ARLINGTON REALTY INVESTORS, DEF 14A, 1995-11-03

ARLINGTON REALTY INVESTORS
DEF 14A, 1995-11-03
REAL ESTATE INVESTMENT TRUSTS

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

ARLINGTON REALTY INVESTORS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

NONE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
N/A
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
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(2) Form, Schedule or Registration Statement No.:
N/A
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(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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<PAGE>
ARLINGTON REALTY INVESTORS
10670 NORTH CENTRAL EXPRESSWAY, SUITE 640
DALLAS, TEXAS 75231
TELEPHONE: (214) 369-5064

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------

To the Shareholders of Arlington Realty Investors:

PLEASE TAKE NOTICE that the Annual Meeting of Shareholders of Arlington
Realty Investors (the "Trust") will be held at 10:00 a.m., local Charlotte,
North Carolina time, December 5, 1995, at 227 W. Trade Street, Suite 2320,
Charlotte, North Carolina, to consider and vote upon the following matters:

1. A proposal to elect three Trustees, each to serve a specified term and
until his respective successor is duly elected and qualified;

2. A proposal to amend the Trust's Declaration of Trust to establish
classes of Trustees;

3. A proposal to amend the Trust's Declaration of Trust to allow the
Trustees to fill any vacancies on the Board of Trustees;

4. A proposal to amend the Trust's Declaration of Trust to authorize the
Trust to issue up to ten million (10,000,000) common shares, par value
$1.00 per share, and ten million (10,000,000) preferred shares, par
value $.01 per share;

5. A proposal to amend the Trust's Declaration of Trust to change the
Trust's restrictions on investment policy to authorize any investment
permitted under Texas law and under the Internal Revenue Code of 1986,
as amended, for a real estate investment trust;

6. A proposal to amend the Trust's Declaration of Trust to change the name
of the Trust to Watermark Investors Realty Trust;

7. A proposal to amend the Trust's Bylaws to permit the Board of Trustees
to amend the Bylaws; and

8. The transaction of such other business as may properly come before the
Annual Meeting or any adjournment(s) thereof.

If all or a significant number of the above matters are adopted,
Shareholders will experience a change in certain Shareholders' rights. These
changes are discussed under each relevant proposal.

Only Shareholders of record at the close of business on November 1, 1995
will be entitled to vote at the Annual Meeting. Shareholders are cordially
invited to attend the Annual Meeting in person.

Regardless of whether you plan to be present at the Annual Meeting, please
promptly mark, date, sign and mail the enclosed proxy to American Stock Transfer
and Trust Company in the envelope provided. Any Shareholder who executes and
delivers the proxy may revoke the authority granted thereunder at any time prior
to its use by giving written notice of such revocation to American Stock
Transfer and Trust Company, 40 Wall Street, 46th Floor, New York, New York
10005, or by executing and delivering a proxy bearing a later date. A
Shareholder may also revoke a proxy by attending and voting at the Annual
Meeting. Your vote is important, regardless of the number of shares you own.

Dated: November 2, 1995 ARLINGTON REALTY INVESTORS

F. Terry Shumate, Vice President
Secretary and Treasurer
<PAGE>
ARLINGTON REALTY INVESTORS
10670 NORTH CENTRAL EXPRESSWAY, SUITE 640
DALLAS, TEXAS 75231
TELEPHONE: (214) 369-5064
------------------------

PROXY STATEMENT
------------------------

FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 5, 1995
------------------------

GENERAL INFORMATION

This Proxy Statement is furnished in connection with the solicitation by and
on behalf of the Board of Trustees of Arlington Realty Investors (the "Trust")
of proxies to be used at the Annual Meeting of Shareholders to be held on
December 5, 1995 (the "Annual Meeting") for a vote upon (1) the election of
three trustees, each to serve a specified term and until his respective
successor is duly elected and qualified, (2) the amendment of the Trust's
Declaration of Trust (the "Declaration of Trust") to stagger the terms of
trustees, (3) the amendment of the Declaration of Trust to fill vacancies on the
Trust's Board of Trustees (the "Board of Trustees"), (4) the amendment of the
Declaration of Trust to increase the Trust's authorized capital, (5) the
amendment of the Declaration of Trust to eliminate certain restrictions on
investment policy, (6) the amendment of the Declaration of Trust to change the
Trust's name, (7) the amendment of the Trust's Bylaws to change the provisions
for amending the Bylaws, and (8) the transaction of such other business as may
properly come before the Annual Meeting or any adjournment(s) thereof. Subject
to the requisite Shareholder approval, the Board of Trustees has approved the
amendments to the Declaration of Trust, the amendment to the Trust's Bylaws, and
the nomination of the three nominees named herein to be elected as trustees. The
Annual Meeting will be held at 10:00 a.m., local Charlotte, North Carolina time,
on December 5, 1995, at 227 W. Trade Street, Suite 2320, Charlotte, North
Carolina. This Proxy Statement and the accompanying proxy are first being mailed
to Shareholders on or about November 2, 1995.

SHAREHOLDERS ENTITLED TO VOTE

Only holders of record of issued and outstanding shares of beneficial
interest of the Trust, $1.00 par value per share (the "Shares"), at the close of
business on November 1, 1995 (the "Record Date"), are entitled to vote at the
Annual Meeting and at any adjournments thereof. At the close of business on the
Record Date, there were 542,413 Shares outstanding. Each holder is entitled to
one vote, in person or by proxy, for each Share held on the Record Date.

VOTING OF PROXIES

When the enclosed proxy is properly executed and returned, the Shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions noted thereon. As to the election of the three nominees as
trustees, Shareholders may choose to vote for all of the nominees, withhold
authority for voting for all of the nominees or withhold authority for voting
for any individual nominee. As to the amendments of the Declaration of Trust and
the amendment to the Trust's Bylaws (the "Amendment Proposals"), Shareholders
may choose to vote for, against, or abstain from voting on any of the Amendment
Proposals. In the absence of other instructions, the Shares represented by a
properly executed and submitted proxy will be voted in favor of all three
nominees for election as trustees and in favor of each of the Amendment
Proposals.

As of the date of this Proxy Statement, the Board of Trustees knows of no
matters to be brought before the Annual Meeting other than those specifically
listed in the Notice of Annual Meeting of

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Shareholders and described in this Proxy Statement. However, if further business
is properly presented, the persons named as proxies in the accompanying proxy
will vote such proxy in their discretion in accordance with their best judgment.

REVOCATION OF PROXIES

A proxy is enclosed herewith. Any Shareholder who executes and delivers the
proxy may revoke the authority granted thereunder at any time prior to its use
by giving written notice of such revocation to American Stock Transfer and Trust
Company, 40 Wall Street, 46th Floor, New York, New York 10005, or by executing
and delivering a proxy bearing a later date. A Shareholder may also revoke a
proxy by attending and voting in person at the Annual Meeting.

VOTE REQUIRED FOR APPROVAL

Pursuant to Section 6.7 of the Declaration of Trust, a majority of the
outstanding Shares entitled to vote at any meeting represented in person or by
proxy shall constitute a quorum at any such meeting. Abstentions will be
included in the vote totals and, as such, will have the same effect as a
negative vote. In instances where brokers are prohibited from exercising
discretionary authority with respect to Shares held by beneficial owners who
have not returned a proxy (so-called "broker non-votes"), those Shares will not
be included in the vote totals and, therefore, will have no affect on the vote.
The election of any trustee requires the affirmative vote of a majority of the
votes cast at the Annual Meeting. Each of the Amendment Proposals requires the
affirmative vote of at least two-thirds of the Shares outstanding, which is
361,609 Shares, in order to be approved.

The following entities, which together own 67.0% of the Shares outstanding,
Fletcher Napolitano Styles and Verruto Family Property Partners, L.P.
("Fletcher"), MIZ Investors Associates ("MIZ"), DAGI Limited Partnership
("DAGI") and Antapolis N.V. (collectively, the "Controlling Shareholders"), have
advised the Trust that they intend to vote all of their Shares in favor of the
Amendment Proposals and each nominee for trustee. If the Controlling
Shareholders vote their Shares as indicated, the Amendment Proposals will be
adopted, and each of the three nominees will be elected. See "Principal
Shareholders -- Change in Control" and "Principal Shareholders -- Security
Ownership of Certain Beneficial Owners".

CHANGE IN SHAREHOLDERS' RIGHTS

If all or a significant number of the matters proposed to be considered at
the Annual Meeting are adopted, Shareholders will experience a change in certain
Shareholders' rights. These changes are discussed under each relevant proposal.
Such changes, either individually or in the aggregate, may be considered
significant.

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PRINCIPAL SHAREHOLDERS

CHANGE IN CONTROL

On November 10, 1994, Davister Corp., a Nevada corporation ("Davister"), the
owner and holder since 1993 of 319,989 Shares, which constituted approximately
64.1% of the 498,985 Shares of the Trust then issued and outstanding, sold such
319,989 Shares to the Controlling Shareholders. Such sale occurred pursuant to
the terms of a Purchase Agreement dated November 10, 1994 between Davister and
the Controlling Shareholders (the "Purchase Agreement"). Under the terms of the
Purchase Agreement, the Controlling Shareholders paid $23,572 from their own
funds or working capital and Davister agreed to pay up to $50,000 from its
working capital, for the Controlling Shareholders' legal costs incurred in
connection with the Purchase Agreement. In addition, Davister agreed to pay,
from its working capital, $100,000 plus fifty percent of any amount above
$100,000 for the expenses of the Controlling Shareholders incurred in connection
with certain post-closing matters and for the financial advisor's fee for
services in connection with, among other things, the Purchase Agreement. These
post-closing matters are defined in the Purchase Agreement as, among other
things: (i) the amendment or cancellation of any or all of the Trust's
contracts; (ii) changing the management of the Trust; (iii) amending the
Declaration of Trust to provide for authorization of additional classes of
Shares; and (iv) amending the Trust's governing documents as may be necessary or
appropriate to carry out such post-closing matters (collectively, the
"Post-Closing Matters"). The financial advisor associated with the Purchase
Agreement was PAZ Securities, Inc., an affiliate of MIZ. The financial advisor's
fee for such services was $15,000.

Under the Purchase Agreement, Davister agreed that after the closing of the
sale contemplated by the Purchase Agreement, it would use reasonable efforts to
cause the Trust and any entity controlling, controlled by or under common
control with Davister or the Trust to cooperate fully with the Controlling
Shareholders and provide any and all necessary assistance to the Controlling
Shareholders in connection with the Post-Closing Matters.

Contemporaneously with the closing under the Purchase Agreement, Davister
and its affiliates contributed five properties, that together had approximately
880 apartment units, to a newly formed partnership, HPI-Southern Properties,
Limited Partnership, a Delaware limited partnership that is controlled by the
Controlling Shareholders ("HPI"). In exchange for this contribution, Davister
and its affiliates received a 30% interest in HPI and $6 million in cash. HPI
accepted the properties subject to $12,447,899 in non-recourse debt. The
payments made by Davister under the Purchase Agreement represent amounts that
Davister would have otherwise paid in connection with the formation of HPI.

On November 10, 1994, pursuant to a Trust Share Purchase Agreement of the
same date, MIZ purchased from the Trust 43,428 Shares (the "Trust Issuance") for
$43,428, which equalled the par value of such Shares. The Trust's management
believes the MIZ purchase was not on the same terms as would have been obtained
by an unrelated third party. The Trust's management has significant doubts as to
whether the Trust's Shares would be valued by a third party as at least equal to
their par value. The Trust's management believes the MIZ purchase price reflects
the Trust's and MIZ's reluctance to issue and buy stock for less than par value.

Although P. Scott Miller and F. Terry Shumate, officers of Davister,
continue to constitute the sole members of the Trust's Board of Trustees, by
virtue of the sale by Davister of 319,989 Shares to the Controlling Shareholders
and the Trust Issuance, an effective change in control of the Trust has
occurred. If the three nominees for trustees are elected, Messrs. Miller and
Shumate will not be officers or trustees of the Trust after such election.

POSSIBLE FUTURE DILUTION

Affiliates of the Controlling Shareholders and affiliates of Davister have
formed HPI. See "Change in Control," above. HPI currently owns certain real
estate properties. The Controlling Shareholders have from time to time discussed
the possibility of the Trust acquiring HPI or its assets. As of this time,
however, no specific transaction has been contemplated and there is no certainty
that

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any such transaction will occur in the future. If such an acquisition did occur,
Shareholders may experience significant dilution of their current ownership of
the Trust. Shareholders may or may not be entitled to vote to approve such
acquisition since under applicable law and the Declaration of Trust, not all
agreements or transactions that the Trust may enter into require Shareholder
approval. In general, mergers or share exchanges that result in the Trust
issuing Shares in excess of 20% of the Trust's outstanding Shares require
Shareholder approval. However, to the extent the Trust has authorized but
unissued Shares, the Trust may issue such Shares to acquire assets without
obtaining Shareholder approval.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

According to the Share transfer records of the Trust and other information
available to the Trust, the following persons were known to be the beneficial
owners, as of October 18, 1995, of more than five percent (5%) of the
outstanding Shares of the Trust:

<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP SHARES OUTSTANDING (1)
- ------------------------------------------------- ---------------------- ------------------------
<S> <C> <C>
Fletcher Napolitano Styles and 59,665(2) 11.0(2)
Verruto Family Property Partners, L.P. (4) Shares
227 W. Trade Street
Suite 2320
Charlotte, NC 28202
Attn: Michael S. Verruto
MIZ Investors Associates (5) 59,665(2) 11.0(2)
6971 N. Federal Highway Shares
Suite 203
Boca Raton, FL 33487
Attn: Simon and Joseph Mizrachi
DAGI Limited Partnership (6) 59,665(2) 11.0(2)
227 W. Trade Street Shares
Suite 2320
Charlotte, NC 28202
Attn: David S. Givner
Antapolis N.V. 184,422(2) 34.0(2)
c/o MeesPierson Trust Shares
(Curacao) N.V.
Number 6 Curacao
Netherlands Antilles
Attn: John B. Goisiraweg
</TABLE>

- ------------------------
(1) Based on 542,413 Shares outstanding on October 18, 1995.

(2) Does not include shares owned by others in group that filed a Schedule 13D
dated November 10, 1994. The group consists solely of the four entities
listed above, which collectively own 363,417 Shares or 67.0% of the issued
and outstanding Shares.

(4) Through his control of Fletcher Napolitano Styles and Verruto Family
Property Partners, L.P., Michael S. Verruto is deemed the beneficial owner
of 59,665 shares.

(5) Through their control of MIZ Investors Associates, Simon and Joseph Mizrachi
share beneficial ownership of 59,665 shares.

(6) Through his control of DAGI Limited Partnership, David S. Givner is deemed
the beneficial owner of 59,665 shares.

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SECURITY OWNERSHIP OF MANAGEMENT

According to the Share transfer records of the Trust and other information
available to the Trust, as of October 18, 1995, the current trustees and
executive officers of the trust beneficially owned the following Shares:

<TABLE>
<CAPTION>
NAME AND OFFICES AMOUNT OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------------ -------------------- --------
<S> <C> <C>
P. Scott Miller, Trustee and President None None
F. Terry Shumate, Trustee, Vice President, None None
Secretary and Treasurer
All trustees and executive officers as a None None
group
</TABLE>

If the individuals nominated to be trustees are elected, the Trust's trustees
and executive officers will be those persons described under "Election of
Trustees". Each trustee and executive officer to the Trust will beneficially own
the shares stated in his biographical information and will beneficially own as a
group, through their control of the Controlling Shareholders, 178,995 shares or
33.0% of the outstanding shares of the Trust.

PROPOSAL 1 -- ELECTION OF TRUSTEES

The Declaration of Trust provides that there shall not be less than two, nor
more than fifteen, trustees and that the number of trustees shall be determined
from time to time by resolution of the trustees. Currently, there are only two
trustees. However, the Board of Trustees has expanded the Board to three
trustees. The term of office of each trustee is one year and until the election
and qualification of his successor. Trustees may succeed themselves in office.
The trustees, in their capacity as trustees, are not required to devote their
time to the business and affairs of the Trust.

P. Scott Miller and F. Terry Shumate, the current executive officers of the
Trust since November 10, 1993, have been trustees of the Trust since December
28, 1993. Each of Messrs. Miller and Shumate intend to resign as executive
officers once their successors as trustees are elected and qualified. Since
November 10, 1993 (the date of election as officers of the Trust), Messrs.
Miller and Shumate have devoted, on the average, less than ten percent (10%) of
their time to the affairs of the Trust.

The Board of Trustees has nominated David S. Givner, Michael S. Verruto and
Simon Mizrachi for election to the Board of Trustees. If, for any reason, any of
the individuals listed below is not a candidate to be elected as a trustee when
the election occurs, the enclosed proxy may be voted for a substituted nominee.
The Board of Trustees does not anticipate that any nominee will not be a
candidate. No family relationship exists among the nominees. Further information
with respect to Messrs. Givner, Miller and Shumate is set forth below.

DAVID S. GIVNER, 51, is the President/Managing Director of HPI Capital,
LLC., and if elected as trustee, will serve as the Trust's President and
Treasurer. Since 1992, Mr. Givner has been President and Chief Operating Officer
of various affiliates of HPI Capital, LLC. From 1987 until 1992, he was Senior
Vice President/Director of Leasing and Consulting Services for Williams Real
Estate Company based in New York, New York. Mr. Givner is also the sole
shareholder and the President of DAGI Corporation, a Delaware corporation and
the general partner of DAGI Limited Partnership, a Delaware limited partnership.
Mr. Givner beneficially owns 59,655 Shares through DAGI Limited Partnership.

SIMON MIZRACHI, 47, is President of Midatlantic Agency, Inc. a Florida
corporation and financial consulting company. Mr. Mizrachi has served as
President of Midatlantic Agency, Inc. since 1992. Mr. Mizrachi and Midatlantic
Agency, Inc. are the sole partners of MIZ Investors Associates, a Delaware
general partnership. Mr. Mizrachi has been a director and officer of PAZ
Securities, Inc., an NASD broker/dealer firm, since 1978. Mr. Mizrachi is an
officer with PAK Investors, Inc., Pudgie's

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Chicken, Inc., Topaz Securities, Inc., Topaz, Inc., Cal-Mar, Inc., TMT Hanes,
Inc., and TMT Sales, Inc. Mr. Mizrachi is also an officer of various affiliates
of MIZ Investors Associates and Midatlantic Agency, Inc. Mr. Mizrachi
beneficially owns 59,655 Shares through MIZ Investors Associates.

MICHAEL S. VERRUTO, 33, is Vice President/Managing Director of HPI Capital,
LLC, a North Carolina limited liability company that develops real estate, and
if elected as trustee, will serve as the Trust's Vice President and Secretary.
Since January 1990, Mr. Verruto has held various positions with various
affiliates of HPI Capital, LLC, all of which are active in real estate
development and management. Mr. Verruto is also the sole shareholder and the
President and Treasurer of Fletcher Napolitano Styles and Verruto Holding
Company, Inc., a Delaware corporation and the general partner of Fletcher
Napolitano Styles and Verruto Family Property Partners, L.P., a Delaware limited
partnership. Mr. Verruto beneficially owns 59,655 Shares through Fletcher
Napolitano Styles and Verruto Family Property Partners, L.P.

THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES.

MEETINGS AND COMMITTEES OF TRUSTEES

The business affairs of the Trust are managed by, or under the direction of,
the Board of Trustees. During the fiscal year ended December 31, 1994, the Board
of Trustees held no formal meetings and five matters were handled by unanimous
written consent. The Board of Trustees has no standing audit, nominating or
compensation committee.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Under the securities laws of the United States, the Trust's trustees,
executive officers, and any persons holding more than ten percent of the Trust's
Shares are required to report their ownership of the Shares and any changes in
that ownership to the Securities and Exchange Commission (the "Commission").
Specific due dates for these reports have been established under applicable law
and the Trust is required to report any failure to file by these dates during
1994. To the best knowledge of the current officers of the Trust, based upon the
representations of its former trustees and executive officers and its ten
percent holders and copies of the reports that they have filed with the
Commission, all of these filing requirements were satisfied by its trustees and
executive officers and ten percent holders.

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PERFORMANCE GRAPH

Commission rules require that a line graph performance presentation be
provided comparing cumulative total Shareholder return with a performance
indicator of a broad market index and either a nationally recognized industry
index or a registrant constructed peer group index over a minimum period of five
years. The following graph demonstrates a five-year comparison of cumulative
total returns for the Trust, the S&P 500 Stock Index and NAREIT All REIT Total
Return Index.

COMPARISION OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ARLINGTON REALTY INVESTORS, S&P 500 STOCK INDEX
AND NAREIT ALL REIT TOTAL RETURN INDEX
FISCAL YEAR ENDING DECEMBER 31

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
ARLINGTON REALTY
INVESTORS S&P 500 STOCK INDEX NAREIT ALL REIT TOTAL RETURN INDEX
<S> <C> <C> <C>
1989 100 100 100
1990 0 97 83
1991 0 126 112
1992 0 138 126
1993 0 150 149
1994 0 152 150
</TABLE>

- ------------------------
*No information is available from any reliable source as to the market price of
the Shares since no established market exists. A number of Shares have traded
in privately negotiated transactions. See "Principal Shareholders -- Change in
Control."

The data set forth above in the graph and related table was obtained from
the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). All
of the data is based upon the last closing price of the month for all
tax-qualified REITs listed on the New York Stock Exchange, American Stock
Exchange and the NASDAQ National Market System. The data is market weighted. The
total return calculation is based upon the weighting at the beginning of the
period. The total return index includes dividends reinvested on a monthly basis.
At year end 1994, there were 223 tax-qualified REIT's in the NAREIT All REIT
Total Return Index with a total market capitalization of $44.3 billion.

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<PAGE>
COMPENSATION

Neither the trustees nor the officers of the Trust received salaries or
other cash compensation from the Trust for acting in such capacities during the
year ended December 31, 1994. The Trust has no retirement, annuity or pension
plans covering its trustees or officers. The Purchase Agreement contemplates
that the Trust's trustees and officers will be compensated initially as follows:
Chairman of the Board of Trustees, President and Chief Executive Officer,
$150,000 per year; Senior Vice President -- Development/Acquisitions, $135,000
per year; Secretary and Chief Financial Officer, $125,000 per year; independent
trustees, annual trustee's fee of $10,000, plus $1,000 for each regular and
special meeting of such entity's Board of Trustees attended, $250 for each
special telephonic meeting of the Board of Trustees participated in and $500 for
each committee meeting attended. The Trust's offices and the specific titles of
such offices currently differ, and in the future will likely differ, from those
contemplated by the Purchase Agreement. Based upon the Trust's current
operations, the Board of Trustees does not believe this compensation will be
paid or given in the near future.

RELATED PARTY TRANSACTIONS

Since November 10, 1993, Davister has provided office space and legal,
administrative and accounting services to the Trust under the supervision of the
Trust's officers (who are also officers of Davister or one of its affiliates).
Except as otherwise disclosed herein, Davister has not been compensated by the
Trust for any services rendered to the Trust.

On December 24, 1993, the Trust entered into a ground lease on its Parker
Road property in Houston, Texas with Plano Outlet Mall, Ltd., a related party.
The lease expired December 23, 1994 and required prepayment of the total annual
rental of $70,000. For financial reporting purposes, the prepayment was
classified as deferred lease revenue and has been amortized ratably over the
life of the lease. On December 31, 1993, the Trust advanced $70,000 to Davister.
Davister agreed to pay $70,000 in costs and expenses (including legal fees) on
behalf of the Trust to repay such advance. As of December 31, 1994, the advance
had been fully paid. One of the Trust's officers is also an officer of a
subsidiary of the general partner of Plano Outlet Mall, Ltd.

AMENDMENT PROPOSALS

At the Annual Meeting, five proposed amendments to the Declaration of Trust
and a proposed amendment to the Trust's Bylaws will be presented to the
Shareholders. The proposed amendments are described below. If approved by the
Shareholders, the amendments will become effective on adoption and will be
effective whether or not the Merger Proposal is approved.

The affirmative vote of at least two-thirds of the Trust's outstanding
Shares at the Annual Meeting is necessary to approve each Amendment Proposal.
The Controlling Shareholders have indicated they will vote sufficient Shares in
favor of each of the Amendment Proposals to assure its approval.

PROPOSAL 2 -- AMENDMENT TO DECLARATION OF TRUST -- CLASSIFICATION OF THE BOARD
OF TRUSTEES

At the present time, the Declaration of Trust provides that a majority of
the Trustees shall be Texas residents and shall serve one year terms. Texas law
no longer requires a majority of trustees of Texas real estate investment trusts
to be Texas residents. Therefore, the Board of Trustees believes the Trust
should have the flexibility of electing additional non-Texas residents. In
addition, the Board of Trustees believes it is in the best interest of the Trust
to stagger the terms of the trustees. Under certain circumstances, the
classification of the Board of Trustees into three classes with staggered terms
may deter a hostile acquisition.

Section 2.1 of the Declaration of Trust is proposed to be amended by
deleting in its entirety the current language and substituting the following in
lieu thereof:

The number of Trustees shall be not less than one (1) nor more than
thirteen (13), as fixed from time to time by the Trustees as provided in
the Bylaws of the Trust. Each Trustee

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<PAGE>
shall serve until his successor is elected and qualified or until his
death, retirement, resignation or removal. In the event of any increase
or decrease in the authorized number of Trustees, each Trustee then
serving as such shall nevertheless continue as a Trustee until the
expiration of the Trustee's then current term, or his prior death,
retirement, resignation or removal.

Commencing with the 1996 annual meeting of shareholders, the Board
of Trustees of the Trust shall be divided into three classes, each class
to consist as nearly as possible of one-third of the Trustees. The term
of office of one class of Trustees shall expire each year. The initial
term of office of the Class I Trustees shall expire at the 1997 annual
meeting of shareholders. The initial term of office of the Class II
Trustees shall expire at the 1998 annual meeting of shareholders. The
initial term of office of the Class III Trustees shall expire at the
1999 annual meeting of shareholders. After the 1996 annual meeting of
shareholders, the Trustees of the class elected at each annual meeting
of shareholders thereafter shall hold office for a term of three years.

A Trustee may be removed by the vote of the holders of two-thirds of
the outstanding Shares at a special meeting of the shareholders called
for such purpose pursuant to the Trust's Bylaws.

THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

PROPOSAL 3 -- AMENDMENT TO DECLARATION OF TRUST -- VACANCIES ON BOARD OF
TRUSTEES

Currently, the Declaration of Trust provides that vacancies on the Board of
Trustees must be filled by a vote of the holders of two-thirds of the Shares.
For the efficient and orderly management of the Trust, the Board of Trustees
desires to have the ability to fill vacancies by a vote of the majority of the
remaining trustees or a vote of the holders of a majority of the outstanding
Shares. Therefore, Section 2.3 of the Declaration of Trust is proposed to be
amended and restated, by deleting in its entirety the current language and
substituting the following in lieu thereof:

Any vacancy occurring on the Board of Trustees may be filled by the
vote of a majority of the remaining Trustees regardless of whether such
remaining Trustees constitute a quorum of the Board of Trustees or by
the vote of the holders of a majority of the outstanding voting shares
of the Trust.

THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

PROPOSAL 4 -- AMENDMENT TO DECLARATION OF TRUST -- AUTHORIZATION OF PREFERRED
SHARES

At the present time, the Declaration of Trust only authorizes the issuance
of up to 10,000,000 Shares. The Board of Trustees believes that the Trust would
have greater flexibility in acquiring future assets if it could issue preferred
shares. Although there are currently no specific plans to issue such preferred
shares, the Board of Trustees believes that it would be more cost effective and
efficient to amend the Declaration of Trust now before an opportunity for
issuance arises. Under certain circumstances, the issuance of, or the ability to
issue, preferred shares may deter a hostile acquisition.

Section 6.1 of the Declaration of Trust is proposed to be amended by
deleting in its entirety the current language, which only authorizes the
issuance of up to 10,000,000 Shares and does not authorize the issuance of any
other class of shares such as preferred shares, and substituting the following
in lieu thereof:

The aggregate number of shares of beneficial interest that the Trust
shall have authority to issue is ten million (10,000,000) common shares,
par value $1.00 per share ("Common Shares"), and ten million
(10,000,000) preferred shares, par value $.01 per share ("Preferred
Shares"). All of the Common Shares shall be equal in all respects to
every other such Common Share, and shall have no preference, conversion,
exchange, redemption, cumulative voting, or preemptive rights.

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The Trust may issue one or more series of Preferred Shares, each
such series to consist of such number of shares as shall be determined
by resolution of the Board of Trustees creating such series. The
Preferred Shares of each such series shall have such designations,
preferences, conversion, exchange or other rights, participation, voting
powers, options, restrictions, limitations, special rights or relations,
limitations as to dividends, qualifications or terms, or conditions of
redemption thereof, as shall be stated and expressed by the Board of
Trustees in the resolution or resolutions providing for the issuance of
such series of Preferred Shares pursuant to the authority to do so,
which is hereby expressly vested in the Board of Trustees. Except as
otherwise specifically provided in any resolution or resolutions of the
Board of Trustees providing for the issue of any particular series of
Preferred Shares, holders of Preferred Shares shall have no preemptive
rights.

Except as otherwise specifically provided in any resolution or
resolutions of the Board of Trustees providing for the issue of any
particular series of Preferred Shares, Preferred Shares redeemed or
otherwise acquired by the Trust shall assume the status of authorized
but unissued Preferred Shares and shall be unclassified as to series and
may thereafter, subject to the provisions of this Article and to any
restrictions contained in any resolution or resolutions of the Board of
Trustees providing for the issuance of any such series of Preferred
Shares, be reissued in the same manner as other authorized but unissued
Preferred Shares.

Except as otherwise specifically required by law or this Declaration
of Trust or as specifically provided in any resolution or resolutions of
the Board of Trustees providing for the issuance of any particular
series of Preferred Shares, the exclusive voting power of the Trust
shall be vested in the Common Shares. Each Common Share entitles the
holder thereof to one vote at all meetings of the shareholders of the
Trust.

THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

PROPOSAL 5 -- AMENDMENT TO DECLARATION OF TRUST -- RESTRICTIONS ON INVESTMENT
POLICY

At the present time, the Declaration of Trust requires the Trust to operate
as a REIT under the Code and Texas law. In addition, Article V of the
Declaration of Trust imposes numerous other restrictions on the Trust that
prohibit it from making investments that are otherwise permissible to REITs
under the Code and Texas law. These restrictions include, among others, the
prohibition on the issuance of preferred shares, the investment of more than 25%
of the total assets of the Trust in real property (other than real property
taken in foreclosure or other similar proceedings to protect loans), the
investment of more than 10% of the total assets of the Trust in unimproved real
property or mortgages on unimproved real property, and the ownership of more
than an aggregate of 1,000 acres of real property outside the corporate limits
of a town or city.

The Board of Trustees currently is evaluating the types of investments the
Trust will make in the future and wishes to have the maximum flexibility that is
permitted for REITs under the Code and Texas law. Therefore, Article V of the
Declaration of Trust is proposed to be deleted in its entirety. Numbering of the
remaining Articles will be unchanged.

Currently the Trust is not, and if this proposal is not approved by the
Shareholders as provided herein, the Trust will not be, operating in full
compliance with certain of the investment restrictions described above.

Although the Trust does not have significant assets that would be affected
by this proposal if it is adopted, the Trust's investments in the future may
experience more volatile fluctuations as compared to the Trust's investments
before its adoption and subsequent revocation of its Plan of Liquidation.

THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

PROPOSAL 6 -- AMENDMENT TO DECLARATION OF TRUST -- CHANGE OF NAME

To reflect the Shareholders' decision last year to revoke and repeal the
Plan of Liquidation and Termination of Trust and the intentions of the Trust to
pursue new business opportunities, the Board

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of Trustees believe the Trust should use a new name, which they propose to be
Watermark Investors Realty Trust. Therefore, Section 1.1 of the Declaration of
Trust is proposed to be amended by deleting in its entirety the first paragraph
of Section 1.1 and substituting the following in lieu thereof:

The Trust created by this Declaration is hereby referred to as the
"Trust" and shall be known by the name "Watermark Investors Realty
Trust." Except as otherwise provided herein, the Trustees shall conduct
and transact the activities of the Trust, make and execute all documents
and instruments, and sue and be sued in the name of the Trust or in
their names as Trustees of the Trust (but not in their names
individually).

THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

PROPOSAL 7 -- AMENDMENT TO BYLAWS -- AMENDMENT OF BYLAWS BY BOARD OF TRUSTEES

Currently, a vote of the holders of a majority of the outstanding Shares
present and voting at a Shareholders' meeting is required to amend the Trust's
Bylaws. For more efficient management of the Trust, the Board of Trustee desires
to have the ability to amend the Trust's Bylaws by a vote of a majority of the
members of the Board of Trustees. Therefore, Article XI of the Bylaws is
proposed to be amended and restated as follows:

Except as otherwise provided by applicable law or the Declaration of
Trust, the power to alter, amend or repeal these Bylaws or to adopt new
Bylaws shall be vested in the Trustees and the Shareholders, and such
action shall be taken by the affirmative vote of a majority of the
Trustees or by the affirmative vote of the holders of a majority of the
Trust's outstanding Shares entitled to vote.

If this proposal is approved, the Trustees intend to amend the Bylaws of the
Trust to conform to the other Amendment Proposals. If this proposal is adopted,
future amendments could also be made to the Bylaws that previously required
Shareholder approval.

THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

AUDITORS

The Board of Trustees has retained Farmer, Fuqua, Hunt & Munselle, LLC to
serve the Trust as independent accountants to audit the Trust's financial
statements for the calendar year ended December 31, 1995. No representative of
such firm is expected to attend the Annual Meeting.

SOLICITATION OF PROXIES

This Proxy Statement is furnished to Shareholders to solicit proxies on
behalf of the Board of Trustees. The cost of preparation and distribution of
this Proxy Statement as well as the cost, if any, of solicitation of proxies
will be borne by the Trust; provided, however that the Trust may be reimbursed
for certain expenses in connection therewith by Davister pursuant to the
Purchase Agreement. See "Principal Shareholders -- Change in Control." The
officers and trustees may also solicit proxies personally or by mail, telephone,
facsimile transmission or telegraph, but they will not receive any compensation
for such services, other than out-of-pocket expenses incurred by them in
connection with such solicitation. Arrangements also will be made with
custodians, nominees, and fiduciaries for the forwarding of proxy solicitation
materials to beneficial owners of Shares held of record by such persons.

OTHER MATTERS

The Board of Trustees does not know of any other matters to come before the
Annual Meeting. However, if any other matters properly come before the Annual
Meeting, it is the intention of the persons designated as proxies to vote in
accordance with their best judgment on such matters.

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FUTURE PROPOSALS OF SHAREHOLDERS

Any proposal intended to be presented by a Shareholder at the 1996 Annual
Meeting of Shareholders of the Trust or the Trust's successor must be received
at the principal office of the Trust or the Trust's successor, which after the
1995 Annual Meeting will be 227 W. Trade Street, Suite 2320, Charlotte, North
Carolina, not later than July 5, 1996, in order to be considered for inclusion
in the Trust's or the Trust's successor's proxy statement and form of proxy for
the meeting.

ANNUAL REPORT

The Trust's Annual Report on Form 10-K/A for the year ended December 31,
1994 and the Trust's Quarterly Report on Form 10-Q for the quarter ended June
30, 1995 as filed with the Commission by the Trust are being mailed with this
Proxy Statement to Shareholders entitled to vote at the Annual Meeting.

The Trust will furnish without charge to each person to whom this Proxy
Statement is delivered, on the request of such person, additional copies of any
or all of the documents described above (other than exhibits to such documents).
Requests should be directed to:

ARLINGTON REALTY INVESTORS
10670 North Central Expressway, Suite 640
Dallas, Texas 75231
Telephone: (214) 369-5064

Dated: November 2, 1995
F. Terry Shumate, Vice President
Secretary and Treasurer

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ARLINGTON REALTY INVESTORS
PROXY SOLICITED BY BOARD OF TRUSTEES FOR ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 5, 1995

The undersigned, having received the Notice for the Annual Meeting of
Shareholders of Arlington Realty Investors (the "Trust"), appoints David S.
Givner, Simon Mizrachi and Michael S. Verruto and each or any of them, as
proxies, with full power of substitution, to represent the undersigned and to
vote all shares of the Trust that the undersigned is entitled to vote at the
Annual Meeting of Shareholders to be held at 227 W. Trade Street, Suite 2320,
Charlotte, North Carolina, on December 5, 1995 at 10:00 a.m., local time, and
any and all adjournments thereof, in the manner specified below:

1. PROPOSAL TO ELECT THE NOMINATED TRUSTEES: David S. Givner, Simon Mizrachi
and Michael S. Verruto.

/ / FOR ALL NOMINEES

/ / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES

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(To Withhold Authority to Vote, write individual's name in space provided)

2. PROPOSAL TO AMEND the Trust's Declaration of Trust to establish classes of
Trustees.