5/13/91. Series 2/20/92
has minimum interest of 8% and maximum interest of 14%, Series 6/29/92 has
maximum interest of 14% and Series 9/13/93, 1/28/94, 10/28/94, 5/12/95,
10/19/95, 5/10/96 and 10/15/96 have maximum interest of 12%.

Payment of interest on an aggregate of $14,930,000 of debentures is
deferred until maturity and earns interest at prime. Any debenture holder who
has deferred receipt of interest may at any time elect to receive the deferred
interest and subsequently receive regular payments of interest.

The debentures may be redeemed, in whole or in part, at any time at the
option of the Company. For debentures issued after 1994, redemption would
generally be at a premium of 1% or 2% if the redemption is prior to 1998.

(continued)

F-7

<PAGE>

INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(NOTE 3) - Subordinated Debentures Payable: (continued)

The debentures are unsecured and subordinate to all present and future
senior indebtedness, as defined.

Maturities of debentures are summarized as follows:

Year Ending
December 31,
------------

1997. . . . . . . . . . . . . . . . . . . $ 3,000,000
1998. . . . . . . . . . . . . . . . . . . 4,000,000
1999. . . . . . . . . . . . . . . . . . . 11,000,000
2000. . . . . . . . . . . . . . . . . . . 7,000,000
2001. . . . . . . . . . . . . . . . . . . 8,000,000
Thereafter until 2005 . . . . . . . . . . 42,500,000
-----------

T o t a l . . . . . . . . . . . $75,500,000
===========

(NOTE 4) - Mortgages Receivable:

Information as to mortgages receivable is summarized as follows:

December 31,
------------
1996 1995
---- ----

First mortgages . . . . . . . . $62,914,000 $48,685,000
Junior mortgages. . . . . . . . 7,687,000 6,906,000
Wraparound mortgage . . . . . . 329,000
------------ -----------

70,601,000 55,920,000
Less unearned discount. . . . . 902,000 774,000
------------ -----------

T o t a l . . . . . . . $69,699,000 $55,146,000
============ ===========

Interest rates on mortgages range from 6% to 24%. Certain mortgages have
been discounted utilizing rates ranging from 12% to 18%.

During 1994, 1995 and 1996 certain mortgages were paid in full prior to
their maturity date. This resulted in the recognition of a gain, which
represents the balance of the unamortized discount applicable to these
mortgages.

Maturities of mortgages receivable are summarized as follows:

Year Ending
December 31,

1997. . . . . . . . . . . . . . . . . $22,472,000
1998. . . . . . . . . . . . . . . . . 9,144,000
1999. . . . . . . . . . . . . . . . . 14,292,000
2000. . . . . . . . . . . . . . . . . 2,767,000
2001. . . . . . . . . . . . . . . . . 766,000
Thereafter until 2015 . . . . . . . . 21,160,000
-----------

T o t a l . . . . . . . . . $70,601,000
===========

The Company evaluates its portfolio of mortgage loans on an individual
basis, comparing the amount at which the investment is carried to its estimated
net realizable value. At the respective balance sheet dates, no allowances were
required.

(continued)

F-8

<PAGE>

INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(NOTE 5) - Related Party Transactions:

During 1995 and 1994 affiliates sold, to unrelated third parties,
properties subject to mortgages held by the Company. In connection with those
sales, the Company's mortgages in the original aggregate amounts of $6,958,000
and $4,000,000, respectively, were refinanced and the Company received new first
mortgages totaling $9,670,000 and $5,610,000, respectively.

During 1994 a mortgage of $100,000, representing a lien on property
owned by an affiliated company, was acquired from a third party. This mortgage
was recorded at cost. In addition, during 1994 the Company made mortgage loans
of $2,400,000 on properties owned by affiliated companies.

Interest income - others includes $120,000 earned on notes receivable
from stockholders in 1994.

Other income includes the following amounts from affiliates:

Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----

Real estate sales commissions . . . . $135,000
Mortgage modification fees . . . . . $ 8,000 $ 42,000 121,000
-------- -------- --------

T o t a l . . . . . . . . . $ 8,000 $ 42,000 $256,000
======== ======== ========

The Company utilizes personnel and other facilities of affiliated
entities and is charged service fees for general and administrative expenses for
placing mortgages, servicing mortgages and distributing debenture interest
checks. Such fees amounted to $367,000, $342,000 and $354,000 in 1996, 1995 and
1994, respectively. Management believes these service fees are reasonable.

(NOTE 6) - Commitments:

[a] Office lease:

The Company occupies its office space under a lease which
commenced October 1, 1994 and terminates on September 30, 2004. In addition to
minimum rents the Company is required to pay its proportionate share of
increases in the building's real estate taxes and costs of operation and
maintenance as additional rent. Rent expense amounted to $180,000, $177,000 and
$44,000 for 1996, 1995 and 1994, respectively.

Future minimum rents under the lease are as follows:

1997. . . . . . . . . . . . . . . . . . . $ 157,976
1998. . . . . . . . . . . . . . . . . . . 174,902
1999. . . . . . . . . . . . . . . . . . . 174,902
2000. . . . . . . . . . . . . . . . . . . 179,133
2001. . . . . . . . . . . . . . . . . . . 191,828
Thereafter. . . . . . . . . . . . . . . . 527,527
----------

T o t a l . . . . . . . . . . . $1,406,268
==========

The Company shares this space with affiliates who were charged
rent of $63,000, $77,000 and $12,000 in 1996, 1995 and 1994, respectively.

(continued)

F-9

<PAGE>

INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(NOTE 6) - Commitments: (continued)

[b] Employment agreement:

Effective as of July 1, 1995, the Company entered into an
employment agreement with its Executive Vice President, who is related to the
stockholders, for a term of ten years at an annual salary of $125,000, which is
subject to increase annually by six percent or by the percentage increase in the
consumer price index, if higher. In the event of the executive's death or
disability, one-half of this amount will continue to be paid for a term as
defined in the agreement.

(NOTE 7) - Income Taxes:

The Company has provided for income taxes in the periods presented based
on the federal, state and city tax rates in effect for these periods.

The provision for income taxes consists of the following components:

Year Ended December 31,
1996 1995 1994
Current taxes:
Federal . . . . . . . . . . . . . $324,000 $143,000 $202,000
State and local . . . . . . . . . 216,000 102,000 164,000

Deferred taxes:
Federal . . . . . . . . . . . . . 26,000 46,000 22,000
State and local . . . . . . . . . 18,000 33,000 15,000
--------- --------- --------

Total tax provision. . . . $584,000 $324,000 $403,000
========= ========= ========

Temporary differences exist between financial accounting and tax
reporting which result in a net deferred tax asset, included in other assets, as
follows:

Year Ended December 31,
1996 1995 1994

Debenture underwriting commissions . . . . $ 19,000 $ 32,000 $ 51,000

Deferred fees and interest . . . . . . . . 58,000 68,000 110,000

Discount on mortgages receivable . . . . . (70,000) (49,000) (31,000)
--------- --------- ---------

T o t a l. . . . . . . . . . . . $ 7,000 $ 51,000 $130,000
========= ========= ========

(continued)

F-10

<PAGE>

INTERVEST CORPORATION OF NEW YORK
AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(NOTE 7) - Income Taxes: (continued)

The amounts of income taxes provided varied from the amounts which would
be "expected" to be provided at the statutory federal income tax rates in effect
for the following reasons:

December 31,
------------
1996 1995 1994
---- ---- ----

Tax computed based upon the
statutory federal tax rate. . . . . . . $435,000 $260,000 $319,000

State and local income tax,
net of federal income tax
benefit . . . . . . . . . . . . . . . . 158,000 98,000 118,000

Nontaxable income . . . . . . . . . . . (9,000) (10,000) (23,000)

Other. . . . . . . . . . . . . . . . . (24,000) (11,000)
--------- --------- ---------

T o t a l. . . . . . . . . . $584,000 $324,000 $403,000
========= ========= ========

F-11

INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996

OUTSTANDING BALANCE OF MORTGAGE

EFFECTIVE ACTUAL FINAL
INTEREST INTEREST MATURITY PRIOR
DESCRIPTION RATE RATE DATE PERIODIC PAYMENT TERMS LIENS

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

<S> <C> <C> <C> <C>
COMMERCIAL FIRST MORTGAGES:
OFFICE BUILDINGS:
NEW CITY, NEW YORK 12.25 6.20 12/08/10 PRINCIPAL AND INTEREST ANNUALLY
EATONTOWN, NEW JERSEY 16.10 14.25 (B) 04/26/97 (C)
BOHEMIA, NEW YORK 16.00 14.25 (B) 08/66/98 (C)

RESTAURANTS:
MANASSAS, VIRGINIA 12.375% 6.50% 12/01/05 PRINCIPAL AND INTEREST ANNUALLY
IRONDEQUOIT, NEW YORK 12.50 7.20 12/01/12 PRINCIPAL AND INTEREST ANNUALLY
DECATUR AND JONESBORO, GEORGIA 13.00 8.50 04/01/13 (C)

PARTICIPATIONS:
FT. MYERS, FLORIDA 8.75 8.75 09/24/06
ORLANDO, FLORIDA 8.50 8.50 11/18/11
FT. LAUDERDALE, FLORIDA 8.75 8.75 (I)

RESIDENTIAL FIRST MORTGAGES:
CO-OPERATIVE APARTMENT BUILDINGS:
NEW YORK, NEW YORK 11.51 11.51 10/31/97 (C)
NEW YORK, NEW YORK 11.51 11.51 07/31/97 (D)
NEW YORK, NEW YORK 9.00 9.00 11/01/99 (C)

RENTAL APARTMENT BUILDINGS:
BRONX, NEW YORK 9.00 9.00 (A) 07/01/06 (C)
BRONX, NEW YORK 10.50 10.50 (A) 11/01/12 (C)
BRONX, NEW YORK 12.53 12.53 (A) 08/01/12 (C)

NEW YORK, NEW YORK 10.00 10.00 10/01/00 (D)
NEW YORK, NEW YORK 10.00 10.00 (A) 05/01/05 (C)
BRONX, NEW YORK 13.37 13.37 (A) 09/01/11 (C)
BRONX, NEW YORK 12.75 12.75 (A) 01/01/11 (C)
BRONX, NEW YORK 12.50 12.50 (A) 08/01/10 (C)
BRONX, NEW YORK 13.50 9.53 (A) 03/01/97 (C)
BRONX, NEW YORK 13.50 9.57 (A) 03/01/97 (C)
BRONX, NEW YORK 13.75 13.75 (A) 06/01/13 (C)
BRONX, NEW YORK 9.00 9.00 (A) 11/01/15 (C)
BRONX, NEW YORK 13.00 13.00 (A) 01/01/10 (C)
NEW YORK, NEW YORK 10.00 10.00 10/01/00 (D)
BRONX, NEW YORK 12.75 12.75 (A) 11/01/11 (C)
NEW YORK, NEW YORK 11.00 10.00 03/15/10 (C)
NEW YORK, NEW YORK 11.00 10.00 03/15/10 (C)
BRONX, NEW YORK 12.77 12.77 (A) 11/01/13 (C)
NEW YORK, NEW YORK 10.00 10.00 10/01/00 (D)
NEW YORK, NEW YORK 11.00 11.00 03/01/99 (D)
CITY ISLAND, BRONX, NEW YORK 24.00 24.00 09/30/96 (D)
NEW YORK, NEW YORK 13.50 13.50 (B) 02/28/97 (C)
HYDE PARK, NEW YORK 16.35 14.50 (B) 03/31/97 (C)

<PAGE>

INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996

OUTSTANDING BALANCE OF MORTGAGE

EFFECTIVE ACTUAL FINAL
INTEREST INTEREST MATURITY PRIOR
DESCRIPTION RATE RATE DATE PERIODIC PAYMENT TERMS LIENS

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

RESIDENTIAL FIRST MORTGAGES,
RENTAL APARTMENT BUILDINGS: (CONTINUED)
EAST ORANGE, NEW JERSEY 15.65 14.25 (B) 04/15/98 (C)
CAMDEN, NEW JERSEY 15.83 14.00 (B) 07/01/97 (C)
IRVINGTON, NEW JERSEY 17.80 16.00 (B) 08/01/97 (C)
PINE HILL, NEW JERSEY 16.00 14.25 (B) 05/01/99 (C)
PHILADELPHIA, PENNSYLVANIA 16.00 14.25 (B 06/12/99 (C)
NEW YORK, NEW YORK 16.50 14.75 (B) 04/30/97 (C)
ELLENVILLE, NEW YORK 16.62 14.75 (B) 04/30/97 (C)
NEW YORK, NEW YORK 16.10 14.25 (B) 09/25/98 (C)

EAST WINDSOR, NEW JERSEY 16.60 14.25 (B) 12/29/97 (C)

FIRST MORTGAGES ON LAND:
OSCEOLA COUNTY, FLORIDA 16.20 14.25 (B) 07/10/97 (C)

RESIDENTIAL SECOND MORTGAGES,
RENTAL APARTMENT BUILDINGS:
NEW YORK, NEW YORK 12.00 12.00 02/01/99 (D) 4,832,000
NEW YORK, NEW YORK 11.00 11.00 02/01/97 (D) 5,666,000
NEW YORK, NEW YORK 10.50 10.50 (B) 02/01/98 (D) 2,320,000
ASTORIA, NEW YORK 14.25 14.25 (B) 01/17/99 (C) 6,289,000
NEW ROCHELLE, NEW YORK 11.50 11.50 (B) 03/01/96 (D) 1,300,000
ROCKVILLE CENTRE, NEW YORK 16.50 14.75 (B) 03/31/97 (C) 576,000
------------
$20,983,000
===========

(A) INTEREST PAYMENTS ARE FIXED. INTEREST RATE SHOWN IS APPROXIMATE.
(B) INTEREST AT FLUCTUATING RATE BASED ON BANK PRIME RATE.
(C) PRINCIPAL AND INTEREST MONTHLY.
(D) INTEREST ONLY, PRINCIPAL AT MATURITY.
(E) NO PREPAYMENT PERMITTED.
(F) NONE
(G) $1,250,000 OF PARTICIPATION OF MORTGAGE WAS SOLD IN 1996.
(H) $750,000 OF PARTICIPATION OF MORTGAGE WAS SOLD IN 1996.
(I) THE PARTICIPATING INTEREST WAS PAID IN FULL IN JANUARY 1997.
(J) THE CARRYING AMOUNT OF MORTGAGES APPROXIMATES COST FOR INCOME TAX PURPOSES.

<PAGE>

INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996

OUTSTANDING BALANCE OF MORTGAGE

FACE CARRYING
AMOUNT OF AMOUNT OF PREPAYMENT PENALTY/
DESCRIPTION MORTGAGES MORTGAGES OTHER FEES

- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL FIRST MORTGAGES:
OFFICE BUILDINGS:
NEW CITY, NEW YORK 300,000 147,000 (F)
EATONTOWN, NEW JERSEY 3,925,000 3,754,000 1% FEE.
BOHEMIA, NEW YORK 3,600,000 3,506,000 ONE MONTH'S INTEREST

RESTAURANTS:
MANASSAS, VIRGINIA $300,000 $130,000 0.5%
IRONDEQUOIT, NEW YORK 340,000 197,000 1%
DECATUR AND JONESBORO, GEORGIA 583,000 379,000 (F)

PARTICIPATIONS:
FT. MYERS, FLORIDA 350,000 348,000 (F)
ORLANDO, FLORIDA 125,000 125,000 (F)
FT. LAUDERDALE, FLORIDA 325,000 325,000 (F)

RESIDENTIAL FIRST MORTGAGES:
CO-OPERATIVE APARTMENT BUILDINGS:
NEW YORK, NEW YORK 950,000 933,000 (E)
NEW YORK, NEW YORK 850,000 850,000 (E)
NEW YORK, NEW YORK 367,000 320,000 (E)

RENTAL APARTMENT BUILDINGS:
BRONX, NEW YORK 895,000 785,000 NOT PREPAYABLE UNTIL 1/1/2000.
BRONX, NEW YORK 2,445,000 2,237,000 NOT PREPAYABLE UNTIL 2/2003.
BRONX, NEW YORK 900,000 900,000 NOT PREPAYABLE UNTIL BALANCE UNDER $200,000,
2% FEE ON UNPAID BALANCE.
NEW YORK, NEW YORK 265,000 265,000 NOT PREPAYABLE UNTIL 1/1/1997.
NEW YORK, NEW YORK 1,335,000 1,298,000 1% FEE
BRONX, NEW YORK 2,850,000 2,850,000 NOT PREPAYABLE UNTIL 3/1/2004.
BRONX, NEW YORK 1,175,000 1,157,000 (E)
BRONX, NEW YORK 1,045,000 995,000 NOT PREPAYABLE UNTIL BALANCE UNDER $200,000.
BRONX, NEW YORK 625,000 591,000 (F)
BRONX, NEW YORK 670,000 633,000 (F)
BRONX, NEW YORK 2,000,000 1,934,000 (E)
BRONX, NEW YORK 1,260,000 1,188,000 NOT PREPAYABLE UNTIL 3/1999.
BRONX, NEW YORK 1,650,000 1,603,000 NOT PREPAYABLE UNTIL 10/1/2000.
NEW YORK, NEW YORK 1,445,000 1,445,000 NOT PREPAYABLE UNTIL 1/1/1997.
BRONX, NEW YORK 1,850,000 1,831,000 NOT PREPAYABLE UNTIL 1/1/2003.
NEW YORK, NEW YORK 1,150,000 1,056,000 (F)
NEW YORK, NEW YORK 300,000 279,000 (F)
BRONX, NEW YORK 4,510,000 4,510,000 (E)
NEW YORK, NEW YORK 425,000 425,000 NOT PREPAYABLE UNTIL 1/1/1997.
NEW YORK, NEW YORK 1,100,000 1,100,000 (F)
CITY ISLAND, BRONX, NEW YORK 650,000 346,000 (F)
NEW YORK, NEW YORK 1,300,000 1,272,000 1%FEE
HYDE PARK, NEW YORK 1,931,000 1,805,000 1% FEE.

<PAGE>

INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV--MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996

OUTSTANDING BALANCE OF MORTGAGE

FACE CARRYING
AMOUNT OF AMOUNT OF PREPAYMENT PENALTY/
DESCRIPTION MORTGAGES MORTGAGES OTHER FEES

- - ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL FIRST MORTGAGES,
RENTAL APARTMENT BUILDINGS: (CONTINUED)
EAST ORANGE, NEW JERSEY 750,000 727,000 NOT PREPAYABLE PRIOR TO 7/15/1997; THEN 1% FEE.
CAMDEN, NEW JERSEY 1,200,000 1,003,000 1% FEE.
IRVINGTON, NEW JERSEY 1,600,000 (G) 230,000 NOT PREPAYABLE PRIOR TO 5/1/1997; THEN 1% FEE.
PINE HILL, NEW JERSEY 7,200,000 7,063,000 NOT PREPAYABLE PRIOR TO 11/12/1997; THEN 1% FEE.
PHILADELPHIA, PENNSYLVANIA 3,800,000 3,670,000 NOT PREPAYABLE PRIOR TO 6/12/1997; THEN 1% FEE.
NEW YORK, NEW YORK 2,400,000 (H) 1,545,000 1% FEE.
ELLENVILLE, NEW YORK 950,000 873,000 1% FEE.
NEW YORK, NEW YORK 2,700,000 2,617,000 NOT PREPAYABLE PRIOR TO 6/26/1997;
THEN ONE MONTH'S INTEREST.
EAST WINDSOR, NEW JERSEY 1,200,000 1,194,000 ONE MONTH'S INTEREST

FIRST MORTGAGES ON LAND:
OSCEOLA COUNTY, FLORIDA 1,600,000 1,571,000 1% FEE.

RESIDENTIAL SECOND MORTGAGES,
RENTAL APARTMENT BUILDINGS:
NEW YORK, NEW YORK 1,050,000 1,050,000 (F)
NEW YORK, NEW YORK 3,300,000 3,300,000 (F)
NEW YORK, NEW YORK 1,400,000 1,400,000 (F)
ASTORIA, NEW YORK 1,160,000 1,149,000 ONE MONTH'S INTEREST
NEW ROCHELLE, NEW YORK 500,000 500,000 (F)
ROCKVILLE CENTRE, NEW YORK 300,000 288,000 1% FEE
----------- -----------
$74,901,000 $69,699,000
=========== ===========

<PAGE>

INTERVEST CORPORATION OF NEW YORK
SCHEDULE IV -- MORTGAGE LOANS ON REAL ESTATE -- Continued

The following summary reconciles mortgages receivable at their carrying values

Year Ended December 31

1996 1995 1994
---------- ---------- ----------

Balance at beginning of period $55,146,000 $56,666,000 $41,521,000

Additions during period:
Mortgages acquired 34,774,000 17,124,000 18,680,000
---------- ---------- ----------

89,920,000 73,790,000 60,201,000

Deductions during period:
Collections of principal, net
of amortization of discounts 20,221,000 18,644,000 3,535,000
---------- ---------- ---------

BALANCE AT CLOSE OF PERIOD $69,699,000 $55,146,000 $56,666,000
=========== =========== ===========
<PAGE>

No person has been authorized by the Company or by the Underwriter to give
any information or to make any representations other than those contained in
this Prospectus in connection with the Offering of the Debentures made hereby,
and, if given or made, such information or representations must not be relied
upon as having been authorized. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any security other than the
Debentures, nor does it constitute an offer to sell or a solicitation of an
offer to buy any of the Debentures in any jurisdiction to any person to whom it
is unlawful to make such offer or solicitation in such jurisdiction.

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

TABLE OF CONTENTS

Page
Available Information 2
Who Should Invest 2
Summary 3
Risk Factors 4
Use of Proceeds 6
Capitalization 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Selected Financial Information of the Company 13
History and Business 14
Management 23
Transactions with Management 25
Stockholders 26
Description of Debentures 26
Plan of Offering 30
Legal Opinions 31
Experts 31
Index to Financial Statements 32
Table 1 -- Mortgages Receivable 15

UNTIL JULY 29, 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

INTERVEST CORPORATION OF
NEW YORK

$8,500,000

$500,000 Series 4/30/97 Registered Redeemable
Subordinated Debentures
Due July 1, 1999

$8,000,000 Series 4/30/97 Registered Floating Rate Redeemable
Subordinated Debentures
Due October 1, 2005

----------
PROSPECTUS
----------

Sage, Rutty & Co., Inc.

The date of this Prospectus is April 30, 1997.