KRANZCO REALTY TRUST, 10-K, 1996-03-19

KRANZCO REALTY TRUST
10-K, 1996-03-19
REAL ESTATE INVESTMENT TRUSTS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the fiscal year ended December 31, 1995 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____ to ____

Commission File Number 1-11478

KRANZCO REALTY TRUST
(Exact name of registrant as specified in its charter)

MARYLAND
(State of incorporation)

23-2691327
(I.R.S. employer identification no.)

128 FAYETTE STREET, CONSHOHOCKEN, PA 19428
(Address of principal executive offices)

(610) 941-9292
(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act:

COMMON SHARES OF BENEFICIAL INTEREST, $.01 PAR VALUE
(Title of Class)

NEW YORK STOCK EXCHANGE
(Name of exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.

YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $156 million based on the closing price on the New
York Stock Exchange for such stock on March 13, 1996.

THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON SHARES OF BENEFICIAL INTEREST
OUTSTANDING WAS 10,322,858 AS OF MARCH 13, 1996.

DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the 1996 Kranzco Realty Trust Proxy Statement to be filed with the
Securities and Exchange Commission within 120 days after the year covered by
this Form 10-K with respect to the Annual Meeting of Shareholders to be held on
June 5, 1996 are incorporated by reference into Part III.

<PAGE>
TABLE OF CONTENTS

Form 10-K
Item No. Report Page

PART I

1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 8
4. Submission of Matters to a Vote of Security Holders . . . . . . . 8

PART II

5. Market for the Registrant's Common Equity and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . . . 9
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . 9
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . 11
8. Financial Statements and Supplementary Data . . . . . . . . . . 16
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures . . . . . . . . . . . . . 16

PART III

10. Director and Executive Officers of the Registrant . . . . . . . 17
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . 17
12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . . 17
13. Certain Relationships and Related Transactions . . . . . . . . . 17

PART IV

14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K ,
Property Table . . . . . . . . . . . . . . . . . . . . . . . 17

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<PAGE>
PART I

ITEM 1. BUSINESS

(a) General Development of Business

Kranzco Realty Trust (the "Trust") was formed on June 17, 1992 as a Maryland
real estate investment trust ("REIT").

On November 19, 1992, the Trust consummated an initial public offering (the
"IPO") of 6,400,000 of its common shares of beneficial interest (the "Shares").
On December 15, 1992, the Trust sold an additional 361,900 Shares as a result
of the exercise of the over-allotment option granted to the underwriters in
connection with the IPO.

On October 7, 1993, the Trust consummated a second public offering (the "Second
Offering") of 2,200,000 Shares. On November 3, 1993, the Trust sold an
additional 50,000 Shares as a result of the exercise of the over-allotment
option granted to the underwriters in connection with the Second Offering.

The Trust and its consolidated subsidiaries are hereinafter referred to as the
"Company".

(b) Developments During the 1995 Fiscal Year

In April 1995, the Company acquired five community shopping centers in the
Washington, D.C. area aggregating approximately 680,000 square feet of gross
leasable area "GLA". The total purchase price for the centers was
approximately $49.3 million, payable approximately $1 million in cash,
approximately $11.2 million by the issuance of shares of the Company's
non-voting Series A Increasing Rate Cumulative Convertible Preferred Shares of
Beneficial Interest, $.01 par value per share (the "Preferred Shares"), and
$37.1 million by the assumption of existing mortgage indebtedness. As of
December 31, 1995, these centers had an aggregate occupancy rate of
approximately 86%. Major tenants at the centers include Giant Food, Peebles
department store, CVS, G.C. Murphy and Shopper's Food Warehouse. Acquisition
of the centers increased the amount of leasable square footage owned by the
Company to approximately 5.7 million at December 31, 1995 from approximately 5
million at December 31, 1994. See Item 2 of this Annual Report on Form 10-K for
certain information relating to these five shopping centers.

During 1995, the Company also completed significant renovation and/or expansion
projects with respect to Collegetown Shopping Center, in Glassboro, New Jersey
and Park Hills Plaza in Altoona, Pennsylvania. The completion of these
projects helped maintain the Company's properties' overall leased percentage at
approximately 93% at December 31, 1995, which was the same overall leased
percentage of the Company's properties in 1994.

With respect to Collegetown Shopping Center, the project included the expansion
of the center by approximately 20,000 square feet of GLA, capital improvements
and reconfiguration of existing space. The formal completion of the renovation
program in November 1995 was marked with the simultaneous openings of the new
Pep Boys anchor store and the opening of the expanded Acme store. Previously,
in July 1995, Payless Shoesource opened a newly constructed free-standing
store.

The renovation project at Park Hills Plaza, completed during 1994, included
significant reconfiguration of existing space to meet the needs of existing and
new tenants. In 1995, the remaining vacant space of 38,500 square feet of GLA
was leased to Superpetz, Inc. (25,700) and Goodwill Industries (12,800). The
addition of the new tenants resulted in an increase in the leased percentage at
the center to 100% at December 31, 1995 from approximately 85% at December 31,
1994.

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<PAGE>
During 1995, three of the Company's anchor tenants, Bradlees, Caldor and
Jamesway filed for bankruptcy under Chapter 11 of the bankruptcy code. The
Company has three Bradlees stores, three Caldor stores and two Jamesway stores.
In general, in a Chapter 11 proceeding, the tenant is required to pay the full
rental to the landlord for the store on a current basis.

The Bradlees stores are located in Bethlehem, Pennsylvania, Whitehall,
Pennsylvania and Groton, Connecticut and are approximately 85,899, 85,120 and
85,120 square feet, respectively. Stop & Shop Companies, Inc. is primarily
liable under all three leases. The Company believes that these three leases are
at or below market rental rates and, therefore, the Company would not have
significant difficulty in releasing these stores if the leases were rejected.
The average rent paid by Bradlees for these locations is approximately $6.50
per square foot.

The Caldor stores are located in Towson, Maryland, Bristol, Pennsylvania and
Hamilton Township, New Jersey and are approximately 94,600, 113,160 and 119,935
square feet, respectively. The Towson lease is guaranteed by The May Company.
The Company believes that these three leases are at or below market rental
rates and, therefore, the Company would not have significant difficulty in
releasing these stores if the leases were rejected. The average rent paid by
Caldor for these locations is approximately $6.15 per square foot.

The Jamesway stores are located in Phoenixville, Pennsylvania and Bradford,
Pennsylvania and are approximately 60,138 and 76,000 square feet,
respectively. Jamesway has disaffirmed the leases on these stores effective
February 29, 1996.The Company believes that these two leases were below market
rental rates and, therefore, the Company will not have significant difficulty
in releasing these stores. The average rent paid by Jamesway for these
locations was approximately $2.60 per square foot.

The Company has started discussions with possible replacement tenants for the
Jamesway stores and the Caldor and Bradlees stores in the eventuality that a
replacement tenant is needed in one or more locations.

The Company is in the business of owning, managing, operating, leasing,
acquiring, developing, investing in and disposing of neighborhood and community
shopping centers. See the Consolidated Financial Statements and Notes thereto
included in Item 8 of this Annual Report on Form 10-K for certain financial
information required by Item 1.

(d) Narrative Description of Business

General At March 13, 1996, the Company owned and operated 38 neighborhood and
community shopping centers (the "Properties") aggregating approximately 5.7
million square feet of GLA located in Connecticut, Maryland, New Jersey, New
York, Pennsylvania, Rhode Island and Virginia.

The Company is self-administered and self-managed and does not engage or pay a
REIT advisor because the Company provides management, leasing, accounting,
design and construction expertise through its own personnel or, where
appropriate, through outside professionals.

The Company's executive offices are located at 128 Fayette Street,
Conshohocken, Pennsylvania 19428 and its telephone number is (610) 941-9292.

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Operating Strategies The Company's operating strategies are to: (i)
focus on the neighborhood and community shopping center business; (ii)
actively manage its properties (in a manner consistent with the REIT tax rules)
for long-term cash flow growth and capital appreciation; (iii) increase
occupancy at its properties by capitalizing on management's reputation and
long-standing relationships with national tenants and extensive experience in
marketing to local tenants, as well as the negotiating leverage inherent in a
large portfolio of properties; (iv) maintain, renovate, expand and reconfigure
its properties; (v) optimize the mix of tenants in each shopping center as that
center's lease expiration schedule, physical configuration, changing
competitive position and trade area dictate; (vi) develop or ground lease the
parcels ("Out-Parcels") of vacant land existing at its properties for use as
restaurants, banks, auto centers, cinemas or other facilities; (vii) benefit
from economies of scale by spreading overhead expenses over a larger asset
base; and (viii) manage and/or lease real estate properties for third parties
to generate additional income (within the limitations of REIT income
requirements) and to provide opportunities to acquire other real estate
properties.

Acquisition Strategies/Investment Strategies The Company intends to make
acquisitions in a manner consistent with the requirements of the Internal
Revenue Code of 1986, as amended (the "Code") applicable to REITs and related
regulations with respect to the composition of the Company's portfolio and the
derivation of income unless, because of circumstances or changes in the Code
(or any related regulation), the trustees (the "Trustees") of the Company
determine that it is no longer in the best interests of the Company to qualify
as a REIT. The Company's acquisition strategies are to: (i) exploit today's
favorable climate for the purchase of neighborhood and community shopping
centers by buyers, such as the Company, which, due to their low level of
existing indebtedness, anticipated high ratio of cash flows to debt service and
expected access to the public equity and debt markets, have access to capital;
and (ii) acquire quality properties which have been over leveraged or need
replacement anchor stores where the Company's expected ability to obtain
financing to fund tenant and other necessary improvements, and its management's
leasing expertise can enhance value. The Company does not intend to invest in
excess of 15% of its assets in any single property.

The Company will generally acquire 100% fee simple or leasehold interests in
real property consistent with the Company's acquisition strategies set forth
above. However, the Company may make equity investments through joint ventures
with developers, owners or other persons which may provide for, among other
terms, (i) a cumulative preference as to cash distributions; (ii) a
participation in net cash flows from operations; and (iii) a participation in
the appreciation of the value of the underlying real property. The Company
contemplates that it would maintain at least equal control over the underlying
real property to be operated by any joint venture (including possibly the
day-to-day management of the real property) and additional investments in or
sale or financing of such underlying real property. The Company may also
acquire investments in real property through issuance of debt or equity
securities in exchange for investments or by such other methods as the Trustees
deem to be in the best interests of the Company.

Financing Strategies The Company intends to maintain a conservative ratio of
debt to estimated value of the Company's real estate assets (as determined by
the Trustees, taking into consideration the tenants in occupancy, gross rental
revenues, geographic location and other factors affecting the value of the
Company's properties) ("Debt Ratio") of not more than 50%. At December 31,
1995, the Company had a Debt Ratio of approximately 47% and a ratio of debt to
total market capitalization, based upon the closing price of the Company's
stock on the New York Stock Exchange as of December 31, 1995, of approximately
57%. The Company intends to finance acquisitions with the most appropriate
sources of capital, as determined by the Trustees, which may include available
cash flows from operations, the issuance of equity securities, the sale of
investments and, within the debt guidelines described above, bank and other
institutional borrowings and the issuance of debt securities. Future
borrowings by the Company for acquisitions may be either on a secured or
unsecured basis.

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<PAGE>
In this regard, in addition to the $100 million borrowing (the "Mortgage
Loan") from KRT Mortgage Securities Trust, which is secured by mortgages on 21
of the Company's properties, the Company has obtained two credit facilities
(collectively, the "Credit Facilities") from Nomura Asset Capital Corporation,
each of which expire June 30, 1996. One of the Credit Facilities is a $50
million credit facility (the "Acquisition Credit Facility") under which the
Company may borrow, subject to customary conditions, funds to finance
acquisitions of shopping center properties and tenant improvements, as the case
may be. As of March 13, 1996, the outstanding principal balance of $23,000,000
was secured by first mortgage liens on Suburban Plaza, 69th Street Drug
Emporium Plaza, Street Road Plaza and Anneslie Shopping Center and are payable
on June 30, 1996. The other credit facility is a $7 million line (the "Working
Capital Credit Facility") under which the Company may borrow, subject to
customary conditions, funds for working capital purposes. Borrowings under the
Working Capital Credit Facility are secured by first mortgage liens on the Best
Plaza Shopping Center and the MacArthur Road Plaza Shopping Center. As of
March 13, 1996, the Company had drawn down the full amount available for
borrowings under the Working Capital Credit Facility.

In February 1995, the Company obtained a $1.0 million unsecured credit facility
which is renewable annually from Corestates Bank, N.A. (the "Corestates
Facility"). Amounts borrowed under the line of credit bear interest at the
bank's prime rate. As of December 31, 1995, the Company had borrowed $500,000
under the Corestates Facility. The facility matures on June 30, 1996.

Operating Practices Virtually all operating and administrative functions,
such as leasing, data processing, maintenance, finance, accounting,
construction and legal, are centrally managed at the Company's headquarters.
In addition, the Company maintains regional offices at The Mall at Cross County
in Yonkers, New York and Marumsco Plaza, in Woodbridge, Virginia. On-site
functions such as security, maintenance, landscaping, sweeping, plumbing,
electrical and other similar activities are either performed by the Company or
subcontracted. The cost of these functions will be passed through to tenants
to the extent permitted by their respective leases.

The Company has a proprietary sophisticated computer software systems designed
to support its operating and administrative functions and to optimize
management's ability to own, operate and manage additional properties without
significant increase in its general and administrative expenses. The Company's
systems allow instant access to floor plans, store availability, lease data,
tenants' sales history, cash flows and budgets. The Company believes its
systems to be as advanced as any in the industry.

Competition All of the Company's properties are located in developed retail
and commercial areas. There are generally numerous other neighborhood and
community shopping centers within a five-mile radius of a Property. In
addition, with respect to some of the Company's properties there are one or
more regional malls within a 10-mile radius. The amount of rentable space in
the area could have a material effect on the Company's ability to rent space
and the rents charged. In addition, the Company will be competing with others
who may have greater financial resources and experience than the Company and
its officers and Trustees for tenants and acquisitions.

Employees As of December 31, 1995, the Company had approximately 55 full and
part-time employees. None of the Company's employees are subject to a
collective bargaining agreement and the Company has experienced no
labor-related work stoppages. The Company considers its relations with its
personnel to be good.

Business Issues As the owner of real estate, the Company is subject to risks
arising in connection with the underlying real estate, including defaults under
or nonrenewal of tenant leases, tenant bankruptcies, competition, inability to
rent unleased space, failure to generate sufficient income to meet operating
expenses, including debt service, capital expenditures and tenant improvements,
environmental matters, financing availability and costs, and changes in real
estate and zoning laws. The success of the Company also depends upon certain
key personnel, its ability to maintain its qualification as a REIT, compliance
with the terms and conditions of the Mortgage Loan and the Credit Facilities
and trends in the national and local enonomy, including income tax laws,
governmental regulations and legislation and population trends.

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<PAGE>
Tax Status The Company has elected to be taxed as a REIT under Sections
856 through 860 of the Code, commencing with its taxable year ending December
31, 1992. So long as the Company qualifies for taxation as a REIT, the Company
generally will not be subject to Federal income tax to the extent it
distributes at least 95% of its REIT taxable income to its shareholders. If
the Company fails to qualify as a REIT in any taxable year, the Company will be
subject to Federal income tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates. Even if the Company
qualifies for taxation as a REIT, the Company may be subject to certain state
and local taxes on its income and property and to federal income and excise
taxes on its undistributed income.

ITEM 2. PROPERTIES

Shopping Center Properties The Company owns and operates 38 neighborhood and
community shopping centers located in Connecticut, Maryland, New Jersey, New
York, Pennsylvania, Rhode Island and Virginia. The Properties were designed to
attract local area customers and are typically anchored by a supermarket,
discount department store or drugstore, and are diversified in size, ranging
from 387,000 square feet of gross leasable area to a village type center of
only 17,000 square feet of gross leasable area. Typical tenants are A & P
SuperFresh Supermarkets (at 3 Properties), Bradlees (3), Pathmark Supermarkets
(5), Discovery Zone (3), The Sports Authority (2), Kmart (4), Caldor (3), Home
Depot (1), Fashion Bug (13), Marshalls (3), Thrift Drug (6), Drug Emporium (4),
Woolworth (1), Radio Shack (7) Toys "R" Us (1) and Kids "R" Us (3). At 23 of
the Properties, free-standing restaurants, retail stores or banks, such as
McDonalds, Red Lobster, Ponderosa, Pizza Hut, Signet Bank, Tire America and
Somerset Tire Service, are tenants located on Out-Parcels. Three of the
Properties are community malls of 287,000 square feet, 218,000 square feet and
173,000 square feet, respectively. One is anchored by Kmart while another is
anchored by Kids "R" Us, The Sports Authority and TJ Maxx. The third was
anchored by Jamesway and A & P SuperFresh Supermarkets. Jamesway closed in
December 1995 and Superfresh closed in February 1996. Fifteen of the Properties
contain additional land for expansion of existing stores and 12 of the
Properties have Out-Parcels available for development of free-standing
buildings for use as restaurants, banks, auto centers, cinemas and other
operations.

The Properties are smaller than regional malls, depend less on long travel
times and the sale of major consumer goods and focus on everyday purchases from
a smaller customer base. Discount stores and supermarkets attract convenience
goods shoppers and bring customers to the smaller satellite shops. Shopping
centers of this kind are typically less vulnerable to shifts in population and
traffic patterns and rely heavily on weekly advertising by the anchor tenants.

Consistent with its intention to retain its shopping centers for long-term
investment, the Company intends to continue to pursue a program of regular
physical maintenance, together with major renovations and refurbishing, to
preserve and increase the value of the Properties. These projects usually
include or will include renovating existing facades, installing uniform
signage, resurfacing parking lots and increasing parking lot lighting.

A substantial portion of the income from the Properties consists of rent
received under long-term leases. Most of the leases provide for the payment of
fixed minimum rent monthly in advance and for the payment by tenants of a pro
rata share of the real estate taxes, insurance, utilities and common area
maintenance of the shopping center. Certain of the major tenant leases provide
that the landlord is obligated to pay certain of these expenses above or below
specific levels. Except for Pathmark Supermarkets, Caldor and Bradlees, which
represented approximately 6%, 5% and 4%, respectively, no tenant represented
more than 4% of the aggregate minimum rent of the Properties as of December 31,
1995. Minimum rent revenues and operating expense reimbursements accounted for
approximately 96% of the total revenues of the Company for the year ended
December 31, 1995. A majority of the leases associated with the Properties
also provide for the payment of percentage rent calculated as a percentage of a
tenant's gross sales above predetermined thresholds. Percentage rent accounted
for appoximately 2% of the total revenues of the Company for the year ended
December 31, 1995.

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<PAGE>
The leases of space at the Properties typically require the landlord to
provide maintenance of a shopping center's common areas, including cleaning,
lighting, paving, security, landscaping and insurance, the costs of which are
typically reimbursed to the landlord by the tenants. The landlord is also
typically required to make roof and structural repairs as needed, which in some
cases are without reimbursement. The leases for larger shopping center tenants
often restrict the ability of tenants to assign or sublet their spaces and
require tenants to use the space they lease for the purposes designated in the
leases and to operate their businesses on a continuous basis. However, certain
of the leases with major tenants contain modifications of these provisions as a
result of the financial condition, stability or desirability of such tenants.
If a tenant assigns or subleases its space, the original tenant generally will
remain liable for the payment of rent under the lease.

Three of the Properties and a portion of another are subject to long-term
ground leases where a third party owns and has leased the underlying land to
the Company to operate a shopping center. The Company pays rent for the use of
the land and generally is responsible for all costs and expenses associated
with the building and improvements. At the end of the lease term, unless
extended, the land, together with all improvements thereon, will revert to the
land owner without compensation to the Company.

As of March 1, 1996, the occupancy rate for the Properties was approximately
90%. The property table set forth below gives more specific information with
respect to each of the Properties as of March 1, 1996.

Corporate Headquarters The Company leases from Norman M. Kranzdorf and his
wife a three-story building containing approximately 20,000 square feet located
at 128 Fayette Street, Conshohocken, Pennsylvania 19428, which serves as the
Company's headquarters. The lease for the Company's headquarters, which
expires on January 15, 1999, provides that the Company will pay a rental of
$153,720 per annum. The lease also provides that the Company will pay for all
real estate taxes, utilities, repairs and other costs and expenses in
connection with the use and occupancy of the building. The Company subleases
2,700 square feet of such space to Scotmar Property Associates, Inc., a real
estate brokerage company, at a per annum rental equal to 40% of the net
commissions received by such entity for leases procured for the Company, with a
minimum rental equal to $28,600 for the period July 1, 1995 to June 30, 1996
and $33,000 for the period July 1, 1996 to June 30, 1997, under the terms of a
lease which originally expired June 30, 1995 but was renewed by the Company in
June 1995 for an additional two years.

Other Properties The Company owns a 90% interest in a partnership which owned
a 39,900 square foot parcel of vacant land in Philadelphia, Pennsylvania. The
partnership disposed of the land parcel on March 13, 1996.

ITEM 3. LEGAL PROCEEDINGS

The Company is not presently involved in any material litigation nor, to its
knowledge, is any material litigation threatened against the Company or its
properties, other than routine litigation arising in the ordinary course of
business and which is expected to be covered by the Company's liability
insurance.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this report.

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<PAGE>
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS

(a) Market Information

The Shares have been listed on the New York Stock Exchange ("NYSE") since
November 19, 1992 under the symbol "KRT." On March 13, 1996, the last reported
sale price of the Shares on the NYSE was $15.125. The following table shows
the high and low closing price for the Shares for the fiscal periods indicated
as reported by the New York Stock Exchange Composite Tape and the cash
distributions per Common Share paid by the Company with respect to each such
period.

<TABLE>
<CAPTION>
1995 High Low Distributions
<S> <C> <C> <C>
First Quarter $19.50 $17.13 $.48
Second Quarter $19.00 $16.63 $.48
Third Quarter $18.75 $16.75 $.48
Fourth Quarter $17.00 $14.00 $.48

<CAPTION>
1994 High Low Distributions
<S> <C> <C> <C>
First Quarter $23.88 $21.13 $.46
Second Quarter $22.63 $20.75 $.48
Third Quarter $21.63 $18.63 $.48
Fourth Quarter $19.88 $16.63 $.48
</TABLE>

(b) Holders

The approximate number of holders of record of the Shares was 658 as of March
13, 1996.

The Company declared distributions to common shareholders aggregating $1.92 per
Common Share during the fiscal year ended December 31, 1995. Of these
distributions, it is estimated that $1.10 per Common Share is ordinary income
and $.82 per Common Share is return of capital.

The Company has paid regular quarterly cash distributions on the Common Shares
since it commenced operations as a REIT in November 1992.

Future distributions paid by the Company will be at the discretion of the
Trustees and will depend on the actual cash flow of the Company, its financial
condition, capital requirements, the annual distribution requirements under the
REIT provisions of the Code and such other factors as the Trustees deem
relevant.

The Company has adopted a dividend reinvestment plan pursuant to which
shareholders may elect to automatically reinvest their distributions in Shares.
To fulfill its obligations under this dividend reinvestment plan, the Company
will, from time to time, repurchase Shares in the open market or issue new
Shares.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth on a historical basis Selected Financial Data
for (a) the Company and (b) the net assets of Kranzco Realty, Inc., a general
commercial real estate management and brokerage business, Barn Plaza, Bradford
Mall, Hillcrest Mall, Loehmann's Plaza at Pilgrim Gardens and Wampanoag Plaza
(collectively, the "Kranzco Controlled Properties"), which, for accounting
purposes only, are considered the predecessor entity to the Company. This

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<PAGE>
information should be read in conjunction with the financial statements
of the Company and the Kranzco Controlled Properties (including the related
notes thereto) and Management's Discussion and Analysis of the Financial
Condition and Results of Operations. The historical Selected Financial Data
for Kranzco Realty Trust as of December 31, 1995, 1994, 1993 and 1992 and for
the years ended December 31, 1995, 1994 and 1993 and the period from June 17,
1992 to December 31, 1992, have been derived from the audited financial
statements. The historical Selected Financial Data for the Kranzco Controlled
Properties as of November 18, 1992 and December 31, 1991 and for the period
from January 1, 1992 to November 18, 1992 and for the year ended December 31,
1991 have been derived from the audited financial statements.

<TABLE>
Selected Financial Data
<CAPTION>
KRANZCO CONTROLLED
KRANZCO REALTY TRUST PROPERTIES

Period
Year Ended Ended Period Ended Year Ended
December 31, December 31, November 18, December 31,
1995 1994 1993 1992 1992 1991

(In thousands except share and per share data)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue
Minimum Rent $40,259 $33,166 $27,688 $3,151 $3,988 $4,200
Percentage Rent 1,044 1,000 695 64 252 318
Expense Reimbursements 10,988 9,455 7,759 720 1,048 1,083
Interest Income 902 985 948 26 0 0
Other Income 277 434 2,619 162 949 1,334
--------- -------- ------- ------- ------ ------
Total Revenue 53,470 45,040 39,709 4,123 6,237 6,935

Operating expenses, exclusive
of interest, depreciation and
amortization 16,482 15,638 13,252 1,451 3,166 2,736
Interest expense 16,208 10,469 8,877 1,064 2,512 2,993
Depreciation and Amortization 10,903 9,066 7,636 782 1,097 1,175
Preferred Distribution 485 0 0 0 0 0
--------- -------- ------- ------- ------ ------
Operating Income (loss) 9,392 9,867 9,944 826 (538) (969)
Net income (loss) for common 9,392 9,867 9,944 826 21 (203)
shareholders

Net income (loss) per
common share $0.91 $0.96 $1.16 $0.01 $21 ($203)
--------- -------- ------- ------- ------ ------
Weighted average number of
Common Shares
outstanding 10,319,464 10,315,497 8,590,850 7,840,464 1,000 1,000

BALANCE SHEET DATA:
Real estate, before
accumulated depreciation $368,073 $318,870 $258,166 $225,596 $41,515 $40,675

Total assets $372,983 $331,779 $298,813 $251,720 $40,481 $40,369
Total mortgages and
notes payable $204,247 $160,771 $118,566 $119,798 $32,620 $32,204
</TABLE>

- -10-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

During the year ended December 31, 1995, the Company invested $46,251,000 in
the acquisition of five shopping center properties and invested $2,952,000 in
the expansion and improvement of existing shopping center properties, which
increased real estate assets on the balance sheet by approximately 15% and
increased the number of properties owned to thirty-eight.

Acquisition of Properties

In April 1995, the Company acquired five shopping center properties located in
the Washington, D.C. area for $49.3 million. The purchase price was paid by (i)
assuming $37.1 million of existing mortgage indebtedness, (ii) through the
private issuance to the sellers of $11.2 million of non-voting Series A
Increasing Rate Cumulative Convertible Preferred Shares of Beneficial Interest,
("the Preferred Shares") and (iii) $1.0 million in cash. The acquisition was
recorded by the Company at $46.5 million to reflect the fair market value of
the Preferred Shares and issuance costs. The centers have a total of
approximately 680,000 square feet of gross leasable area and have a combined
leased percentage of approximately 86% as of December 31, 1995. Three of the
centers are located in Maryland: Hillcrest Plaza in Frederick, 102,000 square
feet of GLA; Coral Hills Shopping Center in Coral Hills, 86,000 square feet of
GLA; and Campus Village in College Park, 25,000 square feet of GLA. The
remaining two centers are located in Virginia: Marumsco-Jefferson Plaza in
Woodbridge, 333,000 square feet of GLA; and Culpeper Town Mall in Culpeper,
131,000 square feet of GLA. The existing mortgage indebtedness bears interest
at rates ranging from 8.0% to 10.5% with remaining terms ranging from less than
one year to ten years. The Preferred Shares have an initial dividend rate of
5.0% with increases of 25 basis points per year to a maximum of 6.5% per year.
The Preferred Shares are redeemable by the Company at any time at their
liquidation preference and are convertible into common shares 16.67% annually
commencing in the fifth year, with a maximum of 50% convertible in any one
year. The Preferred Shares are convertible into the number of Common Shares as
would result in the holder receiving the same amount of distributions from the
shares at the applicable conversion dates as the holder received as a holder of
the Preferred Shares. The acquisition significantly increases the Company's
presence in the Washington, D.C., Maryland and Virginia market areas.

Expansion, Improvement and Operation of Existing Properties

During the fiscal year ended December 31, 1995, the Company also completed
significant renovation and/or expansion projects with respect to Collegetown
Shopping Center, Glassboro, New Jersey and Park Hills Plaza in Altoona,
Pennsylvania. The completion of these projects helped maintain the Company's
Properties' overall leased percentage at approximately 93% at December 31, 1995
and at December 31, 1994.

With respect to Collegetown Shopping Center, the project included the expansion
of the center by approximately 20,000 square feet of GLA, capital improvements
and reconfiguration of existing space. The formal completion of the renovation
program in November 1995 was marked with the simultaneous openings of the Pep
Boys anchor store and the opening of the expanded Acme store. Previously, in
July 1995, Payless Shoesource opened a newly constructed free-standing store.

The renovation project at Park Hills Plaza, completed during 1994, included
significant reconfiguration of existing space to meet the needs of existing and
new tenants. The remaining vacant space of 38,500 square feet of GLA was leased
to Superpetz, Inc. (25,700) and Goodwill Industries (12,800). The addition of
the new tenants resulted in an increase in the leased percentage at the center
to 100% at December 31, 1995 from approximately 85% at December 31, 1994.

- -11-
<PAGE>
During 1995, three of the Company's anchor tenants, Bradlees, Caldor and
Jamesway, filed for bankruptcy under Chapter 11 of the bankruptcy code. The
Company has three Bradlees stores, three Caldor stores and two Jamesway stores.
In general, in a Chapter 11 proceeding, the tenant is required to pay the full
rental to the landlord for the store on a current basis.

The Jamesway stores are located in Phoenixville, Pennsylvania and Bradford,
Pennsylvania and are approximately 60,138 and 76,000 square feet, respectively.
Jamesway has disaffirmed the leases for these stores effective February 29,
1996. The Company believes that these two leases were below market rental
rates and, therefore, the Company will not have significant difficulty in
releasing these stores. The average rent paid by Jamesway for these locations
was approximately $2.60 per square foot.

Liquidity and Capital Resources

At December 31, 1995, the Company had $6,402,000 of cash and marketable
securities on hand in addition to $216,000 in the cash capital reserve
improvement fund established pursuant to the terms of the $100 million
borrowing (the "Mortgage Loan"). During the year ended December 31, 1995, the
Company used $552,000 of the cash capital reserve improvement fund to pay for
improvements and expansions at various properties encumbered by the Mortgage
Loan.

As of December 31, 1995 the Company had total mortgages payable of $204,247,000
of which $37,776,000 bear fixed rates of interest ranging from 6.0% to 10.5%.
The Company is required to make principal payments on these fixed rate
mortgages payable of $6,900,000 in 1996, $548,000 in 1997, $1,749,000 in 1998,
$10,741,000 in 1999 and $365,000 in 2000. During 1996 the Company has a
balloon payment coming due of $6,361,000 on one of the fixed rate mortgages.

The Mortgage Loan bears interest at a fluctuating rate equal to 90-day LIBOR
plus 200 basis points, and matures in three principal installments of
$41,700,000 in 1999, $41,700,000 in 2000 and $16,600,000 in 2001. The interest
rate is reset quarterly in February, May, August and November. As of February
10, 1996 the interest rate was reset at 7.25% (90-day LIBOR plus 200 basis
points). According to the provisions of the interest rate protection
agreements, the difference between the specified rate and the current maximum
rate of 6.75% will be paid to the Company. The Company is exposed to credit
loss in the event of non-performance by the counterparties to the interest rate
protection agreements; however, the Company does not anticipate non-performance
by the counterparties. Under the interest rate protection agreements, the
maximum rates payable under the Mortgage Loan are as follows:

- -12-
<PAGE>
<TABLE>
<S> <C>
November 1993 to November 1994 6.25%
November 1994 to November 1995 6.75%
November 1995 to November 1996 6.75%
November 1996 to November 1997 6.75%
November 1997 to November 1998 8.75%
November 1998 to November 1999 8.75%
November 1999 to November 2000 10.25%
November 2000 to November 2001 10.25%
</TABLE>

As of December 31, 1995 the Company also had $23.0 million of mortgages
outstanding under the $50.0 million Acquisition Credit Facility with Nomura
Asset Capital Corporation. These borrowings bear interest at a rate equal to
30-day LIBOR plus 250 basis points and are due June 30, 1996. The Company also
had a $13,789,000 mortgage loan on the Fox Run Shopping Center which bears
interest at 30-day LIBOR plus 250 basis points, and which requires principal
payments of $173,000 in 1996, $193,000 in 1997, $211,000 in 1998 and
$13,211,000 in 1999. At December 31, 1995 the interest rate on these mortgages
was 8.4725%.

The Company has fully utilized its $7.0 million Working Capital Credit Facility
with Nomura Asset Capital Corporation. The line is secured by mortgages on
Best Plaza and MacArthur Plaza shopping centers. Amounts borrowed under the
line bear interest at a fluctuating rate per annum equal to 30-day LIBOR plus
250 basis points and are due June 30, 1996. At December 31, 1995 the interest
rate on the line was 8.4725%.

In addition, as of December 31, 1995, the Company had four floating rate
mortgages where the interest rate is based on the prime rate, with pricipal
outstanding of $22,182,000. The interest rate on two of these mortgages is at
the prime rate and the principal balances of $11,625,000 are due during 1996.
The interest rate on the third mortgage is the prime rate plus 50 basis points
with the principal balance being amortized at the rate of $200,000 per year.
The interest rate on the fourth mortgage is the prime rate plus 100 basis
points with the principal balance of $ 4,790,000 due during 1996. The prime
rate was 8.50% at December 31, 1995.

In February 1995 the Company obtained a $1.0 million unsecured line of credit
from Corestates Bank, N.A. Amounts borrowed under the line bear interest at the
bank's prime rate, which was 8.50% at December 31, 1995. The facility is
renewable annually, matures June 30, 1996 and there was $500,000 outstanding
under this facility as of December 31, 1995.

The Company is investigating and is currently in negotiations to extend or
refinance the mortgage debt that is maturing in 1996.

The Company has budgeted approximately $3.3 million for 1996 for capital
expenditures to expand and improve its existing portfolio of shopping centers.
The Company expects to meet its short-term liquidity requirements through net
cash flow provided from operations, existing cash, long-term or short-term
borrowings and the cash capital reserve improvement fund. The cash capital
reserve improvement fund may be utilized by the Company for the funding of
costs related to leasing, installation of tenants and capital improvements in
the centers secured by the Mortgage Loan. To meet its long-term liquidity
requirements, such as refinancing its balloon mortgages, financing acquisitions
and capital improvements, the Company intends to either utilize long-term
borrowings, issue debt securities and/or offer additional equity securities.

Management believes it has adequate access to capital to continue to meet its
short-term and long-term requirements and objectives.

- -13-
<PAGE>
Results of Operations

Year ended December 31, 1995 versus the year ended December 31, 1994

Net income for common shareholders decreased $475,000, or 5%, to $9,392,000 or
$0.91 per common share, in 1995 from $9,867,000 or $0.96 per common share, in
1994.

Funds from operations is defined as income before depreciation and amortization
and extraordinary items less gains on the sale of real estate. Management
believes that funds from operations is an appropriate measure of the Company's
operating performance. Funds from operations for common shareholders increased
$1,455,000 or 7% from $20,721,000 for the year ended December 31, 1994 to
$22,176,000 for the year ended December 31, 1995.

Minimum rent increased $7,093,000 or 21% from $33,166,000 for the year ended
December 31, 1994 to $40,259,000 for the year ended December 31, 1995. The
increase was primarily due to the additional rents from a full year of
operations for the four centers purchased by the Company during 1994
($1,737,000) and the additional rent generated by the five centers purchased in
1995 ($3,478,000). The balance of the increase ($1,878,000) or 6% was due to
the leasing of previously vacant space and higher renewal rates for existing
leases at centers owned for the entire years of 1994 and 1995.

Percentage rent increased $44,000 or 4% from $1,000,000 for the year ended
December 31, 1994 to $1,044,000 for the year ended December 31, 1995. The
change was due to the acquisition of the centers purchased in 1995.

Expense reimbursements increased $1,533,000 or 16% from $9,455,000 for the year
ended December 31, 1994 to $10,988,000 for the year ended December 31, 1995.
The increase was primarily due to the additional reimbursements from a full
year of operations for the four centers purchased by the Company during 1994
and the additional reimbursements generated by the five centers purchased in
1995, which was offset by the decrease in snow removal cost reimbursement from
1994 to 1995.

Interest expense increased $5,739,000 or 55% from $10,469,000 for the year
ended December 31, 1994 to $16,208,000 for the year ended December 31, 1995.
The increase is primarily due to the interest on mortgages related to centers
purchased in 1994 and an increase in interest rates on the Company's $100
million Mortgage Loan, which was partially offset by payments related to the
Company's interest rate protection agreements, as previously described, in the
amount of $390,000 and $1,310,000 in 1994 and 1995, respectively. In addition,
interest expense was reduced by capitalized interest on projects under
construction and land under development in the amount of $943,000 and $320,000
during 1994 and 1995, respectively.

Depreciation and amortization increased $1,837,000 or 20% from $9,066,000 for
the year ended December 31, 1994 to $10,903,000 for the year ended December 31,
1995. The increase was primarily due to the additional depreciation for a full
year of operations for the four centers purchased by the Company during 1994
and the additional depreciation for the five centers purchased during 1995.

Real estate taxes increased $1,048,000 or 21% from $4,900,000 for the year
ended December 31, 1994 to $5,948,000 for the year ended December 31, 1995.
The increase was primarily due to the additional real estate taxes for a full
year of operations for the four centers purchased by the Company during 1994
and the additional real estate taxes for the five centers purchased in 1995.
The increase was offset by the capitalization of real estate taxes on projects
under construction of $240,000 and $144,000 during the year 1994 and 1995,
respectively.

- -14-
<PAGE>
Operations and maintenance expenses decreased $122,000 or 2% from
$7,727,000 for the year ended December 31, 1994 to $7,605,000 for the year
ended December 31, 1995. The decrease was primarily due to the reduction in
snow removal costs from 1994 to 1995 which was offset by the additional
expenses for a full year of operations of the four centers purchased by the
Company during 1994 and the expenses relating to the centers purchased during
1995.

General and administrative expenses decreased $82,000 or 3% from $3,011,000 for
the year ended December 31, 1994 to $2,929,000 for the year ended December 31,
1995. The decrease is primarily due to a decrease in state capital stock and
franchise taxes and to a lesser degree a decrease in use of outside
professionals.

Year ended December 31, 1994 versus the year ended December 31, 1993

Net income decreased $77,000, or less than 1%, to $9,867,000 or $0.96 per
share, in 1994 from $9,944,000 or $1.16 per share, in 1993. This decrease is
due to the nonrecurring lease cancellation fees paid to the Company in 1993.
Excluding the lease cancellation fees, net income increased $2,326,000, or 31%
from 1993 to 1994.

Funds from operations increased $1,757,000 or 9% from $18,964,000 for the year
ended December 31, 1993 to $20,721,000 for the year ended December 31, 1994.
The 1993 results include $2,403,000 of non-recurring lease cancellation fees
paid to the Company. Excluding the lease cancellation fees, the funds from
operations increased $4,160,000 or 25% from 1993 to 1994.

Minimum rent increased $5,478,000 or 20% from $27,688,000 for the year ended
December 31, 1993 to $33,166,000 for the year ended December 31, 1994. The
increase was primarily due to the additional rents from a full year of
operations for the four centers purchased by the Company during 1993
($1,817,000) and the additional rent generated by the four centers purchased in
1994 ($3,264,000). The balance of the increase ($397,000) was due to the
leasing of previously vacant space and higher renewal rates for existing leases
which were offset by a temporary decrease in rents ($425,000) at Park Hills
Plaza and The Mall at Cross Country during 1994 while the centers were being
retenanted.

Percentage rent increased $305,000 or 44% from $695,000 for the year ended
December 31, 1993 to $1,000,000 for the year ended December 31, 1994. The
change was due to an increase in sales for tenants who had not previously paid
percentage rent.

Expense reimbursements increased $1,696,00 or 22% from $7,759,000 for the year
ended December 31, 1993 to $9,455,000 for the year ended December 31, 1994.
The increase was primarily due to the additional reimbursements from a full
year of operations for the four centers purchased by the Company during 1993,
the additional reimbursements generated by the four centers purchased in 1994,
and the increase in snow removal cost incurred as a result of the severe winter
weather experienced by the northeast portion of the United States during the
first quarter of 1994.

Other income decreased $2,185,000 or 83% from $2,619,000 for the year ended
December 31, 1993 to $434,000 for the year ended December 31, 1994. The
decrease was due to the receipt of $2,403,000 of lease termination fees in 1993
primarily at The Mall at Cross County and Park Hills Plaza.

Interest expense increased $1,592,000 or 17% from $8,877,000 for the year ended
December 31, 1993 to $10,469,000 for the year ended December 31, 1994. The
increase is primarily due to the interest on mortgages related to centers
purchased in 1994 and an increase in interest rates on the Company's $100
million Mortgage Loan, which was partially offset by payments related to the
Company's interest rate protection agreements, as previously described, in the
amount of $390,000. In addition, interest expense was reduced by capitalized
interest of $943,000 on projects under construction and land under development
during 1994.

- -15-
<PAGE>
Depreciation and amortization increased $1,430,000 or 19% from
$7,636,000 for the year ended December 31, 1993 to $9,066,000 for the year
ended December 31, 1994. The increase was primarily due to the additional
depreciation for a full year of operations for the four centers purchased by
the Company during 1993 and the additional depreciation for the four centers
purchased during 1994.

Real estate taxes increased $440,000 or 10% from $4,460,000 for the year ended
December 31, 1993 to $4,900,000 for the year ended December 31, 1994. The
increase was primarily due to the additional real estate taxes for a full year
of operations for the four centers purchased by the Company during 1993 and the
additional real estate taxes for the four centers purchased in 1994. The
increase was offset by the capitalization of $240,000 of real estate taxes on
projects under construction during the year 1994.

Operations and maintenance expenses increased $1,612,000 or 26% from $6,115,000
for the year ended December 31, 1993 to $7,727,000 for the year ended December
31, 1994. The increase was primarily due to the additional expenses for a full
year of operations of the four centers purchased by the Company during 1993 and
the additional expenses for the four centers purchased in 1994 and the
unusually high snow removal costs incurred as a result of the severe winter
weather in the northeast portion of the United States in the first quarter of
1994.

General and administrative expenses increased $334,000 or 12% from $2,677,000
for the year ended December 31, 1993 to $3,011,000 for the year ended December
31, 1994. The increase is primarily due to an increase in state capital stock
and franchise taxes and an increase in the level of corporate activity which
required the use of outside professionals to a greater degree than in 1993.

Year ended December 31, 1993 versus the year ended December 31, 1992

The comparison of results for the year ended December 31, 1993 as compared to
the year ended December 31, 1992 are not relevant since the Company commenced
operations in November, 1992.

Inflation

Most of the retail tenant leases at the shopping center properties contain
provisions which will entitle the Company to receive percentage rents based on
the tenant's gross sales. Such percentage rents minimize the risk to the
Company of the adverse effects of inflation. Most of the leases at the
shopping center properties require the tenants to pay a substantial share of
operating expenses, such as real estate taxes, insurance and common area
maintenance costs, and thereby reduce the Company's exposure to increased
costs. In addition, many of the leases at the shopping center properties are
for terms less than ten years, which may enable the Company to seek increased
rents upon renewal of existing leases. The northeastern section of the United
States has been experiencing an economic recession, and while the impact of
this economic trend seems to be reversing, if the recession were to continue
for a prolonged time, funds from operations could decline as some tenants may
have trouble meeting their lease obligations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this Item 8 is included as a separate section of this Annual
Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

- -16-
<PAGE>
PART III

ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
year covered by this Form 10-K with respect to its Annual Meeting of
Shareholders to be held on June 5, 1996.

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) Financial Statements

Kranzco Realty Trust
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements Of Operations for the years ended December 31,
1995, 1994 and 1993
Consolidated Statements Of Beneficiaries' Equity for the years ended
December 31, 1995, 1994 and 1993
Consolidated Statements Of Cash Flows for the years ended December 31,
1995, 1994 and 1993
Notes To Consolidated Financial Statements

(2) Financial Statement Schedule

Kranzco Realty Trust
Report of Independent Public Accountants
Schedule III -
Real Estate and Accumulated Depreciation - December 31, 1995
Notes to Schedule III

- -17-
<PAGE>
(3) Exhibits

3.1 Amended and Restated Declaration of Kranzco Realty Trust. (Incorporated
by reference to Exhibit 3.4 of the Company's Registration Statement
No.33-49434.)

3.2 Bylaws, as amended. (Incorporated by reference to Exhibit 3.2 of the
Company's Registration Statement No.33-49434.)

4.1 Specimen certificate for Common Shares of Beneficial Interest.
(Incorporated by reference to Exhibit 4.1 of the Company's Registration
Statement No.33-49434.)

4.2 Warrant to purchase 170,000 Common Shares of Kranzco Realty Trust, dated
November 19, 1992, issued to the Chapter 11 Estate of Bernard J. Rosenhein and
the subsequently consolidated entities. (Incorporated by reference to Exhibit
4.2 of the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.)

4.3 Warrant to purchase 21,429 Common Shares of Kranzco Realty Trust, dated
November 19, 1992 issued to David Goldman. (Incorporated by reference to
Exhibit 4.3 of the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992.)

4.4 Article Supplementary for the Series A Preferred Shares of Beneficial
Interest.

10.1 Kranzco Realty Trust 1992 Employees Share Option Plan, as amended.
(Incorporated by reference to Exhibit 10.10 of the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.)

10.2 Kranzco Realty Trust 1992 Employees Share Option Plan, amended.
(Incorporated by reference to Exhibit 10.11 of the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.)

10.3. Loan Agreement, dated as of November 19, 1992, between KRT Mortgage
Securities Trust and KRT Property Holdings, Inc. (Incorporated by reference
to Exhibit 28.1 of the Company's Report on Form 8-K dated December 17, 1992.)

10.4 Mortgage Promissory Note, dated November 19, 1992, made by KRT Property
Holdings, Inc., in favor of KRT Mortgage Securities Trust. (Incorporated by
reference to Exhibit 28.2 of the Company's Report on Form 8-K dated December
17, 1992.)

10.5 Collection Account and Reserve Account Agreement, dated as of November
19, 1992, by and among KRT Property Holdings, Inc., Norwest Bank Minnesota,
National Association, as account agent, Kranzco Realty Trust, KRT Mortgage
Securities Trust and Norwest Bank Minnesota, National Association, as trustee.
(Incorporated by reference to Exhibit 28.3 of the Company's Report on Form 8-K
dated December 17, 1992.)

10.6 Environmental Indemnity Agreement, dated as of November 19, 1992, by
and among KRT Property Holdings, Inc., KRT Mortgage Securities Trust and
Norwest Bank Minnesota, National Association, as trustee. (Incorporated by
reference to Exhibit 28.4 of the Company's Report on Form 8-K dated December
17, 1992.)

10.7 Representations Agreement, dated as of November 19, 1992, by and among
KRT Mortgage Securities Trust, Cargill Financial Services Corporation and KRT
Property Holdings, Inc. (Incorporated by reference to Exhibit 28.5 of the
Company's Report on Form 8-K dated December 17, 1992.)

10.8 Interest Rate and Currency Exchange Agreement, dated as of November 10,
1992, between Societe Generale, New York Branch, and KRT Property Holdings,
Inc. (Incorporated by reference to Exhibit 28.6 of the Company's Report on
Form 8-K dated December 17, 1992.)

10.9 Letter Agreement, dated November 12, 1992, between Societe Generale,
New York Branch, and KRT Property Holdings, Inc. regarding rate caps.
(Incorporated by reference to Exhibit 28.7 of the Company's Report on Form 8-K
dated December 17, 1992.)

10.10 Letter Agreement, dated October 1, 1993, between Morgan Guaranty Trust
Company of New York and KRT Property Holdings, Inc., regarding rate caps.
(Incorporated by reference to Exhibit 10.10 of the Company's Annual Report on
Form 10-K dated March 17, 1994.)

- -18-
<PAGE>
10.11 Subordination Agreement, dated as of November 19, 1992, by and among
KRT Mortgage Securities Trust, Kranzco Realty Trust, KRT Property Holdings,
Inc. and Cargill Financial Services Corporation. (Incorporated by reference to
Exhibit 28.8 of the Company's Report on Form 8-K dated December 17, 1992.)

10.12 Security Agreement, dated as of November 19, 1992, KRT Property
Holdings, Inc., Norwest Bank Minnesota, National Association, as trustee of KRT
Mortgage Securities Trust. (Incorporated by reference to Exhibit 28.9 of the
Company's Report on Form 8-K dated December 17, 1992.)

10.13 Open-End Mortgage, Mortgage Deed, Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Financing Statement from KRT
Property Holdings, Inc. to KRT Mortgage Securities Trust, dated November 19,
1992, with respect to Barn Plaza. (Incorporated by reference to Exhibit 28.10
of the Company's Report on Form 8-K dated December 17, 1992.)

10.14 Open-End Mortgage, Mortgage Deed, Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Financing Statement from KRT
Property Holdings, Inc. to KRT Mortgage Securities Trust, dated November 19,
1992, with respect to Bradford Mall. (Incorporated by reference to Exhibit
28.11 of the Company's Report on Form 8-K dated December 17, 1992.)

10.15 Open-End Mortgage, Mortgage Deed, Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Financing Statement from KRT
Property Holdings, Inc. to KRT Mortgage Securities Trust, dated November 19,
1992, with respect to Bristol Commerce Park. (Incorporated by reference to
Exhibit 28.12 of the Company's Report on Form 8-K dated December 17, 1992.)

10.16 Open-End Mortgage, Mortgage Deed, Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Financing Statement from KRT
Property Holdings, Inc. to KRT Mortgage Securities Trust, dated November 19,
1992, with respect to Park Hills Plaza. (Incorporated by reference to
Exhibit 28.13 of the Company's Report on Form 8-K dated December 17, 1992.)

10.17 Open-End Mortgage, Mortgage Deed, Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Financing Statement from KRT
Property Holdings, Inc. to KRT Mortgage Securities Trust, dated November 19,
1992, with respect to Valley Forge Mall. (Incorporated by reference to
Exhibit 28.14 of the Company's Report on Form 8-K dated December 17, 1992.)

10.18 Open-End Mortgage, Mortgage Deed, Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Financing Statement from KRT
Property Holdings, Inc. to KRT Mortgage Securities Trust, dated November 19,
1992, with respect to Bensalem Square Shopping Center. (Incorporated by
reference to Exhibit 28.15 of the Company's Report on Form 8-K dated December
17, 1992.)

10.19 Open-End Mortgage, Mortgage Deed, Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Financing Statement from KRT
Property Holdings, Inc. to KRT Mortgage Securities Trust, dated November 19,
1992, with respect to Bethlehem Square Shopping Center. (Incorporated by
reference to Exhibit 28.16 of the Company's Report on Form 8-K dated December
17, 1992.)

10.20 Open-End Mortgage, Mortgage Deed, Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Financing Statement from KRT
Property Holdings, Inc. to KRT Mortgage Securities Trust, dated November 19,
1992, with respect to Whitehall Shopping Center. (Incorporated by reference
to Exhibit 28.17 of the Company's Report on Form 8-K dated December 17, 1992.)

10.21 Mortgage, Mortgage Deed, Leasehold Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Financing Statement from KRT Property
Holdings, Inc. to KRT Mortgage Securities Trust, dated November 19, 1992, with
respect to Wampanoag Plaza. (Incorporated by reference to Exhibit 28.18 of the
Company's Report on Form 8-K dated December 17, 1992.)

- -19-
<PAGE>
10.22 Mortgage Deed, Leasehold Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Financing Statement from KRT Property Holdings,
Inc. to KRT Mortgage Securities Trust, dated November 19, 1992, with respect to
Golfland Shopping Center. (Incorporated by reference to Exhibit 28.19 of the
Company's Report on Form 8-K dated December 17, 1992.)

10.23 Mortgage Deed, Leasehold Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Financing Statement from KRT Property Holdings,
Inc. to KRT Mortgage Securities Trust, dated November 19, 1992, with respect to
Groton Square Shopping Center. (Incorporated by reference to Exhibit 28.20 of
the Company's Report on Form 8-K dated December 17, 1992.)

10.24 Mortgage Deed, Leasehold Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Financing Statement from KRT Property Holdings,
Inc. to KRT Mortgage Securities Trust, dated November 19, 1992, with respect to
Milford Shopping Center. (Incorporated by reference to Exhibit 28.21 of the
Company's Report on Form 8-K dated December 17, 1992.)

10.25 Mortgage Deed, Leasehold Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Financing Statement from KRT Property Holdings,
Inc. to KRT Mortgage Securities Trust, dated November 19, 1992, with respect to
Parkway Plaza I Shopping Center. (Incorporated by reference to Exhibit 28.22
of the Company's Report on Form 8-K dated December 17, 1992.)

10.26 Mortgage Deed, Leasehold Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Financing Statement from KRT Property Holdings,
Inc. to KRT Mortgage Securities Trust, dated November 19, 1992, with respect to
Stratford Square Shopping Center. (Incorporated by reference to Exhibit 28.23
of the Company's Report on Form 8-K dated December 17, 1992.)

10.27 Fee and Leasehold Mortgage Consolidation and Spreader Agreement,
Assignment of Leases and Rents, Security Agreement and Fixture Financing
Statement from KRT Property Holdings, Inc. to KRT Mortgage Securities Trust,
dated November 19, 1992, with respect to A&P Mamaroneck Shopping Center, Cross
County Shopping Center, High Ridge Shopping Center, North Ridge Shopping
Center, Port Washington Shopping Center and Village Square Shopping Center.
(Incorporated by reference to Exhibit 28.24 of the Company's Report on Form 8-K
dated December 17, 1992.)

10.28 Loan Agreement, dated as of November 19, 1992, by and between KRT
Property Holdings, Inc. and Parkway Plaza II Corp. (Incorporated by reference
to Exhibit 28.25 of the Company's Report on Form 8-K dated December 17, 1992.)

10.29 Mortgage Promissory Note, dated November 19, 1992, made by Parkway
Plaza II Corp. in favor of KRT Property Holdings, Inc. (Incorporated by
reference to Exhibit 28.26 of the Company's Report on Form 8-K dated December
17, 1992.)

10.30 Environmental Indemnity Agreement, dated as of November 19, 1992, by
and between KRT Property Holdings, Inc. and Parkway Plaza II Corp.
(Incorporated by reference to Exhibit 28.27 of the Company's Report on Form 8-K
dated December 17, 1992.)

10.31 Security Agreement, dated as of November 19, 1992, by and between KRT
Property Holdings, Inc. and Parkway Plaza II Corp. (Incorporated by reference
to Exhibit 28.28 of the Company's Report on Form 8-K dated December 17, 1992.)

10.32 Mortgage Deed, Leasehold Mortgage Deed, Assignment of Leases and
Rents, Security Agreement and Fixture Financing Statement from Parkway Plaza II
Corp. to KRT Property Holdings, Inc. dated November 19, 1992, with respect to
Parkway Plaza II Shopping Center. (Incorporated by reference to Exhibit 28.29
of the Company's Report on Form 8-K dated December 17, 1992.)

10.33 Collateral Assignment Agreement, dated as of November 19, 1992, by and
between KRT Property Holdings, Inc. and KRT Mortgage Securities Trust.
(Incorporated by reference to Exhibit 28.30 of the Company's Report on Form 8-K
dated December 17, 1992.)

- -20-
<PAGE>
10.34 Trust and Servicing Agreement, dated November 19, 1992, by and among
the parties listed on Schedule A thereto, KRT Property Holdings, Inc. and
Norwest Bank Minnesota, National Association. (Incorporated by reference to
Exhibit 28.31 of the Company's Report on Form 8-K dated December 17, 1992.)

10.35 Note Purchase Agreement dated February 15, 1994 among Nomura Asset
Capital Corporation, KR Suburban, L.P., KR 69th Street, L.P. and Kranzco Realty
Trust. (Incorporated by reference to Exhibit 10.35 of the Company's Annual
Report on Form 10-K dated March 17, 1994.)

10.36 Repurchase Agreement dated February 15, 1994 between Kranzco Realty
Trust and Nomura Asset Capital Corporation. (Incorporated by reference to
Exhibit 10.36 of the Company's Annual Report on Form 10-K dated March 17,
1994.)

10.37 $50 Million Senior Secured Floating Rate Note due 1996 issued by KR
Suburban, L.P. and KR 69th Street, L.P. in favor of Nomura Asset Capital
Corporation. (Incorporated by reference to Exhibit 10.37 of the Company's
Annual Report on Form 10-K dated March 17, 1994.)

10.38 Kranzco Realty Trust 1995 Incentive Plan. (Incorporated by reference
to Exhibit 4.4 of the Company's Registration Statement on Form S-8 No.
33-94294.)

21.1 Subsidiaries of Kranzco Realty Trust.

23.1 Consent of Arthur Andersen LLP.

27 Financial Data Schedule Article 5 Included for Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) purposes only. This Schedule
contains summary financial information extracted from the consolidated balance
sheets and consolidated statements of income and is qualified in its entirety
by reference to such financial statements.

(4) Reports on Form 8-K

None.

(5) Property Table.

- -21-
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

KRANZCO REALTY TRUST
(Registrant)

By: /s/ Norman M. Kranzdorf
Norman M. Kranzdorf
Chief Executive Officer

Dated: March 14, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ Norman M. Kranzdorf President, Chief Executive March 14, 1996
Norman M. Kranzdorf Officer and Trustee (Principal
Executive Officer)

/s/ Robert H. Dennis Chief Financial Officer, March 14, 1996
Robert H. Dennis Treasurer and Trustee (Principal
Financial and Accounting Officer)

/s/ Edmund Barrett Chief Operating Officer, Executive March 14, 1996
Edmund Barrett Vice President and Trustee

/s/ Dr. Peter D. Linneman Trustee March 14, 1996
Dr. Peter D. Linneman

/s/ Irvin B. Maizlish Trustee March 14, 1996
Irvin B. Maizlish

/s/ E. Donald Shapiro Trustee March 14, 1996
E. Donald Shapiro

/s/ James B. Selonick Trustee March 14, 1996
James B. Selonick

- -22-
<PAGE>
INDEX TO FINANCIAL STATEMENTS

PAGE
FINANCIAL STATEMENTS

Kranzco Realty Trust

* Report of Independent Public Accountants F-1
* Consolidated Balance Sheets as of December 31, 1995 and 1994 F-2
* Consolidated Statements Of Operations for the years ended
December 31, 1995, 1994 and 1993 F-3
* Consolidated Statements Of Beneficiaries' Equity for the years ended
December 31, 1995, 1994 and 1993 F-4
* Consolidated Statements Of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 F-5
* Notes To Consolidated Financial Statements F-6

FINANCIAL STATEMENT SCHEDULES

Kranzco Realty Trust

* Report of Independent Public Accountants S-1
* Schedule III - Real Estate and Accumulated Depreciation -
December 31, 1995 S-2
* Notes to Schedule III S-5

<PAGE>
<AUDIT-REPORT>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Trustees of
Kranzco Realty Trust:

We have audited the accompanying consolidated balance sheets of Kranzco Realty
Trust (a Maryland trust) and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, beneficiaries' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kranzco Realty
Trust and subsidiaries as of December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.

Philadelphia, Pennsylvania
February 21, 1996

</AUDIT-REPORT>
F-1
<PAGE>
<TABLE>

Kranzco Realty Trust and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
December 31, December 31,
1995 1994
<S> <C> <C>
ASSETS:
Shopping center properties owned, at cost (Notes 1, 10 and 11)
Land $ 75,386,000 $ 63,180,000
Buildings and improvements 292,687,000 255,690,000
------------ -------------
368,073,000 318,870,000

Less accumulated depreciation 25,152,000 15,494,000
------------ -------------
342,921,000 303,376,000

Cash and cash equivalents (Note 1) 6,129,000 3,924,000
Marketable securities 273,000 244,000
Capital reserve improvement fund (Note 3) 216,000 768,000
Rents and other receivables, net of allowance of
$831,000 and $545,000, December 31, 1995 and 1994
(Notes 1 and 4) 8,282,000 6,352,000
Prepaid expenses 1,875,000 1,891,000
Deferred financing costs, net of accumulated amortization
of $7,633,000 and $4,994,000, December 31, 1995 and 1994 10,071,000 12,410,000
Deferred costs, net of accumulated amortization of $496,000,
and $242,000, December 31, 1995 and 1994 (Note 1) 1,688,000 1,454,000
Other assets 1,528,000 1,360,000
------------ -------------
Total assets $372,983,000 $331,779,000
------------ -------------
------------ -------------
LIABILITIES:
Mortgages and notes payable (Notes 3 and 13) $204,247,000 $160,771,000
Tenant security deposits 1,129,000 944,000
Accounts payable and accrued expenses 1,875,000 2,273,000
Other liabilities 756,000 636,000
Distributions payable (Note 6) 5,094,000 4,951,000
------------ -------------
Total liabilities 213,101,000 169,575,000

COMMITMENTS AND CONTINGENCIES (Notes 8 and 13)

BENEFICIARIES' EQUITY (Notes 2, 6 and 11):
Shares of beneficial interest, $0.01 par value; authorized
100,000,000 shares; issued and outstanding, 11,155 preferred
shares, December 31, 1995, none at December 31, 1994;
10,322,858 and 10,315,497 common shares at December 31,
1995 and December 31, 1994, respectively 104,000 103,000
Capital in excess of par value 186,914,000 178,712,000
Cumulative net income available for common shareholders 30,029,000 20,637,000
Cumulative distributions on common shares of beneficial interest (57,061,000) (37,248,000)
------------ -------------
159,986,000 162,204,000
Unearned compensation on restricted shares of beneficial
interest (Note 7) (104,000) 0
------------ -------------
Total beneficiaries' equity 159,882,000 162,204,000

Total liabilities and beneficiaries' equity $372,983,000 $331,779,000
------------ -------------
------------ -------------
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
F-2
<PAGE>
<TABLE>
Kranzco Realty Trust and Subsidiaries
Consolidated Statements of Operations
<CAPTION>
For the For the For the
year ended year ended year ended
December 31, December 31, December 31,
1995 1994 1993
<S> <C> <C> <C>
REVENUES:
Minimum rent (Notes 1 and 4) $ 40,259,000 $33,166,000 $27,688,000
Percentage rent 1,044,000 1,000,000 695,000
Expense reimbursements 10,988,000 9,455,000 7,759,000
Interest income 902,000 985,000 948,000
Other (Note 12) 277,000 434,000 2,619,000
----------- ---------- ----------
Total revenues 53,470,000 45,040,000 39,709,000
----------- ---------- ----------
EXPENSES:
Interest 16,208,000 10,469,000 8,877,000
Depreciation and amortization 10,903,000 9,066,000 7,636,000
Real estate taxes 5,948,000 4,900,000 4,460,000
Operations and maintenance 7,605,000 7,727,000 6,115,000
General and administrative (Note 8) 2,929,000 3,011,000 2,677,000
----------- ---------- ----------
Total expenses 43,593,000 35,173,000 29,765,000
----------- ---------- ----------
NET INCOME $9,877,000 $9,867,000 $9,944,000

Preferred Share Distribution 485,000 0 0
----------- ---------- ----------

NET INCOME FOR COMMON SHAREHOLDERS $ 9,392,000 $9,867,000 $9,944,000
----------- ---------- ----------
----------- ---------- ----------
NET INCOME PER COMMON SHARE OF
BENEFICIAL INTEREST $0.91 $0.96 $1.16
----------- ---------- ----------
----------- ---------- ----------
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
Kranzco Realty Trust and Subsidiaries
Consolidated Statements of Beneficiaries' Equity
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
Unearned
Cumulative Cumulative Compensation
Common Preferred Net Distributions on
Shares Preferred Shares of Capital Income on Common Restricted
of Shares of Beneficial In Excess Available Shares of Shares of
Beneficial Par Beneficial Interest of Par for Common Beneficial Beneficial
Interest Value Interest Par Value Value Shareholders Interest Interest
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1993 8,064,497 $81,000 0 $0 $128,246,000 $826,000 ($1,774,000) $0

Additional shares sold
to the public 2,250,000 22,000 - - 53,978,000 - -
Issuance costs - - - - (3,532,000) - - -
Options exercised 1,000 - - - 20,000 - - -
Net income - - - - - 9,944,000 - -
Distributions ($1.84 per share) - - - - - - (15,874,000) -
--------- ------- ----- ---- ----------- ---------- ------------ ---------

BALANCE, December 31, 1993 10,315,497 $103,000 0 $0 $178,712,000 $10,770,000 ($17,648,000) $0

Net Income - - - - - 9,867,000 - -
Distributions ($1.90 per share) - - - - - - (19,600,000) -
--------- ------- ----- ---- ----------- ---------- ------------ ---------

BALANCE, December 31, 1994 10,315,497 $103,000 0 $0 $178,712,000 $20,637,000 ($37,248,000) $0

Issuance of Shares 8,062 - - - 145,000 - - (104,000)
Forfeiture of common shares (701) - - - (14,000) - - -
Issuance of Preferred Shares,
net - - 11,155 1,000 7,976,000 - - -
Accretion of Discount on
Preferred Shares - - - - 95,000 (95,000) - -
Net Income - - - - - 9,877,000 - -
Distributions on Preferred
Shares - - - - - (390,000) - -
Distributions on Common
Shares of Beneficial Interest
($1.92 per share) - - - - - - (19,813,000) -
--------- ------- ----- ---- ----------- ---------- ------------ ---------

BALANCE, December 31, 1995 10,322,858 $103,000 11,155 $1,000 $186,914,000 $30,029,000 ($57,061,000) ($104,000)
--------- ------- ----- ---- ----------- ---------- ------------ ---------
--------- ------- ----- ---- ----------- ---------- ------------ ---------
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>

Kranzco Realty Trust and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
For the For the For the
year ended year ended year ended
December 31, December 31, December 31,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $9,877,000 $9,867,000 $9,944,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,903,000 9,066,000 7,636,000
Amortization of deferred financing costs 1,787,000 1,788,000 1,384,000

Changes in assets and liabilities:
(Increase) decrease in -
Rents and other receivables (1,930,000) (2,955,000) (2,833,000)
Prepaid expenses 16,000 (275,000) (286,000)
Other assets (272,000) (540,000) (496,000)
Increase (decrease) in -
Accounts payable and accrued expenses (398,000) (153,000) 822,000
Tenant security deposits 185,000 109,000 (30,000)
Other liabilities 120,000 332,000 4,000
----------- ----------- -----------
Net cash provided by operating activities 20,288,000 17,239,000 16,145,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in shopping center properties (4,261,000) (60,255,000) (32,570,000)
Decrease (increase) in marketable securities (29,000) 13,795,000 (14,039,000)
Decrease in capital reserve improvement fund 552,000 2,030,000 202,000
Increase in deferred costs (625,000) (924,000) (3,494,000)
----------- ----------- -----------
Net cash used in investing activities (4,363,000) (45,354,000) (49,901,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid on common shares of beneficial interest (19,810,000) (19,394,000) (12,903,000)
Distributions paid on preferred shares (251,000) 0 0
Issuance of common shares of beneficial interest 131,000 0 50,488,000
Proceeds of mortgages and notes payable 8,000,000 42,632,000 24,120,000
Repayments of mortgages and notes payable (1,490,000) (427,000) (25,352,000)
Increase in deferred costs (300,000) (524,000) (2,449,000)
----------- ----------- -----------
Net cash (used in) provided by financing activities (13,720,000) 22,287,000 33,904,000
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,205,000 (5,828,000) 148,000

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,924,000 9,752,000 9,604,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 6,129,000 $ 3,924,000 $ 9,752,000
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCINGACTIVITIES:
Preferred shares issued as part of the purchase price for the
acquisition of real estate:
Fair value of assets acquired $44,969,000 - -
Liabilities assumed 36,993,000 - -
----------- ----------- -----------
Preferred shares issued $7,976,000 - -
----------- ----------- -----------
----------- ----------- -----------
Accretion of discount on increasing rate preferred shares $95,000 - -
----------- ----------- -----------
----------- ----------- -----------
<FN>
The Company declared a distribution of $0.48 per common share, payable to shareholders of record as of
December 28, 1995. The distribution of $4,955,000 was paid on January 17, 1996.
The Company declared a distribution of $0.48 per common share, payable to shareholders of record as of
December 28, 1994. The distribution of $4,951,000 was paid on January 12, 1995.
The Company declared a distribution of $0.46 per common share, payable to shareholders of record as of
December 30, 1993. The distribution of $4,745,000 was paid on January 11, 1994.
The Company accrued the quarterly distribution on the preferred shares as of December 31, 1995.
The distribution of $139,000 was paid on January 1, 1996.
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
F-5
<PAGE>
KRANZCO REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 , 1994 and 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS AND NATURE OF OPERATIONS
Kranzco Realty Trust (a Maryland real estate investment trust) and its
subsidiaries ("KRT" or the "Company") are engaged in the ownership, management,
leasing, operation, acquisition, development, investment and disposition of
neighborhood and community shopping centers. In addition to its own
properties, the Company provides management services for shopping centers
owned by third parties. As of December 31, 1995, the Company owns 38 properties
in seven northeastern and mid-Atlantic states.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of KRT
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
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 as of the date of the financial statements
and reported amounts of revenues and expenses during the reporting periods.
The ultimate results could differ from those estimates.
REAL ESTATE
Real estate assets and improvements or replacements are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful life of thirty years for buildings and the related life of the
improvements or the related lease term. Maintenance and repairs are charged to
expense, as incurred.
CAPITALIZED INTEREST AND TAXES
Carrying charges, principally interest and taxes, of land under development and
buildings under construction are capitalized by the Company. Interest is
capitalized using an interest rate which equals a weighted average interest
rate on the Company's indebtedness. Capitalization ceases when construction
activities are completed and the property is available for occupancy by tenants
and the costs are depreciated over the estimated useful life of the property.

F-6
<PAGE>
DEFERRED COSTS
Deferred costs relate to the organization of the Company, amounts related to
the placement of debt and costs of leasing the shopping centers. Organization
costs are amortized on a straight-line basis over five years. Financing costs
are amortized using the effective interest method over the term of the related
debt. Leasing costs are amortized on a straight-line basis over the term of
the related lease.
REVENUE RECOGNITION
Minimum rental income is recognized on a straight-line basis over the term of
the lease agreements regardless of when payments are due and accrued rents are
included in rents receivable. Certain lease agreements contain provisions
which provide for additional rents based on tenants' sales volume and
reimbursement of the tenants' share of real estate taxes and certain common
area maintenance costs. These additional rents are reflected on the accrual
basis.
PER SHARE DATA
Net income per share is based on the weighted average number of common shares
of beneficial interest outstanding adjusted to give effect to common share
equivalents. The weighted average number of shares used in the computations
was 10,319,464, 10,315,497 and 8,590,850 in 1995, 1994 and 1993, respectively.
STATEMENT OF CASH FLOWS
Cash and cash equivalents include all cash and liquid investments with
original maturities of three months or less, primarily consisting of money
market accounts and government investments. Cash paid for interest was
$14,532,000, $9,386,000, and $9,210,000 for the years ended December 31,
1995, 1994 and 1993, respectively, which includes $1,660,000 for the year
ended December 31, 1993 for interest rate protection agreements (see Note 3).
INCOME TAXES
The Company and its subsidiaries file a consolidated Federal income tax return.
KRT intends to maintain its election to be taxed as a Real Estate Investment
Trust ("REIT") under Sections 856 to 860 of the Internal Revenue Code.
Accordingly, no provision for Federal income taxes has been reflected in the
financial statements. The Company is subject to a Federal excise tax computed
on a calendar year basis. The excise tax equals 4% of the excess, if any, of
85% of the Company's ordinary income plus 95% of any capital gain income for
the calendar year over cash distributions during the calendar year, as defined.
No provision for excise tax has been reflected in the financial statements as
no tax was due. Earnings and profits, which will determine the taxability of
distributions to stockholders, will differ from net income reported for
financial reporting purposes due to the differences in the cost basis for
Federal tax purposes and in the estimated useful lives used to compute
depreciation. The cost basis of the shopping center properties for Federal tax
purposes was $383,113,000 as of December 31, 1995.

F-7
<PAGE>
RECLASSIFICATIONS
Certain amounts in the 1994 and 1993 financial statements have been
reclassified to conform to the 1995 presentation.

2. ORGANIZATION AND PUBLIC OFFERINGS OF SHARES OF BENEFICIAL INTEREST:
The Company completed its initial public offering of shares of beneficial
interest and commenced operations on November 19, 1992. In 1993, the Company
issued 2.25 million common shares of beneficial interest to the public at a
price of $24 per share which resulted in net proceeds of approximately
$50,500,000. The Company used a portion of the net proceeds to repay the
outstanding acquisition indebtedness from Nomura Asset Capital Corporation of
$24,100,000. In addition, the Company purchased additional interest rate
protection for the $100,000,000 Mortgage Loan for $1,660,000 and funded
$2,000,000 into the cash capital reserve improvement fund for such loan (see
Note 3).

3. INDEBTEDNESS:
At December 31, 1995 and 1994, the Company had mortgages and notes payable
outstanding of $204,247,000 and $160,771,000, respectively. Concurrent with
the initial public offering, one of the Company's subsidiaries, KRT Property
Holdings, Inc., borrowed $100,000,000 and issued a mortgage (the "Mortgage
Loan") to KRT Mortgage Securities Trust, a Real Estate Mortgage Investment
Conduit (the "REMIC"). The net proceeds of approximately $88,144,000, after
costs of approximately $11,856,000 including $7,500,000 for interest rate
protection agreements, were used to acquire certain shopping centers. Interest
is payable monthly at the 90-day London Interbank Offering Rate ("LIBOR") plus
200 basis points. The rate is reset quarterly on February 10, May 10, August
10 and November 10 of each year until maturity. During 1993, KRT purchased
additional interest rate protection for $1,660,000 which further limits its
exposure to increases in LIBOR, resulting in Mortgage Loan interest rates
limited to:

<TABLE>
<S> <C>
November, 1993 to November, 1994 6.25%
November, 1994 to November, 1995 6.75%
November, 1995 to November, 1996 6.75%
November, 1996 to November, 1997 6.75%
November, 1997 to November, 1998 8.75%
November, 1998 to November, 1999 8.75%
November, 1999 to November, 2000 10.25%
November, 2000 to November, 2001 10.25%
</TABLE>

F-8
<PAGE>
The Company is exposed to credit loss in the event of nonperformance by the
counterparties to the interest rate protection agreements. However, the
Company does not anticipate nonperformance by the counterparties. During 1995
and 1994, increases in LIBOR resulted in mortgage loan interest rates above
limits provided by the interest rate protection agreements. Interest expense
for the year ended December 31, 1995 and 1994 on the accompanying statements
of operations is shown net of reimbursements of $1,310,000 and $390,000,
respectively, relating to the interest rate protection agreements and
capitalized interest of $320,000 and $943,000, respectively.

The Mortgage Loan is nonrecourse and principal payments are due as follows:
$41,700,000 in 1999, $41,700,000 in 2000 and $16,600,000 in 2001. The
effective interest rate payable on the Mortgage Loan was 6.75%, 6.75% and
5.50% at December 31, 1995, 1994 and 1993, respectively.

As a condition of the Mortgage Loan, KRT was required to establish a capital
reserve improvement fund. Furthermore, if the adjusted net operating income,
as defined, of the twenty-one properties pledged as collateral for the Mortgage
Loan falls below $20,000,000 for any four consecutive quarters, KRT must
increase the reserve by $3,000,000 at the rate of $750,000 each quarter. If
KRT subsequently increases net operating income to $22,000,000, the reserve may
be reduced to the original $3,000,000 amount. The reserve may be used to fund
costs related to leasing, installation of tenants and capital improvements. As
of December 31, 1995, 1994 and 1993, the Company was in compliance with these
covenants and no additional reserve is required.

The REMIC issued two types of certificates: Series A-1 Commercial Mortgage
Modified Pass-Through Principal/Interest Certificates (the "Series A-1
Certificates") and Series A-2 Commercial Mortgage Modified Pass-Through
Interest-Only Certificates (the "Series A-2 Certificates"). The Series A-1
Certificates entitle the holder to principal payments of $100,000,000 and
interest at LIBOR plus 135 basis points. The Series A-2 Certificates provide
for payments of interest only at 65 basis points calculated on a notional
amount of $100,000,000. On February 23, 1993, the Company purchased all of the
outstanding Series A-2 Certificates for $3,000,000. This cost is being
amortized using the effective interest method over the remaining life of the
Mortgage Loan.

Other secured mortgages and notes payable are nonrecourse and are payable in
installments over various terms through 2004 at interest rates ranging from
6.00% to 10.50%.

F-9
<PAGE>
<TABLE>
Aggregate principal payments on all outstanding indebtedness are due, as follows:
<S> <C>
1996 $ 54,188,000
1997 941,000
1998 2,160,000
1999 65,853,000
2000 42,265,000
Thereafter 38,840,000
-----------
$204,247,000
-----------
</TABLE>

The Company is currently seeking to refinance its maturing debt and believes
they will successfully complete a transaction(s) at market rates. Upon
refinancing, the Company will write off any unamortized deferred financing
costs related to the debt repaid.

The carrying values of the long-term debt at December 31, 1995 and 1994 were
approximately equal to their respective fair values, as determined by using
year-end interest rates and market conditions. The fair value at December 31,
1995 of the unamortized balance of $5,245,000 in interest rate protection
agreements discussed above was approximately $2,483,000.

In April 1995, the Company assumed mortgages payable of approximately
$36,900,000 in connection with the acquisition of five shopping centers. These
mortgages have maturity dates ranging from 1996 through 2004. Three of the
five mortgages assumed have fixed interest rates ranging from 8.0% to 10.5%.
The outstanding principal balance on these mortgages at December 31, 1995 was
approximately $25,611,000. The other two mortgages assumed have interest
rates payable at prime plus 1% and prime plus 1/2%, respectively. The
outstanding principal balance on these mortgages at December 31, 1995 was
approximately $10,557,000.

In February 1995, the Company obtained a $1.0 million unsecured line of credit
from Corestates Bank, N.A. Amounts borrowed under the line will bear interest
at that bank's prime rate. The weighted average interest rate for this line
was 8.73% for the year ended December 31, 1995. The outstanding borrowings
under this facility was $500,000 as of December 31, 1995. The principal is
due at maturity on June 30, 1996 and the facility is renewable annually.

During 1994, the Company obtained a $7,000,000 secured line of credit from
Nomura Asset Capital Corporation. As of December 31, 1995 and 1994, the
Company has fully utilized this line to fund improvements at various centers
and to acquire a parcel of land adjacent to the Barn Plaza Shopping

F-10
<PAGE>
Center. Interest is payable at 30-day LIBOR plus 250 basis points, if the
borrowing is less than 80% of the purchase price, or 450 basis points if the
borrowing is equal to or greater than 80% of the purchase price. The weighted
average interest rate on this line was 8.49% for the year ended December 31,
1995. The principal is due at maturity on June 30, 1996.

In 1993 the Company obtained a $50,000,000 secured line of credit from Nomura
Asset Capital Corporation for acquisitions. Interest is payable at 30-day
LIBOR plus 250 basis points, if the borrowing is less than 80% of the purchase
price, or 450 basis points if the borrowing is equal to or greater than 80%
of the purchase price. The weighted average interest rate on this line was
8.49% for the year ended December 31, 1995. The outstanding principal balance
of this line of credit was $23,000,000 and $15,500,000 at December 31, 1995
and 1994, respectively. The principal is due at maturity on June 30, 1996.

4. RISKS AND UNCERTAINTIES:
The retailing industry has had numerous entities file for bankruptcy
protection in recent months. The Company has been affected by the bankruptcy
filing of four anchor tenants , Bradlees, Caldor, Jamesway and Rickels and
several smaller tenants at various properties in the portfolio.

The Company monitors each situation closely and believes that its reserves are
adequate. In general, the Company believes in the event certain leases are
disaffirmed by the anchor tenants named above, the existing lease terms are at
or below market rental rates and could be relet. The Company's releasing
assumptions provides for the related capital costs of retenanting including
capital improvements, tenant allowances and leasing commissions. Effective
February 29, 1996, Jamesway has indicated that they will disaffirm their
leases at the two locations in which they had operated. The Jamesway stores
were approximately 60,000 and 76,000 square feet, respectively, and the average
rent paid by Jamesway for these locations was approximately $2.60 per square
foot.

5. OPERATING LEASES:
The Company's shopping centers are leased to tenants under operating leases
with expiration dates extending to the year 2021. Future minimum rentals
under noncancellable operating leases, excluding tenant reimbursements of
operating expenses and additional contingent rentals based on tenants' sales
volume as of December 31, 1995 are as follows:

F-11
<PAGE>
<TABLE>
<S> <C>
1996 $39,325,000
1997 $36,623,000
1998 $33,711,000
1999 $31,016,000
2000 $29,576,000
Thereafter $185,896,000
</TABLE>

The revenue resulting from straight-line rental income adjustments for the
years ended December 31, 1995, 1994 and 1993 was $1,214,000, $1,703,000 and
$1,259,000, respectively. No tenant represented more than 10% of the minimum
rental revenues for 1995, 1994 or 1993.

6. DISTRIBUTIONS:
On December 6, 1995, the Trustees declared a cash distribution of $0.48 per
common share, payable on January 17, 1996 to common shareholders of record on
December 28, 1995. The Company declared distributions of $1.92, $1.90 and
$1.84 per common share for the years ended December 31, 1995, 1994 and 1993,
respectively. The Company determined that $1.10, $1.05 and $1.27 per common
share of the distributions represented ordinary income to the recipient and
$0.82, $0.85 and $0.57 per common share represented a return of capital in
1995, 1994 and 1993, respectively.

7. SHARE OPTION PLANS, INCENTIVE PLAN AND WARRANTS:
The Company has provided share option plans for the employees and trustees of
the Company. The employees' plan has a maximum of 300,000 shares available for
issuance and the trustees' plan has a maximum of 700,000 shares available for
issuance. Pursuant to the plans, 133,200 options (with an exercise price of
$20.00 per share) have been granted to employees and 381,800 options (with
exercise prices ranging from $17.125 to $21.50 per share) have been granted to
the trustees, with an exercise price not less than the fair market value on
the grant date. The options are exercisable at the date of grant and expire
ten years after the date of grant. The following table shows the activity and
balances for each stock option plan:
<TABLE>

<CAPTION>
Trustee Plan Employee Plan
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Outstanding, beginning 663,800 642,800 151,200 151,200
Granted at
$21.50 per share - 6,000 - -
$17.125 per share - 15,000 - -
$18.375 per share 3,000 - - -
Exercised at
$20.00 per share - - - -
Retired (285,000) - (18,000) -
-------- -------- -------- --------
Outstanding, ending 381,800 663,800 133,200 151,200
-------- -------- -------- --------
</TABLE>

F-12
<PAGE>
On June 6, 1995 the shareholders approved the Company's 1995 Incentive Plan.
The purpose of the Incentive Plan is to align the interests of the Company's
trustees, executive officers, key employees, advisors and consultants with
those of the shareholders and to enable the Company to attract, compensate and
retain trustees, executive officers, key employees, advisors and consultants
and provide them with appropriate incentives and rewards for performance.
Awards under the Incentive Plan may take the form of share options ("Options"),
including corresponding share appreciation rights ("SARs") and reload options,
and in the case of employees, restricted share awards, and share purchase
awards. Awards under the Incentive Plan may be granted in combination with
other awards, including Options granted under the Company's 1992 Employee
Share Option Plan and the Trustee Plan. The maximum number of Common Shares
that may be the subject of awards under the Incentive Plan is 1,000,000 Common
Shares. The Incentive Plan provides that in any given year, the maximum number
of Common Shares with respect to which Options or SARs may be granted to any
employee is 100,000 Common Shares. During 1995, 285,000 options were granted
under the Incentive Plan at prices ranging from $17.125 to $20 per share to a
former officer and trustee. These options were replaced by 285,000 options
which were retired under the Trustee Plan at the same prices. During 1995,
7,361 restricted shares were issued to employees and officers of the Company at
the then market price of $17.875 per share. The shares will vest with the
employees over various periods of time.

In connection with the acquisition of certain unaffiliated shopping center
properties, the Company issued 191,429 warrants in November 1992 to purchase
common shares of beneficial interest. These warrants are exercisable within
five years after issuance at $26 per share.

8. COMMITMENTS AND CONTINGENCIES:
The Company rents office space in Conshohocken, Pennsylvania, under the terms
of a net lease from two officers of the Company. The minimum annual rental
under the lease is $154,000 and the lease expires January 15, 1999. During
1995, 1994 and 1993, the Company paid $154,000 in annual rent, respectively.

9. 401 (K) PLAN:
During 1993, the Company adopted a 401(k) Plan covering substantially all of
the officers and employees of the Company and subsidiaries which permits
participants to defer up to a maximum of 10% of their compensation. The
Company, at its discretion, may match up to 50% of the initial five percent of
the employees' contributions and may also make an additional discretionary
contribution. The employees' contributions, together with contributions from
the Company are generally fully vested and are fully funded as of December 31,
1995 and 1994. The Company's contributions to the Plan for the years ended
December 31, 1995, 1994 and 1993 were $60,000, $61,000 and $60,000,
respectively.

F-13
<PAGE>
10. ACQUISITIONS:
The Company acquired five shopping centers during the year ended December 31,
1995 for approximately $49,300,000 which were accounted for by the purchase
method. The results of operations of each center were included from the
respective purchase date. The pro forma financial information presented below
may not be indicative of results that would have been reported if the
acquisitions had occurred on January 1, 1995 and 1994, respectively.

<TABLE>
<CAPTION>
Year ended December 31,1995(Unaudited)
<S> <C>
Pro forma total revenues $55,156,000
Pro forma net income available for common
shareholders $9,048,000
Pro forma net income per share $0.88
<CAPTION>
Year ended December 31,1994(Unaudited)
<S> <C>
Pro forma total revenues $50,883,000
Pro forma net income available for common
shareholders $8,611,000
Pro forma net income per share $0.83
</TABLE>

In 1994, the Company acquired four shopping centers for approximately
$48,792,000 which were accounted for by the purchase method. The results of
operations of each center were included from the respective purchase date.
The pro forma financial information presented below may not be indicative of
results that would have been reported if the acquisitions had occurred on
January 1, 1994 and 1993, respectively.
<TABLE>
<CAPTION>
Year ended December 31, 1994(Unaudited)
<S> <C>
Pro forma total revenues $46,918,000
Pro forma net income $9,908,000
Pro forma net income per share $0.96
<CAPTION>
Year ended December 31, 1993(Unaudited)
<S> <C>
Pro forma total revenues $45,035,000
Pro forma net income $10,905,000
Pro forma net income per share $1.27
</TABLE>

F-14
<PAGE>
11. PREFERRED SHARES OF BENEFICIAL INTEREST:
In connection with the purchase of the five shopping centers in April 1995,
the Company issued 11,155 shares of Series A Increasing Rate Cumulative
Convertible Preferred Shares of Beneficial Interest, $.01 par value per share,
of Kranzco Realty Trust (the "Preferred Shares") at a face amount of
$11,155,000. The Preferred Shares were valued for accounting purposes based
on the fair value of the assets acquired and recorded of approximately
$7,976,000, net of issuance costs. The Preferred Shares have an initial
distribution rate of 5.0% per annum with increases of 0.25% per annum up to a
maximum rate of 6.5% per annum. The Company recorded a discount of
approximately $467,000 at the time of issuance which represents the present
value of the difference between the total distributions to be paid in the seven
year period prior to commencement of the perpetual distribution and the
perpetual distribution amount for that same seven year period. This amount is
accreted on an effective interest method over the seven years. The Preferred
Shares are redeemable by the Company at any time at their liquidation
preference and are convertible into the Company's Common Shares of Beneficial
Interest (the "Common Shares"), 16.67% annually commencing in the fifth year,
with a maximum of 50% convertible in any one year. The Preferred Shares are
convertible into that number of Common Shares as would result in the holder
receiving the same amount of distributions from the Common Shares at the
applicable conversion dates as they received as a holder of the Preferred
Shares.

12. INTERIM RESULTS (Unaudited):
The following presents a summary of the unaudited quarterly financial
information for the years ended December 31, 1995 and 1994.
<TABLE>
Year ended December 31, 1995
<CAPTION>
Net Income Net Income
For Common Per Common
Revenues Shareholders Share
<S> <C> <C> <C>
First Quarter $ 12,257,000 $2,482,000 $.24
Second Quarter 13,172,000 2,248,000 .22
Third Quarter 13,710,000 2,275,000 .22
Fourth Quarter 14,331,000 2,387,000 .23
<CAPTION>
Year ended December 31, 1994
Net Income Net Income
For Common Per Common
Revenues Shareholders Share
<S> <C> <C> <C>
First Quarter $ 10,567,000 $2,138,000 $.21
Second Quarter 10,528,000 2,357,000 .23
Third Quarter 11,504,000 2,579,000 .25
Fourth Quarter 12,441,000 2,793,000 .27
</TABLE>

F-15
<PAGE>
Per share amounts are based on weighted average shares outstanding each quarter
and may not equate to the full year due to increases in shares outstanding.

13. NEW PRONOUNCEMENTS:

In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 121 "Accounting for the Impairment of Long Lived
Assets and for Long Lived Assets to be Disposed Of" which prescribes the
accounting treatment for recognizing impairment losses which the Company plans
to adopt on January 1, 1996. The Company believes the effect of this
pronouncement will not have any material financial statement impact upon
adoption in 1996.

F-16
<PAGE>
<AUDIT-REPORT>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE

We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Kranzco Realty Trust and subsidiaries
included in this Form 10-K, and have issued our report thereon dated February
21, 1996. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The financial statement schedule referred to in
Item 14 is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. The financial statement
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

Philadelphia, Pennsylvania
February 21, 1996
</AUDIT-REPORT>
S-1
<PAGE>
<TABLE>
Kranzco Realty Trust Schedule III
Real Estate and Accumulated Depreciation - December 31, 1995
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G Column I
& H
Encumbrances
-------------------------------- Cost of Amount at
Balance at Initial Improvements Which Carried Date
Description Interest Maturity December 31, Cost Net of December 31, Accumulated Constructed Depreciable
Rate Date 1995 to Trust Retirements 1995 Depreciation or Acquired Life (Yrs)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers:
A & P Mamaroneck
Land <F1> <F2> $ 680,000 $ 287,710 $ 0 $ 287,710
Buildings and
improvements 1,150,837 5,731 1,156,568 $ 119,941 11/19/92 30
Anneslie
Land <F4> 06/30/96 5,500,000 1,348,713 0 1,348,713
Buildings and
improvements 5,394,854 406,448 5,801,302 472,623 06/29/93 30
Barn Plaza
Land <F1> <F2> 5,480,000 1,284,790 306,206 1,590,996
Buildings and
improvements 6,808,226 3,449,914 10,258,140 1,039,359 11/19/92 10-30
Bensalem Square
Land <F1> <F2> 2,950,000 1,185,101 106,403 1,291,504
Buildings and
improvements 4,532,826 37,730 4,570,556 474,232 11/19/92 30
Best Plaza
Land <F4> 06/30/96 7,000,000 1,693,227 531 1,693,758
Buildings and
improvements 6,772,906 2,123 6,775,029 509,931 09/28/93 30
Bethlehem Square
Land <F1> <F2> 10,200,000 4,816,318 145 4,816,464
Buildings and
improvements 19,265,294 1,200,849 20,466,144 2,191,055 11/19/92 10-30
Bradford Mall
Land <F1> <F2> 3,260,000 1,518,627 17,725 1,536,352
Buildings and
improvements 5,954,606 463,358 6,417,964 686,229 11/19/92 30
Bristol
Land <F1> <F2> 8,630,000 3,092,633 0 3,092,633
Buildings and
improvements 13,959,722 1,363,503 15,323,225 1,534,136 11/19/92 10-30
Campus Village
Land 8% 12/01/02 2,795,000 951,663 1,762 953,426
Buildings and
improvements 3,013,600 6,797 3,020,397 70,112 04/19/95 30
Collegetown
Land 9.375% 05/01/96 6,403,000 1,901,831 9,704 1,911,535
Buildings and
improvements 7,609,275 1,238,070 8,847,345 944,948 11/19/92 5-30
Coral Hills
Land 10.5% 08/01/99 6,605,000 3,086,879 6,104 3,092,983
Buildings and
improvements 5,732,776 12,553 5,745,328 133,355 04/19/95 30
Cross County
Land <F1> <F2> 12,310,000 5,330,148 0 5,330,148
Buildings and
improvements 21,320,590 6,177,804 27,498,394 2,351,486 11/19/92 15-30
Culpeper
Land Prime+.05% 11/01/04 5,767,000 1,172,766 51,382 1,224,148
Buildings and
improvements 3,518,299 50,629 3,568,928 81,954 04/19/95 30
Fox Run
Land <F4> 08/10/99 13,789,000 7,945,202 135,482 8,080,684
Buildings and
improvements 6% 08/10/99 3,929,000 16,663,137 269,368 16,932,505 1,271,056 07/21/94 30
Golfland
Land <F1> <F2> 2,380,000 997,368 0 997,368
Buildings and
improvements 3,989,469 40,308 4,029,777 424,668 11/19/92 5-30
Groton Square
Land <F1> <F2> 8,430,000 3,490,394 0 3,490,394
Buildings and
improvements 13,986,580 354,016 14,340,596 1,549,807 11/19/92 4-30
High Ridge Plaza
Land <F1> <F2> 4,110,000 1,564,430 0 1,564,430
Buildings and
improvements 6,057,721 321,691 6,379,412 644,917 11/19/92 30
Hillcrest Mall
Land Prime 03/31/96 6,548,000 1,415,066 0 1,415,066
Buildings and
improvements 4,416,833 202,704 4,619,537 467,201 11/19/92 30
Hillcrest Plaza
Land Prime+1% 05/31/96 4,790,000 1,134,826 2,056 1,136,882
Buildings and
improvements 5,957,835 16,900 5,974,735 138,698 04/19/95 30
Marumsco
Land 9.375% 07/01/04 16,211,000 5,487,073 10,785 5,497,858
Buildings and
improvements 16,461,219 59,360 16,520,579 383,292 04/19/95 30
MacArthur Plaza
Land <F4> 06/30/96 0 682,696 (264) 682,432
Buildings and
improvements 2,727,666 21 2,727,687 205,280 09/28/93 30
Manchester
Land 8.125% 11/01/98 1,833,000 1,051,958 20,197 1,072,155
Buildings and
improvements 3,092,778 64,506 3,157,284 174,326 05/24/94 30
Milford
Land <F1> <F2> 1,020,000 0 0 0
Buildings and
improvements 2,123,804 8,813 2,132,617 221,228 11/19/92 30
North Ridge
Land <F1> <F2> 2,900,000 590,343 0 590,343
Buildings and
improvements 2,361,369 156,851 2,518,220 257,948 11/19/92 10-30
Orange
Land 0 0 0 0
Buildings and
improvements 105,724 439 106,163 11,013 11/19/92 30
Park Hills Plaza
Land <F1> <F2> 6,080,000 2,752,903 0 2,752,903
Buildings and
improvements 9,976,436 1,436,275 11,412,711 1,021,763 11/19/92 30
Parkway Plaza I
Land <F1> <F2> 2,930,000 1,213,750 0 1,213,750
Buildings and
improvements 4,854,998 108,929 4,963,927 514,878 11/19/92 30
Parkway Plaza II
Land <F1> <F2> 2,430,000 1,032,538 0 1,032,538
Buildings and
improvements 3,930,151 20,593 3,950,744 409,672 11/19/92 30
Pilgrim Gardens
Land Prime 03/31/96 5,077,000 1,056,600 0 1,056,600
Buildings and
improvements 4,083,178 443,975 4,527,153 455,433 11/19/92 5-30
Port Washington
Land <F1> <F2> 280,000 50,000 0 50,000
Buildings and
improvements 600,026 2,697 602,723 62,516 11/19/92 30
69th Street
Land <F4> 06/30/96 2,500,000 730,424 3,542 733,966
Buildings and
improvements 2,921,696 26,669 2,948,365 187,857 02/15/94 30
Stratford Square
Land <F1> <F2> 6,650,000 3,057,993 159,420 3,217,413
Buildings and
improvements 12,231,971 70,446 12,302,417 1,276,454 11/19/92 10-30
Street Road Plaza
Land <F4> 06/30/96 2,000,000 1,796,172 32,963 1,829,135
Buildings and
improvements 5,159,488 824,578 5,984,066 422,166 09/28/93 30
Suburban Plaza
Land <F4> 06/30/96 13,000,000 3,277,322 4,784 3,282,106
Buildings and
improvements 13,109,289 18,736 13,128,025 838,547 02/15/94 30
Valley Forge
Land <F1> <F2> 2,770,000 972,663 309 972,972
Buildings and
improvements 4,006,745 1,234 4,007,979 416,380 11/19/92 30
Village Square
Land <F1> <F2> 1,360,000 371,566 0 371,566
Buildings and
improvements 1,486,265 57,709 1,543,974 163,671 11/19/92 30
Wampanoag Plaza
Land <F1> <F2> 5,100,000 1,583,670 230 1,583,900
Buildings and
improvements 8,606,897 1,239,633 9,846,530 1,110,917 11/19/92 5-30
Whitehall Square
Land <F1> <F2> 10,050,000 4,522,056 69,148 4,591,205
Buildings and
improvements 18,088,227 492,065 18,580,293 1,912,865 11/19/92 30
------------ ------------ ----------- ------------- ------------
Total $203,747,000 $346,480,734 $ 21,592,641 $ 368,073,375 $ 25,151,911
<FN>
<F1>
The interest rate is 200 basis points over 90-day LIBOR.
<F2>
The total of $100,000,000 is due in three installments of $41,700,000 in 1999, $41,700,000 in 2000, and $16,600,000 in 2001.
<F3>
The aggregate cost for Federal income tax purposes is $383,113,000.
<F4>
The interest rate is 250 basis points over 30-day LIBOR.
<F5>
Reconciliation of amount shown in column E:
Balance at beginning of period, December 31, 1994 $318,870,026
Additions during period:
Land $12,206,062
Buildings and
improvements 36,997,287
49,203,349
Deductions during the period
Retirements 0
Properties sold 0
0

Balance December 31, 1995 $368,073,375
<F6>
Reconciliation of amount shown in column F:
Balance at beginning of period, December 31, 1994 $15,494,399
Additions during period:
Buildings and
improvements $9,657,512
9,657,512
Deductions during the period
Retirements 0
Properties sold 0
0
Balance December 31, 1995 $25,151,911
</FN>
</TABLE>
<PAGE>

EXHIBIT INDEX

Sequentially
Numbered
Page

Exhibit
No. Description

3.1 Amended and Restated Declaration of Kranzco Realty Trust. (Incorporated by
reference to Exhibit 3.4 of the Company's Registration Statement No.33-49434.)

3.2 Bylaws, as amended. (Incorporated by reference to Exhibit 3.2 of the
Company's Registration Statement No.33-49434.)

4.1 Specimen certificate for Common Shares of Beneficial Interest.
(Incorporated by reference to Exhibit 4.1 of the Company's Registration
Statement No.33-49434.)

4.4 Article Supplementary for the Series A Preferred Shares of Beneficial
Interest.

10.11 Subordination Agreement, dated as of November 19, 1992, by and among
KRT Mortgage Securities Trust, Kranzco Realty Trust, KRT Property Holdings,
Inc. and Cargill Financial Services Corporation. (Incorporated by reference to
Exhibit 28.8 of the Company's Report on Form 8-K dated December 17, 1992.)

10.22 Mortgage Deed, Leasehold Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixture Financing Statement from KRT Property Holdings,
Inc. to KRT Mortgage Securities Trust, dated November 19, 1992, with respect to
Golfland Shopping Center. (Incorporated by reference to Exhibit 28.19 of the
Company's Report on Form 8-K dated December 17, 1992.)

10.32 Mortgage Deed, Leasehold Mortgage Deed, Assignment of Leases and Rents,
Security Agreement and Fixture Financing Statement from Parkway Plaza II Corp.
to KRT Property Holdings, Inc. dated November 19, 1992, with respect to
Parkway Plaza II Shopping Center. (Incorporated by reference to Exhibit 28.29
of the Company's Report on Form 8-K dated December 17, 1992.)

10.34 Trust and Servicing Agreement, dated November 19, 1992, by and among
the parties listed on Schedule A thereto, KRT Property Holdings, Inc. and
Norwest Bank Minnesota, National Association. (Incorporated by reference to
Exhibit 28.31 of the Company's Report on Form 8-K dated December 17, 1992.)

10.38 Kranzco Realty Trust 1995 Incentive Plan. (Incorporated by reference
to Exhibit 4.4 of the Company's Registration Statement on Form S-8 No.
33-94294.)

21.1 Subsidiaries of Kranzco Realty Trust.

23.1 Consent of Arthur Andersen LLP.

<PAGE>
EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

<TABLE>
Kranzco Realty Trust is the sole shareholder of the following entities:
<CAPTION>
NAME JURISDICTION OF INCORPORATION
<S> <C>
1. KRT Property Holdings, Inc. Maryland
2. Parkway Plaza II Corp. Maryland
3. KR Trust One, Inc. Maryland
4. KR Best Associates, Inc. Pennsylvania
5. KR Street, Inc. Pennsylvania
6. KR MacArthur, Inc. Pennsylvania
7. KR 69th Street, Inc. Pennsylvania
8. KR Suburban, Inc. New Jersey
9. Lilac Connecticut Corp. Connecticut
10. KR Manchester, Inc. Connecticut
11. KR Fox Run, Inc. Maryland
12. KR Hillcrest, Inc. Maryland
13. KR Coral Hills, Inc. Maryland
14. KR Culpeper, Inc. Maryland
15. KR Culpeper II, Inc. Maryland
16. KR Campus, Inc. Maryland
17. KR Campus II, Inc. Maryland
18. KR Marumsco, Inc. Maryland
19. KR Marumsco II, Inc. Maryland
20. Lilac New York Corp. New York
</TABLE>

<TABLE>
Kranzco Realty Trust is the 99% limited partner of the following entities:
<CAPTION>
JURISDICTION OF
NAME FORMATION
<S> <C>
1. KR Best Associates, L.P. (KR Best Associates, Inc. is sole
general partner) Pennsylvania
2. KR Street Associates, L.P. (KR Street, Inc. is sole
general partner) Pennsylvania
3. KR MacArthur Associates, L.P. (KR MacArthur, Inc. is sole
general partner) Pennsylvania
4. KR 69th Street, L.P. (KR 69th Street, Inc. is sole
general partner) Pennsylvania
5. KR Suburban, L.P. (KR Suburban, Inc. is sole
general partner) New Jersey
6. Fox Run Limited Partnership (KR Fox Run, Inc. is sole
general partner) Alabama
7. Hillcrest Plaza Limited Partnership (KR Hillcrest, Inc. is sole
general partner) Maryland
8. Coral Hills Associates Limited Partnership (KR Coral Hills, Inc.
is sole general partner) Maryland
9. Culpeper Shopping Center Joint Venture (KR Culpeper, Inc. is
99% general partner and KR Culpeper II, Inc. is 1% general
partner) Maryland
10. Campus Village Shopping Center Joint Venture (KR Campus, Inc. is
99% general partner and KR Campus, II, Inc. is 1% general
partner) Maryland
11. Marumsco-Jefferson Joint Venture (KR Marumsco, Inc. is 99%
general partner and KR Marumsco II, Inc. is 1%
general partner) Virginia
<FN>
Kranzco Realty Trust is 90% general partner of Germantown Associates, L.P., a
Pennsylvania limited patnership.
</FN>
</TABLE>

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of
our reports dated February 21, 1996 included in this Form 10-K, into the
Company's previously filed: Form S-3 Registration Statements File Nos.
33-75554 and 33-72076 and Form S-8 Registration Statements File Nos. 33-56990
and 33-94294.

Philadelphia, Pennsylvania
March 15, 1996

<PAGE>
PROPERTY TABLE
<TABLE>
The following table sets forth certain information as of March 1, 1996 relating
to the Shopping Center Properties owned by the Company:
<CAPTION>
Gross Percent
Shopping Center Property Location of Year Ownership Land Leasable Leased
Shopping Developed Interest/ Area Area (4) Anchor Tenants (lease expiration
Center or Aquired (expiration) (acres) (Sq. Ft.) /option expiration)
<S> <C> <C> <C> <C> <C> <C> <C>
CONNECTICUT
Golfland Orange 1984 Fee 6.20 60,580 100.00% Pathmark (2008/2038)
Groton Square Groton 1987 Fee 17.74 191,278 100.00% Bradlees (2007/2027), Stop & Shop
(2007/2027)
Manchester Kmart Plaza Manchester 1994 Fee 21.06 183,376 91.55% Kmart(1997/2022), Edward's Super
Food Store(1998/2023)
Milford Milford 1966 Leasehold (2020) 3.00 25,200 100.00% Xpect Discount Drug (1999/2009)
Orange Orange 1967 Leasehold (2006) 3.43 27,000 100.00% Pergament Express (2004/2004)
Parkway Plaza I Hamden 1982 Fee 6.55 72,630 85.06% Pathmark (2007/2037)
Parkway Plaza II Hamden 1985 Fee 8.00 154,634 42.52% Kids R Us (2006/2026), Rickels
(2005/2035)<F1>
Stratford Square Stratford 1984 Fee 19.58 159,432 96.64% Pathmark (2009/2039), Marshalls
(2000/2010)

MARYLAND
Anneslie Baltimore 1993 Fee 9.26 175,444 100.00% Caldor (2011/2041)
Campus Village College Park 1995 Fee 1.89 25,529 80.59% None
Coral Hills Coral Hills 1995 Fee 7.00 86,050 96.05% Shoppers Food Warehouse (2004/2029)
Fox Run Prince Frederick 1994 Fee 40.87 288,278 98.84% Kmart(2016/2066), Giant Foods
(2021/2051), Peebles (2012/2032),
Raley's Home Furnishings(2004/2014)
Hillcrest Plaza Frederick 1995 Fee 12 109,071 81.03% Shoppers Food Warehouse (1999/2024)

NEW JERSEY
Collegetown Glassboro 1989 Fee 23.00 250,223 96.41% Kmart (1996/2016), Acme (1999/2034)
Hillcrest Mall Phillipsburg 1985 Fee 18.00 220,985 80.77% Superfresh (1998/2008), Rickel Home
Centers (2005/2030) Staples
(2010/2025), R&S Strauss (2010/2025)
Suburban Plaza Hamilton 1994 Fee 23.15 239,723 98.33% Caldor (2013/2033), Shop Rite
(1997/2017 )

NEW YORK
A & P Mamaroneck Mamaroneck 1976 Fee 2.17 24,978 100.00% A & P (2006/2016)
Cross County Square Yonkers 1986 Fee 10.07 216,018 98.33% Rickel Home Centers (2012/2032),
Kids R Us (2008/2018),
The Sports Authority (2010/2025),
T.J. Maxx (2004/2014)
High Ridge Yonkers 1977 Fee 8.90 88,501 98.47% Pathmark (2003/2027)
North Ridge New Rochelle 1971 Fee 2.80 43,265 62.71% None
Port Washington Port Washington 1968 Leasehold (2067) 1.00 19,600 91.84% North Shore Farms (1998/2013)
Village Square Larchmont 1981 Fee 0.93 17,126 89.92% Don Emilio Restaurant (1997/2002)

PENNSYLVANIA
69th Street Plaza Upper Darby 1994 Fee 2.96 42,500 100.00% Drug Emporium (2000/2000)
Barn Plaza Doylestown 1987 Fee 35.00 181,264 100.00% Acme (2007/2037), Marshalls
(2004/2019), Toy Warehouse(2004/2014)
Bensalem Square Bensalem 1983 Fee 16.38 72,683 95.65% Pathmark (2009/2039)
Best Plaza Tredyffrin 1993 Fee 11.14 113,000 100.00% Best Products (2010/2030)
Bethlehem Square Bethlehem 1987 Fee 48.00 386,820 100.00% Bradlees (2007/2025),
Leh's (1998/2028),,
Shop Rite (2010/2030) Toy Works
(2000/2015),Home Depot (2010/2040)
Bradford Mall Bradford 1990 Fee<F2> 30.00 287,389 60.54% Kmart (2004/2049)
Bristol Commerce Park Bristol 1992 Fee 50.00 273,133 98.06% Superfresh (2008/2038),
Caldor (2013/2033)
MacArthur Road Whitehall 1993 Fee 4.74 51,100 97.82% Drug Emporium (1996/2001),
Frank's Nursery (2002/2032)
Park Hills Plaza Altoona 1985 Fee 24.00 259,664 100.00% Weis Market (1996/2014), Dunham's
Sporting Goods (2004/2014), Carmlike
Cinemas (2006/2016), Toys R Us
(2015/2035), Staples (2010/2020)
Superpetz(2005/2015)
Pilgrim Gardens Drexel Hill 1986 Fee 5.00 83,268 92.03% Loehmann's (2003/2013),
QVC Network, Inc. (1999/1999)
Street Road Bensalem 1993 Fee 10.35 68,031 95.59% Drug Emporium (1997/2002),
Frank's Nursery (2007/2022)
Valley Forge Mall Phoenixville 1985 Fee 18.00 173,562 54.09% Thrift Drug (2000/2010)
Whitehall Square Whitehall 1986 Fee 30.44 298,023 100.00% Bradlees (2006/2024),
Phar Mor (2001/2016),
The Sports Authority (2006/2036),
Kids R Us (2007/2027)

RHODE ISLAND
Wampanoag Plaza East Providence 1989 Fee 18.00 235,325 82.84% Rx Drug (2001/2016),
Cherry, Webb & Touraine (2000/2005),
Marshalls (2001/2001),
Savers/TVI, Inc.(2010/2025)<F1>

VIRGINIA
Culpeper Town Mall Culpeper 1995 Fee 27.48 131,086 89.83% Central Tractor(2000/2010),
Schewel Furniture (2001/2006)
Marumsco-Jefferson Plz. Woodbridge 1995 Fee 36.00 331,224 85.34% Giant Food Store(2004/2024),
Peebles (1994/2004),
Hub Furniture(1997/2012),
Frank's Nursery & Crafts(1996/1996)

Total 614.09 5,666,993 90.34%

<FN>
Footnotes:
<F1>
(1) Includes space for which rent is being paid but which is not presently occupied.
<F2>
(2) 84,692 square feet gross leasable area is subject to a ground lease which expires in 2004.
</FN>
</TABLE>

<ARTICLE> 5
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<PERIOD-TYPE> YEAR
<CASH> 6,129,000
<SECURITIES> 273,000
<RECEIVABLES> 9,113,000
<ALLOWANCES> 831,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,875,000
<PP&E> 368,073,000
<DEPRECIATION> 25,152,000
<TOTAL-ASSETS> 372,983,000
<CURRENT-LIABILITIES> 7,725,000
<BONDS> 204,247,000
<COMMON> 151,810,000
0
8,072,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 372,983,000
<SALES> 0
<TOTAL-REVENUES> 53,470,000
<CGS> 0
<TOTAL-COSTS> 27,870,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,208,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,392,000
<EPS-PRIMARY> .91
<EPS-DILUTED> .91

</TABLE>